HL Deb 07 March 2001 vol 623 cc283-8

7.51 p.m.

Lord Davies of Oldham rose to move, That the draft order laid before the House on 21st December 2000 be approved [3rd Report. from the Joint Committee].

The noble Lord said: My Lords, I beg to move that the draft order laid before the House on 21st December 2000 be approved. For the convenience of the House I shall speak also to the second order in my name on the Order Paper, the Industrial Training Levy (Engineering Construction Board) Order 2001.

The proposals before your Lordships seek authority for the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on the employers in their industries. As your Lordships will know from previous debates, those two boards are the only statutory industrial training boards. They exist because of wide support from employers and employer interest groups in these sectors that believe that without them there would be a serious deterioration in training.

The proposals are expected to raise between £78 million and £83 million for the Construction ITB and around £10 million for the Engineering Construction ITB. The money will be used to finance their training activities, including grants schemes, and the operating costs of the boards. Provision for that is contained in the Industrial Training Act 1982 and the orders give effect to proposals submitted by the two boards.

In each case the proposals are based on employers' payrolls and their use of sub-contract labour. Each board has included the provision to raise a levy in excess of 1 per cent of an employer's payroll. The 1982 Act requires that in such cases the proposals must be approved by affirmative resolution of both Houses. The other place has already approved the proposals.

As required by the Industrial Training Act, both boards have provided for the exemption of small firms from the levy. The level at which this exemption takes effect aims to strike the right balance between helping small firms to grow and giving them an unfair commercial advantage. However, 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 workforce if they are to be competitive and small firms in these sectors are encouraged to take advantage of the services offered by the boards and to provide opportunities for trainees and apprentices.

The Construction ITB is proposing the following rates: 0.5 per cent of payroll for direct employees and 1.5 per cent of net expenditure on subcontract labour; but employers whose combined payroll and net expenditure on sub-contract labour is less than £61,000 will not be liable to pay the levy. The figure represents a reduction of just over a third on the current rate of 2.28 per cent for sub-contract labour and is part of moving to a single rate of levy, subject to annual consultation throughout the industry.

The board is significantly increasing its investment in training. It is making additional grants and other resources available to support employers' efforts. This is being wholly financed by cost reductions, an increase in non-levy income and increased levy income from growth in the industry.

In the case of the Engineering Construction ITB, which assesses head offices and construction sites separately, the following levy rates are proposed: 0.18 per cent of the total of payroll and net expenditure on sub-contract labour for head offices, but head offices whose combined payroll and net expenditure on sub-contract labour is £1 million or less will not be liable to pay the levy; and a levy rate of 1.5 per cent of the total of payroll and net expenditure on sub-contract labour for construction sites, but sites whose combined payroll and net expenditure on sub-contract labour is £75,000 or less will not be liable to pay the levy.

The proposals from the Engineering Construction ITB are the same as those approved by your Lordships last year. For both boards the proposals 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 requires boards to demonstrate that the proposals have the support of the employers in the industry.

I am satisfied that each board has that necessary support. All of the key employer federations have been consulted about the levy rates and agree that these rates are necessary to fund the boards' training plans.

My honourable friend in another place will be meeting with the chairs of each board—Jim Rowland from the ECITB and Hugh Try from the CITB—in the spring to discuss their performance over the last year and to look at key issues for the future. In particular, we shall look at how their work in England will inform and influence that of the regional development agencies and, from April, the new Learning and Skills Council.

Each board is also the government-recognised national training organisation for its sector and is fully involved with the national network. We welcome the importance that each is placing on a forward-looking strategic planning process informed by rigorous analysis of skill needs and supply. We believe that this is crucial if they are to ensure that the education, training, skills and qualifications needs of their sectors, both now and for the future, are met.

The draft orders before the House will enable the two boards to carry out their vital training responsibilities in 2001. I believe that it is right that the House should agree to approve them. I commend them to the House.

Moved, That the draft order laid before the House on 21st December 2000 be approved [3rd Report from the Joint Committee].—(Lord Davies of Oldham.)

Baroness Seccombe

My Lords, I thank the Minister for explaining the two orders before us this evening. As my honourable friend Graham Brady stated during the earlier passage of these orders in another place, the Conservative Party is sceptical about industrial boards in general. However, we believe that the Construction Board and Engineering Construction Board perform valuable functions which we are content to support. These industries are important and it is right that we should look to support the acquisition of skills through appropriate mechanisms.

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 issue of tribunals is an important one as we are currently seeing a burgeoning litigation culture in which our hard-pressed employers are being regarded increasingly as an easy route to compensation payments.

In October, ACAS reported a 32 per cent rise during 1999–2000 in individual complaints. According to Personnel Today, the human resources weekly, the raft of legislative changes brought in under the Employment Relations Act 1999 is the chief factor behind the big rise in tribunal claims reported by ACAS". According to ACAS, the lowering of the qualifying period for unfair dismissal cases from two years to one is estimated to have generated an extra 6,700 cases, while the working time regulations and the national minimum wage account for an extra 7,000 cases.

I raise this point to illustrate that we are seeing a growth in employment litigation, and moreover that this increase stems largely from new regulations imposed by this Government on business. Hence, I share the concern expressed by my honourable friend in another place that we should seek to keep the number of tribunals arising from these orders to a minimum. The Minister in another place implied that relatively few cases regarding the levy go to tribunal, but I hope that the Minister will assure us that these orders will be unlikely to increase that load.

Another important point concerns the issue of costs associated with the levy and whether this results in receivership. In another place the Minister was unable to answer the question of how many cases arise each year in which the levy is a factor in bringing about receivership. I should be grateful if the Minister were able to cast any light on that point today.

The reason I ask about these important issues is because of the desire on this side of the House t o ensure that obligations placed in business by the state do not result in adverse effects on enterprise or employment. However, we recognise the importance of these respective levies and are supportive of the orders.

Baroness Sharp of Guildford

My Lords, from these Benches, I rise to welcome the orders. We strongly believe that these training boards have successfully run the levy system for the past 20 years. They want the system and we believe that it is appropriate. Labour in the construction industry is casual and flexible, moving from one employer to another. Training is vitally important if we are to maintain standards on construction sites and we do not want the quality of labour to be let down by the bad employers.

That said, I want to ask the Minister several specific questions. First, he said that his colleague in another place would soon meet representatives of the Learning and Skills Council. Can he say what they see as the future relationship between the construction industry training board and its engineering counterpart and the Learning and Skills Council?

Secondly, can he indicate what the relationship with the University for Industry would be? What would be the relative role in relation to the training boards? Thirdly, I cannot find in the order an indication of its length or why it is being brought before us. Is it that it comes before the House on an annual basis or is it because there are changes in the rate of levy?

Finally, has the department monitored the order? This is the only industry which uses the levy grant system, the others being phased out by the Conservative government in the 1980s. It would be useful to know how far the Government believe it has been successful in raising standards of training in the industry. It is not an industry in which the levels of workmanship are always high; the ordinary citizen suffers greatly from many cowboy operators within it. There are also considerable skill shortages in the industry. On London building sites all construction industry skills are considerable. Given that, one wonders whether the system has been monitored in any way by the department. Has it thought of other ways of raising skills?

Lord Davies of Oldham

My Lords, I am grateful for the general affirmation of support from both noble Baronesses and I recognise that we need to cover some points of detail. In answer to the noble Baroness, Lady Seccombe, the number of appeals to tribunals is limited. Out of 59,000 companies registered with the board, thirty-five cases were referred to employment tribunals. Any reference to a tribunal indicates friction and the fact that people are less than satisfied with their treatment, but that is a healthy record and should allay concerns about the operation of the order.

The noble Baroness also asked whether the levy drove companies into receivership or bankruptcy? Neither of the boards is aware of any such cases. Without analysing in detail the accounts of every insolvent firm it would be impossible to determine exactly what part the levy demand played on the overall solvency. Boards want to accept payments in instalments from companies with cash flow problems—it is not the business of the boards to see companies go out of existence. There is therefore an understanding of the problems. These are industries in which there is great fluctuation of employment and many small companies. That is why there is also a significant exemption for the very small companies. We are dealing with industries which are fluctuating, fragile and seasonal and it is a tribute to the boards that for more than 20 years they have worked with a degree of success.

The noble Baroness, Lady Sharp, asked several specific questions. If the boards propose to impose a levy of 1 per cent or more, the primary legislation obliges the orders to be tabled before the House after full consultation with the industry and subject to the affirmative procedure. The orders will not come before the House annually if the levies are below 1 per cent. However, they are frequently before the House because the levy is more than 1 per cent. That is the reason why the orders are being moved tonight.

The noble Baroness asked an interesting question about the relationship between the industrial training boards and the two new actors on the scene; the Learning and Skills Council, which is of the greatest significance given its substantial budget, and the University for Industry and Learning Direct. There is a great deal of scope for co-operation. Learning Direct in particular is seeking to make substantial progress with the small firms who are not within the framework of the levy for the boards. They are too small and fall into the exempt category.

As to the broader issue of the relationship with the Learning and Skills Council, I am aware that for many months very substantial consultations have taken place on the establishment of that body. I am not in a position to give a detailed outline of progress, but there is not the slightest doubt that the success of that body will depend on the way in which it relates to the industrial training boards, national training organisations and every other category of training supply, skills enhancements and learning in the country. The noble Baroness probably signals the need for a much more substantial debate once the Learning and Skills Council comes into operation on 1st April.

I hope that I have answered most of the questions raised by noble Baronesses opposite. I commend the order to the House.

On Question, Motion agreed to.