A Government plan to encourage councils in England to build new homes will be paid for by slashing funding given to large towns and cities, shadow housing minister John Healey has said.
Healey said the new homes bonus scheme announced by the Government last month would result in “cuts to many hard-pressed council budgets”.
He warned the Labour Party conference in Manchester that “big towns and cities will be hardest hit” and said the scheme “robs some councils to pay others”.
Under the scheme, the Government will match the council tax raised on each new house built in a council’s area for six years.
But Healey said the money would come from existing grants, penalising those authorities which could not build more homes.
He said: “They’re right to want a strong incentive system for councils and communities ready to see new homes built in their area. But this isn’t it.
“There’s no new money. And the Government will take a top-slice cut across the grant to all local government to cover the cost.
“This scheme robs some councils to pay the rest.”
Healey added: “It will cause chaos in the council tax system, and more cuts to many hard-pressed council budgets. It blows a huge hole in George Osborne’s promise to freeze council tax.
“And our big towns and cities will be hardest hit, as they will have to see many more new homes built every year in their area to ‘break even’ under the new system.”
According to Healey’s analysis of the scheme, based on local housing authority figures for new homes built in 2009, government grant and average council tax, 103 councils would see funds cut by an average £2M each, while 222 councils would gain by an average £400,000.
Under the new bonus scheme, Birmingham would need 8,500 homes a year to be built to avoid losing grant, while Blaby would have to see only 70 go ahead.
Shadow communities and local government secretary John Denham attacked the coalition’s plans to reform policing, health and schools at a time of cuts in public spending.
He said: “You’re not just cutting too fast and too deep; you’re throwing people’s money down the drain. When every penny of local taxpayers’ money has to work harder than ever before, there’s no excuse for that.
“It’s a dog’s breakfast of muddle and waste.”
Housing minister Grant Shapps rejected the criticism, saying: “Under Labour’s watch, house building fell to its lowest peacetime rate since 1924 and the number of first time buyers was the lowest since records began.
“We should take no lessons on housing, given their irresponsible government spending spree threatened to bankrupt the country and send interest rates soaring.
“John Healey hates the idea of giving councils incentives to build new homes because it just highlights how his top-down regional strategies were a monumental, complete and total failure.
“Labour’s local government finance system punished councils for building new homes, by cutting their government grant.
“The coalition parties are putting aside differences to come together to sort out the terrible mess left by Labour.”