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Vince Cable has reiterated the government鈥檚 desire to offer financial guarantees to developers of housing and infrastructure as part of a plan to drive growth in the economy.

In a speech to think tank Centre Forum this morning, the business secretary reiterated plans, to use the government鈥檚 own balance sheet to inject credit into the economy.

Under the scheme being drawn up by the Treasury, the government would use state guarantees to back investment in housing and infrastructure, guaranteeing the risk for specific projects and enabling the private sector to raise finance more cheaply.

The government鈥檚 contingent liability would only become a debt if the guarantee was ever called in and thereby could boost investment without adding to public spending.

Cable said the scheme could be used to 鈥渢rigger a significant volume of housing investment 鈥� leading hopefully to a virtuous circle of new building l3ending to increased affordability and also increased private demand鈥�.

鈥淚nsofar as these ideas reduce uncertainty, they can encourage significant investment from the private sector. Recovery requires a big expansion in social and private house building,鈥� he said.

Cable said progress on the scheme could be made 鈥溾�漴apidly鈥� in housing, including social housing.

鈥淭here is large unmet demand for social housing which may be self-financing if built, in conjunction with private housing. Indeed, some major UK contractors are doing just that with access to long term - 10 years plus finance - with access to guarantees. This activity could be multiplied,鈥� he said.

He said the government鈥檚 strategy was aimed 鈥減roviding certainty about ongoing government support to encourage greater supply chain investment鈥�.

鈥淭his can come through regulatory certainty as much as ongoing subsidy. Co-financing private house building alongside council house building could be an extension of the same principle. The potential is large,鈥� he added.

鈥淭he public sector balance sheet has to be used to leverage in private capital, particularly in housing. Demand has to be created, it does not emerge simultaneously.

鈥淭here is scope here to both create demand and solve a pressing supply need at the same time. Innovative approaches to public policy - making the most of the fact that our resolute action has given us a strong balance sheet - are the key to unlock this potential.鈥�

Richard Threlfall, KPMG head of infrastructure, said state guarantees could slice 2-3% of the cost of finance and the measure was 鈥渆xactly the approach Treasury should be looking at鈥�.

鈥淚t makes a huge amount of sense and I鈥檝e never understood why the Treasury has been so reluctant to uses its guaranteeing powers in this sort of way as at the end of the day it doesn鈥檛 cost them anything.

鈥淭he government has got no money and the economy is struggling so the best way out is to use some form on non-monetary support mechanism.鈥�

It is expected the scheme will be in place by the autumn statement.