Chamber and committees

I take Michelle Thomson’s point, and I am happy to engage with her and others on that in advance of stage 3, if necessary.

I hear Liz Smith’s point about the consultation not being designed with this timetable in mind. I can reassure her on that. There is clearly still scope for stage 3 amendments, but I hope that she appreciates the intent of the consultation, which has been under consideration for a period of time. Indeed, we have been indicating for a period of time, in discussion with the sector and others, that this was on its way, in an attempt to stimulate build-out from the significant number of units that have planning permission but have not yet been started, never mind completed.

I will speak to the four amendments in my name in the group, and I encourage all members to support them. The Scottish Government has carefully considered the committee’s recommendations on the reporting provisions in the bill, and I agree with the committee’s broad view that the strengthening of reporting requirements will help industry to have confidence in the operation of the levy, in line with its stated objectives.

Amendment 10 gives further clarity on the Government’s use of revenues by requiring reporting under the legislation, once enacted, to set out the work that has been fully or partly funded from the proceeds of the levy. Amendment 11 supplements that by allowing reports to refer to the annual progress report that is already required under the Housing (Cladding Remediation) (Scotland) Act 2024. Further to that, in line with the committee’s recommendation, amendments 9 and 12 will require those reports to be laid at least every three years, with provision to lay them more frequently if necessary.

Amendment 37, in Liz Smith’s name, delivers on the same intention as my amendment 9. I would ask her not to move that amendment, given our shared view on the matter. I believe that my amendment is preferable, as it allows more frequent reporting when appropriate while still containing a three-year minimum interval.

I am sympathetic to the aim of amendments 51 and 52, in the name of Michelle Thomson. It is right and proper for the Government to assess the impact of its policies, particularly in areas such as house building, which is not only a key economic driver but an important lever in tackling the housing emergency. The Scottish Government has already committed to undertaking and publishing an updated impact assessment of the levy, ahead of indicative rates being introduced in June. That will build on the draft and full business and regulatory impacts that the Government has already published on the levy. We will also produce triennial reports on how the proceeds from the levy have been used.

Amendment 51 seeks to put much of that work on a statutory footing, but there are three issues with the amendment. First, it mentions an “independent and competent expert”. It is not clear how such a person would be identified and appointed without that being subject to challenge. Secondly, the list of impacts under subsection (2) of the proposed new section that the amendment would insert is broad and lacks specific indicators or a way of measuring outputs. The industry is already subject to a range of external macroeconomic and social factors, and we believe that trying to assess the levy in isolation from wider factors is unrealistic. That would make any assessment subjective and ineffective in providing certainty to industry, and it would add recurring costs to the administration of the levy. Thirdly and lastly, amendment 51 would subject the levy to some of the most rigorous reporting requirements, if not the most rigorous, across the UK tax system, despite it being one of the smallest taxes in revenue terms. I therefore cannot support amendments 51 and 52 in their current form.

Similarly, the Government is unable to support amendment 38, in the name of Liz Smith. For the same reasons, the Government is also unable to support amendments 59 to 61, 63 and 64, in the name of Mark Griffin.

I will begin by talking about amendments 23 and 24, which were lodged by Michael Marra. Taken together, those amendments would introduce new statutory requirements for publishing rates and completing impact assessments before levy rates can be set.

Amendment 23 would require ministers to publish indicative levy rates only after commissioning and laying before the Parliament an independent sensitivity analysis of the levy’s impact on the housing market. Amendment 24 would go further, by preventing ministers from laying regulations to set levy rates until the conditions in amendment 23 had been met, and by requiring a minimum 22-month period to elapse between the publication of indicative rates and the rate regulations coming into force.

The combined effect of the amendments would be to create new statutory preconditions and fixed timescales for rate setting, which would apply not only to initial rates but to any future revisions. Those are conditions that the UK Labour Government will not need to meet in relation to its building safety levy.

The Government has committed to publishing the first levy rates in June 2026, which gives developers a 22-month lead-in time in advance of the levy coming into effect in April 2028. Any future changes to rates are likely to be more marginal—for example, to take account of changes in average house prices. There is therefore not the same rationale to provide 22 months’ notice on each occasion.

The Government has a well-established fiscal cycle, in which tax policy is set as part of the annual Scottish budget, in accordance with best practice as identified by organisations such as the Organisation for Economic Co-operation and Development. Notwithstanding that, the Government recognises the importance of giving advanced certainty to developers and intends to set out rates and bands at the Scottish budget a year ahead of time. For example, the rates for 2031-32 would be set at the 2030-31 Scottish budget.

Therefore, I am not persuaded that a mandatory 22-month period or the well-established practice of setting devolved tax rates and bands at the Scottish budget need to be put on a statutory footing, nor am I persuaded that the levy needs to be subject to more stringent laying requirements than other devolved taxes or the UK Government’s building safety levy in England. Neither this committee nor the Delegated Powers and Law Reform Committee recommends making the statutory duties to publish indicative rates or to conduct analysis a formal precondition for setting rates.

Amendments 25 to 29, lodged by John Mason, seek to replace the bill’s current floor space approach to calculating the levy with an approach that is based on market value. The effect of the amendments would be to fundamentally redesign the levy. When the Scottish Government consulted on a market value approach during policy development, most respondents opposed it and cited concerns about uncertainty, complexity and the risk of dispute, particularly given that the new tax point is at the point of completion rather than at the point of sale.

There was a range of respondents, but we can give more detail on that if required.

Basing the levy on market value would create significant practical and administrative challenges. At the point of completion, market value is often uncertain or not yet crystallised, especially in volatile or site-specific markets. In build-to-rent and purpose-built student accommodation developments, in which there is no intention to sell individual units, there might be no transaction price at all, meaning that formal valuations would be required solely for levy purposes. Those issues would introduce additional costs and complexity for developers and, indeed, for Revenue Scotland. They would increase the scope for dispute and undermine the certainty and predictability that an approach based on floor space provides. Although the committee invited the Government to consider whether market value could better reflect local sensitivities, it did not recommend changing the tax base in order to express a preference for market value over floor space. For those reasons, if agreed to, amendments 25 to 29 would go beyond the committee’s recommendations and amount to a fundamental redesign of the levy.

There is real value in that amendment, so the Government is content to support it.

I make the point that, contrary to what has been stated by some, the advisory group was consulted on setting the levy-free allowance at different levels, in order to gain its thoughts on that.

The Government’s response to the amendments in the group demonstrates a balanced approach between listening to industry concerns and ensuring that a disproportionate level of costs does not fall on to a narrower subset of the tax base. For those reasons, we are happy to support amendments 30 and 31, in the name of John Mason, and amendments 54, 55 and 56, in the name of Michelle Thomson. However, we invite the committee to reject the other amendments in the group.

The aim is to give certainty to the sector that we are taking forward the intent behind the bill, which is to provide funding for cladding remediation.

I have concerns that the definition of “Cladding Remediation Programme”, which is used in amendments 34 to 36, could unduly restrict the use of levy funds. The Housing (Cladding Remediation) (Scotland) Act 2024 provides a mechanism for the instruction of a single building assessment and remedial works where there is limited co-operation from the owners. As much of the programme involves work that is instructed voluntarily, not via the powers of the 2024 act, restricting the use of levy funds to only those works that are instructed under the act would exclude a significant proportion of the works that are instructed as part of the cladding remediation programme. As a result, the amendments could lead to a situation in which funding is not directed to those buildings where the risk is highest.

Liz Smith has pre-empted my final point—I was going to make that exact commitment. I am happy to meet Liz Smith in advance of stage 3 to find a suitable form of words that captures her intent and which focuses on all works that are part of the broader cladding remediation programme, so that a new amendment can be lodged at stage 3.

I am happy to have a conversation about that. I think that we will need to take advice from Revenue Scotland and others on that. Without making a commitment, I am happy to have a conversation to understand whether there is something that would fit that scenario.

Both this committee and the Delegated Powers and Law Reform Committee were clear at stage 1 that matters such as payment time and administration are best dealt with through secondary legislation, precisely because that allows for adjustment in the light of operational experience. The bill already provides powers to make provisions on accounting periods and time for payment, which can be exercised in a way that is targeted, proportionate and responsive, instead of being fixed in primary legislation. That might address the issue that Michelle Thomson has raised.

Revenue Scotland works constructively and flexibly with taxpayers who experience difficulties in paying the tax that they are due to pay. It is important that we allow Revenue Scotland, as Scotland’s national tax authority, to retain the discretion and flexibility to collect and manage the levy in an efficient and effective manner, in line with how it has done that with other devolved taxes.

I turn to amendments 8 and 13, which should be considered together. They will introduce a new regulation-making power to enable information sharing between Revenue Scotland and relevant public bodies, including local authorities, Registers of Scotland and the Scottish ministers. The levy is designed as a self-assessed tax, but Revenue Scotland does not hold the key information that is needed to verify returns, such as data on building completions, ownership or exemptions. Without appropriate information-sharing arrangements, Revenue Scotland’s ability to administer and enforce the levy effectively would be limited.

Amendment 8 will provide the necessary legal gateway to support targeted, secure and proportionate information sharing, while amendment 13 will ensure that regulations that are made under that power are subject to the affirmative procedure, reflecting the importance of appropriate parliamentary scrutiny. The proposals have been developed in close collaboration with Revenue Scotland, COSLA, Local Authority Building Standards Scotland, the Improvement Service and the Information Commissioner’s Office. Together, the amendments will ensure that the levy can be administered efficiently and fairly and with appropriate data protection safeguards in place.

I move amendment 7.

Convener, thank you for your efficient process in moving through the business this morning. It has been much appreciated by me and, I am sure, all members of the committee.

Amendment 15, which is in my name, inserts a new provision into the bill that will force the act to expire after a period of 15 years. That is the Government’s proposed sunset clause, which is designed to ensure that the levy is in place for no longer than is absolutely necessary. That period of time is in line with the committee’s recommendations in its stage 1 report and with the estimated lifetime of the cladding remediation programme.

If the amendment is agreed to, it will mean that, if the Government and Parliament do nothing, the levy will cease after the 15-year period. However, in recognition of the potential for unforeseen costs for the programme, ministers can take action by regulation to extend the lifetime of the levy. To ensure that the Parliament has appropriate oversight of such action, amendment 14 will require that such regulations are subject to the affirmative procedure, which means that the Parliament must agree to any extension beyond the 15 years.

Additionally, subsection (3) of the new section inserted by amendment 15 will require ministers to lay before Parliament a statement of their reasons for extending the levy, which will ensure accountability for the decision. The Scottish Government believes that that is a fair position, and I hope that committee members will be minded to support amendment 15.

Amendment 47, in Craig Hoy’s name, intends to deliver a similar effect to my amendment 15, although with some differences. Amendment 47 would shorten the period in which the levy would be in operation down to 10 years, which is five years fewer than the committee’s recommended position at stage 1. Although amendment 47 contains a provision to extend the lifespan to 15 years, that extension could be applied for only in the ninth year of the levy’s operation. Such a restriction would create issues with Revenue Scotland’s continued operation of the tax and would risk creating uncertainty for developers, who will want clarity on whether the levy is to continue in advance of its final year. Although the aim of the amendment is understandable, its effect would unintentionally cause more uncertainty. I therefore ask the member not to move amendment 47.

The same reasoning applies to amendment 66, in the name of Liz Smith. I note the subtle differences between amendment 66 and amendment 47, such as the requirement to lay a statement of reasons before Parliament when ministers propose to extend the lifespan of the levy. I trust that that means that the member will welcome the similar provision in my amendment 15.

As with amendment 47, however, the 10-year limit for the levy that is proposed in amendment 66 does not match the committee’s recommendation or the proposed lifespan of the cladding remediation programme. As with amendment 47, any extension could be enabled only at the end of the levy’s lifespan, which would create uncertainty for all parties involved. For the same reasons, I therefore ask members not to vote for amendment 66.

Unlike my amendment 15 and the other amendments that I mentioned, amendment 65, in the name of Mark Griffin, would see a termination of the levy after 10 years, with no recourse to an extension. That represents a substantial departure from the UK Labour Government’s approach to the building safety levy in England, which contains no such clause. I have been referring to the UK Labour Government’s approach in my remarks today in the hope that Labour members might reflect on that. However, given their newfound independence, they might not feel the need to do so.

I draw members’ attention to the points that I made on amendments 47 and 66, and to the potential risks of funding shortages in the cladding remediation programme further down the line. I know that no one will dispute the need for the Government to undertake that critically important work. I ask members to consider the implication of placing a greater share of the costs of that work on to the wider public purse if the levy is forced to end prematurely, with no regard to emerging data on the costs of cladding remediation.

For the reasons that I have given, I ask members to support my amendments 14 and 15 in preference to the other proposed sunset clauses in the group.

I move amendment 14.

To be honest, I find it hard to imagine that anyone who was seeking to create another scandal—if indeed they were seeking to do so—would decide whether to do so on the basis of this legislation giving them that opening.

That aside, I make it clear that we are proposing that the act will cease to be after 15 years, unless Parliament decides to extend it. That will not be down to Government ministers; Parliament will need to approve it through the affirmative procedure. That is very clear, and it provides the very clear end point that the sector has been calling for. Indeed, I think that this, in combination with the work that we will be undertaking with Liz Smith in advance of stage 3 on the scope of the use of the funds, will give the assurance that the sector is looking for.

Amendment 14 agreed to.

Amendment 45 moved—[Craig Hoy].