11 March 2013
Last updated at 07:34 ET
Boosting homebuilding and infrastructure spending should be the main goal of the forthcoming Budget, according to business lobby groups.
The CBI and the British Chambers of Commerce (BCC) want tens of thousands of new homes to be built to create new jobs and provide affordable homes.
But they say that the government should stick to its plans to cut borrowing.
However, the BCC says that the government should borrow more if there is no growth within six months.
The BCC is advocating a range of measures, including the building of 100,000 new homes, which it says will cost almost £30bn over three years.
John Longworth, director general of the BCC, said: “If within the next six months there is no prospect of growth… you might have to consider actually borrowing more money but you should only do it to fund areas that the market would forgive.”
The CBI says £2.2bn should be moved from current spending to “high-growth areas”. Some of this money should be used to build 50,000 new affordable homes, which it says would create 75,000 jobs.
The group also wants more investment in roads and infrastructure and a cap on business rates.
The CBI said money could be found from savings within government departments as well as sales of land and property, and insisted there would be no need for further borrowing.
Tax incentives should be provided to encourage the refurbishment of existing properties, the CBI added.
CBI director general John Cridland told the BBC the plan would address a range of problems: “We need Housing Associations to be freed up going forward to build the affordable housing needed.
“If we want nurses and firemen to be able to live in London we need to build these homes. You create construction jobs – and jobs for young people because these are entry-level jobs – and you build confidence.”
He said the government should stick to its fiscal plan, but that these measures were also needed to boost the housing market and would benefit first-time buyers, those trapped in negative equity and those looking to refurbish their homes.
Last month, the CBI said that the UK would avoid falling into a so-called triple-dip recession.
The group believes that the UK economy will grow by 0.3% in the first quarter of the year, after the economy shrank in the last quarter of 2012 – the first period in what some feared might be another six months of negative growth.
The suggestions come as the coalition partners continue to debate whether the government’s austerity plans are the right course for the current flat economic conditions.
Both Prime Minister David Cameron and his Chancellor, George Osborne, are determined to keep to their plans to rein in spending.
On Monday, the former defence secretary, Liam Fox, a Conservative, called on the government to freeze the level of public spending for five years and spend the money saved on cutting taxes and the deficit.
He wants all public spending frozen – as against the current freeze for Whitehall departmental budgets.
He is also urging an end to the ring-fencing of certain budgets, including the NHS, schools and universal benefits such as the pensioners’ winter fuel allowance.
The Liberal Democrat Business Secretary, Vince Cable, is also against ring fencing, although for different reasons.
He told the BBC that protecting some departments intensified the burden on others: “When you have 80% of all government spending that’s ring-fenced it means all future pressures then come on things like the army, the police, local government, and skills and universities.
“So… you get a very unbalanced approach to public spending… I think as a long-term approach to government spending, it isn’t very sensible.”
George Osborne will announce the Budget on 20 March.
UK ‘should spend more on building’