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Nick Raynsford pours scorn on Conservative Party plans to increase the nation's housing stock by match-funding new council tax revenue on developments. One month ago, I posed several questions in my article in The MJ about the Conservative Party's proposal to incentivise councils to grant planning permission for new housing. As these went to the heart of the policy, and raised serious concerns about its cost and impact on revenue support grant, I was surprised to get no response at all from the Conservatives. So, at last week's pre-election hustings on housing and property issues at the RICS, I repeated the challenge. If the policy is implemented on the basis set out by shadow housing minister, Grant Shapps, with councils receiving an extra grant equivalent of 100% of the council tax yield over six years from all new dwellings given planning permission, and 125% on all new affordable housing, the cost will be prohibitive. On very cautious assumptions – no increase in the current, low level of housing starts and no rise in council tax – the cost will reach £2.3bn in just three years. If the scheme was to operate for the duration of a parliament – five years – and the output of new homes was to rise to 150,000 a year, the cost would top £5.5bn. And that still, almost certainly, underestimates the likely impact, since it implies no increase at all in council tax over the five years. Mr Shapps clearly recognises that this is an expensive pledge. He claims that his own local authority would stand to gain £100m for approving 10,000 new homes. Were all local authorities to behave similarly, the cost on Mr Shapps' rough and ready calculation might reach £40bn. So, where is the money coming from to pay for this huge public expenditure commitment at a time when every commentator agrees the public finance cupboard is bare? According to Mr Shapps, there are two sources. First is the housing and planning delivery grant which, he says, would be diverted to pay the housing incentive grant. Leaving aside the inconvenient truth that this would not help councils to maintain capacity in their planning departments, necessary to deliver the planning consents Mr Shapps says he wants, the harsh reality is that housing and planning delivery grant only totals £135m a year. So even if this could be transferred entirely into his new incentive scheme, it would cover only a fraction of the cost. The rest, according to Mr Shapps, is to be top-sliced off the revenue support grant. So, how will councils cope? Mr Shapps appeared unaware at the RICS debate just what an impact a cut of £3 to £5bn in revenue support grant would have on local authority budgets. From his perspective, councils would either have to agree planning consents for more housing or put their council tax up. He seemed oblivious to the fact that shadow chancellor, George Osborne, has said he wants to see council tax frozen for at least two years. He also appears surprisingly unclear about the uncertainty implicit in his proposals. By the very nature of the house construction business, there is a gap of at least two years between the grant of planning permission and the point at which residents start paying council tax on their new home. Although he has not given me a specific answer on this point, it seems likely that the proposed new grant would only become payable from that point. In many cases, the time lag will be longer than two years. So few if any councils will be able to forecast accurately and confidently when they might benefit from the new grant. In the meantime, they will have to cope with the cuts in revenue support grant necessary to fund the scheme. This is no way to plan ahead or ensure a stable basis for local authority budget decisions. The more the housebuilding council tax incentive scheme is exposed to scrutiny, the more dangerous its implications appear. And, most ironic of all, few if any serious commentators in the housing sector believe it will work. Nick Raynsford is former local government minister

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An own goal on spending

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