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Session 1999-2000
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Delegated Legislation Committee Debates

Draft Industrial Training Levy (Construction Board) Order 2000

First Standing Committee on Delegated Legislation

Thursday 20 January 2000

[Mr. Bill Olner in the Chair]

Draft Industrial Training Levy (Construction Board) Order 2000

4.30 pm

The Parliamentary Under-Secretary of State for Education and Employment (Mr. Malcolm Wicks): I beg to move,

    That the Committee has considered the draft Industrial Training Levy (Construction Board) Order 2000.

The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Engineering Construction Board) Order 2000.

Mr. Wicks: I am sure that all of us agree that it is good to see you in the Chair, Mr. Olner, for what could be a brief meeting—although, of course, that is in the hands of the Committee.

The proposals seek authority for the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on the employers in their industries to finance their training activities, including grant schemes, and to fund the operating costs of the boards. Provision for this is contained in the Industrial Training Act 1982 and the orders before the Committee would give effect to proposals submitted by the two boards. In each case, the proposals are based on employers' payrolls and their use of subcontract labour. Each board has included the provision to raise a levy in excess of 1 per cent. of an employer's payroll. The Industrial Training Act 1982 requires that, in such cases, the proposals must be approved by affirmative resolution of both Houses.

As required by the Industrial Training Act, both boards have provided for the exemption of small firms from the levy. The level at which this exemption takes effect aims to strike the right balance between helping small firms to grow and giving them an unfair commercial advantage. However, the boards are committed to supporting the training efforts of small firms, whether or not they pay levy. All companies need a skilled, competent work force if they are to be competitive, and small firms in these sectors are encouraged to take advantage of the services offered by the boards and to provide opportunities for trainees and apprentices.

In the case of the ECITB, which assesses off-site establishments and construction sites separately, the following levy rates are proposed. A rate is proposed of 0.18 per cent. of the total of payroll and net expenditure on labour-only subcontracting for off-site employers—that essentially means those working in head office. Off-site employers with combined payroll and net labour-only payments of £1 million or less will not be liable to pay the levy. It is proposed also that 1.5 per cent. of the total of payroll and net expenditure on labour-only subcontracting for site employers is appropriate. Site employers with combined payroll and net labour-only payments of £75,000 or less will not be liable to pay the levy.

These proposals are different from those approved by the House last year in that the small firms exemption level for off-site employers is based on payroll rather than on numbers of employees. That ensures a more reliable and accurate measure of a company's levy liability and brings the arrangements in line with those for site employers. The change has been introduced in such a way that there will be no drop in levy income for the board; nor will any additional employers be brought into the levy net.

The CITB proposes the following rates: 0.5 per cent. of payroll for direct employees and 2.28 per cent. of net expenditure by employers on labour-only subcontracting. Employers with combined payroll and labour-only payments of less than £61,000 will not be liable to pay the levy. The 0.5 per cent. represents an increase for directly employed labour on last year's rate of 0.38 per cent. The board has explained that the increase is necessary because of important changes that are taking place within the industry.

New rules introduced by the Inland Revenue and the Contributions Agency are causing major changes in patterns of employment in these industries. There has been a large swing from using labour-only subcontractors back to direct employment. Because the levy on labour-only subcontracting is charged at a higher rate, that swing has led to a reduction in the boards' income. The industry has agreed to increase the pay-as-you-earn levy to 0.5 per cent. to maintain the necessary levels of income. I am satisfied that each board has obtained the support of employers within the industry. All the key employer federations have been consulted about the levy rates and have agreed that they are necessary to fund the boards' training plans. This is part of a move to a single rate of levy for all employees over a five-year period to 2003. At the same time, the industry is significantly increasing its investment in training. The CITB will be making additional grants and other resources available to support employers' efforts. That will be wholly financed by cost reductions, an increase in non-levy income and increased levy income from growth in the industry.

For both boards, the proposals involve levy rates in excess of 0.2 per cent., with no provision for exempting employers who make their own training arrangements. In such cases, the Industrial Training Act 1982 requires boards to demonstrate that the proposals have the support of the employers in the industry. I am satisfied that each board has obtained that support.

The proposals are expected to raise between £75 million and £80 million for the CITB and around £10 million for the ECITB. Both boards will use the money to fund a range of training activities, including grant and initiative schemes, new entrant training and operating costs.

The Committee will know from previous debates that the CITB and the ECITB are the only two statutory industry training boards. They exist because of wide support from employers and employer interest groups in these sectors, who believe that without them there would be a serious deterioration of training in these vital industries.

I have had recent meetings with the chairs of each board—Jim Rowland from the ECITB and Hugh Try from the CITB. We discussed the performance of their boards over past year and looked at some of the key issues for the future. I welcomed the importance that each is placing on regular analysis of the labour market. That is crucial if they are to ensure that the education, training, skills and qualification needs of their sectors—both now and for the future—are met. I know that each is committed to ensuring that employers in their industries receive a high-quality service and I thank them and their staff for their continued and committed hard work.

Each board is also the Government-recognised national training organisation for its sector and is fully involved with the national network of sector-level training organisations. The boards are making a significant contribution to work force development. For example, the nationally recognised labour market assessment systems developed by the boards informs the important work of the national skills task force, regional development agencies and, from April 2001—subject to the will of Parliament—the new national and local learning and skills councils.

The draft orders will enable the two boards to carry out their training responsibilities in 2000, and I believe that it is right that the Committee should agree to approve them. I commend them to the Committee.

4.41 pm

Mr. Tim Boswell (Daventry): I thank the Minister for his clear exposition of the orders.

I welcome you to the Chair, Mr. Olner. I know that you have a strong interest in the engineering industry. I think all of us enjoyed being at the sharp end of business and looking at the real world of employment, including manual employment. It is appropriate that we should have a brief and, I hope, constructive debate on the proposals. In a sense, this is our only opportunity to debate them. I notice that the Order Paper refers to the orders as matters for consideration on the Floor of the House, so it will all be over by this evening if we do not talk about it now. I should make it clear that most of my remarks will be on the CITB, not least because it covers many employers and employees, it is the predominant board and is larger in terms of levy income. The other order deals more, but not exclusively, with the offshore industry and health and safety.

I shall, therefore, divide my remarks and comment on the text of the orders, after which I shall make some more general comments pursuant to the Minister's explanation of the orders. For the avoidance of doubt, I make it clear that we shall not seek to divide the Committee or object to the principle of the orders, but it is only right that we should consider their details.

The Minister confirmed my impression that we are debating the only two industrial training boards in existence. The Conservative Government moved away from ITBs as a model, and although in the past Labour was attracted to the levy subsidy scheme and forward training it, too, is now moving away from them. We must therefore consider whether a special case can be made for these industries, and I believe that one can.

We are discussing statutory provisions, so it is important that they should receive the consent—not, I hope, grudging consent, but active support—of not only employers but the whole industry.

I have some experience of agriculture and recall the levy subsidy scheme operated by the agricultural training board. The genesis of such schemes was not only the 1982 Act, which was introduced by a Conservative Government, but the Industrial Training Act 1964, which was also introduced by a Conservative Government. The original intention of the schemes was to introduce a levy and subsidy, but it proved impossible to collect levies from small employers. The CITB and its counterpart have wisely avoided that possibility by proposing an exemption.

We cannot, however, simply nod these orders through because they impose significant charges and, as the Minister said, significantly increase charges on employers this year. The boards, therefore, must show that they are achieving value for money and acting in the best interests of their industry.

It is clear that the boards concerned support the orders, and it is clear from correspondence that there is no significant undertow of negative feelings. In my 12 years here, I do not think that I have received a letter saying, ``I do not like the CITB.'' I may have received one, but I have not researched the point. The boards have a long track record covering 35 or 36 levy periods, which suggests that they are doing something right. We must, however, always be vigilant, which is the purpose of such orders.

I cannot, substantively, don the role of lawyer, so I will don the role of barrack room lawyer and try to go through the orders. Although their wording is, I am sure, familiar to experts and the human resources departments of major national contractors, it does not leap off the page to the lay person or to, for example, a small builder who employs 10 people and has one trustee. The hon. Member for Bexleyheath and Crayford (Mr. Beard) appears to agree with that point. A tax redrafting or revision committee, under the auspices of my noble Friend Lord Howe of Aberavon, meets occasionally. In the light of that, I hope that the Minister will consider whether orders such as these could be made a little more user-friendly. If they are not, two things could happen; first, a misprint may not be spotted, which will lead to embarrassment, secondly, the average person whom I described—the small employer—will simply switch off and fail to respond. Explanatory material is made available, but perhaps the Minister will explain how it is delivered.

It would be helpful if the Minister gave the number of recalcitrant employers and the percentage of levy revenue that is lost, and whether the figure is likely to increase as a result of the substantial uplift proposed by the orders. The difficulty is not so much the letter that we receive suggesting that people do not like the levy and will not pay but that people will vote with their feet, will remain outside the system and will not be traced. I know from my inquiries of the board that it is working hard to prevent that and that the issue is highlighted in its business plan. It offends people, whatever the scale of their operation, if they know that their competitors up the road can tender without incurring such costs.

I note the provision on exemption limits. In a tidy-minded world, it would be possible to create a structure in which the orders and exemptions were identical. Indeed, if one was of that mind, it would be possible to create a scheme to bring the two boards together, which would save our time and would prevent you, Mr. Olner, from having to consider whether we discuss the orders together. I do not know whether the CITB has made a proposal to the Minister, although I know that it has rehearsed it, to reduce the level to £45,000.

The orders provide for the referring of disputes to employment tribunals. I know from my shadowing of employment law that tribunals have an additional heavy work load as a result of implementation of the National Minimum Wage Act 1998 and of the parental leave directive. Will the Minister give us some idea of how many cases are taken to a tribunal? I hope that people are not being litigious when they need not be and that disputes are settled by agreement wherever possible and the number of such cases is small and not increasing.

The final point on my rather small list is rather more contentious and I must be a little more critical. Both orders refer to the regulatory impact assessment. I must admit that I cannot find one. I am told that I could obtain one from Sanctuary Buildings—with a little more leg work, I might have tried to tease one out of Moorfoot—but I tried the Vote Office and the Library. The Library made inquiries of the Department while I was otherwise engaged this morning and, to the best of my knowledge, no assessment is available in the Room. In the context of employment law, I have criticised the Government's rather cavalier use of RIAs, by which I mean that they have not always produced them or treated them seriously enough. If there is an impact on business, and if there is a Government commitment to deal with it, we should know more about it.

I can say from my discussions with the board that the overall package could be containable and may be attractive to business, especially small businesses. However, the principle remains, and possible difficulties might be compounded by the explanatory notes, which do not clearly explain what is proposed.

I turn from those points of criticism and detail to the general thrust of the boards' work. I hope that I can be more constructive about that because these are real-world issues involving many employers and employees and young trainees. It is important that our attitude to improving standards is positive and proactive.

This is not a debate about the building industry in general—if we were to debate that, you, Mr. Olner would reprove us—but some points arising directly from the order are worth commenting on. The board is clearly conscious of its distinctive position and anxious to be sensible and business-like in achieving its objectives. I commend its business plan to members of the Committee, in which it speaks of anti-fraud and evasion strategies and of what it is trying to deliver as a national training organisation I shall not dilate further on that, but there are signs to show that it has a positive grip on the situation. It needs to have such a grip because the construction industry is very fragmented. It has half a million employees, which makes it almost the largest employment sector in the United Kingdom. There is a snag, of which hon. Members are aware from their constituency work—it is not concentrated in one area or another—with local delivery. It does not have the immediate salience of, for example, the chemical industry on Teesside or agriculture on Norfolk. A national focus may, therefore, assist.

The majority of employers in the construction industry are small employers. Even if we allow for the fact that the large employers have bigger labour forces, the distribution of employment suggests that more than half the industry is made up of small employers. What are the implications of that? Strangely, they are different from agriculture, where there are many businesses but few large businesses. There are large construction businesses, but they do not train. The chemical industry, in which the hon. Member for Bexleyheath and Crayford is involved, and the motor manufacturing industry are viewed as large training industries from which small employers poach. In the construction industry, it is the small employers who train and the large employers who poach. The reason is simple: trainees cannot travel large distances to work for a large contractor with contracts around the country. Instead, they must get on their bike or motor bike and travel within a small radius of their home to learn a range of skills.

That affects the acceptability of the levy. A levy subsidy can benefit the small employer. If he can get £6,000 per trainee, he can cope with the levy, which, in effect, is paid by the larger companies as an indirect subsidy to train new recruits. That stands the conventional model on its head.

There are still some problems of image and reality in the construction industry, one of which concerns safety. Crane drivers and forklift operators must carry cards to prove their competence, because they have the potential to damage not only other workers on site and people outside, but themselves. The industry's record in that context is, sadly, still poor.

A further element is that of quality—whether the job is being done to the best standards—which has safety and efficiency implications. Our former colleague and good friend of mine, Sir Michael Latham, set standards for the contracting side of the industry. I hope that the CITB will be able to contribute to the raising of standards. There is a strong desire among employers, including small employers—the cowboys will never be involved in these discussions without coercion—to raise standards. The board alone cannot achieve that; it can only influence the climate under which it is done.

I shall comment briefly on education and training, where the Minister's responsibility now lies. The business plan contains a remarkable statistic on school leavers. The Minister will know that there has been a rapid increase in the number of students staying at school after 16. The number of people who leave school at 16 to go into unskilled or manual employment is quite small. I am always pleased to note that women are becoming involved in construction—there are some excellent female engineers—yet it is predominantly a male activity. Young men of 16 leave school to enter the building or motor industries or a relatively narrow range of activities. An amazing 40 per cent. of school leavers enter the building industry, which places a huge responsibility on it to ensure that they are trained and developed and reach their full potential. Many of them have great potential. They may not have enjoyed formal schooling, but once they do something practical they see the relevance of a subject that they might have done at school—for example, maths—and get into it. A responsibility is placed on the board, employers and colleges and training providers to ensure standards of competence and that the right qualifications are offered.

I am aware from my time as a Minister and since of the high cost of construction courses. The Minister cannot abolish that by fiat and, to some extent, it increases over time. A 16-year-old can be taught history at A-level or a leisure and tourism GNVQ comparatively cost-effectively and cheaply, but it is expensive to train that 16-year-old in construction because there is a lot of kit involved. Health and safety requirements have added to the cost and modern technology has created new techniques and needs. I have seen one or two of the construction industry centres that are sponsored by the board, which are extremely useful. I know that the Minister wants to motivate those who leave school at 16 and those who are disaffected before they leave school, and such centres will have a role to play. Smaller FE colleges will not be able to offer such training.

I would never take health and safety off the agenda, but we must consider whether its requirements and stipulations are appropriate to a 14, 15 or 16-year-old who is training on site. An FE college told me recently that it is very difficult to get school children into training, but perhaps it is an issue that the Minister will discuss with the board and providers.

The industry has been dogged by a bad image but it genuinely wants to become a modern industry. Its leaders, including the board and employers of different sizes, are anxious to get things moving. The message that we must send from the Committee is the need to ensure proper training. In many cases, unless an employee or self-employed person has a card to prove his competence he will not be allowed on site to work.

The board will stand or fall on whether it can deliver a progressive improvement in standards, sensible qualifications and a modern industry with a highly skilled labour force. It would help if the Minister sketched out the direction in which the Government hope the board, and the construction industry more generally, will go.

5.3 pm


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