§ 10.9 pm
§ The Parliamentary Under-Secretary of State for Employment (Mr. Patrick McLoughlin)
I beg to move,
That the draft Industrial Training Levy (Construction Board) Order 1993, which was laid before this House on 9th December, be approved.I understand that with this it will be convenient to discuss at the same time the following motion:
That the draft Industrial Training Levy (Engineering Construction Board) Order 1993, which was laid before this House on 30th November, be approved.The proposals—[Interruption.]
§ Mr. McLoughlin
The proposals before the House seek the authority for the construction and engineering construction industry training boards to impose a levy on the employers in their industries, to finance the running costs of the boards and to fund their range of training initiatives, including grants schemes. Provision for that is contained in the Industrial Training Act 1982 and the orders before the House would give effect to proposals submitted by the two boards.
Both proposals include provision to raise a levy in excess of 1 per cent. of an employer's payroll. The Industrial Training Act 1982 requires that in such cases the propsals must be approved by affirmative resolution of both Houses. In each case, the proposals are the same as those approved by the House last year. They are based on employers, payrolls and their use of sub-contract labour. Both have special provision for small firms.
For the CITB, the rates are 0.25 per cent. of payroll and 2 per cent. of payments made by employers to labour-only sub-contractors. Employers with a liability of £45,000 or less will be exempt. The ECITB treats its head offices and construction sites as separate establishments and applies different levy rates, which reflect the costs of training particular workers. For head offices, the rates are 0.4 per cent. of payroll and 0.5 per cent. of payments to labour-only sub-contractors. Firms employing 40 or fewer employees are exempt. The rates for sites are 1.5 per cent. of payroll and 2 per cent. of labour-only payments with exemption for employers with a liability of £75,000 or less. In each case the proposals have the support of the employers in the industry, as required by the Industrial Training Act, and have the full support of the respective boards.
The House will know that the CITB and the ECITB are the only two remaining statutory industry training boards. Most other sectors of industry are covered by independent arrangements. The Government believe that, in the overwhelming majority of cases, independent employerled arrangements are the most effective. The House will be aware that the CITB is currently under review. This has, I know, given rise to much speculation and concern.
I hope that the House will be reassured when I say that, as in 1990, we have consulted widely with the industry about the effectiveness of the board and its current funding arrangements. I am not yet able to make a statement to the House about the board's future, but I can say that the results of that consultation will be extremely important in informing our decision. Although there is still some work to be done, I hope to make an announcement shortly. In 777 the meantime though, the operations of both the boards continue as normal. I believe that it is right for 1993 that the House should agree to approve the draft orders before it, and I commend them to the House.
§ Mr. Tony Lloyd (Stretford)
Given the crisis into which the Government and their policies have plunged the construction industry and training within it, it is staggering that the Minister should make such a brief speech.
I remind the Minister of the debate that he opened a little more than a year ago on a similar order for the construction industry training board, when the Prime Minister's meeting with a delegation from the industry in October 1991 was described. The delegation stressed the depressed state of the construction industry to the Prime Minister, who disagreed with the delegation's gloomy forecast of when recovery in construction would begin and said that he expected the industry to emerge from recession in the middle of 1992. Many people are still awaiting that recovery, including the hon. Member for Norfolk, North-West (Mr. Bellingham), who has a considerable interest because redundancies at the CITB have affected his constituents. Those redundancies have been made precisely because of the recession in the construction industry and the incompetence of the Government.
I should put the record straight: it was not the present Minister who opened the debate on the CITB in December 1991, but the then Under-Secretary of State, the hon. Member for Mid-Worcestershire (Mr. Forth), who said then that much progress had been made by the CITB. In a sense, he paid tribute to the way in which the board had restructured its operations and he said that new measures on training had been introduced to counter the effects of the recession. Nothing could have been further from the truth, because in the past 12 months training in construction has fallen behind the provisions made in previous years—in common with training in many other areas of economic activity.
The Minister has commented on the Government's view of voluntarism, but it is important to note that Sir Brian Wolfson, chairman of the national training task force, made it clear recently, to the great embarrassment of the Secretary of State and her Ministers, that he now supports levies for all industry, not simply for the construction industry, which has its own particular problems. He believes that those levies are necessary because voluntarism has been such an abysmal failure where it has been adopted.
He also made an outspoken attack on the Goverment's underfunding of the training and enterprise council system. That was hardly surprising when we note that between 1989 and 1990, the beginning of the present recession, until 1995–96—which is as far as Government projections go—there will have been a cut of 32 per cent. in real terms in Government funding for training. That reduction will be made before the present round of public expenditure cuts are imposed. Perhaps the Minister can enlighten the House as to whether more cuts will be made as a result, or can he guarantee that the training budget will be maintained at its present level?
My guess is that the Minister will not be able to tell us one way or another, because the last people to be consulted on the training budget will be Ministers at the Department of Employment, who have failed abysmally to protect that 778 budget. [Interruption.] The Whip may groan, and I should be more than happy for him to break our conventions and debate this matter with me: he is part of the incompetence surrounding those on the Treasury Bench and it is right for him to take some interest in what is going on.
The construction and engineering industries are virtually unanimous in their opposition to voluntarism. In common with Sir Brian, they do not believe that it represents a useful way forward. Many people now believe that it is time for the reviews of the CITB to be put to bed. It is disgraceful that the Minister should come to the House tonight and be unable to tell us where that review stands.
The present remit of the CITB will expire in April this year and if I were the hon. Member for Norfolk, North-West, I should be extremely concerned about the future of my constituents who work for it. I know from that hon. Gentleman's previous endeavours on behalf of his constituents that he is not afraid to criticise the Government for their incompetence regarding the board's operation and their general lack of enthusiasm for what it tries to do.
The Minister should also note that an announcement from his Department stated that a government decision on the future of the CITB would be made "early next year". That was the comment of Mr. Jim Wiltshire, head of the Department of Employment's training division. He went on to say that, in that context, "early next year" meant January, rather than later in the year. I do not consider a date in February consistent with that. When exactly will the Minister allow the training board to know where its future lies?
It is not the board's apologists who are frustrated: the Building Employers Confederation, for instance, has said:frequent reviews have a destabilising effect on training and staff morale.The federation is right. The message is coming through loud and clear from the whole construction training side: morale is indeed at a low ebb, because people are not certain of their future. We need an industrial training board that is committed to getting the best out of the industry. Given the absence of a partner in government to help to obtain that best, the current frustration is understandable.
I should place on record the fact that, although I have prayed in aid of the Building Employers Confederation, it has been critical of some aspects of the CITB. It is certain, however, that a statutory training board and a levy are needed. The confederation's view is now shared by many other organisations. The plant hire firms, whose support for the CITB has seemed a little suspect in the past, recently stated that, if the present levy ended, there would bea rapid collapse in training, with less responsible companies poaching trained operatives off those who have invested in training.Of course, the whole rationale for a levy system—not just in construction, but across the board—is the fact that poaching is what good trainers fear that bad trainers do. No Minister has been able to provide an answer for that.
It is time that the Government came clean. Do they intend to abolish the levy system and the board in what might be called an ideological spasm? The Department has failed to come up with its own ideological offering on the alter of failing Thatcherism. A reluctant Secretary of State for Transport has introduced a Bill for the ludicrous 779 privatisation of British Rail, for a number of silly reasons. Perhaps the Parliamentary Under-Secretary of State for Employment wants to go down in a blaze of glory as the man who finally got rid of the training boards.
§ Mr. Lloyd
Indeed, we do not know what will happen to him as he leaves the building.
Both training and construction itself are now in crisis. Between 1988 and last year, the number of housing starts fell by 36 per cent., and output generally fell by 12 per cent. It should come as no surprise to learn that, over the same period. there was a massive reduction in the number of people employed in the construction industry. Even in the one year between June 1991 and June 1992, there was a 12 per cent. cut in the number of employees in the industry, and a 10 per cent. cut in the number of self-employed. That amounts to a staggering total of 174,000 job losses in that industry in a single year.
The Minister and his colleagues should be ashamed of themselves for allowing that to happen at a time when millions are out of work. Many of the people between 16 and 24 who are currently unemployed—nearly a million —are desperate to obtain employment training in the construction industry; there is a desperate shortage of skilled operatives in the industry, and a desperate shortage of decent quality housing stock and other buildings. For economic, social and human reasons—even to get the Government off the political hook on which they have hung themselves—we ought to train people in construction. Instead, the Government's inaction has led to the rundown of the industry and the rundown of training. That is the charge to which the Minister must respond at some point.
In 1989, the last peak for the construction industry, there were some 81,000 apprentices. By 1992, the number had fallen to 59,000. That is a dramatic reduction. We know that in 1990–91 the CITB was supporting 14,000 construction trainees. By 1991–2, that had dropped to 10,500. Last year, the number was down to 8,500. So even the Government's own schemes have fallen off dramatically.
In the Government's much vaunted youth training scheme, the claims for which are that the youth guarantee works—the Minister and I know that it does not—were it not for the 2,000 places that the CITB is propping up, the Government would look even more embarrassed. Twelve thousand organisations disappeared from the CITB register in one year alone—12,000 building organisations went to the wall because of the crass incompetence and stupidity of the Chancellor and the Conservative Members who support him.
The construction industry has collapsed, and so has training. The Government have been criticised by many of the most senior and eloquent people in the industry. In recent months they have been severely criticised by the big operators which have contracted with the training and enterprise councils to organise adult training: Wimpey, John Mowlem, Henry Boot and Jarvis specialise in the retraining of adults but fear that the cash will not be 780 forthcoming from TECs to continue with this type of training. The chief executive of the east London TEC, Ian MacKinnon, has said:Whether we can continue to justify current levels of construction training we shall just have to wait and see. We must respond to market conditions.He is not talking about whether we need skilled operatives; he is talking about whether there will be enough money in the TEC budgets to allow them to go in for this relatively expensive form of training, not the cheaper options to which TECs are being driven. The Minister must respond to the charge that the underfunding of TECs will mean a lack of skilled people working in construction.
§ Mr. Den Dover (Chorley)
The hon. Gentleman has asked the Minister a great many questions, but he has not said whether his party supports the continuation of the construction industry training board. Will he be a bit more positive and praise its efforts so far, and explain why his party supports the board's continuation, if indeed it does?
Does he not realise that it is impossible for the Government to create these jobs? If there is a market, with low interest rates and with growth in the economy, building will take off. We expected it to do so last year and this year, and one day it will happen.
§ Mr. Lloyd
Conservative Members may have been expecting that, but we have not. We have said that the wrong Chancellor is guaranteed to produce the wrong results. The green shoots of recovery never appeared. That was true at the time of the last election, when the hon. Gentleman went around his constituency claiming that the Conservative Government would not have to cut public spending, that the social programmes would be kept intact and that there would be no tax increases under a Conservative Government. In the light of this afternoon's statement and of other events, that argument is no longer sustainable. The Government have failed the economy and the construction industry. They have sat on their hands and allowed the economy to go down the pan, and they are guilty of allowing the construction industry to go down the pan, too.
The hon. Gentleman invited me to say some kind words about the CITB. I do not come here sponsored by anyone. I come here to advocate the case for better training. I shall have something to say about the CITB in a while. We must not allow the debate to turn on the narrow question of whether the Government can claim that they are doing something worth while. Their record in training and construction is pathetic. I know that the hon. Gentleman is interested in this; he has taken part in these debates for a good number of years and I remember debating these matters with him many times. I hope that he will tell the Government precisely what he thinks about their failures and not allow them the easy ride so often allowed by Conservative Members on such important issues.
As I have said, there has been a gross failure to train, and 174,000 people disappeared from the industry in one year. From the height of employment in construction to its present depth, the most recent Government figures show that nearly 400,000 people have disappeared from the industry. In truth, the figure is much higher than that, because the Government under-records those who disappear and there is not an exact picture. Probably 500,000 people have been lost to the industry. That is a great waste of the skills and talents of people who have been trained in the past using public money and by means 781 of the levy system. That those skills have been allowed to dissipate is a cause for great shame and shows the monumental stupidity of the Government and others responsible.
The general view in construction is that many of those who leave the industry never return. It is certain that massive skill shortages will begin to appear early in any upturn in the industry. Last year, the industry was pressed harder than for many years. The IFF survey, ironically sponsored by the Department of the Employment. was called "Skill needs in Britain—1992". IFF describes its activities as "thoughtful research in British markets". Even in 1992, some 9 per cent. of firms had hard-to-fill vacancies in the previous 12 months. Even in the middle of a Government-inspired recession, some firms have skill shortages that they cannot easily put right. That shows that insufficiency of present skills training.
§ Mr. Nicholas Winterton (Macclesfield)
I entirely endorse the hon. Gentleman's view about the desperate state of the construction and allied industries. Does he agree that the orders should be passed so that the levy may continue for the lifetime of the existing board? There is great diversity of companies within the construction industry. Does he further agree that we need to get the right formula so that the structure of training meets the needs of all sections of the industry? I worked for many years in construction plant hire, and I declare an interest in that for many years I have been the parliamentary adviser to the Construction Plant-hire Association. Training must reflect the interests of all parts of the industry.
§ Mr. Lloyd
It is an interesting speech, with which I have considerable sympathy. In the past plant hire firms have criticised the CITB, but they are strongly on record as saying that they wish the CITB to continue and the review to conclude that there is a need for a levy. They said:If the present levy were to end there would be a rapid collapse in training with less responsible companies poaching trained operatives off those who have invested in training.I agree with the CPA's comments to Government and others. It is about time the review ended, because it has dragged on for far too long. There may be questions about the organisations of training, but it is about time the Government concluded their deliberations with the private sector.
The Building Employers Federation has said that the CITB is too remote from the industry and needs to talk more to employers. We would say that it needs to talk more to employees as well. There must be more than lip service because major issues such as the industry's appalling health and safety record need to be addressed. That can be done only by involving both sides of the industry in the kind of partnership that we advocate.
The Minister has told us that, even after all those months and his departmental officials telling us that there would be an announcement by the end of January, we must still wait to have our uncertainty ended. That is ridiculous when training in construction is collapsing, and the future of the nation is being put at risk by the indolence and incompetence of Ministers.
I am never sure that I do the hon. Member for Macclesfied (Mr. Winterton) any favours when I say that 782 I find in these debates that he and I have far more in common than he has with those on his Front Bench. I will pay him a little tribute by saying that that is because he seems to care, and to think, about the issues. Would that we could see some sign of that among those on the Government Front Bench.
Even last year, a significant number of firms said that they had hard-to-fill vacancies. Two years before that, when we were already well into the recession, 44 per cent. of firms in the construction industry reported that they had hard-to-fill vacancies over the previous 12 months. We know that we do not need to move into a time of boom for skill shortages to emerge, but simply into a time when we are in a recession that is not quite as severe as this. That is what happened two years ago, and the frightening thing is that, since that time, the industry has probably lost 250,000 workers, or perhaps even more.
If the Minister can explain to me, or to any hon. Member, in a believable way, why we can take on trust his assurance that there will not be skill shortages when the recession finally bottoms out, he must know things way beyond what any intelligent commentator on the industry knows.
We need something simple—a CITB that is structured in a way that suits the needs of industry, and that is a matter for negotiation. Obviously, the Government are a central play, as are the industry and the board. We cannot allow matters to drift. For example, the CITB should not be raiding its assets, as it has been for several years, because the Government have chosen to make it operate in that way. We know that, in every year since 1988–89, the CITB has operated in deficit. It spent more than £4 million above its revenue in 1988–89, £1.5 million above in 1989–90, £7.7 million above in 1990–91, £4.1 million above in 1991–92 and a staggering £20.7 million above in the present year of 1992–93.
The Minister has to think how long the board can carry on doing that. Because of the decline in the industry, the levy has fallen in the past three years from £62.8 million to £54.2 million. If the board is to continue to train at the levels of the past year, it can do so only if it continues to raid the assets that it has built up over the years, and there is a limit to how long that can go on for.
At the beginning of the debate, I said that the previous Minister had talked about the success of counter-recessionary policies. The simple reality is that while the CITB has been trying to play its own role, when it operates on its own, it does so against such tremendous odds that it cannot possibly generate the necessary levels of skill in the construction industry. The Government must accept that it is time that they did something.
Another dilemma faces the construction industry, and I hope that Tory Members will take serious note of it, because it is not trivial. When the Department of Education changed the basis of the funding of colleges of further education, it threw a little bombshell into the structure of training in the construction industry. At the moment, the Building Employers Confederation is lobbying the Government on that issue, because it is fearful that the funding mechanisms will mean that college principals and managers will decide to withdraw from construction training because it is expensive compared with courses in, for example, the liberal arts and languages —and I do not mean to denigrate those disciplines.
Roger Elford of the confederation has said: 783There has got to be a funding mechanism which gives the colleges an incentive to mount expensive course like construction.That was made clear to me two weeks ago when I visited a college of further education. The head of the department who was responsible for construction said that he was having to consider carefully whether he could justify the continuation of construction courses because of the high fixed capital costs and high running costs which stemmed from the need for materials. He stressed that he could run cheaper courses that were much more revenue generating.
I know that the Departments of Education and of Employment do not talk to each other, but it is about time that the Minister took a short journey and told his ministerial colleagues at the Department of Education that things are going seriously wrong. Those are not my words alone. They are echoed, for example, by the Building Employers Confederation, which is seriously concerned at the collapse of construction education in colleges of further education. It is a recorded fact that the CITB depends heavily, as does the ECITB, on the courses provided in FE colleges. The collapse of the course is not trivial. We know that the numbers of students signing on for such courses are down on previous years. The Minsiter must say what he intends to do about that.
I agree with the hon. Member for Chorley (Mr. Dover) that I have painted a grim picture, but it happens, unfortunately, to display the truth. It spells out clearly that the Government planned on the basis that the recession would be far shorter than it has proved to be. In other words, they were disastrously wrong. When it became clear that the recession would continue for longer than had been thought, they refused to listen. They refused to take the necessary policy decisions. Even now, the Government are refusing properly to fund training generally. We know that the cuts in the overall training budget have increased by about a third over a few years.
We need a Government who are committed to training. We need also a Government who will commit themselves to the CITB to ensure that there is a properly structured training board for the construction industry, and the same applies to the engineering construction industry. Unfortunately, the Government will not adopt that approach while they pretend that there is no problem.
When there is an upturn in the construction industry, we shall face a horrendous problem. We shall have a balance of payments difficulty greater than that which we already have on the construction account, and that is becoming a serious matter. If we are to have a construction industry of the size that we need, we shall have to import skilled labour from outside Britain. That would be ridiculous and untenable. The hon. Member for Chorley shakes his head. He must come up with something better than that. We know, unfortunately, that training has declined. Where will the trainees come from? From where will skilled construction workers emerge? If the present circumstances are allowed to continue, we shall not see those people.
Exemption has been criticised by many groups over the years. The Federation of Master Builders has stressed that every company benefits from the CITB and that every company should contribute to it. It has made it clear that the good trainers face poaching by the bad trainers. There 784 is the anomaly created by the fact that those below the £45,000 payroll cut-off point are in competition with those just above it, which leads to unfairness.
We know that voluntarism does not work. There is evidence that in every industry throughout the country training has been cut to a greater or lesser extent in the middle of the recession. There has been a levy system in the construction industry, but the cuts have been massive.
§ Mr. McLoughlin
The hon. Gentleman has told us where he thinks the Government are going wrong, but he has not said whether he would increase the levy, or what the general levy for training would be if the Labour party had its way.
§ Mr. Lloyd
The Minister may not be aware—I sometimes doubt whether he does know this—that it is up to him and his colleagues to come up with practical and workable plans for training. The Government have deliberately chosen to underfund training and have refused to play their part in partnership with others in the industry. If Labour were in government, we would listen carefully to those in the construction industry who are saying that the levy is too low, that it does not allow those who want to train to do so adequately and that more needs to be done.
The income of the CITB has dropped dramatically. The Minister must come up with better answers than simply asking me what we would do. But I make this offer to the Minister: if he is prepared to accept cogent advice from the Opposition, we are prepared to help the Government by telling them how to run training. They have made such a disastrous mess of construction that future Labour Governments will inherit the skill shortages caused by their crass policies. There can be no graver indictment of the Government than that.
Of course we are in favour of the order. We shall not divide the House: half a loaf is always better than none. But I make it clear that this half a loaf is sabotaging the long-term future of the country.
§ Mr. Andrew Bowden (Brighton, Kemptown)
I immediately declare my interest as a consultant to Ewebank Preece, which is the 13th largest firm of consulting engineers in the country. It is based in Brighton and employs a significant number of my constituents.
In 1989, only the Engineering Construction Industry Training Board and the Construction Industry Training Board kept their levy-raising powers, because, it was argued, of the mobile nature of their work forces. If that was intended to apply to mobile workers, it surely was not intended to apply to consultants, who are not in the same category. That is backed up by a letter than was sent by the Association of Consulting Engineers to a member of another place. It said:The training funded and organised by the ECITB is mainly at craft and technician level and very little of it is relevant to the majority of employees of consulting engineering firms.In 1989–980, Ewebank Preece's levy was waived. In 1990–91, it was faced with a levy of £70,000. It is now contesting the levy. In 1991–92, under the new formula, the figure is £8,000.
§ Mr. Bowden
Eight thousand pounds.
It seems that Ewebank Preece is being forced to pay the levy when other comparable consultants are not. This raises important points. It means that Ewebank Preece is in an unfair competitive position not only in relation to the levy but in relation to other costs. The preparation of the levy, the staff and the management time involved runs into considerable sums.
The Minister will recall that I tabled some parliamentary questions to find out who pays the levy. The information was not forthcoming. Why? Is it a state secret so that the House, the industry and the public cannot know who pays and does not pay it? On what conceivable grounds can my hon. Friend justify keeping that information secret? I suggest that a list of all the payers should be published because Ewbank Preece is convinced that many comparable consultancies are paying no levy. The company cannot be absolutely certain, but it would be fair and right if all the names were in the public domain.
What about the future? I know that the Minister cannot change the orders that we are discussing, but will he re-examine the White Paper published in December 1988, entitled "Employment for the 1990s"? On page 36 it states:The Government will, therefore, now enter into consultation with each of the statutory Industry Training Boards and organisations representing employers in their sectors with a view to drawing up an agreed programme and timetable for becoming independent, non-statutory bodies.That was published in 1988, but not much has happened since then with regard to the two training boards that we are now discussing.
I suggest that next year my hon. Friend should consider alternative arrangements, such as using the training and enterprise councils to a greater extent. I believe that the TECs have been allocated funds well in excess of £2 billion for the coming financial year, so, perhaps a little extra for them to carry out that role would be the way to proceed. I hope that I have proved to my hon. Friend that the present situation is not as appropriate and fair as it should be. If so, we could ensure that the money for industrial training was used more effectively.
§ Mr. Nick Raynsford (Greenwich)
The debate takes place against a background that, I think all hon. Members will agree, is disastrous for the construction industry. Estimates of the number of people who have lost their jobs in the recession range from the most cautious and conservative figure of about 400,000 to 500,000 or more. One cannot open the pages of the construction industry press without seeing each week a further record of firms going bust.
This week's edition of Building magazine—I declare an interest as an occasional correspondent—records that Clayton Bowmore, a building firm with a turnover of £15 million a year and 240 employees, went into liquidation last week. The article states that the banks were responsible for its collapse, as was the case for A. F. Budge and Lilley, two other construction firms which also went into receivership recently. That is a regular occurrence; every week we read similar depressing stories.
The implications have been devastating for the Construction Industry Training Board. The previous page of Building magazine contains an article recording the CITB's 1991–92 annual report, which shows that more than 1,200 companies which had paid levies to the CITB 786 in the previous year folded in 1991–92 compared with an average of 300 in the previous four years. As my hon. Friend the Member for Stretford (Mr. Lloyd) said, its levy income has been cut dramatically as a result of so many firms going bust in the recession. That is the grim context in which we are considering the order.
The construction industry is vital for the future of this country's economy. Many of us believe that it is one of the keys to bringing the country out of recession. Many of us argue that the Government have been far too slow to take effective action to stimulate recovery in construction. One obvious example is the accumulated capital receipts of more than £5 billion available to local authorities which could be used urgently to stimulate building work. Another is the rapid construction of the Jubilee line, which I know that some Conservative Members have advocated as strongly as I have. That line is vital both for transport communications in east London and for our construction industry. Many such projects should be got under way far faster.
Irrespective of our argument about the lack of energy shown by the Government towards encouraging construction, we can probably all agree that it is essential for this country that we have a properly skilled labour force if we are to come out of recession and be able not just to build the roads, the houses and the infrastructure projects we need but to compete effectively in an increasingly competitive international market.
Training and the skills shortage have been serious problems for the construction industry in Britain for far too long. Before the recession, it was estimated that two thirds of operatives in the construction industry had no formal training. The number of trainees registered with the CITB fell from 135,000 in the mid-1960s to fewer than 50,000 in 1988 before the recession. Since then, we have seen the dramatic fall in training to which my hon. Friend the Member for Stretford has referred. The number of youth trainees fell from 14,385 in 1989 to 8,500 in 1992 —a 40 per cent. reduction. Apprenticeship registrations are down by a similar percentage.
The report that the Department of Employment commissioned on the future skills needs of the construction industry sadly produced evidence at the end of 1991 that productivity levels in Britain still compared very badly with those of our European competitors. We must tackle that problem with determination. We need industrywide training if we are to succeed.
Anyone with a serious interest in and knowledge of construction in Britain knows perfectly well that a voluntary scheme will simply not deliver what is required. That view comes from people with a trade union perspective and from people with an employer's perspective.
The Building Employers Confederation is pretty adamant on the issue. It says emphatically:Training in the construction industry is made particularly difficult because of the industry's structural characteristics: its national coverage; the highly competitive nature of its work ; scattered sites; short-term work load horizons which limit firms that train; the preponderance of small firms; mobility of labour-intensive sub-contracting and self-employment; the wide and ever-changing range of skills needs; and health and safety requirements.Training has, therefore, to be nationally organised to national standards to meet the industry's needs. Collective funding is, thus, essential, and can only be effected through a statutory levy grant system which shares the cost of training and rewards firms that train.787If the levy is discontinued training will decline sharply, skill shortages will arise and productivity will suffer.Thus the industry view is that the levy system must be retained.Little could be more emphatic than that.
Bearing that view in mind, it is pretty depressing to record that the whole future of the CITB and the levy with which it finances its work have been in serious doubt in recent months. The Department of Employment review, the third in five years, has been dragging on, as my hon. Friend the Member for Stretford rightly pointed out. That has caused, in the words of the Building Employers Federation,de-stabilisation of…training policy in the industry.What a way in which to run training in the construction industry when the Government's rhetoric is that we are coming out of recession and when all hon. Members believe that we should be trying to come out of recession. We need a skilled, motivated work force to enable us to do that.
§ Mr. Raynsford
It is a job creation scheme for Ministers, who are shuffling paper around while they are undecided about what to do about the scheme.
It is time to put an end to that uncertainty. it is time for 788 the Government to put aside their foolish ideological hankering after deregulation and their suspicion of any collective action and collective ventures such as industrywide training. It is time for whole-hearted commitment to high quality training throughout the industry.
We need a Minister who will take the matter seriously; who will act with some urgency to reinforce training and to support training initiatives to give some sense of security to those involved in the process; encourage the achievement of higher standards; ensure an adequate level of funding for the levy; and see that the CITB is free from Government meddling for the next four years until the next general election.
I repeat the point made by my hon. Friend the Member for Stretford about the need to reconsider the small firms exemption, which has an extremely arbitrary cut-off point that provides for unfair competition for firms whose payroll and labour-only sub-contracting costs fall below the £45,000 limit.
We need a positive commitment, not the reluctant and half-heared, lukewarm attitude that we have heard from the Government Front Bench. We need to send a clear message that, if Britain is to come out of recession—the construction industry has a role to play in enabling that to happen—it needs a highly skilled work force, and that will be achieved only with effective industrywide training based on a proper financial arrangements.
§ 11 pm
§ Sir Michael Neubert (Romford)
Debates on the order are an annual event. They tend to follow the same form: a few introductory remarks from the Minister and a major contribution from the Opposition Front-Bench spokesman, eager to make his mark and to castigate the Government for every sin in the calendar. On this occasion, the hon. Member for Stretford (Mr Lloyd) spoke for 30 minutes of the 90 minutes available to us.
The contents of the order are largely unchanged, but the background against which we debate it does change. I concur that the background this year is the devastation in the building and construction industry as a result of the longest and deepest recession since the second world war. However, the idea that that is Government-inspired is absurd, and defies belief. That idea undervalues and minimises the effect of the contribution of the hon. Member for Stretford.
I am the parliamentary adviser in the House of Commons to the Federation of Master Builders to which reference has already been made. It represents small and medium-sized builders who have been particularly hard hit. The recession has naturally taken its toll. The FMB used to have more than 20,000 members, but its membership has now dipped below that figure.
Members do not have the accumulated reserves and the earlier expansive profit margins of the large contractors. They can hang in there for a year or two. However, when the recession enters its third year, as it has now, they start to go under.
The Government's stated policy, particularly in the autumn statement of my right hon. Friend the Chancellor of the Exchequer, is very welcome, with its promise of labour-intensive major infrastructure projects, which were mentioned by the hon. Member for Greenwich (Mr Raynsford), and the various forms of support for the housing market. However, the benefits tend to flow first to the major contractors and volume builders.
Work at supplier or sub-contractor level may follow from that afterwards, but only with a time lag. Small builders need work now. They are clinging on by their fingertips. None the less, the FMB fully supports the CITB and its statutory powers to raise a levy. It therefore supports the order. It believes in the supreme importance of training generally, in good times and in bad.
It is just as well that the CITB exists, because if the responsibility had been left on a voluntary basis, there would unquestionably have been a very sharp reduction in training—even sharper than has been the case. Small businesses that are under pressure will naturally look to cut corners and training would almost certainly have suffered as a consequence.
As it is, the CITB has drawn on £6.5 million of its reserves to embark on extra counter-cyclical training measures to combat the otherwise inevitable effects of recession. It has also worked closely with local enterprise companies and training and enterprise councils in joint enterprises to bring many millions more into play, as well as conducting its own grant-supported activity. That is to be welcomed and supported. Since our previous debate, I have had an opportunity of visiting its Norfolk headquarters in Bircham Newton, which is in the constituency of my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham), who hopes to catch your eye, Mr. Deputy Speaker, if there is time.
790 No one should dispute the vital work of the CITB. After all, support for training is an expression of faith in the future. Recovery will come; the only question is when. For all those who are engaged in the construction industry, it is long overdue. Estimates have been made of the numbers who are likely to have been lost by the time recovery comes. The figure has been put as high as 600,000 construction operatives. Many of them will be lost to the industry for ever. If massive inflation in labour costs is to be avoided, we must have sufficient skilled craftsmen in place when the upturn comes.
Despite what has been said so derisively, there were signs of recovery a year or so ago. When I was campaigning in my constituency of Romford, in every street there were "house sold" boards. On the very eve of poll, on a building estate I saw the sign "bricklayers wanted". I thought that that was a sure signal that the recovery was here. As we know, that recovery was snuffed out, and it is easy to see why, by the recession in the German and American markets, which are both major markets for us. When we have a worldwide recession, it goes beyond all sense to suggest that it is entirely the work of the British Government. That has no credibility with the British public, and that is why they re-elected a Conservative Government last April.
The missing ingredient seems to be confidence. Everything else is present. We have low interest rates, low price rises, low wage settlements, high productivity and a competitive exchange rate. They mean that the formula exists for recovery to come—we must believe that it will. Nothing could be more calculated to boost confidence in construction than to see another sign saying "bricklayers wanted". It is the purpose of the CITB and the Government to ensure that sufficient skilled operatives are available when demand returns.
The principle is strongly supported, but the burden of training costs is not entirely equitable. Many small and medium sized businesses in particular would prefer to see contributions from all without exclusion. I agree with the hon. Member for Stretford, amazing as it might seem to him and to me. Those with a payroll cost of £45,000 or less secure exemption from the levy. Although there is an understandable reason for that—the need to encourage small business to emerge and to survive—those with more than three operatives see it as yet another illustration of unfair competition. In good times, one quarter of 1 per cent. of payroll costs might not seem very much, but in times as hard as these it is just one more disadvantage to carry in cut-throat competition.
Those who are struggling to survive at the bottom end of the market in a recession find themselves being ground small by upper and nether millstones. Above them they have the large contractors muscling in on their territory —one example given to me was of a major firm, almost a household name, bidding for the conversion of a house into two flats—and below them they have individuals or groups of individuals operating very largely without constraint or obligation, sometimes legally, sometimes illegally, getting work by word of mouth or small advertisements in local newspapers.
Legally, businesses operating below the VAT ceiling, for example, can undercut those above by 17.5 per cent. That is likely to be a considerable sum. As times are hard for the consumer as well as for the builder, it is a very substantial disadvantage. Nowhere else in the EC is the disadvantage so great. Our VAT threshold is at the 791 maximum of £36,000. In Belgium, Italy and Spain the threshold is nil. Apart from Ireland, which has different rates for services and goods, the next highest threshold is in France, just over £7,000. That is a unique burden of disadvantage.
VAT traders can, of course, offset costs on materials, but cowboy builders these days turn up at the local DIY and are able to buy their goods so cheaply that it does not much matter to them. Illegally, small legitimate builders face unfair competition from the black economy, in which it is a case of cash down and no questions asked. That is especially resented.
The loss of VAT, income tax and national insurance contributions should be a major concern for Her Majesty's Government, and I am sure that it is. How much effort is being made to recover those losses of revenue through fraud? Such fraud is of acute concern to small builders who operate above board and who struggle to make a living for themselves and their employees. In one country at least, I have heard that it is a criminal offence for work to be carried out without proper documentation and evidence of the transaction.
Who can blame legitimate builders for regarding the training levy, relatively small though it is, as yet another burden which is not borne by their competitors? Therefore, the FMB would like to see the exemption from the levy abolished. Despite the disadvantages de minimis, an obligation on all builders would ensure the proper importance of training, especially in health and safety matters, from the start, would remove the element of unfair competition and, what is more, would bring more funds to the function of training.
§ Mr. John Spellar (Warley, West)
First, I declare an interest as a member sponsored by and political officer of the EETPU section of Amalgamated Engineering and Electrical Union. If it will not do irreparable damage, I should like to congratulate the hon. Member for Romford (Sir M. Neubert) on his speech. I am not sure that he drew the conclusions that the rest of us would draw, but on analysis he has clearly identified many of the problems facing the industry. That is not a way of saying that we alumni of Bromley borough council must stick together.
The hon. Member for Romford was speaking on behalf of an industry which is being sorely pressed. I am especially sorry that he did not share our expression of disappointment at the Minister's failure to make an announcement tonight. It is unfortunate, to say the least, that the Minister was not able to make an announcement about his decision on the future of the CITB.
Frankly, the matter has been dragging on for far too long. It is causing considerable concern not only to employees and those on courses with the CITB but to the industry, which obviously has to make plans slightly more than six weeks in advance. The failure to make an announcement tonight—although there had been hints that we might get something by using this debate as the mechanism—will only add to the uncertainty and gloom in an industry which has had more than its fair share of uncertainty and gloom in the past couple of years. Not 792 only can we look backwards at the gloom in the industry, but we can reasonably look forward to another year in which the position will get even worse.
The housing starts and the downturn in work for architects' practices show that this year could well be much worse than the preceding one. The Government must bear considerable responsibility for that. Reference has been made to that responsibility. I should like to respond to an intervention made by the hon. Member for Chorley (Mr. Dover)—I am sorry that he is not in his place. He seemed to minimise the Government's responsibility or opportunity to deal with the problems of the work load.
The hon. Member for Chorley should examine the civil engineering industry, which is overwhelmingly dependent on the work from utilities and from Government Departments. The Government have a clear role and an opportunity to operate in that industry. We should not ignore the Government's responsibility in the private sector, especially in housing. Much of the downturn in the housing industry has resulted from a policy which was clearly, bluntly and explicitly expressed by a previous incarnation of the present Prime Minister, as Chancellor of the Exchequer, in those famous words, "If it isn't hurting, it isn't working." As we have heard in the debate tonight, the housing industry is especially hurting.
What makes the Minister's failure to make a clear statement tonight so extraordinary is that the case for the retention of the board is widely supported by hon. Members on both sides of the House, and by employers in the industry and the union. On a slightly cynical note, I thought that possibly the problem was that the Government listen to employers only when the employers want to disagree with the union, but if the employers agree with the union, they feel that the Government suspect collusion and conspiracy.
§ Mr. Spellar
Yes, like check-off. If the employers agree with the union, somehow there must be something against the public interest. The position adopted in the rest of Europe is that the attitude towards the social partners is clearly understood and that therefore the Government's wish to work with them, rather than divide. Yet it is even more ironic that the major employers in the building industry are those to whom the Tory party continually trots for funds—that is when it is not going to Greek and Chinese millionaires.
The practical and realistic reasons which led the Government to retain the construction and engineering construction training boards when they disbanded others back in 1989 still hold true today. As my hon. Friend the Member for Greenwich (Mr. Raynsford) rightly said, taking a considerable chunk out of my speech, the reason is the inherent nature of the industry. It is not simply that the arrangements are temporarily convenient to unions and management. The reason is the basic nature of the industry. It is by definition short-term. Employers and employees move from project to project and site to site. The work force on those sites are in continual flux as one trade goes off and another comes on.
Those are the factors which led the Government to recognise those realities in 1989. It is simply unfortunate that they have not come to a speedy decision tonight. The need for the training boards has been widely articulated across the industry. The chairman of the Construction 793 Industry Training Board is Sir Clifford Chetwood. Apart from holding that role, he is a major figure in the industry in his own right. In his foreword to the annual report of the CITB, he stated the position clearly:It is therefore with some satisfaction I report that, by judicious use of reserves and by the application of a range of counter-cyclical measures"—perhaps Ministers remember those—
CITB has been able to maintain training at an acceptable level during this period of deep recession in the industry.He moved on to an area which, in the light of recent comments about being paid for working and so on, might strike a further resonance:The Board's Youth Training and other programmes have attracted over £35 million from TECs and LECs. In addition to this expenditure, CITB has provided grant support, amounting to almost £40 million, to employers who have undertaken approved training.Furthermore, on the development of the all-important qualifications for skills, he said:Our work on the development of NVQs has resulted in these new qualifications now being available…for 28 construction occupations.Reaffirming the industry's support, he said:
I am delighted that industry has, once again, confirmed its support for the policies and achievements of CITB by their strong consensus in favour of the statutory levy.Some doubt was expressed earlier about the attitude of the Building Employers Confederation, which, it is fair to say, represents mainly the larger employers in the industry. The hon. Member for Romford spoke substantially on behalf of the smaller and medium-sized employers in the industry. It might have been though that BEC could operate better on its own and more independently. It has stated clearly:
The Building Employers Confederation is strongly in favour of the retention of the Construction Industry Training Board and of the statutory arrangements for the collection of levy in the interests of maintaining a satisfactory level of training in the construction industry.It outlined some of the strong reasons why it felt that the CITB was an advantage to the industry. It pointed out the unique characteristics of the building industry, which have been mentioned several times in the debate, particularly the mobile nature of the work force. It also pointed out, as did Sir Clifford Chetwood, the ability of the CITB, which was probably better placed than many individual employers, to operate a counter-cyclical policy by investing the funds that it accumulated in good times to develop training in an essentially cyclical industry so that it had the trainees and skilled men available when industry picked up.
Furthermore, the BEC stressed the problem that has faced many industries—the poaching of skilled employees by companies which do not pay the levy. That has always been a difficulty for companies in engineering and so on, but it is of critical importance to employers in the building industry, again because the industry is highly mobile. Employers need to understand that if they undertake training they will not simply provide skilled workers for another firm which will pay an extra 50p or £1 an hour and attract those workers away. It is vital to the industry that that is not allowed to flourish.
The hon. Member for Romford effectively emphasised the need for all firms involved in the industry to be covered, so that some firms are not subject to unfair competition and there is a level playing field.
794 I shall not labour the point, but the BEC also mentions the problems that could be faced if there were any great dislocation of the industry, as many private providers of training could go out of business.
Finally, we must consider the number of youth training recruits who have been placed in the industry. Even in these difficult times, 10,000 youth training recruits have been placed in the industry this year. Those youngsters are being brought into the industry and provided with useful work, enabling them to envisage a potential future for themselves. As a result, the Government should seriously re-think. The Minister talks about an early announcement but time is ticking by. We are about six weeks away from the expiry of the Construction Industry Training Board, in April 1993. We need an early response from the Minister, and hopefully it will be a positive response to the debate.
§ Mr. Henry Bellingham (Norfolk, North-West)
We have heard a number of important contributions. I must first declare an interest because the headquarters and the main training centre of the construction industry training board is in my constituency, as is the civil engineering college. Not only does the CITB employ many employees in a remote rural area, but many trainees come through west Norfolk who spend money on goods and services in the locality, so it is a crucial part of my constituency.
The Minister is well aware of my views on the subject. There has been unanimous support from both sides of the House for the principle of the statutory levy. The arguments have been put most forcefully and I shall not repeat them, save to say that I wholly endorse the principle because without it the CITB would be unable to carry on in its present form, which would be a disaster for the construction industry, not least for the reasons about voluntarism suggested today.
Safety has been overlooked. There are still far too many accidents and injuries—and some fatalities—on building sites, but there would be many more without the very high standards of the CITB.
The hon. Member for Stretford (Mr. Lloyd) tried to goad me into rapping the Minister over the knuckles for not coming to the House with a firm decision. I should have been somewhat concerned at the lack of any announcement today, had I not already spoken to my hon. Friend the Minister on several occasions. I know him well and have great confidence in him. I am convinced that he has already made his mind up. He has not yet been able to cross the t's and dot the i's, which is why he cannot come to the House with a firm decision, but I have little doubt that he will come here shortly with a firm statement to say that the statutory levy will be kept and that the CITB will remain in place.
I think that the Minister realises that at the time of the last review the CITB was asked to do a number of things to satisfy the Secretary of State's requirements. It carried out a strategic review and I pay tribute to all the staff at Bircham and to CITB staff throughout the country who worked to the guidelines laid down by the Secretary of State three years ago and fulfilled the conditions that he insisted upon. I believe that all the conditions have been met. The CITB has worked hard during that time to fulfil the obligations placed upon it to modernise, so that it can be a leading training organisation as we move into the 20th century.
795 The board has done a great deal despite the difficulties posed by the uncertainty; the hon. Members for Greenwich (Mr. Raynsford) and for Warley, West (Mr. Spellar) referred to the problems caused by it. I can speak with experience about the uncertainty that has pervaded Bircham Newton in the past couple of years and particularly in the past few months. The board's staff are well paid, professional people who have made a commitment to west Norfolk by making their homes and raising their families there. They are concerned about their future and anxious that the organisation in which they believe should continue. I do not doubt that the Minister will soon make the decision to end that uncertainty.
When the decision is made to retain the statutory levy, and therefore to keep the CITB in its present form, I hope that the next review will not be set for at least four years. I hope that the cloud of uncertainty does not continue to hang over Bircham Newton. Although the board employs staff of the highest standards and sets standards which are admired throughout the world, it cannot be easy for the instructors to work in such a climate of uncertainty.
I hope that the Minister will be able to say that the CITB will not be subject to a review for at least four years. I am certain that my hon. Friend will make the right decision. Such a decision is important not only to my rural constituency, because many jobs depend upon it, but for the future of our construction industry. An overwhelming case has been put for the retention of the CITB. Our construction industry will lead us out of the recession, but to do so it needs the highest possible standards and the necessary skills. It will only retain those skills with the retention of the statutory levy.
I am grateful to the Minister for what he has said today. I am sure that we shall have to wait only a short time before he makes the final decision and I have little doubt that it will meet with widespread pleasure not only in the House but throughout the industry.
§ Mrs. Angela Browning (Tiverton)
I should like to draw the Minister's attention to one part of the industry which comes within the remit of the CITB—the plant and equipment sector, which was mentioned briefly by my hon. Friend the Member for Macclesfield (Mr. Winterton).
My hon. Friend will be aware that we have corresponded about a particular company in my constituency, a small business with three depots, the head of which is in Tiverton.
When the CITB agrees to give grants for training, it lays down certain criteria. The plant and equipment sector feels rather aggrieved at the fact that it has had to pay the levy, but has not qualified for grant. The criteria for eligibility for grant are that the training course should be related to the building and civil engineering industry.
The director of Howden Plant and Equipment Ltd., based in my constituency, has written to me as follows:
We do not feel that Non-operated Plant and Tool Hire companies such as ourselves should be subject to levy as we provide a service to the public and the Construction and Building Industries. We are not actually the 'Construction Industry' in the sense that the original CITB was set up to cover.That company has two trainees on block release and a mature fitter on day release. It pays their training fees and 796 also their full salaries while on that training. The company has been denied grant by the CITB and, to boot, is now subject to a fine of more than £1,100 for its proportion of the levy—yet no contribution from that levy went towards the training courses offered by that company.
When my hon. Friend prepares his review of the CITB, he should consider the plant and tool equipment sector carefully. As Howden Plant and Equipment states, it is a small business. Hon. Members have already mentioned the £45,000 threshold and its effect on such small businesses. Hon. Members will also appreciate that that small business, which has rightly sent its employees on the appropriate training courses for its sector of the industry, which has not received any grant aid from the CITB but which is still paying the levy and which has shown itself to be a responsible employer, still feels that it is being penalised because of its statutory obligations.
I hope that my hon. Friend will take that message on board when he comes to the House to give his decision on the review of the CITB.
§ Mr. McLoughlin
Hon. Members on both sides of the House have shown great interest in the CITB tonight. If I cannot give a full answer to, in particular, my hon. Friends the Members for Tiverton (Mrs. Browning) and for Brighton, Kempton (Mr. Bowden), I shall write to them in due course about the specific problems that they raised.
I am amazed that Opposition Members should complain about the time that we have taken over the review. The Labour party has seen quite a number of reviews over the past few years. First, there was Lord Callaghan's review of why Labour lost in 1979; that was not very successful. Then there was the review by the right hon. Member for Islwyn (Mr. Kinnock), when he first became leader of the party; then, following another election defeat, there was another review. Yet we are told by the new Leader of the Opposition that there is to be yet another. After 14 years, Labour is still reviewing things. It has come to no answers—certainly no answer which have satisfied the time scale for reviews.
§ Mr. Tony Lloyd
This is good knockabout stuff, but the House would also like to know then the Minister intends to announce the results of the review.
§ Mr. McLoughlin
As I have said quite openly, both during this debate and on other occasions, we hope to come to the review shortly. It is clearly not the case that we have only six weeks; reconstitution of the CITB will take place in May this year, so there is some time to go. However, I accept what was said by my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham), who has a direct constituency interest: the sooner the announcement can be made, the better it will be for everyone concerned. My hon. Friend made a number of important points, which I shall consider carefully. The review was set in train some years ago, and I appreciate the time scale problems. I cannot pre-empt the Government's decision by following the attractive route mapped out by my hon. Friend, but I shall take into account what he said when we make our decision.
The hon. Member for Stretford (Mr. Lloyd) wondered whether we ever talked to the Department for Education, and expressed particular concern about the new arrangements for college funding. Of course we talk to the 797 Department; the points raised by the hon. Gentleman have been raised with me when I have met the Building Employers Confederation, and we shall make the necessary representations. I regularly meet the Minister responsible for higher education to discuss matters which are of interest to both the Department of Employment and the Department of Education. It is nonsense to suggest that there is no communication between the two Departments.
My hon. Friend the Member for Kemptown specifically mentioned the way in which the levy had been applied to a firm in his constituency. I shall look into that in more detail, but he willl understand that I cannot give him a direct answer now. The sort of points raised by my hon. Friends the Members for Tiverton and for Kempton will no doubt be put to us in the course of the review. When there is a levy on an industry, it is right that those paying it should feel that they are well served by the training boards to which they are obliged to contribute.
In the course of the review, we shall consider all the representations made to us. My hon. Friend the Member for Romford (Sir M. Neubert) asked what the levy should be. I understand his point of view. Small businesses may feel that without the exemptions the levy might be too complicated and difficult to collect. Far from reducing the number of problems with the black economy, which my hon. Friend pointed out, the payment of another levy might exacerbate them.
There have been a number of representations on this very point—some arguing, like my hon. Friend and the hon. Member for Greenwich (Mr. Raynsford), that the rate should be reduced, others asking for an increase in the number of exemptions. We shall consider these ideas carefully.
We have had a wide-ranging debate on the future of the CITB, and I hope shortly to be able to make an announcement. The levy has received support from hon. Members on both sides, and I commend the orders to the House.
§ Question put and agreed to.
That the draft Industrial Training Levy (Construction Board) Order 1993, which was laid before this House on 9 December, be approved.
That the draft Industrial Training Levy (Engineering Construction Board) Order 1993, which was laid before this House on 30 November, be approved.—[Mr. Greg Knight.]