Scottish ministers are in denial that their policies are bringing the building of low cost housing to a grinding halt in Scotland.

At an evidence session for the rural housing inquiry Labour MSP Rhoda Grant challenged ministers over policies which are squeezing reserves from housing associations, cutting grants and forcing them to take on huge loans.

Mrs Grant, who is Labour's acting rural development spokesperson, commented:

"At a time of recession public investment is vital in supporting industries like the building trade.

"However, cuts to Housing Associations Grants (HAGs) are putting barriers in the way of new affordable housing developments at the very time they could benefit from lower costs in building.

"The Housing Associations are telling me that developments are being stalled because of HAGs but the housing minister Stewart Maxwell dismissed their concerns as wild scare stories.

"The Minister seems to be in denial about what is going on.

"At this difficult time for the housing industry we are seeing a slow down not because of the need for the work but because of the Government’s own policy.

"I was disappointed the minister did not signal any intention to reconsider his policy.

"On the contrary he seemed to be giving up and defending the very policy the Housing Associations are telling us is causing the problem.

"Left as it is the Government will not be able to meet its targets for new affordable housing and we will see rents rise and waiting lists grow.

"I will continue to campaign to get a fairer deal for housing associations and tenants."