Draft Industrial Training Levy (Construction Industry Training Board) Order 2022
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Education (Alex Burghart)
I beg to move,
That the Committee has considered the draft Industrial Training Levy (Construction Industry Training Board) Order 2022.
The construction industry is extremely important to our country. To put it frankly—
Alex Burghart
Let’s try again. The construction industry is obviously vital to our country because its success is the UK economy’s success. The construction sector contributes about £155 billion to the economy, which represents 9% of our gross value added. The industry is made up of about 3.1 million workers, equating to 9% of the UK’s employment.
The Government are clear that construction is integral to achieving two of our main priority objectives in our plan for growth: levelling up and reaching net zero carbon emissions by 2050. Skills interventions will be critical to addressing current skills deficits and looking ahead to meet future construction labour market demands. However, the increased need for skills is not a challenge that the Government can address alone.
The Construction Industry Training Board was set up in 1964 and continues to play an important role by helping to shape interventions and communication to employers. I thank the CITB for working with my Department on this issue.
The draft order will enable the CITB to continue to raise and collect a levy on employers in the construction industry. The levy funds increased provision of skills for individual workers and employers in the sector. Over the coming three years, the CITB expects to raise around £505.2 million of levy funding to be invested in skills training.
Margaret Greenwood (Wirral West) (Lab)
As the Minister knows, the CITB has said that one of the things it will do to address the barriers to training the current workforce is develop a strategy to influence local provision to meet employers’ needs, linking to local skills improvement plans. It seems to me that if someone who wants to get into construction lives in an area where there are few construction companies, and none is involved in developing LSIPs, they may well struggle to find a relevant course. Will the Government ensure that people, particularly young people, who want to get into construction work can do so, even if opportunities in the area where they live are limited?
Alex Burghart
The hon. Lady makes an important point. Obviously, a lot of the skills work that we are putting forward is employer led. By that, we mean that we want students who are studying construction, or indeed another technical skill, at whatever level, to have the opportunity to do on-the-job training. That might be through T-levels or apprenticeships. At the moment, many colleges around the country are finding people who can offer that training, to give students the chance to step up through either a level 2 course or a T-level construction course. So although the availability of placements is to a certain extent limited by the nature of the industry in the area, it is essential that students have the chance to study on the job wherever possible. I hope that answers the hon. Lady’s question, but if she would like to come back, I am happy to respond again.
Members may recognise that small local construction firms in their constituencies say that the CITB pays out grants to cover the cost of certain construction training. Indeed, that is a significant percentage of its activity. It provides a grant system to employers to enable workers to access and operate safely on construction sites—for example, through health and safety training—to drive up skills and to incentivise training that would otherwise not take place.
Mark Eastwood (Dewsbury) (Con)
I appreciate the Minister’s comment about levelling up. One of the initiatives in the Dewsbury town board funding is a construction and skills centre. Does he agree that that could be rolled out in towns fund bids and that local councils and authorities could take that on board?
Alex Burghart
I know that my hon. Friend is championing exactly that sort of work in his area and giving us lessons that we can transpose to other areas. The new centres of excellence will be fundamental to how we build the next generation of skills in our country and create that pipeline for young people and those who are changing careers to enter the workforce with higher levels of skills. I congratulate my hon. Friend on what he is seeing in his area.
Mr Toby Perkins (Chesterfield) (Lab)
The Minister rightly referred a moment ago to the nation’s skills deficit. The order effectively doubles the amount that the construction industry pays, but undoes the reduction that the Government previously put in place. We are not hostile to that, but it returns us to where we were two years ago when the deficit existed. What can he point to in the order that makes anything better? It effectively represents a continuity strategy. We have got a skills deficit, which has built up over a number of years—we can debate why that is. Are the Government doing anything to make the situation better rather than just returning us to where we were?
Alex Burghart
The hon. Gentleman asks a fair question. He rightly points out that, during covid, we reduced the burden on construction companies to help them get through the pandemic, and the order is a return to normal. However, it is only one part of the interventions we are making to create the next generation of people working in construction. I am pleased to say that apprenticeship construction starts are doing well and are above their pre-pandemic level. We are introducing new T-levels in construction and we see a real appetite for the skills bootcamps that the Government have brought in. Those short, intensive courses, which help people skill up over 12 to 18 weeks, with a guaranteed job interview at the end, are popular with potential employees, employers and, I am pleased to say, the Treasury.
Kirsty Blackman (Aberdeen North) (SNP)
On the point the Minister just made, if this order is just bringing us back to pre-pandemic levels, it is not doing anything to fix the immigration situation we have because of Brexit. I know there is a major problem for bricklayers, for example. Will this just get us back to pre-pandemic levels, rather than making up for that shortfall that we see as a result of Brexit and this Government’s immigration policies?
Alex Burghart
As the hon. Lady will have heard me say to the hon. Member for Chesterfield, this is just one of the things we are doing. Our bootcamps are a new innovation that offer people of all ages a rapid route into employment. The construction route was very popular. It is important that the hon. Lady sees this in the round. She raises Brexit, but in my seven months in this job I have had the great pleasure of talking to further education colleges around England, and many principals have told me that there is new enthusiasm from employers to look at skills training in their areas, which did not exist before we left the EU. Lots of companies used to advertise internationally for skills as their first port of call, and people came in. They did not have to invest in training in their own areas. I am pleased to say that that is changing for the better for young people in England.
The work of the CITB will support strategic initiatives to help maintain vital skills in the industry and create a pipeline of skilled workers.
Margaret Greenwood
The Minister is being very generous. A point was raised in the other place about paragraph 10.1 of the explanatory memorandum and the small group of industry representatives that the CITB consulted to examine the current levy arrangements and how the levy should operate. The Minister there said:
“it is up to the CITB as to who it engages with.”—[Official Report, House of Lords, 25 April 2022; Vol. 821, c. GC9.]
I think it is important that the CITB engages with relevant unions on the levy. Can the Minister tell me whether he has any expectation, even though it might not be prescribed in law, that the CITB will consult with the unions?
Alex Burghart
I very much hope that the CITB will engage with all relevant stakeholders.
I will try to make some headway. The remit is broader still. The CITB develops and maintains occupational standards so that employees and employers are assured training is of sufficient quality. That also means that construction skills become more readily transferable, benefiting both employees and employers. The CITB has a critical role in horizon scanning, too. It uses research and labour market intelligence to understand the skills needs of the sector and to work with industry and Government to help ensure that construction has the right skills both now and in future.
Before turning to the details of the draft order, I want to highlight that the most recent levy order—the 2021 order—was for one year, not the usual three years. As we discussed a moment ago, a 50% reduction was prescribed in that year relative to the 2018 three-year order. That was to accommodate the CITB’s decision to allow levy payers a payment holiday in response to cash-flow pressures the industry was facing during the first covid lockdown. This three-year 2022 order returns to the levy rates prescribed by the three-year 2018 order: 0.35% of the earnings paid by employers to directly employed workers, and 1.25% of contract payments for indirectly employed workers such as contractors, for those businesses that are liable to pay the levy.
The industry, having been consulted on the CITB’s delivery strategy and levy rate, supported the retention of the higher exemption and reduction thresholds for smaller employers contained in the 2021 order. To run through those very quickly, construction employers with an annual wage bill of up to £119,999 will not pay any levy, while still having full access to CITB support. It is projected that approximately 62% of all employers in the scope of the levy will be exempt from paying. Larger companies will carry the burden. Employers with a wage bill between £120,000 and £399,999 will receive a 50% reduction on their levy liability, while also receiving full access to CITB services—that covers about 14% of employers.
Mr Perkins
I understand the reason for the tapering that the Minister refers to, but has any analysis been done of whether this creates a cliff edge that disincentivises employment? There will be companies that know that the next person they take on will move them either from being a non-payer to a half-payer, of from being a half-payer to a full payer. In an industry with huge amounts of subcontract work done anyway, it would not be amazing if this was a disincentive to employment. Has any analysis of that been done, and if not does the Minister think it would be a good idea for inquiries of that kind to be made?
Alex Burghart
The hon. Gentleman makes a good point; I will consult my notes while he is speaking, and perhaps return to it in my closing remarks.
The CITB has consulted the industry on these levy proposals via the consensus process, which is required under the Industrial Training Act 1982. Consensus is achieved by satisfying two requirements: both the majority of employers likely to pay the levy, and those employers who are, together, likely to pay more than half the aggregate levy raised, consider that the proposals are necessary to encourage adequate training. Both requirements were satisfied, with 66.5% of likely levy payers in the industry, who between them are likely to pay 63.2% of the aggregate levy, supportive of the CITB’s proposals.
The draft order will enable CITB to play its role in aiding employers to secure and retain a sufficient supply of highly skilled labour in the construction industry in these fast-moving times. I commend it to the Committee.
Alex Burghart
I thank the Opposition for their support for the statutory instrument. I make the general point that, although the hon. Gentleman suggests that we are outsourcing skills or offloading responsibility for the skills agenda to employers in its entirety, that is not the case. We are building a really exciting partnership between central Government, employers—who will, of course, be front and centre—colleges, the Institute for Apprenticeships and Technical Education and Ofqual, as well as mayoral combined authorities and upper-tier authorities.
I was privileged the other day to be present at the signing of a memorandum of understanding between a local Teesside FE college and BP on their hydrogen work. What we are seeing there is a fantastic synergy between local government, business and the people who will train the next generation of skilled employees. That is levelling up in action.
Tom Hunt (Ipswich) (Con)
I am glad the Minister enjoyed his trip to Teesside. However, the highlight of his visits last week would have been going to Ipswich, where he visited Suffolk New College. Does he agree that the most powerful thing is where we have brilliant further education colleges, such as Suffolk New College, working hand-in-glove with local businesses to pinpoint the skills needs in the local area?
Alex Burghart
Absolutely; how could I forget my visit to Suffolk New College in Ipswich last week? I saw a fantastic appetite for our skills agenda there. Suffolk New College is a great provider of T-levels. It works closely with employers to give students a work placement, so that they can gain skills on the job while learning the background in the classroom. I very much enjoyed my trip and hope to return to Suffolk before too long.
With reference to T-levels and BTECs, the construction T-level route that we have set up is very popular. I have been pleased to see colleges across the country taking advantage of that and giving students new opportunities, as well as employers providing work placements. With BTECs, we have been clear on our course from the start: we are shifting from BTECs to T-levels in those areas where T-levels exist, but in the areas where T-levels do not exist and there is no overlap, I would expect those BTEC courses to continue.
Mr Perkins
I am not sure if the Minister has just made an announcement, because we do not yet have the list of the courses that will not be carrying on. Is he saying that the BTEC in construction is one of those that the Government are intending to get rid of to be replaced by the T-level? That is what it sounded like. If that is not the case, can he provide an update on what he sees as the future for the BTEC in construction? He mentions that the T-level is very popular, but actually far more students are studying the BTEC at the moment. Can he clarify that matter?
Alex Burghart
We are only in our second year of T-level delivery and I am very much looking forward to seeing the first results in August. The hon. Gentleman sat through many days of debates on the Skills and Post-16 Education Bill, where he heard both myself and the Secretary of State say that where BTECs and other level 3 qualifications overlap with T-levels, we expect T-levels to be the successor course—I remember a long debate we had about that issue in a Committee Room down the corridor. Obviously, in those areas where there is no T-level, there will be no overlap. I fully expect the Government to say more on that in the coming months.
It has been wonderful to serve under your chairwomanship, Ms Rees, and to find that we have cross-party agreement on the CITB statutory instrument.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Industrial Training Levy (Construction Industry Training Board) Order 2022.