Ireland’s experience of trying to move spending off the State balance sheet has proved tricky in recent years, as highlighted by the saga of Irish Water. Now the issue has raised its head again, with Eurostat, the European Union statistics agency, deciding that the approved housing bodies involved in the provision of social housing should be counted as part of the exchequer finances.
As was the argument with Irish Water, one of the points of having the agencies off balance sheet was to give greater freedom in State financing while also allowing the agencies some scope to raise funds themselves through borrowings from commercial sources. Now the finances of the bodies – both costs and revenues – will move entirely within the State for EU borrowing and debt purposes.
The change will have some impact on the Government’s annual room for manoeuvre in the budget – the so-called fiscal space – but not a significant one in the short term.
This is because the money currently borrowed by the agencies, about €250 million a year, will be included in the spending base and only some of the borrowing amounts in excess of this will count towards the annual spending as reported for EU targets and used to calculate the deficit. So in the short term the impact on the fiscal space – forecast to be some €1 billion in 2019 – will be minimal.
Social mission
Sinn Féin housing spokesman Eoin Ó Broin, a member of the housing committee, said he had been reassured about the immediate impact on the annual budget figures, but that the longer-term implications needed to be assessed. He added that any move to get the agencies back off the State balance sheet needed to be done in a way that did not affect their core social mission.
Some historic debts of the agencies may also have to move on to the national debt, though the amounts involved are not thought to be large. Government sources say they have not yet seen the full decision from Eurostat and will need to study its terms before judging the exact financial implications. Minister for Housing Eoghan Murphy has said he does not expect it to disrupt the delivery of State housing.
There are large numbers of small approved housing bodies – many of them co-operatives for people managing their own properties – but the Eurostat decision relates to the 14 big players who manage the vast bulk of the stock and build houses for rental. They are planned to deliver one third of the 50,000 social houses targeted for completion by 2021.
The decision to move these bodies on to the State balance sheet relates to the fact that they are almost entirely State funded and that local authorities oversee how houses are allocated and what rates are charged to tenants. Eurostat had asked the Central Statistics Office to review the issue. One option, favoured by those representing the sector, would be to try to restructure the bodies to get them off the State balance sheet in future. Given recent experience it remains to be seen if the Government will go down this road, but clearly the issue now needs to be reviewed.
The Government must now decide how to proceed. The change should not affect the short-term delivery of social housing. But it does raise longer-term questions about how the bodies will operate and what structure will be used for this key goal of delivering more social housing.
