Industrial Training Levy (Construction Industry Training Board) Order 2022

Lord Watson of Invergowrie Excerpts

Monday 25th April 2022 Grand Committee

[Lord Storey (LD)]

I thank the noble Lord, Lord Jones, for that tour de force, and, having spent the week in Anglesey, we have a Welsh connection.

As the Minister rightly said, the construction industry is hugely important to the economy of the UK. She also referenced the need for a pipeline of skilled workers. What she did not talk about was the point made by the noble Lord, Lord Jones, that there is a national crisis in the shortage of construction workers, which could hamper the many infrastructure schemes that we have—not just big infrastructure schemes, but local and small ones. If my noble friend Lord Stunell was here, he would tell the Minister in no uncertain terms, which I think he has already done, about the dire consequences of not ensuring that those brickies and pointers, as the noble Lord, Lord Jones, said, are recruited as quickly they should be. I have also wondered why more women are not involved in the construction industry.

The Construction Industry Training Board undertakes a large number of activities, and the Minister spelled them out in some detail, but this is perhaps a time to question what has been going on. I wonder whether the CITB would be considered by Jacob Rees-Mogg as part of his bonfire of the quangos. I hope not, but I hope that it will be reformed and refocused, because there are real concerns. You have only to listen to the National Federation of Builders, which is calling for a fundamental restructuring of the CITB, including an end to its levy-raising powers. It states that the majority of construction employers asked do not see the CITB as adding value to the industry and do not believe that it meets the labour market or industry needs, and that they cannot access the training they need when they need it. That is quite a concern.

Employers in the construction industry are facing many issues, post Covid. Is it fair that the academic institutions receive so much more; should not the levy go directly to levy-paying employers? The levy returns can sometimes be challenging and time-consuming for employers, generating additional administrative costs. Importantly, there needs to be an easier and quicker way to complete the required documentation without further record-keeping. As I have said before, a business must focus on the job of the business, making a profit and securing jobs. When the bureaucracy gets in the way, that often causes real problems for the business.

I hope that the Minister will listen to the comments made and answer them. I too had scribbled down that it would be useful to know, on a regular basis, the names of the small group who advised: let us name them and see who they represent. I had also scribbled a note asking whether the TUC was involved.

[Lord Watson of Invergowrie (Lab)]

My Lords, I thank the Minister for her introduction to the order, which it is fair to say is not controversial. It states that

“the Secretary of State is satisfied that the industrial training levy proposals are necessary to encourage adequate training in the industry”,


and we concur. For that reason, I do not propose to say much at all about the levy itself, which will continue much as before. Rather, I shall focus on the CITB and its role in assisting the construction industry to address some of the issues of recruitment and training it currently faces.

In a previous life, further back than I care to remember, I was a full-time official with a trade union in the engineering sector, and I recall dealing with several industry training boards on a number of different issues. Indeed, from memory, there were more than 20 in the 1980s, until the number was significantly reduced by the Industrial Training Act 1982. It is to be regretted that, apart from those in the film sector, only the Construction Industry Training Board and the Engineering Construction Industry Training Board are still in place today. The last two are non-departmental public bodies, and thus accountable to Parliament and, as the noble Lord, Lord Storey, said, possibly within the sights of the Minister for Brexit Opportunities and Government Efficiency—a quaint name, without a department behind it.

The order we are considering today runs to six pages, but its impact assessment is five times that length. That is to be welcomed, because it contains much interesting—in some cases, fascinating—information and statistics about the levy, the board and the construction industry itself. From it, we learn that the industry has had a levy and grant arrangement for 58 years. The impact assessment says that it currently employs more than 2.5 million people—the Minister said 3.1 million, so I am glad to hear it is growing—contributes 8.6% to GDP, and, if I caught it correctly, 9% of gross value added, which, as an economist, I think is a productivity metric. Both demonstrate the importance of the industry.

The CITB exists to ensure that the construction workforce has the right skills for now and the future, based on three strategic priorities: careers, standards and qualifications, and training and development. As is made plain in the impact assessment:

“There remains a serious and distinct market failure in the development … of skills in the construction industry”.


It is stated that this is because

“the trading conditions, incentives and culture do not lead to a sufficient level of investment in skills by employers.”

Unfortunately, this malaise is not restricted to the construction sector. UK employers in many sectors have long been unwilling to recognise the need for upskilling and to pay for it, and that is a major factor in the low productivity levels from which our economy suffers. The introduction of the apprenticeship levy five years ago was a clear sign of the Government’s acceptance that employers will not in sufficient numbers invest of their own volition in skills development, and thus require a firm hand on their collective shoulder to encourage them to do so.

The training levy plays a key role in equipping the construction industry with the skilled and flexible workforce it needs. In the post-EU world in which we find ourselves, and given the large number of EU nationals who have traditionally worked in the construction industry in this country, it is not just important but absolutely vital that the industry is in a position to train, and continually retrain, its workforce for the challenges facing the economy.

Indeed, to quote the Explanatory Memorandum:

“It is essential, now more than ever, that employers have access to the support needed to upskill existing workers and adequately attract and train new talent, as industry seeks to fully recover from the impacts of the pandemic.”


Absolutely. This order will raise more than £0.5 billion between now and 2024 to invest in training skills, which is why employers have always strongly supported the levy and value the payback they get from their contributions.

However, as the Minister will have noted from the impact assessment, the consultation among employers on the CITB’s proposals for this levy produced a figure of 66.5% in support. That should cause some concern, because not only does it mean that a third of employers were not in favour of the levy—for reasons unknown, or at least not listed in the impact assessment—but the 66.5% figure was down from 76.9% when the vote was last held, in 2017. Perhaps the Minister can say whether DfE officials and/or Ministers have asked the CITB for its explanation of that reduction and what action, if any, the board will be asked to undertake to ensure it does not fall further in three years. More positive is the survey on the final page of the impact assessment, which shows that, when asked whether the statutory levy, grant and funding system should continue, 75% of employers said that it should.

The CITB has had an awkward few years recently, with more than its fair share of criticism from within the sector. The board was forcefully led by Sarah Beale from 2017 until her departure last year, and now has Tim Balcon as its CEO. Ms Beale oversaw a restructuring that saw its workforce cut by two-thirds as it returned to its core business, but that has not assuaged all in the sector. One of its largest participants, Build UK, recently called for fundamental changes, stating that there remains

“widespread frustration with the performance of CITB”.

Mr Balcon deserves the chance to make his influence felt, but are the Minister and her officials aware of the discontent with the board felt by some of the employers it exists to assist? If so, can she share any information as to what support—I am not talking about financial terms—might be offered to the board?

One of those areas should be the need for much greater diversity within the construction industry. The CITB itself deserves credit for becoming, under Sarah Beale, a female-led organisation in a male-dominated industry. One of the potential benefits of that was that it allowed the CITB to push boundaries and promote change, but much more remains to be done. ONS data shows that the construction industry’s 16% female workforce—a point referenced by the noble Lord, Lord Storey—compares with 23% in transportation and 25% in water supply and manufacturing, the other worst sectors.

The 2011 census showed that 13% of the UK population identified as black, Asian or minority ethnic, yet ONS data found that the percentage employed at that time in UK construction was just 7.5%. More worryingly, in a 2015 survey of its own, the CITB found that the actual figure could have been closer to 5%. We should be told what the current figures are, so that the board can begin to plot a course towards increasing the number substantially. As Kay Jarvis of the global infrastructure company blu-3 reported in 2020:

“The 2018 OutNext/PwC Out to Succeed survey also found construction had the third-worst image of all industries as an LGBT+ employer.”


A recent study by recruitment analytics specialist Hays discovered that, of those black people

“who managed to break into the construction sector”—

that term is perhaps of some importance—no less than

“78% claimed they had experienced career restrictions due to their race or other demographic factors such as sexuality and age.”

Whether this is down to structural prejudice or unconscious bias, it highlights the significant and clear challenge of discrimination in the hiring and promotion process, which surely must be addressed. The CITB is well positioned to do so; I hope that the Government will offer it every encouragement, perhaps by setting a baseline and then measuring year-on-year progress against it in respect of equality and diversity in various forms in construction.

--- Later in debate ---

[Baroness Barran (Con)]

My Lords, I thank noble Lords for their contributions to the debate. I will attempt to cover the questions asked but I will of course write on any that I cannot answer at the Dispatch Box.

Before I go any further, the noble Lord, Lord Watson, highlighted the difference between the 2.5 million employees cited in the Explanatory Memorandum and the 3.1 million that I referred to in my opening remarks. The figure of 3.1 million comes from the Office for National Statistics and represents a wider definition of construction that includes the built environment and manufacturing. The figure in the Explanatory Memorandum is an estimate of the CITB-relevant part of the total. I hope that clarifies it for the noble Lord.

The noble Lord, Lord Jones, shared his deep expertise in the sector and asked a number of questions in relation to Wales. In line with the requirements of Section 88 of the Scotland Act 1988, we consulted Scottish Ministers—the noble Lord pointed this out—who confirmed that they are content with the levy order. The Welsh Assembly has also confirmed its support for the order.

The noble Lord asked why the contribution for Wales appears to be so small. The levy is charged to in-scope employers based on their wage bill, so it is possible that there are fewer or smaller such employers in Wales and this is reflected in those figures. The noble Lord also asked how much of the levy will be distributed in Scotland and Wales. The split in income and expenditure between England, Scotland and Wales is not something that the CITB generally measures or reports on.

The noble Lord asked about engagement with the unions. Obviously, it is up to the CITB as to who it engages with. It is the legislation that controls who can actually vote on the levy proposals.

The noble Lords, Lord Jones and Lord Storey, challenged whether the Government are doing enough with our investment in training, qualifications and skills in this area. We have already put in place a wide range of opportunities for adults to gain the skills that they need for employment and are ensuring that people have opportunities to study by delivering on the Prime Minister’s lifetime skills guarantee. The provision of skills, in construction in particular, is supported through a number of routes, including courses available through further education colleges and independent learning providers, with funding of more than £1.3 billion from the adult education budget. Noble Lords will be aware that we introduced construction T-levels in 2020, as an alternative vocational route into the sector, and are continuing to develop skills boot camps, which offer free and flexible courses of up to 16 weeks, funded through the national skills fund.

As noble Lords observed, apprenticeships remain a key route into this industry. There are currently over 640 high-quality, industry-designed standards available, and we aim to continue to improve and grow apprenticeships, so that more employers and individuals can benefit from them.

The noble Lords, Lord Watson and Lord Storey, rightly focused on the lack of diversity in the construction workforce. Obviously the CITB is not responsible for the construction workforce, but it has an important role in facilitating skills opportunities to help the industry strive towards a workforce that reflects today’s society. It undertakes a wide range of initiatives and activities; it works with industry and other partners to try to attract a diverse pool of new entrants into the industry and to promote construction careers. I share the hope of the noble Lord, Lord Watson, that in three years, when we debate this instrument again, the make-up of the sector will look very different from where it is today.

The CITB is funding the training of industry construction ambassadors on fairness, inclusion and respect, who contribute to a dedicated industry project which creates resources for employers to promote and celebrate best practice across the sector. It is also funding a digital resilience hub, which is a free and accessible tool that brings together mental health resources for those working in the construction industry. Finally, it is funding the on-site hubs that support individuals to become employment-ready and site-ready to take up opportunities in construction. Their target is to support underrepresented groups, including women and those from black, Asian and other minority-ethnic backgrounds, to secure sustainable job outcomes. It is fair to say that representation from those groups remains disproportionately low. The CITB continues to work with partners to try to address that.

The noble Lords, Lord Watson and Lord Storey, questioned the value of the CITB and raised some of the criticisms that have been lodged against it, and asked whether there would be an alternative model for funding skills development in the construction industry. The Government seek to evaluate the rationale for and effectiveness of its arm’s-length bodies through a programme of regular reviews, and that includes the ITBs. In 2017, the review of ITBs confirmed that there remains an ongoing need for a central skills body and recommended that the CITB should make stronger efforts to address the skills gap and market failure within the industry. That included the requirement for the CITB to lead on emerging needs, such as supporting the Government’s ambitions for housing.

[Lord Watson of Invergowrie (Lab)]

I mentioned earlier that the impact assessment shows that 75% of employers, when asked, said that they wanted the current scheme to continue. Is it not unthinkable that, with that kind of backing, the Government might move away from the current model?

[Baroness Barran (Con)]

Obviously I cannot predict the future. I can only repeat what the review of 2017 said, on which basis the Government are moving forward. The review showed that there is an ongoing need for a central skills body and, as the noble Lord says, employers support it.

Following that review, the CITB’s implementation of its three-year transformation process, Vision 2020, has helped to make it a more focused and more agile partner to industry, and, as a result of the initiative, the CITB has implemented new governance structures so that industry voices are at the heart of decision-making, has launched new funding systems to allow employers to have easier access to support—the noble Lord, Lord Storey, referred to bureaucracy being a barrier to accessing support—and has moved to an investment model based on strategic commissioning. As I noted, the industry has expressed concerns about the performance of the CITB, but we are confident that it has worked hard to increase industry involvement in its strategic planning to address those concerns.

The noble Lord, Lord Storey, asked about the funding model and exactly what it pays for. The levy provides an investment in skills through a redistributive and collective fund, and it provides value through strategic initiatives that benefit the whole industry—I have referred to some of them already—such as attracting new entrants, identifying common standards and common training solutions, encouraging the transferability of skills, quality control of training provision, leadership and project management development, and collaborative behavioural training programmes.

The noble Lord, Lord Watson, asked about the relationship between the amount of levy that is paid and the grants that an employer might receive. We believe that employers receive value for money, but they do not expect to receive a direct financial return via the training grants that is equal to the levy that is paid. As I mentioned, the levy is an investment in skills through a redistributive and collective fund that benefits all employers.

The noble Lord, Lord Jones, asked about our housebuilding targets. One of the priorities from the DfE to the CITB for 2022-23 is providing support to the industry to meet our ambition to build 300,000 homes each year.

There continues to be the collective view across the sector that training should be funded through a statutory levy system and that that system should be used to contribute to a pool of skilled labour, now and in the future, for this critical sector. There is a firm belief that without the levy there would be a serious deterioration in the quality and quantity of training in the construction industry, leading to a deficiency in skills levels and in capacity. That would create particular challenges in the current economic environment, when skilled workers are needed to deliver the infrastructure projects required to meet the environmental challenge of reducing the UK’s carbon emissions to zero by 2050, as well as all the other ambitions that we have referred to in relation to other infrastructure and housebuilding projects.