172 Army houses in Colchester currently unoccupied

There are 172 unoccupied houses among the 1,031 on the town’s married quarters’ estates, costing the taxpayer £602,000 in rent every year.

Terry Sutton, Colchester branch president of the Royal British Legion, said he found the situation “galling”.

“Money is being wasted at the same time as it is desperately needed to equip troops on the frontline in Afghanistan,” he said.

“When the Government made this decision some time ago, perhaps they did not look at their figures properly – both the number of houses that were needed and the finances behind the deal.”

Defence Estates spokesman, Henry Wilson, said 128 homes were undergoing renovation which “cannot be undertaken when the homes are occupied”. Some 44 of the homes have been allocated to families “due to move in the near future”.

Since its stock of 57,000 homes across the country was sold to Annington Homes in 1996 in a “lease and lease back” deal, the MoD has paid out more in rent than the £1.6bn it earned.

The MoD pays an average £3,500 annual rent to Annington for 41,000 houses, with 17,000 surplus homes sold off in a profit-sharing deal.

Most recently in Colchester, 83 houses in Oakapple Close were sold in July to Iceni Homes, to be rented out to families on Colchester Council’s housing list.

The homes were sold for £5.5million, at an average price of £66,265 each, when Annington had originally purchased them for £30,000 each.

Mr Sutton, who is a former Army officer and works in property management, described the deal as “a very good bit of business” by Annington.

Town MP Bob Russell has long criticised the “scandalous” situation, with the Labour Government echoing condemnation of the deal, which was made by the last Tory administration.

Defence minister Kevan Jones said: “It was not good news for the taxpayer, and it has not been good for the Armed Forces, but I, and all my predecessors, have looked at it, and we can’t change it.

“It is very, very frustrating.”