Shadow chancellor Ed Balls has called for a short-term rise in borrowing to fund the immediate release of £10bn for a major national housing programme.
In a speech on the economy ahead of the Government unveiling its spending plans later this month, he demanded a fresh approach to strike the right balance for growth.
Balls said the time had come for a targeted programme to build 400,000 much-needed new homes, which would create 600,000 new construction jobs and boost small business.
He supported calls from the International Monetary Fund last month for the government to drive the economy with a fresh infrastructure spending boost.
But Balls crucially wants to see a short-term rise in borrowing to start up an immediate national house building programme to stimulate the economy when it is most needed.
“With thousands of construction workers out of work and interest rates at record lows, there is a growing consensus that investing now in improving our infrastructure, particularly housing, would give an immediate boost to the economy, encourage more private sector investment, and give us a long-term return as we strengthen our economy for the future.
“If the entire infrastructure boost recommended by the IMF was spent on housing over the next two years, we calculate that it would allow the building of around 400,000 affordable homes across the country, and support over 600,000 new jobs in construction, including 10,000 apprenticeships.”
Balls said this would also support small businesses, help people aspiring to buy their own home, reduce waiting lists, and easing upward pressure on rents and housing benefit bills.
“So to the Treasury and the Chief Secretary I say this: there is no point in vague promises about more capital spending in 2017 or 2020.
“We need action now. To secure the recovery and get tax revenues coming in, we need that capital spending boost brought forward – and invested this year and next year.”
Mike Leonard, CEO of the Modern Masonry Alliance said: “Britain needs jobs and growth, and building 25000 public rented homes is one way to achieve it!
“We are delighted that more homes will be built in 2013 but remain concerned that the mix is all wrong.
“Most of the building is in the South East, the SME is all but excluded due to lack of finance and the building of homes for public rental has collapsed.
“We fully back Labours call for immediate intervention to correct this dysfunctional market creating the jobs and growth we so badly need.”