Building safety and the Barnett consequentials

1 Building Safety and devolution
2 UK wide initiatives
3 Application of Barnett consequentials
4 Background to Barnett
5 Related articles on Designing Buildings

[edit] Building Safety and devolution

The Grenfell Tower fire in June 2017 led to changes to the rules and processes governing building safety. In response, the government passed the Building Safety Act 2022. The 2022 Act created new rules for the construction, refurbishment and occupation of high-rise residential buildings (that are 18 or more metres high or have seven or more storeys). The new rules took effect between October 2023 and April 2024. See building safety quick links for more details.

The building regulations and safety are devolved matters, within the responsibility of the devolved nations; Scotland, Wales and Northern Ireland, allowing flexibility in their approaches. However certain elements and associated initiatives that relate to Building Safety and the Building Safety Act also impact devolved nations, in particular when it comes to remediation of cladding and mitigation of building safety.

[edit] UK wide initiatives

One example is the Residential Property Developer Tax (RPDT) a Corporation Tax supplement levied by the UK Government on the the UK’s largest residential property developers, and introduced on 1 April 2022. The aim of the tax was to obtain a contribution towards the cost of dealing with defective cladding in high-rise housing stock across the UK ie including the devolved nations.

The tax is limited to the largest residential property developers by each group having an annual allowance of £25 million, with only profits from residential property development activities above this amount being subject to the tax. Only residential development companies liable for UK Corporation Tax fall within scope of RPDT, which is charged at 4% on residential property development profits that exceed their annual allowance. The intention is to raise at least £2 billion from RPDT over a ten-year period, with £200 million generated in the first year.

As a UK-wide tax, revenues are used to fund spending on cladding remediation in England, whilst the Scottish and other Governments receive what are called Barnett consequentials. In Scotland approximately £194 million is expected over the next ten-year period. The Scottish Government has itself committed to spending all Barnett consequentials generated from RPDT on cladding remediation in Scotland.

[edit] Application of Barnett consequentials

When additional public expenditure is planned in England, the corresponding additions which are made to the devolved administrations' funding allocations are referred to as Barnett consequentials, aiming to make fair provision to the devolved nations of Scotland, Wales and Northern Ireland. So in the case of the RPDT, which is a UK wide tax initiative to fund remediation, how the revenues of that tax are shared between thedevolved nations is by using the Barnett formula, Barnett consequentials and the Barnett guarantee.

In the case of Building Safety and because of the significant nature of the issue, separate initiatives have also been proposed in the form of a direct remediation for costs such as the developer pledge (England), the developers’ pact (Wales), and the developer commitment letter (Scotland). Other individual devolved nation programmes that involve a levy are also likely to play a part, such as the Building Safety Levy for England and the Scottish Building Safety Levy, currently in consultation.

[edit] Background to Barnett

Joel Barnett served as Chief Secretary to the Treasury from 1974 to 1979, gaining a seat in the cabinet from 1977 onwards, and was Denis Healey's right-hand man in the Callaghan Government. During this time he oversaw the devising of the Barnett Formula by which public spending was apportioned between England, Scotland, Wales, and Northern Ireland. He subsequently joked about the strange and unexpected form of immortality that was accorded to him by "having his own formula". Following the Scotland Act 1998 and devolution, he argued that the Formula was unfair to England and should be abandoned or revised. He reiterated this view in 2014 shortly before the Scottish independence referendum, calling the Formula unsustainable and saying it had become an embarrassment.

The Barnett formula was first used in 1978, for Scotland and then extended to Northern Ireland in 1979 and to Wales in 1980. It was meant as a temporary measure to avoid annual negotiations on funding allocations between the UK’s nations. The formula was used to determine the level of UK government spending on public services in Scotland, Wales and Northern Ireland until 1999, when devolution in the UK was brought in under the Labour government. Since devolution, the UK Government allocates funding in two ways, either to the UK as a whole, or specifically just for England when the funding is spent on a policy area where the devolved administrations are responsible (including health, education, local government and now Building Safety). Block grants of the devolved administrations are set by the Barnett formula.

[edit] The Barnett formula

The Barnett formula refers to the way funding is calculated, effectively the yearly change to the block grant (the largest of the grants provided to the devolved administrations by the UK government) is carried out by a formula which aims to give each nation the same pounds-per-person change in funding each year.

[edit] Barnett consequentials

[edit] The Barnett guarantee

The Barnett guarantee, is effectively the same process as the consequentials and formula but as a guarantee it gives devolved administrations increased funding certainty, enabling them to decide how and when to provide support, rather than loans or the traditional Barnett consequentials. The guarantee thus allows devolved administrations to spend additional funding allocated by the Barnett guarantee without having to wait for it to be first spent in England.