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Session 2001- 02
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Delegated Legislation Committee Debates

Draft Industrial Training Levy (Construction Board) and (Engineering Construction Board) Order 2002

Third Standing Committee on Delegated Legislation

Tuesday 5 February 2002

Mr. James Cran

Draft Industrial Training Levy (Construction Board) Order 2002

10.30 am

The Parliamentary Under-Secretary of State for Education and Skills (John Healey): I beg to move,

    That the Committee has considered the draft Industrial Training Levy (Construction Board) Order 2002.

The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Engineering Construction Board) Order 2002.

John Healey: Welcome to the Chair, Mr. Cran.

The orders seek authority for the construction industry training board and the engineering construction industry training board to impose a levy on employers in their industry.

Industrial training boards are non-departmental public bodies set up under the Industrial Training Act 1982. Their role is to ensure that there is a sufficient quantity and quality of training to meet the needs of the industries for which they are established and designed to serve. They provide a wide range of services, including setting occupational standards and developing vocational qualifications, delivering modern apprenticeships and paying direct grants to employers who carry out training to approved standards.

The 1982 Act contains provision for a levy on employers to finance an industrial training board's activities and to share the cost of training more evenly between companies in an industrial sector. It is for employer members of a board to make proposals for the rate of a levy for their industry and for the Secretary of State to make an order giving effect to the proposals.

The orders give effect to the proposals submitted to us by the CITB and the ECITB for their 2002 levy. Both involve the imposition of a levy in excess of 1 per cent. of payroll on some classes of employer. The 1982 Act requires such orders to be approved by affirmative resolution of both Houses. In each case, the levies are based on employers' payrolls and their use of sub-contracted labour.

For both boards the orders involve levy rates in excess of 0.2 per cent., with no exemption other than for small firms. In such cases, a levy order can be made only if the orders have the support of organisations representing the majority of those employers who pay most of the levy. It has been established through consultation with the main employer organisations in each industry that the orders have their support.

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The 1982 Act requires industrial training boards to exclude small firms from the levy, and each of the orders does that. In setting the level at which the exemption takes effect, the boards have tried to strike a balance between helping small firms and giving them unfair competitive advantage in their field. However, both boards are committed to supporting the training efforts of small firms, whether or not they pay the 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 the trainees and apprentices they employ.

In the construction industry, a higher levy rate is imposed on employers' use of sub-contracted labour than on their direct work force. That is because, according to the industry, the vast majority of training is carried out by employers with a directly employed labour force. Employers who opt to use labour-only sub-contractors tend to have a transitory arrangement with those sub-contractors and are not normally so involved in their training.

The CITB proposes that both its levy rates in the order should stay the same as those approved by the Committee last year—0.5 per cent. of payroll for direct employees and 1.5 per cent. of net expenditure on sub-contracted labour. Employers whose combined payroll and net expenditure on sub-contracted labour is less than £61,000 will not have to pay the levy.

In the engineering and construction industry, head offices and engineering construction sites are levied at different rates. Head offices are able to plan and manage most of their training needs because work forces are more stable. The ECITB is proposing that its levy rates should also stay the same as those approved by the Committee last year—0.18 per cent. of the total payroll and net expenditure on sub-contract labour for head offices and 1.5 per cent. for engineering construction sites. Head offices with a combined payroll and net expenditure on sub-contract labour of £1 million or less, will be exempted from paying the levy. Sites with a combined payroll and net expenditure on sub-contract labour less than £75,000 will not have to pay the levy.

The proposals are expected to raise between £90 million and £94 million for the CITB during the coming year, and about £10 million for the ECITB. The CITB and the ECITB exist because of wide and long-standing support from employers and employer interest groups. Without them, a serious deterioration of training would take place in these cyclical, peripatetic project-based industries, leading to a real fear that skills needs would not be met.

The record of investment and activity undertaken by both industrial training boards is impressive. The challenge is also significant, particularly in a stable economy with steady economic growth. The CITB estimates that the industry must recruit and train 380,000 entrants during the next five years to meet its anticipated skills needs, and must upskill and qualify a substantial part of the existing work force. In an industry with an average age of between 40 and 50

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years old, and relatively few employees aged 25 to 40, the ECITB anticipates an estimated need to replace at least 650 to 1,000 retirees each year.

Each board is committed to ensuring that employers receive a high-quality service. I thank them and their staff for their continuing hard work. The draft orders would enable the boards to carry on their vital training responsibilities in 2002. The Committee should agree to the consideration of the orders.

10.38 am

Mr. Robert Key (Salisbury): It is a pleasure, Mr. Cran, to meet under your chairmanship. I thank the Minister for the concise way in which he described the two orders.

We should never regard continuation debates as a formality. They are important for many people in British industry, and they are expensive. That said, the industry is not seeking to oppose the levies, and supports the idea in principle of the training boards. However, there are some important questions. This is a dynamic industry, and inevitably circumstances will arise that need explanation.

Some employers continue to pass the levy on to sub-contractors. The guidelines from the board make it clear that the responsibility rests with employers, but how is the levy passed on to sub-contractors? To what extent is that getting mixed up with the problem of cash retentions that exists throughout the construction industry? I know that that is a discrete problem, but is this not another kind of retention that might be resented by sub-contractors?

Will the Minister explain how much the Government spent on training last year? Often it is simple questions that go unanswered and, indeed, unasked. I have read the excellent booklet produced by the CITB, ''Training in our Industry: sharing the levy''. It describes the amount of levy that industry paid in 2000, which was more than £81 million. Training support, which is the total cost of support, including training grants, training allowances and college fees, came to £88 million. From which resources was that gap funded? Was it the resources of the CITB, or was Government money involved?

How will the downturn in the economy affect the level of investment in training and the money raised by the levy? The Minister has stated that we seek to avoid skill shortages throughout these industries, but if the economy does not perform as successfully as we would all wish, do we need to expand the amount of training provided by the CITB and the ECITB?

How does the Department of Trade and Industry monitor the progress of training under the order? This is the only industry that uses the levy grant system, and it would be useful to know how far the Government believe that they have been successful in raising standards of training in the industry. What measures do they use?

Another issue raised in this debate last year was the burden on employment tribunals. We were given figures for 1999. Will the Minister give the up-to-date figures? In the case of the CITB, we were told that in 1999 there were 55,000 registered companies. There

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were only 122 cases and only 35 of those actually went to employment tribunals. It is important to get things in perspective, and those figures put things in perspective. In the case of the ECITB, only 326 companies were involved in cases and there were no appeals. How have those figures changed during the past year?

I consulted a range of groups in preparation for today's debate. I talked, for example, to the Constructors Liaison Group, which is the umbrella group for the National Specialist Contractors Council and the Specialist Engineering Contractors Group. The message that I got from them was that 60 per cent. of registered employers were exempt from the levy because their wage bill was less than £61,000 a year. There is a strong feeling that that is unfair to those who are just above the cut-off point. There is always a problem with cut-offs, wherever they lie. Those groups feel that everyone in the sector should pay for training. They would like to see everybody involved, which implies no cut-off. I wonder what the implications of that would be.

I also consulted the Engineering and Marine Training Authority, which is the national training organisation for engineering manufacture. That covers aerospace, electrical engineering, electronics including semi-conductors in addition to mechanical engineering, the metal trade, motor vehicles, shipbuilding and marine engineering, which is a huge brief. It is important to recognise that not everybody thinks that this is a good idea. Although it is true that the broad mass of companies support the boards and their work, a section of the engineering industry, represented by the EMTA, is strongly opposed to the training levy because its employees tend to stay with the same companies for much longer periods. It has provided training and achieved a stable work force, but it continues to pay the levy. We should not ignore that point.

I read the regulatory impact assessment produced by the Department and congratulate the Minister's officials on their meticulous work in preparing the documentation for the levies. I note that in the risk assessment section, the Department recognises that if the orders were not renewed, there could be skill shortages, wage inflation and a less competitive construction industry.

I want to flag the issue of training in renewable energy resources, which is crucial. Everyone wants us to make better use of renewable energy resources, but there is a skills shortage in mechanical training and a technical and academic gap that need to be addressed.

The Conservative party has been sceptical about industrial boards in general, but we recognise the importance of the construction board and the engineering construction board, and they continue to have widespread support. However, it is important that the state is careful about imposing regulatory burdens on industry, and we must ensure that the Government do not kill the goose that lays the golden egg. We recognise the importance of the two levies and support the orders.

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