Developers to pay £3bn tax to fix cladding scandal

Developers to pay £3bn tax to fix cladding scandal
Michael Gove, the government’s levelling-up secretary [REUTERS/Henry Nicholls]

UK housing developers are to pay a further £3bn over 10 years through a new tax introduced by the government to stop leaseholders in buildings with flammable cladding from being billed with “crippling" amounts to remove it.

Through an extension of its Building Safety Levy, all new residential developments will be taxed in an effort to raise this additional £3bn over the next decade. 

It will help leaseholders in buildings between 11 and 18 metres where, in some cases, their developer can no longer be traced. Previously, leaseholders were facing plans for a 30-year loan scheme, but these have since been scrapped.

Alongside this new tax, 36 of the UK’s largest developers have signed a pledge to remediate fire safety works on buildings over 11 metres that they have played a role in developing or refurbishing over the last 30 years.

Michael Gove, the government’s levelling-up secretary, said today (April 13) that this will raise an estimated £2bn, doubling their existing commitment of £1bn.

Developers which have signed up include Taylor Wimpey, Persimmon, Countryside, and Barratt, among others.

Campaigners have said the bill faced by leaseholders is anywhere upwards of £10bn, making the government’s latest billion-pound commitments, which edges it closer towards this £10bn estimate, significant.

Subsidies committed by government and developersAmounts
Levy on all new development that is then used to fund fixing 11-18m cladding£3bn
Developers to fix their own 11 metres+ buildings£2bn
Government fund for buildings over 18m, subsidised by £2bn tax on developers£5bn

Gove said the new tax and doubling of the £1bn commitment to £2bn is “a significant step” towards protecting innocent leaseholders and ensuring those responsible pay to solve the crisis “they helped to cause”.

But he added: “This is just the beginning. We will do whatever it takes to hold industry to account, and under our new measures there will be nowhere to hide.”

The pledge taken by 36 developers requests that they “act as quickly as possible” to fix buildings which are their direct responsibility, regularly report to the government on their progress, and implement new “proportionate” guidance on building safety.

Back in November, Gove admitted the government was “not dealing fast enough with some of the big issues” posed by the cladding crisis.

“We collectively - the department, some in local government, others in the private sector - failed people by Grenfell," he told MPs.

The new £3bn levy is separate from the 4 per cent property developer tax chancellor Rishi Sunak announced in his Autumn Budget last year on those with profits of £25mn or more.

Set to raise £2bn over 10 years, the developer tax on businesses is part of a bigger, £5bn cladding-focused package announced back in February 2021.

Gove also sent a letter to the Construction Products Association today. He said construction product manufacturers have "failed" to commit funds to fix the cladding scandal, which has emerged following the Grenfell Tower disaster in 2017 which killed 72 people after the building's cladding caught fire.

"I have instructed my officials to do whatever it takes to make sure that construction product manufacturers are held to account through the powers that I am establishing in the Building Safety Bill," said Gove in his letter.

"My new recovery unit will pursue firms that have failed to do the right thing, including through the courts. I will consider carefully how to use other powers at my disposal to make sure that there are significant commercial and reputational consequences for those firms that have not stepped up."