The government has sent out its clearest signal yet that it is pressing ahead with the merger of English Partnerships and the Housing Corporation.

Baroness Kay Andrews, a junior planning minister, speaking at a fringe event, backed the merger of the two bodies. She said: “If we end up with a national agency it will be a much more rational and productive system of delivering housing.”

Building has learned that the Department for Communities and Local Government is due to make its long-awaited announcement on the future of the two agencies late next month.

Many of the DCLG’s delivery functions are expected to transfer to the agency in line with chancellor Gordon Brown’s proposals.

Brown said this week: “We must examine how we can separate the decisions that, in a democracy, elected politicians must make from the business of day-to-day administration.”

A senior Labour source said the DCLG and the Treasury were examining the planning gain supplement. However, Ed Balls, a Treasury minister, said the government had no plans to scrap the PGS.

He said: “The planning gain supplement is an important part of the our response to the Barker report and we are driving very hard on it.”