Official Report 674KB pdf
The next item on our agenda is to consider the Building Safety Levy (Scotland) Bill at stage 2. We are joined today by Ivan McKee, the Minister for Public Finance, who is accompanied by Scottish Government officials. Although the officials are present for this session, under standing orders they are unable to participate in formal stage 2 proceedings.
I also welcome to the meeting Meghan Gallacher MSP and Mark Griffin MSP, who, like committee members, have lodged amendments to the bill at stage 2.
I will briefly explain the procedure that we will follow today, for anyone who may be watching and to remind members. Members should have before them copies of the bill, the marshalled list and the groupings, which are all available on the Scottish Parliament website. I will call each amendment individually in the order on the marshalled list. The member who lodged the amendment should either move it or say that he or she is not moving it when it is called. If that member does not move it, any other member present may do so. The groupings set out the amendments in the order in which they will be debated. There will be one debate on each group of amendments.
In each debate, I will call the member who lodged the first amendment in the group to speak to and move that amendment and to speak to all the other amendments in the group. I will then call other members with amendments in the group to speak to, but not to move, their amendments and to speak to other amendments in the group if they wish. I will then call any other members who wish to speak in the debate. Members wishing to speak should indicate that by catching my attention or that of the clerks. I will then call the minister, if he has not already spoken in the debate. Finally, I will call the member who moved the first amendment in the group to wind up and to indicate whether he or she wishes to press the amendment or to withdraw it.
If an amendment is pressed, I will put the question on the amendment. If a member wishes to withdraw an amendment after it has been moved and debated, I will ask whether any member present objects. If there is an objection, I will immediately put the question on the amendment. Later amendments in a group are not debated again when they are reached. If they are moved, I will put the question on them straight away. If there is a division, only committee members are entitled to vote, and voting is by a show of hands. It is important that members keep their hands raised clearly until the clerk has recorded their names.
The committee is also required to consider and decide on each section of and schedule to the bill and the long title. I will put the question on each of those provisions at the appropriate point.
We will now begin the stage 2 proceedings.
Section 1—The Scottish building safety levy
Amendment 16, in the name of Michael Marra, is grouped with amendments 1, 17, 2, 18, 19, 48, 20 to 22, 49, 50, 4 and 41 to 43.
Given that my comments will be the first at stage 2, I will set out a little bit of the context for the bill.
We had a considered debate at stage 1, and I take on board some of the comments that the minister made at that point. Scotland has been in the grip of a housing emergency for years, and even the Scottish National Party Government acknowledged that, back in May 2024. However, although almost two years have passed since then, little has changed. House building figures from December 2025 showed that the numbers of new-build starts and completions are both falling. Social sector starts have hit their lowest point since records began in 1997, and affordable housing completions are down 23 per cent.
All of that has real consequences. Statistics that were published just last week show that the number of children living in temporary accommodation is at a record high of 10,480 for the period reported. The number of open homelessness applications is also at a record high, and rough sleeping is at its worst point in two decades. That is the context in which the Government has introduced the bill, and we should all recognise that.
In its evidence sessions on the bill, the committee heard repeatedly about the potential for the levy to damage what is an already precarious house-building sector in Scotland. The possible introduction of the levy with unknown rates and at an unknown date is destabilising for a market that needs certainty to plan and make decisions for the long term.
Michael Marra is arguing against the levy, and I have some sympathy for that, but is the fault not at Westminster, which has brought in such a levy in England and, effectively, put us into a corner whereby we have to do so as well, when it would have been better just to put it on to corporation tax or something like that?
I take John Mason’s point. What I am exploring, and want the minister to respond on, is the general defence of the approach that he has taken. It is not for me to defend why the Government has taken that approach. I do not necessarily think that it follows that, because this happened in England, it has to happen in Scotland. I do not agree with the member on that. Our very different housing market and circumstances have formed the basis of much of the approach of the committee and the evidence that it took. I would like to hear the minister defend in some detail the approach that might be taken.
John Mason is right in that there is a significant challenge to be faced when it comes to raising finance to deal with cladding remediation. However, my view is that that is not the limiting factor of the rate of delivery of cladding remediation in Scotland. Certainly, at the moment, there is money in the bank that came through Barnett consequentials but has not been spent. The question is whether substantive issues are preventing the Government from dealing with the situation.
The possible introduction of a levy with unknown rates and at an unknown date is deeply destabilising for a market that needs certainty in order to plan and make decisions for the long term. Across the sector, house builders are making decisions about where to build and how much to build, and they cannot do that with the uncertainty of a levy hanging over them. My amendment 16 seeks to give some certainty to the sector so that it can get on and build now. It would give a firm guarantee that any construction or conversion work that was begun before 1 April 2028 would not be subject to the levy. That would mean that more homes would be built now, rather than house builders choosing to sit it out for two years and waiting to see what a future Government might or might not do. It would be particularly good to get the minister’s reflections on how he sees that dynamic impacting the sector.
At his appearance before the committee on 18 November 2025, the minister stated:
“the commencement date for the levy will be deferred by one year, to April 2028.”—[Official Report, Finance and Public Administration Committee, 18 November 2025; c 42.]
Amendment 16 would keep the Government to that commitment. Clearly, Meghan Gallacher’s amendment 19 has a similar intention, so I will be interested to hear the debate and the Government’s response.
I move amendment 16.
I thank the committee for its engagement and scrutiny on the bill so far. I have had good engagement with individual members on their proposed amendments, and that has been very welcome. I am keen that we continue in that constructive spirit today.
On Michael Marra’s comments, we all understand—I hope—that there is a requirement to fund the cladding remediation programme over the lifetime of the requirement for those works. The cost is significant. As we know, it runs into billions. The funds that will be applied from the levy will form only a part of that. The money has to be found from somewhere—if not from this route, from elsewhere in the Government’s capital budget and, potentially, even from the affordable homes budget. Not having the levy and finding the money from elsewhere is not a get-out-of-jail-free card. Funding would have to be found from another of the Government’s capital budgets.
I reflect that Michael Marra opened with a general framing of the housing challenges that we have. Is it your position that accepting too many exemptions could render the bill unviable—because of the figure of £30 million—but that accepting too few could, ultimately, affect the housing market, as we alluded to in our report? Given that you are where you are—that the bill has been foisted on us, as has been said in earlier comments—do you have a sense of where the sweet spot is that makes the bill still viable without a significant impact on the housing market?
I do not think the bill is unviable. It is absolutely viable.
I meant if you accepted all the exemptions. As you have correctly pointed out, if you were to accept every exemption it would mean that the money would have to be found elsewhere. That is what I was getting at.
As is the case with how the UK Government has configured its measures, the target is to raise £30 million a year, spread over either more or fewer properties. If there are more exemptions, that has an impact on the rate charged on the other properties. We will debate that as we go through the exemptions that members have proposed, some of which would have a greater impact than others. We will consider those. Even for the most significant ones, the numbers would not in fact be so significant.
10:45
Thank you, minister, for the engagement with me on this matter last week. To what extent has the Scottish Government carried out any study of the behavioural changes that have happened since the bill was published? Are you aware of some of the behavioural changes that are likely to take effect in relation to the exemptions that Michelle Thomson is talking about?
We have carried out the impact assessment on that, and we will continue to update it, depending on where we get to with the various amendments to the bill that are being debated now and will be considered at stage 3. We are aware of the profile of the sector and of the impact that any of the amendments would have on the market—which we will discuss as we move through the amendments—and the impact that the exemptions would have on the remaining tax base. We have done quite a bit of work to understand that, and we have done the impact assessment across the whole sector.
Amendments 1 and 2, in my name, are minor technical adjustments to the wording of section 4. The changes clarify the position for buildings that have parts with different uses. Only those parts of a building to which the definition applies will be considered as dwellings or other accommodation for the purpose of the levy. I believe that all interested parties would welcome that minor change.
Amendment 4 makes a change to the definition of the taxpayer for the levy, namely the owner of the property at completion. The Scottish Government has tested that definition with Revenue Scotland and the Law Society of Scotland, which identified that, in specific cases, it is possible that more than one person could be considered the taxpayer. For instance, if the tax point were to occur during the period when the property had been sold but the title had not yet been registered, that would risk uncertainty for taxpayers in such cases. Amendment 4 therefore seeks to remove any such uncertainty by providing a clearer definition.
Amendments 16 and 19 both seek to introduce a form of transitional provision, and the Government cannot support those amendments. We recognise the need for developers to have advance certainty of what their liability to the levy will be, and that is why I took the decision to move the commencement date of the levy back one year, to April 2028. I have also committed to publishing the first set of indicative rates for the levy in June 2026. That will give developers 22 months of advance certainty of their levy liabilities, and that is provided in lieu of potential complex transitional provisions.
My view is that delaying the commencement of the levy and publishing the first set of indicative rates 22 months ahead of time already provides sufficient notice for developers to plan their affairs accordingly. Amendments 16 and 19 would only add complexity and would depress much-needed revenues. I urge the committee not to support those amendments.
There is an established principle that regulatory treatment follows the rules in force at the time of a building or an application. We need to recognise the significant up-front investment in viability decisions made by house builders. That was my reason for lodging my amendment 19, working for Homes for Scotland. How does the minister intend to answer those issues if we do not consider passing amendments 16 and 19 in this group?
In response to the sector, we have moved the implementation back to April 2028, and we have triggered that on completion, which we think is a better method, because it gives more certainty to the market and supports cash flow. We think that that is a better trigger point. To go back and consider what is happening with building warrant applications would run counter to that.
I think that the proposal that we have put in place gives sufficient visibility. It is a more effective trigger point and it is more helpful for the sector. To be honest, amendments 16 and 19 are just seeking to further delay implementation, which is not helpful, given the need for capital income to support the cladding remediation programme.
Amendments 17 and 18, in the name of John Mason, are linked in their aim to bring temporary accommodation within the scope of the levy. I recognise the view that Mr Mason expressed at stage 1 on the benefits of a contribution from larger hotels. However, the amendment as drafted would bring all temporary accommodation within scope, which would not only subject a wide range of recreational accommodation types to the charge but would bring in other temporary accommodation uses, such as accommodation for persons fleeing homelessness or domestic abuse. For that reason, the Government cannot support these amendments as drafted, but I would be happy to consider whether certain types of temporary accommodation would merit being included in the tax base and to discuss that further with John Mason, and indeed with any other members.
Amendments 48 to 50 all seek to introduce an exemption for properties sold to first-time buyers. As with a number of amendments that have been lodged, these proposed amendments to the bill would be very difficult to deliver. At the point of taxation, a building will not have a use, and any such exemption relies on an intended future use. It is not clear how taxpayers would know, at the point of collection, which units were to be sold to first-time buyers. Therefore, while the intent behind amendments 48 and 49 is well meaning, it might inadvertently create additional pressure on developers to demonstrate eligibility, and so increase administration costs for Revenue Scotland.
I think that the minister is making an assumption as to the effective operation of what is proposed. It would be possible to grant a relief to a builder where there is demonstrable evidence that the accommodation is being sold to a first-time buyer, for which there would be ample evidence after completion. Has the minister considered that? In addition, has he considered the vital role of first-time buyers in keeping the housing market viable? They drive demand and create a ripple effect, free up homes for rent, support economic growth, support a balanced market and play into balancing sustainable communities.
I appreciate the complexity of what the minister thinks may be intended, but my question is simple. Would he consider, at least in part, some kind of relief where it can be easily proven after the event that the purchaser was a first-time buyer?
There are two points to answer there. I was going to make the point that, although we cannot support these specific amendments, I am very happy to discuss further with Michelle Thomson and Mark Griffin, and with any other interested members, any further measures that the Government could take to support first-time buyers.
As Michelle Thomson indicated, there may be other mechanisms through which that could be done with regard to the levy, but these amendments would not give effect to that. There is a commitment to discuss how that could be done, whether through land and buildings transaction tax buyer relief, which already plays an important role in supporting people to get on to the property ladder, or through other mechanisms that we could consider.
Another point to bear in mind is that 22 per cent of new-build sales are to first-time buyers. While the proposed measures would potentially have the effect of supporting first-time buyers, therefore, given that the levy is configured to raise £30 million a year, it would mean that the levy that is applied on properties that were not purchased by first-time buyers would be higher— in this case, significantly higher.
Amendments 20 and 41, in the name of Liz Smith, seek to introduce an exemption for heritage buildings. Although I am sympathetic to their aim, I have concerns that the amendments as drafted would risk incentivising people to seek listed status for tax reasons, which is not the aim of the listed buildings policy. I have already committed to a minimum 50 per cent brownfield relief, which I will touch on in speaking to amendments in a later group, but I am happy to discuss further with Liz Smith the issue of an exemption for conversions more broadly. I thank Scottish Land & Estates for its correspondence on the matter, and I have considered its views, because I recognise that we would want to encourage support for conversions.
Amendments 22 and 43 concern the creation of an exemption for key workers. As with the amendments on first-time buyers, the Government cannot accept these amendments, given the complexities that they would cause developers in trying to verify whether the occupiers were key workers and the potential adverse impact that that would have on the tax base.
I also draw members’ attention to the list of residential institutions in section 4(3)(b) of the bill, which are framed with a focus on the building itself and cover accommodation that is provided for those types of cases. If Meghan Gallacher wishes to highlight any types of institution that are not covered in that list, I would be happy to consider those.
Finally, I turn to Craig Hoy’s amendments 21 and 42, which would create an exemption for rural areas. I agree with the intention that remote rural development should be exempt from the levy, given the increasing costs and supply-line challenges that developers in more remote rural areas face. That is why we have already, in section 5 of the bill, exempted developments that are situated on islands. I have also committed to extending that exemption in regulations under section 6 of the bill to island-like rural areas of Scotland, in line with their hospitality relief for non-domestic rates.
Development in other rural areas will also benefit from the levy-free allowance, with a proportionally greater benefit to those building in class 4 and class 6 of the “Scottish Government Urban Rural Classification”, removing up to 81 per cent of units from the charge, depending on developer behaviour. Amendment 42, which defines “rural” specifically using the area classes, refers to that policy document, which has no legal status and is reviewed periodically. Regular legislative updates would therefore be required to keep pace, which would create uncertainty for taxpayers, whose sites may move between different definitions of rurality during the life cycle of a development.
On that basis, the Government cannot support amendments 21 and 42 as drafted, although I would be happy to speak with Craig Hoy to consider further measures that could be practically introduced to protect rural development.
For the reasons that I have set out, I ask the committee to support amendments 1, 2 and 4, and not to support the other amendments in the group.
I will just speak to amendments 17 and 18 in my name, which both deal with exactly the same subject: whether hotels should be included in the scope of the levy.
I accept that there may not be a huge number of new hotels being built around Scotland every year, but if we want to widen the tax base—because the danger is that, with all the exemptions, it is narrowed too much, as the minister said—we should take the opportunity to include hotels in there, on the basis that we want the tax to fall on the people with the broadest shoulders, who can afford to pay. It has to be said that many people who stay in hotels, either for business or as tourists, can afford to pay a little bit extra.
My assumption with regard to the bill is that it will be the final user—the house purchaser, the hotel resident or whoever—who will end up paying for the levy, and I am perfectly comfortable with that. I think that most people staying in hotels could probably afford a few extra pounds; certainly the cost of a hotel in Edinburgh is excessive.
With regard to putting a bit of an extra tax on hotels, is there a danger—it may be an unintended consequence of Mr Mason’s amendment—of harming the tourist trade, which is already struggling?
I think that Edinburgh, in common with other cities internationally such as Venice and Barcelona, is swamped with tourists at certain times of the year, especially in August during the festival. To be frank, I struggle to get a hotel room for under £100 a night in Edinburgh—although I can easily get that in London—so I do not think that there is much danger of losing all the tourists.
What about in rural areas?
Is that another intervention?
Different places are different, and I think that the minister is going to say that the Government will look at different rates in different areas. It is about the principle, however. There are hotels being built—as I said, I accept that it is not a huge number, but I saw in the media last week that there is a piece of land in Edinburgh that was possibly going to be used for housing, and it now looks like it will be used for a hotel. Under the bill, we will have a slightly strange situation in which we will have housing competing with a hotel, and the housing will have a levy on it but the hotel will not. It could be seen that we were favouring the hotel over the housing, which strikes me as slightly odd.
I am struggling to understand the purpose of the amendments. I understand what the member is saying about hotels, but he is making the link that it would ultimately be the consumer who pays. I thought that the intention of the bill, given that the levy will be linked to the completion certificate for a hotel, is that the charge would be paid at that point. Is that not what the member intends, or am I getting confused?
Well, the charge will be passed down the line. I know that the Government’s argument is that land prices would fall because of the bill, but I am sceptical about that, and the committee heard from witnesses who were also sceptical about it. I think the charge will be passed down the line to whoever ends up being the end user, as happens with a tax such as VAT.
I would like the Government to agree to the amendments. If they need a bit of tweaking at stage 3, we could certainly do that, but agreeing to them now would set out the principle. The idea that homelessness residential places might be affected—that someone would build a hotel and it would immediately be filled with homeless people—seems very unlikely, but perhaps that could happen. I hope that the minister will agree to the amendments. If they need to be tweaked, they could be tweaked later on.
11:00
My amendment 19 has been developed alongside Homes for Scotland, as well as a number of home builders who have been in contact with me about the levy. The amendment would exempt from the levy a new residential unit for which a building warrant application has been submitted on or before 1 April 2028. In effect, the amendment would provide a transitional arrangement for homes and projects that are already in development when the levy comes into effect.
I have already referenced the established principle to the minister, but I reiterate that home builders have been very clear that development does not start when the foundations are cut. Many years of activity and equity are invested in a development well before the building is constructed.
The “building control event” that is defined in section 3—the completion date—which establishes the liability to pay the levy, is simply too late in the development cycle for homes that are completed after 1 April 2028. In my view, the liability date ignores the investment already made in the land deal: ground investigations, planning costs and professional fees for design are all borne by the developer well before a building is completed. The minister has outlined the commitment to give 22 months’ notice of the rates from June this year. Already, many developers will have appraised and agreed land deals with no ability to account for the levy that will come into effect as of April 2028.
The application date for a building warrant is different from the building control event or completion date, and it better recognises the substantial pre-construction development and specification that takes place. A building might not be under construction by 1 April 2028, but considerable investment in its development will already have taken place. That is a really important point in my amendment 19.
I want to touch on Michael Marra’s amendment 16, which would prevent the levy being charged where works began before 1 April 2028. Although that is a welcome amendment, I believe that amendment 19, which I lodged and which would exempt from the new levy a new residential unit for which a building warrant application has been submitted on or before 1 April 2028, would provide clearer protection where development has already started, even if that is not visible on site.
I am disappointed that the minister has already indicated that he does not wish amendment 19 to be agreed to today. While he is in front of us, I want to say to him that, if there is an opportunity for him to meet me, Homes for Scotland and Michael Marra—given that we both have amendments in this field—that would be helpful in looking at various alternative amendments for stage 3. What the minister is proposing just now does not go far enough and, if we are trying to get the balance right between ensuring that house building projects proceed without being impacted by yet another levy or scheme that they have to pay into, he has to take that on board before we reach stage 3.
I will touch on my amendment 22, which would provide an exemption for housing
“intended to be used wholly or mainly for key workers”,
including those
“employed in healthcare … social care … education … emergency services … agriculture”
and
“forestry”.
Access to appropriate housing for key workers is essential to sustaining rural communities and local services across the country.
My amendment 43 is consequential to amendment 22. Together, the amendments would ensure that the levy does not make it harder to deliver homes for those people whom communities—rural communities, in particular—depend on most. That is another area in which further consideration is required by the Government and I am keen to speak to the minister about it in more detail between stages 2 and 3, if possible.
I will focus my remarks on three amendments: Liz Smith’s amendment 38 and my amendment 50, which are in this group, and my amendment 53, which also relates to this area.
I have already set out to the minister how important the first-time buyer is, and I have set out my rationale for holding that position. I also want to add a consideration about developers and remind him of how difficult an operating environment they have found the current economic climate to be. It is important that we support developers to have a continued focus on the first-time buyer market. It is much easier for developers to go for the step-up market, as, in that area, access to finance is easier and quicker, transactions are larger and margins are better. My concern is that, if there is not some kind of relief, we could inadvertently limit the activity in the first-time buyer market.
I point out, in response to the minister’s earlier comments, that I see the linkage being to a developer relief, not a relief for the buyer. That would exclude the likes of LBTT. Part of my rationale for taking that approach goes back to my earlier comments. We need to find the sweet spot to make the bill operational, given the set of circumstances in which the Government finds itself, while ensuring that there is not a disproportionate impact on the market. I think that everyone would agree that first-time buyers are utterly vital to ensure that there is activity throughout the market and the cycle of house buying.
I accept what the minister is saying, but I would like there to be a little more clarity.
My amendment 20 seeks to exempt from the levy the conversion of historic buildings, mainly because projects of that nature are not really speculative. They tend to be a more expensive way of producing new homes, and, most importantly, through the conversion of historic buildings into new homes, they deliver a wider public benefit, which the Parliament has discussed in other ways regarding historic buildings. It is important that we encourage the bringing back of vacant or underused buildings into productive use. If the levy were to be applied, that would risk discouraging the reuse and investment that aligns closely with the preservation of our heritage, and amendment 20 is designed to try to avoid that.
My amendment 41 is a straightforward consequential amendment to amendment 20, as it provides a definition of “historic building” by reference to existing statutory designations.
I am happy to discuss the issue further in the context of conversions more widely, because I absolutely agree that we should seek to find ways to support such conversions. I simply think that there is a specific issue with the amendment with regard to it being targeted at listed buildings.
Can you explain what that specific issue is?
The concern is that it would create a perverse incentive in the system for people to seek listed building status for buildings in order to avoid paying the building safety levy. I think that having a more general exemption for conversions would be the right thing to do. It would be better to have a more encompassing policy that applied to all such conversions and was not tied to whether a building was listed.
Thank you.
I will speak briefly to Michael Marra’s amendment 16. I do not think that the minister gave a credible reason when he said that the amendment was effectively a mechanism that would delay the introduction of the levy and would stop funds flowing into cladding remediation. As I think that we have said to the minister on several occasions, the Scottish Government has been given £95 million for cladding remediation and has spent less than a third of that, as I understand it. Therefore, I do not think that the lack of access to capital funds would be an issue by that stage, unless the minister now has a projection of how that money will be spent.
If I may intervene, the first important point to recognise is that, as I said to Meghan Gallacher, we have already delayed the implementation of the levy by one year, which was important to give the sector space and time. In England, the levy comes into effect in October this year, which is significantly earlier than in Scotland.
As things stand, with the levy set to be implemented in April 2028, we are more than two years away—I think that it will be about three months after that date before any revenue starts to flow into the fund as a consequence of the bill. It is fair to say that any funds that are there already will be well and truly spent on the programme, and a lot more besides, before we even start to see any revenue flowing in in 2028.
The point is that the cladding remediation programme in the rest of the UK is significantly further along, so it has presumably been chewing through those initial funds—probably at a higher run rate than we have in Scotland.
It is regrettable that the minister is not minded to support my amendments 21 and 42, because they would provide an essential exemption for housing in rural areas. Evidence was repeatedly put to the committee at stage 1 that development viability in many rural communities is finely balanced. That reflects higher build costs, infrastructure constraints, smaller scale delivery models and weaker market values, which makes housing in those areas less attractive to many developers, whether large or small.
The evidence of that clearly highlights the national housing emergency: an accumulated shortfall of 110,000 homes since 2008 and 700,000 households living in some form of housing need. More recent figures show falling delivery—new‑build completions are down year on year and housing starts are beginning to decline. The problem is particularly acute in rural areas, where even marginal additional costs relative to the total build can be enough to prevent rural schemes from progressing at all.
On that point, do you recognise that, based on our estimation, the significant majority of houses in rural areas will already be exempt under the current proposals, based on the 19-house limit that was put in place?
On that basis, I cannot see why the minister does not just go for a full exemption, which would make the future far more certain for an uncertain aspect of Scotland’s housing market. The evidence that we have heard is that the levy will reduce the number of homes that are delivered in rural areas. When that happens, the minister should be mindful that the overall revenue that is available to the public purse is likely to fall rather than increase, particularly in rural communities.
I also want to draw attention to some recent research on the effect of depopulation on rural communities. One of the causes is the lack of access to affordable housing. Anything that challenges the housing market in those areas could accelerate depopulation, particularly of young and working-age individuals.
My amendment 42 is consequential to amendment 21. It defines “rural area” with reference to the Scottish Government’s sixfold urban rural classification, which is an objective and well-established framework. I understand what the minister said: the framework is subject to change and does not rest on a statutory footing. I am therefore open to discussing with other stakeholders and the minister how my proposal could be incorporated into the bill to provide a degree of certainty and permanence.
Amendment 42, as it is presently worded, uses categories 4 and 6 in order to target the exemption at areas where viability pressures are most acute. I deliberately excluded category 5 in order to reflect what organisations, including Scottish Land and Estates, say best represents the scale, pattern and delivery challenges in category 5 areas. Taken together, my amendments ensure that the levy is targeted in a way that reflects the evidence that was heard by the committee and avoids severe and unintended consequences for rural housing delivery.
11:15
My amendment 49 in this group, and my amendments in later groups, seek to address concerns that the committee raised in its stage 1 report and which were raised in the chamber during the stage 1 debate.
The context of the introduction of this bill is the Government’s declaration of a housing emergency, and its impact on our constituents with regard to the homelessness figures, the number of kids in temporary accommodation, open homeless cases and the perilous state of the housing market, given the current number of starts and completions.
Amendment 49 is an attempt to address a crucial, and key, part of the drivers of support for the house building industry—first-time buyers. I am concerned that the levy could have a disproportionate effect on entry-level housing that young people are increasingly reliant on, particularly in rural areas. The latest figures from Lloyds show that the average age of a first-time buyer is now 31, and the impact that that has on our economy, our population and generally—
Will the member give way?
Yes.
I already indicated in my response to Michelle Thomson that we understand the intent behind the amendments. The issue is that, as drafted, they would require the developer to know in advance who they were going to sell to, which, obviously, is not always going to be the case. However, we are very happy to work with you and Michelle Thomson to see whether there is some other way in which what is being proposed can be given effect to.
I should also clarify that, when I mentioned LBTT earlier, it was in the context of things that we were already doing, and I apologise if that was not clear. As for the levy, we are happy to sit down and see whether there is a way to do this, but members should bear in mind that, if this leads to 22 per cent of sales coming out of the tax base, there will be a corresponding increase in the levy applied to other units.
Will the member give way?
I will take Michelle Thomson’s intervention, too.
It is actually an oblique intervention to the minister—I am not sure of the protocol in that respect.
I am sure that it would be possible in what I am suggesting to have a partial exemption, because I fully accept the concerns around the 22 per cent figure. I think that something could be put in place that might not be a total relief.
I thank the minister and Ms Thomson for those comments. I am glad that the Government accepts the principle, and that it seems to accept that there is a risk to a fundamental part of our housing system. I am not wedded to any particular mechanism, whether it be an exemption, a relief or even a potential reimbursement, because it would be relatively simple to document this sort of thing as a house went through the legal completion process. I look forward to discussing with the minister between now and stage 3 whether there is a way to protect this crucial part of the housing market.
I call Michael Marra to wind up and to press or withdraw amendment 16.
Thank you, convener, and I thank all members for their contributions.
I want to start with the minister’s comment at the outset about this approach being foisted on the Scottish Government. We should be absolutely clear that that is simply not the case.
Will the member give way?
I am happy to get a clarification.
Those were not my words; if I recall correctly, they were the words of John Mason. I say that just for clarity.
Perhaps the position was accepted in tone rather than in words, minister, but I will correct myself in that regard.
This is an approach that the Government has developed. One of the committee’s concerns has been about the entirely arbitrary nature of the £30 million figure; it is a target that the Government has set itself, and many of the amendments that we are discussing in this group are trying to deal with what Michelle Thomson has described as hitting some fantasy target.
Will the member give way?
Let me complete my point, minister. This is about trying to find some sweet spot in order to raise a certain amount of revenue.
I understand the logic of some of this; what is being proposed seems to be 10 per cent of the UK levy, and it is essentially the money that might be available. The Government could quite easily, and equally, have set the target at £5 million, or £100 million. The question is: what figure does it feel that it is proportionate to raise?
I will take the minister’s intervention now.
I was just going to make that very point: it was the UK Labour Government that set the target, and we have taken a pro rata percentage of that.
Absolutely, and it is entirely arbitrary on that basis. It is not as if we have a 10 per cent population share, and therefore we have to raise 10 per cent of the levy. The question is whether this is appropriate to the housing market in Scotland and what the impact will be. The idea that we are working back from that arbitrary figure is part of the problem and it is what these amendments are seeking to address.
Meghan Gallacher touched on our amendments 16 and 19 that relate to the implementation date. It would be good if the minister would commit to having a conversation about that issue. My concern is about what will happen between now and 2028. The housing completion market in Scotland is at a sub-zero temperature and a further cooling of the market will result in the kind of social impact that Mark Griffin and I set out in our earlier contributions. We need to make sure that that will not happen. If the minister wants to make that commitment or otherwise, I invite him to make an intervention on that basis.
I am happy to commit to meeting Homes for Scotland—I meet it regularly to discuss all kinds of issues. However, on the principle of the issue, we are clear about the implementation dates.
I am not clear about the point that Michael Marra is making on what might happen to the housing market in the next two years. If we are giving indicative rates 22 months out—which is what he is asking for—that is clearly being done in the context of not knowing what will happen to the housing market over that period.
There are developments that have already been planned and that are under way. We have taken evidence about that from various house builders. I should say that Miller Homes is one of the groups that has been in touch with me on that basis in relation to amendment 16. It has plans in place, many of which were made years in advance, and it is now asking questions about how viable some of those developments will be. There have been concerns expressed to the committee about that, so we want to make sure that the policy is sensible.
I will intervene to help the minister. The development sector needs certainty, and it also needs to be risk averse. However, the problem is that going down the route of putting measures in place that spook the market—as we did with the Housing (Scotland) Bill—could have an impact on the number of developments that will continue. We do not want that to happen, but it could happen if the amendments are not taken seriously.
The amendments would give security to the sector by saying, “You will not be hit by the levy if a development is already under way.” The development could be under way without a building being in existence, or it could be going through the housing development process that we discussed earlier. That point is important, and I hope that the minister will reconsider.
I think that the minister has put on the record that he does not intend to support the amendments.
I just want to clarify a point. I ask both members—
I have the floor.
—whether it is their position that the trigger point should be on getting the building warrant or on completion of the property.
There are two different amendments in that regard. We could vote for both of them, but if the minister were prepared to commit to having a conversation, I am sure that we could thrash out a compromise position that would give security to the marketplace. Is he prepared to—
We have already moved the date by a year. To give more time, we have also committed to setting the indicative rates 22 months out, which will provide clarity for the market. We have moved the trigger point to the completion of the property rather than on getting the building warrant, because that will be a more effective mechanism. What I am hearing from both members sounds like an attempt to further delay the implementation of the tax, rather than give certainty to the market, because the same argument would apply in one, two or 10 years’ time.
It does not sound as though we will find any common ground on that point.
I will move on to some other parts of the debate. Michelle Thomson’s analysis of the balance between exemptions and raising revenue covered the rest of that area of the debate, including Liz Smith’s issues regarding conversions and Craig Hoy’s issues regarding rural areas. It is all about retrofitting the figure of £30 million into the bill. In the absence of an up-front sensitivity analysis—the committee has asked for that to be done and the minister has committed to doing it, but only after the fact—we are still, as we debate the amendments, working with an arbitrary figure without understanding the general impact of the amendments. That is the character of all these issues. The committee will be voting slightly in ignorance, but that is because of the way in which the Government has undertaken the work.
I gave you a bit of leeway, because Meghan Gallacher was effectively speaking to the minister instead of speaking to your point. Members should let me know that they want to come in before we move to the winding-up speeches. On this occasion, I will let Patrick Harvie come in, because he has not yet had an opportunity to speak. However, as we move through the business, I would like members to let me know in advance that they want to come in.
Thank you, convener—I wanted to speak before the member winds up. First, I acknowledge that I was not part of the committee during its stage 1 inquiry, but I have some background familiarity with the issue. I think that it is important to acknowledge that the purpose of the levy is to ensure that the industry as a whole contributes to putting right the mistakes that have been caused by the industry as a whole.
There are a limited number of ways of doing that. We could take an insurance approach, but that would work only for the future. We could try to recoup money from specific developers for specific buildings that need remediation, but that clearly would not work for those who have simply walked away from their responsibilities. Unless anyone wants to suggest a different way of raising the revenue, or requiring that the public should pay the cost, a levy of this type is necessary. I note from the stage 1 debate that some members supported the principle of the levy, but not the specific levy, and I find that a little frustrating.
I recognise some of the potential impacts that members of the committee are concerned about, but, to be honest, it is not unusual for any industry to predict disaster in relation to any tax or levy that they are expected to pay. While this is not the place for discussion of wider housing policy, I point out that there are other options available to Government to reduce the cost of providing housing and to ensure that house building meets social need instead of serving vested interests. For example, there was a previous policy commitment to a mechanism for land value capture resulting from planning or infrastructure investment; that commitment seems to have disappeared.
Anyway, all of that being my position, I tend to take a sceptical approach to exemptions. I think that the Government amendments seem fine, and I am broadly opposed to most of the others. I am more sympathetic to the argument for removing the exemption for hotels, as has been proposed, and I welcome the fact that the Government is open to coming up with some other solution to that.
I hope that, in those discussions, there would be some consideration for the risk that, by retaining the exemption as it currently stands, we would create a perverse incentive for developers to propose developments ostensibly to be operated as short-term letting businesses, not build-to-rent under long-term tenancies, and then subsequently decide to get planning permission for change of use and sell the apartments off, thereby avoiding the tax. The current approach risks bringing in that perverse incentive.
I ask Michael Marra to wind up and say whether he wishes to press or withdraw amendment 16.
I will press the amendment.
The question is, that amendment 16 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
Section 4—Meaning of “new residential unit”
The question is, that amendment 17 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)
Section 5—Exempt new residential units
The question is, that amendment 19 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
Sorry—I have been told that I am going too fast.
Could I ask that you give the result of the vote each time?
Yes—I think I probably can, if you so wish.
Thank you.
I will do that in future—or do you want me to go back to the ones that we have already done?
No.
Okay—fair enough. I am just trying to get through the business. We are an hour in, and we are still on the first group.
Amendment 48 not moved.
11:30
Amendment 20 moved—[Liz Smith].
The question is, that amendment 20 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 20 disagreed to.
Sorry—I am going a bit too quickly. I will slow down—apologies.
Amendment 21 moved—[Craig Hoy].
The question is, that amendment 21 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 21 disagreed to.
The question is, that amendment 21—
I am hearing that we have done amendment 21. Apologies. See, when you slow down, you just lose your momentum. [Laughter.]
Amendment 22 moved—[Meghan Gallacher].
The question is, that amendment 22 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 22 disagreed to.
Amendment 49 not moved.
Section 5 agreed to.
Section 6—Power to modify types of buildings which may be taxable
Amendment 50 not moved.
Amendment 3, in the name of the minister, is grouped with amendments 5, 6 and 46.
Group 2 contains a number of procedural amendments relating to consultation and parliamentary scrutiny when ministers make regulations under the bill. The group contains three Government amendments, which I invite the committee to support, and one non-Government amendment, which I ask the committee to resist.
I start with amendment 3, in my name. The bill as introduced allows Scottish ministers to modify their regulation of categories of buildings that are included in, excluded from or exempt from the definition of a new residential unit for levy purposes. While the bill already requires ministers to consult with persons they consider appropriate, amendment 3 adds to that by requiring that consultation must include persons who
“represent the interests of the residential property development sector”.
Under the amendment, local authorities must also be consulted. The amendment responds directly to recommendations that were made by the Delegated Powers and Law Reform Committee at stage 1.
Amendment 5 makes a similar modification, requiring consultation with representatives of the residential property development sector before regulations are made under section 10 to specify an alternative 12-month period to be treated as a financial year for levy purposes. Again, that reflects the Delegated Powers and Law Reform Committee’s view.
Finally, amendment 6 makes an equivalent change in relation to section 12, which provides for regulations on the levy-free allowance. The amendment ensures that ministers must consult with representatives of the residential property development sector before making regulations under that power, in addition to any other relevant stakeholders. Given the importance of the levy-free allowance in shaping the overall impact of the levy, it is right that those who are most directly affected are formally engaged before changes are made.
I turn to amendment 46, by Liz Smith, which would introduce a new procedural framework requiring ministers, before making regulations, to publish draft regulations for at least 90 days; set out their reasons and provide a formal representation; and then, before seeking parliamentary approval, consider representations received, any parliamentary resolutions and committee recommendations; publish a further statement explaining how those had been taken into account; and secure Parliament’s approval only once all those steps had been completed.
The practical effect of the amendment would be to introduce an additional delay of at least 180 days before regulations could be made, alongside significant additional administrative and resourcing requirements for Government and Parliament. Although I recognise the intention behind the amendment, the Government does not consider it to be proportionate or appropriate in the context, or to be in keeping with the arrangements for other devolved taxes. The additional statutory timescale might prove problematic in cases in which there is an urgent need to modify one of the regulations.
Parliamentary scrutiny alone should be a sufficient check on the proposed regulations. The relevant regulation-making powers are already subject to the affirmative procedure, and the Delegated Powers and Law Reform Committee did not recommend enhanced scrutiny of that nature. For those reasons, the Government is unable to support amendment 46.
I move amendment 3.
I thank the minister for amendments 3, 5 and 6, which will introduce further consultation with the sector. I have absolutely no concerns about that.
It will be no surprise to members to learn that I lodged amendment 46 because I am keen to have super-affirmative procedures to ensure that, when ministers seek to amend regulations that modify the types of building involved and the tax exemptions, we have as much scrutiny as possible. The clear outcome of our stage 1 scrutiny and report was that there is a need for better quality data to provide information that allows us to understand the impact of the levy. That is why I mentioned behavioural changes earlier. As a result of this process, the housing market will have significant changes placed on it. I want to ensure that additional scrutiny is in place through the super-affirmative procedure. That is why, in due course, I will move amendment 46.
It is not unusual for amendments to various bills at committee stage to aim to improve or strengthen the scrutiny process. If that is done in a proportionate way, that is fine. On the Government amendments in the group, I have no particular objection to specifying that the building industry needs to be consulted, although I am certain that that would have happened anyway, even if it was not specified in the bill. I cannot imagine that any Government—today’s one or any future one—would conduct a consultation on such an issue that did not include the building industry, but I have no objection to specifying that.
However, on amendment 46, I point out the extraordinary scale of scrutiny that Liz Smith proposes. As I read the amendment, it seems that the provisions would apply even to regulations that modify the methodology for calculating floor space. A length of parliamentary scrutiny is being proposed that is comparable to that for documents such as the national planning framework and the climate change plan, which are major documents that set out the broad swathe of Government policy over the long term.
If I remember rightly, when the original legislation on both those documents was proposed there was a 60-day parliamentary scrutiny process, which was subsequently increased to 120 days. A period of 90 days would be firmly in that ballpark, for what are pretty minor tweaks to the detail of the operation of a single levy.
The amendment was drawn up in consultation with the sector, because it feels that, as things stand, we do not have sufficient data to ensure adequate scrutiny of the likely behavioural changes in the marketplace. In several other aspects of Parliamentary processes, we have not had—in my view, anyway—sufficient use of the super-affirmative procedure to check that there has been adequate consultation with relevant stakeholders. That is the purpose of amendment 46.
I will finish by saying that the consultation proposed by the Government, which will be strengthened by the Government’s amendments, seems entirely adequate to hear from the industry or its lobbyists.
I simply think that subjecting the fine detail of regulations on an individual levy such as this to the level of parliamentary scrutiny that is required for major documents setting out long-term and broad policy direction from the Government seems unrealistic. If we expected every minor regulation to be subject to that level of scrutiny, with three days of parliamentary business a week, we would not get through half of what we need to across the entire session of Parliament.
No other colleagues wish to contribute at this point, so I invite the minister to wind up.
I have no further comments.
Amendment 3 agreed to.
Section 6, as amended, agreed to.
Section 7 agreed to.
Section 8—Person liable to pay levy
Amendment 4 moved—[Ivan McKee]—and agreed to.
Section 8, as amended, agreed to.
After section 8
Amendment 51, in the name of Michelle Thomson, is grouped with amendments 52, 59, 37, 9, 10, 38, 11, 12, 39, 60, 40, 61, 63 and 64.
I call Michelle Thomson to move amendment 51 and to speak to all amendments in the group.
I will concentrate my remarks on amendments 51 and 52.
I remind members and the minister that amendment 51 in particular stems from a committee-wide agreement based on an understanding of the complexities and sensitivities of the housing market in Scotland. Despite that, by unanimous agreement, we wanted to ensure that we see evidence of an impact assessment being carried out, given our belief that the introduction of the levy will trigger behavioural impacts by developers.
I appreciate that amendment 51 is very detailed and specific and could bring in issues around capacity. However, I would reflect that the wider housing market is detailed and specific. In reality, many of the interventions that have been made over recent years have been because of a failure to view the housing market as multiple markets, particularly with reference to rural areas and to how small and medium-sized enterprises, as compared to large providers, fit into that.
Amendment 52 is, arguably, the nub of it. It is about the wish to see evidence of this type of work being carried out in advance. We have often seen policy provision being made without an understanding of the resultant impact. The amendment is an attempt to try and put that right, although I concede that it is detailed and specific.
It is also worth fleshing out consideration of how the levy might impact private capital investment in Scotland, including in relation to section 75. We have seen a lot of implications of that not having been considered in the past few years, and we cannot get to where we want to be without supporting private capital. It is very important that there is continued underpinning of investment in Scotland and that confidence in that is retained.
I move amendment 51.
My amendments 49 and 60 would require the Government to carry out and publish a series of assessments of the effect of the levy on the housing emergency and on housing supply before implementation. As recent Government stats show, there is a hugely concerning 8 per cent drop in all sector new build completions and a 5 per cent fall in starts. Although I believe that we should achieve viable funds for the implementation of cladding remediation, I do not think that we can lose sight of the impact on the housing industry and the housing market, particularly in the context of the housing emergency and how we can build a way out of that.
I note that the member includes the term “housing emergency” in his amendments. Is there a legal definition of that?
Yes. We agreed the legal definition in the Housing (Scotland) Act 2025, which was recently passed by Parliament, so the amendment relies on existing legislation.
My concern about the impact on the housing market and how we work through the housing emergency could be alleviated if the Government were required to carry out and publish such assessments. That is why the amendment calls for reviews of the effect of the legislation to be carried out in relation to the impact on the housing emergency and, critically, on private capital investment in new-build residential development. It is crucial that those assessments are linked to the housing emergency declared by the Scottish Government and with the definition in legislation that was recently passed by Parliament.
Further, amendments 60, 61, 63 and 64 propose that all required reports and assessments under the legislation must evaluate the levy against an all-tenure housing target, with delivery measured through completion events under building standards. The intention is to hardwire housing supply outcomes into levy governance, so that the policy is assessed not only on revenue raised but on whether the levy risks undermining housing delivery at a time when Scotland is facing a housing emergency, with fragile development viability and falling investment confidence.
I hope that the Government accepts the need to balance the levy’s impact with the impact on the housing market and will consider the amendments favourably.
I call Liz Smith to speak to amendment 37 and other amendments in the group.
I hope that the committee will bear with me, as this is an important group of amendments that raises significant issues. I welcome the minister’s amendments, and we support all the amendments from other members, including those lodged by Michelle Thomson and Mark Griffin.
As I have mentioned, the Parliament is being asked to hand over a substantial range of powers on the setting of the levy without having a clear understanding of its impact on the housing market at a time when, as Mark Griffin and Meghan Gallacher have pointed out, a housing emergency has been declared under other legislation. A clear outcome from our stage 1 deliberations and our report was the need for much better quality data and information to understand the levy’s impact, including on the housing market, given the current circumstances. In the absence of a clear commitment from the minister in the stage 1 debate to producing a sensitivity analysis, I am supportive of placing a clear and detailed reporting requirement in the bill.
Amendment 37, like amendment 9 in the name of the minister, would give effect to the committee’s recommendation that a report under section 45 be prepared every three years, while amendment 38 seeks to set out what those regular reports should address in respect of the new-build housing market and the wider housing sector, including the Government’s all-tenure housing ambition, and to interconnect the nature and design of the levy, the rates and the cladding remediation programme that it seeks to fund. That mirrors Michelle Thomson’s requirements in amendment 51 with regard to the independence sensitivity assessment, and the issues that arose during our stage 1 scrutiny.
Amendment 39 would also introduce a requirement for the levy to be assessed for compliance against the Scottish Government’s principle of good tax policy making, as defined in the “Framework for Tax 2021”. Finally, amendment 40 is a technical amendment.
At this stage, I want to raise with the minister an issue that was brought to our attention last week. Immediately after the deadline for lodging amendments passed, the Scottish Government produced another document entitled “Accelerating home building in Scotland: a consultation on incentives and penalties to speed up housing delivery”. That could lead to the levy having considerable reliefs or supplements
“to intervene in the market, to stimulate or speed up delivery where build-out is not progressing at pace”,
as the Government’s language has it. I find the timing of that publication, given the possible further implications for behavioural change, not helpful, particularly given that, as I have said, the deadline for stage 2 amendments had passed by then. However, I will come back to the point a little bit later.
I call the minister to speak to amendment 9 and other amendments in the group.
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.
On the points that have been made about amendments 51 and 52, part of the point, for me, concerns confidence about the sensitivity assessment that the minister is setting out and whatever early sight of the measures can be given. It is not unreasonable to say that there is quite a broad range of considerations in amendment 51, but, for me, it is a matter of giving confidence. Seeing what, specifically, will be measured by the Government as part of its sensitivity analysis as soon as possible would give the sector some confidence. What guidance or information can you give in that regard?
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.
On amendment 51, I was particularly keen on the aspect of monitoring or assessing impact across different local authority areas. I do not yet have clarity on whether the Government’s intent is to produce almost a single national figure, or whether there will be detail on the differential impact in relation to viability in different parts of the country. That was a key feature of the evidence that the committee received, with concerns raised about whether different parts of the country will be rendered non-viable for house building. I believe that the committee would be keen to see the sensitivity analysis addressing that issue.
Can we have assurances from the minister that there will not just be one top-end figure for the whole country, and that we will get detail about what the impact will be in different parts of Scotland?
As I said, within the capability of access to appropriate data, we would want to provide information that could help in assessing the impact of the levy. As I have indicated, a range of factors affect the housing market, so picking out the impact of the levy in isolation would prove challenging. However, I repeat that I am happy to engage with members in advance of stage 3 to give more information and assurance on that point.
I note that the UK Labour Government does not require a similar assessment to be carried out for its building safety levy in England. I also remind members that, as in other areas, the Scottish Parliament will have the ability to take stock of the levy scheme at any point, including when regulations are made or changed. I have no doubt that ministers will receive feedback once the levy is operational and will adjust as required.
I am sympathetic to the aim of the amendments that have been lodged by Michelle Thomson, Liz Smith and Mark Griffin. However, I ask them not to press or move those amendments but instead to take the opportunity to discuss with me ways in which the potential impacts of the levy can be measured and reported on as part of the strengthened three-year reporting requirement under amendments 9 and 10. Members across the Parliament will want to ensure that any policy that we enact has the desired effect, and I welcome suggestions on ways in which those impacts might be effectively monitored and assessed once the levy is in place.
As was the previous group on enhancing parliamentary scrutiny, this is familiar territory. Many of our debates on bills involve discussions on how to improve assessments, reports or reviews of the legislation that we pass. However, when we take such action, we should ensure that it is clear, objective and deliverable, and that it will not unintentionally prevent the Government from exercising the functions that we are legislating to give it.
Some amendments in the group require assessments that are not only highly detailed but, by definition, subjective. Let us be honest: if we pass the bill and create the levy, there will always be disagreement between the Government and industry about the rate that should be set, and the industry will always make an effort to lobby for a lower rate and produce evidence to back up that view. The idea that a single objective assessment will answer the question about what the impacts will be is unrealistic; there will always be that difference of views, and the amendments in the group treat as objective something that will always be subjective.
Mark Griffin said that he wants to hardwire housing delivery outcomes. Probably most of us would agree that it would be great if we could do that. However, although a target in Government policy is always helpful in focusing minds and actions, there will always be factors that are outwith Government control. We have just come through a period of pandemic, Brexit, economic changes as a result of energy prices and a host of other factors that will always have an impact on something such as housing delivery. It is therefore not realistic to think that any legislation that we pass in the Parliament can hardwire outcomes in the way that Mark Griffin has suggested.
The Government policy is that there should be a 10 per cent yearly increase in house building. Given the very low base that we are at, that is a modest target. If the Government were committed to hitting it, it, it would accept hardwiring it into legislation.
On whether such a target can be met, I come back to the point that some factors are within Government control and others are outwith Government control. That does not change the fact that a target is helpful. However, I do not think it possible, in the real world, to legislatively hardwire, as Mark Griffin suggests, the outcome as opposed to the action.
Finally, on the proposed assessment against the framework for tax, the tax framework is a statement of the policy of the Government of the day, and I am not aware of any other legislation on tax or levies that requires a statutory assessment of that kind; it seems out of kilter with the more general approach.
I invite Michelle Thomson to wind up and press or withdraw amendment 51.
12:00
I am happy to accept what the minister has outlined and I welcome further discussions. Some good points have been made around the table, and I go back to my earlier points about finding the sweet spot. Perhaps more legislation should have come through the Finance and Public Administration Committee at stage 2, as that might have led to more rigour. However, that might be just my opinion.
I will not press amendment 51.
Amendment 51, by agreement, withdrawn.
Before section 9
Amendment 23, in the name of Michael Marra, is grouped with amendments 24 to 29.
Amendments 23 and 24 would require ministers to complete the sensitivity assessment and then publish indicative rates—in that order—before regulations that set the rates come into force. The amendments would also ensure that the Government keeps the minister’s commitment to bring into force regulations that set the rates at least 22 months after the indicative rates are published.
This morning, colleagues have covered a fair bit of ground in relation to our recommendation on the sensitivity analysis. I understand Michelle Thomson’s decision to withdraw her amendment 51 and her intention for doing so, given the assurances from the minister. I am a little concerned about some of the minister’s language around possibilities in the sensitivity analysis. We, as a committee, want that to be as strong as possible. Our recommendation was informed by a significant body of evidence that came from the sector, which cited serious concerns about the potential impact of the levy on house building, given the years-long grip of the housing emergency.
The detail of the impact on different geographical areas is critical. The issue came up when John Mason raised the situation in Edinburgh, the country’s economic hotspot. Differential impacts would result from a national rate.
Given that there could be differential impacts on different parts of the country, as well as different market conditions, land types and what have you, I have a question in my mind as to whether a sensitivity assessment that is worthy of that name can be conducted before the Government has published indicative rates or before it even says whether there will be different rates for different parts of the country. Surely, the Government setting out its approach to rate setting would be the start of the process of figuring out what the impacts might be, rather than the other way around.
I understand Patrick Harvie’s logic, but I disagree with it, as modelling could be undertaken on a variety of options. I do not agree with the minister’s view on the issue either. Frankly, the regression analysis to control for different variables is not that complex. A fair point was made about the availability of the data sets and how detailed they are for different areas. That will be a constraining factor in how the analysis can be undertaken. However, there is nothing to suggest that different rates could not be modelled for their impact on different parts of the country, if data on those other variables is available. I therefore disagree with Patrick Harvie on that.
As I said, my amendments in the group seek to hold the Government to its commitment in relation to the 22-month period. I am also keen to ensure a specific sequencing of events, which I think is absolutely critical. First, the independent sensitivity analysis should take place, and then the indicative rates should be published, because that pre-modelling is critical. Then, after at least 22 months have passed, the rates can come into force. We have covered the problems that would be associated with, and the challenges of preventing, further cooling in an already sub-zero market.
In keeping with my amendments in the previous group, amendments 23 and 24 are intended to give the sector as much certainty as possible. There are more than 10,000 children who are living in temporary accommodation, and we must ensure that the bill will not have a negative impact on them getting the houses that they need.
I move amendment 23.
Once again, I will speak to just my amendments—amendment 25, with the rest being consequential—which are all about one point. The basic point is to ask whether it is the value or the floor space of a house that would provide a better basis for the levy.
We should want all taxes to be as fair and progressive as possible, with the heaviest burden falling on those who have the broadest shoulders. It would be better to use the value of the house rather than its floor space as the basis for the levy. As things stand, using the floor space would mean that two properties of the same floor space but with different values would pay the same levy. A mid-terrace property in a poorer area will command a lower sales value than a detached bungalow or a smart flat in an upmarket area, and properties in the second category should surely pay more than those in the first.
Yesterday, I had my staff look for some examples. They found an example of new homes that have been built by Barratt Homes—I might as well say which developer it is. The houses are exactly the same, with the same description and everything, but they are being built in two different places: one is being built in the west side of Edinburgh, and the other is in Robroyston in Glasgow. The Glasgow house is selling for £273,000 and the Edinburgh house is selling for £370,000. That is a difference of 35 per cent, yet the levy would be the same for both houses, which seems strange. However, I accept that there are practical issues with whichever method is used, and, however we do the levy, section 9(5) will require regulations.
We heard in evidence that there are questions about how common areas would be dealt with under a floor space system. I also wonder what would happen if a house were to include an attic or a loft. That would presumably not initially be included in the floor space, but it could perhaps easily be converted into a bedroom by a new owner. Therefore, there will be loopholes with the floor space system, although I accept that there could also be complications with a valuation system.
It has been argued that using a valuation system would provide less certainty for the builder or developer. However, my thinking is that the sales price would normally be the same as the value, and I understand that the selling prices of new properties are generally fixed early on; indeed, people sometimes buy a house at a fixed price before work on the house has even started. Those factors would be easily known to the developer and should not pose a major hurdle.
I wonder whether the line of argument that John Mason is using would actually have been a stronger defence of his suggestion during the debate on the first group, which was that something such as corporation tax would be a better tax to raise revenue for the purpose of building safety than a building levy. To follow that logic would be to argue that a building levy is not the right approach in the first place.
That widens the debate out a bit, but I agree with Patrick Harvie. The levy will raise £30 million per year and we will spend something like 10 per cent of that in the first year on the admin costs. There is a whole question about the levy. However, given that—I assume—the levy will go ahead, I am seeking to improve it a bit, and it would be an improvement to make it more progressive and affordable by basing it on the property’s value rather than its floor space.
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.
Were the respondents mainly from the industry or potential house buyers?
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.
Thank you, minister. I call Michael Marra to wind up and to press or withdraw amendment 23.
The minister’s argument against my amendments 23 and 24 seemed to amount to the fact that we have the same housing conditions as the rest of the UK, but that is simply not the case. We have a housing emergency in Scotland—the committee has been particularly concerned about that and about how we ensure that the levy is suitable for the perilous condition of the housing market in Scotland. It is in a terrible state at the moment, so we have to set rates on that basis.
I think that the amendments reflect the commitments that the minister has already made, but they are based on a logical sequencing. The points that the minister made about procedure do not amount to an argument at all, so I will press amendment 23 and will move amendment 24.
On amendments 25 to 29, I have sympathy with the logic and intent behind Mr Mason’s proposals. I also recognise that some of the Government’s approach—given the uncertainty and complexity that it would deliver into a fragile marketplace—is suboptimal. However, it is probably the more sensible approach in practice, given that the legislation must pass. For that reason, I intend to oppose those amendments.
The question is, that amendment 23 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 23 disagreed to.
Section 9—Charging and rate of levy
Amendment 24 moved—[Michael Marra].
The question is, that amendment 24 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 24 disagreed to.
12:15
Amendment 52 not moved.
Amendment 25 moved—[John Mason].
The question is, that amendment 25 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Mason, John (Glasgow Shettleston) (Ind)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 1, Against 6, Abstentions 0.
Amendment 25 disagreed to.
Amendments 26 to 28 not moved.
Section 9 agreed to.
Section 10—Calculation of total levy payable by a person in an accounting period
Amendment 29 not moved.
Amendment 5 moved—[Ivan McKee]—and agreed to.
Section 10, as amended, agreed to.
Section 11—Reliefs
Amendment 30, in the name of John Mason, is grouped with amendments 53, 31, 32, 54, 55, 33, 56, 57 and 44.
Despite my reputation for backing lost causes, I am marginally more optimistic that we might get somewhere with these amendments. My two amendments—amendments 30 and 31—are linked but distinct.
Amendment 30 would strengthen the requirement for reliefs by switching the wording from “may” to “must”, which means that, instead of the Government being allowed to make provisions for reliefs, it would be required to do so.
Regarding amendment 31, I accept that the Government has indicated that it intends to have a range of reliefs, but it would be good to pin that down a little more clearly. I fully accept that we do not want all the rates of levies and reliefs to be in the bill, but it has been suggested by the Scottish Property Federation that it would be good to have a clear steer about relief for brownfield land by including a minimum relief—perhaps 50 per cent, which is the figure that I suggest would encourage the use of such land. To give a relevant example from my constituency, developers have been very keen to build on the green belt on the edge of Glasgow, where there are no shops or amenities and few, if any, public transport links. Meanwhile, at the heart of my constituency is the old Parkhead bus depot—previously a tram depot—which is on contaminated land but is ideal for housing and has excellent public transport links, shops, general practitioner surgeries, schools and churches all close by.
There is a wider issue here than just the levy; it is about how we encourage the use of brownfield land while protecting greenfield land, perhaps through an urban development company such as Clyde Gateway. In part of my constituency, it handles the land clean-up, so the issue is less acute there, but many brownfield sites across the country are not covered by such a scheme, so I want to see that relief—
Will the member give way?
Yes, on you go.
I agree with the general argument that the bill might apply in a different way in different settings, including on brownfield land. However, as I understand it, the bill already allows for flexibility in setting different rates for different land types. Why is it better to specify in the bill what the relief should be than it is to allow for different rates? Is the member not suggesting a less flexible means to achieve the same objective that the bill already permits?
Amendment 31 would set a base level—it could be higher or lower than that—and we will see what the Government thinks about it. Patrick Harvie is correct that we do not need to include any reliefs or rates in the bill and, overall, that is what is happening. However, I want to pass on the point that the Scottish Property Federation suggested to me—I agree with it, because I see it happening in my constituency—that setting a level would set a marker that indicates that we want to take action on brownfield land.
I move amendment 30.
I call Michelle Thomson to speak to amendment 53 and other amendments in the group.
I do not intend to make any further remarks about amendment 53, which concerns first-time buyers. Amendments 54 and 55 are coming up in the group—do you want me to talk to them?
The idea is to speak to other amendments in the group.
Okay. I have nothing further to add on amendment 53, convener.
That is fine. Do you want to speak to amendments 54 and 55, then?
Yes. Amendments 54 and 55 would set the levy-free allowance at 29 units rather than 19. We have had a lot of discussion thus far about smaller builders and the delivery of housing in rural locations, and passing those amendments would certainly help to support that. Fundamentally, the amendments aim to reduce the cliff-edge effects whereby a marginal increase in output can trigger a disproportionate tax and administrative burden. My particular concern is that I want to see an environment in which SMEs are focused on growing their own companies because of the wider benefit, and I do not want the allowance to be restricted to only 19.
I note that the minister has previously conceded the point in a letter to the DPLR Committee. However, while the minister has now determined that the allowance will be set at 19, the sector has not been consulted on the specific decision to do so and no further consultation or explanation has been undertaken. Underlying data sources and evidence have not been shared with the expert advisory group. Given that, I hope that the minister will look favourably on amendments 54 and 55.
I will speak to amendments 32 and 44. I assure John Mason that he might not always be advocating for a lost cause, because I certainly think that, if there is a strong view that we should be seeking a carve-out for brownfield sites, it would give greater assurance to the industry if that is on the face of the bill rather than being subject to change later.
Amendment 32 would introduce a viability-based relief that allows Revenue Scotland to reduce or remove levy liability when payment would make a development financially unviable. The evidence to the committee from Homes for Scotland and a number of developers was that development viability varies sharply and widely across Scotland depending on geography, site conditions, tenure mix and market values. That variation has become more pronounced in recent years as a result of rising business costs, longer planning timescales and increasing pressure on private capital investment and pools. Therefore, a levy that is applied without regard to viability risks stopping marginal developments from proceeding altogether, which would further slow the market. As the minister has stated, when that happens, there is no levy revenue, no associated LBTT receipts and no contribution to housing supply—three issues that are medium to long-term concerns for the committee.
Amendment 32 would provide a limited, controlled and safe mechanism that prevents that outcome, while retaining clear safeguards through evidential requirements that would be imposed on developers before Revenue Scotland considers any potential reductions or removals.
Amendment 44 is simply consequential to amendment 32. It would ensure that regulations that govern the operation of viability-based relief are subject to the affirmative procedure. Given that it is those regulations that determine who pays the levy and in what circumstances, it is appropriate that the Parliament has the opportunity to scrutinise and approve the framework that governs their use.
In the interests of time, I will focus my remarks on my amendment 33. Members of other political parties have an interest in it—Willie Rennie, for example, was concerned about the impact that the levy could have on SMEs. My understanding is that a vast number of SMEs believe that the levy will have a detrimental impact on their businesses. SME developers typically operate with lower margins—often less than 10 per cent—and they have cash-flow constraints. If the levy comes into force and no relief is put in place to support SMEs, they could be forced to pay the levy before they obtain full funds for the development.
I believe that, if the Government does not seek to intervene in this area, the levy could threaten the viability of smaller projects, which developers will potentially avoid, resulting in fewer homes being built. Given the housing emergency, as we have discussed, we cannot afford to have fewer homes built, in particular in the affordable homes sector.
Given that, even with the 19-unit allowance—I will come on to talk about the 29-unit allowance shortly—79 per cent of developers would already be exempt from paying the levy, who in the market is the member targeting her amendment at?
Again, given the contribution that we have just heard from Michelle Thomson, I believe that the Government needs to go back and consult the sector thoroughly on what reliefs or schemes could be put in place to support people in the small and medium-sized enterprise sector. Although the minister has perhaps sought to mitigate some of the issues that the levy has brought forward, I believe that it simply does not go far enough to protect SMEs in this area, and that is the point that I am trying to make.
In rural and remote areas, SMEs deliver more than a third of new housing. We have already heard in relation to previous amendments that an exemption, or some type of relief, would help not only to protect but to increase the building of homes in rural and remote areas, which is, as we all know too well, another issue. That is why I have lodged amendment 33, and I hope that the minister will discuss it further with me with regard to what support we can give to SMEs in relation to the levy.
First, I make the general point that every relief that we choose to add into the system would complicate it and require rate changes elsewhere in order to maintain revenue. Although a case can be made in isolation for any particular relief, it cannot be seen in isolation, as it would have a knock-on effect on the rest of the system. We need to consider that if we want the system to work—I acknowledge that some people probably do not want it to work—as the Government is proposing. If the levy is going to exist, that would be a consequence of bringing in additional reliefs.
Would the member recognise that the figure for revenue is an arbitrary figure that the Government has arrived at of its own making? It is not related to the challenges in the cladding sector as a whole. We have seen no evidence that there is a relationship with what is required. We know that a big amount of money is required over time, but the figure of £30 million is an arbitrary one.
I do not think that there is any suggestion that the levy is going to raise more than we require for the remediation programme. If we accept that the revenue is required, anything that reduces it in one place will have to be compensated for elsewhere, either within the levy or, ultimately, if the member would prefer, through taxes elsewhere or cuts to public services, or other forms of investment.
I will move on. On the point about smaller projects, it seems to me that the very purpose of the levy-free allowance is to address that concern. I think that there is a fair argument as to whether we address the concern about small developments through an allowance or through a relief, but I find it hard to see why we would do both.
With regard to both the question of a viability-based relief and the argument for a multiyear approach to the allowance, I would raise a question: although a levy is not technically a tax, do we take the same approach to any other form of revenue raising? If people had the option to carry their personal tax threshold for income tax from year to year, we would see a significant drop in revenue. We do not do that, and I do not see why we would do it in relation to the levy-free allowance in this case. On viability, is there any other tax where we say to the taxpayer, “Actually, if you think this is too much for you to pay, you just don’t have to”? Either we think that the levy is a legitimate way of raising the revenue that is required from the industry that is responsible for the fact that the remediation programme is necessary, or we do not.
12:30
Would Patrick Harvie accept this point? Property development is a very specific process. If a developer can prove that they will not embark on a development because of the levy, it is surely better if the levy is reduced and the Scottish Government gets the receipts that come from other routes—as we have identified—as well as a portion of the levy, rather than not getting it at all. If a developer can show Revenue Scotland that a development will not proceed because it would not be viable, it is surely better to take a reduced levy.
To be honest, I am not sure how either proof or disproof of a claim of that kind could be relied on. Again, we need to be realistic: any industry that is faced with a levy like this is going to want to pay a lower rate, and to want as many reliefs, allowances and exemptions as it can lobby for.
As a final point, I am still unclear as to why the brownfield relief is a better way of achieving what John Mason is asking for than setting different rates. I ask the minister to respond to that point and clarify his view on what would be the best and most effective way to achieve an objective that I think we all share. That would be helpful.
That is perfectly timed, because the minister is about to come in before John Mason winds up.
I thank members for lodging the amendments in this group. I start by addressing amendments 30 and 31, in the name of John Mason, which would place a requirement on ministers to introduce reliefs using their regulation-making powers in section 11, including a relief of no less than 50 per cent for units that are created on brownfield land. The Government has already committed to introducing a reduced rate of a maximum of 50 per cent for new residential units that are built on brownfield land, and amendment 31 would deliver a broadly similar effect.
In response to Patrick Harvie, I think that the answer is that both approaches would deliver the same effect. John Mason made the point about giving certainty in the bill at this stage to those who are seeking to develop on brownfield land, in order to encourage such development. The Government is sympathetic to that aim and we are, therefore, minded to support amendments 30 and 31.
With regard to amendments 32 and 44, in the name of Craig Hoy, a viability-based relief would significantly increase the complexity and administrative burden both for taxpayers and for Revenue Scotland, which would have to assess detailed commercial appraisals and make subjective case-by-case judgments of financial viability. That would move the levy away from a clear rules-based tax that applies equitably and fairly across the tax base to a system that would increase uncertainty for taxpayers and deliver inconsistent outcomes, and which would—I have no doubt—clog up the tax system with the number of assessments that would need to be carried out. In that context, it is difficult not to see these amendments as wrecking amendments, so the Government cannot support them.
I understand the aim of amendment 53, in the name of Michelle Thomson, as I did her earlier amendments on exemptions. However, I have already spoken to the operational challenges of ensuring compliance with an exemption for units that are sold to first-time buyers and the significant impact that that would have on the tax base, so I cannot support this amendment. I stress again that I am happy to discuss alternative measures to support first-time buyers.
On Meghan Gallacher’s amendment 33, I note that the very purpose of having the levy-free allowance to begin with is to exempt smaller developers from the charge by way of an annual allowance of tax-free units; I will come on to talk about the threshold in a minute. As such, I am not clear on what Meghan Gallacher’s amendment is seeking to address or what problem it is trying to fix. Given that I have already indicated that more than 79 per cent of developers are exempt under the 19-unit allowance from interacting with the levy at all—and we could be about to increase that—who, exactly, is her amendment targeting support at? I asked her that question earlier and she could not answer.
Amendments 54, 55 and 57 seek to set a minimum levy-free allowance threshold at 29 units. During the stage 1 debate, I set out the Scottish Government’s position that the levy-free allowance would be set at 19 units. That would exempt 19 per cent of new-build sales from the levy and, as I said earlier, remove 79 per cent of developers from any requirement to interact with the levy at all. A 19-unit allowance, combined with all other exemptions in the bill, would leave 53 per cent of the eligible tax base chargeable. I am sympathetic to calls from the industry, such as from Homes for Scotland, for the threshold to be raised to 29 units. It is important to look at the data. A 29-unit allowance would exempt around 23 per cent of new-build sales, which is an increase from 19 per cent. It would also remove 85 per cent of developers from the levy, which is an increase from the 79 per cent that I indicated earlier. A 29-unit allowance, combined with all other exemptions in the bill, would leave 50 per cent of the eligible tax base chargeable.
It is important to recognise that, given that 79 per cent of developers would be excluded under the 19-unit allowance, increasing the threshold to 29 does not, in fact, benefit the vast majority of small and medium-sized businesses. I take on board Michelle Thomson’s point that some of those businesses might have aspirations to grow larger, which we would not want to stand in the way of. However, ironically, the benefit of increasing the threshold to 29 would fall disproportionately on larger developers. It would also have the effect of pushing up the levy per unit, because the tax base would be marginally smaller. There would therefore be a number of counter-implications. However, on balance, we are minded to support the principle of a 29-unit allowance, and the Government will therefore support amendments 54 and 55.
We are not able to support amendment 57 due to the restrictions that it would place on ministers’ ability to tailor the allowance to reflect changing conditions in future. I therefore ask Michelle Thomson not to move amendment 57. Amendment 56, which is also in Michelle Thomson’s name, would allow for the carrying forward of an unused allowance. Although such a provision could increase complexity in the administration of the levy, the Government is content to allow for the power to deliver a carry-forward provision, because we recognise that, on the margin, it could prevent smaller developers from having to behave in a way that would be inefficient in seeking to complete or not complete units in order to meet arbitrary financial year-end dates. We are therefore minded to support that provision.
I simply want to put on the record that I have neglected to talk to amendment 56. I am therefore grateful that I had the opportunity to meet the minister prior to this session and glad that we had that conversation. I apologise to the committee and the convener.
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.
I call John Mason to wind up and to press or withdraw amendment 30.
I welcome the minister’s flexible and balanced approach, as I think that he described it. It is interesting to see how different ministers handle amendments at different committees, and I welcome Ivan McKee’s approach to the issues.
That is great in relation to amendments 30 and 31. I tend to agree with Ivan McKee on amendment 32. The word “viability” jumped out at me as being somewhat subjective. It would open up a huge amount of possible loopholes for developers, and also complexity. I therefore agree with the minister and will oppose amendment 32.
I press amendment 30.
Amendment 53 not moved.
Amendment 31 moved—[John Mason]—and agreed to.
Section 11, as amended, agreed to.
After section 11
Amendment 32 moved—[Craig Hoy].
The question is, that amendment 32 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 2, Against, 5, Abstentions 0.
Amendment 32 disagreed to.
Section 12—Levy-free allowance
Amendment 54 moved—[Michelle Thomson].
The question is, that amendment 54 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Gibson, Kenneth (Cunninghame North) (SNP)
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (Ind)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)
Against
Harvie, Patrick (Glasgow) (Green)
The result of the division is: For 6, Against 1, Abstentions 0.
Amendment 54 agreed to.
Amendment 55 moved—[Michelle Thomson].
The question is, that amendment 55 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Gibson, Kenneth (Cunninghame North) (SNP)
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (Ind)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)
Against
Harvie, Patrick (Glasgow) (Green)
The result of the division is: For 6, Against 1, Abstentions 0.
Amendment 55 agreed to.
Amendment 33 not moved.
Amendment 56 moved—[Michelle Thomson].
The question is, that amendment 56 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Gibson, Kenneth (Cunninghame North) (SNP)
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (Ind)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)
Against
Harvie, Patrick (Glasgow) (Green)
The result of the division is: For 6, Against 1, Abstentions 0.
Amendment 56 agreed to.
Amendment 6 moved—[Ivan McKee]—and agreed to.
Amendment 57 not moved.
Section 12, as amended, agreed to.
Section 13—Use of proceeds of levy
The next group of amendments is on use of levy proceeds. Amendment 34, in the name of Liz Smith, is grouped with amendments 35 and 36.
The amendments in this group are supported by Homes for Scotland. Just as important, they seek to give effect to paragraphs 146 and 147 of our stage 1 report, in which we recommended that the proceeds of the levy should be used only for cladding remediation. I do not accept the minister’s reasoning that a restriction in the bill would add to costs and complexity.
As colleagues will recall, we discussed at length the importance of ensuring that the levy will fund only the cladding remediation programme and that it will be time limited through the sunset clause that several members have referred to. Being clear about the use of the proceeds is, I think, imperative if the bill is to be improved—
Will the member give way?
Yes, of course.
Does the member accept the argument that the cost of the cladding programme will be hugely greater than the levy and that, therefore, the levy will easily be swamped by the whole programme?
I accept that that is the situation, but the fact is that the Government has been slow in providing some of the moneys for cladding remediation. Moreover, as Mr Mason will remember, the committee made it very clear in its stage 1 report that the proceeds of the levy should be used only for cladding remediation. That is the purpose of my amendments.
I am grateful to the member for giving way a second time. Does she accept the argument that was made to the committee that, when the cladding on a building is looked at, other issues will come up and that, as a result, it might be hard to separate other safety issues from cladding issues?
Yes, I do. If I remember correctly, the minister and several witnesses made that point to the committee. However, it is impossible to legislate on that, given that we will not know what will be uncovered until the cladding remediation actually takes place. It is difficult for an amendment to deal with that eventuality, because we do not know what the circumstances might be. With my amendments, I am simply trying to reflect what the committee decided on the basis of the evidence that we took.
Moreover, when you
“intervene in the market, to stimulate or speed up delivery where build-out is not progressing at pace”,
to use the Government’s wording, charging the levy at a higher level if a development is not built to an agreed timeframe will rather cut across the purpose of a bill that, in our consideration, we have been assured will put in place a tax for meeting any building safety expenditure. That is the reason for amendments 34 to 36.
I move amendment 34.
12:45
As no other member wishes to speak to this group of amendments, I call the minister.
I thank Liz Smith for lodging these amendments. The Scottish Government has been clear on its intention to use the proceeds of the levy to fund the work of the cladding remediation programme. The costs of the programme are currently estimated at between £1.7 billion and £3.1 billion, which is substantially higher than the £360 million to £450 million that the levy intends to bring in. Even on those estimates, it is clear that the levy will form only a contribution to that necessary and vital work.
Section 13 of the bill sets out that revenues from the levy
“must be used … for the purposes of improving the safety of persons in or about buildings in Scotland.”
That wording aligns with the UK Government’s England-only levy, which was developed by the previous Conservative Government and introduced by the current Labour Government. In line with the specific power in the Scotland Act 1998, this matter was, with the agreement of both parties, devolved to the Scottish Parliament.
That said, I am sympathetic to the concerns of industry stakeholders that the current definition risks a kind of mission creep, whereby funds from the levy could be used for purposes other than cladding remediation. In that vein, I understand the aim of amendments 34 to 36 in seeking to narrow the scope and provide certainty to developers, and I have already taken steps to address that matter through my amendment to introduce a sunset clause to the bill.
I am wondering why that is relevant to the issue of providing certainty for developers. Surely what developers need is certainty about how much they have to pay under the levy and under what circumstances they can get a relief or what have you. I do not understand why they need certainty about exactly what all the money is going to be used for. If some of it is used for some other building safety purpose, how does that hurt the industry?
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.
The minister and I talked about that when we met to discuss the issue. Will he give a commitment that, prior to stage 3, he will work with me to ensure that we sort out the definitions and address the sector’s concerns that there might be some mission creep?
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 invite Liz Smith to wind up and to press or withdraw amendment 34.
I have nothing further to say, except that I am grateful to the minister. We can discuss the issue further in order to find something that suits everybody’s intentions and which will ensure that some of the unintended consequences that might occur do not.
Amendment 34, by agreement, withdrawn.
Amendments 35 and 36 not moved.
Section 13 agreed to.
Sections 14 to 16 agreed to.
Section 17—Cancellation of registration for levy
We move to group 7. Amendment 7, in the name of the minister, is grouped with amendments 58, 8 and 13.
The amendments in group 7 relate to the administration of the levy and the information-sharing arrangements that will be needed to ensure that the levy can be operated effectively. The group contains three Government amendments that I invite the committee to support and one non-Government amendment that I ask the committee to resist.
Amendment 7, in my name, will make a practical and administrative improvement to the operation of the levy. It will require Revenue Scotland to cancel a person’s registration where that person has notified Revenue Scotland and Revenue Scotland is satisfied that the person has ceased their activity and will not carry out any activity that could give rise to a levy liability.
Under the bill as introduced, developers can choose to register voluntarily in advance of completing any new residential units. That is helpful for large or phased developments, but it would also create a scenario in which someone might remain registered despite no longer intending to build. Amendment 7 will provide a clear and proportionate mechanism for addressing that situation. The amendment has been requested by Revenue Scotland, and it reflects standard practice across other devolved taxes.
Amendment 58, which was lodged by Michelle Thomson, would require levy liabilities to be paid in instalments over a minimum of a five-year period for certain types of development, including build to rent and purpose-built student accommodation.
Although I fully recognise the cash-flow concerns that have been raised by parts of the development sector, I am unable to support amendment 58, because its effect would be to mandate a single-payment approach in primary legislation, regardless of the size of the levy liability, the type of developer, the behavioural or fiscal impacts, or the taxpayer’s ability to pay. Creating such an unconditional arrangement would significantly increase the risks of non-payment and defaulting, which would ultimately undermine the revenues that are available to the cladding remediation programme.
However, it could be argued that there is a midway point. While I can appreciate there being concerns about, for example, the use of special-purpose vehicles being a risk to tax receipts for the Government, there could well be a midpoint that front loads payment but still allows for staggered payments. That would not represent such a risk to the Government. Has the minister considered that?
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.
I will not labour my point too much, because I think that the minister has correctly expressed the fact that this area is a particular concern for the build-to-rent sector. I have raised these issues a number of times in evidence sessions. The critical point, which is recognised, is that the sector operates at scale. I regard it as a sector that is utterly fundamental to us achieving the volume of developments that we need at the pace that is required. We must have the sector on side—that is critical. It is also worth pointing out that the same issue could affect mid-market rent and student accommodation.
It is worth reflecting briefly on the business model, whereby, if there is no sale after completion, the developer will be left with such a large financial liability that that might cause some developers to consider whether it would be better to focus on developing in Leeds rather than Edinburgh, for example. That is the root of my—
Will the member give way?
Yes.
There is clearly room for a legitimate debate involving differences of opinion on the desirability of the growth of build to rent or PBSA, but does Michelle Thomson acknowledge that it is a matter of fact that, rather than small businesses and small developments, we are talking about large businesses that extract significant profit from the housing system?
We are definitely talking about large businesses. However, I come to this debate from the position that, if we are to get to the volume that we require, we need those large operators. We must recognise that, because of the way the market works, they can make choices as to where they invest. I want them to be able to invest in Scotland because the limitations of their business model are recognised and understood by the Government. They could easily go elsewhere, but we need them in order to get to the scale that we need.
I invite the minister to wind up.
In response to Michelle Thomson’s remarks on cross-border competitiveness, I note that the reverse is also true. It is worth noting that the levy in England has no provision for any delay in payment—the whole payment is due up front. I look forward to our conversations to explore that issue.
Amendment 7 agreed to.
Section 17, as amended, agreed to.
Section 18 agreed to.
Section 19—Accounting for levy by return and time for payment
Amendment 58 not moved.
Section 19 agreed to.
Sections 20 and 21 agreed to.
After section 21
Amendment 8 moved—[Ivan McKee]—and agreed to.
Sections 22 to 44 agreed to.
Before section 45
Amendment 59 not moved.
Section 45—Report on operation of Act
Amendment 37 not moved.
Amendments 9 and 10 moved—[Ivan McKee]—and agreed to.
Amendment 38 moved—[Liz Smith].
The question is, that amendment 38 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 38 disagreed to.
Amendments 11 and 12 moved—[Ivan McKee]—and agreed to.
13:00
Section 45, as amended, agreed to.
After section 45
Amendment 39 moved—[Liz Smith].
The question is, that amendment 39 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 39 disagreed to.
Amendment 60 not moved.
Section 46—Interpretation of this Act
Amendment 40 moved—[Liz Smith].
The question is, that amendment 40 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
Abstentions
Marra, Michael (North East Scotland) (Lab)
The result of the division is: For 2, Against 4, Abstentions 1.
Amendment 40 disagreed to.
Amendment 41 not moved.
Amendment 42 moved—[Craig Hoy].
The question is, that amendment 42 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 42 disagreed to.
Section 46 agreed to.
Section 47 agreed to.
Section 48—Regulation-making powers
Amendments 43 and 44 not moved.
Amendment 13 moved—[Ivan McKee]—and agreed to.
Amendment 61 not moved.
We have one group of amendments left. I think that we should go for it and try to finish off stage 2 today.
Amendment 14, in the name of the minister, is grouped with amendments 45, 62, 15, 47, 65 and 66.
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.
The minister says that the proposed sunset clauses in amendments 15 and 47 are broadly similar. However, if we look in detail at the minister’s sunset clause, we find that the sun may never set, subject to regulations, so the levy could become part and parcel of the taxation framework. That concerns the industry, and the committee was clear that there should be a sunset clause with a legal backstop.
The financial memorandum for the bill that became the Housing (Cladding Remediation) (Scotland) Act 2024 says that the anticipated expenditure on cladding remediation would be for a period of five to 10 years. Therefore, a sunset clause at 15 years, as proposed by the Government, with no legal backstop, is probably not in the spirit of the original legislation. For the industry to have confidence that the levy will not simply become another aspect of the business operating environment, it is important that there is a clear sunset clause in the bill, and 10 years is a reasonable time span.
Under my amendment 47, it would be possible, with good cause, and subject to parliamentary consent under the affirmative procedure, for that to be extended to 15 years. I believe that my amendment would give clarity and certainty to the industry. Any extension to the lifespan should take place only if there is a clear case and that clear case is put to Parliament, rather than have the levy continuing by default, which is in effect what a 15-year period would mean, given that the general consensus seems to be that the period should be 10 years.
In relation to amendment 45 and making the extension of the life of the act subject to the affirmative procedure, I note that that is similar to the minister’s amendment 14. However, having come relatively late to that particular amendment, I am minded to press amendment 45 as well, just to ensure that there is absolute clarity that it will have the same effect as the minister’s amendment 14. I will do that, unless the minister can say whether he has identified any difference between the application of my amendment 45 and his amendment 14.
Amendments 62 and 66 are about an extension of the provisions in the bill. For the reasons that Craig Hoy has just given, we need to try to give the sector some certainty and a commitment that we will not let things go further down the road without holding to account the delivery of the building work that is being undertaken. If we were to allow that to happen, we would be in a circumstance of considerable uncertainty. That would be a difficult situation that none of us wants to get into.
Some of the witnesses that we heard from at stage 1 were very much in favour of sunset clauses to ensure that the situation cannot go on for ever or be shifted down the line without such a commitment being made.
The minister should be reassured that Labour MSPs will vote and act in line with the desires of their constituents and what best suits the people of Scotland. He may have taken the route of least resistance in the development of the bill by copying existing legislation from elsewhere, but I do not think that that is an appropriate route to take. Scotland has a different and a distinct housing market and we should take the opportunity to reflect that in the bill, as amendments in this group would do.
The Scottish Government has now lodged an amendment to extend the levy’s lifespan to 15 years, with the possibility of a further extension to that period. I am concerned that, contrary to the findings of the consultation and the recommendations of the committee, the Government’s amendment would give it the power to ensure that the collection of the levy can continue long after its stated purpose of providing funds for remediating buildings has been fulfilled. That would be contrary to the purpose of the legislation and damaging to the housing sector’s confidence in being able to increase the supply of new homes.
I worked with the Scottish Property Federation in developing amendment 65 and I agree with its concerns about the levy going beyond the initial 10-year framework. That extension will leave the industry with a distinct fear of mission creep, a point that was touched on earlier in relation to the purpose of the levy.
I add my support to the amendments in the name of Craig Hoy and Liz Smith that attempt to limit the scope of the levy. There are concerns that the bill will leave open the possibility that the levy will remain in place in perpetuity as a source of revenue for the Government, rather than following its stated purpose, for remediating buildings that have dangerous cladding.
Although a 15-year period would be more appropriate than a 10-year period, and I will not vote against having a 15-year sunset clause, my personal view is that, in general, sunset clauses are better placed in legislation that is intended to be very short term, such as emergency legislation. Sunset clauses have become a more regular feature of legislation in recent years, but they are more appropriate for shorter-term questions.
When we are talking about a date that is three parliamentary sessions into the future, rather than set a sunset clause, we simply ought to leave it to a future Parliament and Government to decide whether they want to repeal the legislation in the normal way. However, the balance of views is clearly in favour of some kind of sunset clause, and so a 15-year period would be more appropriate than a 10-year period.
I am sure that we will both still be here in three sessions’ time, Patrick.
Speak for yourself.
13:15
I will just pick up a couple of points in winding up.
With regard to Craig Hoy’s comments, the Government amendments will require the use of the affirmative procedure and the Parliament’s approval to ensure that the legislation is not ended at that point in time. The provisions in the two amendments are broadly similar. As Patrick Harvie has pointed out, any future Parliament could extend or, indeed, repeal the legislation if it so chose, but the point of the sunset clause is to give the comfort that the industry was seeking with regard to the Government’s intent.
If we are seeking to prevent future scandals of this nature, does the minister not accept that, in saying to the developers that this fund could be drawn on for the next 20 to 30 years—possibly in perpetuity—and that its scope could be wider, he is effectively giving them licence to misbehave in future? If he says, “This is for a specific purpose and for a specific period”, rogue operators will not be able to build something that might come to light in 10 or 15 years’ time as the cladding scandal mark 2. Indeed, being very specific might send a positive signal to the industry.
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].
The question is, that amendment 45 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is; For 3, Against 4, Abstentions 0.
Amendment 45 disagreed to.
Amendment 62 moved—[Liz Smith].
The question is, that amendment 62 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 62 disagreed to.
Section 48, as amended, agreed to.
After section 48
Amendment 46 moved—[Liz Smith].
The question is, that amendment 46 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 46 disagreed to.
Sections 49 and 50 agreed to.
Section 51—Commencement
Amendments 63 and 64 not moved.
Section 51 agreed to.
After section 51
Amendment 15 moved—[Ivan McKee].
The question is, that amendment 15 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
Against
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
The result of the division is: For 4, Against 3, Abstentions 0.
Amendment 15 agreed to.
Amendment 47 moved—[Craig Hoy].
The question is, that amendment 47 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 47 disagreed to.
Amendment 65 moved—[Mark Griffin].
The question is, that amendment 65 be agreed to. Are we agreed?
Members: No.
There will be a division.
For
Hoy, Craig (South Scotland) (Con)
Marra, Michael (North East Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Against
Gibson, Kenneth (Cunninghame North) (SNP)
Harvie, Patrick (Glasgow) (Green)
Mason, John (Glasgow Shettleston) (Ind)
Thomson, Michelle (Falkirk East) (SNP)
The result of the division is: For 3, Against 4, Abstentions 0.
Amendment 65 disagreed to.
Amendment 66 not moved.
Section 52 agreed to.
Long title agreed to.
That ends stage 2 consideration of the bill. I thank everyone for their contributions today, and I thank the minister, too. I should also say that the clerks put only one word in front of me—and that was “Slower”. I tried to stick to that.
I am glad that you ignored them, convener.
I am just glad that we got through it all.
I ask members to stay behind for two more minutes so that we can look at our work programme. In the meantime, I will call a two-minute break to allow our witnesses and guests, those in the public gallery and broadcasting and official report staff to leave.
13:20
Meeting continued in private until 13:24.
Air ais
Legacy Issues (Finance)