Levy on housebuilders to fund cladding remediation work delayed to 2028

The starting date for a tax on housing developers that will fund vital cladding remediation work is being delayed by a year, the Scottish Government has announced.

Public finance minister Ivan McKee said the Building Safety Levy, which is being introduced in the wake of the Grenfell tower blaze, is now planned to come into force from April 2028.

Cladding was a key factor in the spread of the fire at Grenfell in 2017, with 72 people dying as a result.

The levy, which will be paid by housebuilders constructing residential properties, is expected to raise £360 million to £450 million to go towards cladding remediation work over 12 to 15 years.

Mr McKee said: “These revenues will make an important contribution to the estimated £1.7 billion cost of the Scottish Government’s cladding remediation programme.”

He accepted the housebuilding sector has raised “significant concerns around the lack of clarity on levy introduction”.

In order to ensure the sector has the “appropriate lead-in time”, Mr McKee told Holyrood’s Finance Committee on Tuesday that the start date for the charge is being deferred by a year until  April 2028.

The Scottish government will set out indicative rates for the levy in June 2026, after the Holyrood election, the minister added.

He said this means the sector will then have “around 22 months to prepare for the introduction of the levy”.

Industry body Homes for Scotland last week told MSPs the levy – which still has to be approved by Holyrood – could lead to fewer homes being built.

And housebuilder Miller Homes warned the tax could make some projects less viable, particularly those in “less desirable locations” that are already less profitable.

Finance Committee convener Kenneth Gibson said there was a “real sense of bitterness” from developers that have not used cladding that they are “having to pay for someone else’s mistake”.

But Mr McKee told him: “The reality of where we are is that this funding either has to come from the Government’s capital budget – and the bulk of it will do that – and a relatively small proportion will come from the industry.

“We’re taking the same approach that has been taken down south in this regard, we think that is a proportionate response.”

Mr McKee had earlier told the committee the Scottish Government had “initially called for a four-nations approach to cladding and remediation, including how it should be funded”.

But he said the UK Government “pressed ahead with proposals for an England-only measure, through the Building Safety Act 2022, which provided for the introduction of Building Safety Levy on the development of new residential buildings”.

Without action in Scotland he said there would be a “gap in the funding available to address cladding remediation” here.

Mr McKee added: “It would also mean developers would contribute to the cost of cladding remediation in England through a Building Safety Levy but not in Scotland.”