Cladding and the Common Good Intervention
Can the Government continue to ignore the plight of leaseholders?
When an unexpected crisis hits a country and people’s lives are at stake, we demand decisive political leadership. In an emergency, most people in this country are willing to make compromises and sacrifices for the common good.
But what criteria do Governments use when deciding to intervene in some crises but not in others?
In 2008, following the financial crash, the UK Government swooped in with a £500 billion bailout package for the banks. It was argued that the crash was unforeseen and banks were ‘too big to fail’, so the State had to provide financial support.
In the Covid-19 pandemic, the Government knew it could not rely on market mechanisms to solve this unforeseen crisis. The safety of our nation’s most vulnerable was deemed worthy of intervention. From the furlough scheme to direct corporate assistance, the Government recognised the case for state intervention. At the same time, it secured unprecedented powers, and liberally threw around public money on projects and contracts that were sometimes dubious or unnecessarily costly.
So why is the same Government not minded to support another unforeseen tragedy, unfolding before our eyes, which is having devastating consequences? Following the Grenfell Tower fire in 2017, it became apparent that many properties were clad with similar flammable materials. Research from the New Build Database and the Office for National Statistics suggests that this might affect as many as 11 million people living in 4.6 million homes[i].
The Government has stated seventeen times on the record that leaseholders should not have to pay and has provided some financial support and a Building Safety Fund of about £5 billion in total. However, this only applies to buildings that are more than eighteen metres high and will only meet a fraction of the cost. The remaining costs for replacement cladding will fall solely on leaseholders. Developers and cladding providers will not be legally obliged to contribute anything. This egregious state of affairs essentially exonerates those with a direct part in creating the problem.
Leaseholders, on the other hand, the majority of whom have a household income of less than £50,000 per annum, could be handed bills of £30,000 to £100,000 payable in weeks to fix defects in buildings signed off as safe when purchased. During a recent Commons debate, a Member of Parliament highlighting this injustice produced an invoice sent to a leaseholder, demanding £79,000 payable within thirty days.
Whilst some Conservative Members of Parliament such as Royston Smith and Stephen McPartland have made it their personal mission to protect leaseholders, others have shown a rather dismissive attitude to their plight. One leaseholder received this reply from her MP:
“It has always been the case that buying property with a freehold or leasehold is a risky business hence the old dictum ‘buyer beware’ and nobody can expect the taxpayer to bailout every defect in every property”
What was the buyer supposed to be aware of? After all there were no registered defects when the property was purchased. Likewise, the victims of Grenfell could not have possibly countenanced the idea that their apartment block would be engulfed in flames.
There is a distinction between foreseeable and unforeseeable risks. Leaseholders should accept the cost of replacement security systems, or new sprinklers as reasonable since these were foreseeable at the point of purchase. Replacing entire building exteriors was unforeseeable.
The Government’s adamant refusal to intervene despite evident market failure reveals an inconsistent approach to risk and the common good. Whenever a Government chooses or refuses to intervene it makes a moral statement about its values and priorities. The risks and consequences arising from the 2008 Financial Crisis and Covid-19 were both sufficiently unforeseeable and far-reaching to persuade the Government to pursue common good intervention.
Where does this leave the victims of the cladding scandal? The introduction of the Fire Safety Bill shows that the risk of a second Grenfell is sufficiently high to warrant new legislation. That, however, is at far as it goes. The risk to leaseholders was no more foreseeable than the 2008 Financial Crisis or the Covid-19 Pandemic. Only with the tragedy of Grenfell was it realised that flammable cladding would have to be removed from apartment blocks.
It appears that those responsible for the financial crash and those responsible for the cladding debacle share a similar fate — absolution from responsibility while the fate of innocent leaseholders is potential ruination.
In the case of cladding, the Government has claimed that helping leaseholders is ‘too complex’. There is no recourse either to the common good or to ‘Levelling Up’ but rather an absence of both. The choice appears arbitrary, justifying intervention via appeals to the common good but then falling back on mantras of bureaucratic difficulty to avoid action when expedient. If there was a principle underlying the common good approach, leaseholders might not be on the verge of bankruptcy. The only difference is scale.
With the Fire Safety Bill due to return to the House of Lords, the clock is ticking for leaseholders. Efforts will again be made by Parliamentarians to put the common good first and help leaseholders. But without support from Government benches, any attempts will be set to fail. Saving leaseholders remains in the Government’s hands; they only need to take the initiative. Compared to the financial sector, leaseholders are at least equally deserving of state intervention. What was done in our name for the bankers, should certainly be done for leaseholders.
