The coalition Government last night faced open revolt from Liberal Democrat MPs in the Westcountry as plans to end council homes for life were condemned as creating an "even more divided society".

David Cameron yesterday returned to the controversial idea that council tenants could be given fixed terms of up to ten years, arguing that social housing should be granted on the basis of need.

But two Westcountry MPs rounded on the Prime Minister's plan to consider moving people on should their circumstances change significantly.

St Ives MP Andrew George said such a move would widen the gulf between local people struggling to find somewhere to live and rich second-home owners in the Westcountry.

Torbay MP Adrian Sanders said ending lifetime tenure "fails" to protect the vulnerable.

Mr George said: "The logical conclusion of his proposal is that we create an even more divided society than the one we have at present — choice of housing for the better off and compulsion and restricted choices for the poorest in society."

Mr Sanders said: "The coalition agreement is based on two fundamental principles: one – fairness, and two – looking after the interests of vulnerable people.

"So far given what we know about this idea, it fails both those tests."

The Prime Minister's comments, first made earlier this week, reflect the widespread view that many tenants could afford to buy or rent in the private sector, in turn giving people on waiting lists better access to social housing.

About 55,000 households in Devon and Cornwall are waiting for suitable council property, with as many as 14 per cent of households in certain parts of the region are stuck without a home.

The Government has prepared, but not yet published, a consultation document on the idea, which Mr Cameron conceded was likely to prompt an argument with the coalition.

While the issue is perceived as one that affects urban areas, the latest Government figures show that rural areas including West Devon and West Cornwall have a greater number of households trapped on waiting lists than Plymouth.

The comments were made by two veteran Westcountry Lib Dems who have already indicated their unease with a number of Tory-driven coalition policies.

Mr George voted against Education Secretary Michael Gove's flagship Academies Bill, and Mr Sanders signed a Commons motion raising concerns over the impact of cuts to housing benefit on poor families.

Lib Dem deputy leader Simon Hughes has already made clear the party would need "a lot of persuading" to back ending life tenure — a policy floated but dismissed by the Labour Government two years ago as it was deemed politically toxic.

With the party's poll rating plummeting, many Lib Dems are concerned about a mauling at next May's local elections and the subsequent effect on morale.

Mr George said: "When the day arrives and we achieve greater choice for social housing tenants and can offer them more options and choice for better housing and alternative accommodation, perhaps then we can look at some of the estate management issues which the Prime Minister has raised.

"However, we are a long way from achieving the choice which those on housing waiting lists and those living in council housing need and deserve.

"Unfortunately, the Prime Minister's proposal emphasises the great distinction between the two parties which make up this coalition."

In Torbay, 5,800 households are on the council's housing waiting list, which represents about ten per cent of households.

Mr Sanders said: "You don't solve the housing crisis by taking housing away from people who have it to give it to those who haven't got it. This isn't something that I can see gaining much support."

At question and answer session in Hove, East Sussex, yesterday, Mr Cameron outlined the coalition will use the public's ideas for cutting spending to tackle the deficit.

The Prime Minister revealed that the Government had received 67,000 suggestions from state employees for how savings could be made since last month.