Ed Balls calls for £6 billion investment in affordable homes

Labour leadership contender Ed Balls today called for an extra £6 billion to be invested to build an additional 100,000 affordable homes in a major new programme of house-building.

Mr Balls will be joined by wife Yvette Cooper - the shadow work and pensions secretary - for the first time on the campaign trail today when they visit a new housing development in central London to highlight his plan.

He argues that the Government should fund a rapid expansion of house-building from a £12 billion "windfall" available because state borrowing for 2009-10 came in at £155 billion - lower than Alistair Darling's forecast of £167 billion in the March Budget.

The shadow education secretary believes his plan could create up to 750,000 jobs in the private sector, boosting economic growth as the UK and global economic recovery remain fragile, and tackling the urgent shortage of decent affordable housing.

He admitted that Labour's pre-election plans to build 176,000 social homes over four years were "too cautious" and acknowledged that the party was "late in recognising the importance of building more homes and more affordable homes" while in office.

A massive boost in house-building would "exemplify the economic alternative we need right now, and expose the myth that cuts can somehow produce jobs and growth".

"The truth is that whilst we made progress, Labour leaders over several decades never paid enough sustained attention to housing to make it the priority it deserved. That must change," Mr Balls said.

"We now need a strong housing policy to support our economy, to provide the homes Britain badly needs and to reconnect with the voters we lost, both young families who want a home of their own and those queuing patiently for social housing."

Mr Balls will also call for a temporary 5% VAT rate for the repair, maintenance and improvement of housing from January - when the Government plans to hike the tax to 20% - to encourage households to invest in the value of their homes. In the short term this could be paid for by part of the remaining £6 billion "windfall", but international evidence suggests that the move could actually increase the tax take, he said.

Mr Balls will unveil the policy at an event held at the National Housing Federation in central London today alongside Ms Cooper, shadow housing minister John Healey and former London Mayor Ken Livingstone.

In an article for the website LabourList, Mr Balls said: "There can be no doubt that the extra homes are needed. With 4.5 million on housing waiting lists and 2.5 million in overcrowded accommodation, more affordable homes would meet an acute social need.

"Since Alistair Darling's March Budget - thanks to our economic recovery plan - tax revenues have been higher and spending on welfare and unemployment lower than predicted. The public finances are around £12 billion healthier than forecast at the time of the Budget.

"The coalition wants to use that extra money to pay down the deficit faster.

"I think that at a time when the economy is still so fragile and other countries are already tipping back into recession, we should instead use that money to boost construction jobs and build new homes."

Mr Balls said that the extra growth and tax revenues created by increasing house-building now would would help Britain pay down more of the deficit later when the economy is fully recovered.

Mr Livingstone said: "I very much welcome the proposals Ed Balls has set out to invest in house-building, both to build much-needed more affordable homes and to stimulate the economy, so that we invest our way through this difficult economic situation rather than slashing services and endangering growth.

"Ed Balls is right to challenge the lazy and damaging consensus the Government is seeking to create that we have no choice but to cut services to the bone. Ed's proposals to stimulate house-building and boost the economy indicate a Labour alternative to the Government's assault on jobs, pay and services is both possible and necessary."