By William Schomberg
LONDON (Reuters) - Britain will announce on Friday an overhaul of rules on how and where new houses can be built as it tries to address a chronic shortage of homes and put its economy on a sounder footing.
A new plan to boost Britain's weak productivity will include powers for the government to step in and draw up housing plans if local authorities fail to do so. Town halls that drag their feet on planning decisions may be fined, the government said.
Britain will also give automatic planning permission for housing developments on suitable brownfield sites -- land formerly used for industrial or commercial purposes -- it said ahead of the release of the productivity plan on Friday.
The government hopes that a nimbler land and housing market will help improve Britain's poor productivity growth by making it easier for people to own homes close to their work and for firms to have more freedom of location.
Finance minister George Osborne said this week that productivity was Britain's "great economic challenge".
A strong recovery in the economy in the last two years has pushed employment to record highs. But growth in output per worker lags behind the rates of many other advanced countries.
Friday's launch of the productivity plan represents the second half of the government's first budget since the Conservative Party of Prime Minister David Cameron won an outright majority in national elections in May.
In the budget statement on Wednesday, Osborne announced major cuts to welfare spending and the introduction of a higher minimum wage as he set out his plans to overhaul the economy over the next five years.
The finance ministry said Britain's economy would be 31 percent bigger if it could match U.S. productivity.
The productivity plan will cover areas including higher education and training, transport, trade and the devolution of power to cities and regions. But changes to planning rules for housing would be the centrepiece.
"Britain has been incapable of building enough homes. The reforms we made to the planning system in the last parliament have started to improve the situation," Osborne said.
"But we need to go further and I am not prepared to stand by when people who want to get on the housing ladder can't do so."
British house prices have risen sharply in the past two years thanks largely to a lack of properties on the market.
Other measures due to be announced on Friday include stronger compulsory purchase powers to bring forward more brownfield land and the devolution of planning powers to the mayors of London and Manchester.
Major infrastructure projects which include housing development may be fast-tracked and planning permission requirements could be relaxed for raising the height of buildings in London to the same level as an adjoining building.