Industrial Training Levy (Engineering Construction Industry Training Board) Order 2012

Baroness Wilcox Excerpts

Monday 19th March 2012 Grand Committee

Moved By

[Baroness Wilcox]

That the Grand Committee do report to the House that it has considered the Industrial Training Levy (Engineering Construction Industry Training Board) Order 2012.

Relevant documents: 42nd Report from the Joint Committee on Statutory Instruments.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I have a fairly lengthy speaking note, which I have tried to minimise, but I hope that noble Lords will bear with me as I go through the main details of the orders.

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. The two industrial training boards—ITBs—whose levy orders we are considering are non-departmental public bodies that operate under the provisions of the Industrial Training Act 1982. The boards are employer-led and their role is to ensure that the quantity and quality of training is adequate to meet the needs of their industries. 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. The Industrial Training Act 1982 permits an ITB to raise levies on employers so that the costs of training are shared more evenly between companies in the industry. The orders before us provide evidence that, despite the current economic difficulties, these two industries will continue to invest in the skills of their workforces in the coming years.

The orders give effect to proposals submitted to us for levies to be collected by the CITB in 2012, 2013 and 2014, and for the ECITB in 2013. Both involve the imposition of a levy which is estimated to be in excess of 1 per cent of emoluments, essentially wage costs, for some employers. The orders can be made only if the Secretary of State is satisfied that the amount of levy is appropriate to the circumstances, that the proposals are necessary to encourage adequate training in the industry, and that they have the support of more than half the employers who together are likely to pay the majority of the levy. The Secretary of State is satisfied that these conditions have been met.

The Act also requires ITBs to include proposals for exempting small employers from the levy. Both orders therefore provide that small firms will be exempt if their expenditure on payroll and sub-contract labour is below a certain threshold that the industry considers to be appropriate. Those firms are still able to benefit from grant and other support from ITBs, and many of them do so.

In the Construction Industry Training Board order before the Committee, the CITB proposes that levy rates should remain unchanged from those approved by the House in 2009; that is, 0.5 per cent of payroll in respect of direct employees and 1.5 per cent of net expenditure on sub-contract labour. The rationale for the higher levy rate on sub-contract labour is that most training is carried out by employers with a direct labour force, mainly smaller employers. For the larger employers who use more labour, only sub-contractors are not usually directly involved in training. The higher levy rate on sub-contract labour is intended to share out the costs of training more equally across the whole industry.

As I said earlier, small firms are not required to pay the levy, and therefore employers whose combined payroll and net expenditure on sub-contract labour is less than £80,000 will not have to pay it. Around 50 per cent of relevant employers fall into this category. In addition, with the support of industry, the CITB has tried to mitigate the impact on employers who are just above the small firm threshold by applying a 50 per cent reduction to the levy payable if an employer’s expenditure on payroll and sub-contract labour is between £80,000 and £100,000. Over three years, the CITB’s proposals are expected to raise between £380 million and £390 million on levy income.

In the Engineering Construction Industry Training Board order, the ECITB also proposes to make no changes to its levy rates. The rate for site employees is 1.5 per cent of total payroll and net expenditure on sub-contract labour. Employers who spend £275,000 or less on site employees will not have to pay the levy. The rate in respect of offsite employees, often referred to as “head office” employees, is 0.18 per cent of total payroll and net expenditure on sub-contract labour. Employers who spend £1 million or less in respect of offsite employees will not have to pay the levy. Of all the establishments which are considered to be leviable by the ECITB, it is expected that around 35 per cent will be exempted from paying the levy. The ECITB covers a much smaller industry than the CITB, so the one-year proposal is expected to raise around £20 million in levy income.

The Committee will note that the CITB levy order covers a three-year period, while the CITB order covers only one year. The Industrial Training Act requires ITBs to submit proposals “from time to time”. Those proposals may provide for levies to be imposed for a period of up to three years. In 2009, both orders were made for three years. This time, the ECITB has proposed a one-year levy order because, in view of the current economic conditions, employers consider that they should retain flexibility on the issue of future levy rates. It is anticipated that next year the ECITB levy order will cover a two-year period with the intention of realigning the two orders, so that from 2015 both will again cover a three-year period.

The Committee will know from previous debates that the CITB and the ECITB exist because of the support 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 quantity and quality of training in these industries, leading to a deficiency in skill levels. The boards’ own annual employer surveys continue to demonstrate strong support for the principle of a levy system. These draft orders will enable the two boards to continue to carry out their vital training responsibilities, and I ask the Committee to approve them. I beg to move.

[Baroness Turner of Camden]

My Lords, I thank the noble Baroness for the very detailed introduction. I have only one or two very minor points to raise on it.

First, when I was a member of the Equal Opportunities Commission we had a very successful campaign, known as the WISE campaign, which was conducted under the leadership of the noble Baroness, Lady Platt, who is herself an engineer. At that time I was a full-time union official and we co-operated with the ECITB—in fact the training board had always had a very good reputation with unions—and with the EOC in order to get women into the study of engineering. At that time it was not felt to be a suitable career for women, and that sort of feeling is still around. I would therefore like to know whether any special emphasis is being put on something like the WISE Campaign in view of the changes to the levy now being imposed so far as the training board is concerned.

As for the CITB, in some of the House’s debates on employment conditions and rights I have often been bothered about the fact that the construction industry unfortunately still has a very bad record on health and safety. I would like to know whether the Minister feels that the levy which is to be applied will be sufficient, and whether sufficient emphasis will be placed on the whole issue of health and safety in construction. I think that it is a very important issue at the present time.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, I, too, thank the Minister for her explanation of these orders. Generally speaking, we welcome the levy. Indeed, if it applied across all industry we might find another means of ensuring that we had more training and more apprenticeships, given that only 4 per cent to 8 per cent of employers actually employ apprentices. I welcome the fact that despite difficult times a significant majority of both the engineering construction industry and the construction industry still believe that the levy is a valuable and viable way forward.

I certainly concur with the points made by my noble friend Lady Turner in relation to women in engineering. Significant attempts are being made by companies to ensure that more women are involved in engineering, and in getting those women who are involved to go to schools and spread the word that this is an industry that provides useful employment and good-quality careers. The same can be said of construction. We are gradually beginning to see more women. I do not know if my noble friend Lady Turner has had the opportunity to visit the Olympic site and see the apprentices there, but it was certainly good to see more female apprentices involved in the construction stages.

I do not have any additional questions. I did not draw the same conclusion from the consultation outcome as the noble Lord, Lord Razzall, because when I read through it I felt that they made quite strenuous efforts to ensure that they had a widespread consultation. They recognise that a declining number of employers are involved in trade associations so they have gone for a wider survey. I think that the surveys are valid and can be justified. I understand why there has been only a one-year levy ordered, but I welcome the fact that both those levies will be realigned.

[Baroness Wilcox]

My Lords, I thank noble Lords very much indeed for the short debate that we have had. As soon as I saw the noble Baroness, Lady Turner, stand up, I almost saw the noble Baroness, Lady Platt, standing up with her because when I first came into this House they were doughty campaigners, and still are. The noble Baroness, Lady Turner, may be interested to know that the noble Baroness, Lady Platt, has stayed in contact even though she has to be at home most of the time and has written most encouraging letters throughout her absence, so she is with us in spirit if not in body.

Although the number of women in this field is increasing slowly, the CITB recognises that the number of women employed in construction remains disproportionately low, and it is directly addressing this issue by actively promoting equality and diversity. It was awarded the equality standard in 2011. Gaining the equality standard is a first for a sector skills council. It is also the first time that an organisation working across the three nations has achieved that standard, so things are improving, although there is more to do.

The noble Lord, Lord Young, kindly mentioned the apprentices at the Olympics site. I have been there and met them. It is lovely to see young girls having the opportunity to take on careers which are stretching them in every way. Both industries are health and safety-intensive industries, as the noble Baroness, Lady Turner, said. We have been told by both organisations that offering excellent training and following rigorous standards is a priority, so they realise that there is further to go in that regard. It is good to hear them say that themselves.

It is important that the levies do not place burdens on small firms, as I am sure my noble friend Lord Razzall will agree. That is why we have the exemptions. As I said earlier, 50 per cent of small firms involved in construction will not have to pay the levy. My noble friend asked about the surveys. I think that they were justified. Getting people to take part in surveys nowadays is not the easiest thing, but given the breadth of this issue, I think that a figure of some 52 per cent or 59 per cent is good. I am delighted that the noble Lord, Lord Young, was happy to welcome that.

The combined figures from associations and the sample showed 85 per cent employer support for the levy, so that looks good. The proposals before the Committee relate to the construction and engineering construction industries, as we have just said. It continues to be the collective view of employers in these two industries that training should be funded through a statutory levy system to secure a sufficient pool of skilled labour. I commend these orders to the Committee.

Motion agreed.