Katie Lam

I think it is fair to say that there are all sorts of ways in which the response to this appalling event and the wider questions that it raised did not happen as quickly and was not as effective as we might have liked—otherwise, we would not still be discussing it today. What is important now is that we make sure that whatever plan we come up with together, as a Parliament, is as effective as it can be to make sure that people are living in the safest possible homes. That is our responsibility now. It should not come as a surprise that legislating to make something true does not make it so. Passing a law that says that buildings must be fixed will not create a single new fire engineer. Rather than easing those practical bottlenecks, however, the Bill too often assumes that the main blocker to timely remediation is owners deliberately choosing not to act. Our fear is that, as drafted, the Bill may risk making the problem worse. Under the Bill, every building must be assessed within a year, and every assessment that recommends work must be audited by Homes England, drawing on the same small pool of specialists. There are owners who obstruct, and they should face the full force of the law, but they are the exception, not the rule. I say once again that I do not doubt that the intentions behind the Bill are noble, but we must always be careful that legislation, even when drafted with the best of intentions, does not produce unintended consequences. Perhaps the clearest risk of unintended consequences comes with the proposed new legal duty. Owners could face two years in prison or penalties of up to half a million pounds for deliberately failing to remediate as soon as reasonably practicable. Those standards—“deliberately” and “as soon as reasonably practicable”—are broad and subjective, particularly given the severity of the punishments prescribed by the Bill. Given that many of the decisions about whether owners have complied with the standards will fall to the regulator, can the Government be sure that due regard will be given to the real practical hurdles to remediation? What guidance will regulators get on what counts as “reasonably practicable”? Doubtless the Government intend for these measures to be used only in the most extreme cases of deliberate obstruction or delay, but we must be incredibly careful when designing new legal duties and criminal penalties. Like it or not, these standards will hang over owners who are attempting to act in good faith, but who are constrained by the practical difficulty of remediation. Likewise, opening up directors to personal prosecution on grounds of neglect risks generating unintended consequences. While directors’ liability for building safety is long established, the Bill goes much further. Have the Government assessed how many capable people will simply refuse to be named as directors on remediation compliance plans? What will it do to the cost of directors’ insurance? What impact will it have on the willingness of well-run management firms to get involved in residential property? How many will conclude that it is simply no longer worth the legal risk? Have the Government assessed whether the Bill will have an impact on access to directors’ insurance more broadly, and whether it could create a disincentive to involvement in residential property by well-run management firms? Another point of concern derives from the Bill’s approach to group accountability for parent companies and firms that are deemed to exercise control. The Bill builds on powers in the 2022 Act, but extends them from recovering costs to imposing penalties for offences. The Government must do more to explain where this stops. In 2022, Parliament let a court or tribunal look through a company’s structure where it was just and equitable to do so. The Bill will allow a regulator to adopt quasi-judicial powers and enforce large penalties in doing so. Limited liability is an important principle that, in its modern form, has endured in this country for more than a century and a half. It encourages investment and entrepreneurship. The erosion of limited liability that the Bill represents may set a worrying precedent. Until now, Parliament has qualified the principle only through the courts. The Bill qualifies the principle through regulators rather than judges. If that is acceptable in one sector, why not in others? Even if we confine ourselves to this sector, can the Government be sure that the erosion of limited liability will not create a direct deterrent to investment in large residential properties, including build to rent? Housing in this country is far too expensive for far too many people. People must be able to trust that their homes are safe, but they also need homes to buy or rent in the first place. Another concerning legal precedent emerges from the Bill’s provisions on retrospective liability for product manufacturers. In 2022, the previous Government gave building owners a route to claim against the manufacturers of defective cladding. The Bill goes much further. It loosens the test itself, so that a product need only have contributed “more than trivially” to a building’s being unsafe. The Government must explain why the 2022 test was not enough. Complying with the regulations in force at the time will no longer be a defence; firms that followed the rules can no longer rely on having done so. Nobody would deny the existence of bad actors—firms that have broken the rules or falsified evidence about their own compliance. Such firms have put people in danger, and some of the consequences have been unimaginably awful. They must be punished. However, there is no reason to believe that those firms would have complied had the legal standard been tougher. The point is that firms that break the rules are going to break the rules, no matter what they are. As is so often the case, the problem is one of enforcement. However, in an effort to tackle this non-compliant minority, the Bill extends retrospective liability well beyond what Parliament agreed in 2022—something that we must always be very cautious about doing. When firms or individuals cannot be sure that complying with the law today will ensure legal safety tomorrow, their behaviour can change. They may be more reluctant to enter the market in the first place, and will certainly be more reluctant to innovate. Insurers will price in that risk, and every new home will cost more to build. As with so many aspects of the Bill, the Government, in attempting to achieve a noble aim, risk undermining important principles. The presumption against retrospective legislation, the principle of limited liability and the principle of clear legal tests are foundational to the way in which we have designed the law in this country. Of course, we can deviate from them—in our country, Parliament is sovereign and can make whatever law it chooses—but when we do deviate, we ought to ensure that we do so with a full appreciation of the facts and implications. It ought to happen only when we can see no other way to solve the problem at hand, and only when we are sure that new legislation, rather than better enforcement or efforts to ease practical bottlenecks, is the right course of action. I reiterate my appreciation for the intention behind the Bill. That anybody should feel unsafe in their own home because of structural or material faults is a profoundly depressing state of affairs. However, we are concerned that, in pursuing this noble aim, the Government may not have given due regard to some of the unintended consequences of the solutions they propose. As the Bill progresses, we will probe all those points and more. We look forward to working, with the same noble aim, to improve the Bill however we can.