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Baroness Buscombe: My Lords, this is an important, if somewhat technical, matter that is worthy of consideration. The Minister has made a good case for the continuation of the levy, setting it in the context of the industry's importance. As he said, the Industrial Training Act 1982 established industrial training bodies to ensure that the quantity and quality of training adequately met the needs of the industries for which they were established. The 1982 Act also contained provisions for the levy on employers to finance ITB activities and share the cost of training more evenly between companies in the industry.

There are two ITBs covering the construction and drilling industries, as we can see from the orders before us, and we are taking those matters together. Both boards provide a wide range of services and training initiatives, including setting occupational standards, providing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards.

These matters are significant because of the context in which we are considering them. Your Lordships will be familiar with the work of Kate Barker and her review of housing supply. Regardless of what one may think about some aspects of the report, one problem that Kate Barker identified, and on which we all agree, is the paucity of skills in the construction industry. That will act as a bar to the delivery of the targets that her report established as necessary. Indeed, the Government, in their own policy, have endorsed those targets. Undoubtedly, we will be unable to build on the scale proposed without significant improvement in the quantity and quality of skills available to the construction industry. I think it important to note at this juncture that, having followed the debate on these orders in another place, while we support them, we do not want to be diverted into the intricacies of house building policies. The Minister will know that I am referring to the failed attempts by the honourable Member for Normanton, Edward Balls MP—I think he prefers to be called "Ed"—to ensnare my honourable friend John Hayes.

However, it is worth saying a word about the Barker review. Mrs Barker warned:

That is worrying indeed. In particular, Mrs Barker warned:

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She refers specifically to the matter before us.

A report by the adult learning inspectorate, published in May last year, found that the construction industry's own research showed an acute shortage of skilled craftspeople. There are 300,000 fewer skilled craftspeople than the industry needs in terms of contracts already planned. During the 1970s, 100,000 people were being trained each year across a range of construction skills, but by 2004, that figure had declined to fewer than 40,000.

The standard of training currently offered can only make the situation worse. Some 40 per cent of those being trained in construction industry skills were found by the adult learning inspectorate to be trained inadequately, and only 34 per cent of trainees complete their apprenticeships. Those are worrying figures, and they are worrying for all of us, regardless of party.

While we are taking the orders together, I draw particular attention to the Construction Industry Training Board—the subject of the first of the orders. It is the largest provider of training in the building and crafts industries. It has 10,000 learners, but only 25 per cent of those will complete their qualifications. Nick Perry, director of inspection at the Adult Learning Inspectorate, commented that the construction industry must face up,

if the industry is to develop the new houses that the Government have planned for. Quite apart from the other buildings that emanate from such efforts to a standard that our nation deserves, urgent action is needed to improve the provision of training in the construction industry.

The Minister said that there is support for the continuation of the levy at an appropriate level. That is vital. The level must be appropriate to deliver the sort of return that is needed. The Minister mentioned that support, and perhaps it is worth while amplifying his point by drawing your Lordships' attention to some figures: 72 per cent of employers support the continuation of the CITB levy-grant system; and 73 per cent believe that the amount of training in the industry would worsen in the absence of CITB construction skills.

I draw two worries to the Minister's attention, and I hope that he will respond.

First, in the past six years, the proportion of levy-paying employers who are members of the main employer federations has dropped from 58 per cent to just over 50 per cent. That reflects a decline in the percentage of construction employers who become federation members, rather than any diminution in support for the levy system in the industry. I mentioned the high level of support, but as fewer people become members of the federation, there is a worry that the levy system will cease to have the necessary depth of support to facilitate the outcomes that we all want.
 
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Secondly, we on these Benches have real concerns about the apprenticeship framework. The major cause of the current low level of apprenticeship framework completions in the construction industry is the failure of further education colleges to find work experience opportunities for trainees who are enrolled on full-time courses. This is one of the examples—there are others—of a gap between what we do in FE and what we do in industry. We need a greater synergy between the activities of further education colleges and the demands of a range of industries, including the construction industry. Perhaps that should be the substance of a debate for another day, but for now, we support the orders.

Baroness Sharp of Guildford: My Lords, the Minister and I have exchanged views on these two orders in the past five years in this House. He will know that we on these Benches very much support the notion of the Construction Industrial Training Board and the levy-grant system that it incorporates here. The construction industry and the construction engineering industry are both characterised by a small number of very large firms, by a large number of very small firms, and perhaps above all by a great deal of sub-contracting in the industry. It is partly because of that tradition of sub-contracting that the industry has been plagued by the free rider problem of someone else always having to do the training. Firms that do the training find that their apprentices are poached by other companies as soon as they are trained. All the expense of training is therefore regarded to some extent as wasted because others benefit from it. In those circumstances, many firms say that it is not worth while training. This has characterised the industry to far too great an extent, which is why we have the levy-grant system that underpins it.

As the noble Baroness, Lady Buscombe, indicated, the system is endorsed by a large number of employers in both sectors. She quoted the figure of 72 per cent of employers in the construction industry who support the levy-grant system, and said that 73 per cent say that there would be less training if it were not there. It is notable, as the Minister said, that for every pound that is invested in training in the construction industry, it is reckoned that £1.79 worth of training is extracted. The figure is similar for the construction engineering industry; it is £1.45. So a good amount of leverage comes out of these expenditures.

Like the noble Baroness, Lady Buscombe, I wish to put to the Minister a number of worries. The first picks up on the noble Baroness's point about the low completion rate of apprenticeships. She suggested that that was partly because colleges could not find work placements for apprentices—a second worry—but many apprentices do not complete their apprenticeship because they are offered a job before that. Perhaps too many employers are prepared to offer a job to apprentices who have not obtained their qualification. As the Minister knows, the ordinary apprenticeship results in a level 2 qualification but the industry regards the NVQ 3 as the proper, full apprenticeship. The failure of many apprentices to go on from level 2 to level 3 is very notable in the industry.
 
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The Minister might like to discuss the following point with his government colleagues in the other place. The Government will be funding a number of large construction projects, particularly in the run-up to the Olympic Games and, for example, in building schools for the future. They will be the major purchaser and funder of many projects. Is it not possible for the Government to write into their contracts the requirement that those employed should have the full qualifications necessary for the job? That would help good employers who fund training to encourage their apprentices to complete their apprenticeship, because they would be employing those with full qualifications rather than apprentices who dropped out half way through. Given the conditions written into many contracts—for example, those for motorways—it would not be an extraordinary contractual requirement.

Secondly, there are now many more young people applying for apprenticeships than there are places available—in a sense, that is a very good upturn—because colleges find it so difficult to find work placements. In particular, it is very difficult to find work placements with small and medium-sized enterprises. I put it to the Minister that it might be feasible to give greater incentives to small and medium-sized enterprises to take on apprentices.

The noble Baroness, Lady Buscombe, did not mention LSC funding of level 3 qualifications. As the Minister knows, the LSC will fund a level 3 apprentice up to 19. Many of those proceeding from level 2 to level 3 are over 19. Although there is an extreme shortage of skills in the industry, there is no public funding, and employer funding is required for post-19 qualifications. Quite a number of young men and women do not proceed to level 3 because they cannot get funding.

The industry has benefited enormously from the influx of immigrant labour, particularly from eastern Europe, over the past three years, but that is not a satisfactory situation. The age profile of the industry is skewed towards those aged 45 and over at the moment. We must replace those older people with trained younger people whom we grow ourselves rather than import. It is important that there is every incentive for people to proceed to get their full qualification.


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