At last: a scheme that roughly resembles a financial solution to the government’s scandalous failure to ensure combustible cladding is removed from mid-rise residential homes.
It’s not perfect, and one can quibble with many details in Michael Gove’s plan to invite, with menaces, developers to pledge to cough up £4bn by March. But the secretary of state for levelling up, housing and communities is heading in the right direction.
First, he’s doing something. It is four-and-a-half years since the Grenfell Tower tragedy, so a muscular attempt to end the quarrels over who should pay to fit proper cladding on buildings between 11 metres and 18 metres tall, as opposed to higher buildings that have been covered by a separate £5bn fund, is long overdue. The government’s dodging of responsibilities to residents has been shocking.
Second, Gove has definitively broken ranks with his predecessor, Robert Jenrick, who took the grotesque stance that leaseholders in mid-rise buildings should borrow to cover the costs themselves. That was patently unfair: individuals found themselves living in unsellable homes and were not to blame for their predicament.
Third, Gove has gone where the money is – the building industry. This is the contentious part because there is no earthly way that he, or the companies, will be able to produce a perfect “polluter pays” formula that distributes the bill equitably.
High-profile stock market housebuilders, rather than private companies and those based overseas, are inevitably easier to chase. And it was woefully unclear in Gove’s announcement how much building materials companies, which should be more directly in the firing line, will be expected to contribute.
On that score, one can summon a degree of sympathy with the large housebuilders. They will pick up the lion’s share of the bill for a crisis that was created in large part by lax regulatory standards among quasi-government bodies.
Note that a few large firms – Taylor Wimpey and Persimmon to the fore – are already funding remediation work; it would be unfair if that is not acknowledged in the argy-bargy over sums.
Nor do legitimate grumbles over details stop there. Gove’s department needs to say more about how the £4bn has been calculated and how it will be spent. The figure looks high, say executives, if it is merely meant to cover cladding replacement, where scaffolding costs fall dramatically on 11-metre to 18-metre buildings (up to six storeys) versus tower blocks.
Alternatively, the sum is too small, according to campaigners, if it is supposed to include non-cladding fire-safety issues such as defective fire doors, flammable balconies and missing firebreaks. Or is Gove’s parallel effort to “end the situation of buildings being declared unsafe when they are not” intended to fill the gap between the £9bn of visible funding (including the new £4bn fund) and previous estimates that have been as high as £15bn?
Clarity is needed and it’s not reassuring that Gove’s department is still appealing for details about the number of affected buildings in the 11 metre to 18 metre category.
Acquiring accurate information, you might have assumed, would have been the first task. An independent overseer of this programme is needed. There is a danger that the execution gets bogged down in bureaucracy, thereby extending leaseholders’ misery.
Yet the housebuilders would be well advised not to bleat too hard. Yes, they’re a soft target for a government in search of funds, but that is partly because life has been made splendid for them over the past decade. George Osborne’s Help to Buy wheeze, as a House of Lords committee report reminded us on Monday, was a £29bn gift that succeeded mostly in inflating house prices in England – and, by extension, housebuilders’ profits margins.
For many, returns on capital employed of 30% or more have become normal, which suggests the pace of housebuilding itself should not be greatly affected by Gove’s extraction of a few billion quid over several years. The four FTSE 100 housebuilders alone have made combined pre-tax profits of £16.5bn over the past five years. Share price falls on Monday of 5%-ish feel about right: shareholders will be hit, but not catastrophically so.
Corporate boards would therefore be well advised to play ball with Gove’s request-cum-threat. They would be within their rights to press him to harry the building materials firms harder than he seems to be doing, but the cladding scandal has gone on too long and needs resolution. The companies don’t have a real choice in the matter: it’s time to throw some money in the kitty.