Public sector workers to get interest-free loans for houses

Public sector workers will be given interest-free loans to help them buy a home under a new scheme to combat staff shortages in schools, hospitals and the police force.

Teachers, nurses and police officers starting out in their careers will be offered a £10,000 loan which they can use as the deposit on a property.

Stephen Byers, the Secretary of State for Transport, Local Government and the Regions, is expected to announce the scheme next week in an effort to persuade talented young people to commit themselves to a career as public servants.

"If we are to recruit and retain key public sector workers like teachers and nurses greater assistance will need to be provided to meet the increase in housing costs," Mr Byers told The Guardian. "At a time of record levels of employment there is a battle for talented individuals between the public and private sectors. If we are to be successful in providing high-quality public services this is a battle we simply cannot afford to lose."

Some 2,000 public sector workers will be able to apply for the loans under a £20m pilot scheme planned for London and the South-east where soaring property prices have led to alarming staff shortages, especially in schools.

It is understood Mr Byers has an overall budget of £250m to implement the scheme across the country. With the help of the loan, a teacher earning £25,000 would be able to buy a property for around £95,000, although they would still find it difficult to get a foothold on the housing ladder in large parts of London and other property hotspots.

The Government will be hoping this latest incentive will fend off criticism at the Trades Union Congress in Brighton later this month from unions unhappy with its support for public sector employees.