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Industrial Training Levy (Construction Board) Order 2005

Volume 670: debated on Tuesday 1 March 2005

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rose to move, That the Grand Committee do report to the House that it has considered the Industrial Training Levy (Construction Board) Order 2005 [5th Report from the Joint Committee].

The noble Lord said: The proposals before us seek authority for the Construction Industry Training Board to impose a levy on employers in the industry it covers. We recognised from the day that we came into office that skills are vital to succeeding in an increasingly competitive global economy. We have made, and we continue to make, major investments in training. This year the Learning and Skills Council will support further education and training to the value of £6.9 billion. We have also established a network of 22 industry-led sector skills councils, with three more in development. This will ensure that we have a clear and strong voice from employers informing the provision of education and training.

The new skills White Paper that we are publishing very shortly will set out our detailed strategy for the continued improvement in the skills levels of the country, which still lag behind many of our key competitors.

We said in our last election manifesto that where both sides of industry in a sector agree, we will help to set up a statutory framework for training. The CITB is a model for such a framework. Earlier I mentioned that the sector skills councils have a very impressive network. and I am pleased to say that the CITB, in partnership with CITB Northern Ireland and the Construction Industry Council, was licensed as ConstructionSkills, the sector skills council for construction. That took place in the autumn of 2003. ConstructionSkills is a pathfinder SSC, developing one of the first sector skills agreements. We proposed these agreements in our last skills White Paper. They will be an important lever in raising our national performance as employers will articulate clearly what their training needs are and make a tangible commitment to meet them, both financially and in other ways. For our part, we will ensure that some of our support for training is directed toward those needs identified by employers.

The construction industry benefits from government funding in the same way as other sectors of the economy. However, the main source of income for the CITB is from construction employers. The Industrial Training Act contains provision for a levy on employers to finance an ITB's activities and to share the cost of training more evenly between companies in an industry. It is for the employer members of a board to make proposals for the rate of a levy for the industry that it covers and for the Secretary of State to make an order giving effect to the proposals.

That is the purpose of the order before us. It gives effect to proposals submitted to us for a levy to be collected by the CITB in 2005. The levy is based on employers' payrolls and their use of sub-contract labour and, as it involves a levy in excess of 1 per cent of payroll on some classes of employer, the order must be approved by an affirmative resolution of both Houses. Also, as the levy exceeds 0.2 per cent with no exemption other than for small firms, the order can be made only if the proposals are necessary to encourage adequate training in the industry and one of three conditions is satisfied. I should add that these are the requirements of Section 11 of the Industrial Training Act 1982.

The first condition is that the proposals have the support of organisations representing more than half of the employers who together are likely to pay the majority of the levy. That condition has been met. In the order before noble Lords, the CITB proposes that both its levy rates should stay the same as those approved by the House last year; that is, 0.5 per cent of payroll for direct employees and 1.5 per cent of net expenditure on sub-contract labour.

Employers whose combined payroll and net expenditure on sub-contract labour is less than £64,000 will not have to pay the levy. That has been increased from £61,000 last year and equates to an employer who employs three people full time throughout the year. Some 39 per cent of employers come into this category. The Act requires ITBs to exclude small firms from the levy, but does not set a minimum size threshold. The figure of £64,000 is the level that the CITB itself, in consultation with the industry, considers to be appropriate.

A further 25 per cent or so of employers will not be assessed for or will not pay the levy for other reasons. For example, they are in their first year of registration with the CITB or have ceased trading. This means that around 60 per cent of the total number of registered employers will not actually have to pay the levy.

The higher levy rate on sub-contract labour is due to the fact that, according to the industry itself, the vast majority of training is carried out by employers with a directly employed labour force. It is also worth pointing out that in the main these tend to be small and medium-sized employers. Employers who opt to use sub-contractor labour are not normally involved in their training. However, it is encouraging to see that the large contractors, who use significant amounts of sub-contract labour, are recognising their responsibility to contribute more than cash to tackle skills shortages in the industry. They have agreed to encourage firms in their supply chains to recruit and train apprentices.

These proposals are expected to raise between £126 and £130 million and it is important to point out that for every £1 levy received in 2003, the CITB returned £1.69 to the industry in total benefits. Of this, £1.02 was paid out directly in training grants, allowances and college fees.

Noble Lords will know from our annual debates that the CITB exists because of wide support from construction employers and their interest groups. There is a firm belief that without it there would be a serious deterioration in training in the industry, leading to a real fear that its skills needs would not be met. This was confirmed by the review carried out by the Government in 2003. The review found that the principle of the levy is still strongly supported in this industry, and a recent independent survey showed that non-federated employers who are liable to pay the levy also agree that it should continue.

The order will enable the CITB to carry out its vital training responsibilities in 2005 and I believe that it would be right for the House to agree to approve it. I commend the order to the Committee.

Moved, That the Grand Committee do report to the House that it has considered the Industrial Training Levy (Construction Board) Order 2005 [5th Report from the Joint Committee].(Lord Triesman.)

I thank the Minister for introducing the order to the Committee and for his thorough explanation. It is in all our interests, as consumers and as a competitive economy, that we have a highly skilled workforce. The encouragement of training and development in the construction industry is welcome and we congratulate the CITB on the support it enjoys from its members and on the detailed consultation it undertakes with them.

We support the order, although we do have some concerns. As technologies, skills and working practices change, we hope that the CITB will reflect this and look carefully at the range of organisations which come within the scope of the levy. My honourable friend Mark Hoban in another place raised the concerns of the British Exhibition Contractors Association, which feels that because of changes in the industry, it should no longer pay the levy. On the other side of the argument, there may well be new industries that should be included. Can the Minister tell the Committee when the CITB last reviewed these issues?

We too welcome the order, in particular the emphasis it places on safety—both the safety of workers themselves and the safety of the practices carried out to meet the interests of their final customers. However, we have one or two questions for the Minister.

First, we notice that the threshold of £64,000, raised last year from £61,000, is not to be increased. That is an effective reduction, given the rate of inflation. How can he be sure that the levy is not an unwarranted burden, in particular on companies operating in London? A wage bill of £64,000 could represent just one relatively small contract. I am thinking of small contractors in London where building costs are very high. Perhaps the Minister can give us a reassurance that it is not an unwarranted burden.

Secondly, I understand that diversity is an issue within the industry. Many are concerned that not enough members of the ethnic minorities and women are being attracted into construction work. That is particularly worrying given the increased number of workers that will be required over the next few years. Can the Minister comment on what the board is doing about that?

Finally, no doubt the Minister will want to ensure that the provision of training in the construction industry is seamless from the youngest entrant through to older workers who need upskilling with new technologies. To what extent are the new apprenticeship scheme and the advanced scheme covered by the levy? Does a certain proportion of the money have to be allocated to training young people at that level? Also, how is training within the industry to be linked with the Government's agenda on vocational skills and training in schools? That is a changing area at the moment. Have the Government thought through the issue in detail so that it is dealt with as seamlessly as possible?

I thank both noble Baronesses for their contributions to what has been a very short debate. Perhaps we are in competition with a matter that is exercising many of our colleagues quite vigorously. However, I hope that I am able to do justice to the questions that have been put to me. If I miss anything, I shall of course write to both noble Baronesses to correct any omissions.

It is right to point out that the CITB is one of a number of organisations. In looking at its relationships with other training bodies, it has been careful not to trespass inappropriately into the terrain occupied by other training bodies. I know that that issue has formed a part of the discussions with regard to training provision in the agricultural sector. Generally speaking, however, concerns about where the proper boundaries lie is a matter of active consideration. I know from reading background papers that talks have also been undertaken with representatives from the Engineering Construction Industry Training Board. That kind of review is essential for precisely the reasons outlined by the noble Baroness, Lady Morris, in her submission; namely that these industries are evolving and technologies bring about changes to where the boundaries lie. We should encourage the continuing review of all those matters and therefore perhaps it is helpful for us to look at it on a year-by-year basis. That allows us to see where we are.

I also wholly take the point about the work of the CITB in making sure that safety and safe practice in the industry is an important part of its agenda in training, because it is a dangerous industry where we would not want young entrants to try to work, oblivious to the dangers around them. The CITB has shown itself as a training board to be effective in dealing with those kinds of questions and is getting more effective all the time.

I do not believe that in facing those burdens and in looking at training as a whole it could be said that small contractors find this particularly burdensome. There is not a great deal of evidence that they have argued that. Actually, the rate of increase at £3,000 compared with last year's figure is not likely to be a problem in terms of the relative rate of inflation.

The critical point is this. Often in industries where there are a number of micro-firms, it is often argued on their behalf—I know that the noble Baroness has not argued this—that they find it a great burden and would therefore prefer that only larger firms undertook all the training in the industry, and that they are somehow removed from that responsibility. One of the reasons that the CITB is such a beacon organisation is that it has made sure that everyone, small or large, shoulders an appropriate burden and that the big firms have helped to provide not just the money, but the training opportunities on their sites to ensure that that money has been effectively spent. That is why I suspect that there is some harmony between the larger and the smaller firms in the supply chain.

The issue of diversity is extremely important. We know well, as the noble Baroness said, that there are far too few young people from ethnic minorities and far too few young women coming into the construction industry. There has been an improvement, as we know, but that improvement was from a low base and the specific programmes that have been introduced, particularly in relation to ethnic minority groups, are beginning to show some considerable advances and there has been considerable discussion of training young women. I hope that we are seeing the beginning of a much more dynamic phase. I put it no more strongly than that today, because I acknowledge the extent of the problem.

The whole process should be seamless. New apprenticeships and new apprenticeship schemes are involved and there is no doubt that careful thought will be needed about the links with vocational training in schools. The White Paper will cover those issues. Rather than anticipate that, if it is felt that the White Paper does not cover the matter adequately, we will no doubt have a good debate on it. This is precisely the kind of area where a training board has managed to make good links with both schools and further education colleges in particular—and, in a small number of instances, higher education institutions as well. So we could expect to see the seamlessness that is essential if the programme is to be realised.

On Question, Motion agreed to.