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July 8, 2008 4:00 PM

Newcastle Liberal Democrats have welcomed a call by Lib Dem Shadow Chancellor Vince Cable to allow councils to acquire new houses standing unsold by house builders.

Mr Cable, who commands considerable economic credibility following his early analysis of the "credit crunch" and being first to advise the nationalisation of Northern Rock, made the call during the annual Institute of Fiscal Studies lecture in London.

Under his proposal, councils and social landlords could be allowed to buy up to 150,000 homes languishing on property developers' books to help shore up the housing market, thus assisting the construction sector and significantly improving supply of much needed social housing.

Senior Newcastle Lib Dem councillor Greg Stone said: "Vince's plan is extremely interesting.

"Allowing councils and registered social landlords to acquire unsold housing stock in this way by allowing borrowing against their balance sheets makes a great deal of sense and could provide thousands of additional housing units on a to-rent or shared-equity basis.

"Clearly councils and RSLs would need the Government to take action to permit such a step, but given that Gordon Brown's economic 'golden rule' about public sector borrowing has long since gone out of the window, there is nothing to stop the Government from following Vince's advice - after all, he has been proved right before.

"The Government's own scheme, which provides £200 million of funding to support housing associations purchase around 1500 properties over the next few years is hopelessly timid.

"The Lib Dems would take a far bolder approach to tackle what is one of the most significant problems facing the country today."

There are believed to be at least 47 such properties within the city of Newcastle.

Councillor Bill Shepherd, executive member for regeneration and housing on Lib Dem-run Newcastle City Council, has confirmed the council's desire to work with developers and lenders to find solutions to the worst effects of the 'credit crunch' and to explore ways to help people buy and keep homes.