Brown acts to curb house prices

The Chancellor will announce next week the biggest boom in affordable housing for more than two decades in an attempt to curb spiralling property prices.

Gordon Brown – who believes that high prices are damaging the economy – will almost double the £1bn budget for the Housing Corporation. The extra funds, for the body that disburses money to housing associations, are designed to kick-start a housing programme for key workers such as police, teachers and nurses to buy or rent properties.

The move comes amid growing concern that public services in the South-east are suffering because workers can no longer afford to buy property in the region.

Ministers insist that the new housing boom will avoid concreting over Britain's green belt. The expansion will be focused on four existing areas with good commuter links to London: Milton Keynes, Ashford in Kent, Stansted in Essex and the Thames Gateway, expanding London to the east.

Mr Brown and John Prescott, the Deputy Prime Minister, who has recently taken over the responsibility for housing and local government, are this week putting the finishing touches to the plan, which they privately describe as a "gear change" and a "step up" the housing ladder for key workers. One top Whitehall source said yesterday: "It is going to be very big."

They have rejected an alternative strategy, pressed on them by trade unions, of increasing the amount of free loans – at present fixed at £10,000 – available to such workers to help them buy homes. The Chancellor has decided that this would merely fuel the soaring prices.

Mr Prescott said yesterday: "The massive rise in house prices has caused us very real difficulties." The situation was affecting "the whole quality of life" because of its impact on public sector workers and, he added, "we have got to do something much more effective" than subsidising house prices as in the past.

The Deputy Prime Minister will follow the Chancellor's statement by announcing measures to streamline the planning system, which ministers claim has hindered housebuilding, before Parliament rises for the summer recess.

Fewer houses were built last year than at any time since the 1930s, and the Joseph Rowntree Foundation had announced in April that less than two-thirds of the houses needed each year are actually being built.

Ministers are negotiating a deal with builders to offer quicker planning approvals in return for more housing, providing that a high proportion of the new homes is "affordable".

Mr Prescott – who is injecting energy into a ministry long distracted by Stephen Byers' travails – is also seeking more money for councils so that they can recruit more officers to speed up the planning process, which has been starved of funds.

He is determined to concentrate not just on building new houses, but also on creating communities properly served with infrastructure and good transport links. He therefore wants more roads, schools and other vital amenities to be provided for new developments; builders have blamed their absence for holding up construction.

He is confident that he can square the circle of providing affordable housing and preserving the countryside by building houses at higher densities than in the past on land that has already been used. In May, years ahead of schedule, the Government exceeded its goal of constructing 60 per cent of new houses on brownfield land, and he is now considering setting a higher target.

The Conservative Party denounced plans for more housing two years ago as a "black day for the South-east and a disaster for the countryside". However, the Council for the Protection of Rural England supports the expansion, providing it is on land already used for development, and not on greenfield sites.

Planning experts said that efforts would be made to avoid the mistakes of the 1960s and 1970s when cheap system housing was put up by councils only to be turned into new slum areas. Better designs are being used to allow higher densities without the social problems caused by high-rise blocks.