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Scottish Labour leadership hopeful Joe Fagan has set out plans to “ramp up” council house building, saying investment from council pension schemes could be used to help fund the construction of more homes.

He set out details of his plans as he battles fellow MSP Michael Marra to succeed Anas Sarwar who stepped down from the role when he joined Andy Burnham’s Government.

Mr Fagan said the policy which he called his Scottish Investment Pledge is one of the “kind of bold ideas” that could help Labour “reconnect with working people”.

The former South Lanarkshire Council leader who only became an MSP in May  said as local government pension funds hold more than £67 billion, “even investment equivalent to 5% or 10% of that would represent billions of pounds of long-term capital” for housebuilding.

His policy proposal comes after independent research warned the Scottish Government could miss a key target for building affordable homes.

While ministers have pledged to deliver 110,000 affordable homes by 2032, the Fraser of Allander Institute forecast only 75,000 could be built by then.

Mr Fagan warned: “Scotland is in a housing emergency and we cannot simply watch another target slip away.

“We need to build more homes, and we need to be much more ambitious about putting Scotland’s own wealth to work in Scotland.”

While he stressed politicians “shouldn’t interfere with investment decisions” involving pension funds, he said the Government should work with councils, housing associations and others to “create a pipeline of projects that are commercially sound and ready for investment”.

He said: “We can ramp up council house building if we connect Scotland’s long-term capital with good investment opportunities in the communities that created that wealth.”

Mr Fagan said his Scottish Investment Pledge could help tackle the “uncertainty” that can prevent councils, housing associations and others from building new homes.

He said: “The SNP has declared a housing emergency but independent research now suggests it could fall around 35,000 homes short of its own affordable housing target.

“At the same time, more than 18,000 households and over 10,000 children were living in temporary accommodation at the last count. That is not a housing system that is working.

“As a former council leader, I know that one of the biggest barriers to building is uncertainty. Councils, housing associations and the construction industry need long-term confidence if they are going to invest, build capacity and train the workforce we need.

“My Scottish Investment Pledge is about unlocking that ambition.

“Scotland has the skills. We have the land. We have enormous pools of long-term capital.

“We should use the power and wealth we already have to build homes, create good jobs and put working-class communities back in control of their future.”