Building Safety Bill

Earl of Lytton Excerpts

Committee stage
Wednesday 2nd March 2022 Grand Committee

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I was already feeling inadequate enough, but my inability to come up with a Latin phrase or joke on this particularly peculiar amendment of mine is nerve-racking. Clause 129 makes further amendments to the fire safety order and focuses partly on the risk of balconies. My Amendment 115A suggests tightening up the wording so that balconies should be considered a risk only if and where they can be shown to materially contribute to the spread of fire, flame or smoke.

I think this amendment is needed because I am concerned about unnecessary building safety work. I am not sure if this amendment is the right way to resolve the problem, but leaseholders who I have spoken to see emerging a widespread focus on alleged non-cladding defects, such as balconies. This can be a driver to carrying out unnecessary fire safety work, for which leaseholders must pay, with no existing government funding to help. We are all familiar with the “#claddingscandal”, but I want to avoid a scandal, or at least an injustice, emerging that is not to do with cladding. That is what this amendment probes.

Broadly, we now have a situation in which a block of flats can have a fire risk assessment that effectively determines that the building is sound but, because some notionally flammable material has been used, for example in the balconies, there are problems with valuations associated with EWS1 and a pre-emptive, rather than necessary, remediation approach. Leaseholders are then encouraged to think of their blocks with these balconies as unsafe and to believe that remediation work is necessary—and the costs will inevitably be charged to them as a fait accompli. This could be driven quite cynically by freeholders using building safety to do upgrades or carry out what otherwise would or should be regular maintenance, at leaseholders’ expense. To be less cynical and assume far more good faith, or at least to understand the pressures on freeholders and owners, I am worried that one of the unintended consequences of this Bill would be to drive up fears among owners, assessors, accountable persons and so on, under the weight of legal and insurance liability, that they would be blamed for any fires that occur, in any circumstances. As such, blame avoidance could mean stretching assessments of what is considered unsafe beyond credibility or credulity.

This seems to be partly the explanation to the rather panicky response to any building materials that can catch fire. At the moment, this is expressing itself as the almost default assumption that balconies with timber as a component are dangerous and should be replaced. This is in spite it being well documented that timber can outperform steel in a fire, depending on how it chars. An example of where this can lead is a block of flats in Castletown in Dorset. Leaseholders were shocked, at the start of the year, to receive a letter telling them that the timber-decked balconies of the 204 flats in their block had to be replaced by aluminium balconies, as some may be unsafe. Guess what? Leaseholders must meet the cost of this work estimated, on average, at £10,000 a flat.

In addition to that horrifying financial prospect, the Atlantic House Leaseholders Association raised some other issues pertinent to the Committee debates so far. For example, there was no consultation at all with the leaseholders on this decision about the balconies. Leaseholders are a tad suspicious that the contract for the work to replace the balconies was awarded to the block owner’s subsidiary company. The plan that was just announced, but not consulted on, is to carry out the installation inside people’s flats, instead of putting up scaffolding, regardless of the major inconvenience and intrusion this will cause in leaseholders’ homes. The other day I talked about whether you can call it your home if people can just come in, in the name of safety. This is really going to affect people’s home lives.

Also, if there is wear and tear on the timber decking on the balconies in question, it should actually have been the building owner’s responsibility to maintain them and keep them up to standard. Yet, despite them having failed to do so, leaseholders are now being forced to pay for the changes to the balconies, under the auspices of building safety and the threat of fire risk.

I am concerned about a climate in which there is a danger of failing to weigh up risks and assess matters objectively and proportionally. Sometimes, in the name of safety—I think that this was true in that instance in Dorset—leaseholders’ lives are being made a misery, and they are being made to pay a lot of money for remediations that do not necessarily mean that they are safer.

I do not know if noble Lords saw the story in the Manchester Evening News about social housing tenants in Salford suffering freezing conditions for months, since cladding came off their blocks. Having lobbied to get their concerns heard, they were recently sent a letter by Pendleton Together, which manages the nine council blocks, offering

“top tips for keeping warm”.

These included: “dress in layers”, wear “a hat and gloves”, keep “active” and consume “warming food and … drinks” —I thought that these might be handy in this Room, which has been rather chilly. This is another top tip:

“don’t drink alcohol to keep warm as it can give you a false feeling of warmth when you’re actually cold”.

If I were cold, I might still have a drink.

More seriously, I am glad to see that Salford council, which should, in general, be commended for its aspirational housing policies—I am not particularly having a go at it—has apologised for what has happened in its area and for the patronising and condescending message of the letter. But I was using it to illustrate that measures designed to keep people safe from fire can lead to home owners suffering freezing cold, for example, in the middle of an energy price crisis. Unfortunately, fire safety can trump common sense.

I will take noble Lords back to balconies and the Atlantic House block in Dorset that I was talking about. There is a similar perverse outcome in relation to balconies there allegedly being made safer, because, ironically, the decision to replace timber decking with aluminium might make them less safe. Luckily, the chair of the leaseholders’ association is a retired engineer from the construction industry, so he spotted that the use of aluminium might not be a safe option at all. Aluminium can be corroded by salty sea air—the block is near the sea—unless it is anodised. The truth is that those leaseholders might well be safer, and not facing a £10,000 bill each, if the balconies with timber decking remained.

My amendment is narrow and might seem a bit specific or even trivialising, but it is an attempt to probe whether the Government will consider adopting a broader cost-benefit analysis approach specifically to balconies to avoid more EWS1-type problems. It is also an attempt to encourage the Government to be wary of the zero-risk approach of a one-sided and overly precautionary culture of fear, with which the Hackitt review is imbued; there are lots of good things in it, but there are also a lot of things that I do not want to just endorse. Many of the leaseholder campaigners whom I have talked to say exactly the same: they warn that we should talk more to leaseholders, who of course want to be safe but do not want safety to lead to them having to pay for expensive and unnecessary remediation work, on balconies in this instance, when it is just not needed. I beg to move.

[The Earl of Lytton (CB)]

My Lords, I think the noble Baroness, Lady Fox, has done a considerable service, because she has highlighted quite a number of things. You might say balconies represent important facets in terms of building safety. The question of balconies may have been triggered by a fire—it may have been in Australia—caused by a discarded cigarette end on a timber-deck balcony. The circumstances, of course, of timber in high summer in New South Wales or wherever may be significantly difficult from in a typical English summer. I grant you that—and, of course, timber does not retain significant degrees of combustibility throughout the season, typically, in this country. I can certainly testify to disposable barbeques being a far more potent source of fire in such circumstances.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

My Lords, as I was saying, the Committee will know that there has been a serious problem aggravating the difficulties that leaseholders have experienced in the post-Grenfell world. This is because insurance companies and mortgage lenders have required these external wall assessments to be made and the dreaded EWS1 forms to be filled in before transactions can proceed. However, not only are the assessments expensive—or they were—but the requirement to provide them implies, or implied, a very cautious view of the needs of fire safety in particular. Worst of all, there has been a crippling shortage of RICS professionals to carry them out.

I argued during the passage of the Fire Safety Bill that this process was over the top, as sometimes happens with professional-based regulation, and increased the numbers of unsaleable properties post Grenfell by hundreds of thousands. I was therefore delighted to hear the Valentine’s Day announcement of the Secretary of State, Michael Gove—in addition to the January comments quoted earlier by my noble friend the Minister —stating that:

“The provisions will protect leaseholders and encourage a more proportionate approach to fixing buildings. Currently, building owners can simply pass all costs on to leaseholders, with no incentive to hold back on unnecessary remediation work that has brought misery to leaseholders. Today’s package, alongside the duties in the wider Bill, will create an environment for tough, proportionate action on critical safety issues while preventing cost inflation and excessive work.”


“Today’s package” sounds good to me. However, I remain a little sceptical, knowing just how bad the gold-plating has been. For example, we were right to agree earlier on the need to be proportionate about balconies, as the noble Baroness, Lady Fox of Buckley, argued.

The purpose of this probing amendment is to invite my noble friend, who is of course the Minister at the Department for Levelling Up, to update us and agree to undertake a review of the situation in 12 months’ time. The review proposed would focus on the tall buildings that are in scope, but the whole sector would benefit from a review that assesses the position of smaller buildings as well as the interests of the consumer rather than just the surveyor—in this case, the leaseholders and property owners affected. I add that the right reverend Prelate the Bishop of St Albans asked me to say that he supports this amendment but had to be elsewhere. I very much hope that my noble friend will look sympathetically on this request, particularly given the helpful change of approach by the Secretary of State.

[The Earl of Lytton (CB)]

My Lords, I will probably disappoint the noble Baroness a little, but I hope that I can also give a bit of explanation. I say that with particular feeling because she chairs the Built Environment Committee, on which I have the privilege to serve.

I understand the irritation that has been generated in some quarters by the EWS1 scheme. I ask the Committee to bear in mind that this was prepared as something of an emergency measure to deal with the logjam of unmortgageable, and therefore unsellable, properties. It was set up at the instigation of government and occurred following discussion with insurers, lenders and valuation professionals. It is a creature of common creation and not the RICS alone, although the RICS put it out. That is quite important.

The unfortunate thing is that, as it was the only form of certification around, it has been latched on to in certain quarters as providing some reassurance for things that it was never intended to achieve. In other words, it was seen as something with a wider fitness for purpose than was ever intended, and that is part of the problem.

When one produces something of this sort, it is produced in collaboration with others, but there will always be people across the spectrum; the insurance world is such that certain sectors of it will top-slice the risk. There will always be some that—a bit like some of what I might call the more adventurous motor insurers—will insure only certain clearly de-risked parts of the market in risk generally. I do not know whether that is a problem here.

This EWS1 was just reviewed in December. The RICS—again in consultation, and again, I believe, with support and collaboration from government but certainly with all the relevant bodies—decided that even though its application in terms of the problems that it created was reduced to a very small proportion, it should be kept because that was the view of valuers, mortgage lenders and insurers. The RICS as a professional body cannot ignore what these people are saying or the commercial pressures that are set before it in dealing with that. The RICS also published its justification in December, which is available on the web. I am all for de-risking things so that assessments of all sorts do not grow horns and a tail. However, I am not sure that having the Government take control and ownership of this particular matter would necessarily reassure lenders or professionals or, for that matter, benefit the market sentiment.

In its evidence to the Levelling Up, Housing and Communities Committee, the RICS acting chief executive made it clear that there is already a process in hand to train up a cohort of fire risk assessors pursuant to the Bill’s objectives. EWS1 itself is probably destined to wither on the vine in a relatively short period of time. I therefore hope that I have given some sort of helpful explanation of why I am not sure that it is a good thing for the Government to take on this thing, even if they felt that they were willing to get their fingers involved in that particular pie, and why it is probably best that the matter continues on the critical path it is now and we see the outcome of this cohort of newly trained people. I am sure that other professional bodies will need to do training as well; we must try to make sure that it is rolled out as speedily as possible so that, hopefully, the problems will be put behind us.

[Baroness Pinnock (LD)]

My Lords, I thank the noble Baroness, Lady Neville-Rolfe, for raising an important issue. There is confusion and concern around these EWS1 forms and assessments. There is confusion—which I will come on to, following on from what the noble Earl, Lord Lytton, just said—and there is certainly concern from leaseholders. Either they wait for ever for these external wall structural assessments, or those who do them err on the side of caution because of the way that they were brought in as an emergency measure following the awful Grenfell fire.

--- Later in debate ---

I am very supportive of this amendment, because all it asks us to do is think about all of the issues and come back. Perhaps the Minister will commit to writing to all of us to put our minds at rest that the Government will create a lot of good fire risk assessors or de-risk some of the issues—this is the problem—that have been created by this emergency measure, although I understand why it was done. With those brief words, I hope that the Minister will respond positively.

[The Earl of Lytton (CB)]

My Lords, I should perhaps explain that, while I am a RICS member and fellow and a registered valuer, I do not actually deal with this particular thing. But, as a valuer, I understand constructs of risk and the attitude of lenders, because they so often dictate the process that is put in place by the valuers: they often set the fee for valuation and their form is used for this particular process. I say again that it is very difficult for a professional institution that tries to weigh up all these different bodies to get away from the big beasts of the mortgage lenders and the insurance world when it is dealing with this sort of thing. But I make no apology for that—there have been problems, and the noble Baroness is absolutely right that they have been visited, as she would say, on wholly innocent leaseholders. It is right that the whole thing should be kept under constant review.

[Lord Khan of Burnley (Lab)]

My Lords, I rise briefly to speak to Amendment 132 in the name of the noble Baroness, Lady Neville-Rolfe. It is a little but very important amendment and, as the noble Baroness will appreciate, “Every little helps” in making sure we get this right. I admire what the noble Earl, Lord Lytton, who spoke with great expertise, said about ending the confusion and providing clarity. That was a very important point. As a Lancastrian, I have never agreed with somebody from Yorkshire as much as I have agreed with the noble Baroness, Lady Pinnock, during the course of this Bill. She is quite right: leaseholders should not bear the costs for issues they have no control over. It is not their fault. We need to end the logjam.

This is my final contribution in Committee. It has been a fascinating debate. I have a special message for the Minister in Latin, to continue the theme: “Da operam, si potes”, or “You can do it, if you try hard”. We have debated a lot of fantastic amendments during this Committee. I am sure the Minister can do it and make this landmark Bill even better, to help people, residents and leaseholders across the whole country.

--- Later in debate ---

[Lord Stunell (LD)]

My Lords, the noble Lord, Lord Aberdare, has certainly been energetic, forthright and determined on this issue, and rightly so. He has reminded the Committee that the Hackitt report made it clear that the withholding of money from second-tier, third-tier and fourth-tier contractors and suppliers put pressure on them, which made it much more difficult for them to deliver a proper and effective product or job on site. The downward pressure that they faced as a result of the withholding of that money was a major problem for them as functioning entities. That was the view expressed in Hackitt, based on the evidence that had already emerged from the Grenfell inquiry.

Of course, there is much wider evidence around the country. The collapse of Carillion is an example. I think that £140 million of retentions were held by Carillion and thereby lost from those on lower tiers in the pyramid. Whatever else might be said about it, that put a number of companies at risk of going out of business, and indeed a number of companies did so just because that money was lost to them. The evil impact of this is very clear.

Some of the impact is less clear but just as difficult. Such companies find that they do not have the resources to invest in skills, training and continuing professional development, simply because they do not have that cash in hand. So it has an impact. Under

“Matters which the review may consider”,


the noble Lord, Lord Aberdare, has sensibly listed in his amendment three important ones and then put “(d) other factors”. I would add investment and training as one of the other factors that suffer as a result of this.

I want to remind the Minister that it is government policy that all government contracts should be written in such a way that retentions are not in place. Unfortunately, not every government department has read the memo. I asked the Business Minister, the noble Lord, Lord Callanan, a Written Question and subsequently an Oral Question about how that was progressing. He was quite frank in admitting, and it is on the record, that the Department for Education had so far refused to implement the Government’s overall guidance that all public procurement should be without retentions built into the contract documents. I have no doubt that the noble Lord, Lord Callanan, is having a good go at the education department; I hope that I can add to that today and another Minister will have a good go at it, at the very least to make sure that the Government get their own departments to follow their own policy, which would be very much in the direction that the noble Lord, Lord Aberdare, is advocating. I have probably said enough, but I certainly hope to hear good words from the Minister in a moment or two.

[The Earl of Lytton (CB)]

My Lords, I support my noble friend Lord Aberdare. The matter of retentions comes right at the end of this series of Grand Committee sessions, but it is part of a culture. It is the race to the bottom, value engineering or cost-cutting. Construction contract architecture and the practices that have grown up with it are all part of the perverse incentives that have somehow been built up.

At one stage in my professional life, retentions of, say, 5% or 2.5% for limited periods, as the case may be, started as security for the proper completion of works as set out and to a required standard. However, I take the point made by the noble Lord, Lord Aberdare, that this has now gained the appearance of an informal and unconsented bankrolling of construction costs at the expense mainly of subcontractors and their suppliers. This has to stop. It is like all such situations: retentions have a legitimate use but have been subject to serial abuse. If we could keep our eye on one and render the other improbable, that would be all very well, but if the bad practitioners do not get the message, some brutal measures may indeed be necessary and better regulation and protection of sums due may follow from that. I cannot help thinking that the small and medium-sized enterprises that have dwindled and atrophied as a component part of the construction industry are the chief sufferers. They are unable to take on the big beasts of construction.

There is a real point behind this. If the memorandum that the noble Lord, Lord Stunell, referred to became a universal code of practice in the sense that you really had to justify yourself before stepping out of line, that would at least be a start. There is a lot we can do with what we know and the existing situation in terms of decent treatment, honest measures and taking care of the whole supply line we are dealing with. What the noble Lord, Lord Stunell, said about investment, training and that sort of thing is absolutely on point, and I certainly support the thrust of this amendment.

[Baroness Hayman of Ullock (Lab)]

My Lords, the noble Lord, Lord Aberdare, has raised a very important issue and certainly has our support. Something has to be done to resolve this, and others who have spoken have swung in strongly behind the noble Lord. I am sure the Minister has listened and is taking note.

We have heard that retention is the customary practice of withholding monies to cover defects and incomplete work, but it is also being used for so much more than that, as the noble Earl, Lord Lytton, and the noble Lord, Lord Aberdare, explained. Depending on the size of the project, it can be insignificant or very significant. Large construction projects can be worth £1 billion; huge sums of money can be affected. As the noble Lord, Lord Aberdare, said, reform of the problems this can cause is long overdue.

Retention is often a cause for complaint and quarrel. Subcontractors often find it difficult and can see it as a tool to be bashed with by the paying party, who can hold back payment whether there is good reason to do so or not. I guess that I ought to declare a past interest in that I used to work for a small business that was contracted into large infrastructure projects, so I am very aware of the kind of impact that retention of monies can have. We worked with a lot of other small businesses within large projects. If payment is held back through retention, often for many months, small businesses have a serious cashflow problem, often meaning they cannot pay their staff. This is about not just training but the basic running of the business. They can then become dependent on constant, rolling bank loans, which is not the way a small business wants to run.

All that could be solved if this was sorted out. We see signs everywhere about considerate contractors, but contractors are not always considerate to their subcontractors. We need to sort this out. As we have heard, it can be such a source of pain and concern when the party holding the monies goes bankrupt. Other noble Lords have mentioned Carillion, which is probably the largest example of that happening.

I will not say any more, because we are nearly there, and we are nearly at another vote, I think. The noble Lord, Lord Aberdare, very ably introduced his amendment, so I think the Minister will have heard his message loud and clear. The last thing for me to say during this Committee is that today in particular, and throughout, the Minister has been given an opportunity to slay a number of dragons, not just this one, so I look forward to his response.