Industrial Training Levy (Engineering Construction Industry Training Board) Order 2026

Tuesday 14th July 2026 Grand Committee

Considered in Grand Committee

11:27

Moved by

[Baroness Smith of Malvern]

That the Grand Committee do consider the Industrial Training Levy (Engineering Construction Industry Training Board) Order 2026.

[The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)]

My Lords, I am grateful for the opportunity to debate this instrument today. In my view, the provisions in the instrument are compatible with the European Convention on Human Rights. The statutory purpose of the Engineering Construction Industry Training Board—ECITB—is to make better provision for training across the engineering construction industry in England, Scotland and Wales.

The engineering construction industry is critical to the delivery of the Government’s wider ambitions for economic growth, clean energy and energy security. It provides the skilled workforce needed to build, maintain and operate major energy, manufacturing and industrial infrastructure across Great Britain. The ECITB’s and the Construction Industry Training Board’s continued value was confirmed by a 2023 independent review. It found that a statutory levy remains the most effective model for industry-wide investment in training and is needed to address persistent and structural workforce challenges within the ITBs’ industries.

This statutory instrument gives effect to the ECITB’s levy proposals for 2026, 2027 and 2028. The levy remains the ECITB’s primary source of funding, and this order is required for the board to raise mandatory assessments on in-scope employers. The ECITB continues to receive strong support from employers. Over 85% of levy-paying employers supported the levy proposals, representing almost 98% of total levy value, exceeding the “more than 50%” statutory threshold for support required from industry.

Before we consider the levy proposals in further detail, I want to point out that a 12-week government consultation has just closed on a proposal to bring together both ITBs—the ECITB and the Construction Industry Training Board—into a single unified body to support the combined skills needs of the engineering construction and construction sectors. The Government are now carefully considering the views raised before making any decisions on reforms that may be needed to ensure the system delivers the support employers need. We cannot prejudge the outcome, but it is vital to the continuity of the ECITB’s support for employers that the levy order we are debating today continues. If the Government choose to proceed with this proposed reform, the earliest that a single body would be in place is spring 2028. Should the direction of reform require a new ITB levy order, this would come to the House through the proper parliamentary process.

11:30

Returning to this levy order, I give my thanks to the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments for their scrutiny of the regulations laid on 1 June 2026. It would be fair to say they have a clean bill of health from those committees. This order retains levy assessment rates from the 2023 levy order and retains the exemption threshold to protect small and microbusinesses, which are nevertheless still eligible for ECITB grants and support. An estimated £137.9 million will be raised in levy over 2026-28, which will be invested in supporting the skills needs of the engineering construction industry. That investment will fund vital programmes to widen participation, raise skill levels, increase opportunity and maintain occupational standards for the industry. This includes targeted grant support to employers to develop the skills pipeline in the engineering construction industry.

Since 2023, over 5,000 apprenticeship starts have been supported through ECITB employer funding, across vital disciplines including electrical, mechanical and nuclear-specific roles. This could include direct grants to employers, travel and accommodation costs, or costs for any additional qualifications required. The funding raised by the ECITB levy directly underpins the country’s broader economic priorities. Over 90,000 people are employed in the leviable workforce, with an estimated contribution to our economy of £33 billion in gross value added, rising to £100 billion when including the wider sectors serviced by the engineering construction industry.

The industry faces significant long-standing and future challenges in recruiting and retaining a skilled workforce, which makes voluntary investment in training less likely to occur. Without a statutory levy, we cannot guarantee that the skills that industry urgently needs will materialise at the scale required. If this order is not approved, the ECITB would be unable to collect levy in 2026, with potential impacts on apprenticeships and vital industry qualifications, employer support programmes, training standards and the future capability of one of the UK’s most economically significant sectors.

According to the ECITB, the UK faces an estimated requirement for an additional 40,000 engineering construction workers, and agreeing this order will play a critical role in supporting major infrastructure projects across Great Britain. In addition to industry support, the proposals before the House today have received the full support of the devolved Governments of Scotland and Wales. They recognise, as do we, that maintaining the ECITB’s ability to raise and invest levy income is vital to ensuring that employers across all three nations can access the engineering construction skills they need. I commend this order to the Committee.

[Baroness Coffey (Con)]

My Lords, I do not seek to oppose this order today, but I have a number of questions. I again start by praising the Government, and I strongly support the move to the DWP and the CITB, as well as, more broadly, the changes that the Government have made to the apprenticeship approach. I fully support the merger of the two bodies, which is under consultation, and I hope that that consultation review will be concluded quickly.

One thing that the Minister mentioned was that 85% of the levy payers, who contribute 98% of the levy, are supportive. I was interested in paragraph 33 of the impact assessment, which said that the independent

“customer satisfaction survey in 2024 … found that 65% of employers agreed or strongly agreed that without the levy and grant system the training would not take place”.

As it says elsewhere in the impact assessment, we have a situation where, in order to generate more income, the ECITB has started increasing its training of overseas learners. I do not really understand where this is going.

I am sure the Minister has been diligent more broadly in thinking about what is happening with the amount of people going on to training who do not complete the training or do not continue into work. That is very worrying, given the amounts of money being invested and what is happening with the follow-up. The Government are using powers, as this is an executive non-departmental public body, so is there an element here of thinking about how this could get a bit more refocused, working independently but also in partnership with the department, given that 47% of young people are dropping out? The figures of people who just do the course and, within so many years, drop out of this industry entirely are even higher.

I know that there is work on how to help employers onboard people into apprenticeships, traineeships and the like, but I suggest that some more focus could perhaps help with that. I suggest thinking about how the objectives and key performance indicators for this board could perhaps be published more regularly. On that, 9 July 2025 is when we last saw the annual report and accounts for 2024, so when does the Minister expect the report and accounts to be laid for 2025? As I say, there is a lot of value in this body and its sister body.

I do not expect the Minister to have an answer to this today, but this body is also a charity, and I am unclear about why that is still needed. Is that limiting what can happen in trying to make this more effective? As I say, a good number—65%—of businesses interviewed said that all this training stuff probably would not happen without this board. But, again, on some of the link-up with the other organisations involved in this, including the Government and particularly the Department for Work and Pensions, I think this is a better home for it than where it was, the DfE.

I would be interested in getting some further understanding on the need for this to be a charity. According to the Charity Commission accounts, it is not eligible for gift aid. There is a lot of complexity in why someone is a trustee, when actually they are all appointed by the Secretary of State. The Minister may not have the answer today, but I would be grateful for a follow-up more broadly.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for producing this order and giving us such welcome information. It is a key job of any Government to grow the economy, and productivity is central to that. This levy is a proven way to fund skills in the construction sector, because the market alone has not invested enough in training. The 2023 review confirmed that this problem still exists, so the case for keeping the levy is strong. Turning to the detail, the order keeps the current rates in place: 0.35% on directors’ pay and 1.25% on payments to subcontractors. These rates have not changed since the pandemic-era reductions ended.

I welcome the extra help for small firms. The exemption threshold is rising from £135,000 to £150,000, which means that 69% of employers will now pay nothing at all. There is also a 50% reduction for firms with wage bills of between £150,000 and £500,000, helping around 10,000 small businesses, I believe. This strikes a reasonable balance: it protects small firms while larger employers continue to pay their fair share, with no cap on their contributions. The Minister has given lots of statistics. There are so many statistics going around, some of which are contradictory.

As Liberal Democrats, we believe in partnership between employers and educators, and that is exactly how this proposal was developed. As we have been told, the CITB ran a formal consultation last year, called “Consensus”, and over 67% of levy payers backed the plans. Those firms represent almost 72% of the total levy value. This is a genuine mandate from the industry itself, not something imposed from above, and it is the right way to build support for a levy like this.

The sums involved are substantial. I believe the levy is expected to raise around £243 million a year between 2026 and 2028. Last year, the CITB raised £228.1 million and used it to fund £129.8 million in grants and £53.4 million in other schemes. This supported around 30,000 apprentices and, I believe, nearly 20,000 people in gaining a qualification. This is a serious investment in skills, and it costs the taxpayer nothing, since the CITB receives no grant from the Government.

The noble Baroness, Lady Coffey, mentioned charities. I should say that charities are exempt from the levy, but I would welcome hearing anything that the Minister can say in answer to the questions raised about them.

I have one question for the Minister: how will the Government check that this money is working? We need to see real gains in skills and productivity, especially given the scale of the construction skills gap across England, Scotland and Wales. I would welcome the Minister’s thoughts on that. As a nation—or, as the Minister said, nations—we need to up our game in providing training and reduce our reliance on imports to address skills shortages.

On the whole, we on these Benches support this order. It keeps a levy system that the industry itself backs, protects small businesses through a fairer approach and funds real training for a skilled workforce.

[Baroness Spielman (Con)]

My Lords, I thank the Minister for introducing this order. We support the continuation of the Engineering Construction Industry Training Board levy for the 2026, 2027 and 2028 levy periods. This provides continuity for the industry without imposing additional costs. As others have said, the levy system clearly commands the support of the vast majority of those who pay for it. It works precisely because it is driven by industry need. Companies understand their workforce requirements far better than Whitehall ever can. The role of government should be to create the conditions in which businesses can invest, recruit and train, rather than to control industries with centrally designed employment schemes.

But it is important to look at the levy in the context of both current and likely future pressures. The scale of the challenge is considerable. The Minister cited estimates of a need for another 40,000 workers by 2030. Demand is rising in nuclear construction and decommissioning, offshore wind, hydrogen, carbon capture and storage, industrial decarbonisation, and the maintenance of existing energy infrastructure. The industry is competing for workers with other infrastructure sectors that need the same skilled trades and technical professionals. The central challenge is how to make sure that the country has the capacity and skills to deliver projects that are already planned.

Employers are facing considerable difficulties in recruiting and training. The workforce is ageing and few new entrants are coming through to replace retiring workers in key occupations. We need more and better technical education. Undervaluing technical and vocational education is a perennial British problem that stretches back for well over a century, and good technical education is not cheap. Successive Governments have wrestled with this for decades, and I can say with confidence that the problem will not be solved by a few soundbites about parity of esteem or by an education policy that is driven by social justice ambitions and that treats educational excellence, national prosperity and growth as afterthoughts. The Government should be taking a hard look at their equivalence and performance tables policy which, over 20 years, has done so much to push young people at school away from technical subjects at GCSE and into non-technical classroom BTECs.

11:45

Engineering construction is also project based and cyclical. A business may have a substantial future pipeline but be justifiably reluctant to take on permanent workers or apprentices when projects are repeatedly delayed, paused or rephased. Businesses are just less able to make long-term workforce investments when they have little certainty about their order books.

The sector is contending with tight margins, high borrowing costs, wage pressures and material inflation. Many specialist contractors and subcontractors simply do not have the financial headroom to recruit and train workers significantly in advance of confirmed work.

The pressures have of course been made worse by the Government’s increase in employer national insurance contributions and the substantial additional burdens imposed by the Employment Rights Act. It is disingenuous for Ministers to express concerns about skills shortages while simultaneously making it riskier and more expensive to employ workers.

I would be grateful if the Minister could address several questions in addition to those already put by my noble friend Lady Coffey. First, what assessment have the Government made of the effect of the policies that they have implemented so far on recruitment, apprenticeships and permanent employment in the engineering construction industry?

Secondly, how are they working with the ECITB and employers to align skills provision with the actual timetable for major nuclear, energy, carbon capture, hydrogen and infrastructure projects? In particular, how will Ministers ensure that delays and uncertainty in government-backed projects do not discourage employers from investing in training and recruitment?

Thirdly, what outcomes will the Government use to judge whether the levy is delivering value for money? Can the Minister provide figures showing how many apprenticeships, qualifications and training places have been supported by the levy and grant system, and how successfully these interventions have addressed shortages in the occupations where demand is greatest?

Finally, what steps are being taken to ensure that the levy system remains responsive to employers, administratively proportionate and focused on training that leads to genuine employment opportunities?

As I have explained, we support the levy order, but the levy cannot succeed in isolation. Its effectiveness will depend upon a stable infrastructure pipeline, a strong vocational education system and a wider economic environment in which businesses are encouraged to hire and retain rather than penalised for it. The Government must now ensure that their wider policies properly support employers to recruit, train and retain their workforces.

[Baroness Smith of Malvern (Lab)]

I thank the Committee for its contributions to the debate, and I welcome the noble Baroness, Lady Spielman, as this is the first time we have faced each other in her new role. I congratulate her on that.

The debate has underlined not only the importance of the ECITB’s work but the scale of the challenge facing one of our most economically vital industries, with a core workforce of 90,000 people and responsibility for £33 billion of output. As noble Lords have recognised, the industry plays a vital role in supporting our energy security, manufacturing capability and critical infrastructure.

As has come through clearly today, the engineering construction industry cannot meet the skills demands of the coming decade without a stable collective system of investment in training, alongside government support. I will return to this in a moment. The evidence is consistent that market forces alone will not deliver the pipeline of skilled workers that the industry urgently needs to meet the demand for new major infrastructure projects.

The ECITB’s levy is the mechanism that enables the collective benefits of a focused skills strategy for the engineering construction industry. It ensures that employers can access support for training and share the benefits of a skilled, competent and resilient workforce. It also opens opportunity, helping apprentices and other new entrants to complete high-quality training and helping existing workers to reskill or upskill to progress their careers.

I will respond to some of the specific points raised. The noble Baroness, Lady Coffey, rightly emphasised the need for success in the spending of the levy and the successful completion of training courses and apprenticeships. The ECITB has confirmed that it currently tracks apprentices and graduates while they are on programmes and receiving grant support. The data that the ECITB collects indicates a positive impact of its grant support on, for example, apprenticeship completion rates. Based on the ECITB’s latest available data for England, Scotland and Wales, of the apprentices who started an apprenticeship in 2020 and were supported by ECITB, 78% have successfully completed their apprenticeship as of December 2025. While we have seen improvements in the completion rates of apprenticeships over recent years, I think that is above the average rate.

The noble Baroness also raised the question of when the annual reports and accounts will be published for 2025. They will be laid in the autumn.

On the point about charitable status, it is not determined by the Government; it is determined by whether an organisation’s purposes are exclusively charitable and legally deemed to provide a clear public benefit. It was therefore a decision for the training bodies themselves—CITB, equally, is a charity—to take on that charitable status.

The noble Lord, Lord Palmer, raised the success of the levy consultation. It would be fair to say to the noble Lord that there are a lot of statistics around. Some of the statistics the noble Lord quoted related to the Construction Industry Training Board rather than the Engineering Construction Industry Training Board; perhaps it would be easier were the Government to decide to go ahead with the merger of the two. Nevertheless, they are different sizes and they do different jobs. The point he made is right: for the ECITB there is, if anything, an even greater level of approval as a result of the levy consultation than the figures he quoted.

Several noble Lords rightly cut to the chase of what the ECITB is responsible for. In other words: what does it actually do, and how, in the broader context, are the Government supporting the need for skills in the engineering and construction industry? On the former, the ECITB continues to invest in skills hubs, training standards and competence assurance across key sectors, including energy, nuclear and renewables. It has supported more than 6,900 new entrants since 2022 and invested £32.6 million in 2025 in training grants and new entrant programmes. During 2024, the ECITB funding supported over 2,000 new entrant starts, including over 1,000 apprentices and 500 graduates. Almost 64,000 learners were trained or assessed using ECITB-approved products, including more than 31,000 learners achieving industry-recognised safety passports and 2,763 learners supported through competence-related programmes. Of course, while the ECITB and the levy we are discussing are important for addressing some of the market failure in delivering skills in the engineering construction industry, it is just part of the broader work the Government are doing to support the engineering construction industry and wider skills. This relates to the points made by the noble Baroness, Lady Spielman.

The Government are delivering significant investment to strengthen engineering construction skills, as part of wider reforms, helping employers to respond to current and future workforce needs. This includes an additional £1 billion of investment to help deliver around 50,000 more apprenticeship opportunities for young people over the coming years—that is particularly important given the 40% fall in young people’s apprenticeships over the last years of the last Government—alongside increased flexibility through the new growth and skills levy and specific sector skills packages in engineering and construction that are worth over £800 million.

Additionally, we are providing targeted incentives for employers, including payments of up to £2,000 for taking on foundation apprentices. We have developed a new foundation apprenticeship in engineering, helping more young people to enter skilled careers, as well as other incentives, particularly for taking young people who may have been out of work on to these apprenticeships. We have continued and in fact increased investment in skills bootcamps and increased devolved approaches through mayoral strategic authorities, enabling local areas to respond to local employer demand and skills shortages.

The noble Baroness specifically raised technical and vocational education. I reassure her that this Government’s action, even in the two years that we have been in government, goes far beyond the soundbites that she characterised. A major reform of post-16 education is in progress, and stronger vocational routes are being developed through the new V-levels, an expansion of the possibility for young people to gain an in-depth technical education through T-levels, improved level 2 qualifications to get young people on to those vocational routes, and the investment I have already outlined in turning around the fall in the numbers of young people who have been able to start apprenticeships, ensuring that those opportunities are available for young people in the future.

Together with the ECITB support, these measures will strengthen the pipeline of skills available to the engineering construction workforce and support the delivery of major infrastructure projects across Great Britain. I hope that, in responding, I have reassured noble Lords about the role of this levy order, its importance in supporting the needs of small and larger businesses, ensuring maximum impact and value for money from employers’ levy contributions, and the important role the ECITB plays in ensuring that this key industry for growth, the development of infrastructure, energy security and manufacturing capability is supported both by the ECITB and the wider policies of this Government.

[Baroness Spielman (Con)]

Can the noble Baroness address my question about the impact of government policies enacted over the last two years on the engineering construction sector, particularly increased national insurance and employment rights?

[Baroness Smith of Malvern (Lab)]

I spelled out some of the impacts of the Government’s policy on the numbers of apprenticeships, the shift to vocational and technical education, the support this Government are providing to turn around the decline we have seen, and the £800 million of sector skills support we are providing for the industry. Is the noble Baroness genuinely arguing that this Government should now reverse the national insurance increases, which is where the investment in the National Health Service, which is also of considerable importance to employers, will come from? If she got her way and we reversed that, I think engineering employers, along with others, would not want their employees to be sitting on the waiting lists we inherited from the last Government.

Motion agreed.