The politics of property: Grant Shapps

Source: Property Week.com
2010/02/10

Raynsford got his figures wrong on Tory plans to fund housebuilding

I was disappointed to hear Nick Raynsford criticising our plans to build more homes (“Shapps lambasted for Tory ‘localism’ plans”, news, 22.01.10).

He is a well-respected figure within the housing industry and, out of Labour’s record nine different housing ministers, the only one who maintains an ongoing interest in the sector. This makes his attack all the more surprising both for its inaccuracy and contradiction.

Labour’s centralist housing targets have failed. No party wants to build too few homes, but it only takes a glance at the low levels of housebuilding, even during the boom years, and the all-time-high waiting list for social housing to confirm that taking power away from communities has been catastrophic.

Instead of top-down targets, we believe in localism — giving power back to communities but, crucially, incentivising them to build. Those incentives will help local people to benefit from development, potentially turning “nimbys” into “yimbys”.

Match point

Our key house building incentive — there are others, including allowing areas that expand their business base to retain business rates revenue — is to match the council tax on each new home with money earmarked for housing for six years. This policy sends a clear pro-development message and, contrary to the assertions of Mr Raynsford, is fully funded and fiscally neutral. However, in attempting to analyse our policy, Mr Raynsford has got himself in a muddle.

First, he has overestimated the cost of the incentive. In a recent article in Inside Housing magazine, he claimed the cost in the first year as £157m. Taking this as his starting point, and even allowing for rises in council tax, by the end of the sixth year the money going to councils to reward them for building homes would be around £1bn a year — nowhere near the various multibillion-pound figures quoted by Mr Raynsford.

Of course, £1bn is not a small sum. It is, after all, meant to be large enough to get more homes built, and we aim to build a lot more homes than this government, but it represents only a small proportion of the overall local government finance settlement. Mr Raynsford’s error seems to have been based on a familiar Gordon Brown trick of double-accounting — adding all the figures together and then claiming it as a one-year total.

But, much more importantly, Mr Raynsford has completely failed to understand how the incentive works. Initially, he unwittingly revealed that he had not actually read the detail of the policy as he stated that the incentive amounted to an unfunded spending commitment — an accusation that, presumably on Reading the policy, he has had to withdraw.

Having realised his error, he changed tack and is suggesting that the money paid out under the incentive scheme will represent a “cut” for local authorities.

However, this ignores the fact that the same sum of Revenue Support Grant money will be paid to the same group of councils, but that a proportion of the authorities will be progressively matching this with development in their communities.

Control Shift, our decentralisation paper published last February, spells out how the council tax incentive would be funded. The retrospective Housing and Planning Delivery Grant will be scrapped and the proceeds will go towards the incentive. The incentive scheme would start in 2010/11, and during this year the Housing and Planning Delivery Grant allocation is £200m — not the £135m that Mr Raynsford claims.

The remainder of the cost of the incentive will come from existing government grants to councils. But, as mentioned above, as a result of the incentive the same total sum of money will go to local government. This means the delay between planning permission being granted and council tax payments being made is not the problem Mr Raynsford makes out.

This government has failed to build the homes the country needs. Our policy will reverse this by empowering local communities to take control of their own destiny.

I hope this has cleared up any confusion on Mr Raynsford’s part, and I look forward to future debates with him and, indeed, the current housing minister, who is the fourth I have faced across the despatch box.