From Class: Why are the Tories so sanguine about adding £60 billion to public debt?

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Class: Centre for Labour and Social Studies

Why are the Tories so sanguine about adding £60 billion to public debt?

Once upon a time, the reclassification of housing associations as ‘public non-financial corporations’ by the Office for National Statistics (ONS), which happened last Friday after years of speculation, would have been seen as a catastrophe. We therefore have to look behind the immediate issue to try to understand why the Government is so sanguine about the apparent disaster of having to add £60 billion of debt to the public balance sheet and why some housing association bosses see it as a great opportunity.

The long-term role of housing associations has been as the ‘third arm’ in housing, sitting between public and private sectors. This made them politically acceptable across the spectrum, sufficiently non-public to keep Tories happy and sufficiently non-private for Labour. Since 1988 they have been in the highly advantageous position of being able to borrow money as ‘private’ organisations, pay tax based on their charitable status, and receive grant from the public sector towards the building of low rent and low cost homes. In return for grant they accepted a regulatory regime governing their management, finances and performance, and were required to co-operate with housing authorities over issues like housing allocations and housing development. In many ways the model has been a great success, although in my view many associations have fallen well below what was possible.

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