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New homes bonus panned

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A flagship government scheme to boost housing supply has been panned by the spending watchdog for making a ‘substantial arithmetical error’ which significantly overestimates its benefit.

The National Audit Office’s report into the so-called £1.3bn New Homes Bonus programme also warns that the way its budget is distributed leaves some councils losing large sums of government funding, increasing their financial risks.

Amyas Morse, head of the NAO, urged the Department for Communities and Local Government to review the whole scheme with urgency. “While it is too early for the scheme to have had a discernible impact on the number of new homes, the signs are not encouraging.”

After accounting for the DCLG’s alleged maths error, the NAO claims the scheme will increase new housing supply by 32,000 fewer homes than the 140,000 official figure. The department’s modelling for the scheme was based on unrealistic assumptions and “very limited evidence of local authorities’ actual behaviour”, the auditors’ report states.

The NAO also found errors in a ‘worked-example’ of the bonus that was presented by the department to authorities and a “miscalculation” in the way it had calculated respondants’ agreement to a public consultation on the scheme.

The councils hardest hit by the way the NHB is distributes were those shunned by developers. These authorities “face losing large amounts” and were “more typically in deprived parts of the country”, the report found.

The department is due to review the NHB scheme in 2013-14, a move which the NAO considers urgent, essential and overdue. “The department’s approach to monitoring and evaluating the bonus and its effects is neither timely nor adequate,” it concludes.

Housing minister Mark Prisk described the NAO’s report as “unduly negative and unfair”. “The New Homes Bonus has already rewarded councils for the delivery of 450,000 homes and we are confident that it has the potential to increase supply by at least 100,000 homes over ten years.”

He added: “The old top-down system under the previous Government built nothing but resentment, and saw house building plummet to its lowest peacetime levels since the 1920s. The New Homes Bonus provides a real incentive for communities to grow, to provide more affordable housing and to get empty homes back into use. It is simple and fair to all parts of the country – councils which build more homes, receive more funding.”

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