The government has promised more cash for house building to overcome Britain's property price crisis.

The chancellor also used his spending review statement on Monday to announce sustained increases in spending on local authorities as ministers seek to avert further large rises in council tax rates.

The Office of the Deputy Prime Minister will get substantial extra funds for its two priorities, which John Prescott will detail in the next few days.

Councils will get a three-year funding settlement to enable longer term financial planning.

And local authority grants from Whitehall will rise by an average of 2.7 per cent per year between now and 2008.

But it is in housing where Prescott's biggest budget boosts will come.

In England funding will rise from £5.9 billion this year to £7.2 billion by 2007/08, a 4.1 per cent average annual real terms rise.

Gordon Brown claimed that this meant cash investment in housing has more than doubled since Labour came to power in 1997.

Ministers want to ease the pressure on house prices in the South East by building more affordable properties in and around London.

Brown stressed that funding for low-cost social housing will by 50 per cent by 2008 while investment in the renewal and renovation in low demand areas in the North and the Midlands will treble.

Prescott's Neighbourhood Renewal Fund will also get more Treasury cash for the regeneration of run-down areas, with an annual budget of £525 million until 2008.

"I welcome this substantial increase in investment. It will allow us to build on the Sustainable Communities Plan to increase housing supply in the growth areas, substantially expand social housing provision to help tackle homelessness and regenerate areas with a legacy of housing decline," Prescott said.

"In doing so, we will protect the countryside and deliver the services and infrastructure needed for genuinely sustainable communities, which are safer, cleaner and greener.

"In addition we will intensify action to reduce social exclusion and deprivation and narrow the gap in outcomes between deprived areas and the rest of the country.

"This is an excellent outcome for delivering our aim of creating places where people want to live and promoting a better quality of life for all."

But Liberal Democrat local government spokesman Edward Davey said the funds would not meet the goal's in the government's own policy blueprints.

"Gordon Brown has failed to provide the cash his own housing review demanded," he said.

"Kate Barker argued for an extra 17,000 extra units of social housing a year, yet the chancellor will only manage an extra 10,000 in three years time.

"The chancellor plans to build houses with £355 million of efficiency savings he's not yet made, along with £215 million of PFI deals not yet concluded. 

"This isn't prudent mortgage finance. This is building without foundations."