The UK government is to underwrite up to 50 billion pounds of private sector building projects in a bid to stimulate the economy.

The Treasury said the new Infrastructure (Financial Assistance) Bill, which builds on a scheme first launched in July, would enable major projects that had stalled due to lack of finance to be underwritten using government guarantees.

To qualify, the projects would have to be "nationally significant", ready to start construction within 12 months, financially credible and "good value" for taxpayers, Chancellor George Osborne told the BBC.

The £50bn scheme includes plans to underwrite construction of up to £10bn of new homes, including guaranteeing the debt of housing associations and private sector developers.

The Chancellor also said the government would also seek to speed up planning decisions and encourage certain developments on Green Belt land.

"I think we can speed up planning. It is absolutely ludicrous that it takes years to get planning decisions in this country," he said.

"This country, in the current economic environment, cannot afford to wait years for development," he said.

The Chancellor also seemed to contradict his party's official line on Heathrow, saying a third runway at Heathrow could be one solution to increasing airport capacity in the South East.

Osborne's comments came as the Prime Minister, David Cameron, told a newspaper that he wanted to "cut through the dithering".

"We have to remember the fundamental truth at the heart of this debate: you cannot borrow your way out of a debt crisis," Cameron wrote in the Mail on Sunday.

"Countries across Europe have found there's a tipping point where piling on more debt isn't just counter-productive, it is lethal - because you slam the brakes on growth."

"We are pulling Britain out of that trap. When I became Prime Minister our market interest rates were the same as Spain's. Ours are now less than 2pc; theirs more than 6pc. Why? Because we threw a lifeline around the British economy and pulled it back from the cliff edge."

The UK economy is currently in recession, with the latest figures showing it contracted 0.5% in the second quarter.

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