DLUHC budget is ‘backstop’ for Gove’s £4bn cladding package

Perm sec seeks ministerial direction over £27m funding request for post-Grenfell fire alarms
Michael Gove. Screengrab: Parliament TV

By Jim Dunton

11 Jan 2022

Housing secretary Michael Gove has set out proposals to make the development sector fund a £4bn package of work to fix unsafe cladding fitted to lower-rise buildings after the Grenfell Tower fire exposed safety risks.

But a leaked letter from chief secretary to the Treasury Simon Clarke approving the move revealed that the Department for Levelling Up, Housing and Communities is being asked to demonstrate how it can cover the cost of the package if the private sector falls short.

Yesterday Gove unpacked the government’s revised plans to cover the cost of replacing problem cladding on residential buildings between 11m and 18m in height. A separate fund exists for taller buildings, which were considered the greater safety risk following 2017’s fire in west London, which claimed 72 lives.

Under the proposals, leaseholders will no longer need government-backed loans to cover the cost of the work. Instead, firms working in the residential development sector will be asked to contribute to the £4bn remediation fund, under the threat of potential new tax liabilities if they do not cooperate.

Gove also said DLUHC was setting up a dedicated team to “pursue and expose” companies at fault in the cladding crisis and force them to shoulder the burden of making buildings safe.

In an open letter to the development sector, published alongside yesterday’s announcement, Gove called on developers to take the lead in fixing known cladding faults with residential buildings between 11m and 18m in height that they were responsible for. He also asked firms to provide DLUHC with “comprehensive information” on buildings they had played a part in constructing over the past 30 years that had “historic fire-safety defects”.

As part of his announcement, Gove said he wanted to open discussions with the nation’s largest housebuilders and developers over the coming weeks with a view to creating a “fully funded plan of action” by early March.

Gove’s letter said firms with annual profits from housebuilding of £10m or more were expected to fall into the scope of the fund. It said firms could deduct the cost of remediation work on their buildings from their contribution.

In parliament, shadow housing secretary Lisa Nandy said Gove’s proposals represented a “welcome shift in tone” from the government but questioned DLUHC’s ability to extract funding from the development sector for the new £4bn pot.

 She asked: “Can the secretary of state tell us what makes him think that he can force developers who, for four years, have refused to do the right thing to pay up?”

No further exchequer funding

Over the weekend, a letter to Gove from chief secretary to the Treasury Simon Clake obtained by the BBC revealed that the housing secretary had pledged DLUHC budgets would be the “backstop” for the fund.

Clarke endorsed Gove’s plans to “use a high-level ‘threat’ of tax or legal solutions in discussions with developers as a means of obtaining voluntary contributions from them” but stressed that Treasury support for the plan was “conditional on no further exchequer funding”.

“You have confirmed separately that DLUHC budgets are a backstop for funding these proposals (in full i.e. the £4bn if required), should sufficient funds not be raised from industry,” Clarke wrote.

“You must prioritise building safety over supply. This should not just be for a future [spending review], but be reflected in spending and delivery choices now, to ensure there is room to pay for this later if needed.”

Clarke said he expected DLUHC officials to work with Treasury counterparts to “underscore the detail of these trade-offs” over the remainder of this month.

In parliament yesterday, Gove told MPs that taxes could play apart in cladding-safety work if necessary.

“I don’t want to move there but we do have the absolute assurance that we can use the prospect of taxation in order to bring people to the table,” he said.

Pocklington seeks ministerial direction

Letters published yesterday also reveal that DLUHC perm sec Jeremy Pocklington has sought and received a written ministerial direction authorising his department to spend a further £27m on installing fire alarms in buildings that currently have “waking watch” arrangements.

Following the Grenfell Tower fire, hundreds of at-risk buildings have introduced waking watch patrols – which involve continuous patrols of a building's floors and perimeter – to maximise the chances of safe evacuation in an emergency. But the high cost of waking watches, estimated at an average of £137 a month per home last year, has fallen on leaseholders. The government has so far committed £35m to fund the installation of new fire alarms in the buildings to reduce the expense.

DLUHC’s latest published top-level exchange on the issue shows Gove authorising the spending of a further £27m to install common alarm systems in buildings that currently need a waking watch.

Pocklington said he required the direction as the Treasury’s Managing Public Money spending guidance did not support such a move because the costs would be borne by the private sector “in the normal course of events”.

Approving the perm sec’s request, Gove said waking watch costs were “a national scandal” and there was an “urgent need” to tackle the problem.

“I am persuaded that this £27m fund is the quickest and most effective way to correct this scandal,” he wrote. 

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