My Lords, I shall speak to Amendment 35. I was expecting others to speak to it first, but I shall address it briefly. I declare my interest as a vice-president of the Local Government Association. I, too, am an enthusiastic amateur and
rise with great hesitation. I also apologise for arriving fractionally late and going in and out, but I have amendments about to run on the Judicial Review and Courts Bill, so I have been trying to balance things in two places.
Whenever a new tax is applied to an industry or business, it is extremely rare that a given organisation simply chooses to absorb that additional cost. In the overwhelming majority of instances, the tax will be passed on to the consumer as a price rise. Businesses rarely undermine their own bottom line when there is little competitive advantage for doing so and where the cost can be simply passed on to the consumer without hurting the demand for their product.
The market is such that there is a massive, chronic shortage of supply of homes in the UK. This undersupply means that, in reality, developers know that demand will not greatly suffer as a result of the building safety levy. They will not absorb the tax. I fear it will simply be priced on top of the cost of new properties. After all, this is the free market, and we cannot escape the fact that that is likely to be the consequence of the levy.
I am not at all opposed to the levy in itself. The aim as outlined by the Government is to recoup money from the industry to part fund the hugely welcome grants that the Government have provided to fund cladding remediation. It is morally right that developers contribute via this charge for their past mistakes. What I am concerned about and object to, which is why I put my name to this amendment, is the idea that social housing providers will also have to shoulder the building safety levy, if I have understood it correctly.
As I said, taxes rarely get simply absorbed. The majority of social housing providers, as in housing associations, are non-profit, so the question is: where will they shift the cost to? As they do not make a profit, they are unlikely to tap into their capital reserves to subsidise the tax. Even those for-profit social housing providers are unlikely to allow it to eat up their presumably slimmer profits compared to those of private developers. So where will it go? As already alluded to by previous speakers, it could be passed on to tenants in the form of increased rents, which would somewhat undermine the purpose of social housing—to have an affordable place to live. Although that alone is a worrying prospect, what concerns me is the effect it could have on the supply of social housing. We already have a major social housing deficit. The homeless charity, Shelter, estimates that more than 1 million households are waiting for social homes. A building safety levy will leave social housing providers with the option of building fewer homes, due to the increased construction costs, or building out at the same rate with the same costs, but shifting the burden of the levy on to construction costs, the result being a lower quality of social housing.
Imposing this levy on councils means council tenants could, in effect, be subsiding the failure of private developers and paying the cost of remediating both council housing and private housing. We desperately need more social housing, and we need it now, which is why we ask the Government: what assessment have they made of the impact of this levy on social housing providers, the supply of social housing and the rental costs faced by social housing tenants?
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Finally, I add my support to Amendment 118 proposed by the noble Earl, Lord Lytton, and Amendment 24 in the name of the noble Lord, Lord Young, both of which are supported by the noble Lord, Lord Blencathra, along with the corresponding Amendments 115, 119 and 130, which aim to solve the issue of leaseholder remediation to ensure that the polluter indeed pays. I would also like to pay a huge tribute to Steve Day, whom many of the Committee know. It has been partly down to his tireless campaigning, as well as people from other cladding groups, that the debate has entirely shifted to there being almost unanimous agreement that the polluter must pay, to such a point where we have two amendments aiming at this end. If I may say so, I know the Minister has also been instrumental in shifting the Government’s position in the huge progress made since last year on this matter. I am grateful to him for his tireless efforts in delivering the Government’s much improved and very welcome offer to leaseholders.
I know both “polluter pays” amendments are highly technical and do not pretend to be a legal expert, which is why I felt it prudent not to explicitly add my name to either. I do, however, understand the general thrust of what they are trying to achieve. I hope the Minister can assure me that the Government’s lawyers are looking carefully at these amendments with a view, I hope, to bringing forward their own amendment that captures the essence of these proposals. In the meantime, I thank him very much for what he is doing. I am glad to think that everybody, from all sides of the House, is trying to work to move this forward with urgency.