Labour leadership contender Ed Balls has called for an extra £6bn to be spent on building 100,000 new affordable homes.
He believes a recent £12bn Treasury windfall from improved public finances should be spent on easing the housing crisis and creating 750,000 construction jobs.
Treasury figures in July showed that Britain borrowed £155bn in 2009-10. That is £12bn less than the amount forecast by Alistair Darling in his March budget.
Balls unveiled the radical policy at a special event at the National Housing Federation today (31.8.10) in central London alongside Yvette Cooper, shadow housing minister John Healey and former London Mayor Ken Livingstone.
Balls said: "The coalition government wants to use the 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."
Based on figures from the National Housing Federation, the extra £6bn investment Balls is calling for, together with matched funding from housing associations, would see an additional 100,000 homes built.
The Home Builders Federation has estimated that every home built creates 1.5 fulltime jobs plus up to four times that number in the supply chain.
So increasing the output of homes by 100,000 would generate up to 750,000 jobs, claimed Balls.
He said: "Crucially, all the extra growth and tax revenues these plans would create would help us pay down more of the deficit later on when the economy is fully recovered."
The Shadow Education Secretary also called 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%.
Mike Leonard on behalf of the Get Britain Building Campaign said "We need to recognise that investing in construction is vital as the money stays in the UK, jobs are created and we are building a better future. We welcome any initiative that puts investing in construction at the centre of the recovery agenda."
