Budget to include £1 bln housing package

By Sumeet Desai

LONDON (Reuters) - Chancellor Alistair Darling is expected to spend an extra 1 billion pounds to support the construction industry in Wednesday's budget, a government source told Reuters on Monday.

The new money will include a fund to restart development at stalled construction sites by investing alongside developers. In addition, the government will create another fund for local authorities to provide new social housing, the source said.

Some cash will also be set aside for helping people facing difficulty keeping up with their mortgage repayments.

The source said the package should help unlock hundreds of millions of pounds worth of housing projects that have been stalled as a result of the global credit crunch and crash in property prices over the past year.

Darling will present his second annual budget on Wednesday, having to balance the needs of a rapidly shrinking economy and an election due by June 2010 on one side and a burgeoning budget deficit that could hit 160 billion pounds on the other.

While analysts say Darling has little scope for a massive fiscal stimulus similar to the 20 billion pound package he announced in November, the government appears keen to boost demand through a host of smaller, targeted measures.

Government sources told Reuters at the weekend that Darling was expected to spend an extra 2 billion pounds to boost employment and another 500 million pounds to support environmental projects.

That means extra spending will total at least 3.5 billion pounds, in addition to any further measures that could be announced in the budget.