By Laurence Norman and Anita Likus
U.K. Prime Minister Gordon Brown announced Monday new plans to cushion the impact of the recession, including extra money to fight youth unemployment and build affordable housing.
A year into a severe recession and less than 12 months from the next general election, Mr. Brown's proposals also included public-services reforms and changes to the political system.
He said he would boost funding for affordable housing over the next two years to £2.1 billion ($3.5 billion) from £600 million. The money will be brought forward from future years' spending plans.
Mr. Brown said the extra spending will deliver 20,000 new affordable homes, creating 45,000 jobs in the construction sector. But analysts were skeptical of how much the program would help the U.K.'s beleaguered house builders.
Most of the U.K.'s house builders are currently only building to meet new orders, and have stopped land purchases as they seek to conserve cash. Many have said a recovery in their businesses depends on banks offering more mortgage products and the threat of unemployment receding. U.K. net mortgage lending posted its weakest gain on record in May, but the number of mortgages approved hit a 13-month high, industry data showed Monday.
Mr. Brown said he planned to give local governments will gain more responsibility for building social housing, but industry experts warned that local authorities would need to be able to self finance in a tight credit environment to meet the targets.
Numis Securities analyst Chris Millington said that companies most likely to benefit from the new social housing plan include broader construction companies like Rok PLC, Kier Group /zigman2/quotes/209470443/delayed UK:KIE -1.28% PLC, Morgan Sindall PLC and Balfour Beatty /zigman2/quotes/202863772/delayed UK:BBY +0.69% PLC, rather than companies focused on building houses.
Mr. Brown said the new jobs program, which will start January 2010, would guarantee a job or training for those under 25 who have been out of work for a year. Those who don't accept the guaranteed job or training will have their welfare benefits cut. He said this £1 billion program, which will be financed from funds set aside in the budget, will provide 100,000 jobs for young people.
Mr. Brown announced various other reforms, including greater choice in public services and further reforms of the upper house of parliament.
He also confirmed the creation of a £150 million Innovation Fund that will be able to lever up to £1 billion of funding for key sectors, like life sciences and low carbon technologies. Mr. Brown reiterated that the new economic programs would be paid for by reprioritizing its policies, not by adding to existing spending levels or debt.
Mr. Brown's Labour Party must hold an election by June 2010. Labour has been far behind in the polls and Brown faced challenges to his leadership in early June.