Seòmar agus comataidhean

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.

I just want to clarify a point. I ask both members—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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