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UK government vows £3.5bn extra cash and developer taxes to fix cladding scandal

Britain's housing secretary Robert Jenrick. Photo: Henry Nicholls/Reuters
Britain's housing secretary Robert Jenrick. Photo: Henry Nicholls/Reuters

The UK government has announced £3.5bn ($4.8bn) extra funding and two new taxes on developers to fix the cladding scandal, promising leaseholders in high-rise blocks in England will face no costs for safety works.

Campaigners and opposition MPs said the measures still failed to cover all of homeowners’ costs, while housebuilding stocks slid and developers spoke out over new tax plans.

Housing secretary Robert Jenrick unveiled the extra cash after a backlash over the existing £1.5bn pot, with many leaseholders and buildings not able to access help. The funding will pay for the removal and replacement of unsafe cladding materials from blocks over 18 metres, after regulations were tightened in the wake of the Grenfell Tower fire in 2017.

Jenrick said he appreciated the “despair” felt by many homeowners, largely leaseholders, left in an “invidious situation” footing the bill for safety measures.

“Leaseholders in high-rise residential buildings will face no costs for cladding remediation works,” he said.

He also unveiled plans to cap costs for leaseholders in four- to six-storey blocks at £50 a month, by providing a long-term, low-interest loan scheme for cladding remediation works. He said the risk was less serious in lower and medium-rise blocks.

The plans would “end the cladding scandal in a way that is fair and generous to leaseholders,” he said.

READ MORE: Persimmon creates £75m cladding fund as UK leaseholders set for new government lifeline

Meanwhile all of Britain’s housebuilders face a new tax, expected to raise £2bn over a decade, to spread the cost of remediation works across the industry. A separate “gateway to developer levy” will also be slapped on high-rise builders in England.

“It cannot be right the cost of addressing these issues falls solely on taxpayers, many of whom are not themselves homeowners,” added Jenrick.

But Stephen McPartland, a Conservative MP and critic of the government’s handling of cladding, said the plans were inadequate, and a “betrayal of millions of leaseholders.” They would not help cover leaseholders’ costs for other fire safety defects beyond cladding, temporary measures such as ‘waking watch’ patrols, and excessive insurance premiums, he tweeted.

Labour’s shadow housing secretary Thangam Debonnaire warned hundreds of thousands of people were still “trapped in unsafe homes,” with many more unable to move. She said the government still did not know how many buildings were unsafe, and called the extra cash “too late for many.”

Liam Spender, a lawyer and leaseholder, affected by the cladding scandal, said the £50 cap “seems good” but could add up to thousands of pounds in interest, which will be “immediately wiped off the value of those flats.”

WATCH: Developer Persimmon sets aside £75m for cladding costs

But stocks in Britain’s housebuilders dived on the planned tax and levy, as well as Redrow’s interim results and Persimmon setting aside £75m in cladding costs earlier in the day.

Redrow (RDW.L) shed 4%, Bellway (BWY.L) 4.8%, Taylor Wimpey (TW.L) 2.8%, Persimmon (PSN.L) 1.7%, and Barratt Developments (BDEV.L) 2%.

Meanwhile Andrew Southern, chairman of property developer Southern Grove, asked: “Why should a company that has never installed dangerous cladding, and perhaps never built high rise blocks in the past, be tarred with the same brush and penalised when they’re no more responsible for this scandal than those in other sectors building cars, running our hospitals and educating our children?”

Ministers have come under enormous pressure, including from Conservative MPs, over the safety worries, large bills and difficulties selling facing many leaseholders in properties with potentially dangerous materials.

The government has for years resisted calls to cover the full cost of retrospective safety work required to meet tighter regulations and guidance it introduced in the wake of the Grenfell disaster. Flammable cladding panels helped the fire spread, with 72 people losing their lives.

But Wednesday’s announcement marks the latest in a line of cave-ins to pressure to do more, with the latest government data suggesting 165 high-rise blocks are still awaiting safety work and many more smaller buildings affected.

The government initially pledged only to cover aluminium composite material (ACM) cladding removal in the social housing sector, then vowed £200m for the private sector, and in 2020 announced £1bn more on a first-come, first-served basis. MPs estimate the true cost of works could run to £15bn.

But Jenrick told MPs 95% of high-rise buildings had seen cladding work commence or be completed. He acknowledged that despite government efforts to make owners foot the bill, many would “simply seek to pass the very significant costs onto leaseholders.”