Reliance on New Homes Bonus
The coalition government introduced the New Homes Bonus to try to promote house building. Under the scheme, the government pays councils for 6 years for each new home built in their area.
In 2014/15 Cheshire East Council is expected to receive £5.1m under the New Homes Bonus (equivalent to a 3% rise in council tax). As the number of houses being built in Cheshire East rises, the amount of New Homes Bonus received is expected to rise to £8.7m in 2017/18 (equivalent to 5% of council tax)
Concerns have been raised that some councils are becoming reliant on the New Homes Bonus and will struggle when the payments stop after 6 years or if the rate of new house building reduces.
Furthermore, concerns have been expressed over whether the New Homes Bonus scheme promotes house building in the right parts of the country. In 2013 the National Audit Office said “The Department has yet to demonstrate that the new homes it is funding through this scheme are in areas of housing need”.
The Conservatives and Labour agree that as a nation we need to build more houses, but they differ over how to meet that need. The Conservative policy is to encourage private industry to build more houses and to allow developers a great deal of flexibility in choosing the sites. The sites the developers choose are those which make the most money for private developers (notablygreenfield sites in Cheshire). Labour would give more power to councils and allow councils more financial freedom to borrow to build houses themselves. The Labour policy would not reduce the number of houses being built, but it would change the locations chosen. Labour policies would also change the style of houses being built (bungalows for the elderly and starter homes for young families, plus high building/environmental standards) and would enable councils to plan and fund the infrastructure necessary to support the new houses (schools, road improvements etc).
Sam Corcoran, Labour Councillor for Sandbach Heath & East, said, “I am concerned as to how the funding gap will be filled. If Cheshire East Council continues to freeze council tax then there could be an unpleasant shock when the New Homes Bonus money runs out.
“During the Budget debate in February I committed the Labour group to freezing council tax for 2015/16. However, before making any commitments for 2016/17 I would like to know the level of government grants available and to see clear plans for how the potential funding deficits of £13m for 2016/17 and £23.2m for 2017/18 will be met. At present the Council has a £23.2m black hole in its 3 year forecast.”
Dr Darren Price, planning expert and Labour Prospective Parliamentary Candidate for Congleton, said, “"You could be forgiven for thinking that the lack of a Local Plan and the virtually unregulated house building on the edges of our towns and villages is very convenient for Cheshire East Council as they benefit directly from the New Homes Bonus every time a house is built. These homes are not the affordable homes that we need though, they are not built in the right places and they do not provide the supporting infrastructure that is so desperately needed. It is nothing more than a short term fix, a situation manufactured by a Government without a heart being used to prop up a council without a clue."