Building standards - building warrant fee model: research project

1. Introduction

1.1 Introduction

1.1.1 In July 2017 there was a change to building standards fee levels. The objective of the change was to increase income from building warrants and associated fees paid by users of the building standards system to achieve full cost recovery for verification. The fee increase also provided an alternative funding mechanism to cover the building standards related running costs of the Scottish Government Building Standards Division (BSD).

1.1.2 Following the fire at Grenfell Tower in 2017 and a number of high-profile building failures, a Ministerial Working Group (MWG) was established to address issues of compliance and enforcement. The MWG was supported by two review panels, one addressing fire safety and the second addressing compliance and enforcement. The Building Standards Futures Board was established to provide direction and guidance on the implementation of the recommendations made by the review panels. The Board is leading a programme of work under seven work streams which are interlinked and collectively aim to drive transformation of the building standards system in Scotland.

1.1.3 The work of the Futures Board will have implications for the cost of delivering the verification service. The purpose of this study is to develop proposals and a model that can be used to deliver a funding model that is flexible and can be adjusted to allow changes to the building warrant fees in Scotland and to allow for various building warrant fee components to support changes identified in the Part 1 Fees research.

1.1.4 An objective of the research was also to identify the impact of the introduction of a devolved fees system for building standards in Scotland. The advantages and disadvantages of options for both a full and partial devolved fee system are considered.

1.2 Study Aims

1.2.1 The brief sets out very specific objectives under four stages of work:

Stage 1: Review

• Review and consider if the current fee setting model is still appropriate for local authority building standards service.
• Review and consider if the indicative 30% above verification staff costs requirement in KPO5 is still an appropriate overhead figure for local authorities.
• Review the appropriateness of the current fee model for High-Risk Buildings (HRBs), including the introduction of pre-application assessments and the proactive monitoring of HRBs including staged warrant inspections.

Stage 2: Fee Modelling

• On the basis that additional funding is needed, expand the initial modelling options provided in Fees Research Part 1, and provide options for a flexible funding fee model. This is to ensure that where there is a need to make changes to the fee levels in the future the model developed should be able to accommodate change.
• Provide a model that will be easily adjusted to take account of the following potential changes to the building standards system:
  • Building Standards Hub.
  • Learning and Digital Development.
  • Digital Transformation.
  • Introduction of Compliance Plan Manager.
  • Other fee components e.g. soft enforcement.
• Identify additional building standards services that could attract a charge e.g. failed visits where re-inspection is required.
• Certification:
  • Consider the effect on local authority fee income where certification is used.
  • Identify the present-day value of the current fixed certification discounts and consider how these should be inflation proofed.

Stage 3: Enforcement

• Review resourcing required for verifiers to undertake soft enforcement activities leading to formal enforcement, and consider the resourcing needed to carry out such activities, in both the current and proposed system.
• Consider sufficiency of the current Grant Aided Expenditure (GAE) given to 32 local authorities to carry out formal enforcement duties.
• Consider the resource needed for a new post-CC enforcement power.
• Review and consider how soft enforcement can be more effective through increasing fees.
• Review how fees for late CC’s and BW’s can be strengthened to discourage starting work without building warrant approval.
• Consider a ‘Penalty Fee’ for starting work after an application has been submitted but before a warrant is issued and consider how this can be applied.

Stage 4: Funding Mechanisms

• Review and consider if the current funding mechanism used to provide funding to support BSD’s central national services is still suitable taking into account the work of the Futures Board workstreams. Make suggestions on an appropriate mechanism to maintain resources, over time, for BSD.
• Consider uplift mechanisms for local authority building warrant fees, including fixed fees (fees accelerator, annual uplift etc.).
• Consider options for a partially devolved fees framework for local authorities.
• Consider options for a fully devolved fees framework for local authorities.

1.3 Methodology

1.3.1 There were three main components to the research:

• Analysis of published data and data held by BSD.
• Model development.
• Stakeholder engagement including:
  • An online survey of Scottish local authorities.
  • Consultations with finance and licensing departments in a selection of local authorities.
  • Consultations with building standards departments regarding enforcement.

1.3.2 The analysis of BSD data was undertaken to gather information for inclusion in the new model. This included data on the number of building warrant applications, fee income associated with these applications, the cost of delivering the verification service and details of the number of certificates of design and construction.

1.3.3 Analysis of data from the Local Financial Returns (LFRs) was undertaken to inform some assumptions in the model. A review of fees for different licenses (e.g. Houses of Multiple Occupation (HMO) and Short-Term Lets (STL)) was also undertaken to support the consideration of devolved fee setting. This data was supplemented by discussions with a selection of finance and licensing departments.

1.3.4 An online survey of all 32 authorities was undertaken with 12 authorities responding. This represents a response rate of 38%. The survey sought to gather opinion on the following topics:

• Additional charges.
• Strengthening compliance.
• Soft enforcement.
• Grant aided expenditure for formal enforcement/statutory duties.
• Certification.
• Funding mechanisms.

1.3.5 A building warrant fee model has been developed which will allow fees to be estimated for a three year period (2024/25 to 2026/27). The model also has the flexibility for BSD to vary some of the key inputs.

1.4 Report Structure

1.4.1 The report is organised as follows:

• Section 2 reviews the current model for setting fees for building warrants to consider if it is still appropriate for local authority building standards services.
• Section 3 sets out the structure of the future model for building warrant fees.
• Section 4 considers if there is any ‘surplus’ of funds within the current building standards system.
• Section 5 sets out the results for future fee rates.
• Section 6 reviews the key inputs and assumptions underpinning the model.
• Section 7 considers matters relating to enforcement.
• Section 8 considers the options for devolving building warrant fees to individual local authorities.