Yesterday the Public Accounts Committee drew headlines with its devastating critique of the New Homes Bonus.
It stated that it is
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.,,,
“The Department 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 Government to use its limited resources to create more homes where they are needed most?
“Its planned evaluation of the Bonus scheme is now urgent.”
Whilst minister are known for rubbishing select committee reports with flimsy replies we also had the highly unusual intervention of Bob Kerslake.
Sir Bob Kerslake, who is also the permanent secretary in the Department for Communities and Local Government, said he had “significant disagreements” with a public accounts committee report which alleges that the government has no idea whether the new homes bonus scheme is encouraging councils to invest in housing….
Kerslake said in response: “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.
“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.
But on this point Sir Bob clearly indicate why he is lacking an upstairs.
On the issue of evaluation Edward Page of the LSE have published a piece on a survey of how policy evaluation is often distorted by politicians and civil servants keen to ensure that their policies are judged a success. He quotes on response
We met regularly with the Head of Research in the [Department] and also occasionally with their policymaking colleagues. One difficulty with these meetings was that they insisted representatives of the [organisation running programme being evaluated] attended. This made it quite difficult to discuss the report openly because these peoples’ livelihoods depended on the scheme. My part of the report was critical of the [programme] and I thought it inappropriate for the [department] to invite these people along. I felt it hindered honest and open discussion.
Ideally departments should not be evaluating the success of their own policies, rather this should be done by an independent body (modelled after the ONS) responsible only to the PAC. Sir Bobs intervention indicated precisely why ministers and civil servants cannot be trusted to evaluate the success of their own policies, they have an inbuilt research bias.
This is particularly true in this case as he was vaulting the success in terms of the original aim of the NHB – i.e. to channel spending in proportion of the number of homes built, rather than that of a neutral observer, does the policy operate effectively on the margin in ensuring that homes get built that otherwise would not.
Lets look back at the history of the NHB. It arose following debates several years ago about whether local authorities were disincentivised over granting permission for new homes as the funding formula for local government took a number of years to compensate for additional population and much funding was needed for up front infrastructure. The incoming conservative administration was influenced by several pamphlets from the policy exchange which said there were no financial incentives for local planning authorities to housing. We have come to something when the head of the civil service defends one the the many failed half baked ideas from that dumb tank.
Indeed there is no evidence at all that the NHB increased new housebuilding overall. Indeed permissions since the introduction of the NHB fell to their lowest post-war level. Permissions only rose following the punitive ‘build what you like where you like’ regime of the NPPF.
Certainly, in considering revisions or replacements for NHB, there is evidence that the NHB has inncetivised local authorities to bring empty homes into use. There is much greater activity on this front now and LPAs consider it less politically painful than building new homes There is also evidence that high growth midlands and northern cities like Birmingham and Leeds have been incentivised to plan positively for housing growth by large NHB windfalls, the policies intention. But where demand for new homes is greates and supply is in the greatest shortfall there is no evidence at all that, for example, the NHB has had the slightest impact in places like Sevenoaks, Woking or Worthing. Here housebuilding activity has been continuing throughout the recession but on a small scale whereas it collapsed in many low value markets. So even those these authorities may have been building far less than the level of household growth. So ironically this has led to a crazy net redistribution of grant from pro-growth but deprived authorities to anti-growth authorities suppressing housing need.
Any replacement for the NHB should only apply to authorities with up to date local plans which by definition have a 15 year housing supply. The money should then be frontloaded and be mainly paid up front on adoption of the plan. Councils could also have extended prudential borrowing on anticipation of adoption. A proportion of monies should be directly ringfenced into pools to pay for those items of social infrastructure most sensitive to large scale new housing growth, new schools and new GP surgeries, with a cross departmental fund replacing departmental funds able to be bid for by local partnerships and then distributed to local bidders who would build the facilities. Funding for infrastructure for very large scale developments such as New Towns should be held by the HCA or a new national infrastructure body, with a presumption that this be devolved to local development corporation partnerships when set up involving local authorities, developers and local communities. The NHB top slice for neighbourhoods should only apply where there is housing planned over a certain threhsold (such as new housing being more than 20% of a neighbourhoods size over 15 years) as again it is just subsidising housing that would be built anyway.