Industrial Training Levy (Construction Industry Training Board) Order 2025

Lord Storey Excerpts

Monday 10th March 2025 Grand Committee

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

My Lords, I thank the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments for the scrutiny they have provided to this order. This statutory instrument, laid in draft on 5 February, will allow the Construction Industry Training Board to raise one more year of levy on the construction sector to fund training. In particular, I welcome the £40 million from levy funds that the CITB is investing in homebuilding skills hubs to support the Government in reaching our 1.5 million homebuilding target.

The CITB’s latest figures state that the construction sector contributes £186 billion to our economy and employs 2.1 million workers—unquestionably a significant part of the UK economy. However, the sector’s reliance on subcontracting and self-employment means that investment in workforce skills is too frequently left to others to prioritise. This levy order reflects the key role that industry plays alongside government in making its workforce safe, competent and increasingly productive.

Established in 1964 with a remit across England, Scotland and Wales, the CITB’s legal purpose is to encourage the provision of construction training. It is a purpose that, some 60 years on, the independent 2023 ITB review found is still needed, due to what the lead reviewer, Mark Farmer, identified as “ongoing market failure”. His report accepts that the current ITB model, a statutory levy system for construction employers, remains the best way to fund such training. The CITB also remains a key partner with government and is an important player in our plan for change. It will work closely with Skills England when it emerges from the passage of legislation through these Houses.

Over the last three years, the CITB has used levy funding to support almost 69,000 apprentices, given grants to over 44,000 businesses and delivered masterclass courses in areas including roofing and bricklaying. This order is the vehicle to bring in just under £224 million of focused funding from the construction sector for the CITB to deliver training and skills activity to support our missions. I trust that noble Lords will continue to support this approach of levy funding training within the construction industry.

Before I outline the details of the SI, I will address the duration of this order. The primary legislation permits a one-year levy order without consensus, the process of consulting with industry, as long as certain criteria are met. The CITB wanted to give industry time to consider the impact of the ITB review before debating its support for three years of levy payments through the usual consensus process. With the delayed ITB review publication truncating the available time before current levy income runs out, the CITB provided me with levy proposals for one financial year. With the ITB review now published, the CITB will start consensus next week on proposals for a 2026 three-year levy order and will listen and respond to industry views in earnest on that.

I turn to the details of the SI. This one-year order retains the levy assessment rates prescribed by the three-year 2022 order: 0.35% of the earnings paid by employers to directly employed workers and 1.25% of the contract payments paid to indirectly employed workers. The levy order exemption threshold means that employers with an annual wage bill of below £135,000 are exempt from paying any levy at all. The CITB estimates that 69% of in-scope employers fall into that category. The levy order reduction threshold provides a 50% reduction for employers who pay a wage bill between £135,000 and £449,999. A further 15% of employers are in scope of this provision and would pay reduced contributions.

Both thresholds have been increased from the 2022 order to prevent employers who have increased employee wages exceeding the limit and facing new or increased levy rates. Employers who are exempt or pay reduced levy rates are still eligible to claim CITB support. The large volume of eligible employers is counterbalanced by the amount of levy paid by larger employers, enabling the few to support the many for the wider benefit of the construction industry.

In lieu of the typical consensus process, the CITB sought views on the one-year proposal from its 14 prescribed organisations, sector federations representing around 30% of all levy-paying employers and the nation councils for England, Scotland and Wales. The vast majority were supportive, and subsequent industry engagement via CITB comms channels and engagement with trade media has not attracted any dissent over a one-year approach. With the ITB review and the CITB’s strategic plan now published, industry is in a much stronger position to enter consensus for the 2026 proposals and make informed decisions.

In conclusion, I have confidence that your Lordships’ Committee will have suitably scrutinised the impact assessment that was laid with the levy documentation; this articulates how the CITB proposes to spend the levy raised by this order. This spend is focused on activities that support the Government’s ambitions to deliver on the plan for change, especially in commitments to build 1.5 million homes in this Parliament and to drive growth for the good of the nation. This order will enable the CITB to continue carrying out these vital training responsibilities. I beg to move.

[Lord Storey (LD)]

My Lords, I always remember how the late Lord Andrew Stunell, who was a spokesperson at one stage for the construction industry, used to rage at us about the huge shortages in every branch of construction. He said, “Just imagine, if we were able to fill these vacancies, how we would be able really to boost the economy and opportunities for young people”.

With an estimated 250,000 extra construction workers needed between now and 2028, it is vital to look at a wide range of ways in which to increase the number of new entrants to the recruitment pool, creating a more diverse workforce. One problem is the mismatch between supply and demand; individuals find it hard to find the right route into a role in construction, and it can be economically challenging for employers to invest in apprenticeships and new entrants.

Better pathways need to be created into the industry. Construction needs to grow apprenticeship starts, which are the main source of industry recruitment at entry level. In addition, around 30% of further education learners need to be able to progress to an apprenticeship or job in construction by assuring employers that they have the skills and experience they need.

Another problem is retention. Better retention of trainees and current workers in construction can significantly reduce skill shortages. Nearly 60,000 new entrants leave the industry each year. We need to retain the current workforce—many leave due to preventable reasons, such as poor workforce culture or limited career progression. Developing a training and skills system to meet the current and future needs, with CITB working with Skills England, will, I hope, start to reverse the problems we face. We very much welcome the levy.