A rare opportunity to welcome an initiative by a bundle of ten councils of all political persuasions – Tory, LibDem, Lab and NOC – arose this week. The issue is an old one on which a dedicated band of experts have campaigned for 20 years or more. And the question is whether George Osborne is any more likely to listen than any of his predecessors as Chancellor. My feeling is not because the tradition of orthodoxy runs deep at HM treasury.
Changing the borrowing rules has been a celebrated cause, where everyone except the people who matter most, in Whitehall, favours change. In essence, in the UK borrowing to invest in council houses has been included in the main measure of public sector borrowing, and therefore subject to strict control. Other countries especially in the Eurozone, do things differently, and we could count council housing and other public corporate activities as separate trading activities where borrowing is determined by the business plan of the organisation involved and its revenue streams – and governed by the prudential code – rather than being controlled by an artificial national count of all debt that only the Brits use.
Detailed work led by the CIH in the 1990s (their report was entitled ‘Challenging the Conventions’) led to high hopes that the new Labour Government would change the rules. Some adjustments were made, mainly with the prudential borrowing regime, which helped, but the breakthrough never arrived. The research for the CIH report was undertaken by the (then) leading Coopers and Lybrand accountancy company, now part of PWC. They then did follow-up research with financial institutions, revealing in a second report called ‘Consensus for Change’ that the City was wholly relaxed about the proposed revision to borrowing measures and that it might lead to over £1 billion of extra investment being available for council housing.
This new initiative, supported by councils from all over the country as well as all political persuasions, takes the campaign into yet another decade. They assert that the change would not affect UK credit ratings, would ease unemployment in construction, and would help deliver the Government’s aspiration to build more homes during this spending review period. Their current estimate is also that an additional £1bn could be raised for investment in new housing.
HM Treasury being what it is, silence will probably be the response. I don’t think they have ever issued a serious rebuttal of the arguments. Time will tell, but some of us have already grown old and grey waiting for this sensible reform.