New Clause 4 - Building Safety Indemnity Scheme

Building Safety Bill – in a Public Bill Committee at 9:25 am on 26th October 2021.

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“(1) There shall be a body called the ‘Building Safety Indemnity Scheme’ (referred to in this Act as ‘the Scheme’).

(2) The purpose of the Scheme shall be to collect money from levies and to disburse the money raised from those levies in the form of grants to leaseholders to pay all or any part of the following types of costs—

(a) remediation of any defect in any external wall of any building containing two or more residential units; or

(b) remediation of any defect in any attachment to any external wall of any building containing two or more residential units; or

(c) remediation of any internal or external defect other than a defect described in paragraphs (a) or (b); or

(d) any building safety works carried out by an accountable person under section 84; or

(e) any other cost of a type specified by the Secretary of State in regulations made under this section.

(3) The Scheme may disburse money for the benefit of leaseholders in any type of building, whether or not a higher-risk building and whether or not the building was completed before the coming into force of this Act.

(4) The levy imposed by the Scheme shall be determined by reference to each of the following—

(a) the Scheme’s best estimate of the reasonably likely total cost grants to cover any type of cost described in subsection (2);

(b) the Scheme’s best estimate of the costs of raising and administering the levy; and

(c) the Scheme’s best estimate of the costs of processing applications for grants to leaseholders and disbursing funds to leaseholders from monies raised by the levy.

(5) Members of the Scheme subject to levies shall include the following—

(a) any person seeking building control approval from the Regulator;

(b) any prescribed insurer providing buildings insurance to buildings containing two or more residential units, whether or not the buildings are higher-risk buildings;

(c) any prescribed lender providing mortgage finance in the United Kingdom, whether or not secured over residential units in higher-risk buildings; and

(d) any other person whom the Secretary of State considers appropriate.

(6) The Scheme is to consult with levy paying members before determining the amount and duration of any levy.

(7) The Scheme must provide a process by which leaseholders, or persons acting on behalf of leaseholders, can apply for grants for the types of costs specified in subsection (2).

(8) The Scheme must provide an appeals process for the Scheme’s decisions regarding—

(a) the determination of the amount of any levy; or

(b) the determination of any grant application.

(9) A building control authority may not give building control approval under the Building Act 1984 to anyone unless—

(a) the person seeking building control approval is a registered member of the Scheme, or that person becomes a registered member of the Scheme; and

(b) the person seeking building control approval pays all levies made on that person by the Scheme under subsection (3).

(10) Any liability to pay a levy under this section does not affect the liability of the same person to pay an additional levy under section 57 of this Act.

(11) Within a period of 12 months beginning with the coming into force of this section, the Secretary of State must make regulations providing for—

(a) the appointment of a board to oversee the Scheme;

(b) the staffing of the Scheme;

(c) the creation and maintenance of a register of members of the Scheme;

(d) the preparation of the best estimates described in subsection (3);

(e) the amount, manner and timing of payment of the levies on members of the Scheme under this section;

(f) the process of joining the Scheme;

(g) the process of leaseholders applying to the Scheme for grants towards any of the types of costs specified in subsection (2);

(h) the process for handling any appeals against decisions of the Scheme on any levy or any grant;

(i) the Scheme to make an annual report to Parliament; and

(j) any other matters consequential to the Scheme’s operation.

(12) Regulations made under this section are to be made by statutory instrument.

(13) A statutory instrument under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(14) In this section—

‘building’ has the same meaning as in section 29;

‘building control approval’ has the same meaning as in paragraph (1B)(2) of Schedule 1 to the Building Act 1984;

‘building control authority’ has the same meaning as in section 121A of the Building Act 1984;

‘defect’ means anything posing any risk to the spread of fire, the structural integrity of the building or the ability of people to evacuate the building, including but not limited to any risk

‘external wall’ has the same meaning as in Article 6 of the Regulatory Reform (Fire Safety) Order 2005 (S.I. 2005/1541);

‘higher-risk building’ has the same meaning as in section 59;

‘prescribed’ means prescribed by regulations made by the Secretary of State;

‘remediation’ means any step taken to eradicate or to mitigate a defect, including employment of any person to temporarily assist in evacuation of any part of a building, and whether or not the defect in question existed at the date any residential unit in the building was first occupied. Remediation does not include anything required in consequence of omitting to effect reasonable repairs or maintenance to all or any part of the building over time, or anything which is the responsibility of an occupant of a residential unit within the building;

‘residential unit’ has the same meaning as in section 123.

(15) This section shall come into force on the day this Act is passed.”—

This new clause would require the government to establish a comprehensive fund, equivalent to the Motor Insurers’ Bureau, to provide grants to remediate cladding and fire safety defects of all descriptions, paid for by levies on developers, building insurers and mortgage lenders.

Brought up, and read the First time.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Health and Social Care)

I beg to move, That the clause be read a Second time.

The new clause would require the Government to establish a comprehensive fund, equivalent to the Motor Insurers Bureau, to provide grants to remediate cladding and fire safety defects of all descriptions, paid for by levies on developers, building insurers and mortgage lenders. The End Our Cladding Scandal campaigners have made it clear that they would like the Government to find, fix and fund all historical fire safety defects, or, as I have put it on a number of occasions, stump up the cash, make homes safe and go after those who are responsible. New clause 4 is an attempt at doing that last bit—going after those responsible.

The Minister mentioned in his answer to the previous debate on new clause 3 that the Government have put forward £5 billion, but he will be aware that the Select Committee on Housing, Communities and Local Government estimates that the cost of remediation could be from £10 billion to £15 billion, and that in the absence of a scheme to legislate to ensure that those responsible pay those sums of money, they will fall on the shoulders of innocent leaseholders.

We do not know the exact figure, because we still do not have the full data on all dangerous cladding on buildings under 18 meters. There is no complete data for non-ACM cladding on buildings of all heights. There are numerous fire safety issues beyond flammable cladding where the data has not been collected: missing firebreaks, flammable balconies, non-compliant fire doors and so on. In Victoria, Australia, as we have learned, they moved quickly to find it, fix it and fund it.

In the new clause the hon. Member for Stevenage has proposed another solution that could be adopted to fund the remediation. The building safety fund of £5 billion is insufficient. The Government have so far refused to tell us whether they agree with the polluter pays principle, on which we took evidence from Steve Day. I tabled a parliamentary question a while ago asking the Government what assessment they had made of the polluter pays principle, and the answer is overdue.

We have also heard mixed messaging. On the one hand, Ministers tell us that they are considering in detail the proposal for the polluter pays principle. On the other hand, they tell us that they are not sure it will work. It would be useful for the Committee to hear the Minister clarify what the Government’s thinking is on the polluter pays principle. None the less, the new clause is before us.

Of course, there are drafting concerns with this new clause, but they could probably be fixed in the fullness of time. However, I repeat that this is an attempt by Back-Bench MPs to find a way to fix the cladding and fire safety scandal and to go after those who are responsible.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government) 9:45 am, 26th October 2021

I thank the hon. Member for St Albans for introducing and explaining the new clause. Again, Labour supports the fundamental principle of rectifying the situation for the hundreds of thousands of people caught in the building safety scandal—to find, fund, fix and recover, using the polluter-pays principle.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Again, I am grateful to the hon. Member for St Albans for the new clause and for how she comported herself. She mentioned the outstanding parliamentary question and, once the Committee concludes today, I will search for it, search for the answer, and ensure that she receives it as quickly as possible.

While I understand the intent behind the new clause, I am unable to accept it today. I believe it is unnecessary, as its intention is already being met. As the hon. Lady said, and as I have expressed previously, significant funding for leaseholders and for remediation is being made available, and I will unpack some of that for the Committee.

The hon. Lady will know that we are spending a significant amount of money on the remediation of in-scope high-rise buildings that are clad with ACM. For 97% of ACM-clad buildings, remediation has either happened or is under way. For socially owned ACM-clad buildings, 100% have been or are being remediated. We have also made available money through the building safety fund to ensure that non-ACM-clad buildings are made safe. So far, £734 million has been allocated. A significant number of buildings have begun their remediation process and 689 have been allocated support.

We have also said that we will bring forward proposals to ensure that appropriate support is available to leaseholders and building owners in the 11 to 18-metre cohort. We are doing further work to assess the prevalence of such buildings, and that will inform the final solution that we land on. We are considering all options to ensure that leaseholders are protected and helped.

The hon. Lady asked whether we believe in the polluter-pays principle. It is a rather—how can I put it?—crude term, but we certainly want to ensure that those who have the responsibility for the defects that have bedevilled so many buildings, and those who own them, pay what they are due. That is why we have announced a residential property developers tax, which we estimate will raise £2 billion. Clause 57, which we have agreed to, gives powers for a building safety levy on high-rise developers. We estimate that that will account for some half a billion pounds of income, and that is due at the gateway to approval stage for the new building safety regime. We certainly believe that those who have the broadest shoulders and those who are responsible for the defects that affect a great many buildings should pay their way, but we believe that the new clause will not work because implementing it will be costly, slow and disproportionate to the financial returns and their timely receipt, and that the Government will need to create a new administrative board to manage the fund.

I should tell the hon. Lady and the Committee that the new clause also risks the mortgage and insurance industries bringing significant and protracted legal challenges. We want them to undertake a much more proportionate and sensible approach to value ascription and risk definition, rather than the risk-averse, computer-says-no approach that they have taken to date. I think this amendment would obscure that sensible and simple objective.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

Why is something along the lines that the hon. Member for St Albans proposes not appropriate here but appropriate for the Motor Insurers Bureau? What else is the Minister doing to address the retrospective challenge of those buildings that are already built? The proposal he mentioned is for new buildings that will be completed only once this legislation is enacted.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

The hon. Lady is simply wrong; what I am saying is entirely retrospective. The £5.1 billion we have allocated for high-rise in-scope buildings is already allocated, and that is for buildings that already exist. The funding mechanism we will bring forward for buildings in the 11 to 18-metre cohort is for buildings that already exist, and the moneys that will be collected through the levy and the tax can be used for buildings requiring remediation that already exist.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

With respect to the Minister, the point that this amendment makes is to ensure that the polluter pays. The grant from the Government appears to be all taxpayers’ money and, from what I can tell, the Government are taking no action to hold to account financially those developers and builders who are the cause of the problem for residents now.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Again, the hon. Lady is wrong; the residential property developer tax is a tax on the developer sector. The high-rise levy is a levy on the developer sector. We want to ensure we have a mechanism, and we believe we do have one, that is speedy, targeted and suitably flexible to meet the challenges of what we know to be a new—in the sense that it was not recognised until the Grenfell disaster—and evolving terrain.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Health and Social Care)

On the point about the residential property developer tax, which has been leaked to the press in advance of tomorrow’s Budget, can the Minister confirm whether that will bring in additional money beyond the £5.1 billion that the Government have put forward, or will the residential property developer tax bring in money that will then add up to the £5.1 billion? Is it new money on top of that, or will it reduce the amount of money the Government have to spend?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Whatever the hon. Lady has read in the newspapers before the Budget and the spending review, I can assure her that I will not add to the Chancellor’s woes or indeed the annoyance of Mr Speaker by making further comments about it before it takes place.

With respect to the new clause, we believe there is a risk that it will not allow us to levy moneys effectively from the builders insurance and mortgage sectors. We do not believe that the design and implementation challenges of the amendment will result in a material return for the resources that will be expended to deliver it.

Finally, there may be an unintended and undesirable further outcome, which is that a levy on insurers and lenders could very well—indeed, probably will—affect insurance premiums and the cost of borrowing for leaseholders. Given the challenges they already face, that is something I am sure we would wish to avoid.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

The hon. Member for St Albans asked whether the levy, the proposed tax that was leaked to the press by Her Majesty’s Treasury, made up part of the £5.1 billion. I note that the Minister did not answer that point, but it would be useful in terms of the journey of today’s new clauses if he could answer that question.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I am happy to say that we expect that to be additional funding, but I will certainly not comment further on what the Chancellor may or may not say in his remarks—[Interruption.] It is in the newspapers; it is not on the record. The hon. Member for Weaver Vale is heckling from a sedentary position, but he needs to recognise the essential difference between what Ministers say and what newspaper journalists interpret them as saying, even before they have said it. There is a fundamental difference. He may be sitting at the feet or bending the knee at the altar of Lord Mandelson, but we must not do that.

In effect, by levying on builders and mortgage providers, the cost will rightly fall on the doorsteps of all homeowners, and potentially on those in the rental sector too. I entirely understand where the hon. Member for St Albans is coming from, and where she wants to go to, but I respectfully request again that she withdraws the new clause, not least because—finally—a number of such amendments and new clauses have been tabled over the past several months, some of which were associated with what is now the Fire Safety Act 2021.

Those proposed amendments were wide-ranging in their ambit and would have allowed, potentially, for a leaseholder to claim for a defective fire alarm that was 10 years old—defective potentially as a result of their own action. We would all—most reasonable people—accept, and those who are suffering the terror, the horror, of being trapped in a building they cannot sell because of this terrible scandal would also accept, that such a liability on a freeholder or builder would be unfair and improper, and might indeed risk what one might call a remediation industry building up, which would not help anyone. I am afraid that the wide ambit of new clauses such as this present an opportunity for that sort of misuse to occur.

I understand all the points that the hon. Lady has made, but I invite her again to withdraw her new clause.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Health and Social Care)

I was particularly struck by an analogy on “Newsnight” last night. A Facebook whistleblower was asked about how Facebook responds to accusations. She said, “It is a bit like my partner saying to me, ‘Have you done the washing up?’, and my answering, ‘I have done the washing up 150 times in the past year and I have spent £3 billion on washing-up liquid’, which is of course a way of not answering the question whether I have done the washing up.”

In answer to the first question, therefore, I was struck that the Minister was at pains to point out the progress that had been made on removing, specifically, ACM Grenfell-style cladding on high-rise buildings—very specific progress. In being at pains to highlight that progress, he sidestepped—I would say, respectfully—all the other fire-safety defects that exist and on which we have taken evidence through the proceedings on the Bill so far.

I was particularly disappointed that there was no answer to how constituents such as mine, who are expecting to receive bills of between £80,000 and £100,000 for fire safety and cladding remediation work, should foot those bills. The Minister’s third point was on the polluter-pays principle. I was a little confused to hear it described as a crude term. It is a very well-established legal principle that exists in other pieces of legislation, notably in domestic and international environmental law. Given the clarity of the situation—innocent lease-holders who have done everything right being left to pick up the tab versus everybody else in the industry, who are to varying degrees responsible for failures—it is actually a very simple principle that is quite easy to understand.

The Minister mentioned that he wants to look at the value and the risk, and come to some kind of agreement on the value of properties and a more proportionate approach. I respectfully ask where on earth the mechanism for doing that is, because as yet we have not seen any mechanism or attempts by the Government to bring the different people together to ensure that that can happen. Lastly, he said that one of the unintended consequences of the new clause could be that insurance premiums go up. I am afraid to say that they are already going through the roof. Some innocent leaseholders have already gone bankrupt and are facing homelessness, and the difference between some of the costs makes very little difference to them.

I thank the Minister for his response, and we will continue to make those points, but I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.