The Government’s Right To Buy policy has “stolen” £90m funding for building council housing in London, Labour has said.

Ministers admitted in a letter that tens of million of pounds from the receipts of council house sales had not been directed back to the capital but sent to the Treasury.

The Treasury cut of sales comes despite a massive shortfall in the Government’s promise to replace any homes sold off under the policy.

Nationally, 26,619 homes have been sold under Right To Buy since 2012 when the policy was revamped by the Coalition government.

Of those, 3,337 have been replaced, according to figures released by the Department for Communities and Local Government.

Tom Copley, the party’s housing spokesperson at City Hall, argued that the policy of diverting money away from London housebuilding was exacerbating the housing crisis there.

“Despite promising that Right to Buy would result in a new home for each one sold the last Government effectively stole £90m which was meant to be spent on new homes for the capital. As a result many councils are finding it impossible to replace their lost homes,” he said.

“London’s housing market is already in crisis, diverting money which was meant to be reinvested in new homes is a total betrayal. You have to wonder whether the policy was intentionally designed this way to reduce the number of council homes in London.”

The revelation about Right To Buy comes as Labour leadership candidate Jeremy Corbyn suggests extending the right to private tenants.

The Government is already committed to extending the policy to housing associations, which are private, not-for-profit landlords.

Private rents in Britain are the highest in the EU, according to the official agency Eurostat. London rents are now double the national average, however.

The capital’s population grew by to 8.6m last year but housebuilding is not keeping pace with demand and prices and rents are still rising.