Building Safety Defects: Costs - Question

– in the House of Lords at 2:56 pm on 18th October 2021.

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Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Deputy Chairman of Committees 2:56 pm, 18th October 2021

To ask Her Majesty’s Government what plans they have to ensure that victims of building safety defects are not liable for the costs of rectifying those failures.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Deputy Chairman of Committees

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and refer the House to my interests as set out in the register.

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, the Government are investing £5.1 billion to remediate unsafe cladding in residential buildings over 18 metres. The Building Safety Bill will require building owners to consider other cost-recovery routes for remediation before passing them on to leaseholders. A new developer tax and levy will make sure that industry contributes. Finally, for the small number of 11-to-18 metre buildings with cladding remediation costs, our support offer will ensure that leaseholders are protected.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Deputy Chairman of Committees

My Lords, that is a very disappointing and, frankly, repetitive response. There has been a clear failure on the part of the Government to protect the innocent victims of this scandal in building safety. The leaseholders need to be supported by their Government and they need to hear clearly from the Government that they are no longer expected to pay for other people’s mistakes. Why cannot the Government just say that and make it happen?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, perhaps there is repetition in both the Question and indeed the Answer. The Building Safety Bill, which is going through very close scrutiny in the other place, provides a legal requirement for building owners to explore alternative ways to meet the costs of remediation works before passing them on to leaseholders, along with evidence that this has been done. Of course, we will look at other ways of strengthening the redress mechanisms to ensure that, wherever possible, this does not fall on leaseholders.

Photo of The Bishop of Durham The Bishop of Durham Bishop

My Lords, have the Government looked closely at the “polluter pays” principle as a way of recouping funds for remediation of building safety defects from those who were initially responsible? Will this, or something equivalent, form part of the Building Safety Bill?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, we are looking very closely at the “polluter pays” principle and the amendments that have been supplied to us by Steve Day. I have asked my officials to meet on a number of occasions; in fact, I am meeting them this Wednesday. There are, however, some difficulties and hurdles that need to be overcome to make this potentially work. I do not exaggerate; they will be quite challenging to overcome.

Photo of Lord Young of Cookham Lord Young of Cookham Conservative

My Lords, since we discussed this on 16 September, we have a new Secretary of State with instructions from the Prime Minister, so we read, to sort out the cladding crisis. While welcoming the new tax on high-rise development and the substantial support that the Government have already offered, this is not enough to prevent innocent leaseholders facing substantial hardship. Further to the suggestion of the right reverend Prelate, should there not be a substantial levy on the developers who built and sold these unsuitable flats?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, we have a new Secretary of State who is putting his fresh eyes on this. We recognise that the developers that put up these shoddy buildings need to pay. Indeed, we may need to look at other people—the cladding manufacturers may also need to contribute to this—because we want to do whatever it takes to ensure that leaseholders are protected as far as is practicable.

Photo of Baroness Watkins of Tavistock Baroness Watkins of Tavistock Deputy Chairman of Committees

My Lords, I declare my interests as outlined in the register. It is intended that there will be a new regime for shared ownership in terms of liability for new leaseholders. However, currently, many leaseholders who own only a quarter of their properties are being expected to recompense the costs for 100%. Can the Minister tell me what the Government intend to do about this? If he cannot, will he write to me, because there is considerable mental anguish among many shared owners—the majority of whom are essential public sector workers such as paramedics, teachers and nurses?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, I recognise the plight that leaseholders in social housing face, particularly those who are shared owners and have only a proportion of the equity. We made it part of our approach to funding for unsafe cladding beyond aluminium composite material that those costs are borne by the registered social landlords if they are not able to recoup the money from developers. We will continue to urge that these people are protected wherever possible.

Photo of Lord Hendy Lord Hendy Labour

My Lords, given the multiple failures of organs of the state revealed in the Grenfell Tower inquiry—through failure to implement the findings of coroners’ inquests, failures of the building regulations, failures of building control and so on—surely the obvious answer is for the Government to establish a fund to pay out to all those who deserve compensation and to use those resources to sue those who are responsible.

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, I do not think it is as simple as that this was at the hands of failed regulation, although we recognise that there was regulatory system failure. That is why we are bringing forward the Building Safety Bill. We have put a substantial amount of money towards remediation costs, and we will do what we can to pursue those that have caused this crisis in the first place.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, a leaseholder in Leeds has received a remediation bill of £101,267—to be paid in the next 12 months. She has no access to the means to pay. What should Emily and thousands of other leaseholders do next, or are the Government accepting that thousands of bankruptcies will ensue?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, I am happy to look at that specific case, because that sounds like an eye-watering sum of money. In the first instance, is full-scale remediation the answer? Has the freeholder looked at mitigation measures that may also achieve an acceptable way of improving things and lowering the fire safety risk? However, that does seem an extremely large sum of money, and I am happy to look into that case.

Photo of Lord Blencathra Lord Blencathra Chair, Delegated Powers and Regulatory Reform Committee, Chair, Delegated Powers and Regulatory Reform Committee

My Lords, I do not want leaseholders, nor the taxpayer, to pay a single penny towards these remediation works, but I want the housebuilders to pay for every pound that it takes. I am afraid to say that the proposed levy is simply derisory. Will my noble friend campaign in government for a proper, full-scale windfall tax imposed on the housebuilders? In 2019, four companies—Barratt, Wimpey, Persimmon and Berkeley—posted profits of £3.8 billion. I repeat: one year, four companies, £3.8 billion. They should be made to pay from their profits for their shoddy work. Will my noble friend agree with that and just say, “Yes, Lord Blencathra”?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My noble friend knows that government is not quite so simple. In all seriousness, we have stated publicly that the new tax on developers will raise at least £2 billion over 10 years. We know that the amount of money required is far in excess of that, but there is no upper limit, and we still have not yet announced the detail. We take my noble friend’s point on board with regard to the windfall tax.

Photo of Baroness Eaton Baroness Eaton Conservative

My Lords, as others have already said, it is important that the polluter pays, rather than leaseholders, who are victims. Can my noble friend the Minister provide further details regarding this residential property development tax which has been alluded to in previous questions?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My noble friend is right that we need more detail. Details of the residential property developer tax will be announced at the Autumn Budget on 27 October, so we will have to wait till then. However, I want to make it clear that the figure of £2 billion over 10 years is an absolute minimum and I hope that we will go far further than that when the rates are finalised.

Photo of Baroness Thornhill Baroness Thornhill Liberal Democrat Lords Spokesperson (Housing)

As has already been stated, social housing providers are having to pick up the bill for all of their properties. These sums are having a significant impact on their budgets and are detrimental to their ability to provide more, and better-quality, social housing going forward. Are the Government monitoring the impact of this on providers’ budgets, in particular the opportunity cost that is lost to the sector, and looking at how this will affect their ability to do the jobs that they want to do to improve their social, affordable and supported housing properties in the future?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

My Lords, we are working very closely with the sector. I point out that there was a £400,000 fund specifically for providers in the social sector to remove aluminium composite material, the most serious form of unsafe cladding. In addition, where social landlords are thinking of passing costs on to leaseholders, there is an opportunity for them to apply to the building safety fund, which many of them have indeed done.

Photo of Baroness Jones of Moulsecoomb Baroness Jones of Moulsecoomb Green

Could the Minister answer my question in very simple language, because I just do not understand this? The leaseholders did not design the building, do not own it and did not apply the faulty cladding to it. So why are they paying anything at all towards replacing it?

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

It is quite clear that the building owner and freeholder have responsibility for keeping the building safe. Whether the costs are passed on to leaseholders is a matter for the individual lease, but we are doing all we can to step in to help recoup the money that should rightly be paid by the developers and have also put forward taxpayer funding to the tune of over £5 billion at this point.