Grenfell Tower Inquiry: Phase 1 Report

Earl of Lytton Excerpts

Thursday 31st October 2019 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I too express my thanks to the noble Lord, Lord Bourne, for introducing this debate. As a practising chartered surveyor, I spend much of my time investigating and trying to head off building defects. I must declare my interests as a vice-president of the Local Government Association and patron of the Chartered Association of Building Engineers. However, I speak not from a special knowledge of tower blocks but more generally. I warmly congratulate our three maiden speakers on their splendid contributions to our debate and look forward to hearing from them in future debates.

That in this country, with its systems for product testing and approval and its long history of construction regulation and fire safety, we should be considering a report into so many avoidable deaths and shattered lives, and the gutted shell of a once purposeful block of homes, should make us all pause to reflect. I share the appreciation of Sir Martin Moore-Bick’s inclusion of a place in his report for each and every one of the victims by name. His Grenfell phase 1 report is truly vast in scope and forensic in its detail. I congratulate his team on it.

My purpose is to look at the failings across the sectors of building construction, improvement and maintenance, and use and management. Like the noble Lord, Lord Porter, I would have preferred to see phase 2 now rather than later because we have a substantial legacy of, and commitment to, high-rise residential blocks in this country. Over time, the perceived risks and the regulatory environment governing them has evolved. Not all critical change to a building is obvious; some really quite subtle changes can alter risks in ways not apparent even to local authority building control or environmental health officers, let alone to the fire and rescue service. Regulations governing post-construction alterations are not always retroactive in effect, as I understand it. At any given time, many buildings will almost certainly not meet the latest standards. On fire doors, at any rate, the report serves to change that, but there is clearly yet more to uncover about wider systemic construction failings.

It seems that there is no more than an informal voluntary system among management bodies for recording or storing the critical features of design and performance data for buildings, for the handing over of core information to successive owners and for logging alterations and repairs. In some cases, these are carried out without reference to expert examination, or perhaps even to the insurers and other interested parties—including, yes, residents. Localised or specialist installation works can fail to take into account the larger implications for a block as a whole. But to be fair to the fire and rescue service across the country, it can fulfil its duties only to the extent that the information is current and available in a useable form, so that it can use it. The report makes valuable recommendations here also and let us note that poor co-ordination is not the exclusive preserve of public bodies.

There has in the past been no equivalent to product recall for buildings, whether from a design fault, critical component failure or poor manufacture and assembly. Many construction warranties seem to protect the developer under the caveat emptor principle and give comfort to mortgagees rather than provide a guarantee of construction adequacy to the consumer. Stricter liabilities will, I am certain, be something for the future.

I note that a recent fire in Greater London in a modern four-storey block of flats erected by a respected housebuilding group appears to have revealed serious workmanship, construction management and warranty sign-off shortcomings. It looks as if, even now, we are not erecting new residential accommodation to the standards legally required. I am not sure that the current regulatory balance of expendable buildings provided occupants can get out safely gives the right signal or avoids perverse outcomes. Not only should occupants be able to evacuate safely but the accommodation unit must contain fire, and perhaps modest explosion, safely and not result in wholesale building failure.

The report’s implicit assertion that blocks of flats should withstand modest kitchen fires is therefore timely. From faulty tumble dryers subject to recall but where the ownership, whereabouts and circumstances of use may be largely unknown, to poorly manufactured smartphone and laptop batteries, in dwellings accidents can happen.

Some will point to the dwindling resources available to local authority building control as a factor. The truth is that their resource has been eroded by manpower losses to the private sector. Approved inspector firms have taken a lot of the available capacity. I have on too many occasions seen defective workmanship and short-cutting in site supervision and construction management. We need more inspectors of higher quality and better regulation and not their alienation.

There is not always an adequate understanding of a building’s fire protection philosophy, any more than there is sometimes of the thermal envelope or the style and category of occupation. That is not unique to social housing or to tower blocks; it happens everywhere. There is fragmentation of responsibility, lack of integration and limited scope of roles, the silo mentality that we hear about, budgetary delimitations, a lack of holistic approach and checks by rote rather than asking those awkward “what if” questions. As we know, modern contracting arrangements in building construction are also fragmented, with known shortcomings in labour, management and contractual arrangements.

I sense that we have lost sight of some of the objectives of delivery of safe, durable and competent housing, and lost an ability to maintain an all-encompassing grasp of the construction process. Technology could assist us, but it is no good if the raw data is not stored properly. Management clearly needs to know, and to inform and educate residents. The bottom line, referred to by other noble Lords, is that the process of the law will follow. The Australian court decision in the Lacrosse fire case has put all on notice of collective responsibility and the pursuit of justice when professionals get it wrong. Phase 2 will undoubtedly complete the picture of just how much more work there is to do, and I look forward to it.

Non-Domestic Rating (Lists) Bill

Earl of Lytton Excerpts

2nd reading (Hansard): House of Lords
Monday 30th September 2019 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, it is an absolute honour to follow the noble Lord, Lord Randall of Uxbridge, and to congratulate him on an outstanding maiden speech. He speaks with very great authority on the retailing and modern worlds from his experience with the family firm. I regret having received the speakers’ list only when I came into the Chamber, so I have not had the opportunity to discover anything embarrassing about him that I can share with the House. However, like many of us, he has a wiki page, which tells me that he studied Serbo-Croatian. Of course, we know of his distinguished career as a Whip in the other place. He will therefore be not only familiar with the usual channels, but unsurprised at some of the stranger bits of double Dutch and jargon that inhabit the business rates world. I look forward to many more of his contributions.

Many years ago, I made my own maiden speech on what is colloquially known as the poll tax Bill. Noble Lords with long memories will remember its fate. I hope that this Bill fares a little better, although, unlike the noble Lord, Lord Randall, I am not at all convinced of its greater worth. I take this opportunity to congratulate the Minister on his appointment and his arrival into the hypothetical world of rating assumptions, in which only really the property and the bills are tangible and most of the rest is some sort of statutory assumption. That is worth bearing in mind. However, the economic outcomes are real enough. The noble Viscount should therefore be especially wary of the complexities and risks. I certainly look forward to working with him on this sector. At my stage of life I have no particular axe to grind, though. As a Local Government Association vice-president, I see all sides. Having a professional involvement of 44 years with this area of local government finance, here is my contribution to what I hope will be a bit of semi-honest brokerage from a ratepayer’s perspective.

A few years ago this Bill, which mainly increases the frequency of rating revaluations, would have been welcome. At this stage, though, my fear is that it is too little and almost certainly too late. We have a five-year revaluation cycle—or did, until it suited the Government of the day to defer the 2015 revaluation date. They argued that that gave certainty to ratepayers. Perversely, it did so, but at the expense of pegging their business rates to the historically high levels of the antecedent 2008 valuation date, which in turn informed the 2010 valuation list. More realistically, it guaranteed certainty of tax yield to the Treasury. Let us not kid ourselves, then, that this was anything particularly to do with benefiting businesses.

The resultant seven-year gap up to the 2017 valuation list meant significant adjustments, which in many cases would have created welcome reductions in rates burdens were it not for something called transitional relief. That operates to shield ratepayers from sharp increases in rates, but is financed by negating the benefits of reduced assessments for the others. It also protects the taxman from falling tax yields and is, I understand, reputed by some experts to have given him a large windfall. It is the extended revaluation gap in a time of rapid change, though, which amounts to the Government taking their eye off the ball.

There is also something called fiscal neutrality. I apologise for inflicting this jargon on noble Lords; it is a Treasury mantra that means that any changes to concessions, such as transitional and small business reliefs, have to be off-set—effectively funded—by higher charges to the remaining ratepayers. At the same time, it provides a safety net, if not a windfall, for the taxman, so it appears at the very least to be somewhat asymmetric as to effect.

Unlike rents, which ultimately have to follow market reality, the national rate yield is a fully protected upward-only construct. This has resulted in extraordinary increases in overall rates burdens on businesses over recent years—extraordinary by comparison with other applicable indices. As a result, there has been mounting pressure for reform of a property tax that is now the highest of any comparable impost anywhere in the EU or the OECD area.

The Minister will tell us, no doubt, that the industry has asked for these valuations. The noble Lord, Lord Randall, also referred to that. I believe that the British Retail Consortium has, indeed, asked for that, but I understand that everybody else has been asking for still more frequent revaluations plus a host of other reforms. I therefore do not feel that the justification for the Bill is entirely there. In any event, it only scratches at a fundamentally much deeper problem.

In effect, the system has been gamed to breaking point, not only by some unscrupulous consultants, but by HMRC and the Valuation Office Agency. Nobody in the business community now has much confidence in it, perceiving it as unjust, unfairly administered with an overly complex system of redress called “check, challenge, appeal”, or CCA, to use its acronym, which is consciously designed, it would appear, to impede fair rights of challenge and appeal.

I commend to the House consideration of a closely argued submission made in March this year to the Treasury Select Committee in another place by Mr Jerry Schurder of Gerald Eve. He is an acknowledged expert in the business rates field. He outlines failings in all the main areas on which a tax properly and reliably rests. However, even if the Minister does not believe Mr Schurder, he cannot deny the evidence that businesses across the land are voting with their feet in responding to business rates burdens as a major consideration in their retailing, office and industrial space occupancy and decision-making, while investors hesitate to commit in the face of empty rates charges. When a taxation system causes behavioural changes on this scale, it is wise to consider carefully the underlying policy, which has certainly contributed to high street atrophy and business reticence. When anyone involved in upgrading their premises finds that they are in receipt of a higher rateable value, removing at a stroke much of the benefit of the improvement, it is also a retrograde system.

Business tax payers need confidence that they are being fairly treated. Here, I fear, they know that they are not. No Government can claim to be business friendly while presiding over unfair local business taxation. The results for retail streets, for visitor attraction to towns, for investment, pension scheme portfolios and so on are negative. However, I am afraid HMRC still does not get it and will shortly have to find radical and costly solutions that will not be fundable on the fiscal neutrality principle, as more and more people trade online or migrate to other methods of trading not involving high-value, high-priced premises. Business rates are not solely to blame, but they and their administration are now widely seen as a very significant factor.

To finish, and given the parameters I have outlined, along with the failure to keep to five-yearly revaluations previously and the subsequent attrition in Valuation Office Agency resources, can the Minister say how the proposal in the Bill will be implemented and funded? Will the additional costs of more frequent valuations ultimately have to be met by the ratepayers themselves? If so, how much more mismanagement should they be expected to fund? When it comes to billing authorities having 100% business rate retention, as we believe is the ultimate intention, what factor of reliability does he think will be a realistic measure of future rates yield? This clearly matters to local government finance officers. However, if the current system collapses through failure to rectify, modernise or resolve the deep mistrust now prevalent—I believe we are close to that situation—the consequential expense of replacing the system will be incalculable, along with a needless destruction of valuable taxation and valuation stock in trade. I refer, of course, to the information base on all properties that go into making up the valuation list.

I really cannot express much enthusiasm for this particular policy tick-box of a Bill, nor do I see it as tackling the real issues. However, given that there is an intention to do something—anything—it is at least welcome to that extent.