Labour calls for £10bn housing boost

Ed Balls has backed calls for the government to finance a £10bn capital spending stimulus, with the shadow chancellor arguing the spending should be focused on boosting housebuilding.

In a speech on the economy this week, Labour’s shadow chancellor said if growth returned to the economy this year the party would shift its emphasis from its current policy of a temporary VAT cut, which it has called for as means to stimulate the economy, to boosting capital investment.

He backed the call by the International Monetary Fund last month for the government to provide “near-term support for the economy”, with an immediate £10bn billion boost to infrastructure investment funded by a short-term rise in borrowing.

Balls said that if this £10bn boost was focused solely on housebuilding, 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 over the next two years.

He said: “We support the IMF’s call, consistent with medium-term fiscal consolidation, for the government to act to boost capital spending over the next two years - financed by a temporary rise in borrowing as Labour has also urged - to build our way to a stronger recovery.

“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.”

He added that there was “no point in vague promises” about boosting capital spending beyond 2015, and that the government should bring forward capital spending 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,” he said.

He said: “As far as capital spending is concerned, it certainly does make economic sense now, as the IMF has urged, to bring forward capital spending to support growth and invest in our long-term infrastructure - creating jobs now, bringing long-term returns and taking advantage of very low interest rates.

“And for the future, we need to invest in the homes, transport and infrastructure Britain needs and ensure a recovery made by the many.”

Balls also said that Labour would commit to the spending envelope laid out by the government in the spending review this month for 2015-16, with the shadow cabinet developing plans for government on the basis of switching departmental spending, rather than increasing budgets.

However said he was prepared to increase capital spending above planned totals.