Raynsford refuses to back plan to ease rural crisis

The government has refused to back a plan to spend council tax from second homes on rural affordable housing.

Local government minister Nick Raynsford has been drawn into a row between Norfolk County Council and one of its districts, which wants to keep £800,000 raised in council tax to alleviate the local housing crisis.

Under the 2004 Local Government Act, which comes into force on 1 April, councils will be able to charge the owners of second homes 90% of local rates, rather than the current 50%. The increase is expected to raise an extra £65m from England's 180,000 second homes.

Moira Constable, chief executive of the Rural Housing Trust, said: "We are disappointed that the revenue raised will not be dedicated to providing housing for local people on modest and low incomes." Completions of affordable homes in rural areas almost halved in the five years from 1997 to 2002.

King's Lynn & West Norfolk Borough Council wants to spend the cash on housing. However, the county council has decided it will be divided between local strategic partnerships – including the councils, voluntary sector and police – in its seven districts.

The county expects to raise about £2.5m in extra council tax from second homes.

The district councils will keep 10%; the partnerships will get 40% directly and will have to bid for another 40%. The remaining 10% will go to the police.

There are nearly 3000 second homes in the King's Lynn & West Norfolk, but the council has a shortfall of 466 affordable homes a year. It builds about 100 homes annually, but loses almost 200 to the right to buy. It has seen a 7% rise in homelessness in the past three years.

We have no plans to change the policy on who benefits from the decision to change the second homes discount

Nick Raynsford, local government minister

Gareth Jones, head of revenues at King's Lynn & West Norfolk, said: "We want the district councils to get the whole of the second homes money. [They] primarily have the housing responsibility: the legislation was to help areas blighted by second homes, where locals cannot afford to buy."

North Norfolk MP Norman Lamb has argued that Norfolk should follow the example of Cornwall council. It is poised to give 75% of the money it raises from second homes – up to £3m – to its districts to spend on affordable homes. Cornwall will make its final decision on Tuesday.

John Dobson, leader of King's Lynn & West Norfolk council, wrote to Raynsford asking for districts to be allowed to keep the extra cash.

However, in a letter seen by Housing Today, Raynsford said council tax also had to cover services run by county councils, such as the police and fire brigade.

He wrote: "We have no plans to change the policy on who benefits from the billing authorities' decisions to change the second homes discount."

A spokesman for Norfolk County Council said: "We are handing the money back to the local strategic partnerships.

"It's not ringfenced for affordable housing; it's up to them what they do with it. We think it's a generous offer because the county is not holding any money back."