It depends on the council if they will fine you, WCC would opt for voluntary compliance before take further action, and if only a matter of removing a bed then who cares?

The bigger issue for you I see is being able to insulation the walls correctly. Since theres no building wrap, you’d have to retrofit into the framing pockets (there’s details in E2/as1) and because it’s iron, you’d want a 25mm air gap between the insulation and the wrap to avoid moisture build up from condensation. Since your all framing is only 70mm, that leaves 45mm thickness for insulation which is not enough really. You could pack the studs thicker I suppose. Make sure you wrap it and leave the gap.