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DCLG considers 'witholding' new homes bonus payments

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The government is considering once again altering how the new homes bonus is split between district and county councils, and could also subject mayoral combined authorities’ funding to the sort of referenda required to increase council tax.

In a technical consultation paper on the 2018-19 financial settlement, the Department for Communities & Local Government said it is also considering “withholding” new homes bonus payments from councils which are “not planning effectively for new homes from 2018-19”. This could result in payments being reduced as a result of successful planning appeals or the quality of decisions taken by councils.

The DCLG has warned “we also intend to go further” the following year. This could include linking new homes bonus payments to how many homes councils are delivering based on the government’s standardised methodology for housing need, announced yesterday.

Currently, in two-tier areas district councils receive an 80% share of new homes bonus payments while county councils get 20%.

“The government is again seeking views on whether county councils should be included in the calculation of any adjustments,” the consultation document said.

This year, the government introduced a policy which will only see councils receive new homes bonus payments on housing built above a baseline of 0.4% growth in their area. The consultation said that is “significantly below the average growth rate in the 10 years before the introduction of the New Homes Bonus scheme” and added: “The government also retained the option of making adjustments to the baseline in 2018-19 and future years in the event of significant and unexpected housing growth.”

The government is proposing a “continuation” of the 2% adult social care precept – on top of an increase of regular council tax of “less than 2%” – with the additional flexibility to increase the precept by between 1% and 3% in 2018-19, provided that increase does not exceed 6% between the years 2017-18 and 2019-20.

Council tax referendum thresholds could also be applied to mayoral combined authorities which are currently funded by their constituent councils through a levy for transport functions, and contributions agreed and provided by councils in their area.

But in 2018-19 elected mayors can raise additional resources through a precept on council tax bills, although West of England CA mayor Tim Bowles (Con) can’t because a parliamentary order was previously made which prevents the region’s combined authority from doing this.

Additional funds raised from adding a precept on to council tax bills must be used to fund the mayors’ general functions. In Greater Manchester CA, Andy Burnham (Lab) can also raise a levy to cover the costs of his police and crime commissioner duties.

As this would be the first year that mayoral combined authorities are setting precepts and do not have a Band D equivalent on which to base such calculations, the councils within the grouping would need to set “notional figures or alternative notional amounts” to determine the baseline.

Meanwhile, the government is continuing to threaten parish councils with council tax referendum limits. While it decided against imposing any in 2017-18, the consultation paper said “the continuation of this position in 2018-19 is contingent upon the government receiving clear evidence of how” parish councils are demonstrating restraint in setting council tax levels and using reserves where necessary to plug funding gaps.

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