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It is a long, difficult and technical process.

One of the reasons is the single building assessment. Officials may want to come in, but there have been questions and concerns about the detail of the remediation that has taken place in some of the buildings in England. One of the reasons why we have gone down the single building assessment route is so that we can reach a single point of truth about what needs to be remediated. Some aspects of the buildings in England have not been remediated, and there are what could be described as on-going disputes about whether or not remediation has taken place satisfactorily in a number of those buildings.

We want to get it right first time, and the single building assessment is a thorough process, which is now being looked at elsewhere. It will help us to ensure that the work that needs to be done is done comprehensively, and that the outcome for buildings for which no work is required is that those buildings are recognised as safe. Those buildings will then go on to a register, which was established by the 2024 act, and homeowners and others will be able to use the information on it for mortgage purposes. It is important that the buildings that require no remediation or a limited amount of remediation can be put on that register quickly.

The act will come into force from January, which will mean that there is more pace with the single building assessment process and that the process can be forced in cases in which, for example, there is a lack of agreement among homeowners. It will also ensure that there is a process by which the data from the single building assessments will be available to help people to move on for mortgage purposes or if they want to sell their homes that they have not been able to sell for many years. Therefore, getting it right is important.

Stephen, do you want to add anything?

Thank you. In our 2023-24 programme for government, we announced that the Scottish Government would seek the devolution of powers to introduce a building safety levy in Scotland that would be equivalent to the United Kingdom Government’s building safety levy for England. As the Scottish Parliament cannot legislate for a new national tax in Scotland without the consent of the UK Parliament, the Scottish Government requested the transfer of powers from the UK Government under section 80B of the Scotland Act 1998.

To inform the UK Government’s decision on that request, the Scottish Government and the UK Government launched a joint consultation, which ran for six weeks, from 8 January 2024 until 19 February 2024. Respondents were asked to provide evidence that devolving the power might have a disproportionate negative impact on UK macroeconomic policy or impede the single UK market in house building in any way. They were also asked whether the powers for a building safety levy in Scotland should be devolved to the Scottish Parliament.

As both Governments agreed that the consultation had surfaced no evidence to prevent the transfer of powers from proceeding, the UK Government confirmed that it would proceed to legislate for the transfer of powers, but that process was interrupted by the general election. However, we have since renewed the agreement to legislate with the new UK Government Administration, and the order will be considered by the UK Parliament this week.

The draft order before us today sets out high-level criteria for the new devolved tax. It provides that a Scottish building safety levy must be charged at a point in the building standards process and that revenue that is raised through any levy must be spent on building safety expenditure. In doing so, the order, in effect, matches the powers that were taken by the UK Government in the Building Safety Act 2022, which was the UK Government’s intention in drafting the order.

The order does not make any further specifications and, provided that it is approved, decisions on all other aspects of the devolved tax policy will be set out in the building safety levy bill, which the Scottish Government intends to introduce as part of its year 4 legislative programme. In line with our new deal for business and framework for tax, the Scottish Government has commenced a consultation and programme of engagement with stakeholders, including people who operate in the residential property development sector, on the design of a Scottish levy, and I look forward to speaking to the committee on the design of the levy as part of its consideration of the bill.

However, the purpose of today’s discussion is to discuss the principles and practicalities of the devolution of powers, and I am happy to answer any questions that the committee has on that.

On your point about the passing on of costs, that is a live issue that came up in our discussion last week. Developers said that, ultimately, they would have to put the cost on to house prices. Developers down south have said that, too. We will continue to discuss the matter with them. We certainly hope that any impact on house prices would be marginal, but we are keeping an eye on that. That will be part of the business regulatory impact assessment that we will undertake, which is the next phase.

Has the issue been raised on a number of occasions? Yes—particularly at the time. On the desire from local government for no further freeze in 2025-26, I have said clearly that it is part of the budget discussions. It is about a package.

In the big picture of all the things that we are getting on with in the agreement space with local government, there is sometimes a lot of focus on the relatively small number of things—some of which might be significant—where there is disagreement. I hope that, through the budget process, we can move beyond some of those issues, because a lot is being delivered, and there is a lot that we can deliver jointly.

I see Katie Hagmann at least once a week—perhaps more often than that—and my officials see their counterparts in COSLA regularly. Perhaps this is not always understood, but a lot of joint engagement and detailed work goes on.

First and foremost, let me recognise that the negotiation is between COSLA and the unions, and it is really important to abide by that principle. Although we have supported local government pay this year and in previous years, it is important to reiterate that the negotiation is between those two parties.

I would very much like to get to a position in which we can move beyond what you have described. Clearly, it has been quite a difficult year, but we have provided additional funding, which was very difficult to identify. Collectively with COSLA, we had to make some very difficult decisions about what would be paused and what funding would need to be utilised for pay. The upside is that two of the three unions have now accepted the offer, and what happens with Unison remains to be seen.

The solution is multiyear funding. One of the better things that the new UK Labour Government has announced is a spring spending review of resource and capital funding, which will trigger multiyear funding, with three-year funding being reviewed every two years. That is how the system used to work, but that has not happened for many years.

Multiyear funding is important because it can help us with so many things, including reform and the ability to reach agreements on productivity and efficiency. A multiyear envelope also helps with pay, because we can then support multiyear pay deals and, in turn, local government. We cannot give out multiyear funding unless we have multiyear funding, but if we get multiyear settlements, we can provide local government with multiyear settlements, which will enable it to get to a more productive space in relation to multiyear pay deals and all the things that come with that, such as reform and doing things differently. It is hard—almost impossible, to be honest—to do all that with single-year budgets. That is the way forward.

The last year with single-year funding will be 2025-26, and we will have to do our best to minimise the chances of industrial action, which is costly to public services. We all want to avoid that, and the longer-term solution is to provide multiyear deals.

I cannot see the UK Government reining back from what has been a clear commitment, and I think that work is already under way on the UK spending review. What remains to be seen is what that looks like. I am sure that we will touch on capital today. We have had a cut to our capital budget, which will, unfortunately, reduce our ability to spend in that area.

The spending review, which covers resource and capital, gives the UK Government an opportunity to look a bit differently at the fiscal rules, particularly in relation to capital and borrowing, which could give us a different trajectory on capital availability. I would like nothing more than that. I can assure you that, at the meetings with the Chancellor of the Exchequer, we have raised that issue and that of financial transactions. Along with Welsh and Northern Irish counterparts, I met the Chief Secretary to the Treasury in Belfast last week. We were really clear about the need for a change in direction with more resource to sustain public services and more capital to invest in infrastructure.

We need to wait and see. I do not think that there will be any change to the principle of doing the review. The uncertainty is about what pops out the other end. We will be trying to influence and engage with all that as much as we possibly can.

I raised the importance of city deals and growth deals with the Chief Secretary to the Treasury. A couple of deals in Northern Ireland are also in that position. Clearly, there is a lot of anxiety locally about the deals. It is really a matter of timing. The deals that had already been signed were fine, and those that were in the process of being signed—which, in Scotland, captures Argyll and Bute—have been put on hold due to the budget and the spending review. We have said that it was really important that we give certainty to communities. We have already said that our share, which I think is £25 million, is there for the growth deal. Our call to the Chief Secretary to the Treasury was for the deal to be expedited as a matter of priority, because it needs to be resolved and certainty needs to be given. We have made our position clear and we will continue to pursue the matter.

We are not complacent but, to look behind and underneath examples of English local authorities going bust, some related to ropey investment decisions that were made without due scrutiny or oversight. The construct of the ability of English local authorities to do that is a bit different from the situation for Scottish local authorities.

There is a debate about the general power of competence. There is also a debate about giving local government more fiscal powers, as we want to do. All of that has to be done within a prudent framework, because we have to make sure that we work under the same requirements.

Although no limits are set by the Scottish or UK Governments on the amount that a Scottish council can borrow, a council is under a statutory duty

“to determine and keep under review the maximum amount which it can afford to allocate to capital expenditure.”

It has to be able to pay for what it borrows, and it has to have regard to the CIPFA prudential code. There are requirements. Councils are also required, before the beginning of each financial year, to set authorised borrowing limits for a three-year period. There is a level of scrutiny, including through the Accounts Commission, Audit Scotland and so on.

The short answer is that I feel that we have a more prudent set of frameworks, which will prevent some of the more extreme cases that we saw down south. However, we must be vigilant, and we continue to work with local government on getting the right balance between meeting aspirations for fiscal powers and ensuring that that is done within a prudent framework.