£1.3bn scheme impact ‘misjudged’ – Can you trust Government construction figures?

In a report published 27 March 2013, the Government’s financial watchdog, the National Audit Office (NAO), has said that significant errors led the Government to believe and openly claim that the scheme would deliver 32,000 more homes than it actually will.

Amidst various policies seeking to substantially boost the construction sector and the inevitable figures that fly around them, the report has cast doubt over whether the Government’s figures can truly be trusted.

Government predictions said the scheme would deliver 140,000 new homes in its first 10 years, increasing the supply of housing by between 8 and 13 per cent. Essentially, it rewards councils that approve housing developments with payments equal to the council tax generated from the homes for six years after they are built – thus encouraging more councils to approve planning applications.

According to the NAO however, the reality is that the correct calculation of the increase in housing supply would have been 6 to 11 per cent, or 108,000 homes. The money was mostly redistributed from central government funding, leaving some councils worse off.

The Communities and Local Government department does plan to review the scheme in 2013/14, but the NAO is calling for a more immediate review; claiming that the department is not ‘adequately monitoring’ the £1.3 billion fund.

Amyas Morse, Head of the National Audit Office, said:

“Some local authorities could face significant cuts in their funding as a result of the new homes bonus scheme. 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.

“The department must now urgently carry out its proposed review of the scheme to ensure that it successfully encourages the construction of much-needed new homes.”

A spokesperson for the Local Government Association also added that “mistaken forecasts and a lingering uncertainty over future income from the new homes bonus” are hampering councils’ efforts to plan their budgets.

Undoubtedly, the policies now being released by the Government will be subjected to equally exacting scrutiny and, if they are found wanting, the result will be extremely embarrassing for this Coalition Government.

27/03/2013                                                                                                         SRJ/LCB

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