David Cameron is to announce an emergency year-long free-for-all in house extensions, allowing homeowners to build up to eight metres into their gardens without council planning permission.

The coalition, currently facing the threat of two years of minimal growth likely to shred its spending and deficit reduction plans, is desperately casting around for shock measures to boost growth, and will on Thursday present a raft of proposals relaxing planning laws and the burdens on housebuilders.

Such is the scale of the fiscal pressure on the Treasury that ministers were suggesting George Osborne might not be able in next year's review of public spending to repeat his pledge to ringfence funds for health and overseas aid.

The latest proposals will double the amount of space homeowners and businesses can build, but restrictions will still apply in conservation areas. The controversial idea to temporarily remove planning permission requirements is also expected to apply to lofts and garages and will be subject to a brief month-long consultation.

In a significant sign of shifting business opinion, the former director general of the CBI Richard Lambert will warn Osborne at a Labour-sponsored conference on Thursday that "the need to scale back the pace of fiscal adjustment now planned for next year is becoming increasingly clear".

On Wednesday another former CBI chief, Sir Howard Davies, was appointed to chair a commission that will allow the Conservatives to abandon their opposition to a third runway if it rules in favour of expansion at Heathrow.

Cameron and his deputy, Nick Clegg, will complement their plans for a relaxation of planning laws with a temporary removal on the requirement for developers to include affordable social housing so long as the planned housing is for rent rather than sale.

The ideas follow a report by Sir Adrian Montague, chairman of private equity group 3i, who was commissioned to find ways of encouraging institutional investors to increase their involvement in the private rented sector. The government will announce that it has found up to £500m from underspend in other government departments to build the affordable homes at no cost to developers.

The Treasury will also publish an infrastructure bill due to be rushed on to the statute book and promising to provide £40bn of state finance for infrastructure schemes that can start within 12 months and represent good value, including possibly £10bn of housing projects.

The aim is to take advantage of the government's historically low borrowing costs, but ensure the borrowing does not appear on the government balance sheet. Cameron will also announce new help for 16,500 first-time buyers, with an extension of the existing FirstBuy scheme, which offers an equity loan of up to 20% of the property value that can be used as a deposit.

Explaining the government's temporary relaxation of planning laws, or permitted development rights, government sources said the aim was to remove unnecessary cost and time delays to people's improvement plans.

Full planning permission is currently needed for any change to a home that extends more than three metres from the property's rear wall in the case of a terraced property, with a requirement to fill in complicated applications that can take eight weeks or longer to be considered. During the relaxation of the rules, homeowners will be able to extend to six or eight metres beyond the property's rear wall, depending on whether it is a terraced or detached property.

Businesses will be able to expand their shop by 100 sq m and industrial units by 200 sq m, and shops and offices will be permitted to develop up to the boundary of the premises.

Annually there are 400,000 planning applications processed, with almost 200,000 for residential improvements, many of which are for changes such as conservatories or extensions.

Cameron will claim: "We're determined to cut through the bureaucracy that holds us back. That starts with getting the planners off our backs. Getting behind the businesses that have the ambition to expand, and meeting the aspirations of families that want to buy or improve a home."

New housebuilding is at its lowest since the 1920s. A new national planning policy framework has only just been pushed through parliament after an outcry by the Conservatives.

At the first relatively brief cabinet since the reshuffle, ministers also discussed plans to encourage councils to redesignate green belt land as suitable for construction, so long as compensating new green belt land is identified.

Cameron has appointed Nicholas Boles as his new planning minister who has in the past described opponents of planning reform as "hysterical, scare-mongering latter-day Luddites".

At the weekend Cameron said he was "more determined than ever to cut through the dither that holds this country back … we will return this week with new government bills for economic development".

In a sign of the looming battles Boles faces, the Friends of the Earth's head of campaigns, Andrew Pendleton, warned the government against tearing up planning laws. "The planning system shouldn't be blamed for the current housing shortage – developers already have permission to build thousands of homes, but are unlikely to do so until the economy improves."

But the House Builders Association countered by warning the government "must avoid causing any more confusion and delay and must speed up, simplify and reduce the cost of making planning applications".