Adopt European Debt Rules To Boost Social Housing

The Chartered Institute of Housing (CIH) has urged the Chancellor, Alistair Darling, to bring the borrowing rules used in the UK into line with those used across the rest of the European Union, when he announces changes in today's Mais Lecture.

The rest of Europe uses the General Government Financial Deficit (GGFD) to measure levels of public borrowing. On this measure, widely accepted by economists and markets, Britain's debt level is below the average of the core group of 15 European countries. Moreover, Britain's current debt is well within the 60% target threshold of GGFD established under the Maastricht Treaty.


CIH has been urging this change since 1995, and the argument is repeated in the UK Housing Review 2008/2009 to be published in December by CIH and the Building Societies Association. CIH points out that a switch to the use of GGFD as the primary fiscal measure for government debt would also unfetter public sector 'trading activities', such as council housing, so that they can borrow freely against their trading income (for example rents), rather than constrain them in the same way as with debt for government services. This would provide a significant boost to social housing production at a time when pressing housing needs are unlikely to be met by the private market.

CIH Policy Adviser John Perry said: "Replacing the current prudent borrowing rules by another rule that is different from those followed by our European partners would not make sense. On the other hand, switching to the rule followed in most other European countries - the GGFD - is not only a logical change but one which the markets and commentators would find hard to reject, since it seems to work perfectly well in countries such as France and Germany."

(CD/JM)