New pension investment proposals could exacerbate problems of second-home ownership in the Helston and Lizard area, local MP Andrew George warned this week.

Mr George, who led the Commons campaign to remove the 50 per cent council tax discount for second home owners, said that just as one "tax loophole" was closing, another was opening up.

Government proposals to allow Self Invested Personal Pensions to invest in property could allow people 40 per cent tax relief on the money used to buy holiday homes and exemption from any capital gains tax on the sale of the property, should the proceeds be invested in a pension plan.

Mr George said: "Many pension schemes are seriously failing and I am sure that most business people and the self-employed will look very carefully at this option. In the present climate, this would inflame the market for second and holiday homes in places like Cornwall and the Isles of Scilly.

"This would be very bad news for locals, especially young people who are already suffering in what is an appalling and unprecedented housing crisis.

"There is hardly any affordable accommodation on the market now. If the Government implements this plan there could be absolutely no affordable housing at all."

The reduction of the current 50 per cent discount for second home owners to 10 per cent is likely to come into effect in April.

Cornwall county council has urged district councils to accept a deal whereby 75 per cent of the extra money raised will go back to the district councils to be used for affordable housing, with the remainder going into county coffers.

Leader John Lobb said it was a "fair and equitable" agreement, but both Kerrier and Caradon district councils have called on the county council to give all the extra revenue to the district councils.