Bonus culture

So has what started out as ‘a Rolls Royce idea’ ended up ‘a Reliant Robin policy in practice’?

That’s not me describing the New Homes Bonus but Conservative MP Stewart Jackson. Now a member of the public accounts committee (PAC), he was speaking at an evidence session in June ahead of its report published this morning. He was also a shadow communities minister at the time the bonus became a Conservative flagship policy.

With scepticism like that on the Conservative side it’s little wonder that the PAC has more scathing criticism of the handling of the policy. It follows an embarrassing verdict (for the DLCG) delivered by the National Audit Office (NAO) in March.

Margaret Hodge, the Labour chair of the PAC, says that with £7.5 billion due to be redistributed between councils by 2018/19 to encourage more homes, it’s ‘vital’ that the bonus works: ‘It is therefore disappointing that after more than two years of the scheme being up and running, no evaluation is in place and no credible data is available to show whether the scheme is working or not.

‘So far the areas which have gained most money tend to be the areas where housing need is lowest. The areas that have lost most tend to be those where needs are greatest,’ she adds.

‘The CLG has yet to demonstrate whether the new homes bonus works. Is it helping to create more new homes than would have been built anyway? Is it the best way for the government to use its limited resources to create more homes where they are needed most?’

Questions like this have been asked from the very beginning. As I blogged when the first allocations were made, the policy is less a bonus for building new homes than a penalty for not building them, and it amounts to a mechanism for transferring resources from deprived areas to affluent ones.

The National Audit Office agreed, branding the CLG’s estimate of the potential increase ‘unreliable’ and based on ‘unrealistic’ assumptions that included a ‘substantial arithmetical error’.

So far, it said, ‘the bonus has mainly rewarded home creation that was not incentivised by the bonus’.

Despite the policy being an attempt to use incentives to change the behavior of local authorities and communities to make them more pro-development, the CLG had not even consulted the cabinet office’s behavioural insight team (the nudge unit).

The message from Amyas Morse, the head of the NAO, was that: ‘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.’

That was in March. Seven months later, the PAC is making the same point about urgency: ‘We would have expected the [CLG] to have planned a systematic evaluation from the outset to track its impact on local authorities’ behaviour towards housing development, and the cumulative impact of the [new homes bonus] alongside the [CLG’s] other policies affecting local authority funding. The department has yet to demonstrate that the new homes it is funding through this scheme are in areas of housing need and the its planned evaluation is now urgent.’

That has prompted Sir Bob Kerslake, permanent secretary at the CLG and head of the civil service, to take the unusual step of issuing a statement publicly disagreeing with the committee: ‘I am disappointed by today’s report and have some significant disagreements with its findings. We have made very clear that our review of the new homes bonus is under way and will be completed by Easter 2014 as we have always promised,’ he said.

‘The whole point of the new homes bonus – which the committee fails to recognise – is to recognise housing growth where it occurs, with money going where those homes are needed most. That’s why we’ve committed £1.2 billion over five years towards this scheme, which the National Audit Office themselves found has the potential to deliver up to 100,000 additional homes over 10 years.’

However, arguments like this did not convince PAC members when he put them forward at a meeting in June and an evaluation published a year after the National Audit Office called for one ‘urgently’ will not meet most people’s definition of the word.

And it seems unlikely that the evaluation will be able to offer much convincing evidence of the impact of the bonus even then. The PAC report points out that ‘the department is committed to establishing if the new homes bonus has changed the behaviour of local authorities as part of its evaluation’.

‘However, the [CLG] told us that disentangling the impact of the bonus from other economic factors and other government initiatives, such as help to buy, would be difficult,’ it added.

Similarly, while there has been a positive trend in the number of empty homes being brought back into use, ‘this began before the Bonus was introduced’. The impact remains unclear – though I have seen evidence that the bonus has had a positive impact on the way my local council looks at empty homes.

In the meantime the PAC suggests adjustments such as offering extra incentives for energy-efficient homes rather than a ‘wholesale shake-up’.

By offering incentives to communities, the new homes bonus did introduce an interesting idea into the debate about how to get more homes built. It was also attractive politically as a bottom-up alternative to Labour’s top-down targets.

However, was it ever really a ‘Rolls Royce idea’? Keep them small and incentives probably will not work, make them more attractive enough and eventually they become a questionable use of public money.

Whether the new homes bonus was badly implemented, or impractical in the first place, or both, the debate has already moved on and in help to buy the coalition has a shiny new flagship. No matter how much Sir Bob and the CLG apply the turtle wax between now and easter 2014, they will still have a used Reliant Robin on their hands.



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