Hundreds of millions of taxpayer dollars will be spent to deal with the flammable cladding crisis in Victoria, where about 500 buildings need rectification work to be made safe.

Key points: Half of the $600 million plan will be funded directly from state coffers

Half of the $600 million plan will be funded directly from state coffers The other half will come from a hike in building permit levies, after the Commonwealth ruled out contributing

The other half will come from a hike in building permit levies, after the Commonwealth ruled out contributing The Government says it will also try to recover costs from dodgy businesses

Premier Daniel Andrews has announced a $600 million package to fund the work, and was asking the Commonwealth to cover half of that cost.

But Canberra has resisted the request for cash, with Treasurer Josh Frydenberg saying building regulation was a state issue and that the Federal Government "would not pick up the bill".

To make up for the $300 million shortfall, Victoria will increase a levy on building permits on larger buildings with works worth more than $800,000.

The cost increase for a two-bedroom apartment worth $610,000 would be $2,200 but low-risk buildings, such as townhouses, would be excluded.

The announcement is a win for owners of buildings that have combustible cladding, who were facing huge rectification costs — but consumer advocates warn the budgeted funds will not go far enough.

The move was among 35 recommendations made by the Victorian Cladding Taskforce, headed up by former Liberal premier Ted Baillieu and former Labor deputy premier John Thwaites.

Mr Andrews wants the issue on the agenda at the next Council of Australian Governments (COAG) meeting in August, and said he had written to Prime Minister Scott Morrison, saying the issue was "above politics".

"This isn't about playing politics, this is a genuine request,'' Mr Andrews said.

"This is a national problem."

Before the announcement, federal Industry Minister Karen Andrews was asked if Canberra would make a contribution.

"The Commonwealth is not an ATM for the states. So no, this problem is of the state's making and they need to step up and fix the problem and dig into their own pockets,'' Ms Andrews told RN Breakfast.

Advocate warns real cost is billions

Consumer advocate Anne Paten, from the Victorian Building Action Group, said the $600 million funding package would not come close to fixing the state's cladding issues.

She told ABC Radio Melbourne the real cost was "many, many billions of dollars".

The Neo200 building in Melbourne's Spencer Street was damaged by fire that spread up cladding in February. ( Supplied: MFB )

"The people who have already been damaged and the taxpayers who've had nothing to do with this are going to give this token amount," she said.

"And on the other hand, the people who caused it and should have to give and live up to the warranty that comes with the building once again walk away scot-free.

"We need enforcement of the laws and regulations that exist, and we need penalties when people ignore those laws."

Mr Andrews said the state was also examining ways to recover some of the costs from people and business "who had done the wrong thing".

That could include laws to punish dodgy providers and so-called "phoenix companies" that set up for only one project, then shut down and made it hard for people to sue them.

The Government also flagged a plan that would see it assume the right to sue industry on behalf of residents because class action had failed.

Hundreds more at-risk buildings may miss out

The taskforce audit had inspected 2,227 buildings as of July 5.

The exterior of the Lacrosse apartments in Docklands caught on fire in November 2014. ( Supplied: Wade Savage )

Of those deemed to be a risk, 72 were rated as an extreme risk, 409 as a high risk and 388 considered a moderate risk.

With the Government planning to pay for rectification works on only 500 buildings, many moderate-risk buildings could miss out.

The Premier said he made "no apologies" for targeting those at the highest risk and said he did not rule out more money being spent on rectification if it protected public safety.

The data, presented at an industry conference, showed one evacuation order had been issued for a private building.

Emergency orders for urgent works were made on 51 properties with building notices issued on a further 387.

The Government will not release its list of high-risk buildings, citing the potential terrorism threat.

"I don't think [releasing the list] would be a very wise thing to do,'' Mr Andrews said.

The Government said the "highest level of rigour" would be applied to whoever was contracted to do rectification works, which Mr Andrews said would take five years.

Cladding has been a major headache for the Andrews Government, as well as in other jurisdictions across Australia.

In recent days, industry has been pleading with the Federal Government for a national response — especially building surveyors worried about insurance.

Insurance companies have stopped giving surveyors personal indemnity coverage for properties with cladding.

Planning Minister Richard Wynne said the permit levy increase would apply to buildings worth more than $800,000.

"For us as a Government this has been a challenging situation to address," Mr Wynne said.

The Federal Labor MP for Wills, Peter Khalil, said the State Government's commitment would be welcomed in his area, where there were 173 buildings found to have combustible cladding.

"The Victorian Building Authority found we were the most affected council area anywhere in Melbourne," Mr Khalil said.

He criticised the Federal Government for refusing to contribute to the scheme.

"I think that's really irresponsible," Mr Khalil said.

"If Victoria is asking for money, why wouldn't New South Wales, the ACT, South Australia?

"It's a national issue."