Mr Holding was reacting to claims made on Monday that senior bureaucrats and Government MPs are arguing over the value of tanks as the Government prepares to spend almost $5 billion on big water projects such as desalination and pipelines.

Mr Holding's advisers say tanks should be a personal choice and should not be made mandatory with the $3.1 billion desalination plant near Wonthaggi set to start operating in 2011.

But Planning Minister Justin Madden, Environment Minister Gavin Jennings and others want tanks as part of a proposed green building code.

Existing five-star rules require that all new homes must have a tank or solar hot water system.

Mr Holding said the desal plant would provide 150billion litres of water to Melbourne, Geelong and towns in Western Port and South Gippsland regardless of rainfall levels.

"Rainwater tanks are a key part of the Government's water plan but are not the complete solution to our water challenges."

He said estimates showed that putting tanks in every home could yield anywhere between 20 and 110 billionlitres a year depending on rainfall, roof and tank size, cost about $4 billion and would take decades to complete.

The Government is also encouraging the use of rainwater tanks by offering rebates of up to $1000, which 25,000 home owners have received.

However, two academic reports cast doubt on Mr Holding's statistics.

One says a tank in each Melbourne household could deliver a city-wide 120 gigalitres a year, more than twice previous estimates by water supplier Melbourne Water.

The second study shows tanks and local recycling of waste water can cut demand for drinking water by 75 per cent and waste water by 63 per cent.

Shadow minister for country water resources Peter Walsh said: "If a project is big and involves a pipe, you can be sure John Brumby will be there for his photo opportunity, but if it's clever and small then Labor leaves it to wither on the vine.

"Water tanks and stormwater collection is the smarter and greener solution when compared to the north-south pipeline and the huge desalination plant that will produce millions of tonnes of greenhouse gases every year."