Ministers have been urged to go further in helping flat owners remove dangerous cladding after plans emerged to pressure developers to cover works costing up to £4 billion.

In an apparent climbdown, Housing Secretary Michael Gove is expected to announce that leaseholders in buildings between 11 and 18 metres tall will no longer have to take out loans to cover the costs.

Instead, a Treasury letter reported by BBC Newsnight suggests he will threaten tax or legislation to pressure developers to cover the costs facing leaseholders, with no more money coming from the Government.

Only leaseholders in buildings taller than 18 metres can currently access grants to replace unsafe cladding under measures introduced in England after the Grenfell Tower fire killed 72 people in 2017.

The letter from Chief Secretary to the Treasury Simon Clarke to Mr Gove said loans for smaller buildings would be replaced by a “limited grant scheme”.

“You may use a high-level ‘threat’ of tax or legal solutions in discussions with developers as a means to obtaining voluntary contributions from them,” it read.

“I am pleased to see that you acknowledge the principle that the taxpayer should not be on the hook for further costs of remediation. To reiterate, my approval of this new package for 11-18m buildings is therefore conditional on no further Exchequer funding.”

Senior Tory MP Sir Peter Bottomley, who co-chairs the All-Party Parliamentary Group on Leasehold and Commonhold Reform, urged the Government to go further.

He told BBC Radio 4’s Today programme: “From what we’re hearing, progress is being made – it’s not enough.”

Sir Peter said “we need to get the money, spend it properly, and we need to overcome the hurdle” of indemnity funding so landlords can make claims from developers and manufacturers.

He said the Government must tell insurance companies to “come to the table with, say, £8 billion and then innocent leaseholders will live in homes which are safe and saleable”.

Labour’s shadow housing minister Matthew Pennycook said: “Any new measures that help resolve the building safety crisis are welcome, but on the face of it these appear far less significant than they sound.

“Nothing on non-cladding defects, no new developer levy and the position on leaseholder liability unchanged. We await further detail.”

A spokesman for the End Our Cladding Scandal campaign said the “devil is in the detail”, with the letter saying the measures do not “extend to non-cladding” costs.

“It’s a welcome step in the right direction but there’s still a long road to travel,” he said.

“It’s not definite still if we are getting to the destination we want to get to but we are cautiously optimistic.”

The BBC and the Daily Telegraph reported that an announcement on the measures is expected on Monday.

Liberal Democrat deputy leader Daisy Cooper said: “Innocent leaseholders are still facing eye-watering bills to fix non-cladding fire safety defects, not of their making, and more defects may be discovered once cladding starts to come off.

“Anything short of putting new laws in place to make the developers pay for their shoddy and dangerous house-building is a betrayal of innocent leaseholders whose lives have been put on hold for four years already.”

A Ministry of Housing, Communities and Local Government spokesman did not dispute the contents of the leaked letter, but added: “We will not comment on speculation.”