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Letter to the Chairman of the LGA from The Right Hon Michael Gove

From: The Rt Hon Michael Gove MP

Secretary of State for Levelling up Housing & Communities

Minister for Intergovernmental Relations

2 Marsham Street



To: Cllr James Jamieson

Local Government Association Local Government House

18 Smith Square



23 March 2023

Dear James,

Thank you for your letter of 2 March setting out your concerns about the Building Safety Levy and suggesting an alternative approach.

I was interested in your suggestion that we consider expanding the Residential Property Developer Tax (RPDT) rather than implement the Building Safety Levy. Thank you for setting out your concerns about local authorities acting as the collection and administration agents for the levy so clearly.

As you note in your letter the RPDT is a supplementary charge on corporation tax. It was set up and designed as a tax on the largest most profitable developers to ensure that they make a fair contribution to the overall costs of building safety remediation, reflecting the wider benefit they derive from the substantial amount of funding the government is providing to the housing market.

The Building Safety Levy will be charged on new residential buildings as part of the building control process. The levy will therefore apply to all residential developments in England no matter where the developer is domiciled. Extending the RPDT would only capture a subset of the developer community. In contrast, the Government can target what the levy is charged on, as set out in the recent consultation, and design it to support wider housing policies (e.g. affordable homes) and maintain as far as possible the supply of housing while still raising the required revenue. Revenue from it will contribute to remediating buildings over 11 metres tall in England and protect leaseholders from having to pay.

All those involved in the building safety system have a role to play, including local authorities. I take your point that implementing the levy and requiring local authorities to act as collection agents will mean that there would be many bodies collecting and returning it to government. But as local guardians of the building control regime, local authorities have established systems, data, knowledge, and relationships in place with the developer sector. You also have proven systems in place for the collection of taxes and fees. Given the statutory responsibilities of local authorities for building control (which will trigger the levy payment as set out in the Building Safety Act) it remains my view that local authorities are a clear candidate to act as the collection and administration agents for the levy.

I do not agree that there will not be any local benefit. Making buildings safer for people to live in is as a public good: revenues from the levy will support people to be safe, and feel safer, in their homes without unfair burdens being placed on leaseholders. Should building safety risks materialise, significant costs will fall on emergency responders, local authorities (in terms of temporary housing and recovery costs) and local enforcement bodies. That is why the Government wants to see serious historic building safety risks addressed, supported by the levy, across the country.

I recognise that collecting the levy will be an additional burden and will require funding. As the consultation noted, we intend to allow local authorities to retain a proportion of levy receipts to cover administration costs. In the consultation, we drew the comparison with the Community Infrastructure Levy where local planning authorities can retain up to 5 per cent of what they collect to meet administration costs.

A key design principle of the levy is ensuring that it is as streamlined as possible to mitigate the administrative burden on all those involved. I am pleased that my officials have been working with the LGA, the Local Authority Building Control and individual local authorities on the levy design, including any upfront resources needed to amend current systems.

I would like to continue working closely with you on all aspects of the levy. I have therefore asked Richard Goodman, Director General for Safer Greener Buildings, to set up a meeting to discuss these issues in more detail with you.

Thank you again for your letter.

Yours sincerely, 

The Rt Hon Michael Gove MP

Secretary of State for Levelling up Housing & Communities and Minister for Intergovernmental Relations