Ministers have warned councils that they must spend their share of the £510m planning grant to beef up their planning departments rather than on infrastructure.

A consultation paper on the planning grant, published last week, says councils must provide extra resources for these departments rather than on roads, street lighting and other aspects of infrastructure.

The subsidy, which replaces the old planning delivery grant, will be given only to councils that increase their housing stock by 0.75% a year. If they do this they qualify for £1,100 from the government for every additional home for which they give permission.

Of the £510m, £316m will go to councils that meet targets. They will also be eligible if they have earmarked enough land to deliver their housing needs for 15 years.

Sir Simon Milton, chairman of the Local Government Association, said: “This is a significant injection of cash that will help councils identify land and plan where new houses will go.

“What is now necessary is funding for roads, transport, schools and hospitals, so we do not build desolate dormitories.”