New ruling on social housing adds £60bn to Britain’s national debt

Labour’s shadow housing minister suggested that housing associations may have been misled

John Healey, the shadow housing minister
John Healey, the shadow housing minister

The stroke of a statistician’s pen yesterday added £60bn to the UK’s national debt and pulled housing associations into the official public sector.

In a long-anticipated ruling, the Office for National Statistics (ONS) stated that housing associations will now be classified as public bodies and that their liabilities therefore also belong to the public sector.

The potential impact of the decision on the nation’s finances will be outlined by the ONS on 20 November in its next scheduled bulletin. But it estimated that it would end up adding around £60bn to the UK’s public debt, which stood at £1,638.2bn in September.

The Government has set out controversial plans to compel housing associations to allow tenants to buy their social housing at a steep discount, in an extension of the “right to buy” policy that covers council homes.

When it was proposed by the Conservatives in the 2015 general election campaign, the policy provoked a uniformly hostile response from housing associations. But last month David Cameron announced a deal with associations that would allow the plan to proceed.

John Healey, Labour’s shadow housing minister, suggested that if ministers had known in advance that the ONS was going to reach this decision then housing associations had been misled.

“This completely undermines the basis for the so-called ‘voluntary’ right-to-buy deal that the Government struck with housing associations,” he said. “That deal was done with the housing association sector on the basis that if they didn’t agree, they risked reclassification as public bodies which we all want to avoid.”

He added that the decision “calls into question the whole deal and the good faith of ministers in reaching it”.

A government spokesman sought to downplay the importance of the move. “This statistical matter relates to a historical legislative change, made by a previous government, which came into effect over eight years ago and makes no difference at all to the way housing associations run themselves and imposes no new controls or rules,” he said.

The spokesman added that the Government would look to bring forward measures to turn housing associations back into purely private sector bodies “as soon as possible”.

Housing associations are third sector organisations, usually charities and not-for-profit organisations, that develop residential properties to be let to low-income tenants at below private market rates.

They borrow to invest using their rental revenues as collateral and are estimated to have total property assets of £400bn. Their role in social housing provision has grown considerably since the 1980s when the previous Conservative government drastically curtailed council house building.

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