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The New Local Government Network is planning to lobby the government to allow councils to offer mortgages to those struggling in the credit crunch. Councils in general are hopeless at practically everything they touch and absolutely lethal when it comes to money. So what happens when they loose ratepayers' money and the council tax has to go up to compensate? I maybe a bit out of touch but I always thought it was the job of local councils to provide services such as street cleaning, refuse collection, police and so on to residents. I did not know it extended to banking services, which are surely well outside their areas of expertise. What do others think? Harry Katz, Norwest Consultants, Middlesex

James Hulme, New Local Government Network, London

Dear Harry,

I would disagree that councils in general are hopeless at practically everything they touch. Most local authorities are more efficient than any central government department and deliver a whole range of services, which on balance reflect value for money. Dispensing mortgages is also not a new concept with councils having a long track record of offering mortgages up until the 1980s.

In a perfect world perhaps the mortgage market should be left to the open market but much of the current housing crisis has been caused by a lack of liquidity caused by mortgage lenders withdrawing financial products and irresponsible lending practices perpetrated by many high street lenders. In such circumstances, with business unwilling to offer financial products, the state has a legitimate role stepping in.

Housing support from councils would allow more people to stay in their homes, thereby reducing the amount of properties flooding an already saturated market and ensuring communities are not riddled with empty properties. Councils have a unique perspective on their local communities. They invest in local education, health, transport and leisure facilities so why not offer help to people deciding where to live?

We should also be clear that this would not just be throwing taxpayers' money at the problem.

Councils would have to show clear financial judgment in offering services and not merely give assistance to the sub-prime market. As such, there is no reason why councils could not be able to make a surplus on their investment – something that would of course benefit council taxpayers.

Donna Werbner, Fool.co.uk, London

Dear Harry,

Should councils offer mortgages to homeowners facing repossession and struggling first-time buyers? Yes, in my opinion.

Social housing stock has been depleted since the early 1980s, many first-time buyers cannot afford to pull together the 10 per cent deposits now required by most lenders and repossessions are rising an alarming 48 per cent a year.

The New Local Government Network's suggestion would therefore kill three birds with one stone with the added bonus of potentially revitalising some parts of the housing market.

As for losing taxpayers' money, do not forget, there is also a chance that this scheme could potentially result in a long-term profit for the Treasury.

While I agree that councils are in general hopeless at practically everything, It is the job of a council to get involved with housing issues.

A quick glance at the history books reveals councils have taken on such a role since 1890, when the Housing Of Working Classes Act was passed to encourage local authorities to improve housing in their area. It seems to me the New Local Government Network's suggestion is along the same lines but is a modern solution to today's modern housing problems.

I just hope that if the government does accept the proposal, it puts proper checks and balances in place to ensure the scheme is run both efficiently and effectively. But I am not holding my breath.

David Copland, Pink Home Loans, Lichfield

Dear Harry,

It is good to see the government and local authorities are finally acknowledging that something needs to be done to help the market recover, although many would say it has come too late.

I believe with the market in its current state, any initiative that can soften the blow of the economic downturn on the customer should be welcomed - whoever it is trying to help.

However, I do not agree with councils having direct involvement with offering mortgages to those affected by the credit crunch purely because I am not convinced they have the skills required to deal with these risky mortgage cases.

With repossession levels at their highest since the early 1990s, both the New Local Government Network and London councils are arguing local authorities are in an ideal position to help stabilise the housing market and James Hulme, a spokesman for the New Local Government Network, has been quoted as saying "that it would take no time at all to do, that it just needs to be agreed with the Treasury as well as how much money can be allocated to it".

This is not something that can be rushed into. It will take a lot of time, effort and skilled people to ensure the correct procedures are in place to allow the proposal to work compliantly and effectively.