§ The Parliamentary Under-Secretary of State for Employment (Mr. Robert Jackson)
I beg to move,That the draft Industrial Training Levy (Construction Board) Order 1991, which was laid before this House on 29th January, be approved.The proposals before the House seek authority for the construction industry training board to raise a levy on the employers in the building and civil engineering industries, to finance the running costs of the board and to run a grants scheme. The proposals are the first to be submitted by the board since it was reconstituted last year. They are different from those submitted in previous years in that the levy is now based solely on a payroll basis.
The basis of the proposals is a levy of 0.25 per cent. on the payroll of employers in the industry, and a levy of 2 per cent. on all payments made by employers for sub-contract labour. Employers with a payroll of £45,000 or less will be exempt from the levy. The proposals have the support of the employers, as required by the Industrial Training Act 1982, and the full support of the board.
The House will know that the Government thought long and hard about their decision to retain this statutory training board. In principle, we believe that independent employer-led arrangements which have the full support of employers offer the best way forward for industrial training. In general, the track record of compulsion through statutory levies in raising the quality and quantity of training is not a good one.
We have, however, retained the statutory principle in the case of this industry because of strong support from employers. The construction industry has particular characteristics which create peculiar problems for training. The mobile nature of the work of the industry, the mobile nature of its work force, both geographically and between employers, together with the large-scale use of subcontract and self-employed labour produce a unique set of circumstances in those sectors of the construction industry.
Let me emphasise that we consulted widely with the industry about the CITB. There was a widespread and strongly held view that the CITB should be retained but that its management should be streamlined and reformed. In addition, the employers in the industry argued strongly for the retention of a statutory levy because of the largely self-employed nature of the labour force.
We were therefore persuaded to give the industry a chance to reform its training board, to remodel it as an employer-led body, and to alter the basis of levy collection. The revised basis of the levy proposals before the House today is one indication that reform is happening. I am happy to say that other reforms, such as the internal restructuring of the board's management and improvement in financial control, are also taking place. I expect shortly to see the Board's revised proposals for its grants scheme, and later in the year its strategic plan. All this is an indication that the CITB is proceeding in the right direction.
We intend to keep a close watching brief on the Board. Its powers to raise a levy are exceptional and the Government, like the House, must be convinced that they are absolutely necessary to preserve the basis of training in the contruction industry. Because of the peculiar nature of 756 the industry, the Government have decided to continue with a statutory board for the time being. As we said in the 1989 White Paper, however, we continue to believe that the most effective incentive for companies to train is a knowledge and understanding of the skill needs and not centralised regulation based on statutory powers.
I believe it is right for 1991 that the House should approve the proposals before it. I commend them to the House.
§ Mr. Henry McLeish (Fife, Central)
I praise the work of the CITB, because the construction industry employs nearly 1.8 million people and makes a valuable contribution to the quality of life and a significant contribution to the economy. We do not intend to divide the House on the order, but we have serious misgivings about the nature of some of the proposals included in it.
The order should be seen against the background of a construction industry in crisis. The order may be supported by the House, but it was not overwhelmingly supported by the CITB. The order also continues the systematic dismantling of the two remaining training boards, which are the continuing victims of the purge that was visited upon the training infrastructure in the 1980s.
The order underlines the Government's failure to address the serious issues of sector provision and the need to develop strong, responsible and adequately funded initiatives to tackle some of the economic problems that we shall face in the years up to 2,000.
We are most concerned about how out of step the Government are with what is happening in Europe; how out of line they are with best British practice in training provision, and how out of touch they are with the key contribution that a supply side skills initiative could make to economic well-being and the quality of life of young people and adults in the labour market.
There are a number of charges that we must direct at the Government. Despite the Minister's fine words, the order has not enlisted the full support of the CITB. We have grave reservations about the details in the order, some of which I shall outline later.
Our second charge is that the Government have abandoned any serious commitment to sector-led iniatives. The record of the past decade is ridiculous: of 23 training boards, 16 were removed, followed by another five, and two were grudgingly accepted as part of the statutory framework. I fear that even they will not last much longer, because the Government are keen on the voluntary sector, and that means that nothing practical will be allowed to get in their way.
The third charge relates precisely to the attachment to voluntarism. Ministers say that they do not want bureacuracy or the imposition on employers of a statutory framework. Why then do successful countries have such statutory frameworks, under which their contribution of supply side skills initiatives make a great impact on the economic well-being and industrial performance—and on a key area in which Britain remains weak: output per person employed?
Fourthly, the Government have invested in training and enterprise councils, which we support. But TECs can co-exist in an industrial and training strategy only alongside a strong sector base. Anyone who knows anything about training knows that we must deal with 757 companies' specific difficulties. TECs have a role to play in helping with difficulties in local labour markets, for instance. We must also attack inter-company difficulties through sector-based initiatives.
It is sad that, after 12 years, the Government seem to be moving away from the type of policies that apply in Europe and from the growing consensus surrounding the need for strong sectors.
My fifth charge is that the Government often lecture us to the effect that industry knows best. The CITB has told the Government that it knows best, but in a spectacular example of hypocrisy, the Government have been unwilling to accept the wisdom of the very people whom they have entrusted with the future of training in construction. Our evidence shows that to be true.
The changes in the levy are important. First, the form of calculation is to be changed; and, secondly, the level of exclusion will be altered. The previous levy on employers was levied per capita and different annual rates were set for different trades. That system will be replaced this year by a payroll levy, as the Minister told us. It is true that the move to a payroll levy has won general approval, but many people think that the level at which it has been set is far too low. The Government have forced the CITB to set the levy at the low rate of 0.25 per cent.
The Building Employers Confederation, for instance, which represents the largest group of employers, argues that that percentage is far too low. The BEC wrote to the CITB on 4 September 1990 as follows:With regard to the level of 0.25 per cent.… the Confederation considers that it may be unwise to set such a low level at this point in time. Furthermore, during the present period of uncertainty with regard to the future funding of training, especially in respect of Training and Enterprise Councils, and Government cutbacks in YT funding, the Board should not allow the industry's long term training to be jeopardised through lack of sufficient financial support raised through levy.So that section of the industry is not happy with the 0.25 per cent.; the needs of the industry demand a higher levy.
When reconstituting the CITB, the Government made it clear that they wanted to increase the financial exclusion level. That has always been opposed by the CITB and most of the industry. The Minister has insisted, against the board's advice, that the small firms exclusion level should be increased from £15,000 to £45,000. That, of course, will affect both the 2 per cent. on labour-only payments and the 0.25 per cent. payroll levy. Even after the CITB was forced to back down over the exclusion thresholds, several employers' organisations wrote to the CITB in September last year complaining about the decision. They included the Building Employers Confederation and the Electrical Contractors Association.
In its 90th edition, in October 1990, under the headlineWarning that training will be hit: Levy 'Escape' Limit Goes Up to £45,000",Construction Board News reported:Despite industry's stated view that all firms should contribute to the cost of training, the CITB has had to agree to a government instruction to exclude many more smaller firms from paying the statutory levy.This, says the CITB, will cut the amount of levy income and reduce its ability to carry out training.The industry has clearly spoken, through its newspaper. The proposal was supported by neither the industry nor the board; it was imposed over their heads by a 758 Government who were wedded to the notion of voluntarism, rejecting the practical, common-sense views of board members.
The Construction Board News editorial also said:In acceptance of another condition imposed by the Government, the CITB has also agreed to switch its levy charging system to one of a percentage of each company's payroll.The initial imposition of conditions does not suggest any degree of voluntarism between Government and the CITB. It clearly shows that the Government have made up their mind that this is the direction that the board will follow. It is not a case of industry knowing best, but one of Government knowing best and handing out their own perverted ideology by diktat.
When the board was reconstituted, it did not approve of a levy system that was not tied to exemption. Again, the Government had stated the conditions under which the board was to operate. They forced the board to undertake a review of the issue of exemptions, and even laid down criteria for how it was to evaluate the views that it received from employers. The review revealed—interestingly—that 10 of the 11 main employers' organisations supported the retention of statutory levy not tied to exemption. The only employers' organisation that wanted to introduce the exemption system was the Scottish Plant Owners Association: as a Scot, I say that with some regret.
The result of the review was a severe rebuff for the Government's policy of leaving training to the market. On every occasion, the board made its views clear; but it had no chance of changing the Government's mind. It must be remembered that these were handpicked industrialists. There were only two trade union representatives on the board, which was not packed with people who would instinctively oppose the Government's aims. Nevertheless, it felt obliged, through the press and in other ways, to voice its concern about a Government who it felt were working against its interests.
The changes proposed in the order are all linked to the future of the CITB. When it was reconstructed in 1989, the Government made it clear that they were reluctantly giving in to employer pressure: they cannot deny that. What is more, the CITB was given not so much a clean bill of health as a conditional reprieve. It was reconstituted for three years; at the end of that period, its future would be reassessed. Many employers' organisations fear that the Government's real intention is still to get rid of the board.
Let me remind the House of the conditions under which the two remaining statutory boards had to operate. Clearly the Government had been moved by pressure to retain them, but had not been moved by force of argument to accept the wisdom of such a move. A press release issued by the Department of Employment on 4 April 1990 included a reference to a letter in which the Parliamentary Under-Secretary of State had set out the priorities to the new board. The first was tocontinue to develop and promote as a matter of priority modular based nationally recognised vocational qualifications for all occupations within the industry.No one could disagree with that objective.
The second was tooperate in a way that ensures its strategies programmes and activities are fully compatible with the development of Training and Enterprise Councils.Some have argued that it should be the other way round, because in many competitor countries strong sector initiatives are complemented by local delivery, by local 759 market intelligence and by bringing employers together to tackle skills training. The Government want sectors o fall into line with TECs, which were barely developed at that time.
The third condition is important:The use of levy funds directly to subsidise training provision and the industry's YTS schemes should be rapidly phased out.Finally:More small firms should be given protection from the burden of levy.Political ideology permeates Government thought on the future of sector initiatives. Voluntarism or the market model are all-important, and any other consideration, especially a practical one, must play a secondary role.
In a Department of Employment press notice on 9 November, the right hon. Member for Sutton Coldfield (Mr. Fowler) outlined his views of the future of the CITB and its construction section. He said:In two sectors I have accepted the strong arguments of employers that statutory arrangements should continue for the time being. But this does not shake our belief'—not practical training considerations, but "our belief"—that a voluntary approach offers a better, long term solution to meeting industry's own training needs.There is not an iota of practical evidence to back the right hon. Gentleman's "belief'. Will the Minister say what evidence the Government have to sustain that view?
The right hon. Member for Sutton Coldfield continued:I have told the two ITBs concerned that we shall be carrying out a searching review in about three years time to see if statutory arrangements are still necessary.The sting in the tail followed:At present I am minded to think that they too should move to an entirely voluntary basis.The simple logic is breathtaking—a belief with no evidence to back it. In effect, the right hon. Gentleman was saying, "We shall have a searching review, but we have made up our mind, so for three years do what you wish under the conditions we impose but after 1993 your time will be up."
There is more practical and compelling evidence of the Government's intention to wind up the CITB. They have encouraged sectors such as heating and ventilation, plumbing and electrical contracting to remove themselves from the scope of the CITB. Under the order, they have increased the exclusion threshold from £10,000 to £45,000 and have refused to allow the payroll levy to be set higher than 0–25 per cent. A Labour Government will undertake not a political but a positive review of sector initiatives and of the non-statutory training organisations.
Those changes have dramatically reduced the CITB's income, in addition to the more general cuts in funding of youth training and employment training. The CITB is being forced to spend more than it receives each year, and its reserves are being eaten away. For the year ending 31 March 1990, its income was £167.6 million, but for 31 March 1991, its expected income has been cut to £125.2 million, with levy income cut from £74.4 million to £59.6 million and income from YT cut from £83.9 million to £52.39 million.
For the year 1989–90, the CITB had a current account deficit of £1.46 million, but for the year ending 31 March 1991, the estimated deficit is. £14.465 million. Over the next two years, it expects to receive even less income in levy and Government funding for YT. The CITB has to assume a budget deficit of more than £10 million for each of those years. That amounts to a budget deficit of more than £35 760 million in just three years. The CITB's total reserves were £74.5 million as at 31 March 1990. It is clear that the Government are forcing the CITB to spend all its reserves as a way of helping the wind-down of that organisation.
On 13 February, in the CITB's news release, the director of training, Douglas Shaw, was reported as saying:Forecasts of an annual deficit of between £10 million and £11 million in each of the next three years and a consequent fall in the Board's reserves make it necessary to look closely at both the nature of training and the level of support for each category.There is a clear implication that income is falling because of levy changes and massive cuts in YT and ET funding. The net consequence is that the board uses its reserves, which will last for a finite time, or it cuts the volume or the quality of training or it cuts both.
Obviously, the Government are putting the CITB in the worst of all worlds—it will not be able to satisfy construction employers, because expenditure is declining, and it is risking its reserves simply to maintain current expenditure levels. I hope that the Minister will comment on the financial difficulties facing the board as the Government's policy unfolds over the next two to three years.
It is crucial that we consider all those aspects against the background of the crisis facing construction training programmes. Before the recession, the biggest problem facing construction was skills shortage. The Reading university centre for strategic studies in construction, in a report called "Building—2001", estimated that the annual skills shortfall in construction could be as high as 50,000. The CITB annual report for 1989–90 shows that the shortage of school leavers was undermining training even further. Numbers on the CITB's two flagship training schemes, the YTS and the electrical contracting industry scheme, were down by more than 2,000 on the previous year. A total of 22,453 people started on those schemes in 1989–90 whereas a year earlier the figure was 24,621.
News comment last year also painted a bleak picture of what was in store for new entrants to the construction industry and YTS. An article in The Independent of 8 June 1990 stated:The biggest youth training scheme in the country, involving 37,000 construction trainees, is under 'fundamental review', which could lead to severe cuts or even closure.That was dramatic news at that time, but it is now clear that the number of apprenticeships has slumped. The number of new entrants next year will drop by about 7,000 compared with the number this year. Obviously, all these financial and political pressures are having a direct result on the volume and quality of training.
If this is the skills revolution about which the Government constantly talk, we should like to know how the Government can spend less, force the boards to spend less and affect quality and volume. The CITB is forced to work on the assumption that it will train even fewer entrants in the next two years. In 1991–92, the CITB is estimated to be training only 17,000 new entrants. Further evidence of training cuts comes from figures published by the National Joint Council for the Building Industries, which oversees the building industry's 8,400-strong apprenticeship scheme. That organisation says that the number of apprentice registrations is dropping drastically compared with previous years.
It would be bad enough if the industry was facing only a skills crisis. The Building Employers Confederation's 761 most recent quarterly state of the trade survey, published in February 1991, shows that training is likely to suffer badly in coming months, but it also shows that 53 per cent. of building firms experienced a cut in output, in the last quarter of 1990. Sixty-seven per cent. of the top 20 national contractors reported a cut in output, and 50 per cent. of firms reported a cut in inquiries for new work. The BEC has also estimated that 100,000 jobs in the building industry could be lost by the end of this year.
When the Minister opened this debate, he did not refer to the crisis facing the industry or to the fact that quality and volume training were being cut. Skills shortages stand at 50,000 a year, and the industry also faces the massive impact of the recession. Obviously we are far from having a world-class work force in the construction industry, but the industry has a great desire to work towards that objective.
This shabby tale of the Government's commitment to training in the 1990s raises several issues. The first relates to small employers. The Government are obsessed with the idea that small employers should be cut off from the reality of industrial life and from a fair contribution to training. Figures from the 1988 labour force survey and unpublished data from the Department of Employment computer show the problems facing small employers. Expenditure on training per employee in a company comprising 10 to 49 employees was 98p per hour. For a company employing between 500 to 999, the figure was £3.07. Expenditure per employee as annual costs for training for the firm employing between 10 and 49 employees was £19. However, for the firm with between 500 and 999 employees, the cost was £61.
Small employers need assistance, but the Government's logic is to exclude them. However, that places stresses and strains on the funding for the board's activities in training in general. The Government also do nothing practical to allow small employers to participate effectively in the skills training that a small company needs as much as a large company.
The Government's figures suggest that, instead of pursuing the political holy grail of voluntarism and exclusion, they should be taking a more positive look at the problems facing small employers in construction and elsewhere and then providing some practical solutions. It is evident that small employers face difficulties, but the Government, for political reasons, turn a blind eye to them.
This shabby tale also raises questions about training and enterprise councils in relation to sectors. The engineering industry training board which claims a lead in the industry, was very critical of TECs in an article in the Financial Times on 24 January. It was critical because it thought that the TECs were in danger of creating alternative and inconsistent standards in relation to national vocational qualifications.
However, a much more telling criticism of the Government's approach to sectors vis-a-vis TECs appeared in the March 1989 quarterly published by Incomes Data Services Ltd., which read:This is the argument coming strongly from several industries at the moment, notably the Chemical Industry Association which established one of the more successful non-statutory training organisations in the aftermath of the abolition of most of the Industry Training Boards in 1982. 762 Local emphasis, the CIA told a recent CBI conference on training, 'must not be allowed to override, dilute or prevent sectoral and national standards, must not step outside agreed sectoral and national policies and must not allow the loudest voice to fill the biggest local fist with most of the new local resources … TECs will only meet their local needs inside a coherent national framework … We see each TEC acting as an additional resource, as additional pressure point upon training and educational priorities, but not as a replacement for a sector's own local network'.That is industry telling the Government that their skewed priorities, which mean investment in TECs to the exclusion of sectors, are not something that British industry can support.
The Government must acknowledge that the Chemical Industries Association is responsible, powerful, efficient and forward-looking in dealing with the needs of its industry and, in particular, skills. If that is so, and we should let industry, which knows best, carry out that role, why do the Government never listen to industry? The answer is that they have closed minds and political prejudices. Time is running out for the Government to tackle the skills crisis before a Labour Government return to do so more seriously—[Laughter]
The third issue that I wish to raise amid the laughter and merriment from the sleepy Ministers is that of the non-statutory training organisations. When the Government were dismantling the statutory training boards in the 1980s, they also set up industry training organisations—the voluntarist arm of the sectoral skills initiative. But interestingly, on 26 February 1988, a study was undertaken, and a press notice issued by the Department stated:The research paper is the result of the first comprehensive review of the country's 102 Non-Statutory Training Organisations, which represent firms employing about five million people.It said that more than half—56—could be described as effective. It does not need a brilliant mathematician to work out that that must mean that nearly half were, by definition, ineffective. The caveat was thrown in that some organisations were being reorganised and so could not contribute to the survey.
If that is successful voluntarism, will the Minister say why the new experiment has, in many cases, been such a magnificent failure—so much so that, on 24 January 1991, a mere three years later, a major research project to examine the effectiveness of the national network of sector-based industry training organisations was announced by the then employment Minister?
The Government stumbled into one change which, for political reasons, could never work. Therefore, three years later, after a report had told them that half the organisations were ineffective, a major review is undertaken. I hope that the Minister will consider the need not only to review the NSTOs, but to review positively the work of the construction industry training board so that it can be assured of a future beyond 1993. The lack of certainty in its work is causing immense problems.
The fourth and most important issue that the Government have failed to address is that of economic performance and productivity. Every study that compares Britain with Europe comes up with two broad conclusions. First, our European competitors have sector initiatives that are strong and employer-led, but that also have Government support. There is a relationship between all the partners, including the trade unions and the providers.
763 Secondly, it is clear that every other country in Europe has a better and more consistent record of improved productivity than we do. The Government may respond and say that, in the early 1980s there was a massive shake-out of labour, restrictive practices were removed and there was an increase in productivity. But where is that productivity miracle now? It cannot be delivered through training and enterprise councils or through a company's specific training. Until we establish a better base for foundation skills for 16 to 19-year-olds, it cannot be achieved through that mechanism. It can be done through supply side initiatives in sectors. Whether in engineering or construction, it is clear that productivity is linked to supply side initiatives.
The Government are throwing away an excellent opportunity to tackle the long-term productivity problems, increase output per person and reduce unit costs. That is the key to this country's success in the 1990s. Through sectors, skills and leadership, we have the opportunity to make better productivity improvements than we have at present. On small employers, TECs, NSTOs and economic performance the Government are guilty of ignoring reality, best practice in Europe, and the growing consensus in British industry about the way forward.
I urge the Minister to extend the remit of NSTOs and to consider a secure future for the Construction Industry Training Board and the construction section of the engineering iindustry training board. The Government should take on board the idea that sectors should have a status similar to that of TECs. Both are urgently needed and both are part of our industrial and training strategy for the 1990s, but they are complementary. One cannot survive without the other. Obviously, the enhanced status for sectors will mean that they will become an important part of the debate rather than, as at present, being regarded by the Government as a Cinderella.
Thirdly, in public policy terms, we must get away from the simplistic "politics first, voluntarism" first attitude to statutory provision. If industry says that we need change, will the Government listen? If there is a consensus on a way forward, will the Government listen? Surely we do not need an over-prescriptive Government allowing a statutory board to continue and then setting limits and parameters within which it can operate. Is there not a balance or flexibility so that we can allow industry to work with Government to achieve the best for its sector, in the interests of its sector, and not be tied by the over-prescription that we constantly see?
Fourthly, will the Government reconsider the fact that they have marginalised the employee part of the partnership? Where in this country can we find the ideal that other European countries have? We do not have it. Obviously, unless we can bring in employee representatives in a more positive way, we shall make little progress.
I do not expect for a minute that the Government will take on board any suggestions that we make, but it is clear that, if the Government will not attend to the skill needs of the nation, we certainly shall. In the remaining few months until there is a Labour Government, it is incumbent on the Minister to take seriously the issues that the Opposition raise.
§ Mr. Michael Latham (Rutland and Melton)
I shall speak for only a couple of minutes, and I shall do so on the basis of having worked directly in the construction industry since 1967 and having been a director of a member firm of the Building Employers Confederation, for which I also worked directly for six years. Therefore, I declare an interest as a director of a large construction company which pays levy and receives grant as a result of training.
The strictures of the hon. Member for Fife, Central (Mr. McLeish) were grossly exaggerated. It is ridiculous to suggest that the Government were not listening. My hon. Friend the Under-Secretary of State has made it absolutely clear that the Government were minded to abolish the construction industry training board a couple of years ago and that they listened not only to the industry but to a considerable number of the hon. Gentleman's hon. Friends. In particular, they listened to my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham). The training headquarters of the construction industry training board is based in Bircham Newton, which is in my hon. Friend's constituency. My hon. Friend the Member for Norfolk, North-West has done an outstanding job in defending the interests of his constituents and raising these matters with Ministers. I pay tribute to him.
Having worked in the industry for many years, and still working in it, I know that the board is absolutely essential to the industry. Despite the continual use of the expression "the construction industry" by the hon. Gentleman and many other people, there is no such thing as the construction industry, except as an overall expression. There are a large number of different industries and different trades within it. Some of them do absolutely no training. The private house building sector, for example, has hardly any apprentices. The vast majority of the work that takes place on house building sites is sub-contracted to labour-only gangs and self-employed men. It is an extremely efficient system but not one which produces many apprentices. That is well known. The hon. Gentleman gave figures showing the declining number of apprentices. I remember giving exactly the same figures 20 years ago in discussions with Ministers at the time. The number of apprentices rises and falls according to the state of the industry; at present, the industry is in recession and is therefore taking on fewer apprentices. That is extremely regrettable.
However, in practice, if there were no construction industry training board and if there were no statutory levy—in particular, if there were no levy for labour-only sub-contractors, which is rightly set at the higher figure of 2 per cent. in the order—there would be virtually no training in the industry. People would continually he poaching each other's men; men would simply move from one site to another hunting the higher bonuses that are on offer, particularly when the industry is in good shape, which at present it is not. It is essential, therefore, to maintain the levy.
I do not accept the hon. Gentleman's strictures about the exclusion of the smallest firms. I agree with the Government that it is right, although I know that that view is not popular with many of the trade associations. As I said, I worked for one for six years. Quite apart from the administrative nightmare of trying to collect any levy from 765 firms that employ one or two men—or possibly no one at all—such a system would take us back to exactly the problems that we faced in 1969.
I do not know whether the institutional memory of the hon. Member for Fife, Central goes back as far as that, but mine does. I worked in the industry then—directly, at the Building Employers Confederation—and I was concerned with those problems. The board nearly collapsed then. It was Robert Carr and the incoming Conservative Government who saved the board and put it on a firm basis, just as the present Government and the present Minister decided to continue with it.
The basis for the salvation of the board by Robert Carr, then Secretary of State in 1970–71 was that it was agreed that it was ridiculous to continue to allow the very large companies—I am a director of one—to make a profit out of the board and the levy because they were training so many people in management and getting all the levy back and more, while small companies employing two or three people could send to be trained once a man whom they could ill spare off site and would then have to go on paying the levy indefinitely, year after year. My hon. Friend the Minister is quite right to exclude such firms from the levy, and I support him in that regard.
Let me stress to my hon. Friend, however, that construction is not like other industries. It has a mobile work force. It does not have fixed places of employment. Men move from site to site, and sites close, often after quite a short period. If we are to retain any training in the industry at all, we must have a board and we must have a levy. We now have an excellent board with a fine chairman in Cliff Chetwood and a new chief executive in General Wilmott. I wish it every success and I look to my hon. Friend to ensure that it has a good solid future.
§ Mr. Jackson
I thank my hon. Friend the Member for Rutland and Melton (Mr. Latham) for recognising that the Government have been flexible and have listened to the industry's arguments and taken into account the special circumstances pertaining in different sectors of the industry—hence the proposals that we are debating today. I agree with my hon. Friend that it is ironic that the Opposition should have chosen this of all occasions to denounce the Government for having ideological hang-ups about voluntarism. Perhaps the hon. Member for Fife, Central (Mr. McLeish) did not think deeply enough about the circumstances when he chose this occasion to launch his attack.
I welcome the hon. Gentleman's support for the CITB and for its work. I agree with him about it. I also welcome his endorsement of the new training and enterprise councils, although I rather regret the hon. Gentleman's tendency to attempt to set up an opposition between a TEC approach and a sectoral approach. As he said at one point in his speech, they have to be complementary. Arguments based on the premise that they are somehow rival approaches, which formed an element of the hon. Gentleman's speech, are ill founded. The TECs and the industrial training boards—the sectoral bodies—have complementary roles, and we must recognise that.
The hon. Member for Fife, Central rather ironically chose to make a strong pitch in favour of a compulsory 766 levy approach to training. This is not the occasion on which to debate the Labour party's evolving policy on training, although I assure the hon. Gentleman that we take his ideas seriously. We had an opportunity for an extensive debate about these matters only a few weeks ago. The Opposition signally failed to give the House the chance to consider their latest thinking. Opposition Members said nothing about their ideas about compulsory levies—it was Conservative Members who took those matters up.
The hon. Gentleman spoke of the Government's "perverted ideology" in favour of voluntary approaches. The argument about compulsory levies and their value is essentially a practical one based on what works best. The hon. Member for Fife, Central made great play of the experience of other European countries, but there is only one major one that operates the sort of compulsory levy system of which the hon. Gentleman was talking. The French have had considerable success in their training experience, but the majority of those who have examined the system reckon that their levy system has been irrelevant to it.
It is not as though we in Britain are without any practical experience of operating a levy system. We had one, under Governments of both parties, from 1964 through to the early 1980s. If the hon. Member for Fife, Central is right when he says that we do not have a world-class work force in the construction industry, the roots of that must go back to the 15 years when we had the sort of levy system that he considers to be a panacea which will solve all problems.
The Government's philosophy on training, as I explained when I replied to a recent debate on the subject, is to work with employers to improve the quality and quantity of training. That is the way in which we shall achieve the productivity improvements to which the hon. Gentleman rightly attaches importance. Most employers feel strongly that a voluntary partnership will work best. Where there is support for a statutory approach, as there is in this instance, we shall accommodate it. The hon. Member for Fife, Central should recognise the irony of the Opposition rebuking the Government for our attachment to voluntarism during a debate on a statutory levy.
§ Mr. McLeish
The Minister cannot have it all ways. The attack on the Government's form of voluntarism was based on their hypocrisy. The CITB was given a conditional reprieve. The Government were in the curious position of wanting to step back from interfering with industry while saying to the board, "Yes, you can operate on your own, but you must have more exemptions for small businesses and a low payroll levy. You must not use funds from the levy to invest in youth training." That is a curious form of voluntarism. We have argued that over-prescription will stem from the voluntarism that the Minister is preaching.
§ Mr. Jackson
The other great theme of the hon. Gentleman's speech was small firms, and I shall take it up. Before doing so, I express the view that he has not recognised the extent to which there has been consultation with the industry about the operation of the CITB. The decision to retain the principle of a statutory levy arose from consultation with the industry, as did the various reforms which have taken place within the board. The hon. Gentleman must not assume that every arrangement is 767 perfect. It is necessary to keep arrangements under review, and that is what we did. The consequences of that are the changes to and reforms within the CITB to which he referred.
The hon. Member for Fife, Central talked about the levy and the level of the CITB's income. Secondly, he referred to the small firms exclusion threshold. The levy of 0.25 per cent. was a matter for the board, and it was the board that proposed it. The income from it will be the same as that which would have been derived from a per capita levy. The hon. Gentleman spoke of the Opposition's plan for a further review, should they form a Government. I take from that the implication that the hon. Gentleman would intend to increase the levy. I can imagine the kind of welcome that that would receive from the building industry, which I hope will take note of what the hon. Gentleman has said—indeed, I am sure that some of my hon. Friends will draw its attention to the hon. Gentleman's remarks.
§ Mr. McLeish
There is no need for correction. The Minister has raised issues which were not discussed. No one suggested the imposition of a bigger levy. The important feature was that a Labour Government would conduct a positive review—not a political review. There is a significant difference between that, as a statement, and the logical development—as in the mind of the Minister—to the position that the Government have reached.
§ The Parliamentary Under-Secretary of State for Health (Mr. Stephen Dorrell)
A positive review results in a tax increase.
§ Mr. Jackson
As my hon. Friend says, a positive review results in a tax increase.
The hon. Gentleman cannot attack the Government for having fixed the levy at too low a rate and then attempt to deny the perfectly logical implication that it is his intention to increase the levy.
The hon. Gentleman made great play of the reduction in levy income. That was the other aspect of his argument, but he now seeks to imply that he does not believe that that income should be made up by increasing the levy, having made the point that levy income has been reduced. In fact, the reduction in the income is due to the reduction in the size of the coverage of the board due, for example, to the removal of various sectors. My hon. Friend the Member for Rutland and Melton recognised that the industry has many different sectors and aspects to it. That has been reflected in the changes in the scope and coverage of the CITB that we have developed. The board's total coverage has been reduced by 25 per cent., and that is what the reduction in income reflects.
It is ironic that the hon. Gentleman recognised the strength of the CITB's reserve position but did not seem to draw any conclusions from that about what would be an appropriate levy.
§ Mr. McLeish
The implication was that if the CITB continues to use up its reserves as it is doing at the moment, within a few years those reserves will have disappeared. The first question to ask the Minister is 768 whether that makes sense for a board which has substantial assets and wishes to retain them. Secondly, if there are cuts in youth training funding and in the income generated by the levy, will that not result in both the volume and quality of training being drastically cut in the next two or three years?
§ Mr. Jackson
The hon. Gentleman has a lot of explaining to do to the building industry. He wants to increase the levy—that is a reasonable implication of his remarks about its being too low—but he now says that the reserves should not be spent. It would be difficult to say to the building industry, especially in the present economic downturn, that a board with substantial reserves should maintain them—and possibly even increase them—while raising the levy that it imposes upon the companies in the sector. That is an unreasonable suggestion to make to the building industry at the present juncture, and the hon. Gentleman should reflect on that.
The hon. Gentleman's other main point related to the exemption of small firms. It was interesting that although the hon. Gentleman affected to be a friend of the small firms—"Give them a chance to contribute to the levy" seemed to be the tone of his argument—he wants to increase the burden on them. That is the logical implication of the proposition that the level for the exclusion of small firms has been set too high.
When we consider the small firms' exclusion from something like a statutory levy, we must ask whether the game is worth the candle. That was precisely the point made by my hon. Friend the Member for Rutland and Melton. The construction industry contains an impressive number of small firms. The most recent census of production shows 160,000 such firms, many of which are very small, as my hon. Friend knows the industry so well can testify. Indeed, 14,801 firms have payrolls of £15,000 or less, and 23,022 have payrolls of £45,000 or less according to the most recent census of production.
If the scope of the levy is extended as the hon. Gentleman would like, many thousands of small firms will be brought into the requirements. Policing them will be extremely complex, difficult and burdensome, and what would be achieved as a result? Although there are many small firms in the industry, the vast majority of its employees work for the larger companies. In fact, 10 per cent. of the firms employ 76 per cent. of the employees—and pay 73 per cent. of the levy. Those circumstances are reflected in the fact that the loss of income to the CITB from raising the small firms exclusion level from £15,000 to £45,000 is only £1.8 million.
The hon. Gentleman talked about stresses and strains on the budget as a result of the change in the exclusion level, but £1.8 million out of an annual total levy income of nearly £60 million does not strike me as being a major stress or strain. The House is obliged to set against that £1.8 million the savings in hassle and bureaucracy affecting many thousands of small firms which we shall achieve by raising the small firms exclusion level. The hon. Gentleman should reflect on that point.
This is a very interesting illustration of the dangers of the statutory approach that the hon. Gentleman favours. The danger implicit in any statutory approach is the extension of law-making, rule-making and bureaucracy. There is inevitably a tendency to focus on the statutory arrangements for their own sake, rather than to keep one's eye on the ball in terms of more and better training. The 769 way to keep one's eye on the ball in that respect is to win the co-operation of employers rather than to proceed as the hon. Gentleman suggests.
§ Question put and agreed to.
That the draft Industrial Training Levy (Construction Board) Order 1991, which was laid before this House on 29th January, be approved.