I have presented evidence to the National Audit Office, which is carrying out a review of the New Homes Bonus. My research reveals the extent of the redistribution of the grant; redistribution is taking place even when two councils have the same level of success in building new homes.
A simple model, which uses information recently published by the Department for Communities & Local Government, reveals the systemic redistribution of grant as a result of the scheme. A heat map from this research featured on the BBC’s national news.
A massive redistribution occurs even if all councils do equally well proportionately in building new houses - with the biggest underlying net loss of grant being £9m for one council in 2014-15. If the total New Homes Bonus increased to £2bn by 2018-19, that council’s net loss could be £28m in that year.
The extent of the redistribution of New Homes Bonus grant
The BBC map vividly showed this redistribution of funding around the country and no justification has been given as to why ministers have not acted to remove the inequitable redistribution.
While the scheme was designed to redistribute resources to encourage house building, there are at least four redistribution effects that are evident within the scheme - some of which are obvious and have been subject to consultation, and others that are less transparent but have a huge impact. This is putting unnecessary extra pressure on many councils providing key services such as social care.
The main cause of the distribution is the way in which the money to fund the scheme is simply topsliced from general funding.
The most deprived councils facing the greatest spending needs therefore see the largest grant cuts to fund the scheme.
County councils also lose out because 80% of the New Homes Bonus is paid to districts.
It is hoped that the National Audit Office will give a truly independent assessment of the scheme and its impact.
It is also hoped that it will suggest changes to the way the scheme operates and is financed. This would restore fairness and avoid the impact on services from unjustified and disproportionate net funding cuts.
Paul Woods, director of finance and resources, Newcastle City Council