Treasury could relax financial rules to make way for largest council house building programme for decades

Gordon Brown has said he is willing to waive financial restrictions on council borrowing and house building to kick start a new wave of construction and boost the economy.

The Prime Minister said councils should be allowed to borrow more money than currently allowed and be able to keep proceeds from rent and sales as long as they can prove they will act quickly and efficiently.

Building quoted Brown as saying: ‘In the past we have placed restrictions on local authorities delivering social housing. But let me today be clear, if local authorities can convince us that they can deliver quickly and cost effectively more of the housing that Britain needs, then we will be prepared to give you our full backing and put aside any of the barriers that stand in the way of this happening.’

The changes are expected within months and are designed to reverse the dramatic fall in homes built by councils since Margaret Thatcher introduced the right to buy policy in the early 1980s. Last year only 375 council homes were built.

In contrast, thousands of homes could be built by councils in the next few years, said the Times in its front page report on January 30th. These will most likely be erected on sites left empty by struggling house builders, but which already have planning permission.

Government sources told the Times that Brown has the support of housing minister Margaret Beckett in pushing through the new regulations, but Chancellor Alistair Darling is said to be resisting the proposals that could add billions of pounds to public debt.