The ONS Returns

by Ken Gibb

After the reclassification of English housing associations in the Autumn of 2015 into ‘public non-financial corporations’, many in Scotland believed that it was likely that in due course ONS would decide to look at the other housing association sectors across the rest of the UK. Last week ONS confirmed what many thought probably inevitable. The proposed work will be carried out by ONS in the last three months of 2016.

In its work programme, ONS said:

Cases scheduled for assessment:

  1. Registered providers of social housing (known also as registered social landlords in Wales) including registered housing associations in Wales, Scotland, and Northern Ireland

Current classification: Private Non-Financial Corporations (S.11002)”

ONS last assessed the classification of social housing providers in devolved governments in 2003 under the 1995 European System of Accounts rules. The existing classification will be reviewed to assess the impact of the latest 2010 European System of Accounts Rules and, where relevant, of changes in legislation which have occurred since the previous assessment. This will establish whether these bodies should be recorded in the public or private sectors for statistical purposes and whether they are market or non-market producers. Altogether, this will establish in which statistical sector their activities (including their assets and liabilities) should be recorded. As part of this review, ONS will also consider the classification of the associated social housing regulators where applicable.”

While this may not be clarified until the end of 2016, the Scottish case, like in England, is one based fundamentally on the relationship between the regulator and the sector. A number of implications would flow if Scotland is similarly reclassified. First, liabilities and assets would go on to the public sector books, adding to public debt. This may also mean wider government influence and a degree of control over new borrowing. Second, the question then becomes: will the Scottish Government go down the same road as the UK Government and try to deregulate the sector and hence have the reclassification reversed.

Just how this deregulation might be attempted and what its intended and unintended consequences might be for the sector – are quite hard to discern but require very careful consideration. Whatever else, deregulation should not be undertaken lightly or too rapidly. The English deregulation experience over the next few months will be an important if not critical guide for the Scottish government and the Scottish housing regulator. All of the UK devolved governments need to work together.

So, other things equal, we will now engage in a debate for several months about the appropriate way for the Scottish Government to respond to the probable reclassification and what form of regulatory level is both sufficient for reclassification reversal and adequate for the needs of the sector (indluding finance), its long term commitments and the interests of tenants (the current primary purpose of the SHR). What might this mean in a Scottish context for the delivery and composition of the 50,000 affordable units proposed for the next Parliament, if the present government is re-elected?

But we may be getting ahead of ourselves. The ONS has not started the work yet; it may be affected one supposes by the English experience (i.e. it may even be possible to short circuit multiples changes to classification). We will also have to see if primary legislation (as in England) is required to make the changes that the sector and presumably the government want.

All of this is about regulation and ultimately control over the sector. It is ironic that whereas all four UK nations adopt recognizably similar forms of housing regulation, the significant substantive policy divergence over the last few years between England and Scotland regarding social housing policy has absolutely no bearing on the current classification debate.