The Government will take “every step necessary” to ensure the building industry fixes the problem of dangerous cladding blighting thousands of leaseholders in medium rise blocks, Michael Gove has said.

Four and half years after the Grenfell fire exposed the dangers of cladding, the Housing Secretary said that no leaseholder living in a block above 11 metres would have to pay for fixing dangerous problems.

He confirmed that he had “an absolute assurance” from Chancellor Rishi Sunak that he was ready to impose taxes on the sector if they were not prepared to come forward with a solution.

“We will take action to end this scandal and protect leaseholders,” he said.

“We will make industry pay to fix all the remaining problems and help to cover range of costs facing leaseholders.

“Those who manufactured combustible cladding and insulation – many of whom have made vast profits, even at the height of the pandemic – they must pay now instead of leaseholders.”

Mr Gove said while he was seeking to convene a meeting with industry to find an agreed way, he was ready if necessary to “impose a solution on them in law” to cover the estimated £4 billion costs to deal with the issue.

“We do need to have additional backstops and it is clear that taxes can, if necessary, play (a part). I don’t want to move there but we do have the absolute assurance that we can use the prospect of taxation to bring people to the table,” he said.

“The fact that the (Treasury) Chief Secretary (Simon Clarke) and the Chancellor have authorised me to use the prospect of taxation, shows that we are prepared to take every step necessary.”

However, shadow housing secretary, Lisa Nandy, said that a leaked letter from Mr Clarke showed he had warned that a decision to impose new taxes was “not a given at this point”.

“It appears what he’s told the public – that tax rises are the backstop – is not what he’s told the Treasury,” she said.

“Has the Chancellor agreed to back a new tax measure if negotiations fail or is he prepared to see his own already allocated budgets, levelling-up funding, or monies for social or affordable funding, raided?”

In a significant U-turn, Mr Gove confirmed that leaseholders in buildings between 11m to 18m would no longer have to take out loans to pay for removing cladding, bringing them in line those in high-rise blocks.

“Leaseholders are shouldering a desperately unfair burden. They are blameless and it is morally wrong that they are the ones who should be asked to pay the price,” he said.

Mr Gove said he had established a dedicated team within the Department of Levelling Up, Housing and Communities to expose and pursue the firms responsible.

At the same time, he said, he was revising the safety rules for medium rise blocks with greater use of “sensible mitigations” such as sprinklers and fire alarms in place of “unnecessary and costly” remediation work.

The End Our Cladding Scandal welcomed Mr Gove’s revised approach but said his talk needed to be backed by “tough action”.

“It is clear from a leaked Treasury letter over the weekend that Chancellor Rishi Sunak still does not appear to understand the gravity of our situation and is seemingly doing all he can to evade ensuring homeowners are protected,” it said in a statement.

The Grenfell United campaign group, representing survivors and the bereaved, said the change of approach was long overdue.

“The success of this change of tactic remains to be seen. When the reliance is put on those responsible to come forward and provide funds to fix it, our experience gives us little faith,” it said.

However, David O’Leary, policy director at the Home Builders Federation, said the solution needed to go beyond developers and builders.

“We are keen to work with the Government – and we have (been) throughout the process – to find solutions. We would like to see other sectors brought into the discussion as well,” he told BBC Radio 4’s PM programme.

“There are questions to be asked about the product manufacturing sector. Clearly there are some issues with testing and the testing regime on products on which we are reliant.

“This a conversation that needs to go beyond property developers.”