The Labour leadership has been defeated in a debate on housing policy at the party's annual conference.

Delegates voted for a change to policy on council borrowing rights despite John Prescott saying the move would create "real problems".

The vote overshadowed Prescott's proposals to build 10,000 low cost homes for first time buyers by using surplus government land.

A ballot of delegates has already decided that Iraq will be debated on Thursday - leaving ministers facing embarrassing calls for troops to be withdrawn from the country.

Meanwhile, the leadership is also trying to prevent a vote on the renationalisation of the rail network.

Party officials are trying to persuade the white collar rail union TSSA to sign up to a statement which might envisage state control in future.

The union's motion calls on ministers to introduce an "integrated, accountable and publicly owned railway".