Byers unveils home loans for key workers

Stephen Byers, the local government and transport secretary, yesterday unveiled plans to give as many as 14,000 key public sector workers, mainly in the south-east, new help to buy homes, including interest free loans of £10,000.

He coupled the announcement with a warning that the government risked losing the battle to recruit key public sector workers unless it acknowledged the importance of the public sector ethos, as well as improving their conditions.

Many nurses, teachers and police have been driven from their careers by the spiralling cost of housing in the south-east, despite a plethora of existing ad hoc increased allowances. Figures show house prices in London rising by 17% a year, compared with 7.7% nationwide. The Royal Institute of Chartered Surveyors reports that a flat in Greater London costs an average £170,000, compared with £85,000 in the south-east, £55,000 in the north-west, and £45,000 in the north.

Large tracts of the capital's public sector are staffed by foreign agency workers. Ambitious plans to recruit and retain staff are jeopardised by the absence of affordable housing. Recognising the scale of the crisis, Mr Byers also announced he was considering requiring developers to build some affordable low cost housing alongside office developments. Local authorities have powers to negotiate cheap housing in private residential developments. Councils are also to be required in a green paper to prepare audits designating the proposed proportion of affordable homes to be built in their area.

Mr Byers, in a break with some of the election rhetoric of New Labour, also said: "It is important that we realise the agenda for modernisation and reform of public services is not just about the role of the private sector. This agenda must also include measures that demonstrate that we value public sector workers, and the steps that we will need to take to recruit and retain key public sector workers.

"At a time of record employment levels, there is a battle taking place between the private and public sectors for talented individuals. If we are to provide high quality public services, this is a battle that we cannot afford to lose.

"There is a very valuable public sector ethos which we should not lose sight of."

Mr Byers was speaking as he gave details of the 95 successful bids, mainly by housing associations, to run schemes aimed at helping 8,000 key workers buy their first home, mainly through shared ownership or interest free equity loans. The total cost of these schemes is £230m. About 4,000 nurses and health care workers, 2,800 teachers, and 900 police officers will benefit.

Setting out the shared ownership proposal, he said that, if a key worker bought a £150,000 property, he or she would take out an £80,000 mortgage with normal repayment terms, and the remainder, in the form of rent to a housing association, would be subsidised by government.

Alternatively, the state could fund the purchase by providing 20% of the equity - £30,000. No repayment on capital or interest would be required, but if the property was sold, then 20% of its sale price would have to be repaid.

A further 2,000 workers will benefit from separate interest-free equity loans of £10,000. This £20m scheme is available for housing hot spots outside London, such as Bristol. It will be for teachers, nurses, and police officers in the first five years of their career. Ministers hope the sum could be used as a deposit on a home, although the sum would be insufficient for many houses in London and the south-east.

Mr Byers accepted the starter home concept had been there previously, but said the scheme's details and the distribution of the allocation was new.