§ The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls)
I beg to move,That the draft Industrial Training Levy (Engineering Board) Order 1990, which was laid before this House on 6th February, be approved.
§ Mr. Speaker
With this, it will be convenient to consider the following motion:That the draft Industrial Training Levy (Construction Board) Order 1990, which was laid before this House on 6th February, be approved.
§ Mr. Nicholls
The debate 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. For the engineering board, one part of the levy proposals—that covering site employees in the engineering construction sector—establishes a levy rate of 1.5 per cent. Similarly, the construction board proposals, covering labour-only subcontractors, establish a levy rate of 2 per cent.
Hon. Members will not need reminding that both those sectors are vital to the country's economy. The engineering industry employs nearly 2 million people in 21,600 firms. Its activities are wide ranging, including mechanical engineering, electrical and electronic engineering, vehicle and aircraft manufacture and engineering construction.
The construction industry is almost as large and employs about 1.8 million people, covering activities such as building, civil engineering, electrical contracting, heating and ventilating and plumbing.
The engineering levy proposals are in two parts. The first applies to engineering manufacture, which comprises the majority of the industry, and the second applies to the engineering construction industry, which employs approximately 40,000 workers. I will briefly outline the proposals in both sectors.
For engineering manufacturing establishments, the board proposes a total levy of 1 per cent. of an employer's payroll, 0.07 per cent. of which will be non-exemptible. Those rates are the same as last year. The bulk of the levy is therefore exemptible. Employers who train satisfactorily will be given credit for that 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. Almost 70 per cent. of firms will therefore be excluded from levy because of their size.
In the engineering construction sector, for off-site employees establishments with up to 30 employees will be excluded from the levy. That again would mean that almost 70 per cent. of establishments would not pay levy. Establishments with more than 30 employees will be levied at 1 per cent. of payroll. The non-exemptible element of the levy will be 0.15 per cent. Those rates are also the same as those approved last year.
For site employees, the levy has been increased by 0.38 per cent. to 1.5 per cent. of payroll in response to growing skill shortages in this part of the sector. No levy is payable on the first £50,000 of payroll, which will exclude about 14 per cent. of establishments.
60 The raising of a non-exemptible levy in excess of 0.2 per cent. in the on-site sector means that under the Industrial Training Act the board must demonstrate that there is consensus in the industry for the proposals.
Employer organisations representing 60 per cent. of leviable establishments and about 86 per cent. of the work force have confirmed their agreement to the proposals, thus satisfying the conditions of the Act.
The engineering industry training board anticipates that the levy proposals I have described will raise some £22 million. It will apply to those firms what fall within the scope of the board between the date the order comes into force and 31 August 1990.
The construction levy proposals are in the same format and at the same rates as those approved by the House last year.
The board estimates that the levy will raise £66.4 million and it is proposed in three parts. First, there will be a per capita levy on directly employed construction workers in the main industry. The rates will vary according to the type of person being trained and will reflect the training costs for each occupation. The rates are subject to an overall limit of 1 per cent. of payroll.
Secondly, the board proposes to retain the 2 per cent. levy on payments made to labour-only subcontractors. This rate has not changed since 1981 and reflects the board's judgment that subcontractors undertake too little training, relying instead on obtaining skilled manpower trained by other employers.
Companies covered by those two parts of the levy with payrolls of £15,000 or less are excluded from the payment of levy. Approximately 29 per cent. of firms are excluded by this provision.
The third part is the levy for the brick manufacturing industry. The board proposed a rate of 0.05 per cent. of payroll, with firms having a payroll of £100,000 or less being excluded.
As with engineering, the construction board is required to demonstrate that there is consensus within the industry for the proposals because the levy exceeds 0.2 per cent. of payroll without an exemption scheme. Support has been gained from employers' organisations representing 60 per cent. of employers liable to pay the levy and from 82 per cent. of employers who pay more than half of the total levy.
Turning to the future, in line with recommendations in the White Paper "Employment for the 1990s", the EITB has put forward proposals for an independent training organisation representing engineering manufacture and for the retention of statutory arrangements for engineering construction. These proposals were approved in November 1989.
Currently the board is working on the development of a plan and timetable for the management of this transition and it is anticipated that an independent engineering training authority, covering engineering manufacturing, will be fully operational by July 1991.
§ Mr. Andrew Rowe (Mid-Kent)
Will my hon. Friend assure the House that not only is great care being taken to ensure that the plans for training meet the requirements of the national training qualifications council but that they will be recognised in Europe?
§ Mr. Nicholls
I am sure that my hon. Friend is entirely right. Underpinning the arrangements will be the 61 proposition, on which I believe there is a fair amount of consensus, that it is up to employers to train in their sectors because they feel the need of skilled people and because they know how to meet those shortages. I entirely accept what my hon. Friend said about the need to ensure that the standards and qualifications are recognised in Europe.
Our plan means that the levy proposed, for collection in 1990–91, will be the last to be raised by the engineering manufacturing sector.
For engineering construction, it is anticipated that the levy and grant arrangements will secure an adequate supply of skilled workers by rewarding those employers who train. It is expected that the exemption arrangements for this sector's off-site establishments will be replaced by a voluntary code of practice.
In the construction industry, the Government accept that, because of the particular employment patterns—a highly mobile work force and heavy reliance on labour-only subcontracting—statutory arrangements will need to continue, with a thorough review in 1992. In the meantime, a number of sectors in the construction industry training board—principally, electrical contracting, plumbing, heating and ventilating—are developing independent arrangements.
The proposals have received unanimous approval from the respective boards and will assist in sustaining their worthwhile activities within their industries. I commend them to the House.
§ Mr. Henry McLeish (Fife, Central)
The Minister's speech had a familiar ring, but I am grateful for the fact that he opened up the debate at the end of his speech by talking about the Government's new ideas for voluntarism within the training boards structure in the years ahead.
The Opposition support the orders. We wish to congratulate the construction industry training board and the engineering industry training board on their work and their commitment to tackle the emerging skills crisis. Although we applaud their past work, the future is ominous. The Government have said that they will let the two boards continue for three years, but the Opposition have no doubt that, after this thorough-going review, they will again be put on a voluntary basis. We believe from our perspective of the skills crisis that that would not be a good idea for the industries or the nation.
Our anxiety is heightened by the fact that, despite the Government's rhetoric over the past decade, they have been involved in a systematic assault on the training infrastructure. The Manpower Services Commission was stripped of its responsibilities and was changed into the Training Commission, which has been emasculated over the past few months. The Skills Training Agency is about to be privatised, again with no real regard for the nation's training needs but again doing much to satisfy the Government's aim to move towards the market model. We have also seen the final attempt to dismantle the training boards structure. In 1981, in a document entitled "Framework for the Future", the Government said that 16 of the 23 training boards should go out of existence. This was followed by a recent decision to axe another five and the decision that two should continue on a statutory basis, with a review promised at the end of three years.
62 The Government's record does not reinforce our confidence that training is safe in their hands. They have not tackled the skills crisis and, even more alarming, they have assaulted what could have been the basis of a training structure in the 1990s.
I should like to dwell on the Government's attempt to have voluntarism or the market model. Many people regard voluntarism as a polite description of the crude market mechanism which is being introduced into the delivery of training. On 8 November 1989, the former Secretary of State for Employment—the right hon. Member for Sutton Coldfield (Sir N. Fowler)—said:The amendments, which we moved in another place, are designed to enable us to change statutory industrial training boards to voluntary employer-led bodies or to employer-led boards. The change is part of the changes to the existing framework necessary to meet the challenges of the next decade.In an extraordinary paragraph, the right hon. Gentleman said:In future, training must help business succeed, become the responsibility of employers, provide standards that are set by industry, allow adults and young people to receive qualifications".Is that not what the training boards and every training company have been doing for the past decade? Is it not nonsense to suggest that they must now contribute to business success? What has training been about? Is not training about success, profitability, competitiveness and trying to give us an edge, whether in a world market or a European market? The right hon. Gentleman was trying to establish the simple point that, regardless of the crisis of the skills shortage in this country or in the world market, the Government would go down a market road on training. Later, the right hon. Gentleman said:That approach is far preferable to one of regulation and compulsion."—[Official Report, 8 November 1989; Vol. 159, c.1121–22.]I have a simple question for the Government: what evidence sustains the Government through onslaught after onslaught by the Opposition, industrialists and our European competitors and suggests that, by changing the statutory nature of these boards to one of voluntarism, all our training problems will disappear? Is the evidence based in this country? If so, I hope that the Minister will refer to it in his response. Is it based on the experience in Europe? It cannot be, because people there are walking in a different direction from the Government.
We see no sense in leaving industrial training entirely to the market. Of course, employers must play an active leading role, but they have not walked away from their responsibilities, as the Government are doing. Is it much more to do with what emanates from No. 10 Downing street and the fact that everything must pay homage to the market model? The Government are in danger of isolating themselves from mainstream opinion on training, but, more important, they are in danger of turning their back on the emerging skills crisis, which has enormous implications for the challenges of 1992 and for our ability to compete in a world in which other countries invest in development and innovation, linked to training in a way about which either the Government have no conception or, if they have, it is not reflected in their actions.
As if that were not bad enough, on 9 November, in a press notice issued by the Department of Employment, the right hon. Member for Sutton Coldfield posed the real threat to the two remaining boards. He said: 63In two sectors I have accepted the strong arguments of employers that statutory arrangements should continue for the time being, but this does not shape our belief that a voluntary approach offers a better long-term solution to meeting industries' own training needs.At the end of that paragraph, the right hon. Gentleman said:I am minded to think that they, too, should be moved to an entirely voluntary basis.That is what he said, after accepting the three-year continuation of the boards' lives and the review which is to take place.
The Government have made up their mind. The two boards are living on borrowed time. We may be one, two or three years from having the 23 training boards completely removed from the training scene, to be replaced by what the Government call voluntarism. In 1987, the Varlaam report, prepared by the Institute of Manpower Studies, stated that the non-statutory training organisations that the Government had set up were not working. No one was surprised. In an editorial on 4 March 1988, the Financial Times stated:One immediate area where reform is needed is the sectoral Non-Statutory Training Organisations (NSTOs), which were established by employers after the abolition of most statutory Industrial Training Boards … After six years, the first comprehensive survey of the 102 NSTOs found that half, covering about 2.5 million employees, were 'not effective'.The main conclusion to emerge from the report was that those organisations needed more Government support. Is that not a curious paradox? Those bodies were set up in the voluntary sector supposedly to undertake the work of the statutory boards, but after a few years in operation the main conclusion of the study was that they needed more Government help.
§ Mr. Rowe
Is it not a promising feature of the training scene that in a number of companies people are putting in their own time and effort to acquire qualifications that will enable them to earn substantially higher wages? But is it not also the case that in many industries the gap between those who have acquired higher qualifications and those who have not is much too small and that the reason for that is that the trade unions have traditionally pressed for a flattening of the salaries and wages structure? Would it not be a good idea to change that?
§ Mr. McLeish
The hon. Gentleman makes some interesting points. I accept that one of the key issues that we face in Britain is not only to increase the volume of skills in every sector but to improve the quality.
My main criticism of the Government is that, although they claim to seek voluntarism, there is nothing in legislation to encourage the individual. To engage the nation in tackling the skills crisis, we need not only the participation of employers but firm leadership from the Government. That combination is replicated in every country in Europe, in the far east and by two of our major competitors—Japan and America. That is the central point that I am trying to stress.
What are our other main criticisms of the Government? First, they seem to oppose any statutory provision. After all, that goes against the grain of their political prejudice, which is well documented.
Secondly, they are against the concept of a levy because they are mindful of what they regard as bureaucracy and because they think that employers should be left to do 64 what they wish, regardless of whether the effect on economic performance is good or bad. That cannot be right.
Thirdly, the Government have spent the past 10 years seeking confrontation over the delivery of training. Why is it that, even on the newly constituted boards in the engineering and construction industries, we must again have a majority of employers? I do not particularly mind a majority of employers, but why have the Government gone out of their way to isolate and marginalise the providers of training, the educationists and the trade unionists? In Europe, the social partnership concept brings together employers and trade unions in a constructive relationship. Yet this Government do not seek partnership even though it is the model used by all our European competitors. Instead, they seek to build in confrontation, which is a luxury that we cannot afford. We cannot measure up to the challenges that we face without partnership, consensus and a degree of unanimity concerning our national objectives.
Let me deal specifically with engineering. Nowhere is our skills crisis more evident than in engineering. We read that, in the last quarter of 1989, we had a 20 per cent. cut in manufacturing investment, a £20 billion trade deficit, 20 per cent. skills shortages being reported repeatedly by the CBI and an interest rate of 15 per cent. We read that 52 per cent. of employees receive no training and 20 per cent. of employers provide no training. What does the Government's voluntarism do to tackle the problems in the engineering sector? If there is a way out of the economic crisis that Britain faces in the 1990s, it is surely to invest in manufacturing and provide it with the best skill training base that we can offer through a partnership between employers and employees. But it seems that the Government simply do not care.
What about small businesses? In a debate a few weeks ago we pointed to the fact that nearly 6 million people are either self-employed or in small businesses. In the newly constituted boards, there is to be a larger exemption and that gives rise to concern about small businesses. Small businesses need assistance because they make an enormous contribution to growth and employment, but some of them cannot afford the finance—especially given the other national problems that I have outlined—to invest in training. What are the Government doing to encourage small businesses and to involve them in a partnership to ensure that their product development, production processes and productivity improve?
The Opposition support the orders, but we believe that their success will be governed by the circumstances in which they are implemented over the next two to three years. The Government have made great play of the improvements in productivity that have taken place in the past decade. It does not take an economic wizard to realise that, if one sheds 2 million to 3 million employees from manufacturing industry, productivity will increase and unit costs are likely to fall. But improvements in unit costs and productivity are starting to level off and the reason is simple: we have shed manpower without investing in the two sectors in which our competitors do well—technology and capital equipment and training. We simply cannot continue to marginalise those who wish to contribute to training. We must now take seriously the fact that we have a major skills crisis. We need partnership, and we cannot have the Government walking away from the problem and calling their neglect a strategy.
§ Mr. Richard Holt (Langbaurgh)
This is one of those rare occasions on which it is possible to support the Government but also to speak critically, as the hon. Member for Fife, Central (Mr. McLeish) has shown. It also affords us the opportunity to examine not merely the question of training but the creation of opportunities for young people to earn a living later in life.
I am delighted that so much of this debate has been about Europe. I have discovered that what happens in Europe is very different from what happens in Britain. In Europe, young people can still begin apprenticeships at 13, 14 and 15, which is not possible in our somewhat hidebound education system. It is time the Government realised that if we are to meet the skill shortages of the future and get young people to enter craft industries we must look again at the division that we have created between education and training. That division does not arise on the continent, and if we are to be on all fours with our competitors on the continent we must examine why they succeed and we fail. One of the reasons is that they do not entertain the nonsensical idea that one must have comprehensive education until 16 and only then begin a craft apprenticeship.
The Europeans stream youngsters at a much earlier age. They give them the educational classification most suited to their needs, and that includes apprenticeship training. In France, youngsters can begin at 13 or 14. We do not regard the French as educational Philistines—on the contrary, we regard them as rather forward-thinking. Youngsters can do a two-year pre-vocational training from 13 to 15 and can then train for their craft at a training centre for apprentices from 15 to 18 years of age. We should be examining that way forward rather than continuing with our rather nonsensical training boards.
I do not suppose that I am the only hon. Member to have served on one of the boards. I do not suppose that I am the only hon. Member to have been responsible for apprentice training. I do not suppose that I am the only hon. Member who has examined youngsters in craft skills. I also spent a great deal of my time in local government dealing with education at all levels. I could see the divide then, and it has been there for a long time—at least for the 28 years to which I refer.
As chairman of an apprentice training scheme, it was my responsibility to sign indentures at the beginning and at the end of training courses. The contribution made by trade unions in that context was nil and employers were not very clever either. The result was that any youngster who lived long enough had his certificate signed; it had nothing to do with whether he had passed an examination or created a piece of work. On the continent one still has to prove that the qualifications have been attained and that one can do the work. I do not believe that the training boards represent the best method of ensuring that—now or in the future. Nor can we leave training entirely to those in industry who are responsible for it today.
I disagree with the hon. Member for Fife, Central. In the past decade training has become a growth industry. My professional body, the Institute of Personnel Management, established its own institute of training in the past two or three years. Now there are many trainers doing much training, but those worthy people often do not get their hands on the raw material that they have to train until it is too late.
66 We should have a debate on the relationship between education and training. An education Minister should be present when we debate training and vice versa. We should examine what is happening in Europe, Japan and America. We should not be hidebound and say that we cannot reduce the school leaving age. No one is asking us to reduce it overall. Nor is that how it works on the continent. Youngsters in Italy, France, Germany and Holland are under strict controls when they begin their craft training and apprenticeships. They train in all sorts of skills—agriculture, catering and tourism as well as the furniture trade with which I was concerned. From 1992 our furniture trade will be trying to compete with its European competitors although it has a skills training shortage while they have not.
It is all very well to pass these orders and to collect the levy. I used to do that. We spent a great deal of time collecting money and paying it out. We were concerned not so much with training as with the administration of the scheme. That is why I was glad to see the back of the training boards, and I would vote for their abolition again.
I urge my hon. Friend the Minister to consider what happens on the continent. Employers are excused from national insurance contributions for apprentices. They are not levied or paid, so employers are encouraged to take on apprentices. There is no time in this short debate to develop the argument fully, but I hope that I have sown enough seeds in my hon. Friend's mind for him to take my suggestion away and to come back to the House with a debate on education and training in the light of 1992 and what is happening in the rest of Europe.
§ Mr. Simon Hughes (Southwark and Bermondsey)
The questions arising from the debate will not lead any of us to oppose the orders. Nevertheless, I did not hear the Minister explain how the regulations will be governed in the three-year period that the Secretary of State announced before the completion of the review. One order expires in March and the other later this year. It would be interesting to know whether the Minister anticipates, as I do, further orders thereafter.
According to the Government's figures, in the past three years two thirds of all employees received no training. I agree with the hon. Member for Langbaurgh (Mr. Holt) that, unless we give far more serious consideration to our training needs and act on the conclusions which show how inadequate training is, we shall not have an economy adequate for the next century, let alone 1992.
The construction industry training board and the engineering industry training board were singled out for continuation. The Government regard them as having a particular contribution to make to their respective industries, as evidenced by the employers who told them so. The construction industry training board ensured good training in safety practices. The Minister will be aware that safety matters give rise to widespread anxiety. We must ensure that there is adequate training to the best and highest standards of safety practice, so that we continue to reduce the number of fatalities. Sadly, for many years we have had too many of them.
Part of the general plan outlined by the former Secretary of State in his statement in November included increasing remission for small firms from contributing to 67 the levy. Given the growth in the number of people working for small firms, we should not exempt small firms per se from the levy. Such an exemption, together with the exemption from the obligation to apply as high training standards as large firms, would exclude many people from the possibility of training.
The Government have identified the other part of the agenda, not the hidden or voluntary part—that we should give incentives to those who provide the best training. My colleagues and I support the idea of remitting tax for good training. If people produce evidence to show that they have trained well and we provide a tax incentive, that would encompass good training practice across all sectors, not just engineering and construction, and not just large firms. That would encourage people to train.
After the review I hope that the Government will resolve to continue to ensure that industries such as engineering and construction have the best possible training structures in place. Nothing should be done to undermine the good practice, good standards and good achievements of those boards in the past. We need to preserve the highest standards. It would be a great sadness if, because of the dogmatic argument about getting rid of anything that is on a statutory basis, we were to get rid of two bodies that had proved their worth. I hope that the two boards realise that there is general support for them in Parliament and we hope that they will do an ever-improving job, whatever the size of firm.
§ Mr. Ron Leighton (Newham, North-East)
Time is very short, so I shall be brief.
I understand that the construction industry training board is to be reprieved and I am sure that we are all thankful for that. The Minister announced that the engineering industry training board is to be axed. I fear that that is likely to prove to be a mistake. We will rely on employer voluntarism when it was due to the failure of such a policy that the industrial training boards were set up.
There is to be a successor organisation to the engineering industry training board. Are all the activities of the board to be transferred? If not, what will happen to 68 the activities not transferred? What will happen to the board's assets? Are they all to be transferred? If not, what is to happen to them? Who appointed the first governing council of the successor body, or who made the recommendations to the Minister? Why was not even one educationist put on the governing council of the new body? Can the Minister explain the relationship with the training and enterprise councils? Are the non-statutory industry training organisations to set the standards that the TECs will implement?
I see the Minister looking at the clock. I shall take only 60 seconds more. I, too, read the Varlaam report. It states that many voluntary bodies are not effective and that if the Government wish the standard setting issue to be in the forefront of non-statutory training organisations' activities, a great deal more additional support will be necessary. Will that necessary support be forthcoming?
§ Mr. Nicholls
Detailed points have been made in this short but useful debate and, clearly, I shall have to write to hon. Members to do justice to their speeches.
I assure the hon. Member for Fife, Central (Mr. McLeish) that I never doubted his commitment to training. Some of his implications about his party's support for training, however, rang hollow. He asks for proof that when the industrial training boards move into the voluntary sector they will be a success. If he considers the present industrial training board system, he must conclude that after 25 years they cannot be said to have been an overwhelming success. It is only right after 25 years that the Government should look at the situation and see how it can be improved. Bearing in mind his personal commitment, it is a bit rich to hear from him that a party which initially took a sceptical view of youth training and vigorously opposed employment training at its outset is in favour of training. However, we may be able to deal with that another day.
§ Question put and agreed to.
That the draft Industrial Training Levy (Engineering Board) Order 1990, which was laid before this House on 6th February, be approved.
That the draft Industrial Training Levy (Construction Board) Order 1990, which was laid before this House on 6th February, be approved—[Mr. Nicholls.]