Cladding crisis: Appalling impact persists as Government remediation plans fail to measure up - PAC

The cladding crisis continues to exact an unacceptable toll on people in affected buildings.  In a report published today, the Public Accounts Committee warns that, eight years on from Grenfell, the Government still does not know how many buildings have dangerous cladding, how much it will cost to address, or how long it will take.

The PAC was left appalled at the continuing emotional and financial impact of the crisis, which may have affected as many as three million people. Evidence to the inquiry found far too many people still feeling trapped in unsafe homes, facing financial uncertainty and unable to sell their homes and move on. Disputes over safety still delay work starting, with Government's promise of a formal dispute resolution process yet to materialise; and there is a risk that residents in affected buildings face exorbitant insurance premiums long-term, a risk that Government is not doing enough to manage.

The Committee's report challenges Government on how effectively it is putting residents at the heart of its remediation efforts, and asks it to consider what more it can do to help bring down insurance premiums for residents awaiting work to start.

The Government published a plan at the end of last year, with a target to complete remediation on all buildings over 18m, with at least a completion date for all buildings over 11m, by 2029 – twelve years after the Grenfell fire. The PAC shares campaigners' concerns that the plan, which will rely in part on new legislation, is both insufficiently ambitious and at risk of not delivering what is promised. Up to 7,000 unsafe buildings are yet to be identified, and Government has yet to find a way to secure financial contributions from manufacturers of dangerous cladding. The report also warns of insufficient capacity and skills across regulators, local authorities and the construction sector which risk undermining the plan – a risk about which Government appears complacent.

The PAC is seeking a clear update from Government on what is being done to address the gaps between its plan, and what will be required to deliver it.

The report further highlights the potential impact of remediation plans on housebuilding overall. Government is not taking seriously enough the risk that paying for remediation diverts social housing providers' resources away from building new housing, and told the PAC's inquiry that it expects the impact of its policies to be small. Housing associations in London reported a 90% drop in social housing starts over the last year. The PAC is seeking a formal impact assessment of cladding remediation policy on housebuilding from Government by the end of the year.

Finally, the report finds that half a million pounds was lost to suspected fraud when taxpayer protections were relaxed to get money out to projects quickly under the Building Safety Fund. The PAC recommends that Government strengthen its counter-fraud controls and ensure they are adequate to meet accelerated funding demand.

Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “The Grenfell tower fire will forever be a badge of shame for the nation. Residents were let down by failings at every level. A community was traumatised, and 72 lives were lost. Rightly, all in positions of responsibility have vowed to do everything in our power to prevent such a disaster ever happening again. But eight years after Grenfell, it is still not known how many buildings out there have dangerous cladding, and when it will be removed. That vow remains unkept for every day that is still the case.

“As a chartered surveyor, I take a deep personal interest in building safety. I was utterly appalled by the evidence given to our inquiry, showing residents still mired in the national cladding crisis, with no immediate solutions at hand. Leaseholders with modest financial means can often be left with potentially large financial liabilities, effectively rendering their property unsaleable. There are two main reasons for this – one, the non-cladding defects in buildings such as non-cladding defects, and two, where leaseholders also have a share in the freehold. That crisis shows signs of having a chilling effect on housebuilding overall, with social housing providers forced to divert resources to remediation rather than badly needed new homes. Despite longstanding promises to make industry pay, Government has yet to find a way to secure this outcome.

“It would have course been the Committee's wish that this report carried better news for all affected. Unfortunately, we are united with campaigners in deeply regrettable scepticism that current remediation plans are capable of delivering on what's promised. We would therefore urge Government to look to the recommendations in our report, to help close the gap between their current plans, and the reality on the ground.” 

PAC report conclusions and recommendations 

Given the lack of progress to date and the remaining challenges ahead, we are sceptical about the adequacy and achievability of MHCLG's Remediation Acceleration Plan. With up to 7,000 unsafe buildings yet to be identified, painfully slow remediation progress and significant barriers still to address, we share campaigners' concerns that MHCLG's Remediation Acceleration Plan is both insufficiently ambitious and at risk of not delivering what is promised. The 2029 target in the plan is twelve years after the Grenfell fire and still does not expect remediation to be complete for all buildings. Some buildings might not even have started remediation works by then. Remediating buildings more quickly will in part rely on legislative changes, the timing for which MHCLG does not control. In addition to Homes England's efforts to identify all affected medium-rise buildings, MHCLG will also need to legislate to introduce mandatory registration of these buildings. The Remediation Acceleration Plan does not address the impact of non-cladding defects on progress with cladding remediation. Despite longstanding promises to make industry pay, MHCLG has yet to find a way to secure a financial contribution towards remediation from manufacturers of dangerous cladding products.

Recommendation 1. MHCLG should, within six months, provide the Committee with an update clearly setting out:

1. i) what it is doing to address the gaps between its Remediation Acceleration Plan and the policy and legislative changes needed to deliver them, and by when it expects them to be addressed;
2. ii) what it is doing to ensure that non-cladding defects are not holding up progress on cladding remediation and

iii) Homes England's progress identifying buildings with dangerous cladding;

1. iv) When it is going to produce proposals to ensure that all fire safety defects, irrespective of whether they are related to cladding issues, are properly addressed.

Insufficient capacity and skills across regulators, local authorities and the construction sector risks undermining MHCLG's acceleration plans. In 2020, the previous Committee warned that skills needed for remediation work would come under pressure as the scope of government's programmes increased. With MHCLG now planning to accelerate remediation, there are risks that there will not be enough suitably qualified fire risk assessors to determine the scope of works, or trained cladders to undertake the work. This is likely to be exacerbated by a wider context of ambitious housebuilding targets and constrained construction sector capacity. Yet MHCLG appears complacent about the risks posed by this lack of capacity. Despite MHCLG's assurances of additional funding and support for local authorities, local authorities may still lack the powers, capability or capacity to undertake the volume of necessary enforcement action. Where buildings are entering MHCLG's portfolio, ongoing delays to building control approvals by the under-resourced Building Safety Regulator (BSR) could continue to hold up works on the highest risk buildings. We are alarmed to hear that BSR approvals are typically taking four to five times longer than the targeted 12 weeks.

Recommendation 2. MHCLG should, by the end of July 2025, write to the Committee clearly setting out what action it is taking to help ensure there is sufficient capacity across the remediation system, and how it is assuring itself on progress.

We are appalled that those living in affected buildings continue to suffer an unacceptable financial and emotional toll. Far too many people continue to feel trapped in unsafe homes, many facing financial uncertainty and many unable to sell their homes and move on with their lives. Residents face ongoing delays to works starting, often due to disputes over which safety risks are considered tolerable, and disruption when work is underway. MHCLG's promise of a formal dispute resolution process is yet to materialise. The previous Committee recommended greater transparency and communication in 2020, yet information for many residents is still poor. MHCLG asserts that its 2023 Code of Practice for remediation puts residents at the heart of the process, but adherence is not mandatory and there is little evidence it is achieving this. Homes England's 'Tell Us' tool, which enables residents to ask if Homes England is aware of their building, sounds promising but Homes England acknowledges there is more to do to publicise it. It is too early to say whether the resident surveys required for the Cladding Safety Scheme are making a difference.

Recommendation 3. MHCLG and Homes England should write to the Committee annually, starting alongside its TM response, with an update on how effectively it is putting residents at the heart of its remediation efforts, including:

1. i) the usage and effectiveness of the 'Tell Us Tool' to help identify affected buildings; ii) the effectiveness of its dispute resolution process and whether it is using restrictions on developers;

iii) how it is measuring and monitoring adherence to the Code of Practice and what action it is taking for any breaches; and

1. iv) the outcomes of resident surveys conducted for the Cladding Safety Scheme.

MHCLG is not doing enough to manage the risk that residents in affected buildings face exorbitant insurance premiums in the long term. The previous Committee raised concerns in 2020 about the spiralling insurance costs faced by residents awaiting remediation and MHCLG committed to working with insurers to address them. MHCLG asserts that it has taken steps to ban terrible practices around high fees and commissions for arranging insurance. However, industry research shows that premiums for high-rise buildings doubled between 2016 and 2021 and MHCLG admits that the risk pooling arrangements it has brokered with the insurance industry have yet to reduce the highest rates. Insurance costs for buildings remediated under MHCLG's more proportionate approach to risk (using the PAS 9980 standard) may remain high even after works are completed. This new standard prioritises risk to life rather than risk to property and supports greater use of lower cost mitigations such as sprinklers. Where risk is deemed tolerable, this can mean some flammable cladding staying in place. The insurance industry is warning that, without a standard that prioritises risk to property and requires the removal of combustible cladding, it will be unable to reduce premiums significantly.

Recommendation 4. MHCLG should urgently:

1. a) undertake a review of insurance premiums so it understands how rates compare for those remediated under both the new and old standard; and
2. b) consider what more it can do to:
3. i) help bring down insurance premiums for residents awaiting remediation works; and
4. ii) address the risk that insurance for buildings remediated in accordance with the newer PAS 9980 standard is unaffordable even after works are compete, and ask the insurance industry to provide information about the overall costs of insurance premiums in high rise buildings post Grenfell and the increased insurance company payouts to policy holders.

Eight years on from Grenfell, we are concerned that MHCLG still does not know how many buildings have dangerous cladding, how much it will cost to address, or how long it will take.  MHCLG's latest estimate, that 9,000 to 12,000 buildings will need remediating at a total cost of between £12.6 billion and £22.4 billion, is very broad given the length of time that has passed since Grenfell and is now more than a year old. MHCLG asserts that it is working to narrow the range, but promised six-monthly updates have not materialised. This level of uncertainty means that MHCLG cannot know if it is on track to achieve value for money for residents and the taxpayer. PAS 9980, leaves too much open to interpretation and is resulting in disagreements over the extent of remediation required. Meanwhile, MHCLG's data on the unit costs of remediation is based on the costs of remediating high-rise buildings under the more risk-averse standard pre-dating PAS 9980. This risks further uncertainty and a lack of accuracy in its estimates of the total cost of remediation. MHCLG assures us that overall taxpayer contributions are capped at £5.1 billion, but the broad range of potential costs means it does not know how far in excess of the cap public funding might need to rise in the short term to maintain the pace of remediation before contributions are fully recouped from the new Building Safety Levy which would have to run for longer to fund any shortfall.

Recommendation 5. MHCLG should:

1. a) By the end of July 2025, publish its latest estimates for how many buildings are affected by dangerous cladding, how much remediation will cost (including latest unit cost data), and when it expects work to be completed;
2. b) bring forward, by the end of 2025, detailed proposals as to how construction manufacturers should be required to pay a share of the fire safety remediation costs and how this will relieve the pressure on leaseholders and tenants; and
3. c) indicate when it will respond to the Morrell report on product testing and safety and whether as part of that they will be giving consideration for a requirement that all tests of materials, those that fail as well as those that are successful, should be published.

MHCLG's previous attempts to speed up remediation exposed the taxpayer to increased risk of fraud. When MHCLG launched its high-rise Building Safety Fund in 2020 it relaxed a range of taxpayer protections in order get money out to projects quickly. While this approach has since been reversed, a potential loss of over £500,000 has been identified due to suspected fraud involving funds paid out in advance. MHCLG says that counter-fraud activity was underway before a belated Fraud Risk Assessment was completed in 2023. We are concerned that poor record keeping resulted in documentation being lost. Lessons are being learned, and the Cladding Safety Scheme is on a sounder footing, including counter-fraud controls. As MHCLG prepares to accelerate remediation work, we are encouraged that it is engaging with the Public Sector Fraud Authority and taking forward work to undertake a measurement exercise to learn more about the extent of potential fraud and the effectiveness of its controls.

Recommendation 6. MHCLG should, by the end of 2025: use findings from fraud measurement exercises to strengthen its counter-fraud controls and ensure they are adequate to meet accelerated funding demand; and share relevant learning across the Ministry to help prevent fraud in other programmes.

We are not convinced that MHCLG is taking the potential impact of its remediation plans on wider housebuilding targets seriously enough. The government has pledged to build 1.5 million homes during this Parliament. The construction sector is reporting workforce shortages. There is a risk that MHCLG's approach to remediation could negatively impact the delivery of this target, and the construction of affordable housing in particular. Paying for remediation works risks diverting social housing providers' resources away from building new housing. Housing associations in London are reporting a 90% drop in social housing starts over the last year. There are also concerns that the cost to developers of the Building Safety Levy may further reduce the supply of affordable housing. MHCLG has not published an impact assessment of these policies on the viability of housebuilding, claiming both that it expects the impact to be small and that it is likely to be affected by too many other factors.

Recommendation 7. MHCLG should, by the end of 2025, publish a formal assessment of the impact of its remediation policies (including the Building Safety Levy) on housebuilding projections in both the social and private sectors and what action needs to be taken to ensure the building of 1.5 million homes is not affected by these policies.