Industrial Training Levy (Engineering Construction Industry Training Board) Order 2020

Lord Watson of Invergowrie Excerpts

Wednesday 2nd September 2020 Grand Committee

[Lord Watson of Invergowrie (Lab)]

My Lords, I thank the Minister for the clear and concise manner in which she laid out this statutory instrument and what it seeks to achieve. The Opposition welcome the introduction of the latest version of the Engineering Construction Industry Training Board levy.

The levy has gained the status of a most venerable instrument. As my noble friend Lord Hain, an esteemed historian, said, it was first introduced in 1964, at a time when the UK was ending 13 years of Tory misrule by welcoming the Government of Harold Wilson and the white-hot heat of the technological revolution. The levy that we are considering today has certainly stood the test of time, although, as my noble friend Lord Hain also highlighted, the representation on the board unfortunately has not.

In a previous life, I was a trade union official involved in negotiations in the manufacturing sector. That involved regular dealings with some of the various industrial training boards then in existence. From memory, there were in excess of 20, until being significantly reduced in number by the Industrial Training Act 1982 —the legislation under which this order is issued. Today, there are just three boards, each of which is a non-departmental public body sponsored by the Department for Education, and thus accountable to Parliament.

The ECITB website reveals, to my surprise, the importance of the sector. It directly supports around 190,000 jobs and accounts for more than one-fifth of the total UK economy. The board raises its funds through training levies, and we learn from the Explanatory Memorandum to this order that, in 2019, the ECITB made grants of just under £20 million to subsidise employers’ training costs. Inevitably, that figure will be substantially lower this year, and it would be helpful if the Minister could indicate what estimate the ECITB has made to her officials about what it expects it to be.

Given the effects of the pandemic, does the Minister know whether the ECITB intends to return or retain levies paid this year that are currently unable to be used for training purposes? If the latter, does it intend to reduce the amount taken from employers in levy payments in 2021 as a consequence?

The annual priorities letter sent to the board by the predecessor of the noble Baroness in January this year—it now seems a lifetime away—states:

“The ECITB has a vital role in ensuring that our country has the technical skills needed to deliver critical infrastructure and energy projects.”


The letter set out the Government’s six priorities for the ECITB for the current year. While all are important—even more so because of the pandemic—the one that stood out for me was this:

“Help the industry to tackle current and future skills issues, with a primary focus on supporting employers to recruit a diverse and inclusive workforce, engage with the apprenticeships programme and to develop the training that best meets their needs, supporting the implementation of the new engineering and manufacturing T levels and the provision of industry placements.”


I emphasise that priority because it links to the need to ensure that more young people, particularly females, understand the importance of the engineering construction sector and the fact that it offers sustainable and well-paid employment, and embrace the STEM subjects at school to enable them to follow that path. There remains a serious and distinct market failure in the development of skills in the construction industry as a whole, something that stems in part from the fact that trading conditions, incentives and culture do not, it seems, lead to a sufficient level of investment in skills by employers. That is not by any means a failing restricted to the construction sector, but the ECITB also has a vital role in providing support in reskilling and upskilling, a factor that will increase in importance after the break with the European Union.

The introduction of the apprenticeship levy in 2017 was a clear sign that the Government accepted that employers would not in sufficient numbers invest in skills of their own volition but required a firm hand on their shoulder to encourage them to do so. As other noble Lords have said, that levy has not yet been as successful as many had hoped, but I believe that no purpose is served by criticising an initiative that is a positive step and ultimately will raise significantly the number of apprenticeships undertaken. The question now is how long that will take, with so much of industry in difficulty.

There is no mention in the Explanatory Memorandum of how the ECITB levy interacts with the apprenticeship levy. There are many apprentices in the engineering construction sector whose employers are being asked to pay two training levies, albeit that they are differently focused. Given that in general many apprenticeships are taken up by people aged 25 and above, it is perhaps surprising that greater resistance from employers in engineering construction is not evident. The Explanatory Memorandum tells us that 25% of employers registered their opposition to the levy in the ECITB’s consultation but gives no hint as to the reasons for that sizeable minority position. On a point touched on by the noble Baroness, Lady Garden, can the Minister say whether being asked to pay two levies was an issue in the sector?

The so-called consensus process to which the Minister referred—it is the name given to the way in which the board seeks the industry’s approval for its proposed levy rates—gained acceptance for the existing levy rate being maintained for onsite employees but being raised on a phased basis over three years for offsite employees. I was going to ask the Minister about this, so I was glad that she explained in her opening remarks why such differential rates are deemed appropriate.

The consultation demonstrates that engineering construction employers strongly support the levy, clearly valuing the payback from their contributions. I wish both the organisation and the industry that it represents well and I look forward to hearing of progress in the development of the skills that are required when Parliament comes to consider the effectiveness of the levy from this year until 2022.

If I may, I should like to finish by paying tribute to my noble friend Lord O’Neill of Clackmannan, who very sadly passed away last week. I feel it appropriate to do so here because my noble friend campaigned long and hard against the construction industry’s failure to pay subcontractors on time, too often causing the bankruptcy of small companies. The noble Lord, Lord O’Neill, argued for the establishment of a retention fund to avoid such events, but to no avail. Such a scheme would give subcontractors a measure of security and provide more security in the industry and I hope that it will soon be established, forming, as it would, a fitting tribute to a fine man and a good friend to so many.