Could construction kick-start the economy?

News has emerged that the government will shortly launch an urgent plan to kick-start construction, as the Prime Minister looks to the housing sector to rescue the nation's flagging financial fortunes.

Intuitively, this is a logical 'next step' for the coalition following April's GDP figures - published by the Office for National Statistics (ONS) - which pinpointed poor construction output as the trigger for a double-dip recession.

However there is disagreement about how a renaissance in construction would be financed, and essentially the government wants to create growth without raiding its own funds. According to Inside Housing:

'Options being considered include using government guarantees to encourage private sector investment in housing, and the possibility of using housing association balance sheets to support further development through extending the £1.8 billion affordable rents programme.'

However, Kate Barker, author of the 2004 Barker Report into housing policy, is sceptical of this approach saying, 'I’d be surprised if this this turned out to be the way forward.'

Danny Alexander, the chief secretary to the Treasury, recently met with housing association chiefs, exploring plans to make it cheaper for them to borrow money from capital markets. According to news site 24dash:

'...it is understood that the plan could feature the Bank of England purchasing social housing bonds as part of its quantitative easing programme.'

While Inside Housing focuses on housing associations' potential to finance a construction boom, Matthew Warburton from the Association of Retained Council Housing writes:

'Current government incentives are insufficient to stimulate more new house building', arguing that council self-financing is a desirable alternative - promoting the view that central government should encourage this by removing debt ceilings, paving the way to prudential borrowing.