A Different Class?

 

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.

 

Community-led Approaches to Reducing Poverty

 

What Works Scotland held an event in Clydebank Town Hall this afternoon – a workshop of about 40 people from the public and voluntary sectors, plus a few academics and councillors. The focus was on reviewing the evidence and practice concerning specifically community-led approaches to reducing poverty.

Ostensibly, this was an opportunity to showcase Richard Crisp (Sheffield Hallam University) who led a team of researchers who carried out a formal evidence review for the Joseph Rowntree Foundation. Organised and convened by my colleague, Claire Bynner, this was also a chance to share the work with our What Works Scotland  case study colleagues in West Dunbartonshire and also hear from other speakers including Bruce White from Glasgow Centre for Population Health. I was the rapporteur at the end of the event.

The first speaker was the deputy leader of West Dunbartonshire who set the tone for the day. He emphasised the priority of effective anti-poverty measures and championed the evidence of effective grassroots ‘voice’ and the importance of real life stories found in the JRF research we were discussing. He also, however, stressed that poverty is also (and always) political. For me, that latter point reminds us that even in such straitened times, governments still make choices over what they prioritise and could come to different conclusions about progressive taxes, about the mix of redistributive and more untargeted policies.

Bruce White (GCPH) presented important demographic and other trends relating to different dimensions of poverty comparing Glasgow and West Dunbartonshire. Bruce highlighted the utility of powerful infographics using aggregate and especially disaggregate data. One could not fail to be struck by the significant gradients across neighbourhoods often displaying massive differences from the most to the least affluent areas when looking at child poverty, fuel poverty, proximity to vacant and derelict land, to life expectancy and healthy years’ expectancy. He also illustrated the value of the bespoke community profile created for West Dunbartonshire.

This was followed by Richard Crisp’s evidence review. There were a number of things about this work worth noting:

• He was clear that community-led approaches do impact on poverty and do so in different helpful ways – but they are modest in comparison to the scale of the problem.
• He presented a useful typology of community led approaches: voluntary action (e.g. food banks); community organisations (e.g. neighbourhood clean-ups); social action (e.g. living wage campaign); community economic development (e.g. social enterprise); and, community involvement in service delivery (e.g. participatory budgeting).
• He distinguished between material and non-material forms of poverty. The former concern reducing the costs of housing or energy, providing access to affordable credit or creating employment opportunities. The latter encompasses health and well-being, the quality of housing and the physical environment and wider social participation. The framework used also distinguished three types of positive impact: pockets (immediate respite or support ‘felt in the pocket’), prospects (approaches that help people exit poverty) and prevention (approaches that mean people do not enter poverty). I thought this was a good way of carving up and analysing the evidence. They then moved on to see whether attractive approaches had potential scalability or reach.
• The research team used this framework and found considerable variety in impacts, their depth and scalability. Little evidence was found of approaches that might be called prevention-based.
• I was a little concerned initially about the use of the terms scale and spread but Richard, to my mind, correctly, pointed out that specific approaches have to be situated and contextualised and then assessed as to whether they are adaptable to different settings. It is also the case that local or community-level policies have to be set in the wider sub-regional or regional economic context.
• Finally, there was a powerful point made in the conclusion. Despite the good things evidenced in the report and seen in different parts of the UK every day in local communities, if national politicians thought that the community, the third sector and the big society would step in to fill the gaps created by austerity and deliberate policy change – they were wrong. The scale of the shortfall and its consequences for increased and deepened poverty need a sustained large scale response.

It was not all speakers speaking – there was plenty of active and varied interaction and participation from the delegates. This was a genuinely stimulating event and it was great to see that the JRF’s UK research spoke so clearly to west central Scotland. Tomorrow the caravan heads to Dundee and I am sure it will be similarly relevant there.

Scottish Council Tax Banding Reforms

I was back giving evidence this morning at Holyrood. The Scottish Government has drafted a statutory instrument that seeks to increase the weight and consequent charge applied to properties in Band E, F, G and H. They have also proposed an amendment to the means-tested Council Tax Reduction Scheme (CTRS) such that those households on below median incomes who do not currently receive CTRS will be eligible for all of the increase being met by the CTRS if they are in the higher bands. The extra £100m that this will generate will be hypothecated to support the national priority of closing the educational attainment gap. Finally, it is proposed that the long standing council tax freeze will be replaced by a cap allowing up to 3% increases in annual average council tax bills.

There are wider related issues as well concerning ongoing consultation over localising a share of income tax receipts so as to promote local economic growth.  Second, the Government is also consulting over taxes that encourage the reuse of vacant and derelict land and tax development. Finally, councils will be given the power to charge the full council tax on second homes.

The whole process around the Statutory Instruments and related immediate changes is highly truncated with the rapidly approaching new financial year, changes to CTRS, the new cap – and of course local elections thereafter in 2017.

The proposals are the outcome of the process begun by the Commission on local tax reform. The proposals need to command a majority in Parliament. Not everyone in Holyrood agrees with this current band-tinkering direction of travel (e.g. the Scottish Greens).

There is interesting written evidence on the site, not least from David Bell and form the former minister and co-convenor of the Commission, Marco Biagi.  In the section below, I paraphrase the main reflections in my written evidence.

Reflections on Reform and Beyond

Is the proposal package more progressive (i.e. ‘fairer’)? It makes a regressive tax less regressive and offers significant exemption and hence compensation (albeit through a means-tested route) to all of those on below median incomes. The changes proposed do not appear on reflection to be massively difficult for councils to implement though there will inevitably be opportunity and transaction costs. However, I think there are wider questions and concerns.

While there was not complete consensus on the Commission for the action recommended there was agreement on the need to end the council tax and the freeze. What is being proposed, especially given the absence of a general revaluation, is clearly what the Scottish Government, in carrying through manifesto pledges, feels it can do. But what is maximal for them is less than the minimum in the context of the reasonable expectations generated by the Commission. My worry is that without further commitment to substantive reform we will back in five years saying here is a property-based tax which sets values on market levels from 30 years in the past. The weighting may be more fair but the values that place properties in bands will be in most cases wrong and increasingly illegitimate. It is hard not to see this as a political fudge which does not resolve the underlying problems indicated above.

A second point is that fairness with property taxation is complex. It is not just about tax in relation to current income (important as that is) but it is also about the importance of inequality transmitted and reflected in the housing market and the relative failure to tax housing as an owner-occupier investment. While we repeatedly hear of the importance of social justice and tackling inequality, one of the key sources of that inequality (as well as damage through market volatility to economic productivity) is apparently sacrosanct. Moreover, as John Muellbauer at the University of Oxford pointed out, there are other ways to support low income households pay their local taxes, such as through allowances (like the Greens proposed), deferred payments as well as well-designed benefit systems.

Third, while the CTRS reform is in many ways a neat solution to compensating those in low incomes in higher value properties, it does add a further layer of means-tested complexity, and it is not clear at this point what will be done to ensure the highest levels of take-up. This is all the more germane given that the exemption would go much further up the income scale to immediately below median net incomes. There is a tension here with government policy elsewhere which will likely lead to councils setting full council tax on second properties on the basis to bring properties into more efficient use, yet at the same time CTRS is being used to help households stay in properties that are often only marginally affordable, if that.

Fourth, I was surprised that it was deemed unnecessary to carry out an equality impact assessment for the CTRS and that no wider assessments were required for either the tax change or the CTRS. The £7m figure for the additional cost of the CTRS must have assumptions about take up rates – it would be interesting to know more about these – as I think there would be grounds to think that rates might be relatively low. Additionally, aren’t the lessons from the land building transactions tax introduction that these sorts of tax changes do have market effects at the upper end of the housing market and that this is likely to have some degree of impact on when people decide to move how and could conceivably affect the labour market decisions of higher net worth households. I would have thought that was something working looking into.

Fifth, while ending the freeze and giving councils back the power to charge full council tax on second homes provides more discretion locally, this is offset by the implementation of hypothecation the extra £100 million to a national government priority.

Following the evidence session this morning, a few final thoughts struck me.

First, the truncated nature of the process has left a few uncertainties. There was a lengthy discussion this morning about the mechanism by which the £100 million for education will be managed and allocated locally. Second, we are unclear about the timeline and practical proposals for the localising of income tax receipts. Third, there is clearly no appetite for revaluation within the Scottish Government but the underlying problem and entropy of increasingly non-credible valuations will not go away. Fourth, there may be other unintended consequences and transaction costs if many high band property households seek to have their homes revalued down to lower bands – though I do not know the scope in practice for people to do this.

All in all, to paraphrase Marco Biagi, concerning the council tax, few people would have started from where we are now but equally on reflection how many will be happy with where we have ended up?