Woolwich MP John Austin Walker said that it was 'madness' that capital receipts 'sit idle when thousands of families live in squalid housing conditions.
'All that the Labour party demonstrates by that argument is how little it understands about local authority finance,' said the minister.
'The Labour party cannot come to terms with the fact that if a local authority has got rid of its debt, it can spend the money on what it likes. It must be a fundamental first charge on any revenues to discharge responsibilities for debt. Once that is done, a local authority has complete freedom. That is merely prudent housekeeping,' he said.
'The sums involved amount to slightly over £1bn, but the other side of the local government balance sheet show £37bn of local government debts.'
Mr Curry added that funds attributable to the sale of councils houses are not used for building new homes: 'because we do not believe that local authorities are the best providers of housing.'