Budget 2009: The return of council housing?

By politics.co.uk staff

An emergency £1 billion package to revive the UK’s housing market will be unveiled in the Budget tomorrow, with an emphasis on social housing.

The news comes as inflation hits the UK for the first time in nearly five decades.

The retails price index (RPI) for last month were lower than at the same time a year ago, according to the Office of National Statistics (ONS).

It’s the first negative reading since March 1960, when Harold Macmillan was prime minister.

Shadow chief secretary to the Treasury Philip Hammond said: “The return of deflation to Britain for the first time in nearly 50 years adds to the woes of the British economy and makes it tougher for hard-working families to deal with the burden of household debt.”

But many economic analysts welcomed the news, hoping that falling prices will encourage consumers to spend.

A prolonged period of deflation, however, can hold off spending as consumers wait for prices to drop further.

A special fund will be set up to reverse decades of movement away from council houses, with the aim of setting up thousands of council homes.

A fund to buy council houses will be set up, the holiday on stamp duty will be extended and financial help will go to houses which have just been built but cannot be sold due to falling prices.

There are rumours of a restriction on tax relief on pension contributions, however.

The state may end up taking a stake in stalled housing projects.

The reports come as Margaret Beckett, housing minister announced that a goverment scheme to help struggling homeowners came online today.