The building industry has traditionally led the country out of recession. Let it do so again. The problem we have now is that people are losing spending power to commodity price inflation while wages are static or even decreasing. Those same people are also maxed out on credit, unsure about their jobs and so aren't spending. Banks aren't lending because they can see that their customers can't afford the borrowing and they are also worried about their own stability. Meanwhile people are gradually paying off their debts so the money supply is decreasing.
Because banks have been splashing money about for decades house prices, mortgages and private rents have shot up and become such a large portion of our spending that most people don't have money left to spend in the general economy. This applies especially to the young, who would normally spend a large proportion of their income, to a much greater extent than to the older generation who have paid off their mortgages. Because of low interest rates on savings the older generation don't have much spending power either.
Energy prices have rocketed because of increasing worldwide demand and geological supply constraints: the world is running out of cheap oil and gas. The shale gas, at which the government is clutching, is only becoming viable because of the high prices of gas worldwide. It cannot make a difference to current gas prices because the cost of production is so high. After all, the Chancellor is having to give the shale gas companies a tax subsidy to get them to look for the stuff.
Something must be done to reduce people's fixed payments without creating a run on the banks by reducing house prices at too fast a rate. Something must also be done to increase the money supply to ordinary people. It's ordinary people who spend the money on goods which are bought and sold to create growth in the economy.
The government must step in to provide the money but this can't, and shouldn't, be done by borrowing because the government is also maxed out on debt. This money should be created by the government printing the money itself. This is no different to the way the banks create money except that the government won't have to pay interest on it. If you don't fully understand how new money is created look at the Positive Money website (http://www.positivemoney.org/how-money-works/how-banks-create-money/)
Now for how to get the economy going. Ditch the Green Deal and initiate a national insulation scheme instead, with houses insulated to PassivHaus/Zero carbon insulation levels (an 80% fuel saving approx), paid for by printing the money. There would be 200K to 300K jobs in this in the installation alone plus those in design, training and the insulation industry. By starting on Housing Association houses first a high level of take up would be gained and early eradication of fuel poverty would be achieved.
This measure would save each house holder about 80% of their fuel bills and would eradicate fuel poverty. Some households, which are currently fuel poor, would not make the 80% saving but would save some and take the rest as increased comfort. That saving would then be available for spending in the general economy to boost growth. Eventually the nation would save 80% of the 40% of the energy that we use in buildings, that is a 32% saving on the national energy bill. This would come off the balance of payments deficit and help with reducing the national debt.
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The government should also build or purchase from house builders large numbers of highly insulated houses for rental instead of for sale, again financed by printing money. This would get building going, solve the housing crisis, reduce the cost of private rents, reduce the level of housing benefit payments and would gradually reduce or stabilise the price of houses. Over time this would make house prices affordable to all people in the UK and permanently reduce the proportion of income spent outside the general economy.
