As the government is planning to take steps to give the housing market new life, councils would sell £2 billion worth of mortgages to tens of thousands of those individuals worst affected by the credit chaos. The proposed new initiative will mean that production of thousands of new council houses, going back on decades of government policies which have promoted the ideology of tenants buying their council houses.

It is thought that there is still deep concern about the effect of the plan from tax payers groups. A spokesman for the Taxpayers alliance said “If councils start giving out risky loans underwritten by tax payers, council tax could soar to totally unaffordable levels. The new local government network, a think tank under the command of Chris Leslie a key supporter of Gordon Brown, is calling for a reformation of the rules that currently prevent councils from the sale of competitive mortgages.

These plans are believed to have been considered by the treasury minister Yvette Cooper and are set to be discussed more in depth at a cabinet meeting scheduled for next month.