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www.communities.gov.uk

The Rt Hon John Healey MP

Minister of State

Minister for Housing and Planning, attending Cabinet

Growth funds

Date of statement	15 December 2009
Type	Written

I am publishing today the Government's response to their consultation on the proposed changes to the Growth Fund for 2010-11. Copies have been placed in the Library of the House.

The Growth Fund provides capital and revenue funding to the 75 growth partnerships in Growth Areas and Growth Points across 163 local authorities in England, supporting their planned housing growth, enabling housing development to be brought forward, tackling barriers to delivery and ensuring that new development is planned as sustainable communities. Provisional funding allocations for 2009-10 and 2010-11 were published in December 2008.

The exceptional economic circumstances and global recession have affected the availability of finance, credit and mortgages. The Government have taken action to help people stay in their homes, stay in work, and to help firms stay in business. The Government have also continued to focus on providing the affordable homes that people need. The Government are clear that getting house building across the country started, and providing the affordable homes that people need, is a priority during the current exceptional economic circumstances.

The Government set out the housing pledge as part of Building Britain's Future on 29 June, with a £1.5 billion package of measures to build an extra 20,000 new affordable homes in 2009-10 and 2010-11, of which over 13,000 will be for social rent, and 10,000 open market homes. As a result, the Government are now investing £7.5 billion in 2009-10 and 2010-11 to deliver up to 112,000 affordable homes and around 15,000 private homes.

While the majority of funding for the pledge comes from other Government Departments' programmes, given the importance attached to stimulating the housing market, I also reviewed our own investment programmes in Communities and Local Government to support the pledge. As such, the Government have switched £128 million capital funding from the Growth Fund in 2010-11 to support the pledge. All regions have benefited from the pledge funding, which has been considerably greater than the impact of the 2010-11 switch from growth funding.

Given the impact of the exceptional economic circumstances on the delivery of homes and infrastructure, there is uncertainty that it will be possible to use Growth Funds in the way envisaged when multi-year allocations were made before the global recession. Switching some grant money from the Growth Fund will mean it is still used for housing purposes and that the fundamental aims of the Growth Fund-to support housing growth-will still be met.

I wrote to the leaders of all local authorities in the Growth Areas and Growth Points about the housing pledge on 17 July, highlighting the opportunities for additional funding, and set out the planned adjustment to the Growth Fund. The Government's preferred approach was to make a pro-rata reduction to the provisional 2010-11 capital allocation of each Growth Area and Growth Point. Provisional revenue allocations for 2010-11 remain in full. The Government believe this approach would provide certainty on funding decisions in a timely manner, is fair and transparent. Consultation on the proposed changes lasted six weeks.

The consultation showed that although respondents did not welcome any reduction in funding they did show general support for the Government's preferred approach of a pro-rata reduction for every growth area local authority and the Government will therefore revise funding allocations for 2010-11 as set out below. Revised funding allocations will be paid by the Homes and Communities Agency to the nominated accountable body for each Growth Area and Growth Point in the first quarter of 2010-11. Local authorities in growth locations will still have the flexibility to prioritise how funding is used to best support local priorities.