The local government minister says the New Homes Bonus will go to the areas that need it most. But, in reality, the exact opposite is taking place
The comments from local government minister Don Foster this week to publicfinance.co.uk about the New Homes Bonus are in stark contrast to the reality of the scheme. They fulfil the fears of many local authorities that ministers do not have full comprehension of the effects of the funding system that they have introduced.
The New Homes Bonus has been one of the clearest examples of government policy that has diverted funding away from areas that are most in need, whilst not delivering sufficient tangible benefit to local priorities.
The minister said that ‘the money will go to the areas that most need it’, but it’s the exact opposite that has occurred. The bonus has used previous revenue funding and re-allocated it according to build-base, not needs-base.
Consistent with the general trend in the new funding system, local authorities do not have to demonstrate a need but instead have to rely on the number of houses built. However, the amount of new build is largely conditional on factors outside of council influence, as demonstrated by the National Audit Office.
In addition to moving away from needs-based funding, the bonus does not address local housing need. There is no room for recognising local housing priorities for the right type of houses to be built in the right places.
The scheme only pays out for new houses, so the most benefit is gained from brand new, high-value homes. Unsurprisingly, this type of housing scheme is most likely to be found in places with the lowest level of need, not the highest.
Neither does the scheme create as many winners as it does losers, as stated by the minister. The changes currently under consultation serve to compound the problems local authorities face by removing more revenue funding.
It is hard to find any authority in favour of the current proposals. Districts are concerned about diverting housing investment to infrastructure spending. Counties are understandably aggrieved at the prospect of losing all of their NHB funding. For authorities in deprived areas, the proposals do not address the underlying problem of redistribution.
Foster states that ‘if you’re a council that really needs that money then you will get it’. The New Homes Bonus epitomises the experience of councils in areas of high need.
Take Knowsley, for example. It is one of the neediest areas in the country, ranking fifth on the Index of Multiple Deprivation. However, as a result of the New Homes Bonus, it has a shortfall in funding of £3m. The new top slice for the local growth fund only serves to exaggerate this shortfall.
Building more houses is a national priority that will be a focus of attention during party conference season and beyond into election campaigns in 2015. The New Homes Bonus has served to move funding away from the areas that need it most, and has not been evidenced to lead to significant new house build.
For genuine growth that benefits all areas of the country, ministers must fully understand the implications of their policies and deliver real solutions that work for all.
Rob Newton is principal policy officer for the Special Interest Group of Municipal Authorities
