Second Standing Committee on Delegated Legislation



Tuesday 19 December 1995


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The Committee consisted of the following Members:

Chairman: Mr. Patrick Thompson

Alison, Mr. Michael (Selby)

Baker, Mr. Kenneth (Mole Valley)

Byers, Mr. Stephen (Wallsend)

Cann, Mr. Jamie (Ipswich)

Cash, Mr. William (Stafford)

Church, Ms Judith (Dagenham)

Dicks, Mr. Terry (Hayes and Harlington)

Foster, Mr. Don (Bath)

Greenway, Mr. John (Ryedale)

Hall, Mr. Mike (Warrington, South)

Hampson, Dr. Keith (Leeds, North-West)

Jackson, Mr. Robert (Wantage)

Mahon, Mrs. Alice (Halifax)

Paice, Mr. James (Parliamentary Under-Secretary for Education and Employment)

Pearson, Mr. Ian (Dudley, West)

Prentice, Mr. Gordon (Pendle)

Rathbone, Mr. Tim (Lewes)

Streeter, Mr. Gary (Plymouth, Sutton)

Mr. D. W. N. Doig Committee Clerk

3 Second Standing Committee on Delegated Legislation Tuesday 19 December 1995


Draft Industrial 'Draining Levy (Construction Board) Order 1996

4.30 pm

The Parliamentary Under-Secretary of State for Education and Employment (Mr. James Paice): I beg to move, That the Committee has considered the draft industrial Training Levy (Construction Board) Order 1996.

The Chairman: With this it will be convenient to consider the draft Industrial Training Levy (Engineering Construction Board) Order 1996.

Mr. Paice: This is the annual debate on the levy and I am overcome with awe at the galaxy of parliamentary talent arrayed on the Conservative Benches today. I am gratified that my right hon. and hon. Friends, have joined us this afternoon for this important debate.

Mr. Tim Rathbone (Lewes): Speaking on behalf of my hon. Friends and, I am sure, for Opposition Members, I welcome the Minister to his new post. I am glad to be here, as much to support him in that capacity as to take part in considering the draft order.

Mr. Paice: I am grateful to my hon. Friend for congratulating me on achieving the post that I have held for 18 months. The proposals before the Committee are intended to obtain authority for the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on employers in their industries with which to finance the boards' operating costs and to fund their range of training initiatives, including grants schemes. Provision for that is contained in the Industrial Training Act 1982 and the orders give effect to proposals submitted by the two boards. Both proposals include a 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 a year ago. As in previous orders, they are based on employer's payrolls and their use of subcontract labour. Both include special provision for excluding small firms from payment of 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 subcontracting. Employers with combined payroll and labour-only payments of less than £61,000 are exempt from paying the levy. 4 The Engineering Construction Industry Training Board treats head offices and construction sites as separate establishments and applies different levy rates that reflect the costs and 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 subcontracting, with an exemption for head offices that employ 40 or fewer employees. The rates for sites are 1.5 per cent. of payroll and 2 per cent. of net expenditure on labour-only subcontracting, with an exemption for site employers with combined payroll and net labour-only payments of £75,000 or less. In each case, the proposals have the support of the employers in the industry, as required by the Industrial Training Act 1982, and they have the full support of the respective boards, which consist of senior employers, trade unionists and educationists. Last December, I drew the Committee's attention to the levels of both boards' financial reserves. I have received from each an analysis of the rationale for their reserve requirements. Reserve levels change throughout the financial year, reflecting the dynamics of the business. From January 1996, both boards will operate on a financial year ending in December. Balance sheets will, therefore, give a much better view of underlying financial strength than they have done hitherto. Both boards are keeping their reserve requirements under constant review. A year ago, I expressed some concern about the reserve levels; I am now content that, on the basis of the new picture, the levy proposals are justified. The Committee knows 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. However, in the CITB and the ECITB, employers and their representative organisations have remained firm in their support for a statutory levy system. Both boards have undergone major reviews of the need for their continuance. Following those reviews, we reconstituted each of them for a further term of office up to March 1998. In doing so, we recognised the strong feelings of the employers and their representative organisations and the performance and achievements of the boards. I should like to take the opportunity to mention some of those achievements. Both boards are doing their utmost to maintain training levels in difficult trading circumstances in the construction industry. Both have successfully developed modern apprenticeship programmes, which provide a high quality, work-based training route leading directly to achievement of national vocational qualifications at level 3. The CITB is also developing an initiative known as construction partnerships involving employers, parents, schools, colleges, training and enterprise councils and local enterprise companies. The draft orders will enable the two boards to carry out their training responsibilities in 1996, and I recommend them to the Committee.

4.36 pm

Mr. Stephen Byers (Wallsend): As the Minister said, the orders are supported by the respective boards, which 5 comprise employers, trade unionists and educationists. In partnership, those groups have recommended the measures to the House. As the Minister pointed out, there is an array of talent in the Committee. The Opposition will not divide the Committee on the orders, which are unanimously supported by the boards. The annual consideration is an opportunity to rehearse stale arguments about a levy as opposed to a voluntary system of funding training. I do not want to discuss that, but the issues are not as simple as politicians are all too ready to portray them. It is unusual for The Times Higher Education Supplement to consider training, but on 9 December an editorial dealt with the Government's consultation document, "Lifetime Learning", which the Minister launched two weeks ago. The editorial calls for "voluntary individual learning accounts". It states: "And here is the rub. Business contributes £28 billion for training, Government £37.4 billion and individuals £12.6 billion. The CBI is to study whether that £28 billion is enough. Almost certainly it is not. But while prospective funding remains voluntary, it is likely to be inadequate. The Government has ruled out compulsion.… But unless the politicians twist arms, nothing much will happen." All too often, twisting arms has meant the imposition of a levy. Perhaps those of us who have been brought up to regard a levy as the only way forward should reconsider our position. It will not be easy. In its annual survey of the views of TEC directors, the Financial Times found that more than half those directors supported the levy. There is an understandable reason for preferring a levy. We are now considering a levy on the construction industry, all parts of which are prepared to accept that a levy can play a valuable role. However, others question whether a levy is appropriate for financing training. One can understand why a levy is deemed appropriate in certain contexts. In construction, as elsewhere, those who have no skills are five times more likely to be unemployed than those with some skill base. The majority of those who have been out of work for more than a year have no skills whatever. It is in the individual and in the national interest to improve our skills base. The skills needs report, which was due to be published in September but has been delayed until December—it has still not appeared—will deal with some of the issues of shortages in the construction industry as elsewhere. It would be for the benefit of the Committee if the Minister could tell us when that important report may be published. The real challenges for the Committee, and indeed for the country, is to establish a learning culture in which we all value training. That is not the case at present.

Dr. Keith Hampson (Leeds, North-West): Oh come on!

Mr. Byers: We are all probably responsible for that failure, and I am surprised that the hon. Member for Leeds, North-West (Dr. Hampson) disagrees with that. Many hon. Members would accept that we are not performing as we should be in training. I do not lay the blame on one Government. Later on, I shall make the point that we might jointly agree on a national strategy to meet the shortage.

The Chairman: Order. I remind the hon. Gentleman that the orders are fairly narrowly defined. Perhaps he 6 should not initiate a general debate on training. Will he confine himself as far as he can to the orders?

Mr. Byers: I am grateful to you, Mr. Thompson, for ruling me out of order, because I might have been about to develop a policy that could well have gone beyond the narrow remit of the orders, but which would have been of some interest to all members of the Committee. The orders, which are based on the levy system, give us an opportunity to discuss the merits or otherwise of such a system. Within the narrow confines of the orders we can debate a strategy that the construction industry has achieved not by compulsion but by consensus. We want a national strategy to deal with what we perceive as the training shortfall in our skills base. That means moving together, as the construction industry does, with employers and employees co-operating in the interests of improving and developing our skills base. Such a partnership should be extended to other industries and it is worth debating whether that should be achieved by a levy, although that is perhaps not a matter for the Committee this afternoon. In the spirit of partnership and of working together, we shall not seek to divide the Committee on the orders.

4.43 pm

Dr. Hampson: We used to have such a national strategy. The orders are wholly admirable and represent the last remnants of what used to be a national system to which, as far as I am aware, every employer in every industry except the construction industry was totally opposed. The Government listened to the construction industry and accepted that it had particular concerns that justified maintaining the old system. I have been involved in such matters longer than the hon. Member for Wallsend (Mr. Byers) and I cannot recollect anyone wanting to continue with the levy system as it used to operate. That only goes to show that we are dealing with old labour.

4.44 pm

Mr. Paice: I am not sure whether to be grateful for your intervention, Mr. Thompson, because I thought that we were about to witness a volte-face by the Opposition on their policy on levies. It would have been a wonderful opportunity for my hon. Friends to learn what today's new training policy is. To a certain extent, I share the concerns of the hon. Member for Wallsend about skills levels. The Government have never pretended that we have everything right and that skills are up to the standard at which they need to be—not that there will ever be a day on which we can say that we are at the right level because the rest of the world is striving to go ahead at the same time. We are, therefore, continually trying to maintain and to better our competitive position. Of course we need to continue to develop a training strategy, but I part company from the hon. Gentleman on the suggestion that we do not have any such strategy.

Mr. Robert Jackson (Wantage): As we have touched briefly on strategy and the hon. Member for Wallsend has 7 mentioned it, will my hon. Friend comment on this point? The figures given by the hon. Gentleman for the balance between the investments by the community through the taxpayer, by business and by individuals make the contribution of individuals appear large—he gave the figure of £12 billion. Most of that money is an economist's estimate of the opportunity cost of the time spent by individuals in their training. If that contribution is taken out—the notional contribution of the time spent, for example, by students at university, which is part of the £12 billion—it is striking how small the contribution of individuals towards training costs is. The hon. Member for Wallsend asked who will get the benefit from training. The answer, in large part, is the individual. Should not we be thinking, in terms of the strategies that the hon. Gentleman discussed, whether in the construction industry or more widely, of trying to find ways in which to encourage individuals to intervene more in their own training?

Mr. Paice: I am grateful to my hon. Friend the Member for Wantage (Mr. Jackson). The Committee will recall that had had these responsibilities a few years ago and fulfilled them in a way that I could not hope to emulate. My hon. Friend is right. The hon. Member for Wallsend referred to "Lifetime Learning". I commend it to my hon. Friend and to the hon. Gentleman, who would learn what it states rather than what The Times Higher Education Supplement says that it states. It pays a great deal of attention to the need to encourage the individual to accept a greater responsibility as we move into a much more flexible labour market, and into a situation in which we all know that jobs for life will be a thing of the past and that people will expect to change tack many times during their working lives. We may all want to bemoan that change, but that is the way of the world today. The need for the individual to accept greater responsibility is important and we have emphasised it in the consultation document. I commend it to the Committee and look forward to the results of the consultation, which should be completed by the end of February. The hon. Member for Wallsend also referred to basic skills. I draw the Committee's attention to the announcement made at the time of the Budget—it is relevant to the orders and to the wider sphere—that we will run pilot programmes next year to concentrate on basic skills and to gain access to those people, to whom the hon. Gentleman rightly referred, who have little chance of a job because they have no qualifications or skills. Although I cannot make any commitment, the clear logic of pilots is that they may lead to something grander. My hon. Friend the Member for Leeds, North-West rightly reminded us that back in the days of compulsory 8 levies across all industry, employers were training simply as a means of getting their money back or for training's sake rather than because they believed in it or because they had carried out a proper training needs assessment and examination of their business needs. At that time, a study demonstrated that 69 per cent. of employers said that they would spend more if they were not compulsorily required to pay the levy. The events of the past decade or more have proved that over and over again. We have a voluntary system for most of industry which has delivered ever-increasing volumes. Obviously, members of the Committee will say that that sits ill with the orders, but the important point is that the orders have the support of the industry. As my hon. Friend the Member for Leeds, North-West said, that is not the case in any other sector of industry in the country. Both the Confederation of British Industry and the Engineering Employers Federation have recently carried out surveys of their members and both demonstrate wholehearted opposition to any suggestion of the reintroduction of a compulsory levy in any form. In the case of the Construction Industry Training Board and the Engineering Construction Industry Training Board, there is support for a levy, largely because of the unique labour market within those industries. The much greater use of subcontracted labour and the emphasis on short-time working clearly make the voluntary approach much harder to operate because of the fluidity of the work force within those two sectors. Those are the reasons why we have put the orders to the House. As I said in my introductory remarks, I have considered the reserves, which were a matter of concern for me a year ago. Both boards have now produced their own rationale as to the level of their reserves. I believe that they are now planned to be at a more prudent level. With the balance sheets changing in the new financial year beginning 1 January, we shall get a more accurate picture because of the flow of funds in and out of the boards—in through the levy and out through grants systems. With those words, I am happy to commend the order to the Committee.

Question put and agreed to.

Resolved, That the Committee has considered the draft Industrial Training Levy (Construction Board) Order 1996.

Draft Industrial Training Levy (Engineering Construction Board) Order 1996

Resolved, That the Committee has considered the draft Industrial Training Levy (Engineering Construction Board) Order 1996.—[Mr. Paice.]

Committee rose at eight minutes to five o'clock



Thompson, Mr. Patrick (Chairman)

Alison, Mr. Michael

Baker, Mr. Kenneth

Byers, Mr.

Church, Ms

Greenway, Mr. John

Hampson, Dr.

Jackson, Mr. Robert

Paice, Mr.

Pearson, Mr.

Rathbone, Mr.

Streeter, Mr.