Scotland’s Sceptical Housing Leaders

by Ken Gibb

In today’s Chartered Institute of Housing’s Scotland news and views (27 February 2013), there was a report that Scottish ‘housing leaders’ were sceptical that independence or greater fiscal powers would improve the ‘deal’ for housing. The report goes on to say that:
• One in eight thought there would be a better deal
• Three in eight said it would make no difference
• Fifty per cent needed more data before they could make up their minds.

A few caveats are in order. I don’t know what the sampling frame was for this Scottish housing leader survey or its representativeness, other than it was drawn from council and housing association senior staff (i.e. it would be good to hear from the private sector too). It is of course a survey done to help market the Institute’s upcoming conference in Glasgow next month (and one in which I am also presenting –  the Joseph Rowntree international evidence review I have just completed with Duncan Maclennan and Mark Stephens). Nonetheless, the short piece raises interesting questions.

One of the reasons it suggests for the lukewarm reaction is that housing is already largely devolved. However, there was more enthusiasm for changing London’s control of the purse strings. This is as much about the public accounting rules over borrowing and identifying the legitimate limits to state activities in housing programmes, as it is about the actual level of the block programme to the Scottish Parliament. While any independent European nation has to operate within EU State Aid rules and conform to general principles of public accounting, it is well-known that the treatment of, for instance, councils as housing provider trading bodies could open up significant additional investment opportunities, were the UK/Scottish Governments to view this differently to the status quo (as has been repeatedly pointed out by Steve Wilcox and others).

Would housing be a bigger priority if Scotland was independent or had substantially greater financial autonomy? The sceptics surveyed worried that housing capital programmes are an easy target for cuts. Indeed we know that in the present review period such programmes took a larger hit than capital spending as a whole (broadly 45% against 33%) but that this differential has subsequently been narrowed by additional housing spend, Barnett consequentials and other in-year revisions. Nonetheless, it is difficult to see housing as a protected area and indeed the direction of travel is to spreading shallower subsidy further rather than growing social housing programmes.

Respondents also pointed to the general lack of appetite for using tax-raising powers (including the frozen council tax) for housing. The long-term consequences of sustained council tax freezing should not be ignored in this context. Last week at a David Hume Institute seminar, the former Lib Dem MSP, Jeremy Purviss, made the point that the freeze has the cumulative effect of weakening local financial accountability (and becomes harder to unpick later on). Perhaps the Government will get their nationally fixed local tax (promoted then dropped in their first term) after all – but through the back door?

But in any case – there is the small matter of the new Scottish land and buildings transactions tax shortly to be legislated on and offering the promise of a form of progressive stamp duty for Scotland. Can it be used creatively and innovatively?

Finally, in the survey, the respondents suggested that there should be a better balance between the Scottish housing system, the tax system and benefits. I will leave benefits for another day but, apparently, two in three want more taxation for home ownership!

I would welcome the opportunity of creating the conditions to normalise housing as a commodity and an investment. Along with greater supply elasticity and stronger rental markets, moving to more neutral taxation is the way to eventually provide long-term stability to the volatile housing market. This has been promoted for many years in certain quarters, most recently by the Joseph Rowntree Foundation Housing Market Task and in a paper by Tony O’Sullivan and myself in Housing Studies last year. However, despite making (we thought) coherent academic arguments about sensible and fairer long-term objectives for the housing system and the positive role taxes can play – the point of our paper was to set these against the political difficulties of making that change credible and feasible. I suspect it will be just as hard ‘an ask’, politically, in Scotland as elsewhere in the UK?