Can Michael Gove stop Industry passing the buck over building safety scandal?

For nearly two years, a small army of lawyers has been trying to decide who to blame for Grenfell Tower’s dangerous cladding. At the outset of the latest phase of the public inquiry into the disaster, lead counsel warned the organisations involved against indulging in “a merry-go-round of buck-passing”.

Robert Booth

Some chance.

After hundreds of hours of hearings where architects have blamed builders, builders have blamed manufacturers and manufacturers have blamed regulators, a conclusion about why 72 people died after their homes were wrapped in plastic that burned like petrol is still months away.

Michael Gove now faces a similar problem as he seeks to pin responsibility for similar failures on not just one, but thousands of apartment buildings across England. It is a quagmire that has defeated several cabinet predecessors in charge of housing, to the anguish of hundreds of thousands of people whose homes have been rendered worthless.

“We want to try and cut through that,” the secretary of state for levelling up, housing and communities declared on Monday morning.

Gove’s plan – to give developers until March to come up with a plan to foot the £4bn bill to fix cladding on medium-rise blocks – rests on giving the housebuilders very little room for manoeuvre and stopping them from pointing the finger elsewhere, at least in the first place.

His team understand that the problem requires an urgent fix, not least with the fifth anniversary of the Grenfell fire looming in June and backbench MPs facing considerable pressure from constituents whose lives are in turmoil. They also recognise it doesn’t solve everyone’s building safety problems. But they have decided to start here.

Gove will threaten to strip builders of valuable government contracts and access to subsidies such as the help-to-buy programme unless they promise to do two things: “Fund and undertake all necessary remediation of buildings over 11 metres that you have played a role in developing” and “make financial contributions this year and in subsequent years to a dedicated fund to cover the full outstanding cost to remediate unsafe cladding on 11-to 18-metre buildings”.

The punishments for inaction could include a new law requiring them to pay, restricted access to government funding and public contracts, the pursuit of companies through the courts and even using planning powers to make their operations difficult. Gove has one more “blunt but heavy instrument” in his armoury: a tax hike. The government has already consulted on a new 4% tax on profits of residential property developers to raise £200m a year to help fund remediation works. This could be increased and the Treasury has given Gove permission to “use a high level threat of tax … as a means of gaining voluntary contributions from [developers]”.

Some observers believe this will be a sufficiently tight vice to trigger action. They calculate housebuilders cannot afford to wreck their relationship with the government and will pay up and consider pursuing materials manufacturers and others with threats of legal action of their own.

Stewart Baseley, the executive chairman of the Home Builders Federation, hinted at what may be to come when he accepted that leaseholders should not have to pay for remediation, but said builders should not cover the costs alone. The implication was: what about the companies like Kingspan and Arconic that made combustible cladding materials? What about the subcontractors who may have assembled them wrongly?

If Gove doesn’t manage to quickly reach the £4bn target from the developers (and remember, previous appeals for developers to do the right thing failed), his department’s own coffers could be raided. That is an unappealing prospect given Gove’s responsibility for Downing Street’s flagship levelling up policy and the urgent need to keep investing in social housing.

“Leaseholders shouldn’t pay, the polluter should pay and we want to work with everyone involved to get to a constructive solution,” Gove said on Monday.

Whether that happens may come down to who blinks first.


£1bn wiped off FTSE house builders as Gove delivers cladding bill

Oscar Williams-Grut 

House builders lost more than £1 billion in value today after the government gave the industry just a few weeks to come up with fully costed plans fix the £4 billion cladding scandal…

….Shares in house builders slumped. Persimmon was the biggest faller on the FTSE 100, down 3.1%, while Redrow dropped 3.3% on the FTSE 250. Other major developers registered similarly sharp falls and £1.3 billion was wiped off the sector’s market value in early trade, according to stockbroker AJ Bell.

UBS analyst Gregor Kuglitsch said the cost of the new measures was “significant”.

“The current market cap of the sector is around £40bn so a £4bn cost would equate to ~10% on a pre-tax basis,” he and his team wrote in a note to clients. “This assumes the listed sector would bear the brunt of the cost, although there are likely some private companies that will also need to pay.”

Gove’s announcement comes on top of the building safety levy and residential property developer tax. Both were announced last year to help fund the government’s £5 billion commitment to tackling the problem.

Stewart Baseley, executive chairman of the Home Builders Federation said: “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.

“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.”

Rico Wojtulewicz, head of housing and planning policy at the National Federation of Builders (NFB), said: “The Government has already introduced one industry specific cladding tax, and now another is on its way. This piecemeal approach is confusing, unnecessarily complex and will likely impact the number of homes built.

“It’s also worth pointing out that the developer paying for remediation will almost certainly not have been responsible for the cladding put on the property – most of which was retrofitted long after construction and has nothing to do with the developer.

“Another construction industry related tax is neither fair, nor proportionate and industry will be dismayed at this scatter gun approach to fixing an issue that several governments set the regulation for.

“Perhaps all MPs will sacrifice a percentage of their salary and pensions to help fund remediation, as the real responsibility lies with legislators?”

A spokesperson for Taylor Wimpey said it has “acted on this already for its customers” and “made sure Taylor Wimpey customers do not have to pay for these improvements.”

“We trust that we will not be penalised for our early action to do the right thing,” the company said. “There are many organisations involved in the issue of fire safety, including large business in our supply chain and indeed Government themselves, and so the proposed response must recognise this.”

Gove said: “Some developers have already done the right thing and funded remedial works and I commend them for those actions. But too many others have failed to live up to their responsibilities.”