You remember when Gordon Brown used to take flak for cooking the borrowing books? Turns out the Conservatives aren’t averse to pulling off the odd conjuring trick themselves.
With the party having promised to build millions of new homes up and down the country, without having much of a clue about how to finance them, it seems Chancellor Philip Hammond has found that he too can wield a magic wand, when he’s of a mind to.
Housing associations are to be reclassified as “private bodies”, and hey presto! That’s £70bn off the nation’s overall debt.
The mountain becomes a little less mountainous, and it might create some wiggle room at a time when even the Institute for Fiscal Studies has questioned whether the Government’s current borrowing targets are a good idea.
The move could also facilitate housing associations borrowing more to build more, without imposing any further strain on the public finances – at least, if the Government plays ball. It should be borne in mind that there is some debate in Cabinet about how the game should go.
First things first, however. Some new regulations need to go through Parliament to stop ministerial interfering.
Housing associations were originally considered to be private bodies, but in 2015 the Office for National Statistics (ONS) bowled the Government a googly when it announced that its meddling with them had reached the stage where they could no longer be considered to be either charities or private businesses. Instead, they would have to be classified as state entities, which meant that their debt would have to be added to the Government’s books, casting a pall on the Treasury’s numbers.
With the ONS on board with the proposed reforms, it’s happy days for Mr Hammond. Or at least happier days than he’s recently been experiencing.
In isolation, what the Government is doing here is actually sensible – for once.
Housing association debt is good debt. It is secured on an asset (the house) which can be counted on to provide a reliable stream of income to keep up with the interest payments on it in the form of rent.
In fact, it is eminently sensible to allow housing associations to borrow more, and perhaps a lot more, because that way they could build more, and they need to be allowed to build more if the Government is to have any hope of easing the housing crisis.
That word is often overused, but when you have people from boroughs like mine, which has no spare social housing, dumped in temporary accommodation miles and miles away, and forced to take two or three long and arduous bus journeys just to get their kids to school, no other word will do.
Unfortunately, while the Chancellor’s conjuring trick could assist with the problem, it will not solve it by itself. It is not a substitute for the coordinated national action necessary to fully fix it.
Nor is it really an example of the the new thinking that Sajid Javid, the Communities Secretary, says is required to prevent the creation of a rootless generation of tenants funding the retirements of wealthy people through short-term rental agreements on buy-to-let homes.
Part of that new thinking really should include the scrapping of the Right to Buy legislation, that facilitates the subsidised purchase of housing association and council homes by those lucky enough to be in a position to afford a mortgage.
This benefits a subset of relatively well-off tenants, and takes social housing out of the nation’s stock, further impacting to the very poor people that desperately need it. The policy could therefore be considered a metaphor for everything wrong with Conservatism.
But I suppose, aside from that, the Chancellor’s trick just about merits two cheers from the audience. Hip, hip... No, scrap that. It’s worth maybe worth one and a half.
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