Taxpayers’ money to buy unsold new homes in £1billion rescue plan

Alistair Darling will intervene with taxpayers' money to prevent the collapse of stalled housing developments and could buy up unsold new properties to let to needy families.

At the same time, the Chancellor is expected to extend to the end of this year the suspension of stamp duty on properties costing £175,000 or less — a move brought in last September in an attempt to perk up the housing market, which has proved to be not enough.

The package of measures will be hailed as an attempt by the state to protect construction industry jobs and stave off a market collapse that could damage Labour's hopes of hitting its long-term targets for house building.

The plan was confirmed by Treasury sources as Housing Minister Margaret Beckett announced the launch of her long-awaited plans to help homeowners who fall behind with their mortgages.

The scheme is not the generous bail-out that some reports suggested late last year but will typically allow mortgage payers to postpone payments for up to two years if they become temporarily unemployed or ill.

The idea is to save them from repossession, but ultimately homeowners will have to pay all the mortgage money they owe, even if that means selling their houses.

The Government is offering insurance to lenders, who choose to take it up, that taxpayers will meet their losses in the handful of cases where homeowners cannot repay loans. Labour was dealt a blow today by an opinion poll showing voters have more confidence in the Tories to run the economy. Only 35 per cent back the Government, against 45  per cent for the opposition, a gap that has widened over the past year.

On voting preference, the Conservatives led by 40 to 30 per cent in the ICM/Guardian poll, a narrower gap than in other surveys.

The poll found few shared the Chancellor's optimism about the chances of recovery this year, with more than half expecting things to get worse and only four in 10 anticipating an improvement.
Preventing a bigger slump in house building and the homes market is seen by ministers as vital to avert a worsening political crisis.

Richard Diment, director-general of the Federation of Master Builders, said the industry needed help. "We're sinking deeper and deeper into a massive housing crisis, and we cannot afford to use the state of the economy as an excuse for doing nothing about it," he said.

The industry says it needs to complete 223,000 new homes per year to keep up with demand but was only finishing 185,000 a year before the crash. This year's figure is set to be 70,000.

Mr Darling's rescue schemes will even involve the Government completing road and infrastructure schemes that developers had promised to throw in for free in new estates.

A government source said: "We need to unlock these developments but just as importantly we need to ensure there is a construction industry left when the recovery gets under way."