§ 5.18 p.m.
§ The Minister of State for Defence Procurement (Lord Trefgarne) rose to move, That the draft order laid before the House on 16th February be approved.—[12th Report from the Joint Committee.]
§ The noble Lord said: My Lords, I beg to move that the draft order be approved.148
§ The order is before your Lordships today because one part of it—that covering site employees in the mechanical and electrical engineering construction industry sector—involves a levy exceeding 1 per cent. of emoluments.
§ Your Lordships will need no reminding of the importance of the engineering industry, which is the largest manufacturing sector in terms of employment. Engineering output has risen during the last five years by 10 per cent. The increase is most marked in the electrical and instrument engineering sector. Mechanical engineering has continued its growth. Protecting the skill base of the industry is clearly vital. That is why it is essential that this order should be approved so that money is available to the Engineering Industry Training Board to enable it to encourage firms to train in the industry.
§ Before looking at the detail of this levy it may be helpful if I were to set the scene by explaining briefly what the Engineering Industry Training Board is doing about training in the sector. We very much welcome the board's efforts to meet engineering skill needs. It is putting an increased emphasis on high technology needs by providing an advanced technology training team. It also offers grants to help alleviate high technology skill shortages—for instance, by encouraging companies to carry out more training for the conversion of suitable people to work in high technology areas. Accelerated management training and the development of promising engineers is offered through the board's fellowship schemes.
§ These measures clearly demonstrate the board's commitment to stimulating employers to invest in training, and the levy order before us now will enable that work to continue.
§ The board of course recognises that there is room for improvement: that employers must be encouraged to improve the volume of training if the engineering sector is to grow and not be hampered by skill shortages. To this end, the board issued at the end of last year an information paper setting out its view that the levy and exemption system now in operation was not bringing about the necessary quantity of training. The paper offered three options to improve the situation. First, more rigorous exemption rules; secondly, a levy/grant system and lastly, a system where the board is funded entirely through a non-returnable levy of up to 0.2 per cent. of payroll.
§ I understand that the board has agreed that, before making its final decision, it should develop criteria for a revised levy exemption scheme to deliver an adequate quantity as well as quality of training. The board will meet again in June to consider these criteria.
§ Technological advance has clearly had a significant impact on the employment patterns of engineers. They are now widely employed in sectors not traditionally associated with the engineering industry. The board is beginning to address this problem by instigating a survey to identify where engineering skills are used and the flows of engineers in and out of the various sectors. This survey will go a long way towards identifying engineering skill needs across the whole of industry and again it has our support—indeed, we are contributing to its cost.149
§ Turning to the levy proposals before us now, they are in the same format as those approved by both Houses last year and are expected to raise just over £19 million. The levy will apply to those firms which are employers in the industry between the date when the order comes into force and 31st August 1987. The actual amount of levy due is calculated on the basis of the total emoluments paid by those employers in the 12-month period starting on 6th April 1986.
§ The levy is made up of two main parts. The first part applies to mainstream engineering, and the second to the mechanical and electrical engineering construction industry. For mainstream engineering establishments, the board has agreed unanimously to propose certain small increases in the non-exemptable portion of the levy. For establishments in the mechanical and electrical engineering construction industry sector, the levy arrangements proposed remain the same as those approved by your Lordships last year. I recommend the order to the House.
§ Moved, that the draft order laid before the House on 16th February be approved. [12th Report from the Joint Committee]—(Lord Trefgarne.)
§ Lord Dean of Beswick
My Lords, my party of course welcomes these proposals although they underwrite some existing proposals and alter them slightly. We welcome these training proposals because they are fundamental and necessary to our survival as a manufacturing nation. As the Minister said, engineering is by far the largest section of our manufacturing industry. The sad fact of course is that over the past decade the number of people employed in the industry has reduced from 3 million to 2 million. There is no sign of that employment picking up.
I think that a figure of 25,000 was quoted as being the number of people involved in training schemes. To put that into context, we must realise that less than a decade ago 90,000 to 100,000 apprentices were taken into the engineering industry annually to be trained on site or in factories. That shows the scale of the deterioration that has taken place in what was once one of the world's biggest manufacturing bases.
The Minister referred to the fact that patterns are changing. Of course they are changing rapidly. It would be silly to say that that is not so. I am a trained engineer. I left the tools of my trade some 14 or 15 years ago. I should require some retraining because time has passed me by. They are doing different things in engineering factories now. We welcome the proposals and what they seek to do.
Your Lordships will recall that last week there were banner headlines in the press and on the media about the Government's success in reducing the monthly unemployment figures by 71,000. I was surprised because I have a government document from the Department of Employment. It contains figures that give cause for serious alarm. It states:Later estimates show that the number of employees in manufacturing industry decreased by 22,000 in January".That is double the number in any one month last year. I do not claim that all those 22,000 jobs were lost in engineering, but, it still being our biggest manufacturing industry, there is no question but that 150 a considerable number of those jobs will have been lost in the engineering industry.
Within the past couple of weeks we had a debate in your Lordships' House on this country's manufacturing industries. Many fears were expressed on all sides of the House about what is happening to us as a manufacturing nation and what that means to our survival, our standard of living and the conditions we have come to expect in education and the health service. Your Lordships asked what we could do as a manufacturing nation.
I do not decry the service sector. During that debate one of your Lordships gave a graphic description of how the service sector was parcelled out. Some of it consists of banking and financial institutions which play a prominent part in our overseas trade. Financial deals bring large sums of money to the Treasury. I do not decry the day-to-day service industries. They are necessary and do an excellent job. But our finite North Sea oil reserves are running out and our manufacturing base is still haemorrhaging severely. I bring all that to the notice of your Lordships' House because I am surprised that it was not made more of in another place by people who are critical of government policies.
The loss of 22,000 jobs in one month from our manufacturing base is an immense tragedy. It cannot quickly be put right. I recall the Secretary of State telling us in this House last year that he hoped that by last Christmas the loss of jobs in manufacturing would level out and start to pick up. I am not trying to score a political point, but the loss of those 22,000 jobs in January should have made the banner headlines. They show the serious position we are in. To make the case that the figures had been reduced by 71,000 was meaningless in the terms of the country's economic well-being.
My last point is this. As I have said before in your Lordships' House, it is excellent to train young people to take their place in the new sunrise industries. We know that the smoke stack industries' numbers have depleted and they will never return to previous levels. Nothing could be more cruel if, after training these youngsters to the skills of engineering, there are no jobs at the end of the road. It would be a cruel deception inflicted on them. Sadly, on the figures that were quoted in this report by the Department of Employment last week I suspect that that will be the case.
However, having said those few words, I hope that in the not too distant future we shall see concrete evidence that the manufacturing base is starting to expand once again. Noble Lords may watch the graph shown on ITV on Friday nights. It indicates quite clearly that even where there are gains in the week's figures, they are always in the non-manufacturing industries.
I do not say this with disrespect to those who work in the service industries and in distribution but we are in danger of thinking that we can survive by becoming a nation of warehousemen and shopkeepers. Nothing could be further from the truth. Was it not the right honourable gentleman, Edward Heath, who commented some time ago that we cannot survive as a nation by just taking in other people's clothes as 151 washing; we have to survive by manufacturing the clothes before washing them? That comment by the former Prime Minister encapsulates what we are talking about.
I have no desire to oppose this order. However, I hope that those few remarks put the subject into context. Training is desirable but if it means a dole queue at the end of the period it is a cruel deception and one that is not worthy of us.
§ Lord Rochester
My Lords, from these Benches I should like to thank the noble Lord, Lord Trefgarne, for the clear way in which he has explained the order and for telling us why it is necessary to seek parliamentary approval for it. It is good to know that both employer and employee members of the mechanical and electrical engineering construction industry sector committee have unanimously agreed to the levy which is applicable in that sector and that the proposals were subsequently approved by the engineering training board without dissent.
Having said that, it is plain that all is far from well with regard both to the quantity and quality of training in the engineering field. The best evidence for this is that the board has said that the levy and exemption system now in operation is not producing the necessary amount of training. They have offered—and the noble Lord, Lord Trefgarne, gave some indication of this—a number of options as to how the situation might be improved. In particular, they have agreed that before reaching a decision criteria should be developed for a revised levy exemption scheme to provide training that is adequate in both quality and quantity.
I believe that the problem goes very much deeper than that. Half the people qualified to work in engineering are not employed in the engineering sector itself but in other sectors of industry. The engineering board has no responsibility for training in those other sectors which, since 1982, have in many cases not been covered by any training board since most boards were then abolished altogether by the Government. The result is that many employers in the engineering industry are training only for their own immediate needs. Some of them are all too ready to poach our qualified people from the larger more far-seeing firms which are exercising more responsibility in the matter.
I hold no brief for the old-fashioned apprenticeship system under current conditions which relied on time serving rather than on achievement. I further recognise what the Government have done under the aegis of the youth training schemes and what they no doubt aim to do under the new job training scheme. However, I do not think it is enough. Nor, to judge from their recent evidence to a Select Committee in another place, does the engineering training board.
I am also troubled by the fact that in a recent survey by the engineering board 60 per cent. of the firms involved said that they were experiencing difficulty in recruiting specialist graduates in areas such as electronics. That reminds me that only last Wednesday the Science and Engineering Research Council were obliged to cancel the funding of further research in universities because the Government were 152 unwilling to reimburse to the council the amount—I believe that it was £8 million—representing the cost of the most recent pay rise. I suggest that in the light of such factors it is surely wrong that 90 per cent. of companies in the engineering industry are now altogether exempt from paying a levy, and that the total amount currently being raised by levy is only £3 million compared with a potential maximum of £160 million. In my view there is need—and I think I speak for my noble friends on this—both for the Government to give a stronger lead and for engineering employers as a whole to recognise that training should be regarded not as a cost to be borne reluctantly, if at all, but as a worthwhile investment for the future.
The noble Lord, Lord Dean of Beswick, made some reference to the situation in the manufacturing industry. That is now generally so serious that there surely is a strong case for introducing some form of national training levy with remission to employers being made conditional on their providing training which conforms to certain specified criteria. I do not suppose for one moment that when the noble Lord, Lord Trefgarne, comes to reply he will give the slightest encouragement to that idea. But I hope that he will at least say something which shows that the Government recognise there is need for more than an exhortation in this field and that he will indicate what action he thinks should be taken, and by whom, to improve the situation.
Subject to those very considerable reservations, we on these Benches are prepared to approve this order.
§ Lord Trefgarne
My Lords, I am grateful to both noble Lords for their contribution to this debate, and indeed for their welcome, if qualified, to the order that I have proposed to bring before your Lordships. Perhaps I may answer one point by the noble Lord, Lord Rochester, about the possible scope of the board being too limited. The noble Lord may be interested and reassured to know that my honourable friend the Parliamentary Under-Secretary of State for Employment discussed this matter with the EITB chairman as recently as 4th March. As a result, I understand that MSC funds will be made available to help EITB to commission an independent survey into the use of engineering skills in other sectors. Indeed, I referred to this during my earlier remarks. To be frank, we are a little short of information in this area. I very much hope that with the information provided by the survey to hand, it will be possible to move forward in a way that the noble Lord would approve.
The noble Lord, Lord Dean of Beswick, was complaining about employment opportunities in the service sector rather than in the manufacturing sector. He saw that as an unfortunate trend. I do not think that he was complaining about the increase in the service sector so much as the decrease in the manufacturing sector. It is perhaps worth noting that despite the decrease to which the noble Lord has referred (which has not been as great as the noble Lord said, but I do not dispute the fact that there has been a decrease) there has been an increase in the level of production of the manufacturing sector and an increase, too, in productivity, as I understand it. Therefore, it follows that the manufacturing sector is 153 becoming steadily more efficient and more successful not only in the domestic market but in world markets as well. So I think we have nothing to apologise for.
The fact of the matter is that industry is moving into a new era where production methods involve the employment of many fewer people than they did in the past. That has been necessary to ensure that products remain competitively priced, particularly in world markets. The result has been an increase in the level of production but, sadly, a reduction in some areas in the number of persons employed in this activity. To a considerable extent this has been offset by an increase in employment opportunities in other sectors. I do not disagree with the noble Lord that there has nonetheless been a decrease in the manufacturing sector overall, but that has been offset and to some extent mitigated by the effects—
§ Baroness Seear
My Lords, I am sorry to interrupt the noble Lord. Would he not agree however that he cannot be entirely happy about the conclusions he has drawn from the statement he has made about the increase in productivity despite the decrease in the number of persons employed, which is no doubt true, unless he also takes into account the extent of capital investment and the return on the capital invested? You may be getting the results you say, but unless you take that other item into account you do not know whether you are doing well or not.
§ Lord Trefgarne
My Lords, I am not sure that I totally follow the point which the noble Baroness has made about the amount of money, but I shall be happy to be instructed by the noble Baroness on some other occasion.
I take no comfort from the fact that the level of employment in any particular sector is less, because I recognise that in some cases at least it means that there are people unemployed; and nobody deplores that situation more than I do. On the other hand, there are new employment opportunities arising both in the service sector and in the new sunrise industries, as they are called, in the manufacturing sector. But I agree that there are some older industries the products of which are no longer competitive and clearly employment opportunities in those industries are on the decline.
§ On Question, Motion agreed to.