Property developers and those who missold dangerous building products have been warned they will have to “pay to put things right” as the government announced fresh action to solve the cladding scandal.
Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, warned those responsible for the crisis that they are being “put on notice” as he pledged that leaseholders living in a development above 11 metres would no longer have to pay to fix safety problems.
The new proposals come more than four years after the Grenfell Tower fire in June 2017, in which 72 people were killed.
Since then, the cladding scandal has trapped leaseholders in unsafe and unsellable homes.
Gove pledges: ‘We will make industry pay’
In a statement to the House of Commons on Monday, Mr Gove confirmed a government U-turn that will see the scrapping of previous plans whereby leaseholders in lower-rise buildings were only being offered low-interest loans for the removal of cladding on smaller buildings.
The Cabinet minister acknowledged the “injustice of asking leaseholders – very often young people who have saved and made sacrifices to get their first steps on the housing ladder – to pay money they don’t have to fix a problem they didn’t cause, all while the firms that made a profit on those developments sit on their hands”.
Mr Gove told MPs the government would now take “every step necessary” to ensure the building industry instead pays to fix the problem of dangerous cladding.
“We will take action to end this scandal and protect leaseholders,” he said.
“We will make industry pay to fix all the remaining problems and help to cover range of costs facing leaseholders.
“Those who manufactured combustible cladding and insulation – many of whom have made vast profits, even at the height of the pandemic – they must pay now instead of leaseholders.”
The cost of remediating unsafe cladding on buildings between 11 to 18 metres in height is estimated to be £4bn, which is the sum now being sought from industry.
Britain’s four biggest listed house builders – Persimmon, Barratt, Berkeley, and Taylor Wimpey – saw a combined £1.2bn wiped off their values on Monday as the government’s plans were announced.
The government has already promised £5bn to pay for the removal and replacement of cladding for all leaseholders in buildings 18 metres and higher.
Developers warned of new laws or taxes if they don’t pay up
In a stern warning to developers and the building industry ahead of planned talks, Mr Gove added: “We will also ensure that those who profited and continue to profit from the sale of unsafe buildings and construction products must take full responsibility for their actions and pay to put things right.
“Those who knowingly put lives at risk should be held to account for their crimes, and those who are seeking to profit from the crisis by making it worse should be stopped from doing so. Today I am putting them on notice.
“To those who missold dangerous products like cladding or insulation, to those who cut corners to save cash as they developed or refurbished people’s homes, and to those who sought to profiteer from the consequences of the Grenfell tragedy – we are coming for you.”
Mr Gove’s plans include tasking forensic accountants to track down those responsible and extending help to cover leaseholders of low-rise flats.
The building industry has been warned of new laws forcing them to act if they don’t agree to the £4bn plan by early March.
Potential action includes restricting access to government funding and future procurements, the use of planning powers, and pursuing firms through the courts.
Mr Gove has also warned of using new taxes to ensure developers live up to their responsibilities to fix dangerous cladding.
Labour cast doubt on Gove’s taxes threat
However, Labour questioned Mr Gove’s ability to impose levies on the building industry in order to raise cash.
Lisa Nandy, the shadow secretary of state for levelling up, housing and communities, warned that money earmarked for ministers’ levelling-up schemes or housing projects could be “raided” if talks fail to ensure developers stump up.
She highlighted a letter from Treasury minister Simon Clarke which, she said, cast doubt that a new tax on those responsible was the backstop.
In the letter, seen by Sky News, Mr Clarke told Mr Gove that he “may use a high-level ‘threat’ of tax or legal solutions in discussions with developers as a means to obtaining voluntary contributions for them”.
But Mr Clarke also warned Mr Gove that decisions over taxes remained with the Treasury and was “not a given at this point”.
“It appears what he’s [Mr Gove] told the public – that tax rises are the backstop – is not what he’s told the Treasury,” Ms Nandy told the Commons.
“This letter says ‘you have confirmed separately that DLUHC budgets are a backstop for funding these proposals in full should sufficient funds not be raised from industry’.
“That is not what the secretary of state told the House a moment ago.
“So can he clear this up: has the Chancellor [Rishi Sunak] agreed to back a new tax measure if negotiations fail or is he prepared to see his own already allocated budgets, levelling-up funding or monies for social or affordable funding raided?
“Or is his plan to go back to the Treasury and renegotiate and legislate if he fails in March? If that is the case, it’ll take months and there’s nothing to stop freeholders passing on the costs to leaseholders in the meantime.”
Campaigners call for ‘tough action’ on non-cladding safety defects
Cladding campaigners welcomed Mr Gove’s statement but warned that the “tough” talk needed to be followed by “tough action”.
The End Our Cladding Scandal group said in a statement: “It is clear from a leaked Treasury letter over the weekend that Chancellor Rishi Sunak still does not appear to understand the gravity of our situation and is seemingly doing all he can to evade ensuring homeowners are protected.
“There may be more funding for cladding only, but the burden of paying for repairs for other serious safety defects – lack of compartmentation, missing fire breaks, shoddy building work – has still not been lifted from leaseholder shoulders, whatever their building’s height.”
Stewart Baseley, executive chairman of the Home Builders Federation, called for “proportionate” solutions to be found in talks with ministers.
“The largest UK based house builders, who only built a minority of the affected buildings, have already spent or committed approaching £1bn to remediate affected buildings and the recently announced Property Developers Tax will raise billions more,” he said.
“We will engage directly with government but any further solutions must be proportionate, and involve those who actually built affected buildings and specified, certificated and provided the defective materials on them.
“However, the most urgent action remains for government to define guidance and work with lenders, insurers, surveyors and the construction industry to understand what remediation work actually needs to be done to resolve issues for residents quickly and simply.”