Industrial Training Levy (Construction Industry Training Board) Order 2009

My Lords, I shall speak also to the draft Industrial Training Levy (Engineering Construction Industry Training Board) Orders 2009. 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 House will be interested to note these are the first orders made in compliance with the amendments made to the Industrial Training Act 1982 by the Further Education and Training Act 2007 and cover three years. In the current economic climate the importance of skills cannot be overstated. We therefore welcome the orders before us as evidence that, despite the current economic difficulties, these two industries will continue to invest in the skills of their work forces in the coming years. The industrial training boards, or ITBs, whose levy orders we are considering were set up under the Industrial Training Act 1982. Their role is to encourage the provision of adequate training for employees and prospective employees in the industry. They provide a wide range of services that include setting occupational standards, developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards. Under the Industrial Training Act 1982 an ITB may submit proposals to the Secretary of State to enable it to raise a levy on employers to finance the board’s activities and to encourage adequate training in the industry. The existence of a levy also shares the cost of training more evenly across an industry. The board makes proposals for the rate of levy for the industry it covers and the Secretary of State may make an order giving effect to the proposals. These orders give effect to proposals submitted to us for levies to be collected by the CITB in 2009, 2010 and 2011 and the Engineering Construction Industry Training Board in 2010, 2011 and 2012. As 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 affirmative resolution procedure is required for these orders. As the levy rate is in excess of 0.2 per cent of relevant emoluments, a levy order can only be made if the Secretary of State is satisfied the proposals are necessary to encourage adequate training in the industry and that one of three conditions is satisfied. The relevant condition is that the proposals have the support of more than half the employers who together are likely to pay the majority of the levy. Both boards have followed procedures stipulated in the Industrial Training Levy (Reasonable Steps) Regulations 2008 and their proposals meet that condition. The Act requires ITBs to include proposals for exempting small employers from the levy. The Act does not set a minimum size threshold. Both the CITB’s and ECITB’s proposals set a level for the exemption of small employers that the industry considers to be appropriate. Employers who fall below the threshold are not, however, precluded from benefiting from a grant and other support from the boards, and many of them do so. In the order before the House, the CITB proposes that its levy rates should be unchanged from those approved by the House last year. That is, 0.5 per cent of payroll in respect of direct employees and 1.5 per cent of net expenditure on subcontract labour. As I said earlier, small firms are not required to pay levy, therefore employers whose combined payroll and net expenditure on subcontract labour is less than £80,000 will not have to pay the levy. This is an increase from last year’s threshold of £76,000. The level equates to an employer who employs three people full time throughout the year and 40 per cent of employers come into this category. 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 are not normally involved in training. The ECITB also proposes to make no changes to last year’s rates. First, in respect of site employees, the rates 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 for site employees is £275,000 or less will not have to pay the levy in respect of site employees. 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. Secondly, in respect of off-site employees, often referred to as head office employees, the rates will be 0.18 per cent of the total of payroll and net expenditure on subcontract labour. Employers whose combined payroll and net expenditure on subcontract labour for offsite employees is £1 million or less will not have to pay the levy in respect of offsite employees. 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. Over three years, these proposals are expected to raise between £535 million to £540 million for the CITB and between £55 million and £60 million for the ECITB, which, after all, covers a much smaller industry. It is worth pointing out that the CITB currently returns to its industry £2.20 in direct and indirect training support for every £1 levy received. For the ECITB the figure is £2.52. The House 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. The draft orders will enable the two boards to carry out their vital training responsibilities in 2009 and beyond and I believe it is right that the House should agree to approve them.