Second Standing Committee on Statutory Instruments, &c.



Tuesday 13 December 1994


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The Committee consisted of the following Members:


Barron, Mr. Kevin (Rother Valley)

Bates, Mr. Michael (Langbaurgh)

Cook, Mr. Frank (Stockton, North)

Etherington, Mr. Bill (Sunderland, North)

Gardiner, Sir George (Reigate)

Goodson-Wickes, Dr. Charles (Wimbledon)

Gordon, Ms. Mildred (Bow and Poplar)

Grylls, Sir Michael (Surrey, North West)

Harvey, Mr. Nick (North Devon)

Liddell, Mrs. Helen (Monklands, East)

Moate, Sir Roger (Faversham)

Neubert, Sir Michael (Romford)

Paice, Mr. James (Parliamentary Under-Secretary of State for Employment)

Purchase, Mr. Ken (Wolverhampton, North East)

Spellar, Mr. John (Warley, West)

Townsend, Mr. Cyril D. (Bexleyheath)

Twinn, Dr. Ian (Edmonton)

Whitney, Mr. Ray (Wycombe)

Mr. M. Hennessy, Committee Clerk

3 Second Standing Committee on Statutory Instruments, &c. Tuesday 13 December 1994


Draft Industrial Training Levy (Engineering Construction Board) Order 1995

4.30 pm

The Parliamentary Under-Secretary of State for Employment (Mr. James Paice): I beg to move That the Committee has considered the draft Industrial Training Levy (Engineering Construction Board) Order 1995.

The Chairman: With the leave of the Committee, with this it will be convenient to consider the draft Industrial Training Levy (Construction Board) Order 1995. As soon as the first motion has been disposed of I will ask the Minister to move the second motion formally and the question will then be put without further debate.

Mr. Paice: The proposals before the Committee seek authority for the Construction and Engineering Construction Industry Training Boards to impose a levy on the employers in their industries, to finance the operating costs of the boards and to fund their range of training initiatives, including grants schemes. Provision for this is contained in the Industrial Training Act 1982 and the orders before the Committee give effect to the proposals submitted by the two boards. Both proposals include 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. In each case the proposals are exactly the same as those approved by the House early this year. As in previous orders they are based on employers' payrolls and their use of sub-contract labour. Both have special provision for excluding small firms from paying the levy. For the Construction Industry Training Board the rates are 0.25 per cent. of payroll and 2 per cent. of net expenditure by employers on labour-only sub-contracting. Employers with combined payroll and labour-only payments of less than £61,000 are exempt from paying the levy. The Engineering Construction Industry Training Board treats its head offices and construction sites as separate establishments and applies different levy rates which reflect the costs and the different arrangements for training particular workers. For head offices the rates are 0.4 per cent. of payroll and 0.5 per cent. of net expenditure by employers on labour-only sub-contracting, with exemption for head offices employing 40 or fewer employees. The rates for sites are 1.5 per cent. of payroll and 2 per cent. of net expenditure by employers on labour-only sub-contracting, with exemption for site employers with combined payroll and labour-only payments of £75,000 or less. 4 In each case the proposals have the support of the employers in the industry as required by the Industrial Training Act and have the full support of the respective boards, which consist of senior employers, trade unionists and educationists. I have closely examined the financial situation of each board and am aware that their reserve levels are substantial. I have asked each board to provide me with a detailed analysis and rationale for its reserve requirements. I have made it clear that I will not be prepared to bring forward next year's levy proposals without a clear and agreed reserves policy. The Committee will know that the CITB and the ECITB are the only two statutory industry training boards. Most other sectors of industry are covered by independent, non-statutory training arrangements. In these two industries though, employers and their representative organisations have remained firm in their support for a statutory levy system. Both boards have recently undergone major reviews of the need for their continuance. Following these reviews we reconstituted each of them for a further term of office up to 1998. In doing so, we recognised the strong feelings of the employers and their representative organisations and the performance and achievements of the boards. Both have developed and introduced National and Scottish Vocational Qualifications into their sectors as well as modern apprenticeships which provide a high quality work-based training route leading directly to achievement of an NVQ at level 3. The CITB has taken this further and developed a comprehensive new training policy which offers young people a choice of routes into the industry. At a different level, the ECITB's fellowship programmes are a notable example of investment by the industry in its project and site managers. The draft orders before the Committee will enable the two boards to carry out their training responsibilities in 1995, and I commend them to the Committee.

4.34 pm

Mr. Kevin Barron (Rother Valley): I am interested in the notion that although the Government have abolished some 20 industrial training boards, the two in the construction industry have remained. The Government are making a case not just for these two—indeed, the Minister is making the case that perhaps many of the others should have remained. The Opposition fought the abolition of the training boards. We said that the principle of voluntarism in the funding of quality training places does not work. Employers consistently failed to put their hands into their pockets to pay for training, and the industrial training boards required them to do so. It was generally accepted, as the Minister said in his speech, that the training boards worked. Having read some of the speeches of the Secretary of State for Employment, I wonder whether he would feel comfortable giving this sort of statement about the involvement of employers and trade unions raising levies for training. The Minister pointed out, as did his hon. Friend the Minister of State for Employment, the hon. Member for Maidstone (Miss Widdecombe) in the debate on the Floor of the House in January, that there was widespread support among employers for both these training boards. I was glad to hear 5 the Minister's support. Indeed, they are not alone in this: Sir Clifford Chetwell, the chairman of the Construction Industry Training Board has argued for the retention of a statutory levy on industry. He said that quality training was dependent on it and that "a voluntary levy would not be an effective substitute" as few firms would pay. A Financial Times survey of training and enterprise council directors found that almost half of them expressed the need for a levy. Another survey, conducted by the British Institute of Management, discovered that two thirds of managers believed that there should be a statutory obligation on employers to provide training, and that three quarters of them support some form of training levy. Labour Members support the principle that industries should pay a levy towards training their work force. Scrapping the 20 training boards has effectively destroyed the possibility of a clear national training strategy. The Government thought that industrial training levies were a regulation and had to go. It becomes clearer by the year that if this nation hopes to compete globally, we must have a well-thought-out national training and education programme. The result of the Government's decision to abandon a national strategy is clear: more than 100,000 real apprenticeships have been lost forever. Industry, just as we predicted, did not invest in training of its own accord. Neither have the Government invested in training in place of industry. Spending on training has been cut by more than on third in real terms since 1987—from £4.3 billion to £2.6 billion in the last financial year. There has been a 30 per cent. cut in employment training funding, and an 11 per cent. cut in youth training funding. Only a few days ago, the Chancellor's Budget statement cut a further £500 million from the Department of Employment's finances, and froze the training budget for three more years. The CITB's document, "Craft and Operative New Entrant Training Policy", which is a well-considered and lengthy work, gives more bad new about the Government's record. It states clearly and simply that it is concerned about "The almost universal unacceptability of the Government's youth training scheme". The document criticises the "lack of employment prospects and the low rate of allowance paid to trainees". The board even plans to distance itself from youth training by topping up its payments to trainees.

The Chairman: Order. This is a narrow order. I am sure that the hon. Gentleman will relate his remarks directly to training levies.

Mr. Barron: I will do that, but the Minister mentioned the modern apprenticeship scheme. It is important that we put on record what has been happening in Britain in recent years. I have just mentioned the Construction Industry Training Board's general comment about youth training schemes. Money raised is used to train young people in its specific training needs. The modern apprenticeships announcement promised 150,000 places. We do not know whether that will be achieved. The most we can say at the moment is that there has been a small-scale pilot with fewer than 1,000 places. The jury is out on that. We shall be monitoring the pilot and it is important that we do so. 6 The Construction Industry Training Board thinks it knows—it very well may know—why there will be an absence of training for young people. Without proper funding from the Government, youth training will become a ghetto, existing only to deliver the Department of Employment's youth guarantee and offering no real prospect of high-quality, relevant training. The Minister mentioned the reserves of money available to the training boards as though it were a threat to the levy for next year—that there will be no levy if the boards still have that money. I want him to explain that. I understand that ideologically he might have a problem defending training levies in this case but I am interested in what he has to say. It is vital to carry on with the two boards. Government statistics show that people without skills are five times more likely to become unemployed than those with higher education qualifications. The rate of unemployment among those without qualifications is rising. The "Skills Needs in Britain" survey was published this year and relates to the construction industry. It states that the number of hard-to-fill vacancies—jobs which cannot be done because people are not trained to do them—has risen by 76 per cent. in 12 months, from 25,000 in 1993 to 44,000 in 1994. The current level is higher than any time since 1990. One in five vacancies are hard to fill nationally. There are regional variations in the rate: in the south-east, it is 29 per cent.; in the east midlands, it is 31 per cent. The number of vacancies that cannot be filled in the construction industry because people do not have the right skills is double that of last year. Without a skilled workforce on which to base a recovery, Britain will always be low skill and continually under pressure from our competitors. The chairman of the CITB, Sir Clifford Chetwell, has called on the Government to match the funding offered by its member companies. That is a start. I shall conclude by saying that much good work has been done by training boards over many years. The future up to 1998 of the two we are discussing is supported by the Opposition. It is a great shame that we have lost the national training strategy by the previous abolition of 20 boards. If we are to compete in training and in commerce and industry, those boards must be secured for the future. I hope that the funding goes some way to doing that. We should be talking about reintroducing boards to bring back a national training strategy. We should not have the mess that we have now in which most people are involved in training at a lower level and do not know what they are there for. Their role seems to be to keep people off the unemployment figures and off the streets rather than training them to have the opportunity to work.

4.44 pm

Sir Michael Neubert (Romford): My particular interest is in the construction board order and I should like to speak briefly in support of it without exhausting the patience of my colleagues on the Committee. The Federation of Master Builders retains me as its parliamentary adviser in the House and I should like to put on record its full support for this renewed measure and for the principle of a statutory training board and statutory levy to fund it. The order was passed on the nod in the other place, so there is obviously no great dispute about it. I welcome the fact that it is being taken in Committee rather than on the Floor of the House because, that being the case, 7 it is no longer an issue between the parties. It can be considered here, rather than late at night with fewer people present than are here this afternoon. It is important that we continue to support the two boards and there is a case for an exception to the rule on industrial training boards generally. We do not need to rehearse all the arguments, but the obvious one is that this work is carried out on differing sites. The people employed move from place to place and the ability to sustain training in those circumstances is extremely difficult. It should be known that eight out of 10 craftsmen receive their training in small and medium-size building businesses, which are represented in their thousands by the FMB. The problem has always been that in a recession there has not been work in which young people can be trained in those skills—that is what we have seen in the past few years—and when recovery comes there is the other problem of a shortage of skills which inflates building costs to nobody's great advantage. There needs to be a reserve and, although I can understand the Minister's concern, it is legitimate for there to be reserves because, in that way, the training boards can work against the economic cycle and ensure that we do have adequate numbers of skilled employees for our construction industry at all times. I leave it to my hon. Friend to refute the argument of the hon. Member for Rother Valley (Mr. Barron) who spoke for the Opposition about the lack of training. I understand, and I can confidently expect confirmation of this from the Minister, that private industry has invested very substantially in training and is providing other industries with the skills that we need to have a flexible, highly trained work force to compete with the best in the world. Returning to the point about the construction industry, there are differences which are recognised by the statute and by the levy that is proposed. I fully support it and hope that we may continue to support the principle in years ahead.

4.46 pm

Mr. Ken Purchase (Wolverhampton, North-East): I am conscious of your remarks, Mrs. Dunwoody, to my hon. Friend the Member for Rother Valley with regard to the narrowness of the instrument. In essence, it is a technical matter to be considered on that basis. However, you may be prepared to allow me a few remarks regarding the subject of the instrument. Around 90 per cent. of all businesses in this country have no more than 20 employees and the order suggests that there is an exemption—which is a correct exemption at this time—for small firms, although I think that, in the experience of us all, a great deal of sub-contracting and sub-contracting to that is carried out in the building trade. As the hon. Member for Romford (Sir M. Neubert) said, training and organising training courses within the building industry is an exceedingly difficult task. It behoves us to recognise that the order may well have been requested by the builders' employers, but they are under considerable pressure and I wonder whether the Minister can assure us that the amount of money being raised in this way will be sufficient to carry out all the tasks related to training and the ancillary purposes that are required in the building industry. 8 Given the dramatic reduction in the number of building operatives—I understand that over a little less than 20 years the number has decreased from 1.2 million to fewer than 400,000—the levies collected on a per capita basis will not be sufficient. It is true that productivity gains have been made in building, as in other areas of enterprise, largely due to new techniques and technology and investment in equipment, and we should consider whether turnover rather than head of work force should be used as the basis for the levy. Many of the reasons for the reduction in numbers employed, which has led to a reduced collection for the training board, stem from the phenomenal, unheard of cuts in public expenditure in recent years. It has been falling like a stone. That leads me to think that the basis of the instrument is becoming rather ramshackle and should be reviewed in the light of the new circumstances. The Minister mentioned the modern apprenticeship scheme. Frankly, employers have not been able to maintain an apprenticeship scheme in recent years, desirable though that would have been. It is particularly important in the building industry that people would will ultimately be employed—perhaps self-employed—within the building jobbing trade should have a strong foundation in the skills necessary to carry out work in domestic and industrial premises. The modern apprenticeship scheme, welcome though that is, by no means makes up for the loss of the apprenticeship scheme and we should consider whether sufficient resources are available for the training that is required. It was a feature of the building industry, especially in the medium and larger-sized companies, that it had excellent relationships and arrangements with further education colleges. That has now changed: the funding is no longer available from local authorities in the same way and the Higher Education Funding Council has not taken up the slack. In referring to the document and to the fact that the employers have asked for this deal, I wonder whether it is sufficient for the purpose. Can the Minister assure us that enough will be collected to ensure that people who may ultimately carry out work in our homes or workplaces have had proper high-quality training?

4.52 pm

Mr. Paice: I am grateful to the hon. Gentleman and to my hon. Friend the Member for Romford for their comments. The hon. Member for Rother Valley made several comments, some of which were fairly predictable, about the overall role of the levy in funding training in this country. I must explain to him that this is not the 1970s but the 1990s. The world has moved on. He need only look back to 1980 to find a survey in which 69 per cent. of firms said that they would continue with the same or higher volumes of training without a levy. That was one of the main reasons why the Government then decided to abolish most of the training boards that he has described. There is no doubt that, at that time, a vast amount of training was being done simply for the sake of it, as a means of recouping some of the levy that was being forcibly taken from firms. The old training boards were immensely bureaucratic and since their abolition training volumes have increased considerably. 9 The two boards that we are dealing with specifically today represent two different aspects of the construction industry, which is perhaps unique inasmuch as it has a highly mobile work force and, as the hon. Member for Wolverhampton, North-East (Mr. Purchase) mentioned, a large amount of sub-contracting. Both those facts make conventional training policies and practices harder to implement and, for that reason, the employers themselves support the continuation of a levy. I must tell the hon. Gentleman that that support is certainly not forthcoming for the concept of a wholesale levy on business to fund training as, I believe, is advocated by the Labour party. One need only look at the situation in Australia to find evidence that a levy does not work. A levy was introduced there and a survey two years later showed that only 4 per cent. of companies had anything positive whatever to say about the outcome. The hon. Member for Rother Valley referred to the youth training guarantee, and he and the hon. Member for Wolverhampton, North-East referred to modern apprenticeships. We have never stated that the money that we put into youth training should be the sole amount paid to YT trainees. It is open to employees—in many cases, it is common practice—to supplement that by paying some or all of the allowance, by paying a supplement on top of the allowance or by making a contribution towards the managing agent. That has always been the case. The hon. Members for Rother Valley and for Wolverhampton, North-East also raised the issue of reserves. Clearly, it is prudent for training boards to have some reserves. That is the case. With the hon. Member for Wolverhampton, North-East, we recognise that the changing work force in construction will mean that the levy income will decline for a year or two. Because of the impact of the recession, there will be a lead time on the amount of the levy that is raised. We recognise that there will be a decline, but I am not suggesting that the boards should eliminate their reserves. That is far from our position. However, the reserves as a proportion of turnover and of leviable income are very high. Both boards have recently started to develop policies to use those reserves in order to expand their activities, and that is welcome. The simple point that I wished to make to the hon. Member for Rother Valley is that I should not look favourably on the boards coming to the Government to ask for a levy next year or even for an enhanced levy—in other words, that they claim to need more money—if they have unjustifiably high levels of reserves in the bank. There is nothing more sinister in my point than that. My hon. Friend the Member for Romford supported the proposals and he brought with him comments of support from sectors of the industry. Of course, we consult the industry and its organisations to ensure that the proposals have the support of employers. In the case of the CITB, organisations representing 51.2 per cent. of leviable employers support the continuation of the levy. For the ECITB 55.7 per cent. of organisations support it. The 10 CITB has recently introduced a new entrant training scheme that is designed to do what my hon. Friend the Member for Romford and the hon. Member for Wolverhampton, North-East described. It will deal with the fundamental problem of the quick turnover of labour and the fact that skills, once gained, are often lost when jobs disappear. However, we should remember that ultimately the responsibility for training and for retaining skills must lie with the industry. The hon. Member for Wolverhampton, North-East supported the need to exempt small firms from the levy. I am grateful to him for that because it is important. I underline the point—I do not know whether the hon. Gentleman took it on board—that small firms are eligible for training assistance. They are part of the boards' activities. They receive training, grants and are eligible for other activities. However, they do not have to pay for them. It is as simple as that. The hon. Member for Wolverhampton, North-East referred to turnover and suggested that we were using a per capita basis to determine the amount of funds available. We do not use a per capita basis, but a percentage of payroll. Although there is a clear linkage between them, they are different. Normally, the boards come to us with proposals and it is not for the Government to decide on the system that they should adopt. I am not clear whether they have ever considered a turnover proposal, but I shall ask them at one of our meetings whether they have. I am sorry that I cannot give the hon. Gentleman a more definitive answer. The hon. Gentleman also asked about further education colleges. This year funding has shifted from the Department for Education to the Department of Employment. That money is going straight to training and enterprise councils, which will use it in their contract arrangements with training providers. Of course that will include the CITB and the ECITB. I hope that I have answered all the questions raised by hon. Members from both sides of the Committee. I commend the orders.

Question put and agreed to.

Resolved, That the Committee has considered the draft Industrial Training Levy (Engineering Construction Board) Order 1995.


Resolved, That the Committee has considered the draft Industrial Training Levy (Construction Board) Order 1995.—[Mr. Paice.]

Committee rose at one minute to Five o'clock.



Dunwoody, Mrs. Gwyneth (Chairman)

Barron, Mr.

Bates, Mr.

Gardiner, Sir George

Goodson-Wickes, Dr.

Liddell, Mrs.

Moate, Sir Roger

Neubert, Sir Michael

Paice, Mr.

Purchase, Mr.

Whitney, Mr.