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‘Fundamentally unfair’ New Homes Bonus disparity must be rebalanced – CCN

The “inexplicable” 80:20 split of New Home Bonus (NHB) cash allocated to two-tier areas should be reviewed to incentivise better growth and efficiency, the County Councils Network (CCN) has warned in its response to the Spending Review.

County councils currently receive 20% of NHB money, which they argue will have negative net financial impact over the coming years as counties effectively receive less support for every house built in their areas.

They have called on the government to change this, to promote growth within regions that deliver infrastructure and transport “vital” to facilitating new housing.

CCN is asking for at least 60% of the NHB cash to be handed to upper-tier councils, especially in light of “increased demand” of statutory services such as schools and social services.

The response added: “Our evidence suggests that not only is the system fundamentally unfair, it is creating perverse incentivises which counter the wider objectives of government policy.

“Alongside ensuring adequate funding compensation for local areas as a result of housing growth, one of the ore aims of the NHB policy is to facilitate housing growth. However, the funding is un-ring-fenced and as such councils do not have to reinvest it in housing or infrastructure.

“CCN also contend that the NHB is not achieving other important objectives, such as incentivising joined-up collaborative working on housing, growth and strategic planning. In some cases, it is acting as a perverse incentive against joint working, which is concerning given the importance of county and district collaboration in delivering devolution deals.”

They stressed that a 2014 evaluation of the NHB by the Department for Communities & Local Government found nearly half of county council planning officers did not think the bonus has led to better communication and negotiation between councils within the same area.

“With no commitment from the government on the continuation of NHB beyond 2015-16, CCN believe that without reform the NHB is financially penalising our member councils for doing the right thing and supporting housing growth. In addition, the NHB, as currently structured, is not achieving important objectives of incentivising both economic growth and sector efficiency,” the response said.

The NHB is a grant paid every year for six years to local councils to increase the numbers of homes they build and use. It is based on the amount of surplus council tax revenue raised for new-build homes and conversions.

Other proposals in the CCN response included urging the government to introduce long-term indicative budgets for local authorities of at least five years.

The network argued that in recent years, provisional settlements were determined just three months before the start of a financial year. It called this “completely unacceptable” as it restricts robust financial planning and leaves little time for public consultation and scrutiny.

It added to previous calls from the network and the LGA to create multi-year settlements to provide long-term planning and investment across public services. The CCN called short-term funding settlements a “barrier to integration” and argued that it hindered deployment of all public resources.

Their Spending Review survey showed that almost 70% of council leaders found the government’s “inability to plan” due to their short-term budgeting nature was a risk to their authority, with another 17% viewing it as a “high risk”.

The CCN also went on to blame the council tax referendum, which “effectively acts as a cap”, for penalising counties by hindering their service provision. It said the referendum “further exacerbated financial pressures” on county regions by forcing them to find alternate ways to fund “inflationary” service costs.

It asked for the referendum to be abolished or for a higher upper-tier local threshold trigger to be set for the council tax referenda – which the network recommended be no lower than 5%.

A higher threshold should also be accompanied by more freedoms over council tax bands and discounts, it said.

The Spending Review will be unveiled on 25 November.