First Standing Committee
on Delegated Legislation
Monday 10 February 2003
[Mr. Bill Olner in the Chair]
Draft Industrial Training Levy
(Construction Board) Order 2003
Draft Industrial Training Levy
(Engineering Construction Board)
The Chairman: Before we begin, I should point out a mistake in the list of hon. Members attending. Mr. Michael Jabez Foster is listed, but it should be Mr. Michael Foster—the hon. Member for Worcester.
The Parliamentary Under-Secretary of State for Education and Skills (Mr. Ivan Lewis): I beg to move,
That the Committee has considered the draft Industrial Training Levy (Construction Board) Order 2003.
The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Engineering Construction Board) Order 2003.
Mr. Lewis: The orders before the Committee are intended to obtain authority for the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on employers in the industries that they cover. Industrial training boards are non-departmental public bodies, set up under the Industrial Training Act 1982. Their role is to ensure that the quantity and quality of training are adequate to meet the needs of the industries for which they are established. 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 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 industry. It is for the employer members of a board to make proposals on the rate of levy for the industry in question, and for the Secretary of State to make an order giving effect to the proposals.
Today's orders give effect to proposals submitted to us by the CITB and the ECITB for their 2003 levies. Both involve the imposition of a levy in excess of 1 per cent. of payroll on some classes of employer, and 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 subcontract labour.
For both boards, the proposals 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 proposals have the support of the organisations representing the majority of those
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employers who pay most of the levy. It has been established, through consultation with the main employer organisations in each of the industries, that the proposals have their support.
The 1982 Act requires industrial training boards to exclude small firms from the levy. 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 to grow and not giving them unfair commercial advantage. However, both boards are committed to supporting the training efforts of small companies, 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 the relevant sectors are encouraged to take advantage of the services offered by the boards, and to provide opportunities for trainees and apprentices.
In the construction industry, a higher levy rate is imposed on employers' use of subcontract 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 subcontractors tend to have a transitory arrangement with those subcontractors and are not normally involved in their training.
The CITB proposes that both its levy rates should remain the same, as approved in Committee last year. The figures are 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 £61,000 will not have to pay the levy. It is estimated that that provision will exempt 40 per cent. of employers.
In the engineering construction industry, head offices and engineering construction sites are levied at different rates to reflect the fact that head offices, where work forces are more stable, can plan and manage most of the training needs themselves.
The ECITB proposes that both its levy rates should also remain the same as those approved in Committee last year. The first rate is 0.18 per cent. of total payroll and net expenditure on subcontract labour for head offices. Head offices whose combined payroll and net expenditure on subcontract labour is £1 million or less will not have to pay the levy. It is estimated that that provision will exempt 80 per cent. of head offices. The second rate is 1.5 per cent. of the total of payroll and net expenditure on subcontract labour for engineering construction sites. If a site's combined payroll and net expenditure on subcontract labour is £75,000 or less, it will not have to pay the levy. That equates to an employer who employs four persons full time throughout the year. It is estimated that the provision will exempt 32 per cent. of sites.
Overall, the proposals are expected to raise between £109 million and £113 million for the CITB, and around £11 million for the ECITB. The Committee will note in these annual debates that the CITB and the ECITB exist because of the wide range of support from employers and employer interest groups in various sectors. There is a firm belief that without
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them there would be a serious deterioration of training in the cyclical, peripatetic and project-based industries, and that skill needs would undoubtedly suffer. Each board is committed to ensuring that employers in the various industries receive a high-quality service, and I want to thank them and their staff for their continued dedication and commitment.
The orders will enable the two boards to carry out their vital training responsibilities in 2003, and I believe that the Committee should approve them.
Mr. Tim Boswell (Daventry): May I first welcome you to the Chair, Mr. Olner?
Among members of the Committee there are probably those who have not been frightened of getting their hands dirty in the past, and who understand the importance of being able to secure a skilled labour force. That should pave the way for a constructive debate, and I am grateful to the Minister for introducing the orders in that spirit.
We have had the unusual, but not unique, experience of being informed by a prior debate in another place last Thursday. Some of the points that the Minister has just made—and others on which he did not need to touch again—were mentioned then, and added to the pot. That was a useful start. I do not intend to prolong my comments or to press the matter to a Division, unless remarkably provoked by something that arises during the sitting. That is not to say that there are no matters of controversy and nothing that we should pause on; I simply mention that that is the spirit in which I speak.
I should like to concentrate on what I think are the main issues. I do not propose to talk much more about the levy for the engineering construction industry. That is not because it is not important—although certainly in my constituents' experience it is not particularly salient. The Minister, when winding up the debate, might want to make a point or two about it; just because we are not featuring the engineering construction industry, it does not mean that it should go unremarked.
It is a welcome feature of both orders—and, may I say before I am ruled out of order, not always a characteristic one of the Government—that at least we are not looking for any additional stealth taxes. We are considering the same rates as last year and no more.
The Chairman: One step in the water, and no further.
Mr. Boswell: I agree with your strictures, Mr. Olner. There is no increase this year in either the engineering construction or the main industrial training boards levy. The Minister nods.
It was helpful to hear one of the Minister's colleagues in another place pointing out the relative scale of the two bodies. There is an anticipated income of around £11 million for the ECITB, and between £109 million and £113 million for the CITB. In terms of levy income, they are broadly in a ratio of 10:1. That is why I shall primarily concentrate my remarks on the CITB. That is a subject on which there has been
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some traffic of discussion in Committee, and others may wish to contribute on the issue.
In recording the fact that there is no percentage increase in the levy, let me also say that, unless I have overlooked something, there is no material change in the coverage of the levy's components, as the Minister said. There are good, principled and hallowed reasons why there should be different rates for self-employed subcontractors and head office direct employees, and I was not proposing to reopen that issue.
It is worth recalling that the head legislation does not merely comprise the Industrial Training Act 1982. We must go all the way back to the Industrial Training Act 1964, which my first political mentor—I recall him with a degree of affection—took through the House when I was just starting out. He was the late and very sadly lamented Joseph Godber, for whom I did a great deal of work in the latter part of the '60s and whom I admired immensely. He brought a degree of common sense to these issues, and on the whole it still exists in the construction sector, although others have perhaps been more controversial.
It is not our intention, or that of my noble Friend Baroness Blatch, to subvert the levy principle. Indeed, we think that the Construction Industry Training Board performs a useful and constructive role, and we are at one with the Minister on that. The CITB's recent satisfaction survey—I am not sure whether it was meant to appear at the same time as the levy or whether that was coincidental—shows a high degree of employer satisfaction with the board generally, although there is a particular problem to which I will return. The survey shows that a majority of employers are content, are prepared to pay the levy and want the system to continue. It does not seem to matter whether they are in trade associations. Most of us would not be dissatisfied to get 58 per cent. in an election. We need not argue about the issue.
The board is chaired by Sir Michael Latham, who is a former distinguished Member of the House and a very wise choice on the part of the current generation of Ministers. Peter Lobban is the chief executive. I have known them for some time, and Michael happens to be one of my oldest personal friends. He is highly respected in the construction industry and will continue to go to a great deal of trouble to work with it.
If we look at the history of some of the other training boards, we see a pattern. In the late '60s and thereafter, Joe Godber agonised over the Agricultural Training Board. Some boards were not successful, did not win popular approval and were changed. However, the two before us continue. It is incumbent on any levying body to obtain the support of the work force.
I turn now to the Minister's general points, with which I feel some sympathy. Most of us feel that skills, including manual skills, are extremely important in a work force. That is increasingly true in construction, where huge changes have taken place. There has been a huge reduction in the number of unskilled labourers who hauled bricks and so forth, although they have not been eliminated. They would have characterised
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the industry a generation ago, when the board was set up. Now, however, many people operate under a different legal regime because they are self-employed subcontractors or work for a firm of subcontractors. Their skills mix is totally different.
I vividly remember going to see some houses being coupled up to a new water main, although, strictly speaking, that is on the margins of construction. None the less, it was interesting. Compressors were being run by individual operators who would have been seen as unskilled labourers a generation before. They were doing the whole job of connecting the house, and it would have been a serious matter had they made a mistake, but they did not—they were doing an excellent job. We are at one about that change in the mix.
I shall add just one specific point that tends to get overlooked, but which I hope that the Committee will not do so. There is an important safety aspect to the matter. It will be well known that the construction industry had a depressing record on industrial accidents, fatalities on site, and so on—although thank God it is beginning to change. The only way that it will continue to change for the better is by the application of training and good working practices and through the exchange of such practices. The CITB and those who train under its auspices have an important role to play in that regard.
At this point, I shall introduce a matter that tends to be forgotten in the argument. It is a little counter-intuitive that in most cases, such as in financial services or marketing, we tend to think of the big companies conducting the training operations—picking up the graduate entrants and so on and processing them—and of those who are trained gradually dissipating throughout the work force. It used to be said that if someone were Unilever-trained, they would end up doing something useful in another business. In construction, things are quite different, because of the way in which the industry is structured. Much of the activity is carried on by smaller craftspeople and smaller craft businesses, often on behalf of larger employers. There is no sense in a 16-year-old modern apprentice being transported across the country to another site for a major national contractor if they can be trained in their own community. The levy provides an appropriate balance for that exchange. It is often forgotten—it struck me the first time that I handled a levy order some years ago—that that is an unusual example of the training system at work. However, I emphasise that it appears to work.
In passing on to other areas in which there might be some concern and on which the Minister must reflect and respond, I would not like to suggest that we feel that everything in the training garden is lovely. First, there has been the continuing problem with individual learning accounts, under which people incur expenses for developing their own skills. I flag that up in passing because it is the subject of a different debate. I am reluctant to re-open the matter, as the Minister has had intermittent responsibility for skills, except to say
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that it must be tidied up and that we must all learn lessons from it.
Secondly, I am worried about modern apprentices, although not in concept, which is usually valuable. The involvement in modern apprenticeships has generally faltered—I am not talking specifically about construction and I have not brought the sectoral figures—and there seems to have been a move to foundation modern apprenticeships. Although that is not unwelcome, there is definitely a significant decline in the advanced modern apprenticeships. We must address and deal with that issue collectively, as a House, and I hope that the board can play a part in that.
Thirdly, there is a general concern about the sector skills councils. It is not that there is anything wrong with them, but in most cases they have not got off the ground. Their progress has been slower than I had anticipated and, indeed, than Ministers had undertaken to achieve. I hope that they will proceed. I understand that in construction there is a move towards a body that I believe will be called ''Construction Skills'' and that it will bring under its umbrella, or work on behalf of, Northern Ireland, and so on. That is likely to go ahead, but Ministers were unwise to drop the national training organisations without having got the new structure ready. I hope that by the time the Minister responds to next year's orders he will have some definite news for the Committee.
I come to the difficult bit. Let us say for a start that it is in the nature of a training board, given the histories on which I touched briefly, that a levy is a serious matter. It is the imposition of a compulsory charge on a group of employers. I am pleased to see the Minister nodding. No one should casually impose a tax on others as if it did not matter; it must be justified.
In passing, I must say that there is a case for a proper annual rehearsal of these orders, and the messages that I receive from the CITB suggest that it also believes that there is such a case. That means an hour and a half of the Minister's time, and I know from experience that that also means a great deal of preparation. That is not wasted time; Ministers need to focus on the issue, and officials need to brief them on it. It is also important that we have a parliamentary filter through which concerns may be expressed about a compulsory levy, of which there are not too many outside the tax system.
Two logical difficulties are bound to arise from the structure that is adopted, as they would in the case of a voluntary levy system or trade association subscriptions, which are not inherently different. The first relates to the difficulty and, in certain cases, undesirability of getting a precise return—or juste retour, as the Europeans would say—from each and every penny collected in levy. As I said, some people are natural trainers who will receive net grant, while others are net payers. Some sectors will pay money in, while others draw money out. There is nothing wrong with that, as long as the arrangements are broadly fair and appropriate.
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The second difficulty relates to what I was saying about sector skills councils. It is not always easy to match what is within the scope of a training board or sector skills council with a particular industry framework. There will also be questions at the margin about whether a group of employers should have been on one side of the line or the other, how the line was drawn and whether it was most appropriate, especially where a function is performed in-house in one business, but out-sourced in another.
Plant hire is an example of that. Some plant hirers will hire equipment, others will hire equipment with an operator. That equipment clearly needs an operator. It is clear from the substance of the arguments made that that operator needs to be trained, and that someone must pay for that training. That is part of the process; it is required. The next questions are whether training is charged as part of the operation of hiring out or in some other way, and who ends up paying and on what basis. Those problems are inherent in the structure of this sort of industrial arrangement and this sort of levy.
Hire Association Europe has voiced considerable concerns about the levy, as the Minister and the Government will be aware. Other hon. Members may also be aware of those concerns, as the association has very actively drawn attention to its case—