Building Safety Bill (Second sitting)

Kate Osborne Excerpts

Thursday 9th September 2021 Public Bill Committees

[Mike Amesbury]

Q It is good to see you both, from afar. I have a question for you both: does the Bill ensure that the polluter pays? They are still receiving billions of pounds of Government subsidies. Is that clearly outlined in any provision in the Bill to ensure that leaseholders are protected and the polluter pays?

Liam Spender: No. The same builders that have put up buildings with the horrific array of defects that we are seeing are still perfectly entitled to draw on the Help to Buy scheme and the recently announced subsidies for affordable housing. There has been no accountability or payment from the polluter. All that has been offered, which is not in the Bill, is the residential property developer tax, which we do not know the details of. But it is wholly inadequate that it will recover only 13% of the estimated £15 billion cost. The bulk of the cost of the current crisis and/or future crises is being dumped on leaseholders, which is what this Bill does.

Giles Grover: I agree with Liam. It is not holding them to account at all. The latest figures are approaching £15 billion, and developments have made £2 billion since the catastrophic events at Grenfell. Government have supported them through the Help to Buy scheme and through instantly having a stamp duty land tax relief, and there is a mortgage guarantee scheme for first-time buyers that is open to everyone. The figure that always bothers me more than anything is the amount of money that the Exchequer loses every year—billions of pounds—to the zero rating of VAT on construction.

A lot of those things have laudable aims, but do they actually help the supply side? They do not; they are all about demand. Government are happy to praise the economic effects—the jobs, the flow of taxpayer money—and it certainly pans out to support the construction industry. The collective state of industry failure is affecting hundreds of thousands, if not millions, of people. It has taken two and a half years of kicking and screaming to get a bit of money out the Government every so often. Every year there is a little bit more. They keep telling us, “We’re not going to give you any more; we aren’t going to help you out”, but then we get further. There will be a point next year, hopefully, when the Government will say, “Here’s a little bit more”, but everything is a little bit here and little bit there. We are not being helped.

Why are we being forced into a planning tax loan scheme? Why are the Government not forcing the developers to pay that? The simple point goes back to: it was never our fault, it was never anything we did. The regulations are terrible, weak and inadequate. A lot of people knew that for years; the Government were advised of that for years. Builders were allowed to do whatever they wanted and to cut corners. Dame Judith Hackitt says there is a race to the bottom, focusing on profits over safety. But now, we are the ones on the hook to make that right. I do not get how that is at all fair. We need more funding from Government, we probably need more funding from the developers, and we need more funding from the product manufacturers as well. Leaseholders should finally be protected.

[Kate Osborne (Jarrow) (Lab)]

Q Good afternoon. Broadly, what are your views on the responsible person or persons? What do you think of the responsibilities placed on them? More specifically, is it reasonable to expect all accountable persons to be sufficiently knowledgeable to assume the responsibilities in the Bill?

Liam Spender: I think the whole responsible person regime has not been properly thought out. You cannot see, as parliamentarians, the full detail—that is being developed behind closed doors with industry. You are being asked to put this through without seeing how that very important relationship will work. The fundamental issue with the accountable person and building safety manager is that you would expect to find that regime in a petrochemical refinery, not in a residential building. It is totally unsuited to what needs to be done, massively over engineered, and the cost of it will fall on residents. The Government need to go back to the drawing board and come up with a much more tightly defined set of duties for these people, in order to avoid a situation where we end up with the advice notes, on steroids—which is a real risk.

Giles Grover: I would echo those comments. The difficulty is, again, that the legislation and the guidance are still not really there to help us understand how it will work. There are potentially moral hazards between the roles of those accountable persons—the building safety managers—in terms of how they will coalesce. There might be different accountable persons, or responsible persons, depending on the building. It still feels like there is no effective control. I do not think anybody wants to be an accountable person right now; the competencies required are a pretty wide skill set, and I fear that they will not be able to get insurance. I think we need a lot more work on how the accountable person will interact with the responsible person.

[Shaun Bailey]

Q Thank you so much for coming today, Giles, and for your candour. I want to talk about how the Bill addresses some of the inherent power and structural inequalities that we see, particularly when it comes to the industry. Broadly speaking, we have heard some positive overtures about how we change behaviours and the possibilities that are there. How do you think this Bill should go further to do that? From a personal perspective, I have seen what those inherent inequalities do day to day; I have lived through that. What it sounds like from your responses is that there is a system that needs to be ripped apart. How do you think, within this Bill and subsequent legislation, that can be done?

Liam Spender: Thank you for that excellent question. There are three critical things to address. First, there need to be leaseholder resident representatives on the rule-making bodies. This avoids a situation where industry and Government make rules that suit them, and pass the bill on to leaseholders who are left with the inadequate tool of challenges to the building safety charge and service charge, to contest bills that have already been paid. Secondly, the Government are trying to perform some sort of Frankenstein operation, with the Building Safety Bill, on a system that has had its day—namely, leasehold. There is a fundamental imbalance of power in the leasehold system in favour of landlords. Until you address that, you will not solve the problem of rules being made to suit landlords and bills being passed on to residents with no oversight, and no control. Thirdly, Dame Judith Hackitt identified in her report the culture of box ticking in the industry, the race to the bottom and value engineering—all that sort of stuff. Until that changes, nothing changes; buildings will continue to be built that are not fit for occupation and we will end up repeating the cycle at some point in the future. Those are the three things that need to be changed. I think that the McPartland-Smith amendments go a long way towards changing them, by introducing clear, legal routes to recovery against builders if they do not do their jobs properly.

Giles Grover: I will just echo the comments on the fact that the whole leaseholder structure means that you are still at the bottom of the food chain. There is all this talk about the building safety charge, but, as Liam said, ultimately it is about leasehold law—despite the Government thinking there might be protections in landlord and tenant law, we have seen that there are not the supposed protections there should be, because all the cases are based on the terms of the lease, which are always written against us. There needs to be an overarching look at the fact that it is not just the building safety charge, it is about service charges and how they are levied. There needs to be a bit more control over that, so that there is the actual ability to challenge it, rather than saying, “You can potentially go to the tribunal.” Ultimately, the cases we have seen do that just end up being rebuffed.

I am still concerned about the insurance issues we are facing now. There does not seem to be enough control. We have seen buildings insurance soaring by hundreds of per cent. I am not sure what protections there are against that happening. We have tried to report it to the FCA and the CMA, but are simply told that the responses are not as constructive or helpful as they could be.

Everything needs to be looked at again—even the building safety charge itself. When it was first drafted, I remember a meeting with one of the deputy directors of MHCLG where they said they did not really know much it was going to be. It was an academic exercise. Even the numbers in the current impact assessment say it will be £16 a month. It might be £42 or £26 a month. For existing buildings it should be more. No one really knows. As some industry figures have started to look at it, it might well be hundreds of pounds a month. There needs to be an overarching, holistic look at service charges and building safety charges. That would be the first thing.

To go back to Liam’s point about the McPartland-Smith amendment, that is what we are hoping the Conservatives will look at and realise that, yes, residents must be protected now, because they are the innocent people.

--- Later in debate ---

[Shaun Bailey]

Q I just want to come back on the really good question that was asked about resident and tenant representation, because we know that when that is done well, it ensures that people can live in safe communities and make the representations that they need to. We also know what it looks like when it is done horrendously wrongly and the power of a few is collated around a small minority, who seem to dictate what happens for everyone else in a community.

May I just ask you both: where should the driver be to ensure that tenant representation is effective? Should it be prescribed from national Government, in the context of this Bill? Should there be a mix? We have so many different types of ownership and of tenant model; I have three that are utilised in my own local authority alone. How do we ensure that every single person who needs that representation actually gets it, and where should the prescription for that come from—from national Government downwards, or from local government upwards? How do we do that? As you said in response to me before, the core of this is the importance of ensuring that those communities are accurately represented. So I am interested to hear from you both your thoughts on that.

Liam Spender: Thank you for the question and for engaging with the detail on this; as you say, it is vital. There is no one better placed than the people living in buildings to have a view on what is safe and what they think needs to be done to make those buildings safe.

I think there needs to be clearer language in the Bill about taking into account the resident’s voice, because at the moment a lot of the language in the Bill is passive; it is about residents being given information and not particularly good rights of consultation. There needs to be something in the Bill that creates a genuine partnership between the managers and the people living in the buildings.

To reiterate the point that I made in previous responses, residents need a voice on the groups and committees that make the rules, so that from the ground up and from the get-go the rules are shaped by that voice as they are being made, rather than just presented at the other end.

The last point I will make is that there needs to be better and more readily accessible advice for leaseholders and tenants. Perhaps specific programmes can be set up to provide that advice, so that people know where to go to get help when things are not working, and we do not end up with relationships breaking down, and so that we can have a genuine partnership. I think that would be a helpful addition.

I will let Giles add anything that he wants to add.

Giles Grover: I echo all those comments. Again, I have seen for myself the difficulty of engaging all residents; there is the turnover of residents as well, and you might have absent leaseholders. I appreciate that it might be difficult to do it on a statutory basis, but a lot more guidance and help could be provided to those responsible persons. In general, whether at this point there is that engagement with residents, or whether it is about tackling the issues that we are still facing, in terms of fire safety in our buildings, there probably needs to be a lot more partnership with local government and central Government. Local government—local authorities—and the fire service are able to be more reactive. They are on the ground and already have that relationship with the responsible persons and the managing agencies. That whole approach of saying, “Okay, this is what central Government are doing and this is what local government is doing, supported by the fire services,” could actually help drive a lot of it forward. Councillors have that local knowledge, as they are the ones residents turn to directly, as well as their MPs. Engagement with all stakeholders could be a lot better than it seems currently designed to be.

[Kate Osborne]

Q Have you considered or anticipated any possible increases to service charges or rent as a result of the Bill? If so, do you have any idea what that impact might look like to you as leaseholders or tenants?

Liam Spender: I think the simplest answer to the question is that we can expect the cost of living in higher-risk buildings, however defined, to be significantly higher in the future than it is today. We cannot really give any credence to the Government’s estimates that it will be between £9 and £26 a month. If you read the press articles, some of which quote industry figures you will be talking to next week, they are already talking about £500 a year extra just to pay the administrative costs of the new regime. That might not sound like a lot of money, but for some people—particularly shared owners who struggle to get on the ladder—it is make-or-break money. It is a lot of money if you have not got it—that is one way of describing it.

If that sort of burden were being imposed on a company, there would be uproar about it and there would be a great deal more scrutiny of it, but billions of pounds of costs are being loaded on to leaseholders as a result of the new regulatory regime, and the question that needs to be asked is whether we really need to spend that money. Do we really need to spend other people’s money—people who may struggle to pay—on this particular issue? I will hand over to Giles and let him add anything he wants to add.

Giles Grover: It is difficult to consider it, because last year it slightly changed. Last year, it included the historical remediation costs, and there were some vague, wide-ranging, heavily caveated figures about what it might be. Those figures are still heavily caveated. I suppose the difficulty I have is thinking about the future building safety charge when I have to pay a lot more already. A lot of people are already paying hundreds of pounds, so it is hard to have this conceptual thought about what may be put in place when they are already facing hundreds of pounds a month. Until there is more clarity about what it actually is, until there is more control over the building safety charge, and until the problems I am facing right now and the thousands of pounds I have to pay right now are resolved, I will not really consider it fully.

[The Chair]

Q Thank you. Unless there are any other questions, we have a couple of minutes left at the end. Giles and Liam, is there anything else you want to add that we have not yet covered? You have just a couple of minutes each to do that. That would be really helpful to us. Is there anything you feel we should have questioned you on but have not covered yet? Over to you, Liam.

Liam Spender: The one thing we would like to have spoken about, but we have not had the questions to do it, is how the Bill affects the housing market. In addition to the cost that is being loaded on to leaseholders, does it affect the functioning of the market? We already know—we made references to this in our written evidence—that banks are starting to make extra provision in their books because they think mortgages are worth less as a result of their exposure to cladding. If you ask me, that is shades of 2008, when we had an enormous banking crash. I suppose the issue for Parliament to consider, when considering this legislation, is what the effect on the economy of not putting up enough money—not by a long shot—to fix the current cladding issues and then creating this enormously complex machine, which may not be suited to the task. I do not think it is and I do not think many people think it is. What is the effect of that on the housing market and, in turn, what is the effect of that on the wider economy? And does Parliament really want to make that choice without knowing and considering that impact? I will hand over to Giles to add anything he wants to add.

Giles Grover: Thank you, Liam. On that point, I think it was in November 2020, before the Chancellor’s spending review, when we wrote to make exactly that point. The shades of the 2007-08 financial crisis were starting to become clear: the impact on regulatory capital of the banks with mortgages being valued at zero, and the increasing number of forfeitures. We saw reporting earlier this year about the impact on flat sales transactions. I think they were halved in September 2020. So, as Liam says, there is the effect on property prices, especially in the north—I am from Manchester. The property prices would be lower, but that means that the actual remediation costs are much larger. I think that has not really been considered.

There is the loan scheme as well. It might not be part of the Building Safety Bill, but we still have no idea how it is going to work and how it will not materially impact property prices.

The other thing I will just pick up on, which is in the Building Safety Bill, is the measurement of height and height being the determinant of risk. I think it was Sir Ken Knight who said earlier that height was a crude threshold. Robert Jenrick also said on 20 January 2020 that it was an arbitrary threshold; it might be important, but there are other factors. There is talk of PAS 9980, which will help with that, but, as was mentioned earlier today, the fire at Richmond House, Worcester Park, was in a building that was under 11 metres and it was completely destroyed in 10 minutes. Okay, there is the issue of higher buildings; I understand you might have to phase the scheme in, but we need a solution for all buildings. We need proper risk matrices that actually look at building risk holistically—that look at occupancy and means of escape and do not just say, “Okay, you’ve got cladding here.” What about the internal issues? What about the cavity barriers? What about the lack of sprinklers? One example of what could be done, which we have suggested before, is this. Rather than forcing people in buildings under 18 metres or between 11 and 18 metres to pay a cladding tax, why not ensure that you have sprinklers in those buildings? That is now part of Approved Document B, because Government have realised the clear safety principles of it. That would actually go a long way towards helping many of the people in the under 18-metre or 11 to 18-metre buildings. One final point is that we need to ensure that all buildings, not just those over 18 metres and from 11 to 18 metres, are safe, because those under 11 metres are still potentially very unsafe.