MP Edward Leigh said a planning shake-up had created 'perverse incentives'

A £68 million-a-year Government scheme to speed up planning decisions on major housing developments in England has created "perverse incentives", a report by MPs has warned.

Councils are rewarded with cash from the Planning Delivery Grant scheme if they meet a 13-week target for decisions and between 2002/03 and 2007/08 the number hitting the target almost doubled from 37% to 67%.

A report from the House of Commons Public Accounts Committee, which comes days after Prime Minister Gordon Brown put house-building at the heart of his agenda, acknowledged the scheme had helped increase numbers of new homes to 207,500 a year by 2007/08.

But it said that local authorities appeared to be losing interest in applications once the deadline has passed. And it noted that the proportion of major residential applications which are rejected within the 13-week period has increased since the scheme began in 2002.

The committee also raised concern that the Department for Communities and Local Government (DCLG) has no figures on how long it takes from the initial, pre-application stage to the start of construction. A National Audit Office (NAO) report in December suggested that the process takes an average of almost two years.

Committee chairman Edward Leigh said: "The measures introduced by the Department for Communities and Local Government to speed up the handling by local authorities of planning applications for major housing developments are having unintended effects.

"Yes, the authorities have now focused their efforts on increasing the number of decisions taken within the 13-week target period. But the target has created perverse incentives: authorities can lose interest in applications once the target has been missed; and, of the decisions taken within the 13 weeks, a much greater proportion are rejections than acceptances.

"The Department simply does not know how long it takes on average from the initial, pre-application stage to the start of construction. NAO work suggests that the whole process takes on average almost two years.

"It will have to be speeded up if the rate of delivery of new homes is to meet underlying housing need, estimated at nearly a quarter of a million new households a year."

The report called on DCLG to consider the adoption of a new target based on the average time taken for a decision to be made.