Industrial Training Levy (Construction Industry Training Board) Order 2015

Baroness Donaghy Excerpts

Thursday 26th February 2015 Grand Committee

These orders will enable the CITB and the ECITB to continue to carry out their vital training responsibilities. I commend the orders to the Committee.

[Baroness Donaghy (Lab)]

My Lords, as the author of a report on the construction industry, in particular fatalities in the construction industry, I spent some time on the area of training and skills uplifting, and met people from the CITB. It is important to place on record how very important the levies are to the particular industries and how very pleased I am that there is cross-party acceptance of the continuation of the levies.

I see that there has been some mild redistribution, or that it will at least take effect in 2017. That is good news. One thing I found in my report was that although the CITB work was very good—that is the area that I know best, rather than the ECITB—there was very little redistribution of the income. It is all very well to say that small companies that are exempt from the levy can still apply for grants, but it is the sheer logistics of sparing members of their workforce to go away and train that causes one of the most difficult problems for small companies. We need to consider ways in which we can persuade companies to take on apprentices, but in the confidence that apprentices will be able to find employment afterwards. With or without the levy, I still think that we are falling down on guaranteeing jobs in some of these companies, even if it means an element of government subsidy for a year or so. I am making a plea for more redistribution.

The Minister referred to deficiency in skill levels. I agree entirely that it would be even worse than it is now if we did not have these levies. I do not think that we can be particularly proud—I am not making a party-political point; this is a problem that has spanned Governments—given the skills shortage in this country, which has been a major problem. The fact that we are importing bricks and bricklayers says quite a lot about the nature of construction in this country. That short-termism is highly damaging to our economy. The fact that we allow so many underskilled and unskilled people on to sites explains, I think, some of the lower levels of productivity that we have. We need to look at the deficiency in skill levels. Some very good work is being done here, but it really is not solving the problem in major areas in our construction industry.

I ought to finish on a positive note. I thoroughly welcome any continuation of the levies, any changes that make life better for the smaller companies and, incidentally, any changes that mean HMRC will have a closer eye on some of the activities in some of the subcontracting areas.

[Lord Young of Norwood Green (Lab)]

My Lords, in principle I, too, welcome the changes in the levy for the CITB and the ECITB. I have a number of questions to put to the Minister, whom I thank for the introduction.

I believe that there is a triennial review taking place. One should know the fate of that, because it is important. We need to be sure that the way in which the levy is organised does not mean that it is at odds with the way in which the CITB is developing.

We have two main concerns about the change in the third year of the levy period. The impact assessment discusses this. I hope the Minister will elaborate a bit further on any mitigating steps to be put in place. The first concern is that the nature of the construction sector is very much that of a subcontracting model. In many respects, prime companies often squeeze the margins of their subcontractors. How will that be addressed? The impact assessment states that a potential effect is the passing on of the costs of the levy from main contractors to subcontractors. That is a common practice outside the existing system and it reduces the legitimacy for employers if they do not pay levies on payments to their own subcontractors. I would welcome the Minister addressing that.

We are particularly concerned about the potential with the change in the third year for the greater use of umbrella companies and labour agencies. That is a real problem for the construction sector. Trade unions such as the Union of Construction Allied Trades & Technicians and others have rightly highlighted the fact that it undermines the efficiency, operation and fairness of the construction sector. This measure could help to increase that usage. What will the Minister do to mitigate that?

My noble friend Lady Donaghy anticipated me—I, too, will refer to the fact that there is a savage irony that despite the levy we still have a shortage in basic but essential skills such as bricklaying. We ought to be looking at how well this scheme does in attracting young people into the industry—especially young women—pointing out that these are good skills and the pay can be good in the right circumstances. We have some concerns about what the industry is doing to improve on that.

In relation to the Engineering Construction Industry Training Board, we know that there is a large demand for new engineering jobs. We have a significant skills shortage in this sector. EngineeringUK states in its latest report:

“Filling the demand for new engineering jobs will generate an additional £27 billion per year for the UK economy from 2022 … To meet projected employer demand the number of engineering apprentices and graduates entering the industry will need to double … Engineering companies will need 182,000 people per year with engineering skills in the decade to 2022 but there is a current annual shortfall of 55,000 skilled workers”.

Do we believe that with the levy as it is currently structured the industry is going to meet that challenge? It is a big challenge and it is a very important one. Is the levy being used innovatively; for example, to go into schools to encourage young people, especially girls, to study things such as GCSE physics? The levy might often be used for people who are entering the industry at the age of 18, 19 or 20 but is it being used more innovatively to ensure that we encourage people to go into these sectors at an early enough age?

Those are the general questions that we have. We support the principle of the levy and the way it is being restructured but we have concerns about the construction industry and the engineering construction industry being able to meet the challenge of skills demand in these important sectors.