Industrial Training Levy (Hansard, 2 February 1988)

§ The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls)

I beg to move, That the draft Industrial Training Levy (Engineering Board) Order 1988, which was laid before this House on 13th January, be approved. Our debate tonight takes place because any industrial training levy order which involves a levy exceeding 1 per cent. of an employer's payroll must receive parliamentary approval under the Industrial Training Act 1982. In the case of the Engineering Industry Training Board, one part of the levy proposals—that covering site employees in the mechanical and electrical engineering construction sector—establishes a levy rate of 1.12 per cent. and requires approval under the affirmative resolution procedure.

The board's levy proposals for 1988 show no change from those approved by the House in March of last year. The board anticipates that it will raise some £19.6 million from the levy, after allowing for exemption. The levy will apply to those firms which fall within the scope of the board between the date the order comes into force and 31 August 1988.

The levy proposals are in two parts, the first applying to mainstream engineering, and the second to the mechanical and electrical engineering construction industry. I shall briefly outline the proposals in both sectors.

For mainstream engineering establishments the board proposes a total levy of I per cent. of an employer's payroll. For an establishment with fewer than 1,000 employees, 0.08 per cent. of payroll will be non-exemptible; larger establishments will pay a non-exemptible levy of 0.08 per cent. in respect of the first 1,000 employees and 0.072 per cent. in respect of the remainder. The bulk of the levy is therefore non-exemptible— that is, employers who train satisfactorily will be given credit for this and will not be required to pay the maximum levy to the board. In addition, firms employing 40 workers or fewer will be excluded totally from paying levy. Some 68 per cent. of firms employing 12 per cent. of the work force will be excluded from levy because of their size.

For the mechanical and electrical engineering construction sector, again the levy proposals are the same as those approved last year. In this sector, arrangements differ for workers employed on site, and those employed off site. For on-site employees no levy is payable on the first £50,000 of payroll; above that, a non-exemptible levy of 1.12 per cent. will apply, and 31 per cent. of establishments employing 0–5 per cent. of the work force will be below the levy threshold.

For off-site employees, establishments with up to 30 employees will be excluded from levy; this will mean that some 79 per cent. of establishments employing 11 per cent. of the work force will not pay levy. Establishments with more than 30 employees will be levied at 1 per cent. of payroll. The non-exemptible element of this levy will be 0.15 per cent.

The raising of a non-exemptible levy in excess of 0.2 per cent. in the on-site sector means that the board must satisfy another requirement of the Industrial Training Act 1982 — that there should be a proven employer consensus in the industry for the proposals. Employer 945 organisations representing more than half the employers liable to pay levy, and also representing employers liable to pay more than half the total levy between them, have confirmed their agreement to the proposals, thus satisfying the conditions of the Act.

The proposals before the House that we are debating tonight were approved unanimously by the board and the Manpower Services Commission. They show no change from those approved by the House in March last year. Therefore, I commend them to the House.

§ Mr. Barry Sheerman (Huddersfield)

As usual, the Opposition support the order and congratulate the board on its past work and proven desire to adopt and adapt to the changing realities of training. Some of us get used to the routine of supporting orders such as this and I welcome the Minister to yet another late night session.

Since last year, a number of initiatives have come out of the Engineering Industry Training Board which has long recognised that, even with the levy exemption system and a statutory board for this sector of industry, there is still a failure adequately to train sufficient highly skilled men and women to maintain this leading, indeed the largest, sector of our manufacturing industry.

Even with the small economic upturn that we have seen in recent months, and against the backdrop of an industry which now employs only 1.9 million workers when as recently as 1979 it was employing 3 million workers, we are already experiencing dreadful skill shortages in the industry which strike dangerously at the heart of our ability to compete successfuly as an industrial nation and successfully to create wealth by meeting the challenges of technology and international markets.

Only last month a report—I wait for the Minister to listen to this because it is something that he should digest and think about — from the National Institute of Economic and Social Research revealed the appalling gap that exists, and progressively opens, between us and the major countries with which we are in direct competition in the engineering sector.

The report reveals that between 1975 and 1985—a period of 10 years — compared with Germany and France we have done appallingly badly at producing a trained work force with engineering qualifications. Between 1975 and 1985 France increased by 60 per cent. the numbers of people obtaining craft-level vocational qualifications. In the same period, Germany increased its numbers by 35 per cent. And what did Britain do? The United Kingdom achieved a decrease in the numbers of these skilled personnel of 30 per cent. That is a depressing picture to paint on a night when we are discussing the Engineering Industry Training Board and its ability to carry out its functions on its present levy and on the levy proposed tonight. Let me put the percentages in real numbers of how many people obtained craft engineering qualifications: 10,800 received them in 1985 in this country; in France, 27,000 qualified—two and a half times as many; in Germany, 55,000 qualified—five times more.

Even on a night when we agree with the order, I recommend that the Minister read the national institute's report seriously and examine its recommendations. They are not all to be swallowed at one gulp, but the report 946 shows that France and Germany, using different methods from ours, are taking training in the engineering industry seriously and attempting to do something about it. France, like us, started from well behind the Germans, but recognised that there was a problem and used its own institutions in its own way to meet the challenge. The problem with our country is that the Government do not recognise the problem or react to the challenge.

Why, in spite of the training board and the levy, does our country fail to produce the skills that we need? I shall suggest some reasons; we have rehearsed them before, but it is worth telling the House about them tonight. First, only 50 per cent. of those working in the engineering industry work in the engineering sector as described in the Industrial Training Act 1982. Fifty per cent. work outside in the service industries, the financial sector and beyond. They are beyond the remit of the board and outside its scope. One might agree with some of the engineering employers who ask why they should train qualified engineers when they will be recruited by someone who paid nowt for their training.

Secondly, employers with fewer than 40 employees are on the register but are not included in the liability for the levy. That is a large percentage. This country has many small engineering workshops with about 20 or 30 men. So 12.5 per cent. of the industry goes out, because firms with fewer than 40 are excluded. Thirdly, some of the small and large companies that have long been regarded as reasonable trainers have never understood the crucial fact that British companies, unlike our international competitors, seem unable to grasp, which is that our companies too often regard training not as an investment but as a cost. That is a sad reflection on what is happening to the training of the work force in this country.

Over the past nine years the Government have abolished all but a handful of statutory training boards. I am sorry to say that the recent Anderson report for the Manpower Services Commission shows what has happened to the sectors of the industry for which the boards were abolished. We know how disastrous that has been for all those sectors, apart from the few examples that the reports picks out as shining lights in a dark and tragic picture.

The Government have spent most of their money on programmes centred on the unemployed. That is not surprising, as unemployment has risen under the Government's policies. So most of the wealth put the way of training has been for programmes that are not so much for training but for income support aimed at the unemployed. What has been wrong with the country and what has happened to the Engineering Industry Training Board—even with its levy—has been an inability to do as much as can and should be done to train the work force in work, which is the fastest route to increasing productivity and wealth creation.

The Government have never understood the central lesson that other competitive countries have learned, that the sum of individual companies pursuing their individual training progammes, their own company interests and their own company benefits, will never add up to a training programme for this or any other sector of industry. What is more, it will never add up to anything that produces a training policy in the national interest.

There is only one body responsible for the national interest—the Government. But this Government have a total lack of a national strategy. It has always been 947 replaced by a potent and corrosive ideology. The Engineering Industry Training Board has informed the Government often of the crisis in engineering training. We faced a crisis last year and the year before; we have faced it over the last nine years. [Interruption.] The Minister's hon. Friend seems to be running a book; it would be interesting to know what he is betting on. I should not like to run a book on the crisis in the engineering industry. If hon. Members want to bet on the British racehorse in terms of competitiveness, it is not a very good one to bet on under this Government. We are in the midst of a steel crisis and we are facing bottlenecks, steel shortages and a loss of competitiveness internationally.

The Government are still obsessed with the myth that the free market will deliver what the country needs with no real Government direction. The Labour party says that what is needed is leadership and commitment to provide a trained base of human resource without which we cannot succeed, as every industrial nation knows. We should look to the future, not towards yesterday or how well we did 20 or 100 years ago.

At the beginning of the week I had a meeting with the Engineering Employers' Federation. It was a disturbing and worrying experience. When I have talked to its counterparts in the United States, Germany and France, I have found people who want to move into innovation and who have prepared themselves and their country for future challenges and for being in the forefront of technology and engineering. What I found with the Engineering Employers' Federation here was a great desire to remain in the past, to look only to the short-term future of their own companies and not to the future of their sector or their country. I find that profoundly depressing and disturbing.

Some of the nostrums so popular in organisations like the Engineering Employers' Federation will be the epitaph of British industry in years to come unless we have a Government who say that they have a national interest to train. There must be a strategy to train. We must take it forward in a leadership role. I suspect that the Government will allow organisations like the Engineering Employers' Federation to lead. Indeed, the proposals to change the complexion of the board and the nature of the Manpower Services Commission lead me to believe that there is no longer a national strategy for training but merely a wish to follow the dictates of individual companies. I repeat that that does not open the way to a strategy for training that will benefit this country in the years to come.

So I end on a profoundly pessimistic note. Yes, we have an Engineering Industry Training Board and it is doing a relatively good job. But much more needs to be done in this sector. Mechanisms, plans and an impetus from Government are needed so that training in this sector is taken on as never before.

I refer to a report in the Financial Times only this week which I think gets to the heart of the problem. A study of the training programmes of major companies in this country shows that often even the large companies—and in terms of the engineering industry this means those with tremendous clout and with more than 1,000 employees —have little real direction in their training programmes. They do not know what their training is supposed to secure. They do not have a training plan that prepares the company to face the future. Indeed, many of the training programmes described by the Manpower Services 948 Commission only this week are more a laying on of hands, to be able to say that they are training, doing the basics rather than doing what our competitors in the United States, Germany and Japan are doing. How can we put ourselves in the forefront of training for the new, innovative age of the next 10 or 20 years?

We shall not oppose this order, but we are profoundly worried about the direction of engineering training in this country.