That this House takes note of the situation of leaseholders who are facing substantial bills for fire and building safety remediation work; and of the need for safe, green and affordable housing.
My Lords, I start by reminding the House that I am a member of your Lordships’ Built Environment Select Committee and an honorary fellow of the Institution of Civil Engineers, and served for two years as Minister with responsibility for building regulations, between 2010 and 2012.
I make no apology for bringing back to your Lordships’ House the unfinished business arising from the dreadful tragedy of the Grenfell Tower fire, which killed 72 men, women and children and ruined the lives of many others. Consequent upon that, fire inspections have been held at thousands of buildings in the UK to check whether they are compliant with all relevant fire safety rules. In the event, many have been found not to be compliant. One estimate is that up to 1.5 million households may be living in a home that has fire safety deficiencies. It is not just combustible cladding that must be taken down and replaced; other literally vital, life-saving features such as cavity barriers, fire stops and fire doors have been wrongly installed. All must be replaced or repaired.
We know that the cost will be huge, and that the burden falls unfairly. I, my noble friends and other noble Lords will today challenge the Minister and the Government on how that burden falls. However, this debate, held while COP 26 is meeting in Glasgow, is also about another, even wider issue: ensuring that all our homes, both existing ones and those still to be built, are safe, sustainable and affordable. That also requires massive investment and a new approach to design and construction, including cutting heating bills with better insulation and decarbonising heating systems, while ensuring that neither affordability nor safety is compromised. Towards the end of my remarks I will say something about the challenges faced in achieving that, and give some words of advice to the Minister on how to make a good start.
These two seemingly separate imperatives—fire safety and climate resilience—are closely linked. Both require strong government leadership to set the long-term regulatory and investment climate. Both require new skills and expertise to deliver. Both will require strong oversight and evaluation to guarantee successful outcomes. I want the Minister to join the dots and undertake to learn the lessons that we painfully learned from the Grenfell Tower crisis to deliver on the climate change crisis successfully. I also want him to acknowledge that his Government have much more to do on both fire safety and climate resilience before they can begin to claim to be delivering safe, green, affordable homes for all.
The inquiry into the Grenfell Tower disaster exposed many shocking failures of design, manufacture, testing, installation, supervision, inspection and regulation. There have been failures by clients, developers, suppliers, contractors, subcontractors and inspectors. There is a very long list of people who made mistakes or, worse, deliberately cut corners to save time, money or face. The residents and leaseholders of Grenfell Tower paid a high price indeed for those multiple failures, for which they bore no blame; indeed, they did their best to prevent them.
My Lords, I thank the noble Lord, Lord Stunell, for his choice of subject for this debate, which I hope will come up with some helpful suggestions for resolving the crisis facing leaseholders, resolving the current impasse and enabling Michael Gove to respond to the rumoured injunction from the Prime Minister to “sort out the cladding crisis”.
I begin by thanking my noble friend the Minister for his tireless work behind the scenes to get a better deal for leaseholders caught up in the post-Grenfell cladding scandal. The steps the Government have taken so far to help leaseholders, which I welcome, have been in part due to his interventions in the intergovernmental discussions that have taken place. These started with the Treasury taking the view that there was no role for taxpayer funding in finding a solution, so we are making some progress.
My concern is that the combination of government help, freeholder support and voluntary action by developers still leaves a very substantial shortfall and, unless further steps are taken, we are likely to see bankruptcies, repossessions and evictions of people who took every reasonable precaution to protect their interests. As the noble Lord has just said, some 1.5 million householders are potentially caught up in this crisis, which is likely to come to a head next April when the bills fall due and land on leaseholders’ mats.
I agree with the unanimous recommendation of the Select Committee in another place, which it repeated in its report earlier this year:
“It has consistently been this Committee’s position that leaseholders should not have to contribute towards any of the costs for a problem they played no part in creating.”
Indeed, I believe that was also the Government’s initial position, though not the Treasury’s. The Select Committee’s proposal was that there should be a comprehensive building safety fund, fully funded by government and industry, and the Government should establish clear principles regarding how the costs should be split between the two. Total contributions should not be capped. I regret that the Government have not accepted the recommendation and have instead come up with a capped contribution from themselves and an inadequate contribution from industry.
My Lords, I, too, thank the noble Lord, Lord Stunell, for securing this debate, and I thank the noble Lord who will speak after me. It has been four years, four months and 20 days since the Grenfell Tower fire. On the 14th day of every month, Grenfell survivors and their loved ones walk around the remains of Grenfell Tower to signal that they are yet to receive justice for what has happened.
Many in the other place allowed the Fire Safety Bill to pass on the promise that the issues relating to the remediation of unsafe buildings would be dealt with comprehensively and thoroughly in the Building Safety Bill. However, the Bill has just completed Committee in the other place and the Government have yet to set out how they intend to deal with the unaffordable costs faced by leaseholders for interim safety measures and the remediation of unsafe buildings.
The Government’s reannouncement of £5 billion for the removal of unsafe cladding only raised concerns for those affected. The Red Book notes that £3 billion will be spent over the spending review period up to the end of March 2025. Can the Minister tell the House when he expects all dangerous cladding will have been removed?
The residential property developer tax provides little comfort for leaseholders. Rather than helping those struggling to pay for interim safety measures and non-cladding remedial costs, the Government have chosen to use the £2 billion as a funding source for the building safety fund. As we have heard already in this debate, unless more funding is found, leaseholders will be forced to pay bills running into tens of thousands, if not hundreds of thousands, of pounds for non-cladding remedial costs. In many cases leaseholders cannot raise these sorts of sums and will therefore lose their homes and be forced into bankruptcy. Of course, this is already impacting on their health and well-being through no fault of their own and will continue to do so.
My Lords, I agree with the right reverend Prelate the Bishop of London that those responsible for the cladding crisis should pay for the remediation. I found the proposal made by the noble Lord, Lord Young of Cookham, for an extra levy and a Treasury grant to be particularly convincing, and I hope it will command broad support in your Lordships’ House.
I congratulate my noble friend Lord Stunell on his wide-ranging and forensic examination of the key issues in relation to the cladding crisis, the need for fire and building safety remediation, and the desperate position of so many leaseholders who are being asked to pay large sums of money, when they were not responsible, for cladding on their properties having to be replaced or for other essential fire safety work. I subscribe to all that he has said.
But in my contribution today, I want to look at government housing policy more generally in the context of the second part of the Motion, which refers to the need for safe, green and affordable housing. When I say affordable, I mean housing that is affordable to those on average incomes, rather than housing that is priced at 80% of the market rate.
I look forward to hearing from the Minister when he replies. He has a new departmental title, of course, in that he represents the Department for Levelling Up, Housing and Communities. Very recently, the department was the Ministry for Housing, Communities and Local Government, and just before that it was the Department for Communities and Local Government. These constant name changes cannot disguise the failure of the Government to build enough homes. Low-paid workers have been priced out of buying a home in many parts of the country. Over recent years, property prices have risen well ahead of earnings, and the Government have been obsessed with encouraging demand to the detriment of increasing supply. Are the Government still committed to reaching 300,000 new homes a year by 2025? If so, how will they do that when a handful of developers control the timing of so much of our supply, which has led to their substantially higher profits? Do the Government have a plan?
My Lords, I am delighted that the noble Lord, Lord Stunell, has secured this debate. His party, with cross-party support, has spear- headed the cause of those caught up as blameless home owners in the wake of fire safety measures following the Grenfell tragedy. Like him, I am a member of your Lordships’ Built Environment Select Committee. I declare my professional involvement with property and construction. My focus is particularly on property economics, leasehold issues and the sheer level of collateral damage being inflicted on an entire home ownership sector.
So I am glad to have this opportunity to speak on the matter once again, because the problems have not gone away, nor has the ruination of people’s lives and finances due to failures to construct buildings to a standard of safety and competence we should expect. It is not as if the required standards of the past 40 years have gone away, or that overarching principles of safe construction have been abandoned; rather, there has been attrition in the oversight of those charged with the solemn duty to comply with them together with what is termed “value engineering”.
You could not get away with constructing a car to unsafe standards, so why permit a building constructor to plead the principle of caveat emptor on a far more important element in people’s lives? Unsafe buildings cause deaths. The Motion in the name of the noble Lord, Lord Stunell, refers to safe housing. Yes, indeed, one’s home should be a place of sanctuary, of occupation on one’s own terms, of security, and is often the embodiment of the owner’s entire capital asset. Destroy the safety, security, comfort, predictability and confidence that this embodies and you do much more than create some remediable, physical or financial loss. It results in trauma of impossible and inescapable proportions for individuals and households, and a loss of faith in the sector and in what the Government are doing about it.
My Lords, I declare an interest as vice-chair of the All-Party Group on Fire Safety and Rescue and as a vice-president of the LGA. I congratulate my noble friend Lord Stunell on securing this important debate.
I start by agreeing with him and my noble friend Lord Shipley about the need for affordable, safe and green housing. Homes built for lifetime occupation also need to be part of it, ones which can easily and cheaply be adapted for disabled and elderly residents. It says much about the current large property companies that they regularly refuse to build to these standards, although Habinteg tells us that average new-build costs are just a handful of thousands of pounds, whereas adaptations in later life can cost 10 times that amount, as well as the costs of people having to leave their beloved homes and move into care homes. This also says much about who is currently in the driving seat on standards and regulations: it is not the Government or local government, but the builders. There is now evidence of the system being abused, as outlined by the noble Earl, Lord Lytton.
The Grenfell Tower fire happened in June 2017. As we know, 72 people lost their lives. The very moving “Grenfell: The Untold Story” documentary on Channel 4 took us step by step through the concerns of residents during the obviously mismanaged updating works, the night of the fire, and the problems they have had since in other accommodation. For those who have never been present at a fire, it was pretty terrifying. I speak as someone who has been; as part of my job as a stage manager, I had to get an entire audience out of a theatre that caught fire. It is pretty frightening as the smoke rolls towards you.
Far too many blocks are excluded from government assistance, as outlined by a number of noble Lords, including my noble friend Lord Stunell, despite the Government offering some billions of pounds to “end the cladding scandal”. Sitting behind the large growth in flats recently has been the need to increase the number of homes, especially in the greater south-east and around our larger cities and conurbations across the UK. Large numbers of flats and apartments, many high-rise, have been built over the last decade, which are essential. Many more are needed. But the financial structures, as outlined by noble Lords, have also exacerbated the problems of leaseholders facing large bills for cladding.
I add my voice to the thanks to the noble Lord, Lord Stunell, for tabling this debate. I want to make the House aware of my interests in the register. I have been involved in the property market for 40 years, and a member of the RICS for most of that time. I own two buy-to-let flats in London but, mercifully, I do not believe that either is affected by the cladding problems. In my comments, I wish to address the first of this debate’s two sections: the situation of leaseholders affected by the need for remedial work.
First, I repeat that the £5 billion made available by the Government is not enough and inadequate. It is not nearly enough for remediation. The noble Lord, Lord Young, and others have mentioned this. The impact on residents’ lives applies equally to those in the 11 to 18 metre-high buildings—the noble Lord, Lord Stunell, mentioned this in his introductory remarks—and, indeed, those in the four-storey buildings below 11 metres. There are some tragic stories and huge costs there, too. There is help from government in other ways, but the costs are enough to bankrupt thousands of the home owners we have just heard about.
This will not go away. The long-term political fallout from it is likely to be severe. It is nothing to do with which party is in power. There is simply widespread outrage, nationwide, that the Government have failed to provide remedy. This is of course unreasonable but it reflects a wider and deeper difficulty: the entitled society. We should be extremely proud—indeed, we are —that we provide a roof over everyone’s head, free education and healthcare, a minimum wage and unemployment benefit, but removing personal responsibility, which is a risk, can have corrosive side-effects. This nanny state is creating an entitled population, looking to apportion blame at the feet of government for any misfortune. I do not propose to abandon the welfare state, but perhaps some reflection is worth while to restore personal responsibility and some common sense.
My Lords, I draw the attention of the House to my relevant interests as a vice-president of the Local Government Association and as a member of Kirklees Council.
I thank all noble Lords who have contributed to the debate, and, in so doing, making many constructive proposals for the Government to consider in seeking a solution to the appalling situation people find themselves in. I particularly thank my noble friend Lord Stunell for the clarity of his analysis of the issues we are addressing, and Peter Apps of Inside Housing for his very helpful briefing to those of us contributing to the debate.
I make no apology for concentrating my comments on the cladding crisis. This debate is, at its heart, about people—people as leaseholders, shared owners and tenants. A very large number of people are affected. It is estimated that as many as one in 10 of all households in England has been drawn into this building safety crisis. The Government’s own figures estimate that 8,000 buildings over 18 metres, involving 460,000 households, are affected. For those in buildings between 11 and 18 metres, the figures are 34,000 buildings and 700,000 households. There are also buildings below 11 metres that have flammable cladding that need to be considered, as the noble Lord, Lord Thurlow, has just said, especially if they are, for example, residential care homes. As my noble friend Lord Stunell said, this is not a niche issue that is wrecking the lives of just a few people in very high-rise blocks. This is adversely impacting the lives of at least 3 million of our fellow citizens.
Following the awful tragedy of Grenfell, the Government have put blanket expectations on buildings over 11 metres for the removal of flammable cladding and everything else that is combustible. The questions that follow that Government decision are: who is to pay for the remediation, and who is responsible?
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In the aftermath, many hoped that it was simply some horrible combination of rogue circumstances that could be never repeated. Sadly, that is not true. We now know that thousands of homes in hundreds of high and medium-rise blocks have many of the same deficiencies in their construction. Again, it is about not just combustible cladding but missing cavity barriers, fire stops and fire doors. One estimate, by the British Woodworking Federation, is that 600,000 fire doors need remediation.
There will be long lists of people and organisations to blame in each and every failure, but on none of them will the names of the leasehold residents who live there appear. Yet, in every one of those defective blocks, it is the leaseholders who are expected to foot the bill. The remediation costs being passed on to leaseholders are typically multiple thousands of pounds each. The magazine Inside Housing ran a survey of leaseholders. They reported huge bills. Some 60% of those who replied to that survey faced a bill more than £30,000, with the top 15% facing bills of more than £100,000. On top of that come the huge service charges for waking watch provision and massive rises in insurance premiums. With sometimes a nil valuation on their property, leaseholders cannot raise mortgage funds to cover the cost; nor can they sell up and leave.
The Government’s response, after a wobbly start, has been to move forward with the Fire Safety Act and now the Building Safety Bill. They have tabled plans for some financial assistance, but those plans are not only manifestly well short of what is needed, they are themselves moving at a snail’s pace on delivery. For instance, four years after the fire, only £79 million of the £200 million set aside to help private leaseholders has been spent. There are still no details published on how to apply for the loan scheme for leaseholders trapped in low and mid-rise blocks, announced by the Minister with great fanfare nine months ago.
The Government have repeatedly sent out confused messages that have made the situation facing leaseholders worse. The initial EWS1 scheme was intended for use only on high-rise blocks, those over 18 metres. It provided a way for mortgage providers to underwrite transactions on those properties. It was a struggle to do so because there were far too few fire risk assessors to cover the 1,700 buildings in scope, so there were long delays. But the Government’s January 2020 consolidated advice note, stating that combustible cladding on any height of building posed a fire risk, immediately led to EWS1 certificates being demanded of every building, increasing the demand for fire risk assessments from 1,700 to several tens of thousands. That created an enormous backlog of EWS1 assessments.
As a palliative, a year ago the Government set up a training scheme with RICS to train an additional 250 fire assessors. A year later, today, I want to hear from the Minister how many trained fire assessors there are and what the department’s estimate is of the backlog of assessments still to be done. The Minister may reply that, back in July this year, he announced that the EWS1 was to be withdrawn and replaced by PAS 9980 and that a new code of practice would be established with a sound, risk-based assessment procedure. However, neither the code nor the publicly accessible standard has arrived yet. Will the Minister give an assurance today from the Dispatch Box that both of those will be published before the Christmas Recess?
The procedural dithering by the department is making the position of leaseholders, already under intense financial pressure, worse with each passing day. A study by Sheffield University, funded by the ESRC, reported that for most leaseholders the financial pressures were at least as much responsible for their stressed mental state as fears for their safety in case of fire. Leaseholders have understood the brutal reality that they are more likely to face foreclosure than fire death. The Government have a clear duty to respond urgently to reassure them.
Of course, above and beyond all the administrative fumbling by the department is the overriding question of funding. Other noble Lords will have plenty to say on this, and I will listen particularly carefully to what the noble Earl, Lord Lytton, has to say about drawing on the polluter pays principle to recompense leaseholders. All I will say is that, should the Government not come forward with an equitable scheme beforehand, the Minister can expect a difficult time when the Building Safety Bill reaches your Lordships’ House. It remains a central responsibility of this Government to ensure that the blameless victims of this terrible episode are not left swinging in the wind, exposed both to fire risk and financial calamity.
A central theme of that Building Safety Bill is to establish a golden thread of responsibility for due process and good construction, overseen by a tough regulator. That is a principle I strongly endorse: indeed, I can claim to have prefigured it in the Sustainable and Secure Buildings Act that I successfully brought forward in the other place as a Private Member’s Bill 15 years ago. Of course, the Building Safety Bill rightly focuses on fire safety and the immediately presenting and very pressing issue of fire prevention in high-rise blocks, but that golden thread principle should be a fundamental part of the regulatory system for the whole construction industry. It can help to ensure that new and retrofitted homes are actually built to the standards specified, that people doing the work have the skills and capability for the task, and that when something goes wrong there is a clear audit trail.
By way of illustration, six years ago a fire broke out in the wall of a modern block of three-storey town houses in my former constituency and spread vertically to the roof. The fire spread through the roof space, and three homes were gutted. Missing fire stops and cavity barriers were the facilitators of the fire spread. It happened 10 years and one month after construction—important from the warrantee angle at the time. Of course, there was no paper trail, or digital trail, on who did what or why during construction. According to the Greater Manchester Fire and Rescue Service, which attended that fire, this absence of cavity barriers is a very common fault to find in the timber-framed house fires it attends. At the time, it told me it supposed that it would be a national problem. When I inquired, the then Minister said that a study was being commissioned by the department. Can the Minister here today tell us whether that happened and what it reported? He might find it interesting—or maybe not—but it could well provide long-term evidence of a long-term problem.
Less dramatically, there have been multiple reports of people moving into new homes and finding the roof insulation still rolled up in the loft, and the level of basic faults in newly completed homes remains unacceptably high. We are going to see the wholesale introduction of modern methods of construction—prefabricated and timber-frame construction—aimed at high levels of home insulation. We are targeting a complete revolution in the technology used to heat our homes. All these and much more are on the menu as zero-carbon homes are seen as the gold standard to achieve in the coming decades. All will need higher skills and closer supervision than they are currently getting if there is not to be disappointment at best, or catastrophic failure at worst, in achieving the ambitious numerical and sustainable housing targets that the Government espouse.
Grenfell Tower had many contributing causes but the absence of clear regulatory oversight of the sort now proposed in the Building Safety Bill was, sadly, an enabler of the failures that happened. So too was the absence of trained and qualified staff and workers. So, my final ask of the Minister is that he should keep clearly in focus the case for learning from this horrible episode the need to ensure that the golden thread principle is not just seen as a one-off response to a wholly exceptional problem, but as a vital necessity for delivering safe, green and affordable homes in the future. I beg to move.
There is a precedent for more generous intervention than the Government have offered so far. I refer to the Housing Defects Act 1984, which I put on the statue book 37 years ago. That provided for a 90% grant towards the cost of repairing the defect of a property, subject to an expenditure limit, or repurchase of the property at 95% of the defect-free value. That legislation covered Airey houses, built after the war, that were discovered to be defective in the 1980s. The background is similar in many ways to the problems confronting today’s leaseholders.
Under that legislation, properties were designated if they were defective by reason of their design or construction and if their value had been reduced substantially because the defects had become generally known. Designation was reserved for serious inherent defects that owners, councils or professional advisers could not have known about on survey, sale or purchase —a close parallel to today’s problems for leaseholders. Compensation was provided by the Government on the terms I have outlined.
So I pose the question: if it was right for the Government—a Conservative Government—to intervene generously then to protect innocent home owners, is there not a case for more generous intervention now? In this case, I am not suggesting the Government should pay 95% and I make no apology for repeating a suggestion I have made on earlier occasions, supported by the right reverend Prelate the Bishop of Durham and my noble friend Lord Blencathra, namely that there should be a retrospective levy on the developers who initially sold the defective flats—the “polluter pays” principle referred to by the noble Lord, Lord Stunell.
Instead, the Government have announced a prospective levy of a 4% tax on profits over £25 million on future residential development, to raise just over £1 billion in five years. There are three problems with that solution. First, it does not produce enough money. We are looking at a shortfall of some £10 billion between the cost of remediation at about £15 billion and the £5 billion now on offer. The levy falls well short. Secondly, the buildings on which the levy is payable will not be defective but built under the new higher building regulations. Thirdly, the levy will not fall exclusively on those who benefited from the sale of defective property. Many future developers who had no part to play at all in the Grenfell tragedy will pay, potentially passing the cost on to future purchasers.
So my suggestion to Michael Gove is that he meets the £10 billion gap with a £5 billion retrospective levy on the developers of the offending flats, most of whom are still around and have substantial reserves, and a further £5 billion from the Treasury, belatedly delivering the recommendation of the Select Committee that costs should not fall on leaseholders. I believe a solution along those lines would enable us to begin to draw a line under this problem and relieve thousands of leaseholders of the nightmares they now suffer from.
I understand the Government’s reluctance to commit additional taxpayer funding to resolve this crisis. The taxpayer should not be required to pay for the failures of an industry that has paid out billions in dividends over the past decade. I am also aware that there are multiple efforts to develop a feasible solution to this, but the issues around housing and inequality in this country are a state of emergency. As it stands, the only comprehensive solution I am aware of is the “polluter pays” amendment, already mentioned by the noble Lord, Lord Young. As he said, it would require developers and builders who constructed blocks of flats that did not comply with building regulations in force at the time of construction to pay for their remediation. This amendment is supported by a range of UK stakeholders and has also attracted international attention. Ted Baillieu, the former Premier of Victoria, Australia, and co-chair of the Victoria cladding task force, sees it as a way of ensuring that those responsible for the crisis pay, and as an opportunity to restore trust. It would be an opportunity to serve as a model for other jurisdictions across the world. Other noble Lords will be better qualified than I am to comment on this.
If the Government are not satisfied that the polluter pays Bill represents a solution, I know that many in this House will be eager-eared to hear the Government’s own solution that will deliver us from this crisis. I know that the Minister is entirely well intentioned and that he is committed to navigating a way out of this issue, but it is true that Members of your Lordships’ House are becoming impatient at the lack of action, and I hope that next time this matter is discussed in the House, the Minister will have something new to present.
We are gathered here today on 4 November 2021. In the next 10 days, Grenfell survivors, sympathisers and their loved ones will walk again. Let us find a response that is sufficient enough to not be complicit in the prolonged injustice and eyesore that this issue and housing standards in this country have become.
On plans, what are the Government’s plans for the planning system? Over 40,000 responses were sent in as part of the recent consultation on the planning system. What is happening to all those replies? What lessons have the Government learned about subsidising demand through Help to Buy and stamp duty holidays? Both seem to have led to higher prices for buyers and higher profits for builders. Indeed, the stamp duty holiday has apparently cost just under £5 billion in lost revenue to the public purse.
As the noble Lord, Lord Barwell, who was Housing Minister from 2016 to 2017, wrote in a letter to the Times on 15 May this year:
“Demand-side interventions such as Help to Buy and stamp duty holidays, while helping some, fuel house price inflation, making it harder for others to get on the ladder.”
I agree with him, and I also agree with his later statement that we need more homes for rent which are affordable. What is the Government’s plan to meet the lengthening waiting lists for social housing, estimated by the Local Government Association—of which I am a vice-president—to be over 2 million households?
The affordability crisis has impacted on very many people. This has proved particularly acute recently in rural areas, where prices have risen by 14% over the year May 2020 to May 2021. I conclude that the Government need a clear strategy to deal with the shortage of homes. Again, I hope the Minister will confirm that there is to be no watering down of the commitment to 300,000 new homes a year.
The Budget announced some more investment in housing and specific funding for affordable homes on brownfield sites. That is all welcome. But what is the Government’s thinking on the need for more supported housing units? The National Housing Federation forecast earlier this year a shortfall of around 47,000 supported housing units by 2025. Why did the Chancellor refuse to proceed with an increase in the stamp duty surcharge for the purchase of second homes, as suggested by the Office for Budget Responsibility? It seems to have been seriously considered.
Are the Government still committed to ending rough sleeping by 2024, and is the plan for doing so sufficiently robust?
On greening our housing stock, is the sum of money announced in the Government’s Heat and Buildings Strategy sufficient to deliver all the changes needed for decarbonisation and retrofitting of buildings? Many experts claim that it is nothing like enough and that prices will not drop over the coming years as the Government hope they will.
I return to cladding. It was reported in the Times on Friday 29 October that Robert Jenrick, the then Secretary of State, had fought the Treasury for more money for two years to deal with the cladding crisis but that no extra funding was forthcoming. I do not know what Governments are for if they are not there to solve problems like this. A large number of leaseholders, through no fault of their own, have been landed with huge bills when owners and developers should be responsible. More than the £5 billion pledged so far will be needed, as the noble Lord, Lord Young, reminded us, so why are the Government raising developer contributions with only a 4% levy on company profits over £25 million and why is it seen as a contribution towards the £5 billion already announced as opposed to being an extra sum that would then generate £7 billion?
As all speakers have said today, the cladding crisis needs resolution.
As we have heard, this has gone far beyond the cladding issue alone. Investigations have revealed a raft of omissions and defects in construction that, had they been known about at the time, would not have passed the regulatory material suitability or code of practice standards when a building project was approved and subsequently implemented. It is a fundamental truth that those home owners now faced with unsaleable properties, eye-watering service charges and remediation costs purchased in good faith and had no part in the creation of those defective buildings. It is also the case that the identity of those responsible for construction deficiency is, in most cases, known.
So, while I advocated the Government getting ahead of the curve and leading the way on this very complex issue, with many economically powerful players, I did not mean to suggest that the taxpayer should bail out the home owners. Of course, there is a role for a compensatory fund and a levy, and the Government are acting on this but only for the limited capacity of the most at-risk buildings. That leaves a gap between the scope of what the Government set out to do and the extent of the problems, as we now know them.
I believe that the Government should be the instigator and driver of a more encompassing framework. Here I pay tribute to the comments of the noble Lord, Lord Young of Cookham, because much of what I say will dovetail with them. The framework should ensure that those responsible are indeed held to account, that home owners are thereby accorded relief from their resultant woes and that confidence is restored.
In the last five months, I have had many discussions with Steve Day, an inspirational campaigner who is well known to the Minister and who was faced with a huge remediation bill on an east London flat. Due in large part to his persistence, a group colloquially termed the “polluter pays” movement has grown up and garnered very considerable support. I wish to address the principles behind it this afternoon. It borrows from the principles in the Environmental Protection Act, seeking to make the polluter—or, in this case, the developer or constructor and his team responsible for the works—liable for the consequences of their failures. It differs from the EPA in that it would not try to apportion individual responsibility in some proportional manner but would provide joint and several liability on the developer or builder and leave those who are responsible to sort it out among themselves, after the Government have recovered the money.
It would make the first point of recourse for appeals to the First-tier Tribunal to keep things out of the mainstream courts as far as possible, thus discouraging economic might from bullying much weaker parties. It would attach parent company liability by a device customarily used by the Competition and Markets Authority, when treating a company and its subsidiaries as a single liable entity. It would remove the protection of special purpose vehicles, which developers have often used to try to ring-fence, if not actually escape, liability.
The polluter pays principle asks the Government to employ industry experts to check whether builders built to the required standards, including manufacturers’ instructions. If not, it then places the burden of proof on constructors to evidence that their installations met building regulations in force at the time of construction. If they do not have the evidence or they broke the building regulations in force at the time, they would need to put their hands in their pockets. As we have seen all over the media and in professional reports, there has been widespread non-compliance with construction standards, despite the fact that there is a very profitable housebuilding sector—so I believe that a large recovery potential is in fact there.
The polluter pays principle would also provide a way forward for proportionality in risk assessment, providing for the full range of property types, building heights, defect categories, and so on. It would draw on a vastly greater resource than the Government currently propose under their levy, and it would not impose a blanket levy on the many good and conscientious builders and their development teams. But it needs government to get ahead of the current freefall in risk-averse reactions and broker a pan-sector approach.
As a consequence, if this was taken forward, it would in fact set in place a legacy that would restore confidence and counter the perversity of the race to the bottom in construction standards and the culture of getting away with things if you can, rather than doing a good job and going that little bit further.
I fervently hope that, given the information, background, purposes and mechanics, the Government will see fit to incorporate this into the Building Safety Bill as an amendment of their own. If so, I will strongly support it; if not, I shall argue for one to be incorporated notwithstanding. I put it to the Minister that, in all justice and morality, this demands action. The problems of damage to market confidence, sector economics, social fabric, and personal health, well-being and life chances simply cannot be allowed to persist. This is a systemic failure that must not be allowed to persist. I know he has listened to the polluter pays argument, but I now ask him to take it forward.
This Government’s obsession with home ownership has meant that, for many young people, finding that deposit and part ownership have enabled them to get on to the property ladder. But neither they nor their funders understood that these homes were being built to unsafe standards, signed off by a less than independent inspection process, which has now resulted in them facing extraordinarily large bills for remediation and, prior to remediation, the cost of 24-hour walking warden services.
I will spend a short time on the liabilities of the construction sector. The major builders say that, for those buildings completed after the standard 10-year structural defect warranty, they and their insurers can wash their hands of any liability. However, most structural defect warranties assume that the contractors have built to building standards and complied with the building inspection rules of the day. It is now evident, way beyond the chilling evidence at the Grenfell inquiry, that the short cuts that too many of these companies, and their contractors and suppliers, took have resulted in unsafe buildings with dangerous cladding never designed for these blocks, which act, in effect, as installed firelighters.
As a member of the All-Party Group for Fire Safety and Rescue, I have watched the evidence given by cladding manufacturers at the Grenfell inquiry. Managers of cladding firms, granted immunity under the terms of the inquiry, explained how they deliberately used the wrong cladding—and cladding certificates—for these buildings. Clerks of works at the site, at best, took their words at face value; in the worst cases, some inspectors clearly turned blind eyes. That immunity was a high price to pay but at least we are now getting to the real root of the problem: a broken building and inspection system.
Three years ago, the APPG even heard of one tower block, not in London, where all the non-fire-compliant front doors to the flats were removed and replaced with compliant doors for one week, to the utter bemusement of the residents. After the building was inspected, the old doors went up again. Whistleblowers have been saying for the past few years that many bad practices had already started since the relaxation of the inspection regime.
In any other industry, local government, the Government, construction and financial services industry bodies, and their insurers would have got together to talk through how to manage this crisis. Banks, building societies and housing associations will also need support if they are to find the resources to help them round their rules, so that they can help people who have mortgages or leases with them in these buildings with cladding.
In any other industry, freeholders would have sued the building companies and their insurers to protect the leaseholders. Instead, too many freeholders have turned to leaseholders to pay. Other noble Lords have talked about the “polluter pays” principle. I agree with the noble Lord, Lord Young of Cookham, that there will also need to be other structures for payment. I like the idea, as others have said, of an extra levy to provide for the £10-billion and £5-billion holes in the system.
In any other industry, those who falsified construction certificates, especially if relating to cladding, would have been interviewed by the police. Falsifying cladding safety certificates, and inspection works in this instance, have put hundreds of thousands of leaseholders and their families at high risk of fire, of damage to their properties and of their injury or death.
However, this is not any other industry. In 2019, property tycoons gave the Conservatives more than £11 million. There were questions about cash for access and a dinner at which the then Housing Secretary, Robert Jenrick, was sat next to a large potential donor. I know that he left, but the point is that it was very uncomfortable. Despite the Select Committee in the other place recommending that the Government do all they can to protect leaseholders from these costs, instead, the reality is that leaseholders are facing bills so large that some are higher than the value of the property they have bought. They cannot sell with that liability. Their mortgagors are equally stuck because their rules are also strict.
There are 500,000 homes facing a tornado of problems. It is time that the Government led a proper round of emergency discussions with all the parties and not just for high-rise buildings of over 12 metres. This arbitrary height definition has no place when cladding remains dangerous. However, what needs to happen first is that the building sector, especially large construction companies, must agree its share of the immediate payment of remediation costs. I hear the Minister saying, “But we’ve told freeholders not to pass charges on to leaseholders”. Until the Government own this issue and start to strong-arm the various bodies to take responsibility, this will not change; it should, but will not. If there is no change, will the Minister agree that a class action of leaseholders against the constructors should be funded by the public purse? In the meantime, will the Government take other actions to help resolve these issues?
I fear that this cladding misfortune will rest with government, rather than the fault lying with the manufacturers of the faulty materials or those responsible for faulty construction or supervision. The Government are expected to step up. I believe the right way forward is for the Government to establish the structures to enable the compensation system to work in protecting individuals from huge costs. They should not write the cheques themselves unless their own supervisory systems have failed the taxpayer.
Manufacturers of faulty materials are generally large corporations. Individuals cannot afford to sue them. Companies and their insurers spend millions of pounds every year in legal fees protecting shareholder returns. It is their job. The Government should create a structure that gives leaseholders a voice and recourse to law, without ruinous financial consequences.
There is an escape route for government. We have heard it several times already: the “polluter pays” principle. The French manufacturer Saint-Gobain, a huge PLC, sells its dangerous cladding in the UK through its subsidiaries. Even after withdrawing it from sale in France, having discovered that it was unsafe, it went on selling it here. Where is the moral compass in that? It should have been sued, yet curiously the Government have not done this. It should have funded a large part of the compensation, reducing the taxpayer burden. With this in mind, the increase from six to 15 years in the statute of limitations period proposed for claims in the Building Safety Bill is an excellent start—but the problems stemming from faulty materials will not go away. Manufacturers must be held responsible, not taxpayers.
Finally, will the Minister please explain why the Government do not appear to be bringing legal action against the manufacturers of faulty, combustible materials used at Grenfell and other developments—cladding that has to be removed at great expense? It was in use throughout the country. Instead, Her Majesty’s Government are spending hundreds of millions of pounds of taxpayers’ money, and the taxpayers’ bill is bound to keep rising. The Government are the only entity capable of taking on the funded firepower of legal action against multinational corporations. I believe this is where taxpayers’ money should be spent—not on financial remedies, which are the province of corporations and their insurers.
Early estimates of the total cost for just removing and replacing the cladding were £16 billion. The spending review last week—cynically, in my view—included a restatement of the funding available, which, as we have heard from several noble Lords, is £3 billion from the taxpayer and a further £2 billion raised by a levy on developers over the next 10 years. I thank the noble Lord, Lord Young of Cookham, for his comment about there being a precedent, when dealing with the Airey homes, for the taxpayer contributing far more towards remediation, rather than this capped and inadequate £3 billion currently in place from the Government.
I remind noble Lords that that government contribution is only for the replacement of flammable cladding, and only for buildings over 18 metres. Worse follows because, as cladding is removed, so are building safety defects revealed, as we have heard—a big one being the lack of fire breaks. These, too, must be put right, but there is no government grant for these serious building errors.
Leaseholders, who do not own a single part of the building, are being expected to pay for the failings of the construction industry. Leaseholders should not be paying a penny piece towards putting right the absolute failures of developers, materials manufacturers and government regulation. That view has been supported by many noble Lords, including the noble Lord, Lord Young of Cookham, and the noble Earl, Lord Lytton. Leaseholders are receiving bills for non-cladding work of over £100,000. As my noble friend Lord Stunell stated, Inside Housing has estimated that the majority of leaseholders have been billed for over £30,000. This is—I repeat—for putting right a building that belongs not to them but to the freeholder.
Even worse follows, because the fire risk has resulted in “waking watch” costs and enormous hikes in insurance. I have previously quoted in this House a leaseholder whose average service charge was £700 per quarter but which then jumped to an unaffordable £3,000 a quarter. For some, that alone has been enough to push them over the financial cliff edge: an elderly gentleman who I met at a campaign rally said to me, through tears, “I just can’t pay—what am I to do?”
The consequences for leaseholders are catastrophic. They have a flat that literally has no value, they have no recourse to effective legal action and they are being forced into totally unpalatable choices: bankruptcy, repossession or eviction, or putting their flat into an auction. This is so unjust. Leaseholders have done everything right and nothing wrong, and their lives are being wrecked by the inability of government to produce effective solutions. There are solutions that the Government should and must consider, so that leaseholders are not seen as collateral damage in this awful crisis.
As the noble Earl, Lord Lytton, has explained, the “polluter pays” approach has much to recommend it. This well-developed proposal has also been supported by several other noble Lords, including the noble Lord, Lord Young of Cookham, my noble friend Lord Stunell and the right reverend Prelate the Bishop of London. I too add my support to their plea for the Minister to respond positively to this proposal.
The Government should also consider a more risk-based assessment of flammable cladding and building defects. Will the Minister agree to provide information on the conclusions that the Government have reached on such risk assessments? Will he also tell the House whether alternatives to cladding remediation have been considered and assessed, and remedies sought, such as the ones that my noble friend Lady Brinton suggested? These are actions that the Government can, and should, take to put an end to the suffering of millions of our fellow citizens.
Those in shared ownership, for example, forfeit their equity if they are unable to pay hugely inflated service charges. Is that right and just, when none of it is their responsibility? Leaseholders have already been driven to the edge of despair. Some have already chosen bankruptcy, despite the consequences, simply to escape the mental torment of living under such constant pressure. Next April is the deadline for bills for remediation that cannot be paid and will, therefore, see many more driven to bankruptcy.
Leaseholders tell me that there are already institutions lining up to benefit from their misery, as they seek to buy up property, cheaply, vacated by leaseholders through bankruptcy or in other ways. That is simply not acceptable. Leaseholders, as I will constantly say, have done everything right and nothing wrong. They must not pay the price for others’ failures, and I for one will continue to speak up for them until the Government effectively address all their issues. I look forward to hearing full and constructive answers from the Minister to the many proposals suggested today.