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

1. Introduction

1.1 Context

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 Local Government and Communities Minister, Kevin Stewart advised that the changes to fees regulations will provide additional building warrant related fee income across Scotland. Overall, the Minister expected that the fee increase should provide every local authority with additional funding to help support their verification service and further improve performance. 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 The proposed fee increase was expected to deliver approximately £3.5 million in additional funding which was split broadly as £2 million to support investment in the local authority building standards service and £1.5 million to cover the overall running costs of BSD.

1.1.3 Following the fire at Grenfell Tower in 2017 a Ministerial Working Group (MWG) was established to address issues of compliance and fire safety. To support the MWG two Expert Review Panels were convened, the first on Fire Safety and the other on Compliance and Enforcement. The Building Standards Futures Board was then established to provide direction and guidance on the implementation of the recommendations made by the Expert Review Panels. The Board is leading a programme of work under seven workstreams which are interlinked and collectively aim to drive forward the transformation of the building standards system in Scotland. The introduction of some of the proposed changes identified by the Futures Board will have implications for the cost of delivering the building standards service in the future.

1.1.4 The purpose of this study is to review building warrant fees in Scotland. The study should consider how fees are used to support the delivery of the verification service and how verifiers invest in their service to meet the requirements of both the Operating Framework and Performance Framework. The study must also determine how the future requirements for building standards verification can be delivered and determine if there is a need for an increase in fees to support the changes.

1.2 Study Aims

1.2.1 The specific objectives of the research were set out in the terms of reference under four phases of work:

Phase 1

• Determine if the current building standards fees are sufficient to support the delivery of verification services and to meet the operational and performance frameworks (conditions of verifier appointment) throughout Scotland.
• Review the additional income generated from fees following the 2017 increase and identify how much and how the income has been reinvested into local authority verification services.
• Review and quantify improvements in service delivery and verifier performance following the 2017 fee increase and identify if the objectives set out by the Minister were achieved.
• Review the impact on the building warrant fee of discounts for Certification of Design and Construction.

Phase 2:

• Identify and show how and if Grant Aided Expenditure (GAE) has been used to support the local authority building standards statutory functions.
• Identify and show how income from building warrant fees are used to support the local authority verification services provided by building standards teams.
• Identify and consider the impact of changes to the verification delivery model which will require additional financial resources e.g., Central Building Standards Hub, introduction of the Compliance Plan Manager Role, increased compliance requirements, pre-application discussion fees and the monitoring of high risk building (HRB) projects.
• Provide evidence to support incentivising the use of certification and potential reductions in fees when used to support the building warrant application process.

Phase 3:

• Review the current funding mechanism supporting BSD and identify any capacity in the system to support additional central services.
• Identify and report on similar funding mechanisms or other funding solutions which could be used to support a future Central Building Standards Hub or other similar bodies.
• Review the Local Authority Building Control fee setting in England and consider the benefits a similar mechanism would provide.
• Identify other relevant funding mechanisms which could be used.

Phase 4:

• Determine the frequency of increases to building warrant fees in Scotland and offer a solution for change e.g., 'a fee accelerator approach’ or other fee increasing systems such as: considering the effect on the system of a significant increase such as 100%.