Rugby's expansion has been supported by millions in grants - and it could be about to end with 'catastrophic' effects

Rugby Borough Council could lose out on £12.3m in grants over the next four years if the Government's 'New Homes Bonus' (NHB) grants are scrapped.

Wednesday, 30th October 2019, 5:29 pm
File image.

The borough is one the fastest growing areas in the country, and this growth is only set to accelerate after the passing of the borough's 12,400-home Local Plan earlier this year.

At present, the borough council receives grants from the Government for every new home built in the area.

The scheme is based on the amount of extra council tax revenue raised for new-build homes, conversions and long-term empty homes brought back into use.

And there is also an extra payment for providing affordable homes.

But the Government is holding a consultation into proposals that could see the scheme scrapped.

And Rugby council said the effect of such a decision could be 'catastrophic' for the borough.

What might happen, and how much could the council lose out on?

For 2020-21, Rugby council expects to receive £2.4m in NHB grants - around 16 per cent of the total revenue income of the council.

Revenue income is then spent on the day-to-day running of the authority.

Should this grant system continue as normal, the council would be set to receive around £14.7m over the next four years.

But there is now uncertainty over its future, with the council giving three possible scenarios for the scheme.

In the 'worst-case' scenario, the Government would abolish the scheme completely - meaning the council would receive no NHB grants beyond 2020-21.

If this is the case, the council stands to lose out on £12.3m of grants.

In another scenario, the Government would pay the grants for 2020-21, but in the three years after that they would only pay 'legacy payments'.

In this scenario the council expects to lose out on £10.6m.

The final scenario would be a complete continuation of the scheme - although this is not believed to be likely.

Rugby council says the effect could be 'catastrophic'

Rugby council's report, published in the agenda for the November 4 cabinet meeting, states that the severe financial impact on some authorities (particularly high-growth districts including Rugby Borough Council) will be factored into the response to a consultation being held on the matter.

Included in that report is the council's draft response to the consultation, in which a council officer says that the cost of services cannot be met by a council tax increase alone.

Adding: "Without a replacement scheme, the potential cliff edge from the loss of NHB will be catastrophic for the council.

"It is essential that the Government implements a replacement scheme that continues to incentivise housing growth."

It is not yet known if the Government will replace the scheme in some form.

Visit and view paragraph 9.4 on page 54 for more information.

You can see the council's draft response to the consultation in that same report on page 101.

Rugby council responds to the Advertiser

A spokesman for Rugby Borough Council said: “The New Homes Bonus has supported local authorities in dealing with increased demand for services since 2011.

“However, uncertainty over both the formulation of the bonus and the future of the scheme post-2020 has presented local authorities with a considerable challenge when it comes to planning for the future and formulating annual budgets.

“The technical consultation on the Local Government Finance Settlement 2020-2021 gave local authorities a platform to raise concerns with the Ministry of Housing, Communities and Local Government about the uncertainty surrounding the future of the New Homes Bonus and the issues it creates for authorities trying to balance service delivery with financial sustainability.”