Council tax plan could cost £2.3bn

In October, the Tories announced plans to match council tax take for six years for every new home built - rising to a 125 per cent payment for every new affordable home.

However, former housing minister Nick Raynsford claimed the scheme was likely to be scrapped after three years once its true cost to that point of £2.36 billion became clear.

He said: ‘This Conservative pledge promises a substantial transfer of funds from government to support local authorities agreeing new homes. The costs are potentially astronomical and, given our difficult financial position, some clear answers are required now from the Conservatives on how they would repay this pledge.’

However, Mr Shapps said Mr Raynsford had simply failed to read the finer details of the proposed policy, saying the incentives would be funded from the existing Communities and Local Government department budget, top-slicing some of the increase in formula grant and scrapping short-term schemes like housing and planning delivery grant.

Mr Shapps added: ‘It is a significant change from the current flawed regime which, at best, provides no incentive for communities and, at worst, just creates ill-will among existing residents.’

The National Housing Federation welcomed the proposals but said it had concerns about how workable the plans were in practice.

A spokesperson for the NHF, said: ‘The amount of cash on offer may not be sufficient, it needs to be size and tenure neutral and it needs to be targeted at the right council - in areas with county councils, the lion’s share of the cash would go to the county, when it’s actually the district we want to incentivise.’

John Stewart, director of economic affairs at the Home Builders Federation, said: ‘If you remove the top-down approach we have now and give the responsibility to local authorities there has to be an incentive.’

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