Latest Public Sector News

02.11.15

Housing associations join public sector, adding £60bn to national debt

Housing associations and some for-profit housing bodies registered with the Homes and Communities Agency (HCA) will now be considered a part of the public sector – a switch expected to add £60bn to the sector’s net debt.

The Office of National Statistics (ONS) reclassified housing bodies – or private registered providers of social housing (PRPs) – on Friday (30 October) after launching a review in September.

The review followed legislative and regulatory changes brought about through the Housing and Regeneration Act 2008 – but also ensured that the statistical treatment is aligned with guidance in the 2010 European Systems of Accounts, which came into force in September last year.

Housing bodies will now be considered ‘public non-financial corporations’ for the purpose of national accounts and other ONS statistics.

A key conclusion of this assessment was that PRPs should be considered institutional units since they can incur liabilities, enter into contracts and are sufficiently autonomous.

And as a result of the 2008 Act, Whitehall has consent powers over disposals of social housing assets and power to direct the use of disposal proceeds.

It can also control the voluntary winding-up, dissolution and restructuring of a registered provider, as well as regulate how providers are managed and governed.

In a release on 20 November, ONS will provide more information on the impacts of this reclassification, including the expected £60bn debt increase – although it stressed that this is a “very approximate initial estimate”.

The reclassification will come into effect on public sector finances and employment statistics early in 2016, ahead of the Budget 2016 announcement.

The National Housing Federation was “disappointed” with the decision, with its chief executive David Orr saying this could mean fewer new homes are built at the time of a national housing crisis.

“We therefore welcome the government’s commitment to take the necessary steps through deregulatory measures in the Housing Bill to address the issues raised in this decision,” he added.

The Housing and Planning Bill will get its second reading in the Commons today (2 November).

Shadow housing minister John Healey MP said the decision was also a blow to the chancellor and undermined the basis for the voluntary Right to Buy deal announced earlier this month.

“That deal was done with the housing association sector on the basis that if they didn’t agree, they risked re-classification as public bodies which we all want to avoid. Today’s ONS decision calls into question the whole deal and the good faith of ministers in reaching it.”

But a DCLG spokesperson downplayed the decision’s importance, saying: “This is purely an ONS statistical change which will be applied retrospectively. The change makes no material changes to the operation of housing association, gives the government no new powers over them, imposes no new borrowing controls and has no effect on tenants.”

The spokesperson added that the government would bring forward measures to reverse the "retrospective decision" as soon as possible.

While the Chartered Institute of Housing welcomed the intention to undo the ONS move, its chief executive, Terrie Alafat, said the changes could bring significant implications for both the public sector and Whitehall, as the government balance sheet would have to be adjusted to incorporate the finances of 1,300 different, often charitable organisations.

She also noted: “In making these changes it is important that the government creates a framework that still allows housing associations to meet housing need, respond to their tenants and meet their funders’ requirements as well as ensuring that historic public investment in the sector is protected.”

(Top image c. Rui Vieira/PA Images)

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