Scottish Building Safety Levy: consultation on proposals
Introduction
In the wake of the Grenfell tower tragedy, we took a range of actions, including changes to Scottish Fire Safety Standards in 2019 and then again in 2021. Changes to the fire safety requirements of cladding systems were introduced in June 2022, including banning highly combustible metal composite material panels on all buildings and a ban on combustible external wall cladding systems of residential and high-risk buildings over 11 metres.
We also established a Cladding Remediation Programme to identify, assess and address the safety risks for buildings within scope. The Programme aims to improve the safety of residents and owners by addressing the risk to human life that is (directly or indirectly) created or exacerbated by a building’s external wall cladding system, as well as the consequential negative impacts which can currently exist in relation to the buying, selling, and re-mortgaging of relevant flatted residential properties in Scotland. The Programme scope is limited to multi-residential domestic buildings which may include a commercial premises, constructed or refurbished between 1 June 1992 and 1 June 2022, 11 metres and over in height and incorporating a form of external wall cladding system.
The costs associated with the delivery of the Cladding Remediation Programme fall into a number of different categories:
- the cost of assessing risk
- the cost of any urgent interim mitigations to manage that risk prior to remediation
- the cost of remediation
In addition, there are a number of associated costs, including but not limited to:
- the costs of engaging with residents and homeowners
- costs associated with assurance of work undertaken
- cost of professional advice on mitigation measures
- administrative costs for programme delivery
It is estimated there are circa 1,000 high rise and 5,000 medium rise buildings within the scope of the programme based on data currently available. The Scottish Government is currently undertaking work to estimate the number of buildings within scope of the Programme. Until this exercise is completed the total cost envelope for the Cladding Remediation Programme cannot be defined.
Our approach to funding cladding remediation
The Scottish Government is committed to establishing a funding approach to safeguard homeowners and residents by addressing the risk to human life that is (directly or indirectly) created or exacerbated by a building’s external wall cladding system. It is right that developers make a contribution to remediating buildings that they have developed, where they are able to do so. However, there are buildings where a developer no longer exists where significant costs may fall to the Scottish Government. The Scottish Government believes it is appropriate to raise a portion of the necessary funding required to remediate these buildings from the residential property development sector.
In England, where cladding remediation work is also being undertaken, the UK Government has the power to introduce a Building Safety Levy to provide additional revenue for cladding remediation in England. The decision to introduce an England-only levy has created a gap in the funding options and powers available to the Scottish Government, relative to those available to the UK Government.
In recognition of this funding gap, we have requested the devolution of powers to create a devolved Building Safety Levy. More information on this process is available in the fact bank below.
Following the devolution of powers, we propose to introduce a Scottish Building Safety Levy, applied to new residential construction, to fund cladding remediation work in Scotland.
Devolution of powers for a Building Safety Levy in Scotland
In our Programme for Government 2023-2024 we set out a commitment to pursue the devolution of powers to create a Scottish Building Safety Building Safety Levy in Scotland. The UK Government and the Scottish Government jointly held a consultation from 8 January 2024 to 19 February 2024, seeking views and evidence on the proposal to devolve powers to the Scottish Parliament for a Scottish Building Safety Levy.
The consultation posed two questions:
- The UK and Scottish Governments would welcome any observations and evidence addressing the criteria set out in the Command Paper. In particular, do you agree that devolving the proposed tax power would not impose a disproportionate negative impact on UK macroeconomic policy or impede the single UK market in house building?
- Bearing in mind there is no option to extend the UK Building Safety Levy to Scotland, do you agree that the power to introduce a Building Safety Levy should be devolved to the Scottish Parliament?
The consultation received 17 written responses. Representations were received from organisations and individuals from across the property, accounting and law sectors: 8 were broadly in support of devolving powers for a Scottish Building Safety Levy, 6 were opposed, and 2 expressed no opinion. A summary of responses to the consultation can be found on the UK Government website.
The UK and Scottish governments agreed that no evidence was surfaced to prevent the transfer of powers from proceeding and the UK Government has agreed to progress legislation to devolve powers to the Scottish Parliament.
On 19 April 2024, the then Deputy First Minister and Cabinet Secretary for Finance, Shona Robison MSP, informed the Scottish Parliament of the outcome of the discussions with the UK Government, and that the Scottish Government would proceed to engage with the residential property development sector and wider stakeholders to ensure that the design and delivery of the devolved Levy is informed by the widest possible range of views. The Cabinet Secretary provided a further update to Parliament on 5 September 2024 that, following the General Election, the new UK Government administration has renewed the agreement to devolve powers. The Scotland Act 1998 (Specification of Devolved Tax) (Building Safety) Order 2024 was laid before the Scottish and UK parliaments on 10 September 2024.