Just under a year ago many of us sat looking at the ONS website waiting for the news about whether or not they would reclassify English housing associations as public bodies for public accounting statistical purposes. On the basis of a review of the powers of the Regulator created under the previous UK Labour Government, the ONS took the view that these powers of disposal of assets, board and senior staff appointments were sufficient to deem that enough degree of control from a government agency meant that reclassification was indeed appropriate. This shifted more than £60 billion of debt on to the public books and initially raised uncertainties about the freedoms housing associations would retain over borrowing.
This fundamental change was not wanted by Government or the sector or other major stakeholders. In the midst of last year’s controversial housing legislation in England, the Government proposed a series of measures aimed at deregulating the English sector sufficiently, they hoped, to re-re-classify the sector back into the private sector.
Still with me? Yesterday morning the ONS announced its decision regarding the classification status for public accounting statistical purposes for housing associations in Scotland, Wales and Northern Ireland, assessing them on a similar basis as was the case in England. They are now described as ‘public non-financial corporations’. The Scottish Housing Regulator (SHR) has been reclassified as a ‘central government body’.
Interestingly, the Scottish Government had taken pre-emptive action by preparing and pre-announcing deregulatory legislation on a similar basis to the English proposal in order to reduce uncertainty and get back to the pre-announcement status quo. In 2012 the ONS re-reclassified English further education and sixth form colleges which it has earlier reclassified in the public sector in 2010 because Government relaxed some of its earlier controls. So there is a precedent.
According to Inside Housing, the reasons for reclassification in Scotland were threefold: the SHR has a degree of control over the management of housing associations, the housing associations need consent from the SHR over ‘constitutional change’ such as mergers and take-overs, and, associations also need consent over the disposal of assets like land and housing.
The Scottish Government plans to respond with new legislation which will first remove the need for consent over the disposal of assets, they will ‘limit’ the power of the SHR to appoint board members and officers, and, remove the need for the SHR’s consent regarding restructuring, voluntary winding-up and dissolution of housing associations. The Scottish Federation of Housing Associations appear to share the Government’s optimism that this will be enough to put the sector back in the private sector, though they reserve the right to scrutinise the ONS details closely. They do make the point that the Scottish regulatory framework has evolved in recent years to put some distance between the sector and public control [link].
This is a statistical exercise but it has real implications, potentially. Governments around the UK would not seek corrective legislation if it were not of significance. Linked to this is the wider question of the degree of autonomy or level of external control applied to an important part of the voluntary or third sector, The reclassification also creates some uncertainty which may impact on policy delivery i.e. the Scottish Government’s preparedness of response in part reflects their desire to protect their priority to deliver the 50,000 affordable housing supply target over the life of this Parliament.
Deregulation is not without its risks – how will lenders respond to the changing regulatory environment? The English experience will provide a guide. Second, is this the end of the matter – will ONS accept the deregulation as sufficient basis for changing the classification back? The plans set out by the Scottish government may well turn out to be quite appropriate and sufficient for this purpose. ONS reclassification could be the dog that did not bark. We will see.