Lib Dems: we would create a fourth way

Leader Charles Kennedy said the party would fund councils to upgrade their homes without the need for transfer to a housing association, arm’s-length management organisation or the private finance initiative.

He said: “The government’s attempts to pressurise tenants and councils to transfer homes to registered social landlords would end under the Liberal Democrats. We will reform the system so that housing is not starved of funds if tenants opt to stay with the council.”

The party plans to allow councils to raise 75% of their total funds locally, rather than the existing 25%.

Councils could increase taxes in order to fund renovations – they would be able to levy business rates, which are currently controlled by centrally, and a local income tax, which would replace council tax. They would also get a greater share of national income tax over time.

The government has argued against allowing councils to borrow money, which it says would push up public borrowing. Taxation would not have this effect.

The party also plans to increase low-cost homeownership. Under one proposal, tenants could buy shares in a mutual ownership trust and sell them back to the trust when they move house. The shares increase in value as house prices go up, but the land would be owned by the trust so land costs would be permanently excluded from the price of the house.