Measures to reform the Right to Buy scheme and bring it up-to-date in areas under greatest housing pressure were announced yesterday by Deputy Prime Minister John Prescott.

The changes, aimed at meeting local housing market pressures, reducing homelessness and exploitation of the Right to Buy scheme, will mean maximum discounts available to council tenants purchasing their homes being reduced to £16,000.

Forty-two local authorities in parts of London and the South-East have been invited into the scheme with an option to opt out. The government is also widening the scope of restrictions on Right to Buy resale, to protect affordable housing in rural areas.

Prescott will set out how a modernised Right to Buy scheme fits in with the government&#39s wider strategy on affordable housing when he announces his plan for sustainable communities shortly.

Prescott says: “I am totally committed to the principle of Right to Buy. We are not abolishing the scheme, but modernising it. This Government supports home ownership and we are actively supporting alternative home ownership schemes, such as the Starter Home Initiative, which frees up social housing while promoting private home ownership.

“However, Right to Buy has changed little over the past quarter of a century, despite the major transformation of much of the housing market. In certain housing crisis areas, Right to Buy has had an adverse effect on the supply of affordable housing, penalising those who desperately need somewhere to live. That is why I am taking urgent action to reduce the maximum discounts available. The cost of Right to Buy has escalated and the savings from lowering the discount can be put into new social housing.

“The Right to Buy scheme must be modernised, aligning the discounts available more closely with local market conditions such as the high housing pressure we are experiencing in the south of England, particularly London. I intend to consult with the local authorities concerned and will consider exemptions where there is a case to be made.

“The current maximum discounts will still be available to all tenants who apply for Right to Buy before the change comes into effect in March 2003. The new discount level will come into line with that available to assured housing association tenants under the Right to Acquire scheme.

“There is also concern about how local people in rural areas can afford their own home. I&#39m widening the restrictions brought in by the previous administration which prevent council homes bought by tenants from being sold on to those from outside the area, and I am today making it easier for local authorities to extend those rural areas protected by these restrictions”.

Research into the exploitation of Right to Buy confirms the scheme is being abused in inner London. Between 1998 and 2001, 5% of all council home sales in inner London were by companies making deals with tenants to acquire the properties for their own speculative purposes.

Prescott adds: “Reducing maximum discounts will straightaway act as a disincentive to companies who are profiteering from the Right to Buy scheme. These companies are offering a short-term cash solution to those who are most vulnerable. We must nip profiteering and exploitation in the bud before it spirals out of control on a national level”.

The government will monitor the impact on sales under the Right to Buy scheme once the targeted lower £16,000 maximum discount comes into force.