Government claims that its new housing initiatives will create more homes and bring economic boost to communities are both touchingly naïve and misleading, claims Nick Raynsford

Communities and Local Government questions generated a light-hearted parliamentary exchange last month, when the secretary of state got his briefing papers out of order.

Having to admit that he didn’t know which question he was supposed to be answering, Eric Pickles owned up: ‘I beg your pardon, Mr Speaker, but I have not the remotest idea where I am!’

Quick as a flash, a Labour backbencher offered help: ‘You are in the House of Commons!’

The incident provides an appropriate metaphor for much of the Government’s behaviour, no more so than in housing policy.

Two weeks ago, housing minister, Grant Shapps, set out his beliefs in an article in The MJ (‘This is one bonus we do support says Shapps’, 24 February). To anyone with a modest understanding of what is happening in housing, it is clear that the minister has little or no idea of where he is, let alone how he got there, or where we are likely to go in the future.

Like many of the new Government’s ministers, Mr Shapps takes a decidedly ‘year zero’ approach to policy. Everything that preceded May 2010 was wrong, and everything in the future is going to be wonderful.

So, even though his own department’s figures show that housing output grew, year on year, in the period leading up to the recession, achieving a near-20 year record output with 207,000 net additions to the housing stock in 2007-08, Mr Shapps continues to claim that the Labour Government’s planning policies caused the decline in new house-building over the past three years. This is quite simply untrue.

Compounding his error, he went on to claim that the new Government acted immediately to get the country building again. The reality is the opposite. The Government’s early actions – slashing the Homes and Community Agency’s investment budget and unlawfully trying to revoke regional spatial strategies – destroyed confidence in both the private and social housing sectors, stopped the recovery in its tracks, and contributed to the disastrous 2010 outcome of the lowest house-building figures since 1923.

If his understanding of the past and the present is woeful, his Pollyanna-ish optimism about the future is touchingly naïve.

The New Homes Bonus (NHB) in Mr Shapps’ vision will unleash a cornucopia of benefits – not just ‘an opportunity to build more homes’, but also ‘a welcome economic boost’ and the resources for councils and communities ‘to address and focus on other local priorities’. The reality is rather different. Only £250m a year will be new money – the rest of the cost, rising rapidly as the scheme is incremental – will be topsliced from formula grant.

So, for many councils, including those which are keen to promote new housing, the net effect will be negative.

Brighton and Hove City Council, for example, is estimated by Hometrack to gain £2.5m a year by 2015/16, but to lose £7.2m in reduced formula grant, leaving a net deficit of £4.7m. So much for the welcome economic boost.

The story gets worse. For not only is the NHB largely funded by a claw-back from formula grant, it also has an inbuilt bias against regeneration areas and poorer councils, where most homes are in low council tax bands. This is because payments are calculated on the basis of net additions to the housing stock – with demolitions counting against the total – and in a way which gives disproportionate benefits to large homes in high council tax bands which, incidentally, could perversely encourage more unsustainable greenfield developments.

Because of all these complexities and the time-lag between the grant of planning consent and the completion and occupation of the homes – the point in time at which they begin to count towards the NHB – it will be very difficult, if not impossible, to forecast accurately what the likely financial benefits will be for an authority from any particular development.

As ought to be crystal clear after the experience of Local Authority Business Growth Incentives Scheme (LABGI), complex schemes without clear linkage between the decision to approve a development and receipt of the reward are very unlikely to act as an effective incentive.

Add on top of that the anti-development rhetoric which has accompanied in many areas the introduction of the Government’s new localist planning regime, and it would take a brave commentator to predict a rapid rise in housing output, let alone recovery to the level achieved by the previous government in 2007/8.

Nick Raynsford is a former local government minister