George Osborne has signalled plans for a major deregulation of planning laws, raising the prospect of allowing more development of green belt land.
In an interview on Sunday, the chancellor of the exchequer said he wanted to see more "imaginative" thinking by planning authorities, which could allow building on previously protected land.
His words will anger some ministers and members of the coalition who have campaigned for protected green belts around urban areas to remain free of development.
The announcement of new legislation, which the government hopes will be "fast tracked" into law by October, will also be seen as an acknowledgement that the economy needs a major injection of capital.
In the interview with the BBC's Andrew Marr, Osborne acknowledged the difficulties the country was having in moving out of recession, saying there was no "magical" solution but insisted that despite sustained negative growth, progress was being made.
He refused to say whether he would give up his role as head of the Conservatives' political strategy in the cabinet reshuffle – due to be announced this week – in order to focus on the economy.
Osborne also refused to rule out the option of building a third runway at Heathrow, saying "all options" were being considered. Last week, Downing Street insisted it was sticking to the coalition policy not to add a new runway, despite intense pressure from the business sector and Tory backbenches to reconsider.
Osborne said new planning legislation would be brought before parliament in the next two weeks.
"We will have a specific piece of legislation published next week so that government can use the low interest rates we have earned by being tough on the deficit to underwrite construction projects including housing," he said.
Asked if this would mean developers would be allowed to build on green belt land, Osborne said: "We published our national planning policy framework in March and we are not preparing to tear that up.
"But if you look for example at Cambridge, they have been pretty smart about swapping some bits of the green belt for other bits – in other words allowing some development on the green belt if you bring in new pieces of land into the green belt.
"Those powers already exist but are not widely used. I would like to see more," he said.
Planning policy was thought to be a settled issue after the government backed down on plans to loosen planning rules earlier this year following a campaign by the National Trust.
Councils are drawing up new local development plans to comply with the national planning policy framework (NPPF) by next April.
Under plans being considered by ministers, local authorities may no longer be required to hold a public inquiry if green belt land loses its protected status.
England's green belt covers over 6,000 sq miles of countryside around towns and cities to prevent urban sprawl.
This week's new bill will enable the government to guarantee up to £40bn of private sector investment in infrastructure.
Treasury insiders said they were already involved in talks with 30 companies over the proposed projects, including proposals for the £600m Mersey Gateway project, a six-lane toll bridge between Widnes and Runcorn.
A further announcement, also this week, is expected to set out plans for guaranteeing construction of new homes, with guarantees worth up to £10bn.
This will be followed by an economy bill which will set out further help including more planning reforms.
The legislation will be fast tracked in order to ensure that detailed discussions with commercial parties can take place as soon as possible. It is expected to receive royal assent by the end of October.
Osborne said the low level of bank lending was one of the economy's key weaknesses, and also proposed a "small business bank" to bring together existing schemes to boost lending to small businesses.
The prime minister, David Cameron, is expected to announce new measures to stimulate the housing market on Thursday.
Osborne's plans are likely to be bitterly fought inside the cabinet, with senior Liberal Democrats and the communities secretary, Eric Pickles – who negotiated the peace deal over the national planning policy framework – reportedly opposed to further changes.
The chancellor declined to say whether the announcement was an acknowledgement that the government's economic strategy was not working. "They are difficult times for the British economy, difficult times for the world, but our economy is healing, jobs are being created. It is taking time but there is no easy route to a magical recovery," he said.
"This country faces a big question about this country's future role in the world. I am determined that we will be in the right place at the right time to ensure that we are one of the western economies that thrives in this new world," he said.
Osborne also refused to say whether he would give up his role as the Tories' senior political strategist – despite demands from backbenchers that he concentrate on the economy.
The Tory MP for Northampton South, Brian Binley, called this weekend for Osborne to stand down from his job to concentrate on winning the next election.
"I am 110% focused on the economy – any changes to the cabinet will be announced by the prime minister," Osborne said.
Cameron has signalled the start of his political fightback by vowing to "cut through the dither" that he says is holding Britain back.
As MPs prepare to return to Westminster on Monday following the summer break, the prime minister promised a series of high-profile initiatives to get the country moving again and breathe new life into the flagging economy.
His comments will be seen as a riposte to discontented Tory MPs who have attacked his leadership during the recess, with one senior backbencher suggesting he was a political "mouse".
Writing in the Mail on Sunday, Cameron made clear he was ready to take on his critics – bringing forward controversial measures to boost growth by relaxing planning rules.
He said the country could not afford the "paralysis" that caused new housing developments to be held up by entrenched local opposition and lengthy planning inquiries.
"A familiar cry goes up: 'Yes we want more housing, but no to every development – and not in my back yard.' The nations we're competing against don't stand for this kind of paralysis and neither must we," he wrote.
"Frankly, I am frustrated by the hoops you have to jump through to get anything done – and I come back to parliament more determined than ever to cut through the dither that holds this country back."
Meanwhile, the Tory rightwinger David Davis said the government must draw up a new, alternative pro-growth strategy to get the economy moving.
In an interview with the Sunday Telegraph, Cameron's former rival for the party leadership said a further round of spending cuts before the general election in 2015 was "inevitable".
"The coalition's cuts should have been earlier and deeper," he said. "This is not about individual policy areas. This is about something more fundamental … something deeper. There is an alternative economic policy."
Labour said the government's new proposals to stimulate growth showed a lack of ideas.
Chris Leslie, the shadow financial secretary to the Treasury, said the chancellor was desperate to cling on to his failing plan, regardless of the long-term damage the IMF had warned it risked doing to the economy.
"We will look closely at the details of any further changes to the planning system, including what happens to protections for the green belt. But this will not address the real reasons why construction has contracted in the last year, such as slashed public investment in housing and the lack of confidence and demand in the economy.
"What we need is a change of course and real action now to boost jobs and growth, including genuinely bringing forward infrastructure projects, a temporary cut in VAT and tax breaks for small firms taking on extra workers."
www.guardian.co.uk/politics/2012/sep/02/...lation-planning-laws
