Letter to the Chair of the LGA from the Deputy Prime Minister

From: 
Alex Norris MP 
Parliamentary Under-Secretary of State for Local Growth and Building Safety 
2 Marsham Street 
London 
SW1P4DF 

To:
Councillor Louise Gittins 
Chair, Local Government Association
18 Smith Square
London
SW1P 3HZ

18 November 2024

Dear Councillor Gittins,

Thank you for your letter of 3 October to the Deputy Prime Minister, the Rt Hon Angela Rayner MP, about the launch of the Building Safety Levy, your concerns and potential alternative options. I am replying as the Minister responsible for this policy area. It was a pleasure to see you at the recent LGA conference. 
As you note, I am keen to reset the relationship between central and local government and see engagement such as this as crucial to that approach. I am aware that the levy team in my Ministry has been working closely with your colleagues in the LGA and some local authority (LA) representatives on the details of policy design and implementation; many thanks for their time and input. 

You suggest in your letter that an alternative option to the Building Safety Levy would be to expand the scope of the existing Residential Property Developer Tax. The Residential Property Developer Tax is a temporary 4 per cent profits tax and applies to developers' profits exceeding an annual allowance of £25 million for an accounting period. The rate,-threshold, as well as the length of the tax was set following the outcomes of the consultation and extensive engagement with the industry on the potential impacts of the tax on developers and in the housing market.

The Building Safety Levy is expected to bring in around £3 billion of revenue for building safety. We do not believe that changing the Residential Property Developer Tax could bring in a similar amount of income to the introduction of the Levy. The additional income required to fund the remediation programme is therefore better raised by the Levy. 

The design of the Levy allows the Government to support wider housing policies by targeting what it is charged on, allowing for variable rates to take account of local conditions, and to exclude certain types of development which are a particular priority, such as affordable housing. 

You note that the collection of the Levy through local authorities will involve 296 LAs with building control responsibilities, as compared to a single centralised point of collection for other taxes. I would observe, however, that LAs, as overseers of the building control regime, have the required expertise to manage these systems, as well as existing relationships with developers which will be required for collection and enforcement of the Levy as part of the building control regime. You correctly note that LAs are collecting the Levy on behalf of central government, but I would add that the positive impact of making buildings safe through the remediation programme will be felt in local communities around the country. Decanting buildings deemed unsafe also comes at a considerable cost to LAs, and completing work to make buildings safe now should avoid further such issues arising. 

I recognise the pressures faced by LAs at this time, especially in terms of recruiting trained staff. We will provide new burdens funding to pay for Levy start-up costs, such as IT upgrades and staffing changes. LAs will also be able to retain a proportion of receipts to fund their ongoing costs. As part of a wide-ranging engagement strategy, we will continue to work with you directly, as well as LAs themselves and other stakeholders such as Local Authority Building Control, to explain the changes to LAs and provide support and guidance where required. We are looking forward to our upcoming joint webinars on the Levy which should help your member authorities further prepare for launch of the Levy. We will aim to target engagement at those LAs which might require particular support and are keen to work with you to understand how else we can help. 

I note your list of additional requirements LAs will face, but would counter that not all of the requirements listed are strictly necessary to deliver the Levy. Levy administration does not require additional surveying staff to assess and inspect works, as the majority of work is desk-based, including the spot-checks of applications for accuracy. LAs may wish to incorporate inspections as part of this process, but MHCLG is not insisting on this. Second, sending the Levy income and management information to MHCLG by LAs should not require further connections to be established between LAs and MHCLG, as LAs should already have access to MHCLG systems. We will continue to work with you and our wider working group to minimise the reporting burden. Management information will be explained in the guidance and adaptation of IT systems on the LA side, including back-of-house systems, will be covered by new burdens funding. 

I would also query the reference to separate systems for Levy collection and payment. Levy systems will not necessarily need to be completely separate from other systems and departments; IT providers have indicated a further module could be added to most existing systems, and the similarity of the Building Safety Levy to the Community Infrastructure Levy means that in authorities where there are Community Infrastructure Levy teams and systems, these should be fairly easy to adapt. 

We are aiming to share further information on our timetable for Levy launch with you and other stakeholders in coming months. I note your concerns about the lead-in time required for LAs to prepare for launch and my officials will continue to work with you and others to provide clear information and support in a timely fashion, while delivering on our commitments to remediate dangerous buildings and collect the revenue from developers required in order to make these improvements as speedily as possible. 

Thank you for writing on this important matter.

Yours Sincerely,

Alex Norris MP
Parliamentary Under-Secretary of State for Local Growth and Building Safety