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Pressure is growing on the Government to allow councils to pick up the pieces from the credit crunch. The leader of local government in England, a think-tank, and the head of the Housing Corporation have all called on ministers to enable councils to step in. LGA chairman, Sir Simon Milton, used a keynote speech to appeal directly to housing minister, Caroline Flint. He called for councils to be allowed to borrow on the open market and use ‘capitalisation' where local authorities could re-mortgage their assets to invest in house building. He said: ‘Councils want to provide decent homes quickly for those who cannot afford to rent in the private sector or buy their first home, but have been hamstrung by the lack of freedom to borrow off council assets.' CLG officials have been reviewing the issue, and Whitehall insiders say Ms Flint is giving the issue ‘serious consideration'. Further support came from the New Local Government Network think-tank, which has close links with ministers, and also backed the idea. Anthony Brand, author of a NLGN study, said: ‘Prudential borrowing would support lower-interest debt than the markets can support. ‘The Government should set £2bn of its £50bn intervention package aside for supporting these measures, and allowing the hardest-hit councils to apply for funding. This could help up to 15,000 people out of difficulty and even provide a long-term profit to the Treasury.' And Housing Corporation chief executive, Steve Douglas, urged the public sector to help the Government reach its target of three million affordable homes by 2020. He said: ‘Now is the time for us in the public sector, local authorities and central government to take a leadership role. Between us, we have a significant amount of developable land and resources.' But Sir Robert Kerslake, chief executive of the new Homes and Communities Agency which launches next December, was this week lukewarm to the idea. Speaking at a private dinner of chief executives in London, he said: ‘I haven't yet seen local authorities get into the serious business of mortgage lending, even by using prudential borrowing. And even if they went into the mortgage market, the chances of going back to 120% mortgages won't happen. We're more likely to go back to 10% deposits and a return to rationing of loans.' A CLG spokesman said: ‘Local authorities have a long-standing power to offer mortgages and support homeowners. We recognise that market conditions are more difficult at the moment, which is why we have expanded our shared ownership schemes. We are also in discussions with industry and lenders to see what more we can do.'

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WHITEHALL

Credit crisis pressure mounts for town halls

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