Section 2: Proposal
The objective of the proposal is to increase income from building warrant and associated fees paid by users of the building standards system to achieve full cost recovery for the system.
1. To provide additional resources for local authority Verification services to encourage recruitment and retention of professional staff and to support service and performance improvement.
2. To introduce an alternative funding mechanism to cover the building standards related running costs of BSD.
A number of studies conducted for BSD in recent years have analysed aspects of the relationship between Verifier fees, income and costs.
In 2012 Scottish Government commissioned research to review the fees structure to establish if the system met the cost of the Verification service provided by local authorities. The findings from this work were not conclusive. This was mainly due to the difference in the way that local authorities record financial information and the manner in which Verification service overheads were calculated. However the study recommended a number of changes and the following areas were identified for future review:
- fee rates, particularly minimum and fixed fees
- discounts for Certifiers of Design or Construction
- fee levels not covering the cost of verification for lower value projects
- the effect of cross-subsidisation of fees on the overall fee structure
- fee levels for work started or completed without a building warrant
In 2015 a follow up to the 2012 research summarised the overall position in Scotland with regard to Building Standards income and expenditure over recent years. In 2008 income to Building Standards departments in Scotland exceeded expenditure by £5 million but by 2013 expenditure exceeded income by some £15.6 million. The emergence of a deficit was the result of a fall in income driven by the sharp decline in development activity resulting from the financial crisis and subsequent recession.
In 2014 substantial cost reductions and an upturn in income had helped narrow the overall financial deficit for Building Standards to £6.9 million and most recent statistics show that has now fallen to £2.4 million. (source: Local Government Finance Statistics).
The research suggested that in "good times" the fee income from Verification covered the costs of the service. A sharp drop in income caused by the recession combined with an inability to cut costs in line with income resulted in deficits.
There is now evidence that as income has risen, authorities are coming back into a position in which surpluses in some local authority areas are being generated. That position however, is very sensitive to changes in economic conditions which might be influenced by geographical differences between local authorities.
Additional Resources for Local Authorities
Local Authorities administer the system within their own geographical areas and generally use their building standards departments to undertake verification and enforcement roles. At present the verification process, checking building warrant applications and completion certificate submissions, is funded from fee revenue received from building warrant applicants, circa £29 million in year 2014/15.
Scottish Government has become aware that since the economic downturn of 2008 there has been a trend where experienced Building Standards Managers and staff have either retired or taken voluntary exit arrangements from local authorities. It is noted that there appears to be little corresponding intake of trainee or apprentice Building Standards Officers in many areas of Scotland. This reduced workforce may have been adequate for the number of applications at that time. However it has become apparent that as work has picked up, there is a shortage in the number of building standards staff in local authorities to process applications.
This has created a dip in performance in some local authority areas leading to extended processing timescales for building warrants. Scottish Government feels that for the system to be maintained and enhanced, particularly where they are trying to improve local authorities' performance times when dealing with building warrant applications and processing completion certificates, there is a need to invest in staff for the future of the Building Standards profession.
In light of the above Scottish Government would expect to see the additional fee revenue raised by this proposal reinvested in buildings standards service improvement. An additional £2 million would provide sufficient revenue for an intake of trainee Building Standards Officers with at least one additional trainee building standards surveyor for all authorities and two for larger ones.
Covering the building standards related running costs of BSD
The Scottish Building Standards Agency was established in June 2004 to fulfil the duties placed on Scottish Ministers by the 2003 Act. It was subsequently abolished on 1 April 2008 with the duties of the agency reverting to Scottish Government and the newly formed Building Standards Division ( BSD) within the Directorate for Local Government and Communities.
BSD prepares and updates building standards legislation and guidance documents, conducting any necessary research and consulting on changes as the Act requires.
On behalf of Scottish Ministers, BSD gives views to help local authority Verifiers make decisions in particular cases, and deals with applications to relax standards for particular matters.
BSD on behalf of Scottish Ministers manages the approval of Verifiers, and Certifiers of design and construction and it checks how local authority Verifiers and certification scheme providers are operating the system.
Currently the Division employs 18 members of staff, the majority of whom are constructional professionals. This includes professional architects, engineers and surveyors who are supported by a number of administrative of staff. The current annual programme and administrative budgets total approximately £1.5 million.
As mentioned previously it was appropriate that when the current system was being devised, and during the bedding-in period of that system, the 'public purse' paid for development and maintenance work. However it is now the wish of Scottish Ministers to take this to the next level and place the entire system on a full cost recovery basis. This would include not only the drafting of legislation, technical and procedural guidance, but also the other construction related work of BSD.
In considering options for this proposal Scottish Government looked at ways for costs to be recovered to fund BSD. In many countries throughout the world, the building standards and supporting documents are developed at a national level as is the case in Scotland. Those tasked with such work are generally funded by the sales of the standards and guidance, the reprint royalties, and sometimes the consultancy they offer to the enforcing authorities and practitioners. Canada and the United States are two examples of such an approach.
However, it was considered that the Scottish legislation and guidance should be freely available, as is currently the case with the online versions on the Scottish Government website. The intention would always be to promote awareness of Scottish building standards. Such an approach is conducive to encouraging compliance with building regulations.
This means that everyone involved in building projects, big or small, is able to study the documents, and importantly be aware that when undertaking such work building regulations must be met. So on that basis, Scottish Government does not consider that funding the work of Building Standards Division through the sales of documents or Ministerial Views, for example, was an appropriate direction to take.