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Session 2008 - 09
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Public Bill Committee Debates

The Committee consisted of the following Members:

Chairman: John Bercow
Allen, Mr. Graham (Nottingham, North) (Lab)
Brown, Lyn (West Ham) (Lab)
Burgon, Colin (Elmet) (Lab)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
Creagh, Mary (Wakefield) (Lab)
Curry, Mr. David (Skipton and Ripon) (Con)
Harris, Dr. Evan (Oxford, West and Abingdon) (LD)
Hayes, Mr. John (South Holland and The Deepings) (Con)
Heppell, Mr. John (Nottingham, East) (Lab)
Leigh, Mr. Edward (Gainsborough) (Con)
Ottaway, Richard (Croydon, South) (Con)
Simon, Mr. Siôn (Parliamentary Under-Secretary of State for Innovation, Universities and Skills)
Stringer, Graham (Manchester, Blackley) (Lab)
Ward, Claire (Vice-Chamberlain of Her Majesty's Household)
Williams, Mrs. Betty (Conwy) (Lab)
Williams, Stephen (Bristol, West) (LD)
Glenn McKee, Committee Clerk
† attended the Committee

Second Delegated Legislation Committee

Tuesday 24 February 2009

[John Bercow in the Chair]

Draft Industrial Training Levy (Construction Industry Training Board) Order 2009
4.30 pm
The Parliamentary Under-Secretary of State for Innovation, Universities and Skills (Mr. Siôn Simon): I beg to move,
That the Committee has considered the draft Industrial Training Levy (Construction Industry Training Board) Order 2009.
The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Engineering Construction Industry Training Board) Order 2009.
Mr. Simon: Very many thanks to you, Mr. Bercow. This is the first time I have served under your chairmanship, certainly as a Minister. It is my first time serving under anybody’s chairmanship as a Minister, although I feel as if I served on thousands of these Committees as a Back Bencher. I assure colleagues on both sides that I know how they feel.
Graham Stringer (Manchester, Blackley) (Lab): Excited.
Mr. Simon: Well, these are important matters and I am sure that we will debate them fully and with interest. However, I have excised all surplus words from my speech.
The orders seek authority for the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on employers in the industries they cover. They are the first orders made in compliance with the amendments made to the Industrial Training Act 1982 by the Further Education and Training Act 2007 and cover three years. We welcome the orders as evidence that, despite the economic difficulties, these two industries will continue to invest in the skills of their work forces in the coming years.
The two industrial training boards whose levy orders we are considering were set up under the 1982 Act. Their role is to encourage the provision of adequate training of employees and prospective employees in the industry. They provide a wide range of services, including setting occupational standards, developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards.
Under the 1982 Act, an ITB may submit proposals to the Secretary of State to enable it to raise a levy on employers to finance the board’s activities and to encourage adequate training in the industry. The existence of a levy shares the cost of training more evenly across an industry. The board proposes the rate of levy for the industry it covers and the Secretary of State may make an order giving effect to those proposals.
The orders will give effect to proposals submitted to us for levies to be collected by the CITB in 2009, 2010 and 2011, and the ECITB in 2010, 2011 and 2012. As both involve the imposition of a levy estimated to be in excess of 1 per cent. of emoluments—essentially, wage costs—for some employers, the affirmative resolution procedure is required. As the levy rate is in excess of 0.2 per cent. of relevant emoluments, a levy order can be made only if the Secretary of State is satisfied that the proposals are necessary to encourage adequate training in the industry and that one of three conditions is satisfied. The relevant condition is that the proposals have the support of more than half the employers who are likely to pay the majority of the levy. Both boards have followed procedures stipulated in the Industrial Training Levy (Reasonable Steps) Regulations 2008 and their proposals meet that condition.
The 1982 Act requires ITBs to include proposals for exempting small employers from the levy. It does not set a minimum size threshold. The CITB and ECITB proposals set a level for the exemption of small employers that the industry considers appropriate. However, employers that fall below the threshold are not precluded from benefiting from grants and other support from the boards, and many do.
The CITB order proposes that the levy rates should be unchanged from those approved by the House last year. Those were 0.5 per cent. of payroll in respect of direct employees, and 1.5 per cent. of net expenditure on subcontracted labour. As I said, small firms are not required to pay the levy. Therefore, employers whose combined payroll and net expenditure on subcontracted labour is less than £80,000 will not have to pay the levy. That is an increase on last year’s threshold, which was £76,000. That level equates to an employer who employs three people working full time throughout the year, and 40 per cent. of employers fall into that category.
There is a higher levy rate on subcontract labour because, according to the industry, employers with a directly employed labour force carry out the vast majority of training. Therefore, employers who opt for subcontractor labour are paying a higher levy rate because they are not normally involved in training. The ECITB also proposes to make no changes to last year’s rates, so the rates will be, in respect of site employees, 1.5 per cent. of total payroll and net expenditure on subcontract labour. Contractors whose combined payroll and net expenditure on subcontract labour for site employees is £275,000 or less will not have to pay the levy in respect of site employees; this is the smaller firm exclusion. The level is unchanged from last year and equates to an employer who employs 15 to 20 people working full time throughout the year. We expect that 54 per cent. of sites will be exempt.
The rate in respect of off-site employees—often referred to as head office employees—will be 0.18 per cent. of the total of payroll and net expenditure of subcontract labour. Employers whose combined payroll and net expenditure on subcontract labour for off-site employees is £1 million or less will not have to pay the levy for off-site employees. That level is also unchanged from last year and equates to an employer who employs about 40 people working full time throughout the year. It is expected that 73 per cent. of head offices will be exempt.
Over three years the proposals are expected to raise between £535 million and £540 million for the CITB and between £55 million and £60 million for the ECITB, which covers a much smaller industry. The Committee will know from previous debates that the CITB and the ECITB exist because of the support that they receive from employers and employer interest groups in their sectors. As I indicated earlier, there is a firm belief that without them there would be a serious deterioration in the quality and quantity of training in those industries, leading to a deficiency in skill levels. The boards’ annual employer surveys continue to demonstrate strong support for the principle of a levy system. The draft orders will enable the two boards to carry out their vital training responsibilities in 2009 and beyond. It is right that the Committee should agree to approve them.
4.38 pm
Mr. John Hayes (South Holland and The Deepings) (Con): This is not the first time that I have served under your illustrious chairmanship, Mr. Bercow. May I say, without being impertinent, that the times that I have done so figure large in my memory and I hope are etched in each of our hearts? It is, however, the first time that I have served opposite the Minister on a Statutory Instrument Committee. Given his performance today, which was polished, without being oily and smooth, without being slippery, I cannot see this being a contentious meeting. This is a serious matter, as it always has been, which requires a non-partisan approach and I am grateful for the way in which he has introduced the subject.
The Minister has indicated that the Industrial Training Act 1982 requires industrial training boards to demonstrate that the levy proposal has the support of the relevant industry—organisations representing more than half of employers who are likely to be liable to pay the levy. As the Minister will know, those representative organisations have traditionally been the employer federations or trade unions. However, an increasing proportion of employers no longer choose the members of such organisations, making it difficult to demonstrate consensus, which we talked about when debating the levies in previous years. Therefore, the Further Education and Training Act 2007 allows support for levy proposals to be demonstrated by consulting more widely with employers, whether or not they are members of representative organisations. However, there is a difficulty with that—there is an argument that we should be reinforcing and supporting those representative organisations and by creating that extra flexibility we may have created circumstances where it is harder to do so. There is an argument that we should be reinforcing the role of organisations that provide training in the workplace such as apprenticeships. It would be useful to know how the Minister feels we can encourage employers to join those organisations, which give both structure, purpose and form to the sectors we are debating today.
Current practice is for ITBs to make proposals for levy orders annually but the Further Education and Training Act makes orders stand for a three-year period, as the Minister will know. He told us that that originates from the Industrial Training Act, which established the ITBs to ensure that the quality and quantity of training were adequate to meet the needs of the industries for which they were established. That Act also contains provision for a levy on employers to finance the ITBs’ activities and to share the cost of training more evenly between companies in the industry. It is for the employer members of the board to make proposals for the rate of the levy and the industry it covers, and the Secretary of State to make an order giving effect to those proposals. The levy must have the support of organisations representing more than half of the employers, as I have said.
There are currently two ITBs, as the Minister told us, covering the construction industries and the engineering sector, both of which provide a wide range of services and training initiatives including setting occupational standards and developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards. The Minister stressed again that the thresholds in respect of these levies are to grow. That is welcome. He told the Committee that the level of the levy is to be unchanged. That is welcome too in the current economic circumstances. I have just received a note from one of my colleagues which tells me that there are a number of kinds of organisations in each sector which are specifically exempted from paying the levy. That is not just on the basis of size, but on the basis of whether they are start-up businesses and whether they are closing, rather than starting.
Certain questions remain which I hope that Minister will deal with. The first arises from his comments about subcontracted labour. It would be interesting to know what proportion of businesses in the construction sector employ subcontracted labour. He talked about the commitment to training of businesses that largely employ direct labour and the commitment of those that largely rely on subcontracted labour, which he suggested are less likely to invest in training. That seems perfectly logical. It would be interesting to know what proportion of business largely relies on subcontracted labour. That is a contentious subject in the current climate and highly relevant to the matters we are debating today.
The second question concerns the impact that the Further Education and Training Act has had on the way in which ITBs consult to establish consent for the levies. We debated that in previous years, making the point that we needed to widen the scope of consultation, for the reasons I gave earlier. I should like to know what effect that change has had. Does the Minister have evidence or has he received representations on the impact of that change? How are people consulting and how well is that working?
Thirdly, the Opposition welcome warmly the order that established the ITB that covers the film industry, which came into force on 7 December 2007. What lessons have been learned from that success about building consent for a new training levy? Such a levy might be appropriate in other sectors. We are interested to hear the Minister’s comments on that.
Finally, will the extension of training levies be considered when the Government review the impact of the skills pledge in 2010? The Government set out their plans ambitiously around a pledge, which was designed to encourage businesses to invest in skills and training.
4.45 pm
Sitting suspended for a Division in the House.
5 pm
On resuming—
Mr. Hayes: Thank you, Mr. Bercow. Members of the Committee will be disappointed to learn that I was about to conclude before the Division in the House—I was building up to a Periclean peroration when we were interrupted. However, I know that the intervening time will have given the Minister additional opportunities to gain inspiration to answer the questions that I posed. For his benefit, I will just repeat my final question.
I do not want to be unkind, but when the Government issued the skills pledge there was a veiled threat that if people did not sign it they might be obliged to pay a training levy. Speaking personally, I am not unconvinced by the arguments for training levies; I rather like the idea of such levies. Certainly it is something on which the Opposition are taking representations and considering—I put it no more strongly than that—particularly of the kind that has been established in the film industry, which is entirely voluntary. It is supported by the film industry and facilitated by its sector skills council. I would be interested to know the Government’s perspective on levies, given that we are debating these matters today and that the year 2010 is hurtling towards us. We have had little information about the state of the skills pledge, including how many businesses have signed up to it and whether it has been a success or failure. It would be interesting to know what plan B is. Is it a plan for additional training levies? Having posed a few specific questions, I look forward to the Minister’s response. However he may respond, I do not imagine that it is likely that we will divide the Committee.
5.2 pm
Stephen Williams (Bristol, West) (LD): Good afternoon, Mr. Bercow. It is always a pleasure to serve under your firm but genial chairmanship. I am not sure that the occasions on which I have done so are etched on my heart but, none the less, they are usually a pleasure.
This is the third time in this Parliament that the hon. Member for South Holland and The Deepings, the Conservative spokesman, and I have spoken in Committee to reapprove the levy, and this is the third Minister that we have dealt with. At least there is continuity for both the main Opposition parties. I welcome the Minister to his first official role in Committee—no doubt we will be seeing an awful lot of each other in the next few weeks as we debate the Apprenticeships, Skills, Children and Learning Bill. In 2008, the right hon. Member for Tottenham (Mr. Lammy), who was then the Under-Secretary of State for Innovation, Universities and Skills, said that this was the last time that we would approve the levy before the general election. The political climate has clearly changed, but the economic climate has changed as well. When I looked at the remarks that I made last year on this subject, I found that I talked about
“cranes puncturing the a building boom”—[Official Report, 7th Delegated Legislation Committee, 20 February 2008; c. 9.]
I said that that was happening in Bristol city centre. Many of those cranes are now still, and the construction industry workers that were employed on housing and other commercial projects in the centre of the city—and I am sure that that is a fact in most of our constituencies—are lying idle.
Both these levies are designed to ensure that training in this important sector of our economy continues, even during a downturn. I was encouraged to see that the continuation of the levy still enjoys substantial majority support in both sectors to which it applies. I looked back at our debate in February 2008, when we were in Committee to reapprove the levy, to see how much we expected to raise last year for the industrial training part of the levy. The figure that was quoted then was £181 million. Looking through the notes for 2009, there is still an expectation that an amount in excess of that figure—£188 million, in fact—will be raised by the levy this year. I wonder whether that is an optimistic forecast of the impact of the levy and whether the Minister has a revised figure. No doubt, the total value of the payroll on which the levy is applied has declined.
As we heard in representations from the Engineering Construction Industry Training Board, in the engineering industry there are long-term pressures. It is not just a question of whether the levy itself delivers training; there is a long-term worry that not enough people are going into this particular sector, taking the stem subjects at school, or taking an apprenticeship or going to university to take these subjects. That is going to constrain our ability to develop green energy solutions—or even nuclear industry solutions, if that is the way forward—to climate change.
Finally, on the day that the “Closing the gender skills gap” report was launched in Parliament only an hour ago, it would be remiss of me not to mention it. The hon. Member for South Holland and The Deepings and I had a hand in developing the report. I hope that the levies and Government policy will help to address the skills gap between men and in women who participate in the two fields under discussion. I do not know whether our next meeting to approve the levy, which is scheduled for February 2010, will take place before the general election. None the less, the Liberal Democrats are happy to support the continuation of both levies for another 12 months.
5.6 pm
Mr. Simon: I realised as soon as the hon. Member for South Holland and The Deepings stood up to speak that I had rudely failed to greet him to this forum. It ill behoves me, being so new, to do so. We were first introduced by a mutual friend, Frank Johnson, who would have liked to be noted in such an arcane parliamentary environment. I gratefully accept the words of welcome from the hon. Gentleman and from the hon. Member for Bristol, West.
While treating these important matters seriously and respectfully, I shall endeavour to skip through them in a smart fashion. The hon. Member for South Holland and The Deepings asked whether the new consultation arrangements that were introduced by the 2007 Act have undermined the role of representative organisations, and how those new arrangements are going. When the new arrangements were introduced, there was no intention whatsoever—the hon. Gentleman knows this, because he was there and I was not—to undermine representative organisations in any way. The two boards under discussion chose to consult differently; the CITB consulted, as it was entitled to do, by asking representative organisations and by sampling, whereas the ECITB consulted solely by sampling, although it is keen to point out that it has the support of the relevant organisations. The question of how both boards can best do so is ultimately a matter for them; as the hon. Gentleman explained, the flexibilities have already been set out. It is worth restating, however, that there was, and there remains, no intention that the representative organisations should be undermined in any way.
The hon. Gentleman asked about sub-contracted labour. I do not have a figure detailing the exact proportion of labour that is directly sub-contracted in the industry, but we should be able to obtain it. We will talk to the boards and write to the hon. Gentleman with the relevant information. Bigger building firms tend to sub-contract their labour and do not therefore provide training, whereas small and medium-sized enterprises directly employ a much smaller workforce to provide the vast bulk of training. The purpose of the arrangement is to ensure that the funding levels the playing field somewhat.
The hon. Gentleman also asked about what he called, in a surprisingly cynical phrase, the “veiled threat” of firms being asked to pay a levy if they did not sign the skills pledge. I was not part of the process, but I find it hard to imagine that any of my colleagues were involved in the dirty business of veiled threats. The skills pledge has been extremely successful so far. Some 2,282 firms in the construction industry and more than 7,000 firms in total, covering 5.1 million employees, have signed up, and they should be congratulated on doing so.
Mr. Hayes: I was going to ask the hon. Gentleman how many firms had signed up, but he has anticipated my question with those helpful figures. It would be interesting to know how the skills pledge is observed. We will be giving things up for Lent—chocolate, fine wine, beautiful women or some other indulgence—but we do not always stick to our promises. How is the pledge measured and monitored? What do we expect of people once they have signed up and how do we check how they are getting on?
Mr. Simon: I am grateful for the hon. Gentleman’s further input on the skills pledge. I cannot answer in detail now but I will, if he wishes, write to him with the exact implementation and monitoring details. He knows, however, that more than anything, the pledge is a statement of intent and commitment and is a badge of honour among employers about the importance of training.
The hon. Member for South Holland and The Deepings asked about the Film Industry Training Board. It is still a work in progress but the strongest lesson is the importance of the support from all sides of the industry, a wide range of employers and the trade unions. He also touched on categories of employers who are exempt. Those exemptions include people in their first year of business, charities, and employers who have ceased business. In addition, given the smaller firms that are exempt under the thresholds, some 65 per cent. of employers will not pay the levy. I am struggling among all these bits of paper, the number of which has increased while I have been in Committee, to find my note of the questions asked by the hon. Member for Bristol, West.
Stephen Williams: In an attempt to be helpful, I think that I asked only one question. It was about the amounts to be raised by the industrial part of the levy, because the figure looked higher than it was last year—clearly the economic circumstances have totally changed since then.
Mr. Simon: I am grateful to the hon. Gentleman. I have found my note now—it says “Bristol, West: forecasts”. The answer is that the CITB 2009 forecast remains at £188 million. Next year’s forecast is revised down, and the 2011 forecast is at £183 million. It is worth noting that the ECITB forecasts—I do not have the exact figures—have been revised upwards. I hope that I have answered everybody’s questions. On that note, I commend the order to the Committee.
Question put and agreed to.
That the Committee has considered the draft Industrial Training Levy (Construction Industry Training Board) Order 2009.

Draft Industrial Training Levy (Engineering Construction Industry Training Board) Order 2009

That the Committee has considered the draft Industrial Training Levy (Engineering Construction Industry Training Board) Order 2009.—(Mr. Simon.)
5.15 pm
Committee rose.

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