UK Chancellor George Osborne has just given a gift to his friends in the city of London which will cost the UK taxpayer an additional £135n of national debt.
Just before the 2015 General Election, the Tories came up with a throw away Right to Buy policy for housing associations, labelled “back of a fag packet” thinking by HM Treasury staff.
Osborne’s ‘solution’ to a housing crisis triggered by the lack of affordable housing, was to force housing associations, private bodies outside the public sector, to sell off social housing at a 20% discount to existing tenants.
For accounting purposes, housing association debt is considered “off-balance-sheet.” Since Thatcher sold off local authority housing stock in the 1980s, social housing has been delivered by housing associations, which are private bodies financed by bank loans, not by central Government borrowing.
Debt accumulated by housing associations has not counted towards the UK Government debt figures until now, even though housing welfare payments, distributed via local authorities, ultimately fund the loan repayments.
Osborne, by forcing housing associations to sell private assets, has burst the myth that housing associations are private sector entities.
Curiously, the UK media and “free market” think tanks like the IEA have failed to comment on the hypocrisy of a Conservative Government, which sold off council housing explicitly to avoid state intervention in housing, now directly intervening in the free market to sell-off said ‘private’ housing.
Unfortunately, the Homes and Communities Agency (HCA) who regulate housing associations do not collect data of how housing associations are actually financed, from whom they borrow, or the interest rates they pay.
However 2014 universal HCA accounts suggest that the ‘book value’ of housing association debt to be transferred to the public sector is actually £135billion which according to Jonathan Portes, equates to “one of the largest nationalisations in UK history” and not the £60billion quoted by Government.
By bringing housing associations back under state control as new accounting changes in the form of FRS 26 take effect from 2016 onwards, Osborne is transferring an enormous private sector burden of bank debt, onto local authorities, which will be forced to pay for the Right to Buy discounts, by selling remaining housing stock.
As with PFI, it now appears the Conservatives have engineered a vast deception, to financialise the public sector by stealth, with complex bank loans and derivatives, commonly thought illegal for use by public authorities.
Join the Vox Political Facebook page.
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Buy Vox Political books so we can continue
fighting for the facts.
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here: