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New Homes Bonus baseline should be scrapped, say councils

Words: Laura Edgar
Money / iStock-185267728

The District Councils’ Network (DCN) says district councils should be rewarded rather than punished for delivering more homes while facing the ‘biggest cut’ in their spending power than any other tier of councils.

Responding to the 2019/20 Local Government Finance Settlement Technical Consultation, district council leaders argue that the New Homes Bonus baseline should be scrapped.

The representative for 200 district councils across England also wants decisions on council tax to be set locally, not by nationally set referendum principles, and greater flexibility on local revenue-raising powers.

DCN said districts fully support the New Homes Bonus as a “powerful” incentive to deliver housing and economic growth, but believe plans to increase the baseline is a “perverse” incentive by reducing the reward for those local communities that have embraced additional new homes.

The introduction of the 0.4 per cent baseline threshold for the New Homes Bonus removed more than £70 million in funding from district councils in 2017/18 and this could increase if the baseline is extended further.

DCN said that it is also concerned that any changes of approach to the New Homes Bonus beyond 2019/20 risks more uncertainty when Fair Funding and 75 per cent Business Rates Retention comes into force.

It wants further discussions with the government before formal consultation.

Sharon Taylor, DCN member board lead for sustainable finance, said: “New Homes Bonus has been a powerful driver for housing growth, but increasing the baseline would be a perverse incentive because it would penalise the very councils which have succeeded in meeting the government’s housing targets. We are against the proposal to increase the baseline, which instead should be scrapped.

“It is paramount for districts to be given more financial flexibilities that will help them not only to deliver on both their prevention role, but also further succeed in delivering new homes to tackle the housing crisis, providing homes people desperately need.”

Taylor concluded that more measures are needed to empower districts to contribute to meeting the government’s housing target, including lifting the borrowing cap and allowing councils to retain Right to Buy receipts for much longer.

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