Industrial Training

HC Deb 12 January 1988 vol 125 cc255-63 10.46 pm

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

I beg to move, That the draft Industrial Training Levy (Construction Board) (No. 2) Order 1987, which was laid before this House on 1st December, be approved. The order requires parliamentary approval under the provisions of the Industrial Training Act 1982, because one part of it — that covering labour-only subcontractors—involves a levy exceeding 1 per cent. of an employer's payroll. The levy proposals are in the same format as those approved by both Houses in January 1987, and show only one change from those arrangements. The board forecasts that the levy proposals will raise about £48 million.

The levy is made up of three parts. First, there will be an occupational levy on directly employed construction workers in the main industry. A set amount will be raised for each occupation, but that is subject to an overall limit of 1 per cent. of employers' wage bills. The rates vary according to the type of craftsman trained, and reflect the training costs of each craft. It is here that one change has been made from last year's levy proposals. The per capita levy rate for the principal building crafts has been reduced from £75 to £70. This has been made possible by a slightly lower than anticipated take-up of Construction Industry Training Board grants in that sector in the current year. Apart from that reduction, there are no changes in this year's levy proposals.

Secondly, the board proposes to retain the 2 per cent. levy on payments made by firms in the main industry for work done by labour-only sub-contractors. That rate has remained unchanged since 1981, and reflects the board's judgment that labour-only sub-contractors in general undertake too little training, relying instead on obtaining skilled manpower trained by other employers. For the main industry, covered by these two levy rates, companies with payrolls of £15,000 or less will not be required to pay levy. That will exclude from levy about 51 per cent. of all construction firms within the board's scope.

Thirdly, for the smaller brick manufacturing sector, the board proposes a rate of 0.05 per cent. of payroll. Employers with a wage bill of £100,000 a year or less will be excluded from the levy. That, too, is unchanged from last year.

The levy proposals have been approved by the board, and are strongly supported by the employers' organisations in the industry. In fact, as the proposals make no provision for exemption, and as some employers will be paying levy amounting to more than 0.2 per cent. of payroll, the board is required by the Industrial Training Act 1982 to demonstrate a double consensus of support for its proposals — first, among employer organisations representing all firms, large and small, which will pay the levy; and, second, among organisations representing firms that between them will pay more than 50 per cent. of the total levy. The fact that the board's proposals command that level of support, and have done so every year since the need for consensus was introduced in 1973, demonstrates the strong support in the industry for the board's work.

The levy proposals have been agreed by broad consensus among building employers, adopted by the board without opposition and approved by the Manpower Services Commission. They are necessary for the board to continue with its work of developing and improving training arrangements in the construction industry, and I therefore commend the order to the House.

10.50 pm

Mr. Barry Sheerman (Huddersfield)

While the Opposition support the order and congratulate the CITB on its work and the challenges that it has met over the past years, and, indeed, over the past year, and although the hour is late, I want to take the Minister to task briefly for not acknowledging tonight that there is a real crisis in the construction industry. There is a crisis in training for the construction industry as a whole. While the Minister is right to state that the Construction Industry Training Board conforms to a model that we would have liked to see in far broader terms for most of British industry, we still lament and regret the fact that the Government abolished all but six of the industrial training boards.

This evening I want to draw the attention of the House to the fact that the Construction Industry Training. Board is exactly the system that we admire: it is a statutory board, it has a levy and in many senses it is a very successful industrial training board. It is the model that we would like to see in the rest of British industry. While we admire the CITB and believe that much that it does is of great worth, there is something of a conundrum.

We warned the Government this time last year that there would be a crisis in training for the construction industry. Although there is an industrial training board and a consensus between employers and employees — and we cannot leave out the employees and the very positive approach that the Union of Construction, Allied Trades and Technicians takes on all training matters —there is also tremendous evidence of skill shortages throughout the country, especially in the south-east, south-west and London. Those shortages of trained and skilled people in the construction industry have been caused by the reluctance to train over the past 10 years. While there is a levy and the industrial training board performs some of the job, there are other facets of Government policy that have undermined training in the construction industry, and it is important that I put them before the House briefly this evening.

The crisis facing the construction industry is very grave. It affects all the attempts to build major public and private projects and may endanger some of the projects that the Government hold dear and which they want to see reach fruition over the next two or three years during the Government's lifetime. However, the failure to train adequately in the construction industry will also frustrate any ambition to build publicly or privately provided homes for the homeless or to renovate and repair much of Britain's crumbling housing stock.

I hope that the House will indulge me when I ask, what are the reasons for the crisis and what can the CITB and the levy do about it? The present situation is largely of the Government's making. The crisis has been a long time coming. The Opposition warned the Government last year that there was a crisis and we warned them in the years before that. We told the Government that, if they did not take training seriously, particularly in crucial industries such as the construction industry which must lead in any economic regeneration, when any growth came it would be short indeed because it would run up against a shortage of skilled workers.

Half the problem is the construction industry's inability to reproduce the skills available to the industry. The CITB sometimes puts out figures that show a rough balance between the number of workers coming into the industry and the construction work going on, but if one looks beyond the statistics, one sees a disturbing picture. There are half the number of apprentices in training—half the number of skilled men and women coming into the industry—that there were 10 years ago.

There has been a dramatic decline in the industry's activity over that period, which coincides with the election of the Conservative Government in 1979. Now, the rate of building is back up to what it was in the mid and late 1970s, yet there is a great decrease in the amount of training. The reason for that is a serious question, which was partly answered in the Minister's brief introduction to the order this evening. It is due to the high level of exemption in the industry.

Let me give some evidence. An increasing portion of the industry is out of scope, due to the exemptions of small employers who make up an increasing share of the industry and due to the growth of labour-only subcontractors being granted what are called 714 certificates. Despite the increasing activity of the CITB, that greater level of exemption means that less training is being done, even when the labour-only sector is levied at a rate of 2 per cent. That does not make up sufficiently for the failure of a large part of the industry to train.

Let me give some figures. The Minister will be aware that, in 1979, 30 per cent. of the construction industry was accounted for by one-person firms. Within six years, that shot up to 40 per cent. At the other end of the scale, in 1979, 20 per cent. of firms had between eight and 24 employees. In 1985, that had fallen to 10 per cent. of firms employing between eight and 24 employees. At the top level, in 1979, 6.7 per cent. of firms were the large companies that most people know, employing over 25 employees. By 1985 that had fallen to 4.5 per cent.

There has been a real change in the nature of the construction industry, to which the CITB has not been allowed to adapt. The Government have been completely unaware of the need to do something dramatic to change the nature of training in the industry. There has been a downward spiral of training due to the growth of small firms who are out of scope, and labour-only subcontractors.

Another reason why the levy is not reaching the parts that it needs to reach is that the crisis in the construction industry has been aggravated by the Government's attitude towards local authorities and direct labour organisations. The Conservative party does not like local government or DLOs. But the DLOs do a wonderful job and they do a particularly good job in training.

Let me give one figure. In Greater London, the DLOs account for 14 per cent. of the construction work, but for 35 per cent. of training. The Government's persistent war on local authorities and direct labour organisations means that their ability to operate as such and their capacity to train have been severely affected. That is another reason for the training crisis in construction.

Moreover, the crisis that the construction industry faces because of the catastrophic shortage of skills will soon be accelerated. Just before Christmas, the Secretary of State announced yet another review of the skill centre network, which has been under attack from the Government for the past eight years. The Government have closed a third of the skill centres and have very little sympathy or patience with what is left of the network. They refuse to understand that the skill centre network represents the major opportunity for adult training in many of the traditional skills, as well as in the new technology skills.

Let us consider the impact of the skill centres on the levy and the inability of the levy to cope. The fact of the matter is that the skill centre network provides a large percentage of the skilled workers entering the construction industry. Only last year, the Under-Secretary's predecessor said at the Dispatch Box that a crisis package of 4,000 new trainees must enter the construction industry. He had had talks with the CITB. Of the 4,000, 2,000 were to be provided by the CITB in new YTS places. That came about, and more power to the CITB's elbow for delivering those 2,000. One thousand were to come from other providers—mainly private providers of youth training in the construction industry.

It is interesting to note that only 250 of the promised 1,000 came on stream. The remaining 1,000 places, which were to be financed partly by the levy, were to come from the skill centres. The Minister will know that the skill centres delivered the extra places. In the financial year 1986–87, skill centres trained 16,400 people in the essential construction skills of bricklaying, carpentry and painting and decorating — 7,400 unemployed people on MSC-sponsored schemes and 9,000 adults already in employment. Such training and retraining are vital in an industry that is undergoing much change.

What can the CITB do, and how can the levy system be used, to meet the crisis that we are facing in the construction industry, which is as real as for any other industry? It is scandalous in those sectors that no longer have statutory training bodies. The recent Anderson report, which the Minister should know well, points out that, whereas there is a handful of good non-statutory training bodies, most of them have been dismal failures. Large sections of British industry now fail to train to an adequate standard to keep us in competition with our French, German and other industrial competitors.

There is a collapse of training throughout British industry, and the construction industry is not immune to the problem. Skilled workers are not available now and soon with large schemes such as Canary wharf, the Channel tunnel, Sizewell B, the expansion of Stansted airport and the extension of the M25, the absence of the skilled people needed will be catastrophic. We are already feeling the absence of those skills, but they will be felt much more severely by this time next year.

A recent estimate shows that the Canary wharf scheme alone will require 15 per cent. of the manpower of our construction industry. The impact of that one scheme alone will be incredible. A recent survey of the Federation of Master Builders showed that 45 per cent. of its members were having difficulty finding qualified workers. Even with all the schemes that I have mentioned coming on stream, there is a crisis. Therefore, I am surprised that the Minister has been relatively complacent about what has been going on. The order comes through; he thinks that it is a good thing; he has laid on hands this evening, but he has not said one word about the crisis that we face.

In my final comments, I should like to suggest some answers to the crisis. What can the Government, the CITB and the levy system do to meet the situation? The Government's panic this time last year—they did panic — was too little, too late: 4,000 new trainees were not nearly enough even at that stage. Firm action on labour-only supply must be taken now; the legitimised lump, as it has become, will succeed in undermining the training system in the construction industry.

Although the answers are not simple, some action must be taken on one-person business exemptions and on the limit of £15,000 in turnover, because, as the Minister said, that is 51 per cent. of the industry. There must be a system whereby every employee in the construction industry is involved in training and comes within the purview of the industrial training board. The Government could tackle the way in which that is done. With the analysis and the new review of finance and training with which the Manpower Services Commission has just come forward, I believe that here is the opportunity to look again at strengthening the power of the CITB so that all employees in the construction industry will be covered.

Moreover, because of the picture that I have painted this evening, I believe that there is a need for a dramatic emergency programme to target particular regions and sectors to ensure that the shortages that I have described do not become a disaster for the great construction projects that are in hand. In docklands, for example, we must be able to find ways of training the people in Newham and Tower Hamlets, where there is 20 per cent. male unemployment. Those people must be trained to help in the task facing the construction industry. In our country, which still has dreadful levels of unemployment in its city centres—even in London—it must be possible to find a way of training those unemployed people to take part in such efforts.

In conclusion, I am afraid that the bullet that the Government are too ideologically blinkered to bite is that of contract compliance. If they really want to do something about the construction industry and training, they must say to a firm that wants to tender for work on large public or private contracts, "You will not get a contract unless you can show that you are training, and that every person on a site is eligible for training and has training and retraining as part of their individual contracts."

It is absurd that, when we still have massive unemployment, we have such dreadful skill shortages which will, as I have said, endanger the growth of our economy and the stimulation that many of those great projects offer. I do not want to discuss only Canary wharf, the Channel tunnel and the other great projects, but to return to the simple fact that many people in this country live in squalor — be it in public or private housing —largely due to the absence of skilled workers to renovate and refurbish their houses.

Of course we shall not oppose the motion tonight, but we believe that the Government must take in hand the crisis of training that lies beneath the issues that we have discussed.

11.10 pm

Mr. Nicholls

In all fairness, I should reply briefly to the speech that the hon. Member for Huddersfield (Mr. Sheerman) has just made. It is a great tribute to his eloquence that, in what might have been a narrow debate, he has been able to make a wide-ranging speech. I do not criticise him for that.

The hon. Gentleman admires the work done by the CITB, and I associate myself with his admiration. It will come as no news to the CITB that the hon. Gentleman feels as he does, but it will be pleased to hear him say so again. He said that there was a chronic skills shortage throughout the industry, and lays the responsibility for that at the Government's door. That cannot be right, because the main responsibility for training must lie in the hands of the employers. Going back to the 1970s, one can see that the economic state of the country was so parlous that it was not much good telling employers then that they should be thinking of the future and of investing in training. A great many of them, under the Governments of that time, were not so much investing in training as trying to keep their heads above water.

Mercifully, we now live in a different climate, but the damage done over the years cannot be repaired in a few moments. The skill shortages are more complicated than the hon. Gentleman would have us believe. It is inevitable that there will be skill shortages in parts of the country in an industry as diverse as the building industry. Having said that, however, there are grounds for optimism. A great deal of taxpayers' money is provided. Well over £1 billion is spent on YTS training, and well over £1.5 billion is spent on training in general. The CITB is responsible for the biggest YTS training agency. It has 22,000 trainees under training out of a total complement in the industry at large of about 62,000 trainees. That augurs well for the future.

The hon. Gentleman complained about the decline of traditional apprenticeships. I understand his point, but times move on. There are ways into the building industry now other than through the traditional craft apprenticeships. The hon. Gentleman would acknowledge that, too. One can, for instance, discuss the role increasingly played by those who enter the industry as site surveyors, planners, buyers, estimators, site engineers, civil engineers, production managers, quantity surveyors, structural engineers, and so on. All those people play an increasing part in a changing building and construction industry, but do not enter it via traditional apprenticeships. Even a substantial number of those now in YTS training use that training as a foundation course before going on to an apprenticeship.

The Government are putting a vast amount of taxpayers' money into providing the infrastructure necessary for training, and are doing the initial pump priming in YTS and other schemes. However, in the end training is a matter for the employers.

Not for the first or the last time, the hon. Gentleman and I differ over the future of the boards. Honest men will sometimes honestly differ. Speaking rhetorically, so that I do not provoke him, perhaps I can say that if his attitude to the creation or existence of the CITB were right, he would have to say that all the 16 boards that were quietly laid to rest by the Government and replaced by non-statutory training organisations had been doing a super job—but they clearly had not. At the time, the industry accepted that the CITB was doing a decent job, and the hon. Gentleman has already paid tribute to that. The CITB was perceived to be doing a good job, which is why it survived. The hon. Gentleman is perhaps stretching the imagination and the facts a little too extremely if he believes that in the good old days of the many training boards training was at a higher level. It would be nice if that were the truth; in fact, it is not.

I hope that the hon. Member for Huddersfield will not take it amiss if I take him up on a point of detail regarding his remedy for bringing more people into scope. I can understand him saying that, because the exemption level is at £15,000 and has been so since 1975, there must be fewer and fewer people within scope. However, because there has been a general increase in the economy, with small businesses coming into operation, it is perhaps surprising — certainly it is true — that more and more people have come into scope even though the £15,000 exemption has not been raised since 1975.

The hon. Gentleman is of the opinion that the Government do not like the skill centres and have it in for them. I believe that I can set the hon. Gentleman's mind at rest regarding our motives. Two reports have cast considerable doubt on whether the skill centres are providing the right sort of training at the right sort of price.

The National Audit Office report said that it considered that the MSC's agreement to purchase fixed amounts of training from the Skills Training Agency had resulted in the MSC incurring considerably higher total costs for providing training courses". The Public Accounts Committee noted the action that the MSC was taking to improve value for money in the operation of schemes, but expected it to continue its efforts to minimise the diseconomy arising from its agreement with the Skills Training Agency to purchase a fixed amount of training at Skillcentres". Faced with such evidence, it would have been the height of folly for the Government not to respond.

Without in any sense trying to prejudge the eventual outcome, it was clearly right for my right hon. Friend the Secretary of State for Employment to ensure that outside consultants would consider the matter and decide whether the STA is doing the job that the hon. Gentleman and I would want it to do.

Mr. Sheerman

As a former member of the PAC, I can understand what was said by the Committee and the National Audit Office. However, I do not believe that those quotes should be taken out of context. The skill training network has changed a great deal, but the PAC did not look at the broader fact that the skill centres represent the one agency in the country with proven success in imparting skills to adults. No other organisation or institution has been as successful as those centres.

Mr. Nicholls

If I were to concede those remarks in their entirety, I would be pre-empting the result of the inquiry that we have instituted. I believe that the hon. Gentleman and I would be at one in wanting to see the right type of training delivered to those in need of it at the right price. If there is prima facie evidence to suggest that the MSC is paying too much taxpayers' money — our money and that of our constituents — to the STA, that evidence should be studied. That is as far as it goes. The matter is being considered and I would not like to make any judgments at this stage.

The hon. Gentleman has his doubts about whether the levy goes wide enough. The two main limbs of the order cover firms with a payroll of £15,000, which represents a person and a half. I had better not say a man and a half, as I might be leapt at from other areas of the House—[Interruption.] I understand that the hon. Lady in question is not here.

The levy of f £15,000 covers a small number of employees and although it may, on the basis of the hon. Gentleman's calculation, exclude 51 per cent. of those who would otherwise be in scope, it affects only 2 per cent. of the work force. On the basis that the devil can quote figures for his own purposes, I can find such a figure.

I am sure that the hon. Gentleman did not intend to identify labour-only sub-contracting automatically with the black economy. Although he came up with a nice term of alliteration, "the legitimised lump", I did not take that personally, as I assumed that he was referring to the operation of labour-only sub-contractors.

It is entirely true that, in the very nature of things, labour-only sub-contractors do not usually play as direct and large a part in training as they otherwise might. That is inevitable from the very nature of them. Having said that they are the legitimate part of the industry, they are not the illegitimate part. A swingeing levy is imposed on them. The board has instituted one scheme, the levy grant system, to operate for training those who will be labour-only sub-contractors, and another pilot scheme is operating to that effect.

The hon. Gentleman is right to say that this causes a particular problem, but it is the legitimate end of the problem. The CITB feels that the labour-only subcontractors play their part, through the pilot projects they are operating and the levy imposed.

Mr. Andrew Rowe (Mid-Kent)

Does the Minister agree that one of the problems that dogs the construction industry is that the differential in wages between the highly skilled and semi-skilled or unskilled is too low to allow for the kind of—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. We had better stick to the levy rather than discuss the pay structure in the industry.

Mr. Nicholls

I am tempted to respond to my hon. Friend, but I know from experience that I would not begin to get away with it. I ask my hon. Friend to come and see me later.

The hon. Member for Huddersfield finished where he started, by talking about the necessity to train. That must be entirely right. Billions of pounds of taxpayers' money are being devoted to that end. Training for the construction industry is not a straightforward or routine matter. It is a peripatetic industry, which brings particular problems in its wake. Training must be the responsibility of the employers, and there is increasing evidence to show that employers are matching that responsibility. The Government have a role to play in ensuring that the billions of pounds are spent properly, and there is no doubt that they are fulfilling that role to the full.

Question put and agreed to.

Resolved, That the draft Industrial Training Levy (Construction Board) (No. 2) Order 1987, which was laid before this House on 1st December, be approved.

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