Treasury minister Danny Alexander has attacked his government's flagship £7 billion policy to create more homes, warning there is no evidence it has made any difference.
Mr Alexander questioned whether the scheme had had any impact.
The policy, one of the main Coalition moves to boost house building, was introduced by the then Conservative housing minister Grant Shapps in 2010.
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At the time Labour branded the plans a con and suggested they would cost billions.
Called the New Homes Bonus, the policy is designed to reward town halls in England for every extra home they approve.
Earlier this year the policy was branded incoherent and unfair by LibDem Local Government Minister Stephen Williams.
But Mr Alexander went further and questioned whether the scheme had made any difference to house numbers. He said: "To be candid with you, the New Homes Bonus is not something that we as Liberal Democrats particularly advocated for. I'm not convinced that the New Homes Bonus actually makes any real difference.
"It rewards councils for developments that are taking place in their areas. But I have not seen much evidence that it genuinely makes a difference in terms of whether or not councils are pursuing development."
Hilary Benn, Labour's Shadow Local Government Secretary and the MP for Leeds Central, said: "We have warned for some time that the New Homes Bonus is taking money away from less well-off communities and giving it to areas where the houses would have been built anyway.
"Combined with this Tory-led government's decision to cut much more funding from the most deprived councils, it has led to growing unfairness that simply cannot be justified.
"I am glad that Danny Alexander has finally realised this, but it has taken him a long time to understand the effect of the policy he helped introduce."
Earlier this year a damning report by a cross-party group of MPs had also questioned whether the New Homes Bonus scheme had made any difference to the number of houses being built.
The influential Commons Public Accounts Committee (PAC) also warned that the policy risked widening the divide between the south of England and the rest of the country.
Tory ministers say the scheme is designed to ensure local communities share in the proceeds of growth.
The Department for Communities and Local Government has defended the New Homes Bonus scheme. Before 2010 councils could have lost central government funding as a result of building new homes. The PAC estimated that around £7.5bn will have been met on the policy by 2018-19.