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Again, I will reflect on some of the points that you have made as we go through the rate-setting process and understand some of the variances.

Obviously, we are talking about a different type of use, and hotels make up a very small percentage in the big scheme of things. Perhaps officials can comment on the other criteria that might apply.

And you are asking that I un-exempt some things. That is very admirable of you, Mr Mason.

That is the intention, yes.

Yes. If build to rent were excluded, we would be putting more load on to other parts of the sector. Build to rent is a rental revenue model, but within it the calculation of capital outlay for construction costs is obviously significant, and that outlay is factored into the business case that the investors take forward. The levy would be another piece of that calculation that they would need to take on board. I think that the build-to-rent model would be well set up to deal with that.

It could be different, but that is what it is called.

Good morning, convener. Thank you for inviting me to give evidence to the committee on the Building Safety Levy (Scotland) Bill, which, as the committee will know, has been introduced in response to the Grenfell tragedy.

The Scottish Government initially called for a four-nations approach to cladding remediation, including how it should be funded. However, the UK Government pressed ahead with proposals for an England-only measure through the Building Safety Act 2022, which provided for the introduction of a building safety levy on the development of new residential buildings.

In the absence of an equivalent levy in Scotland, the introduction of a levy in England would create a gap in the funding that is available to address cladding remediation in Scotland. It would also mean that developers would contribute to the cost of cladding remediation in England through a building safety levy, but would not do so in Scotland.

As the committee will be aware, the Scottish Government’s capital budget position is challenging over the medium term, with cladding remediation expenditure representing a significant and sustained pressure. Therefore, our programme for government 2024-25 contained a commitment to introduce a Scottish building safety levy to support the funding of cladding works in Scotland.

The estimated revenues from the levy will be in the region of £360 million to £450 million over its expected lifetime. With no corresponding block grant adjustment, those revenues will make an important contribution to the estimated £1.7 billion cost of the Scottish Government’s cladding remediation programme.

The committee has just heard from Revenue Scotland about the collaborative approach that we have taken with that body in co-designing the bill, utilising its extensive experience and expertise in tax collection. The financial memorandum for the bill sets out the indicative costs for Revenue Scotland’s administration of the levy. At 2 per cent, those costs are small relative to the overall revenues and are proportionately less than the UK Government’s costs for its levy.

The bill sets out provisions for a Scottish building safety levy that broadly align with provisions for the equivalent levy in England, to ensure consistency for those operating on both sides of the border. However, in some areas, we have taken a distinct approach to adapt to the Scottish context. For example, we responded to concerns from parts of the industry about the tax point for the UK levy being set too early in the development process, which may cause cash-flow issues. We have also designated Revenue Scotland as the collection authority, as opposed to the UK Government’s approach of designating responsibility to each of England’s 296 local authorities. That will make the process in Scotland easier for developers.

Throughout the process of the bill’s development, we have been mindful of the strong need for new housing in Scotland and the importance of avoiding disproportionate impacts on the viability of new development projects. That is why we have gone further on exemptions by including exemptions for developments that are built on islands, in recognition of the acute housing pressures that Scotland’s island communities face. In addition, our levy-free allowance is designed to protect small and medium-sized developers, who would be less able to absorb the costs of any levy.

Taken together, the measures in the bill are intended to target the areas of the house-building sector where viability pressures are most likely to arise. Overall, however, we share the UK Government’s assessment that the levy is not expected to have any significant macroeconomic impacts and that any negative impacts on supply will be small.

Notwithstanding the above, I recognise that the industry has raised significant concerns about a lack of clarity on levy introduction and about the need for lead-in time and the publication of rates in advance of introduction. In response to that, and to ensure that industry has appropriate lead-in time, the commencement date for the levy will be deferred by one year, to April 2028. In addition, the Scottish Government will set out indicative rates in June 2026, after the Scottish Parliament election.

The measures that I am setting out today will provide industry with around 22 months from the publication of rates to prepare for the introduction of the levy. Allowing for a significant period of lead-in time in that way means that the levy will apply to all relevant completion certificates that are accepted on or after 1 April 2028, which negates the need for complex transitional arrangements.

The UK levy has received cross-party support, and the Building Safety Levy (England) Regulations 2025 were recently passed unanimously. I am seeking to obtain a similar level of cross-party support in the Scottish Parliament. I welcome the committee’s scrutiny of the bill and look forward to members’ questions and the discussion ahead.

We are happy to look at that, bearing in mind the fact that the more exemptions that are introduced, the more the impact would fall elsewhere, as has already been said.

No, as I indicated earlier.

I recognise that that may be the case in some situations. As I say, the levy is being taken forward on exactly the same basis as in the rest of the UK. If the fund was not raised in that way, it would have to be raised either through taxation or less investment in public services, and the impact of that would be felt by people who also had no direct involvement in creating the situation that we find ourselves in with these buildings.