Devolving Building Safety

Craig DalzellA couple of weeks ago, Nicola and I chatted on the Policy Podcast about the pile of public consultations overflowing our desks and the desks of our colleagues – it’s worth a listen as while it’s often a thankless task that takes up a lot of time for very little result, the result that comes from it is a vital part of our democracy.Amusingly, during the podcast I mentioned that because we’re a Scotland-based think tank and Scottish politics structures are an order of magnitude more accessible than UK political institutions are (which isn’t to say that access is easy…) we very rarely engage with UK level public consultations. It’s amusing, because in the past week as I’ve been chipping away at our consultation pile, I’ve ended up responding to two UK consultations – one on the sustainability of UK debt and another on the topic of today’s column – a proposal to devolve a new tax power to Scotland.The power in question is a levy on “building safety” and it presents us with somewhat of a dilemma.As a think tank that is pro-independence and, more importantly for this issue, as a think tank that campaigns for local autonomy and local democracy we are almost always going to come out in favour of new devolved powers and the tax in question undoubtedly would work best if it was devolved rather than reserved. However, the tax itself is a terrible idea and we cannot support it being used by either the UK or Scottish Governments.The wake of the horrific tower block fire in Grenfell resulted in the UK Government (eventually) being pressured into looking at the woeful state of building quality in Britain. I’m not talking about houses being built to insufficient efficiency standards (though this too is an issue) but about homes being built without even meeting minimum safety standards yet still being signed off as habitable. The scale of the problem is unknown (because the root cause is that developers are allowed to “complete” homes without any real inspection or compliance mechanism in place to check the quality of the work) but the UK Treasury estimated that the cost of fixing the problem of illegal cladding that led to Grenfell will cost over £4 billion. This does not include all of the other potential safety defects that could infest newbuild homes. To try to fix the problem, the UK Government came up with the worst possible solution in the form of the Building Safety Levy.This Levy is a new tax to be applied to all future newbuild homes in England (with exceptions such as for small developers and self-builds) that would be collected by local councils who would hold the funds in a pot to be used to fix safety defects when they are found.Think about that for a moment. You’re a corrupt developer who has been cutting corners for years. The Government just told you that you’ll be able to jack up your selling price and someone else (home buyers and the councils) will pay if they later discover that the houses you built are unsafe. How, exactly, does this encourage you to not cut even more corners?Think about the position of a local council, already on the brink of bankruptcy. This tax is projected to bring in around £300 million a year across England but we have no idea of the scale of the problem. One problem the size of the Grenfell cladding issue would be more than enough to outstrip this fund. This represents a massive moral hazard that will almost certainly lead to the UK Government having to bail out English local councils due to the actions of those corrupt developers that this tax will encourage to become even more corrupt.The consultation isn’t strictly asking about the soundness of the tax itself but is about devolving the power to bring the tax to Scotland to the Scottish Parliament. As a local tax, Westminster has little power to directly instruct Scottish Local Authorities to charge this levy (well, it could, but doing so would be a breach of the Sewel Convention). The most constitutionally sound way of bringing the tax into Scotland is to devolve powers and then “suggest” that the Scottish Government introduces it to Scottish Local Authorities. The consultation is extremely concerned that refusing to bring the tax in in Scotland would harm the “UK Single Market for house-building”. I think the opposite is true.You see, Scottish Local Authorities would be just as vulnerable to the moral hazard of dodgy builders as English ones would but the difference is that the UK Government has unlimited funds to bail out councils down south if they get into trouble. The Scottish Government does not. This means that a Scottish Building Safety Levy would place both Scottish Local Authorities AND the Scottish Government at financial risk should the tax revenue be insufficient to pay for safety defects caused by the tax. I highly doubt that Westminster will agree to take on that potentially unlimited liability ahead of time.Of course, this is a completely nonsense way of trying to deal with building safety – it is likely to make the problem worse, not better (videos from China of their “Tofu Dregs” buildings comes very much to mind here). Developers should be held to higher standards of construction and should be forced to take on the full and unlimited liability of correcting any safety defects found either during the mandatory inspection phase before a building is signed off as habitable or after if a defect is initially missed but traced to construction (rather than anything the owner did afterwards). This liability should be recoverable from Directors and shareholders of the companies if they need to, so as to avoid the perennial problem of companies disappearing into a puff of financial smoke the moment they are called to justice.We’ve submitted our response to the consultation (you can read it here) and you can submit your own response here before February 19th. We fully support the devolution of all tax and other powers to Scotland and fully support as many of those powers being held at local level as possible so in that sense we support the devolution of the Building Safety Levy, however that support is on the basis that devolving the tax will hamper Westminster’s ability to levy the tax directly on Scotland and we shall campaign as strongly as we can to prevent the Scottish Government from bringing in this tax either.