Controversial homes bonus plan criticised

Ministers and senior civil servants have been fielding questions about the government’s surprise decision to hand about a third of New Homes Bonus to local enterprise partnerships.

Leaders and treasurers have expressed serious concern about the controversial plan to include £400m a year of New Homes Bonus payments in the single funding pot for growth to be accessed by LEPs from 2015-16.

The Department for Communities & Local Government has been inundated with requests from treasurers for further details – and told many to wait for a forthcoming consultation.      

A report to the LGA’s finance panel seen by LGC said the decision had come “as a surprise”, adding: “It means pooling at LEP level of un-ringfenced funding previously received directly by councils and which many will have planned to use to help bridge the funding gap.

“This will potentially redistribute money between councils and impact on the funding for local services. Those impacts do not appear to have been properly considered and we are urgently seeking more detail.”

Paul Woods, Newcastle City Council treasurer and an LGA financial adviser, said treasurers needed to know as soon as possible whether the £400m would come from 2014-15 or 2015-16 budgets and whether councils would be expected to contribute the full £400m from existing allocations.

He also suggested the £400m should not be treated as an additional cut over and above the 10% cut in resource departmental expenditure limits announced in last month’s spending round.

“It must be treated as though it was part of the 10% real terms cut that has been announced – otherwise it is simply an extra cut.” This would “bring the real cut up to 11.9%”, he said.

District leaders who met communities secretary Eric Pickles last week were told that next year’s funding would not be affected and that the top-slice would be taken from both county and district councils.

District Councils Network chairman Neil Clarke (Con) criticised the government’s decision to change the New Homes Bonus deal.

“We have been instructed to hand over something like 35% of the New Homes Bonus to the LEPs from 2015-16,” he said. “We were told it was going to be for six years and [now] it seems like the playing field has moved and the rules are changing.”

District councils have expressed concern about money being handed to LEPs where they may lack influence.

As reported by LGC, the South East LEP is currently debating a new board structure which excludes district leaders.

Leaders and treasurers of top tier councils have also raised objections.

City of York Council leader James Alexander said the decision to top slice what had been a clear and simple incentive payment for new housing would damage accountability and transparency. “This money was earmarked for democratically elected councils and will now be spent by unelected quangos instead,” he said. “This move is undemocratic and is a dangerous precedent for the future.”

A London treasurer expressed similar concern about funding “going to the LEP [which] effectively means a third of the borough’s reward [for building new houses] going to straight to Boris”.

One treasurer who did not want to be named warned there would be some “very negative responses” to the “highly controversial” policy and this could undermine the attempt to devolve growth funding to local areas. “This could lead to significant ‘strings’ or conditions being attached to funding, which will reduce its flexibility and potentially weaken the concept of a ‘single fund’,” they said.

11th July 2013 Ruth Keeling, Local Government Chronicle

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