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Session 2000-01
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Delegated Legislation Committee Debates

Draft Industrial Training Levy Order 2001

First Standing Committee on Delegated Legislation

Monday 22 January 2001

[Mr. John Maxton in the Chair]

Draft Industrial Training Levy (Engineering Construction Board) Order 2001

4.30 pm

The Chairman: I call the Minister to move the motion.

Mr. Clive Betts (Sheffield, Attercliffe): On a point of order, Mr. Maxton. It appears that we have a slight impasse for a few moments, as the Minister is not yet present. If I move the motion formally, what will happen when the Minister arrives? Will he be able to speak immediately, or will he have to wait his turn to respond to hon. Members' comments?

The Chairman: Any member of the Committee may move the motion formally, or may move it and speak to it, but once it has been moved, if someone else is speaking when the Minister arrives, he will have to wait until the person speaking has sat down. Any member of the Committee may speak more than once, so—[Interruption.] As the Minister has now arrived, I ask him, once he has filled his water glass and taken a quick drink, to move the motion.

The Parliamentary Under-Secretary of State for Education and Employment (Mr. Malcolm Wicks): I beg to move,

    That the Committee has considered the draft Industrial Training Levy (Engineering Construction Board) Order 2001.

The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Construction Board) Order 2001.

Mr. Wicks: The rain is wonderful in Eastbourne, Mr. Maxton. I apologise to you and the Committee for being late. I must get my breath back. I ran up the stairs, I am afraid. I must go to the gym more often.

Mr. Tony McWalter (Hemel Hempstead): Does my hon. Friend agree that the arrangements will help the construction industry to ensure that the quality of work done in future will be a great deal better than in the past?

Mr. Wicks: I agree with that early but helpful intervention.

The proposals will authorise the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on employers in their industries in order to finance training activities, including grant schemes, and the boards' operating costs. Provision for the levy is contained in the Industrial Training Act 1982, and the orders will give effect to proposals submitted by the two boards. In each case, the proposals are based on employers' payrolls and use of subcontract labour. Each board has included provision to raise a levy in excess of 1 per cent. of an employer's payroll.

The Industrial Training Act 1982 requires that, in such cases, the proposals must be approved by affirmative resolution of both Houses. As required under the Act, both boards have provided for the exemption from the levy of small firms. The level at which that exemption takes effect is intended to strike the right balance between helping small firms grow and giving them an unfair commercial advantage. The boards are committed to supporting the training efforts of small firms, whether or not they pay the levy. All companies need a skilled, competent work force if they are to be competitive. Small firms in these sectors are encouraged to take advantage of the services offered by the boards to provide opportunities for trainees and apprentices.

The Construction Industry Training Board proposes the following rates: 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 £61,000 will not be liable to pay the levy. That represents a reduction of 34 per cent. on the current rate of 2.28 per cent. for subcontract labour, and is part of the move towards a single rate of levy, subject to annual consultation with the industry. The CITB is significantly increasing its investment in training, making additional grants and other resources available to support employers' efforts. That is being wholly financed by cost reductions, an increase in non-levy income, and increased levy income from growth in the industry.

The Engineering Construction Industry Training Board assesses head offices and construction sites separately. The proposed levy rate for head offices is 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 be liable to pay the levy. For construction sites, the proposed rate is 1.5 per cent. of the total of the payroll and net expenditure on subcontract labour. Sites whose combined payroll and net expenditure on subcontract labour is £75,000 or less will not be liable to pay the levy. The ECITB proposals are the same as those approved by the House last year.

The proposals for both boards involve levy rates in excess of 0.2 per cent. with no provision for exempting employers who make their own training arrangements. In such cases, the Industrial Training Act 1982 requires boards to show that the proposals have the support of the employers in the industry. I am satisfied that each board has that support. All the key employer federations have been consulted about the levy rates and agree that they are necessary to fund the boards' training plans.

The proposals are expected to raise between £78 and £83 million for the CITB and around £10 million for the ECITB. The Committee knows from previous debates that both boards are statutory industrial training boards. They exist because of wide support from employers and employer interest groups in the sectors that I have mentioned, who believe that without them there would be serious deterioration of training. In the spring, I will meet the chairs of both boards—Jim Rowland from the ECITB and Hugh Try from the CITB—to discuss their performance over the past year and to consider key issues for the future. We will especially examine the way in which their work in England will inform and influence that of regional development agencies and, from April, the Learning and Skills Council, which is an important new player in post-16 education and training.

Each board is the Government-recognised national training organisation for its sector, and fully involved with the national network. I welcome the importance that each places on a forward-looking strategic planning process, informed by rigorous analysis of skill needs and supply. That is crucial if they are to ensure that the education, training, skills and qualifications needs of their sectors are met now and for the future. Each board is committed to ensuring that employers in those industries receive a high-quality service. I thank the boards and their staff for their continued hard work.

The draft orders before the Committee will enable the two boards to carry out their vital training responsibilities in 2001. It is right that the Committee should approve them, and I commend them to the Committee. They may seem dry regulations, but they involve matters of great importance. Indeed, when I think about them I sometimes get breathless.

4.40 pm

Mr. Graham Brady (Altrincham and Sale, West): It is a pleasure to see you in the Chair, Mr Maxton—and the Minister in his place. I know that he and the hon. Member for Sheffield, Attercliffe (Mr. Betts)—and, indeed, all members of the Committee—are relieved that he got here in time to present these two important orders. He did a tremendous job, given the difficult circumstances that he obviously encountered in travelling back to the House. Labour Members' interventions were most inventive. I almost considered making a point of order accusing them of wasting the Committee's time, but their action was justified.

We have embarked on an important short debate. The Minister has spoken about the work of the remaining industrial training boards: the Engineering Construction Industry Training Board and the Construction Industry Training Board, which are doing important work in their respective sectors. The debate is important not just because of the work done by those bodies, but because of the principles that are at stake. The orders give the power to impose a compulsory levy or charge on business, backed up by recourse to the employment tribunals to enforce the payment of those levies. The Government are licensing the training boards to raise a tax: in a sense, it is a hypothecated tax. It is an unusual situation—it was less unusual when there were more industrial training boards, before they were abolished by previous Governments.

The Minister would not expect me or my hon. Friends to be sympathetic to compulsory levies on business, which inevitably add to the burden on industry. It is telling that it was the previous Conservative Administration who recognised the need and importance of preserving those two industrial training boards because of the unusual circumstances that apply to aspects of the engineering industry. Conservative Governments were right to sweep away most of the industrial training boards. The Labour party found their abolition regrettable at the time, but the Government have now come into line with our thinking. Although they want to maintain the two boards that are the subject of our debate, I do not think that they plan to return to more widespread provision through a levy mechanism.

There are particular reasons and circumstances why that funding mechanism is appropriate in those sectors: the predominance of project work, the importance of contract staff, the number of staff who move from one employer to another, the large number of individual contractors who operate in the sectors and the large number of small companies. Given the compulsory nature of the levies, it is a tribute to the hard work and effectiveness of the boards that such a high degree of acceptance and consensus has been revealed by the consensus project. In any situation where compulsion applies, there is a tendency for people to object to some extent to the compulsion placed on them but, as the Minister said, there is a great deal of acceptance and support for the work of the training boards. There is considerable satisfaction with what is being achieved.

The Engineering Construction Industry Training Board deals with an industry that employs around 39,000 employees, which constitutes about 2 per cent. of the engineering work force—I am sure that members of the Committee will correct my figures if they are wrong. The Construction Industry Training Board deals with a much smaller sector, and last year it trained 22,780 new entrants. That shows the difference between the sizes of the sectors dealt with by the two boards.

The training boards serve the interests of those companies that fall liable to the levy, but they also provide training and support to those that fall beneath the levy threshold. In the past year, training has been provided by the Construction Industry Training Board for more than 6,000 trainees who were engaged by non-levy bearing companies. That benefits the whole sector. The companies that pay the levy accept that grants and support for training should be given to companies that are not in the levy category. That is surprising, and I pay tribute to the boards for their work in that respect.

Some of the training provided is in niche sectors—areas that one could categorise as market failure. For example, I understand that about 15 or 20 new steeplejack recruits are needed every year. The boards contribute to meeting needs that may not otherwise be adequately supplied.

One reason for the high degree of consensus and acceptance of the boards and the levy regime is the boards' focus on quality and output, and the welcome recognition of the importance of delivering value and containing costs. The measure proposes to reduce the levy from 2.28 per cent. to 1.5 per cent. for the labour-only category of the CITB while freezing the rate for those engaged under PAYE at 0.5 per cent. That is a welcome sign of the boards' self-restraint and self-regulation.

The boards carry with them so much of the industry that they serve because the industry recognises that they will not take advantage of the unusual, unique powers available to them, with the approval of the House, to set a levy rate. That shows good sense and the desire to maintain and control costs for the industrial sectors concerned.

I have several questions for the Minister when he has regained his breath. First is a matter that my hon. Friend the Member for Daventry (Mr. Boswell) raised a year ago when the corresponding orders were tabled in January 2000. Following the enactment of the National Minimum Wage Act 1998 and the Employment Relations Act 1999, the employment tribunals have a considerable additional work load and have been struggling to cope with that burden. What burden will be imposed by the enforcement mechanisms?

Will the Minister give some thought to the exemption level for small businesses? In his opening remarks, he said that the boards do not apply a levy to businesses whose wage bills are below a certain level, but he did not assess or evaluate whether that exemption level is appropriate or, indeed, how it compares with others. The wage bill is an unusual way of calculating a small business exemption. In other legislative roles, the Government tend to consider numbers of employees rather than the wage bill. I would be interested to hear the Minister's thoughts on the reason for using the wage bill as the measure for exemption of small businesses and the appropriateness of the levels that have been fixed. Does he think that they could be fixed at a different level?

What are the implications for the time that companies may have to wait for a case to be heard and resolved by an employment tribunal? The regulations, which of course reflect orders that have been in force for some time, may not impose an additional burden. However, will either the two boards concerned or the member or client companies that come into contact with them have to wait longer for the resolution of disputes by employment tribunals than would have been the case a year or two years ago, before the tribunals' work load increased?

How many cases go to tribunal and how much levy is concerned in those cases? There is a small levy rate, which we have discussed and which I have welcomed on behalf of the official Opposition. I also welcome the fact that the rate, in one category at least, is being reduced quite considerably, but the Minister will be aware that even a small levy rate imposes a cost on the sector to which it is applied. It would be helpful if the Minister could give us figures for the number of businesses that may have difficulty paying the levy rates. Again, that information does not appear in the evidence in the regulatory impact assessment for the two orders. Even if the overall amount is small, it is an increase in marginal costs, which could in some instances push a relatively small business into bankruptcy or liquidation. Can the Minister give us some idea of how often that happens, if at all? Of course, we would all welcome the answer that that does not happen.

The Minister referred to the need for the boards to interact with the regional development agencies and the learning and skills councils. Recent press comments have suggested that the learning and skills councils may not be as advanced in making their working arrangements in time for their April start date as Ministers had hoped. Could he put a little more flesh on the bones and tell us how he sees the relationship developing in respect of young people, whose training may be a direct concern of the learning and skills councils? There may be a crossover in both funding and provision. Does the Minister envisage that the learning and skills councils will, for instance, become an additional conduit of funding available to the boards? Does he envisage co-operation between the boards and the learning and skills councils in making training provision available in particular areas?

The Minister said that the orders do not provide for an exemption for companies that decide to provide their own training. What consideration is being given to the appropriateness of that? A company may submit its own training proposals at a certain level, thus showing that it is taking its share of the burden to provide a proper supply of adequately trained recruits to the industry. Would it be proper to consider either an exemption or an abatement to ensure that payment is not made more than once to achieve the same end?

Would the Minister also comment on the slightly wider issue of the role of the training boards in relation to the training of school leavers? I am thinking in particular of the interaction of this measure with some of the other Government policies, such as the desire to increase the percentage of school leavers who go on to higher education. By achieving that aim, the Government may perversely reduce the available body of recruits into the construction industry and parts of the engineering sector. Does he have any thoughts on the possibility of encouraging more school leavers, if it is appropriate to their needs and educational attainments, to go directly into the training that is provided by these boards?

Would the Minister also comment on the interaction between the work of the industrial training boards and the Government's new deal programme? The new deal has been criticised, even by those who are often a little more friendly to the scheme as a whole than I am, for being somewhat bureaucratic and inflexible. Does the Minister envisage any changes to the new deal to make the qualifying dates and the period for which subsidies can be paid a little more flexible? It may then accommodate more appropriately some of the needs of the industrial training boards, and perhaps allow them to fit together and offer training and programmes for unemployed people that can bring other benefits.

I have referred to the comments that my hon. Friend the Member for Daventry made last year. I read them with interest. He said then that in his 12 years in the House of Commons he had not received a single letter criticising the Construction Industry Training Board. I remain hopeful. I have not yet served 12 years in the House, but I, too, have not received a single letter or heard an adverse comment about the work of the industrial training boards. When views were sought, the boards found strong support from their industrial sectors. That support has been reflected by previous Governments, who made special provisions for sectors that have special needs by allowing these industrial training boards to continue. I am pleased that the Government have maintained that practice, and I look forward to the Minister's comments on the points I have raised. I shall listen to them with considerable interest.

4.58 pm


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