Liberal Democrat leader Nick Clegg has signalled the government is ready to loosen its austerity drive with a "massive" increase in state-backed investment into housing and state infrastructure.
According to an interview in the FT, Clegg also said the coalition was looking at "massively amplifying" credit easing schemes, including its £20bn lending scheme to small business.
According to the FT, the terms of the European economic debate changed earlier this month, following recognition that Francois Hollande's election as French president puts growth, not austerity higher up the political agenda across Europe.
Clegg said he personally welcomed the election of the French Socialist leader.
However, the promised injection of state-backed investment has been met by scepticism from business leaders and Labour.
"We've heard promises about infrastructure investment time and time again, but nothing has happened," said Rachel Reeves, shadow chief secretary to the Treasury.
The NewBuy indemnity scheme is one example of the type of investment the government is keen to make, with 95% mortgages guaranteed jointly by the developer and the government.
One idea being examined is a new credit easing scheme for housing associations to lower their cost of borrowing, perhaps by allowing social housing bonds to be included in the Bank of England's QE programme.
On the housing market, Pete Redfern, chief executive of Taylor Wimpey, the housebuilder, said the shortage of mortgage financing is the biggest market constraint.
"New Buy is working on a functional level but the rates are too high," he said. "If the government is to invigorate the housing market, they need to look at mortgage financing."
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