Building standards fee income and re-investment in service delivery: review

8. Modelling and Results

8.1 Introduction

8.1.1 A spreadsheet model has been developed which can provide projections of fee income under alternative fee structures and scenarios. The model can be used to project fee income at the Scottish level, but it can also be applied at the local authority level.

8.1.2 The structure of the model is shown in Figure 8.1. The core model estimates fee income from building warrant applications by type and value of work bands. It then makes an allowance for discounts provided for certification to determine total building warrant fee income net of certification discounts.

Figure 8.1: Structure of Building Warrant Fee Income Model

No. of Cases by Building Warrant Type

Income by Warrant Type and Total Fee per Case

Discount for Certification

Building Warrant Fee Income Post Certification

8.1.3 Income in the model was determined by the following parameters:

• The number of building warrants by type:
  • Building warrant applications: zero fee, conversions, demolitions, other applications by 9 value of work bands.
  • Building warrant amendments: split by 2 value of work bands.
  • Extensions to building warrants.
  Average fee for each warrant type and value of work band.

8.1.4 Table 1 in Annex C sets out the key parameters, the assumptions underpinning each parameter and the source of the data/assumption. The total number of building warrant applications and amendments is taken from BSD data returns along with the distribution of applications across five value of work bands.

8.1.5 Information gathered through the survey of local authorities has been used to fine-tune the information in some of the value of work bands including estimates of the number of zero fee applications, conversion and demolition applications. Survey information has also been used to provide a more detailed breakdown of applications in the over £1 million value of work bank. Table 2 (Annex C) provides a summary of the assumptions relating to building warrant fees.

8.1.6 Modelling the certification discounts is more complicated as there is less information available on the distribution of certificates by value of work band or the proportion of applications (by value of work band) which have a certificate. A simpler approach to modelling certification has been adopted and is based on the total number of certificates by scheme and an average discount. The average discount is assumed to be £100 for certificates of design and £35 for certificates of construction^[29].

8.1.7 The model was developed using data from 2021/22 and tested on data representing a five-year average (2017/18 to 2021/22). Table 3 (Annex D) provides a summary of the estimated fee income in 2021/22 using the model and the estimated fee income using the five-year average data. The results confirm that the model is “fit for purpose” for examining the effects of different changes in fees.

8.2 Results from Modelling

8.2.1 All options have been modelled on the average number of warrants over the last five years.

8.2.2 Table 8.1 sets out the results for Option 1, 1a and 1b. The Table shows the base level of fee income using the current fee rates by value of work band and type of application. For each Option, the additional income is shown which is then added to the base income to derive total fee income by Option.

8.2.3 The Table shows:

• Option 1 (a flat increase of 28% across all values of work and type of application) yields additional income of £10.2 million.
• Option 1a (Option 1 but with the potential to charge for specific services) yields additional income of £12.1 million. This comprises £10.2 million from Option 1 with optional additional income of £2 million. Charging for checking structural calculations and the building standards register add approximately £1m each in additional fees. These additional charges are assumed to be discretionary.
• Option 1b (varying the percentage uplift^[30] by value of work) yields an additional £10.3 million

8.2.4 Table 8.2 provides a summary of the results for Option 2 which is the introduction of a different fee scale of HRBs. Once the additional income from HRBs was known, an uplift (21.5%) was applied to non-HRB projects to generate a total uplift of £10.3m. Overall, an additional £10.3 million can be raised by the separate fee structures with almost £2.9 million from HRB projects and £7.4 million from non-HRBs.

8.2.5 Table 8.3 provides a summary of the average cost of a building warrant application or amendment using different measures of total costs. This is provided to illustrate potential warrant costs if authorities were allowed to set their own fees to recover their costs. (Option 4). The Table illustrates (using a very simple approach) the average costs if an individual authority was to set its own fees to cover costs. The average cost per building warrant and amendment application is based on total verification costs and the KPO5 measure of costs (verification staff costs plus 30%). The Table groups authorities on an urban/rural classification^[31].

8.2.6 The Table shows that using total verification costs, the average cost would exceed current income per application in seven authorities – three rural, two primarily rural and two primarily urban. In most of these authorities, average costs per warrant exceeds average income per warrant by a few hundred pounds.

8.2.7 Using KPO5 as the measure of average costs, the average cost would exceed average income per application in eleven authorities – all authorities listed in paragraph 8.2.6 plus one urban, two primarily urban and one rural.

Notes: 1 – alterations and extensions to HRBs