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Housing Associations: Reclassification

Private Members' Business – in the Northern Ireland Assembly at 3:30 pm on 10th October 2016.

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Debate resumed on amendment to motion:

That this Assembly notes the likelihood that the Office for National Statistics will reclassify Northern Ireland’s 22 housing associations from independent social businesses to public bodies; that this may limit their ability to access private finance to build new homes; that the £1 billion of private debt already on their books could be added to the Executive’s balance sheet, taking the Executive’s total borrowing to levels that would reduce drastically their ability to borrow money for other initiatives across the Executive Departments; and calls on the Minister for Communities to prepare to bring forward urgent legislation to reverse the reclassification of Northern Ireland housing associations so that they can remain classified as independent social businesses. — [Mr Allen.]

Which amendment was:

Leave out all after "notes" and insert "the decision by the Office for National Statistics to reclassify Northern Ireland’s 22 housing associations from independent social businesses to public bodies; recognises that this will have a significant impact on housing associations and their ability to provide new social and shared ownership homes; further notes that this decision will add nearly £1 billion of housing association debt to the Northern Ireland Executive’s balance sheet, seriously impacting on the Executive’s ability to borrow money for other initiatives across the Executive Departments; and calls on the Minister for Communities and Minister of Finance to expedite the steps necessary to reverse this reclassification; and agree quickly an interim derogation arrangement with HM Treasury to enable the sector to continue to function normally, to engage closely with the Scottish and Welsh Governments to agree a joined-up approach, and to outline a clear and detailed timeline for specific action, including bringing forward legislation, within the time frame that any HM Treasury derogation allows, to ensure that Northern Ireland’s housing associations can remain classified as independent social businesses.". — [Mr Allen.]

Photo of Paul Givan Paul Givan DUP

I am grateful for the opportunity to address the motion. Like other Members, I am fully aware of the work that housing associations do in building and maintaining a significant number of social homes in Northern Ireland — homes for many of the most vulnerable members of our society. I recognise that anything that threatens that work and, indeed, the added value of the activities that housing associations undertake with, and on behalf of, their tenants is unwelcome and needs to be addressed.

(Mr Deputy Speaker [Mr Kennedy] in the Chair)

Let me assure those Members who brought forward the motion, the Opposition. Well, I am not actually sure whether it was the Opposition. I noted that, when the motion was first brought forward, it was in the name of the Ulster Unionist Party alone. I then noted that, with it having got it so badly wrong, the amendment was brought forward by Members from the Ulster Unionist Party and Members from the SDLP. I note that the Alliance Party, the Green Party or People Before Profit was not included in that. Maybe opposition exists only within the Ulster Unionists and the SDLP as the official Opposition, or maybe the more minor parties in opposition feel put out by that. I am not quite sure about the genesis of the motion. The motion that was laid first was wholly inaccurate in what it was calling on me to do. It called for:

"the Minister for Communities to prepare to bring forward urgent legislation to reverse the reclassification of Northern Ireland housing associations so that they can remain classified as independent social businesses."

With the motion having been brought forward, the Executive being fully aware of all those issues, and the Minister of Finance and I bringing a joint paper through the Executive, an amendment was then brought forward that demonstrates how flawed the Ulster Unionist Party's motion was. Maybe it is because of the expertise in the SDLP or maybe it was just that the Ulster Unionists read the press release that the Minister of Finance and I provided, but the amendment:

"calls on the Minister for Communities and Minister of Finance to expedite the steps necessary to reverse this reclassification" and to seek a derogation. There was no mention of the Minister of Finance in the original motion. There was no mention of a derogation in the original motion. After the Executive take a decision and provide that statement to the public, we get an amendment that more accurately reflects what the Executive need to do. The Executive, however, are already doing it. If this is the calibre of the way in which the Opposition are going to conduct their business, clearly it is going to be left to the Executive to get on with doing business. The Opposition should be able to highlight where the Executive do things wrong and how they should go about doing things. I listened to Mr Beggs say that asking for derogation only is "living in cloud cuckoo land." That is exactly what we need to ask for — a derogation. That will allow the Executive and the Assembly the opportunity to take the legislation through it. Does Mr Beggs believe that we should not have a derogation? I do not know because he is not in the Chamber now. Maybe some of the members of the official Opposition, led by the leader of the official Opposition, want to respond on whether we should get a derogation or not. Mr Beggs did not seem to know.

Photo of Paul Givan Paul Givan DUP

I am happy to give way.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

We just had Question Time with the Minister for Communities, during which he failed to answer two questions that I put to him. Now that he is supposed to be responding to the debate, might he do that?

Photo of Danny Kennedy Danny Kennedy Deputy Speaker

I am not sure that that is a point of order. Minister, go ahead.

Photo of Paul Givan Paul Givan DUP

It is not a point at all.

I listened to the Members who spoke about this. The SDLP was ably led by Ms Mallon — on her own, I hasten to add. The SDLP is so concerned about opposition that it puts down just one Member to front up the debate, and nobody else joins them. That is a demonstration of how seriously it takes this issue. The SDLP just so happens to have the chairmanship of the Committee, and the Chairman of the Committee dealing with what is supposed to be and is a very serious issue was not able to be here for the debate. Maybe the Opposition need to reflect on the way in which they want to conduct their business, but this Executive will get on with doing business.

Within hours of the Office for National Statistics announcing its decision, the Executive had dealt with the issue and taken a strategic decision on how we wanted to go forward. The Opposition were left playing catch-up and having to amend their original motion because they got it so badly wrong. I want opposition to work. My party argued for opposition to be put in place as part of the Fresh Start Agreement. It is because of that negotiation that there is an official Opposition. We are being badly let down in the House when we do not have people who are able to carry out the role of official Opposition by testing this Government. They are not able to do that.

Photo of Paul Givan Paul Givan DUP

I will make some progress and then happily give way to Ms Mallon. Let me explain a little bit more about the detail.

ONS made its announcement on 29 September. On that very day, the decision was issued, and it was agreed that officials in my Department should take forward, as a matter of priority, work to develop proposals to achieve a reversal of the ONS decision. It was also agreed that officials in the Department of Finance should commence negotiations with Her Majesty's Treasury to agree a derogation from normal budgeting rules for a period to allow us time to progress the necessary legislative changes. On one level, this is a technical adjustment to do with the application of international statistical standards to national accounts, and, if that was the extent of the impact, this would not be the important issue that it is. That was highlighted by Members, and Mr Agnew rightly pointed out that this is a hugely serious issue. It is so serious that the Opposition should be ashamed about the cack-handed manner in which they have addressed it. Members have outlined how serious it is, so let me repeat some of those points.

Photo of Paul Givan Paul Givan DUP

I will give way to Mr Allen later.

The change of status means that the subsequent annual borrowing of housing associations will count against the Department's capital budget. As a result, the capital needs of the housing associations would need to be assessed against other departmental priorities, and this is likely to constrain the annual borrowing of housing associations and therefore impact on the funding of new social housing development. In turn, this would result in a reduction in the number of new social homes being built each year at a time when we have increased pressure on public finances and increasing numbers on the housing waiting lists. That is clearly an unacceptable situation. The treatment of the historical debt of the housing associations needs to be considered as well, but that would have little impact in Northern Ireland. While the historical debt is added to the public sector net debt at a UK level, this does not impact on the Department's budget or the Northern Ireland Executive's debt. Therefore, it does not affect the Executive's borrowing powers.

Officials in my Department will now consider all the detail of the ONS announcement. They will also consider the response in the other jurisdictions — Scotland and Wales have just had their associations reclassified as well — and put forward proposals that best suit our needs. The main areas specified in the ONS decision include the powers of the Department in relation to consent powers over the disposal of land; removing, suspending or appointing committee members to a housing association as a result of an inquiry into mismanagement; and directing housing associations to transfer land to another body as a result of an inquiry into mismanagement.

I indicated that I would give way to Ms Mallon and then Mr Allen.

Photo of Nichola Mallon Nichola Mallon Social Democratic and Labour Party

I thank the Minister. Minister, on a number of occasions, you have emphasised the grave severity of the issue, yet you spent the first five minutes — one third of your response — deriding and scolding the Opposition, followed by another two minutes telling us what we already knew. Will you please address the substantive issues and address and answer some of the questions that I and other Members posed?

Photo of Paul Givan Paul Givan DUP

Again, I am not sure where Members have been. I went to the Committee and highlighted that this was an emerging issue. I also raised it repeatedly during Question Time and said that it was an emerging issue that would have serious ramifications for our ability to provide the housing that we need. The direction of travel in all of this was that a decision was coming and we were preparing for it. The Executive then engaged — rightly — on that issue, and, within less than 24 hours of the decision being taken by the ONS, the Executive agreed on the strategic approach that we needed to take. We are moving ahead in addressing the issue, the first step of which is, obviously, seeking a derogation.

During the debate, the Member asked, "Where is the legislation? Why is legislation not being provided?". For the Opposition to do their job, they need to know how all those areas function. Excuse me if the Members feel that I am giving them something of a lecture, but I am doing it in the interests of trying to ensure that the Opposition are in a position to do the job that they are meant to do.

The ONS provided a summary. I am holding the official letter that was received on 28 September and made public on 29 September and that the Executive then addressed. The Member wants to know why there is not legislation on the Floor of the Assembly right now.

Photo of Paul Givan Paul Givan DUP

The Member said that she did not ask that: have a look at Hansard. The final paragraph of the letter from the ONS deals with the issues:

"[This] provides an adequate summary of the points most relevant to this decision. However, please note that this may not be an exhaustive list of all central government controls in place in the current legislation."

The ONS is still to give the detailed publication of its report, which will identify all the measures that it believes need to be addressed to have the reclassification. What a foolish Executive they would be if they produced legislation when they did not know exactly what they needed to legislate for. That is a basic function of how the Executive have to do their job. When we get that detailed report, please be assured that the Executive have already taken those decisions and that the issue is at hand. The Opposition can rest assured that we will be able to address them.

Photo of Andy Allen Andy Allen UUP

I thank the Minister for giving way. On a number of occasions, the Minister has emphasised the seriousness of the matter. However, as other Members pointed out, it was not serious enough for you or the Finance Minister to come before the House and make a statement and give the House an outline of how long a derogation we need to apply for to start shaping the legislation. Will you give us an idea of that?

Photo of Paul Givan Paul Givan DUP

Again, Members clearly were not listening when we raised the issue in Committee and on the Floor of the Assembly. I have been questioned on the issue and have sought to reassure Members that I take it very seriously, so seriously in fact that, within less than 24 hours of the decision being taken, the Executive took the decision on how we would effectively deal with it and immediately made that available to the public. I understand that members of the Opposition will maybe feel that they are not being taken by the hand in the way in which they want to have their hand taken. We have informed the public about it all; that was released into the public domain. Instead of the Opposition focusing on the real issues, what I have heard from them in previous debates is that they want the BBC charter to have a requirement to give coverage to the Opposition in the Assembly and that they are concerned about where they should be seated in the Chamber and the title that should be given to the leader of the Ulster Unionist Party. Opposition is about a lot more than those issues. It is about delivering on the real issues that matter to people. I happen to take the provision of social housing incredibly seriously. We need to provide the homes that our people demand of us. We will get on with doing the business that is required of us.

Over the next number of months, we will develop and consult on the proposals and complete the drafting of the legislation. We will then take that draft Bill through its Committee Stage and bring it to the Assembly. I will need the support of the Committee in carrying out its scrutiny role when we get to that stage. Given that the issue, as Members have indicated, is so critical to them, I have every confidence that the Committee will expeditiously deal with all that scrutiny and we will get this through by receiving Royal Assent as soon as possible after we know the exact nature of what we need to legislate for. I look forward to working with all Members constructively on the issue.

Photo of Philip Smith Philip Smith UUP 3:45 pm, 10th October 2016

I support the motion and the amendment, which I urge all Members to support. As many said during the debate — I listened to many of the comments — if we had not tabled the motion, when would this important issue be debated? I, for one, certainly do not believe we are wasting our time; we are bringing out key issues that need to be aired. When we as a party formed, along with the SDLP, the official Opposition, we said we would be constructive and positive. Today I hope we have shown that through the intent of the motion and the amendment, which I believe can and should get the Executive parties' support. That is why I have been surprised at the attitude and tone of some on the Executive Benches. The response seems to be "How dare you ask a question?". I am afraid we will continue asking questions, whether you like it or not, frankly.

Photo of Andy Allen Andy Allen UUP

Will the Member give way?

Photo of Philip Smith Philip Smith UUP

I certainly will.

Photo of Andy Allen Andy Allen UUP

Does the Member not find it extraordinary that the Minister criticised the Opposition for tabling the motion but did not find time in his 15 minutes to outline the timeline for derogation and to say when we would see legislation? Will that derogation be long enough to allow legislation to be passed? What discussions has he had with the Treasury to ensure that the derogation has a timescale that befits what we need to do here?

Photo of Philip Smith Philip Smith UUP

I thank Mr Allen for his point. I totally agree: the Minister spent 15 minutes saying very little. He did it very well, but he said very little.

The one thing the debate has brought out is a ministerial statement, such as it was. It has delivered that output — on a hugely serious issue, as the Minister admits. Otherwise, we should do what Mr McCann expected and take it that everything is all good. We were told the Executive approved a paper last Thursday, so we could all sleep easy. The question for me is this: why did the Minister not proactively take the issue to the Floor? Where is the openness, transparency and respect for the House? At least, Minister Ó Muilleoir tweeted yesterday that he was looking forward to the debate and referenced "good partnership work", which is what, I think, everybody was trying to bring forward today. I presume his busy schedule did not allow him to attend despite the tweet, but at least he was making the right noises. We have had to endure a patronising lecture from the Minister. Frankly, when he and his colleagues can deliver good government, I will take a lecture on opposition from him. Until that time, he can, frankly, keep it to himself.

I want to address the substance of the debate. While this is a statistical change to the presentation of national accounts, as my colleague Andy Allen outlined when moving the motion, there are critical elements to the ONS reclassification of Northern Ireland's housing associations as public bodies. There is the obvious impact on the provision of public and affordable housing in Northern Ireland. Without the ability to access private funding, it will be impossible to achieve the Executive target of 8,000 social housing starts. The Finance Minister has already made it clear that the only alternative under the changed accounting rules is to fund future builds from the Northern Ireland Budget. Frankly, that is totally untenable. It is also ironic, to my mind, that, as the public-sector voluntary exit scheme comes to an end, we are potentially adding 3,000 workers to the public-sector payroll. There are massive ramifications of this that need to be aired, and the debate was timely and required, despite what the Minister might think.

Everyone is agreed that we have no alternative but to seek a derogation from the Treasury to allow us the space to legislate to deliver the changes needed to reverse the ONS decision. What changes are needed? First, the Department's direction of governance will need to be changed: consent before disposing of land, powers relating to the dissolution or winding-up of an association and powers relating to the disposal of proceeds funds will all need to be changed. Essentially, the reclassification is based on the degree of control the state can exercise over housing associations' corporate policymaking, and legislation will be needed to reverse the ONS assessment.

Northern Ireland's housing legislation is both older and more complex than that of Great Britain, making our process more challenging. When the housing associations were classified in England in October 2015, Parliament was fortunate enough in that the Housing and Planning Act 2016 was already under way and could be amended to include a package of deregulatory measures, but even with that running start, the process is likely to take 18 months before Royal Assent. In this jurisdiction, we will have to start the legislative process from scratch. I encourage the Minister to get the process under way, as time is against us. It would have been useful to at least have got some outline today of what a timetable would need to be and also an understanding of what the initial engagement has been with the Treasury around this derogation. I believe that the Treasury is being robust on this. We will need to agree a window of at least 18 months in which to pass the required legislation, so the first action for the Minister for Communities and the Minister of Finance is to convince the Treasury that we have developed a tight timetable and credible plan to reverse the situation and are thereby deserving of the time and space to deliver the required changes.

Photo of Naomi Long Naomi Long Alliance

I thank the Member for giving way. Will he agree with me that it is a shame that the Minister could not provide reassurance and that, whilst we accept that the full nature of the ONS comments are not available, the Executive could, at least, be working on legislation at this point based on the initial response of the ONS?

Photo of Philip Smith Philip Smith UUP

I totally agree with the Member. It would have been nice to have heard some positivity at least from the Minister rather than just the diatribe that we have had to endure.

There has been mention of the potential for a coordinated approach with colleagues in Scotland and Wales, if required, to secure the Treasury derogation for the three devolved institutions. If that needs to be done, so be it. Again, we need to progress that without delay. The legislative changes that are required will not drastically deregulate the housing association sector, so I do not believe that Members should be overly concerned about the change that is needed. Housing associations will still be regulated by the Department. They will still be regulated charities with charitable controls. There are still the strong protections around the reinvestment capital grant of £2·3 billion that is being invested by the Northern Ireland Executive in housing association assets.

In conclusion, we need to see quick action from both relevant Departments to drive forward the changes needed to reverse this ONS classification, otherwise our ability to borrow to invest will be stymied, and we will be unable to build the thousands of social and affordable homes that Northern Ireland desperately needs. I urge Members to support the motion and amendment.

Question, That the amendment be made, put and agreed to.

Main Question, as amended, put and agreed to. Resolved:

That this Assembly notes the decision by the Office for National Statistics to reclassify Northern Ireland’s 22 housing associations from independent social businesses to public bodies; recognises that this will have a significant impact on housing associations and their ability to provide new social and shared ownership homes; further notes that this decision will add nearly £1 billion of housing association debt to the Northern Ireland Executive’s balance sheet, seriously impacting on the Executive’s ability to borrow money for other initiatives across the Executive Departments; and calls on the Minister for Communities and Minister of Finance to expedite the steps necessary to reverse this reclassification; and agree quickly an interim derogation arrangement with HM Treasury to enable the sector to continue to function normally, to engage closely with the Scottish and Welsh Governments to agree a joined-up approach, and to outline a clear and detailed timeline for specific action, including bringing forward legislation, within the time frame that any HM Treasury derogation allows, to ensure that Northern Ireland’s housing associations can remain classified as independent social businesses.