Official Report 540KB pdf
The next item is an evidence-taking session on the 2026-27 budget with Màiri McAllan, the Cabinet Secretary for Housing. We are also joined by the following witnesses from the Scottish Government: Sean Neill, director for housing; Kirsty Henderson, acting head of performance and finance in the more homes division; Kersti Berge, director of energy and climate change; Gareth Fenney, interim deputy director of heat in buildings delivery; and Stephen Lea-Ross, director of cladding remediation. I welcome you all to the meeting. There is no need for you to turn on the microphones. We will do that for you.
I invite the cabinet secretary to make a brief opening statement.
Good morning. Thank you for inviting me to give evidence and for your flexibility in making a slight change to the agenda that allows me to attend Cabinet today.
I am happy to talk about my portfolio budget today. Given the difficult financial circumstances, I am pleased to have secured a draft budget that includes substantial investment in some key areas, namely homelessness, affordable housing, heat in buildings, building standards and cladding remediation. By way of context, which is certainly relevant to budgetary matters, in the housing emergency action plan of September 2025, we committed further funding to enhance our offer in this financial year. That included an additional £40 million to invest in acquisitions, the establishment of a national fund to leave, and additional funding for housing first.
In my statement on the housing emergency action plan, I also committed up to £4.9 billion of a mix of public and private funding to support the delivery of at least 36,000 affordable homes over the spending review period. Our budget and the spending review that we are here to discuss today have confirmed that mix. A record £4.1 billion of that will be public investment, and we are confident that we will leverage the remaining £800 million, which we can discuss today.
We are complementing that record sum with record certainty. The sector has been asking for multiyear budgets for a number of years, and I am pleased that we are able to provide that. For this financial year, it means that £926 million will go to the affordable homes supply. That is the single biggest allocation since our records began in 1989.
The committee might remember that we doubled the adaptations budget to £20.9 billion in 2025-26. Our budget maintains that. It also includes £8 million of support for councils with rapid rehousing transition plans, £2 million for our newly rolled-out national fund to leave and an additional £4 million that we will invest in homelessness prevention actions. Although they are not in my budget, it is worth noting that £106 million of discretionary housing payments are also supporting policy objectives in the portfolio, including £83 million to mitigate the UK’s bedroom tax.
I turn to decarbonisation. I will be quick, as I do not want to spend too long on opening remarks. Our allocation of £1.3 billion to heat in buildings over the spending review period will allow us to maintain investment in our schemes and in our headline grant and loan offer.
On cladding remediation, we will make £371 million available over the spending review period, in line with our commitment that home owners should not have to pay for essential cladding remediation. That speaks to the national effort that will be required over the 15-year programme, in which we expect between £1.7 billion and £3.1 billion to be invested.
I will pause there in the interests of time, but there is much to dig into, and my colleagues and I will answer your questions.
11:15
Thank you for that very positive opening statement. Thank you for your efforts on the housing portfolio in the budget. We have a number of questions about the affordable housing supply programme, after which we will move on to energy efficiency and decarbonisation and then cladding. Those are the areas that we want to cover this morning.
I will lead with a few initial questions. You have set out a four-year investment profile for the affordable housing programme. How confident are you that that profile puts you on track to meet the commitment of providing 110,000 affordable homes by 2032? From the work that you have done, can you tell us what the risks are of so much delivery being pushed towards the final year of the target period? What are you doing to reduce those risks?
Everything centres on our target of delivering 110,000 affordable homes by 2032. When I talk about that target, I sometimes like to remind those I am speaking to that it is the second target, because the first one—to deliver 100,000 affordable homes—was met in 2021. That is important context. Overall, around 141,000 affordable homes have been delivered since 2007.
You are quite right: in 2021, we set a new target of providing 110,000 affordable homes by 2032. By September 2025, we had delivered just over 31,000 affordable homes towards that target. We will have numbers for the rest of this financial year, and we expect 36,000 to be delivered over the next four years.
I have a couple of points to make about that. First, I expect 36,000 not to be the ceiling of our ambition over the coming four years. It is the minimum number of houses that I would like to be delivered through a mixture of public grant and the scope that exists for leveraging private investment.
Secondly, you touched on the issue of the accelerated delivery in the latter years. That will be necessary, because the first couple of years of the target’s programme were disrupted, as were so many things across our economy, by Covid, Brexit and inflationary pressures, which continue to hurt the construction industry. We are having to respond to that, and we will have to increase delivery towards the end of the programme.
However, I want to give the committee the confidence of knowing that everything that we are doing now is about trying to scale up in order to be in a position to achieve that target. It is not simply a question of how much public grant we can offer. The four-year certainty that we are providing will allow the supply chain and our construction industry to scale up in order to be in a position to deliver, and our councils and the house builders to know what is coming.
I know that there is a sharp curve towards the end, but everything that we are doing at the moment is about preparing to be able to deliver that.
Great—thank you.
You mentioned the construction sector. Construction inflation and viability are clearly central to whether homes get built. I would be interested to get a sense of what assumptions you are using for construction cost increases over the next four years. Do you expect the grant per home to keep rising, or do you expect the sector to absorb more of the costs?
On that last point, the public grant rises. I am fairly sure that that table has been published as part of the spending review. If it has not been, I am sure that it will be in due course. The profiling of the public grant over the four-year period is such that it rises. That is intentional.
By way of factoring in inflation, we will take account of a degree of predictable inflation when we think about how we will use that funding and what it might deliver. Of course, there will always be things that are outwith our control. No one expected some of the economic shocks that we have suffered in recent years. Part of that is outwith our control, but when it comes to funding, certainty and the policy landscape—for example, exclusions from rent control for mid-market rent and build to rent—for everything that is within the Government’s control we will try to create an atmosphere where we can simplify and speed up delivery in the coming years.
That is very helpful—although I guess that we are about to arrive at a moment of uncertainty, with the upcoming election. We will see where we get to.
I will now move on to a question on the Scottish National Investment Bank and the work that you are doing in that space. You have said that you are going to work with the Scottish National Investment Bank—otherwise known as SNIB—to accelerate housing investment and bring in more private finance. I would be interested to hear about exactly—or as exactly as possible—what work is going on and when we will see tangible outcomes such as new funds, new partners or an increased number of starts.
The Scottish National Investment Bank is an absolutely critical partner. It is independent from Government and it is a critical partner in housing investment, not least in bridging the £800 million gap. We work closely with the investment bank. I would summarise the current position as follows. There has been great work to date—I can speak to some examples of that—where the investment bank has made an investment, made a substantial return and delivered homes in communities.
The more important thing is that there is real opportunity for that to increase. I have been speaking with representatives of SNIB, which has been doing a significant amount of market testing on the appetite for growth in housing. It is fair to say that there is a lot of it out there—provided that the right conditions can be created for investment.
By way of example, SNIB invested £60 million into the Thriving Investments mid-market rent fund to deliver affordable, high-quality rental homes across Scotland in mid-market rent. The fund has a mandate to build 1,500 high-quality homes close to major city centres, and it has already delivered 742 mid-market rent homes, with another 449 in development. That is a city example. The other example that I have in front of me is a very different proposition. It is in Lerwick, and it is a £730,000 investment that has supported the construction of six high-quality one-bedroom homes for key workers in Shetland. You can see from that not only the work that has already been done but the bank’s ability to invest in ways that support the needs of different communities.
I will mention, out of interest, that we recently took a delegation to London to meet investors there. The Scottish National Investment Bank came with us, and so did representatives of Glasgow, Edinburgh and Highland councils. They made the pitch for the investable proposition that is Scotland’s housing market, and it was well received. We have complemented that with work that the Deputy First Minister has been doing on the InvestScotland portal, which seeks to create one window through which to move in order to invest in Scotland. We are trying to simplify the offer, make the case and create the right conditions for it to work.
That sounds very positive. However, something that causes alarm bells to ring, and which I have started to think about it quite a bit over this session, is the fact that it is one thing to invest, but Scotland suffers from a history of wealth extraction. One of the pieces of work that we have been doing over this session has been on the idea of community wealth building. We are encouraging all that external investment, but how do we ensure that wealth is not completely extracted through shareholders and so on, and that the communities are actually invested in? How do we build that wealth?
Earlier, we were talking about place-based work with the Cabinet Secretary for Finance and Local Government and the amazing work that is happening at Granton with out-of-silo funding. The main point is, how do we ensure that investment comes in but also that the wealth stays with the communities?
That is a really important point. There are two strands to it, as far as I see.
The first is a more general point, which is that a lot of the homes that are being delivered from investment are about unlocking economic opportunities for the local area. I mentioned that Highland Council was talking about its pitch for investment. That is geared to a large extent to the significant economic opportunities, which you will be very familiar with, around the Highlands and Islands—I am sorry, Highland Council is looking only at its area, but I see the picture more widely—however, those opportunities will not be unlocked without housing. Therefore, the investment in housing definitely brings a local community benefit that gets reinvested into the communities.
Then there is the separate question of making sure that we use local contractors. The greatest economic opportunities are extracted in that way, and the community wealth building work will absolutely help us to achieve that.
One more bit of interest is that I have been trying to support small and medium-sized enterprise house builders, because they in particular have had difficulty in recent years and are less able to withstand shocks. They are also critical to rural and island areas, because that is principally where they operate.
We are trying to take a whole-systems approach, but community wealth building work will be critical as well.
It is good to hear that you are aware of the issues of SMEs in construction. During a session that we had on rural issues, some years ago now, we learned that after 2008 the bottom fell out of that sector. It is good that you are nurturing it.
Staying on the same theme, I will bring in Evelyn Tweed.
Good morning, cabinet secretary and officials. Thank you for your answers so far.
Cabinet secretary, you touched on these in one of your previous answers, but I would like to dig a bit deeper into the challenges that have been experienced in the delivery of the affordable housing supply programme, which have led to underspend. Do you think that, in the future, you will be able to spend the full budget?
That is a very important question on an issue that occupies our minds a great deal.
In the early years of this parliamentary session, delivery was hampered by the economic events that we know were on-going and to which you have alluded, and there were underspends in those years. If I am getting my financial years correct, we fully utilised last year’s budget—the 2024-25 year—and we are on track to do the same in this financial year of 2025-26.
That demonstrates two things. First, general conditions are picking up. Secondly, the approach that has been taken to the deployment of the affordable home supply programme by the Scottish Government and by Kirsty Henderson’s team means that it is working on the ground. The programme works closely with those to whom we are offering grants; we stay in close contact with them and help to monitor progress. It is also a flexible scheme. Kirsty can probably say more about this than I can, but Kirsty and her team in their area offices not only review proposals and make the money available once the allocated spend has been made—and not in advance of that—but equally, the team can be flexible and move money around to where it can be spent to make sure that we are fully spending that budget. Kirsty might have more to say about managing underspends.
We were in that unfortunate position in the first few years of this parliamentary session, which also coincided with the peak of the profile of our budget, as it was originally planned.
Our teams work very closely with local authority partners to put in place strategic local programme agreements on an annual basis. Those are reviewed regularly and problems with specific projects are flagged. There is also an element of slippage built into all those programmes, so that, if something is to move, shift or slow down, another project can come in and be accelerated to take that up.
As far as possible, we work with local authorities to make sure that they can utilise their full resource planning assumption for their area. However, there will be circumstances in which that is not possible.
11:30
As the cabinet secretary pointed out, we do not pay out our money in advance of need—it must be on receipt of the works when they have been completed. We are able to look around and shift that money to maximise the delivery, to make sure that it is accelerating the delivery of homes on the ground. We would look to prioritise the completion of homes rather than the acquisition of a site—although, obviously, acquiring sites is also important in order to provide that pipeline for future years. A lot of flexibility is built in to that.
There is also flexibility in the grant rates to deal with expensive projects. Invariably, those come up, and we are very flexible about how we look at them. At the same time, we evaluate those projects to make sure that they offer value for money, and we try to drive efficiencies where we can.
The only thing that I would add to that is that, at the beginning of this parliamentary term, we committed to £3.5 billion of investment, and that commitment will be met. Albeit there are different project variables that we have been responding to, that commitment will be met.
If it is of interest to the committee, that £3.5 billion over five years is compared to £4.1 billion of public investment over the coming four years. That will be a significant increase in investment and over a shorter period.
It is really good to hear that we have moved on from some of the problems that we were experiencing before and that we will achieve that budget.
We know that there is an issue for local authorities in relation to temporary accommodation. What impact do you think that investment in acquisitions and voids might have? Will acquisitions help the situation?
In the situation that we are in, in relation to temporary accommodation, it is about the degree of harm. As far as I am concerned, at the end of the spectrum, with the biggest difficulty, there are children who are living in unsuitable accommodation. Then there are the people who are spending too long in suitable accommodation.
The investment that we have made in acquisitions and in turning around voids has been about saying that, although the foundation of our approach is on house building—which must always continue—we need a year to 18 months for units to come through the process and be completed and that, in the meantime, we need immediate responses to serve those children who are in unsuitable accommodation and everyone else, moving back across that spectrum. That investment has been very successful. It is part of an activist and interventionist approach that the Government has been taking in recent years, since we declared the emergency.
Let me get my figures in front of me. The targeted investment that we have made so far has brought 1,250 voids and acquisitions back into use as affordable homes. That is a major achievement. As you can imagine, the work that is required to bring voids back into use will differ depending on the condition that they were in, and the number of acquisitions that can be made depends on the local market. It has been a really important part of providing immediacy in the programme. It is something that we have always done—acquisitions have always been part of our strategy—but that has ramped up significantly of late, and it has made a big difference.
When I worked in housing, I found that a lot of the acquisitions were in bad condition. Often, it took a long time to do the works that were required to bring them back into use. Is there a lot of flexibility when organisations are looking at such properties? Do they have the flexibility to do the work? It takes a bit longer, but you get a good product in the end.
I will go to Kirsty Henderson for the details of the flexibility. In recent years, the funding has been directed, for the most part, to those areas with the greatest strain on their homelessness services. To my mind, there is a lot of flexibility in what they are able to do and acquire because it is based on their local market, which they know better than I do.
Kirsty can say more about Ms Tweed’s experience of the condition of acquisitions.
We work closely with local authorities and RSLs, and there is a discussion about what types of acquisitions will be targeted in an area. The local authority or RSL will also want to make a judgment about how much work will be required, the speed at which that can be done and the standard that the property can be brought up to. Some build types will never meet a great standard because their construction type will not allow that, but there is definitely some flexibility. A discussion is had to find out how much is required to make each property work and to bring it up to standard, whether that means a new kitchen, new windows or whatever is necessary. There is definitely flexibility.
There tends to be a standard arrangement for what authorities and RSLs can make work, although that is different across local authorities and there can be exceptions. For example, if a property was in a really poor condition but was in an area where it was really difficult to get homes, there would be an open discussion about what grant would be required to make that work while still ensuring value for money.
I will close that part of our discussion by saying that the work on turning round the number of voids—which has not been exhaustive but has significantly eaten into them, to the extent that there is not a huge amount of scope left for the turning round of voids—plus the work to acquire homes now is supported by our work to bring long-term empty private homes back into use and by our investment in the Scottish Empty Homes Partnership. We had a record year in 2024-25, with 2,066 privately owned homes being returned to active use, which was a 10 per cent increase on the year before. I present those three things together to show the interventionist approach that we are trying to take.
That is great. Thank you, cabinet secretary.
It is helpful to hear that.
I am going to bring in Alexander Stewart, who has a question on the same theme.
Good morning, cabinet secretary. The budget provides £163 million of financial transaction funding. What is the intention for that funding and how will it be used in 2026-27? Will support for low-cost home ownership schemes continue?
I will take the last part of that question first and will then say a little bit about FTs. I might also bring in Sean Neill to give a little more colour to the answer on FTs.
I am very seized of the need to support, among others, first-time buyers, and there are two things that the budget confirms in that space. One is the continuation of the open-market shared equity scheme. One of the actions in my housing emergency action plan was to re-expand eligibility for that scheme, which we call OMSE. I have figures here to show that it has already helped to deliver some results for first-time buyers: 365 applications were approved between 2 September and the end of December last year, with 68 purchases completed, 19 of which were by households that included children. That vindicates the wider eligibility for that scheme. We will also maintain the first-time buyer relief within land and buildings transaction tax.
I know that stakeholders have called for more bespoke support packages for first-time buyers and I understand that need, but it must be balanced with other needs in the housing portfolio.
A number of opportunities are open to us with FTs, and we will always challenge ourselves to find the best ways of investing those. Sean can say a little about that.
We have an established charitable bond scheme that, through its investments and through financial transactions, actually generates grants back into the affordable housing supply programme, strengthening the overall budget.
We have spoken a little bit about the role of financial transactions in supporting mid-market rent, and, ultimately, they can also be used with partners such as SNIB to help us drive forward the delivery programme that the cabinet secretary set out.
There are a range of opportunities and vehicles. Through the housing investment task force, we are working with investors to understand what further opportunities there are across Scotland for us to use our financial transactions to get the most impact and deliver against our housing targets.
How do you envisage the rural and islands housing fund developing? How do you see the budget supporting community-led housing developments in the next year?
We, in the Scottish Government, are very clear in our minds that there is a real need for rural housing, and we want to make sure that the system can respond to that.
The core way in which the Government supports the delivery of housing in rural and island areas is through the general programme. You will know that, of our target of providing 110,000 houses by 2032, 70 per cent should be for social rent and 10 per cent should be in rural and island Scotland. I can tell the committee that we have consistently exceeded delivery of that 10 per cent through the core affordable supply programme, working with councils and RSLs.
That has been and will continue to be supplemented by the rural and islands housing fund and the rural affordable homes for key workers fund, which will be provided for in the coming budget. They are demand-led schemes, which means that, by their nature, we rely on people coming to us with opportunities. However, the funding is there to supplement what the core programme provides.
I mentioned the work on SMEs, which is about bolstering housing delivery in rural areas.
I think that there was a second part to your question, but I am sorry—I cannot remember what it was.
It was about how things are going to develop in the next year, which you have already given us an indication of.
Mark Griffin had an interest in financial transactions, but that discussion appears to have unearthed what he was interested in.
I have a question about rural housing and the community-led aspect of that. It is great to hear that you are delivering more than the 10 per cent target for rural and island Scotland. Members of the Rural Affairs and Islands Committee all talk about the fact that, even though 17 per cent of Scotland’s population is rural, only 10 per cent of the housing budget is allocated to rural areas. It is great that you are operating on the basis of at least 10 per cent of the target number of homes being provided in rural Scotland.
You said that the rural and islands housing fund and the rural affordable homes for key workers fund are demand-led schemes. We have had the initiative to support community housing enablers such as the Communities Housing Trust and South of Scotland Community Housing, which have been tremendously important in creating a pipeline of demand. Are you aware of that? What are you planning to do to support them to keep going with that work?
I am aware that, certainly in the Highlands and Islands, other people are showing up in the housing landscape who have the potential to play an enabling role. They have an incredible amount of knowledge, which they can use to support communities to develop one or two houses or flats that will keep those communities alive.
As a point of principle, I am very supportive of community-led housing. Earlier, I mentioned the fact that local authorities know their market better than I do. As someone who comes from an area that does not have a large centre of population but that is made up of lots of different communities, I know that the closer you get to the need in a community, the more it is understood. Identifying the need and making the case for it to be met is probably one of the most useful elements of community-led housing.
When it comes to practical delivery, it is clear that support is needed. That is where my absolute support for community-led housing is slightly caveated, because I do not want to burden community groups with what councils, the Scottish Government and RSLs ought to be doing, which is providing the housing.
I think that there is a sweet spot to be found, which will enable us to combine local knowledge and support for development, where a community group has the capacity to do that. Equally, we should always be clear that it should not fall to communities to lead the work from start to finish.
The rural and islands housing fund is there to support such projects, which we will assess as they come forward. I will continue to work with community organisations, principally on identifying need, because I suspect that there is a bit of a gap there.
For clarification, you would work with community enablers on identifying need. They work to support communities to get the confidence and capacity when they are embarking on a £6 million housing project and they have never had the experience of doing that. Helping to build that confidence seems to me to be a crucial role.
11:45
Yes, that is right. It is about taking the first big step, but a housing project is full of big steps, from start to finish, as anyone who has ever been involved with one will know. The funds are in place to supplement the core programme, and, as a matter of principle, I am very supportive of community-led work.
I also like what you said about how it should not just be left to communities to do it. Councils need to take a facilitation approach in supporting the community to deliver rather than having a volunteer board that can be hung out to dry when any project goes on for quite a long time.
Yes. Absolutely.
We are going to change themes. I will bring in Willie Coffey on energy efficiency and decarbonisation.
I wonder whether I can ask a specific question about one of the budget lines in the blue book—I hope that your colleagues have it with them this morning. It is on page 92 and it is the budget provision for energy efficiency and decarbonisation. The budget line shows that the proposal is to allocate £326.5 million in the coming year, but, compared to the autumn budget revision figure, it is only a 1.6 per cent increase. That suggests a real-terms cut for that particular budget line. Cabinet secretary, could you or one of your colleagues clarify that and explain whether that is the case, please?
I will start on that, and then I might go to Kersti Berge, the director. The table that I have in front of me is the level 3 budget. Is that what you are referring to?
It is the level 2 budget on page 92 of the budget document.
I do not actually have the budget document in front of me, but I am told that they are the same figures. What I have here is that the autumn budget revision figure was £320.6 million and the total for this year is £325.6 million, so that is a cash-terms increase of £5 million. In the current financial climate, with public money being in short supply, maintaining my budget at that level was a success in many ways, because it allows me to continue to run all the heat in buildings schemes, particularly my area-based schemes, the warmer homes schemes that are directed at fuel poverty, and the Home Energy Scotland grant and loan. I appreciate that inflationary pressures are hurting budgets, so being able to maintain the position in cash terms has allowed me to keep my schemes running. I will, of course, update the committee in due course about the split of investment between the schemes.
Of course, if we compare it to the outturn in the previous year, which is the figure to the left on that page, we see a 10 per cent increase, but that is the outturn figure. I suppose that I am saying that it depends on what we want to compare it with, but it looks initially as though there has been a wee cut in provision compared to the autumn budget review figure. I suppose that we, or those who are here in the next parliamentary session, will see the outturn figures for that particular budget line. If you are confident that it is sufficient to provide the funding that we need for this theme, that is quite encouraging.
We had that discussion last week about how the schemes will have to work harder and how we will do a bit of a review across the schemes in the coming financial year just to make sure that we can get the maximum out of them. However, as I say, that slight increase in cash terms was a win because it allows me to keep the schemes running.
Okay. In terms of support for our colleagues in the private sector, do you think that the budget will provide sufficient funds to enable private landlords to meet their obligations in relation to minimum energy efficiency standards and so on?
The committee knows that I have undertaken the sequencing work in respect of all the regulatory issues around heat in buildings and that the energy performance certificates reform—which we have brought to committee—was recommended to be first, with the private rented sector minimum energy efficiency standard and other issues to follow.
I am still waiting for public clarification of the warm homes plan content, which will inform the policy decisions on things such as PRS MEES. I am very aware that, as I take that decision, I will have to be conscious of the support that is offered to landlords. However, as of today, I do not know what is in the warm homes plan, so I have not made a final decision on PRS MEES in Scotland. I cannot comment, therefore, on the funding that would flow from that, but I will, no doubt, discuss it with the committee in due course.
Okay. Thanks very much for that.
I do not know whether you have given us that sequencing. It would be helpful to see what you are working to, if that is possible.
I know that we discussed that last week, so I am sorry if that has not been forthcoming yet. We will get you that.
It would be great to see that when it comes. Thanks very much.
Our last theme is cladding. I will bring in Fulton Mackay, who is joining us online—Fulton MacGregor, even. I do not know why I said Fulton Mackay. That is going back a few years.
There are not very many Fultons in the world, convener, so let me just tell you that I have been called Fulton Mackay far too many times for me to count. It is a very common thing that I have experienced.
Good morning—it is still morning. I have a couple of questions on cladding, cabinet secretary. In the interests of time, I will ask them together. How confident are you that the £52 million allocated for cladding remediation in 2025-26 will be spent, given that just £2.4 million had been spent by 30 November 2025? How will any underspend this year impact progress on future spending?
I am just going through my pack of papers to find the figure for the spend—yes, here we are. As of the end of December 2025, £15.9 million had been spent against the programme, which demonstrates the ramping up of activity following the passage of the primary legislation that was required to work around Scotland’s unique tenure systems.
The committee will see that we have invested around £55 million next year and £371 million over the course of the spending review. As we have said before, this is a 15-year programme, and we have talked about estimates of between £1.7 billion and £3.1 billion. Mr MacGregor asked how confident we can be that the spend that has been allocated will be spent. I am confident, because the primary legislation got those barriers out of the way and we are now moving into a period of rapid single building assessment deployment and mitigation measures where they are needed, and cladding remediation where that is identified as being life-safety critical.
You have assured us that there will not be an underspend, but if there were, what would that mean for people living in affected buildings and for upcoming programmes in future years?
I do not envisage that there will be an underspend. The challenge for cladding remediation, now that everything is in place, is not about managing underspend; it is about managing the vast amount of spend that will be required.
Stephen Lea-Ross and I, working together with our teams, consider very closely the rhythm of the programme, with properties coming into the single open call, being considered, grant letters being offered, and then moving through to the SBA being undertaken. The next stage is review, and then mitigation in the first instance, if required.
There is a rhythm to the programme and I believe that the available funding will absolutely be spent. I know that consideration is on-going of the building safety levy, and its supplementing what we are talking about, so the challenge will not be not getting money out the door, but the cost of the programme.
That is great. We appreciate the updates on cladding.
The committee has been addressing an area that is kind of similar but different to cladding: reinforced autoclaved aerated concrete. Meghan Gallacher has some questions, possibly on cladding but also on RAAC.
Good morning. I want to start with a point of clarification, if I may, which takes me back to the private rented sector and the energy efficiency standards. I know that the cabinet secretary has not seen that plan as yet, but we are running out of time, given the number of weeks that we have before the dissolution of the Parliament. Does the cabinet secretary envisage the plan coming forward between now and then, or could there be a delay to any regulations being brought forward?
When the UK Government will produce its warm homes plan is entirely outwith my control. The plan has been delayed a number of times so far, although the indication that we are getting from the UK Government is that the intention is that it will be forthcoming fairly soon. I would not want to overstress that point to the committee, because there is nothing that I can do to control that. What I can do, once I am in receipt of the plan, is consider it and its implications for Scotland, very quickly, and come back to you.
That is helpful, cabinet secretary.
We know that roughly £97 million of Barnett consequentials have been sent through in relation to cladding, and we also had a debate last week on the Building Safety Levy (Scotland) Bill. Can you clarify how much of the Barnett consequential funding has been spent so far? You have talked about upscaling the spend in that area, but it would be good to know how much of the Barnett consequential money has already been spent.
Mr MacGregor talked about a figure having been spent, and I was able to put on the record my own figures, which show that, by the end of December, £15.9 million had been spent.
I take this opportunity to encourage us not to put some misplaced emphasis on those consequentials, which have arisen once and will not arise again. Consequentials that arise from spend in England and Wales are absolutely fine, but they do not necessarily mirror the stage of the programme that another country might be at. As you all know, we had to introduce primary legislation in order to navigate Scotland’s unique legal system.
As welcome as £97.1 million of consequentials might be, they arise only once, as I said, and the amount is far less than the £371 million that we are allocating over the spending review period, and it is a complete drop in the ocean compared with the up to £3.1 billion that will be required to be spent over 15 years. I understand the scrutiny, and I completely welcome it, but I would just encourage us not to put a misplaced emphasis on consequentials, given the scale of the programme and the spend that will be required.
I accept your point, but—and I know that you are aware of this—the frustration is with the time that it is taking to get the cladding remediation off the ground. An issue that I have come across, and which I wrote to you about in December, relates to the cladding remediation programme and the differences in letters coming from the Scottish Government to people who are trying to sell their properties but who have been affected by cladding problems. In 2024, the Scottish Government appeared to say that it would fully fund remediation costs in those cases where it could not identify the developer; however, that view appeared to have changed substantially a year later when another person was trying to sell their property.
Having seen the two letters in question, I think that it would be good to get some clarification on this. One individual was able to move on and sell their property, while the other person feels trapped. We need to be really careful with the language in those letters. It would be good to hear from you or, indeed, the officials on the matter, because I am worried that some people have received a letter saying that remediation will be fully funded while others have not.
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Thank you. I have your letter and am drafting a response. I also saw your interaction with Ivan McKee during the passage of the bill. I just want to make sure that the response is exactly where it needs to be.
I put on record the seriousness with which I take the cladding remediation programme and the worry and concern that I know will be experienced by many people across the country. It is absolutely my intention—the Government’s intention—that every stone is turned, that we pursue the programme to the nth degree and that safety work is ensured. That is absolutely my motivation.
I will come to Stephen Lea-Ross on the exact wording, but the principle and our position remain that we will pay for essential cladding remediation. There might be instances in which, for example, an SBA—being a very full assessment—will identify fire risks, some of which will pertain to cladding and some of which will not. It is important that the Government differentiate between the cladding remediation programme’s funding essential cladding remediation and its not being able to attend in all circumstances to the suite of other issues that could arise. That might be the issue that you are dealing with in those letters. Stephen can perhaps say more and, in any case, I will come back to you in writing.
Further to the cabinet secretary’s remarks on the programme, we have undertaken further quality assurance to verify that there is consistency in language in the letters that are received by homeowners. The principle has not changed: the cladding remediation programme will fund essential cladding remediation in a building for which no responsible developer has been identified as having ownership or an interest such that they might be asked to take forward remediation works.
I have another couple of points of clarification. As a matter of principle, we do not issue letters of comfort to be used by lending or funding institutions—that continues to be the case for the programme—but we will clarify the position in respect of a building’s ownership and/or whether we have identified a responsible developer in connection with that building and development. Having reviewed letters that have been issued in the past, we accept that there were some differences, which is why we have tightened up the process, but we have attempted consistently to mature that approach and be clear on both how we communicate with homeowners and what we have said that we will consider funding when it comes to essential cladding remediation. That position is now fully set out on the website.
That is helpful, and I look forward to receiving your letter.
I will pick up on that briefly and move to a question about RAAC in a second. I know that you are having to increase the spend for carrying out cladding remediation work. The importance of building safety is widely accepted. No one will dispute it. However, there are concerns over a disparity, in that the Finance and Public Administration Committee has reported that the building safety levy would raise £30 million a year. I know that that will be scrutinised in the Parliament over the next few weeks. Will the figure be clarified at that stage, so that whatever committee that will be dealing with it or scrutinising a part of it knows exactly what the figures are?
My working assumption is that £30 million per annum could be raised via the levy, and that we could expect that to come into play from 2028. However, that may end up not being the case because, as you say, the bill is still going through the Parliament and is by no means in final form.
That is helpful. I will move on to a question on RAAC. The Government has stepped in to offer investment support in the north-east equating to roughly £10 million, through the housing infrastructure fund. However, other local authorities have not been so fortunate as to be included in that offer; for example, West Lothian Council has estimated that it needs roughly £85 million in order to fully remediate RAAC-infected schools, community buildings and council homes. I know that, in this meeting, we are talking only about homes, but those are included in the £85 million. Will you extend the offer to other local authorities with the greatest need for RAAC remediation, or was what we saw in Aberdeen a one-off?
The agreement that was reached was not a case of an offer being made by the Scottish Government and accepted by Aberdeen. There was an ask by Aberdeen City Council to re-purpose funds that had been committed to the council some years ago via the housing infrastructure fund but had never been spent. It is important that I make it clear that that was not a Government offer and was not additional Government money. There was internal work in the council, along with work in the community, which was not an easy process for anyone involved, not least the homeowners. The council reached a proposal that involved looking to that unspent fund as a way of meeting the need and providing what was required and then asked for flexibility. We were initially unable to accept that ask because the terms of the housing infrastructure fund did not allow that, but we could agree that money in the affordable homes supply programme could be made available to Aberdeen, in a way that was entirely separate from the ask about RAAC, and that it was up to the council to decide how to re-profile its spend. The council chose to do that for RAAC.
That is a very different proposition to having an offer made by the Government and I must clarify that no such offer will be made. I have spoken with residents, elected representatives and council officers, usually in open forum and occasionally in public meetings. I have spoken to them all and heard their concerns but I must be very clear that there will be no central remediation fund for RAAC from the Scottish Government because we simply do not have the flexibility to provide that.
In Aberdeen, the council looked within its own plans and asked for flexibility for existing funding pots and I have said that I will consider that for any council that comes forward, but that is a very different proposition from having the Government make offers, which we will not be making.
Thank you for that clarification, cabinet secretary.
The City of Edinburgh Council has said that it is going to see whether there are any further examples of RAAC-related issues in its local authority area. Do you see there being more councils in difficult and precarious financial situations trying to remediate buildings and homes? If no further funding is to be made available to them, could that lead to a situation where we will have empty properties that need to be demolished, or whatever the council decides? I am concerned about that, because those buildings have been identified as risks. How can we remedy that? Is there any potential for discussion between the Scottish Government and councils about that issue if councils lack the financial means to remediate the homes and buildings that are impacted?
First, I am no technician and no expert on the physical inspection of RAAC. I rely on advice, but the work that has been undertaken in Scotland certainly went beyond desk-based study, which means that we have a uniquely clear picture of the presence of RAAC. I again caveat that by saying that I am no technician, but the approach that has been taken gives me a lot of confidence that, where it exists, RAAC has been identified.
I appreciate that that does not negate the challenge that RAAC presents. It is a building standards issue and the responsibility for that falls on the owner. Sometimes, that owner will be an institution, such as a council, and councils have worked really hard across the board to attend to the needs of their tenants when RAAC has been found in council homes. Sometimes, the responsibility falls to the individual. I understand that it is not easy for an individual to grapple with that, which is why I have gone to residents in council areas throughout Scotland and have sat down to speak to them about it. It is why I have said that, if individuals and councils can work together to produce plans and proposals for flexibility within existing budgets, I will consider those plans.
I entirely sympathise, but I have to come back to the fact that there is no scope for RAAC remediation within central Government spend, not least when, as we have just talked about, there is the spend attached to cladding remediation, which is a major public safety issue, or the need to build more affordable homes or attend to the pressures on temporary accommodation. There cannot be a central RAAC fund.
However, in regard to what we can do, I have set up a RAAC in housing leadership group. I am keen to foster a close understanding between us, the UK Government, councils, UK Finance and the Association of British Insurers on the ability to sell a home once the RAAC in it has been remediated. We cannot have a situation where, by whatever means, people have either paid or been supported to remediate RAAC in their home and it has green status, but they still find that they cannot sell it. There is new Institution of Structural Engineers guidance out and I will have another meeting with the leadership group at which I will try to get an agreement that we can borrow and have financial products placed on houses with green RAAC status.
That is helpful, cabinet secretary.
I want to pick up on something that you said earlier about building standards. At the beginning of your opening statement, you talked about the budget and what fits into that envelope, and you mentioned building standards. We have not really gotten into the detail of that, but I think that that issue is connected to the conversation that we have just been having about cladding and RAAC. Over this parliamentary session, the committee has started to really look at building safety and quality. In our evidence sessions on cladding, RAAC, and damp and mould, it has come up that sometimes the materials that are used—for example, the cladding technology and the chemicals that are in it—are problematic. Is there something that we need to do in that space?
We were thinking about a couple of issues. One is whether there needs to be an inventory of the fundamental materials that go into house building in the future, so that we know what materials our houses are being made of. The other issue is whether we are making sure that the materials that a construction company or a housing developer chooses to put in are actually up to standard. Nobody could have imagined a situation in which cladding led to the horrors of Grenfell tower, but do we need to be doing something to monitor that kind of thing?
I might ask Stephen Lea-Ross to say a word or two about the cladding aspects of that. We are straying slightly from our topic, but this is a very important issue. It would be fair to say that mistruths were part of the cladding issue and one of the fundamental problems leading to Grenfell. Perhaps Stephen can say a bit more on that, but the Government is responding to what the Grenfell inquiry found and its recommendations. Another thing that we have done is create a building safety forum within Government, which monitors the building landscape and intel as it arises. RAAC is still used throughout Europe as a building material, because, if it is properly maintained, it does not present an issue. That is very different from the situation with cladding.
Our approach is more about good communication and understanding the intelligence around building materials, as and when it arises, and making sure that we are taking commensurate action. Stephen, do you want to say something on cladding?
A few points are worth noting from the cladding example. As Ms McAllan has alluded to, one of the distinguishing features of the cladding problem as it emerged post-Grenfell is the dishonesty in the supply chain that led to those products being used in the first place, rather than a lack of knowledge in industry about what are suitable building materials.
From the cladding example in particular, we know that fire engineering continues to develop as a science. One thing that is common to the cladding, RAAC and some other structural issues that we have identified is that they are ex post facto—nobody could have realised that they were an issue when the problem first emerged. There probably are limits to what you can do ex ante in terms of inventory of building materials.
12:15
It is also worthy of note that work had already been undertaken on building standards in Scotland. Our building standards were amended in 2006 in response to the Garnock Court fire. Although we are still undergoing a process of assessment and a significant number of buildings have been identified this year, so we cannot be certain of this, our work so far with local authorities and in reviewing stuff in the high-rise inventory indicates—although I am not categorically saying that this will be the case when we come to the end of the process—that only a modest proportion of buildings overall had significant amounts of the worst types of cladding that have been identified in the context of the cladding problem, that is, ACM and HPL cladding.
The other thing that I would say is that, in addition to the building standards system having been reformed in 2006 and subsequently, there is confidence broadly across the sector in the fact that we already have a pre-emptive approach to building standards and to the building warrant application process. There remains confidence in the verifier-based system, which is different from the system used elsewhere in the United Kingdom and applies to all categories of commercial and residential build. We are also currently undertaking public consultation on further reform of that standards system, to give people as much confidence as possible.
Finally, as the cabinet secretary has already set out, one of the things that we are constantly looking to do through the ministerial working group—the forum on building and fire safety—is take a broader, holistic look at building safety and structural issues as they arise, and to continue to engage with industry, whether through producing new guidance, refreshing existing guidance or raising awareness of some of those issues.
It is helpful to hear from you the differentiation between cladding and RAAC and that you are taking a broader view of that forum. A question about its scope has come up at committee, because once you get into a building, you discover other things.
We both agreed, cabinet secretary, that we were straying a little from discussing the budget, but the issues were connected. We are now talking about cladding remediation in the context of a budget, because of the fact that we were misinformed about the materials that ended up being used. There is absolutely an interconnection—I do not know whether that is systems thinking or out-of-silo thinking. Are we using the right materials? Will it get us into a situation down the line?
I totally take your point, Stephen, that we cannot necessarily predict the future of something, but it is about having an awareness of what the construction industry is choosing to use and ensuring that we are getting the right materials into people’s homes.
You will possibly be glad to know that that was the end of our questions for you. It has been a very good discussion. The housing budget has had a wobbly time over this parliamentary session, and from this discussion, it feels like it is now in a much better space.
I really appreciate your focus and, I would say, diligence. As convener of this committee, I am grateful that we have a Cabinet Secretary for Housing, because we absolutely needed that level of leadership in this space. It is great that we finally got there in this session.
That concludes our questions and the public part of the meeting.
12:18
Meeting continued in private until 12:47.
Air ais
Draft Climate Change Plan