Industrial Training Levy (Engineering Construction Industry Training Board) Order 2008

rose to move, That the Grand Committee do report to the House that it has considered the Industrial Training Levy (Engineering Construction Industry Training Board) Order 2008. The noble Baroness said: These 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. I have a fairly lengthy speaking note, which I have tried to minimise, but I hope noble Lords will bear with me as I go through some detail. Noble Lords will be interested to note that it is anticipated that these orders will be the last single-year orders to be brought before Parliament. As a consequence of amendments made to the Industrial Training Act 1982 by the Further Education and Training Act 2007, which are due to come into force on 2 March 2008, future levy orders are likely to be three years in duration. The importance of skills cannot be overstated. Britain can succeed in a rapidly changing world only if we develop the skills of our people to the fullest possible extent, carry out world-class research and scholarship and apply both knowledge and skills to create an innovative and competitive economy. The creation in June last year of the Department for Innovation, Universities and Skills will drive forward delivery of the Government’s long-term vision to make Britain one of the best places in the world for science, research and innovation and to deliver the ambition of a world-class skills base. However, despite the real progress we have made since 1997, we still have a lot of work to do before our nation’s skills compare to those of our key competitor nations. The Government have made, and continue to make, major investments in training. This year the Learning and Skills Council will fund further education and training to the value of more than £8.5 billion, but while the Government have a role in setting the framework for success, employers need to be in the driving seat if we are to equip the workforce with the skills that employers need. Recognising the important contribution made by sector skills councils since 2002 and the potential for them to make an even greater impact, we have backed the call made by the noble Lord, Lord Leitch, for sector skills councils to be reformed, relicensed and empowered. We have also backed his call for a new commission for employment and skills. It will begin its operations from 1 April. A key early task for the commission will be to manage the relicensing of the sector skills councils, making sure that every sector skills council is an authoritative and powerful advocate for skills in its sector. In past manifestos we promised that where both sides of industry in a sector agree, we will help to set up a statutory framework for training. This commitment remains in place, and the recent order establishing the Film Industry Training Board for England and Wales, which came into effect last December, is an example of our continued commitment to this principle. The two industrial training boards whose levy orders we are considering are models of the successful application of such frameworks. They are non-departmental public bodies set up under the Industrial Training Act 1982. Their role is to ensure that the quantity and quality of training are adequate to meet the needs of the industries they cover. They provide a wide range of services including setting occupational standards and developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards. In fact the Construction Industry Training Board, in partnership with the Construction Industry Training Board Northern Ireland and the Construction Industry Council, operate as ConstructionSkills, the sector skills council for the construction industry. It developed one of the first sector skills agreements, which now underpins every facet of the Construction Industry Training Board’s operations. Last year it maintained its position at the forefront of developments and launched an arm of the National Skills Academy on the site of the 2012 London Olympics, to address skills issues arising from this important project. The Engineering Construction Industry Training Board is not a sector skills council. I am pleased to say, however, that it has worked closely with the Sector Skills Development Agency and will continue to work with the new Commission for Employment and Skills to scope out its future role within the Skills for Business Network. The Industrial Training Act 1982 contains provisions which enable levies to be raised on employers to finance an industry training board’s activities and to share the cost of training more evenly between companies in an industry. It is for the employer members of a board to make proposals for the rate of levy for the industry it covers and for the Secretary of State to make an order giving effect to the proposals. That is the purpose of the orders before us. They give effect to proposals submitted to us for a levy to be collected by the Construction Industry Training Board in 2008 and the Engineering Construction Industry Training Board in 2009. The proposals from the Construction Industry Training Board and the Engineering Construction Industry Training Board have the support of organisations representing more than half the employers who together are likely to pay the majority of the levy. The Secretary of State is satisfied that the levies are necessary to encourage adequate training in the industry. The Act requires industry training boards to exclude small firms from the levy, but does not set a minimum size threshold. Each of these proposals sets a level that the industry considers to be appropriate. Employers who fall below the threshold are not however precluded from benefiting from grant and other support from the boards, and many of them do so. In the order before us the Construction Industry Training Board proposes that both its levy rates should stay the same as those approved by the House last year. The rates will be 0.5 per cent of payroll for direct employees and 1.5 per cent of net expenditure on subcontract labour. Employers whose combined payroll and net expenditure on subcontract labour is less than £76,000 will not have to pay the levy. This is an increase from last year’s threshold of £73,000 to reflect wage inflation. The level equates to an employer who employs three people full time throughout the year. 40 per cent of employers come into this category. A further 25 per cent of employers will not be assessed for or will not pay the levy for other reasons; for example, they are in their first year of registration with the Construction Industry Training Board or will have ceased trading. This means that around 65 per cent of employers will not actually be required to pay the levy. The higher levy rate on subcontract labour is because, according to the industry, the vast majority of training is carried out by those employers with a directly employed labour force. Employers who opt to use subcontractor labour tend to have a transitory arrangement with their subcontractors and are not normally involved in their training. It is encouraging to see that the large contractors, who use significant amounts of subcontract labour, are recognising their responsibility to contribute more than just cash to tackle the skill shortages in the industry. Through Construction Industry Training Board-ConstructionSkills’ programme-led apprenticeships initiative, large contractors have initiated action to encourage firms in their supply chains to recruit and train apprentices. The Engineering Construction Industry Training Board also proposes to make no changes to last year’s rates. The rates for sites will be 1.5 per cent of total payroll and net expenditure on subcontract labour. Contractors whose combined payroll and net expenditure on subcontract labour is £275,000 or less will not have to pay the levy. The level is unchanged from last year and equates to an employer who employs 15 to 20 persons full time throughout the year. It is expected that 54 per cent of sites will be exempted. For head offices, it will be 0.18 per cent of the total of payroll and net expenditure on subcontract labour. Head offices whose combined payroll and net expenditure on subcontract labour is £1 million or less will not have to pay the levy. This level is also unchanged from last year and equates to an employer who employs around 40 persons full time throughout the year. It is expected that 73 per cent of head offices will be exempted. These proposals are expected to raise £175 million to £180 million for the Construction Industry Training Board and £14 million to £15 million for the Engineering Construction Industry Training Board, which covers a much smaller industry. It is worth pointing out that the CITB currently returns £1.90 in direct and indirect training support for every £1 levy received. For the ECITB the figure is £2.11. The Committee will know from our annual 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. This was confirmed by reviews of both boards carried out by my department in 2003, which found that the principle of the levy is still strongly supported in each industry. The boards’ own annual employer surveys also demonstrate continued strong support for the principle of a levy system. The industry training boards’ successes have not occurred without the significant efforts of the many people working for them. In particular, I pay tribute to the leadership of the two boards. For the ECITB, Terry Lazenby and David Edwards have continued to spearhead the industry’s drive to meet the challenge facing it. The same is true of Sir Michael Latham and Peter Lobban, who will retire in August from the CITB. I thank them all and wish Peter Lobban a long and happy retirement. The draft orders will enable the two boards to carry out their vital training responsibilities in 2008, and I believe it is right that the House should approve them. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Industrial Training Levy (Engineering Construction Industry Training Board) Order 2008. 7th Report from the Joint Committee on Statutory Instruments.—(Baroness Morgan of Drefelin.)