§ 4.15 p.m.
§ Lord Henley rose to move, That the draft order laid before the House on 18th November be approved [2nd Report from the Joint Committee 1993–94].
§ The noble Lord said: My Lords, it may be for the convenience of the House if I speak to this order and the following order together.
The proposals before the House this evening seek authority for the Construction and Engineering Construction Industry Training Boards to impose a levy on the employers in their industries, to finance the operating costs of the boards and to fund their range of training initiatives, including grants schemes. Provision for this 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 proposals must be approved by affirmative resolution of both Houses. In each case the proposals are almost exactly the same as those approved by the House last year. As in previous orders they are based on employers' payrolls and their use of sub-contract labour. Both have special provision for excluding small firms from paying levy.
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 payroll of £61,000 or less will be exempt. This is an increase from the previous threshold of £45,000. The ECITB treats its head offices and construction sites as separate establishments and applies different levy rates which reflect the actual costs and the different arrangements for 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 a smaller number of 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 payroll 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, which consist of senior employers, trade unionists and educationists.
The House will know that the CITB and the ECITB are the only two statutory industry training boards. Most other sectors of industry are covered by independent, non-statutory arrangements. In these two industries though, employers are firm in their support for a statutory board and the House will recall that last year we reconstituted the CITB for a further five years. In doing so, we recognised the strong feelings of the employers and the performance and achievements of the board.
1102 The House will also be aware that the ECITB is currently being similarly reviewed. Such reviews are necessary if we are to ensure that the training arrangements we have in place are right for the employers in a particular sector. As with the CITB we have consulted fully with the industry about the effectiveness of the board and the levy system more generally. The ECITB's current term of office is due to expire in July and the Government expect to make an announcement about the board's future around the beginning of April.
The draft orders before the House will enable the two boards to carry out their training responsibilities in 1994 and I believe it is right that the House should agree to approve them. I commend them to the House. I beg to move.
§ Moved, That the draft Order laid before the House on 18th November be approved [2nd Report from the Joint Committee 1993–94].—(Lord Henley.)
§ Baroness Turner of Camden
My Lords, I thank the noble Minister for his usual lucid explanation of these orders. It is not my intention to oppose them this evening but I wish to make some comments. First, the Minister will be aware that we on this side of the House have always supported industrial training boards. It is a matter of regret to me that most were disbanded some time ago, leaving only the CITB and the construction side of the EITB. I am quite prepared to agree that some of them may have become redundant and that the system should have been examined since nothing remains good and viable for ever. However, the ITBs had a role which was industry specific. In other words, they were focused directly on particular industries and able to plan and organise with the peculiarities of those industries in mind.
I am glad to say that the Government accepted that argument in regard to the CITB and have decided, as the Minister said this evening, that it should remain in being for another five years. I am very glad about that and so, I am sure, are the CITB staff since I know that they were concerned for their future. However, there is still a time limit rather than a situation in which the CITB is seen as having a continuous existence well into the future. But at least it is an improvement.
The support of everyone in the construction industry—the large employers organised through the Federation of Master Builders and the unions with membership in the industry—has been crucial in persuading the Government that there is something very special about the construction industry and therefore that the arrangements for the board should stand. Long may it continue that way, for construction is very special. It is a key economic component in the UK. If we are really to work our way out of the recession and into an era of rather better employment prospects, then construction will have to lead the way.
However, the industry has been hit very hard by the recession. The downturn in housing and the inability of local authorities to engage in large housing initiatives have had a bad effect. The result is that the number of new trainees on CITB schemes has fallen to around 10,000. There is considerable unemployment in the 1103 industry. Indeed, the federation reports that there have been substantial and damaging reductions in training and recruitment programmes for both apprentices and graduates.
All that must obviously have had some effect upon the revenue of the CITB, since that is forthcoming via a levy raised as a percentage of the payroll. This is an industry in which the operations are often inherently hazardous. There is a high rate of industrial injury and sometimes, regrettably, fatal injury. The CITB's training programmes play a vital role in ensuring that sites are as safe as possible, but the operation of training programmes in which the protection of health and safety feature very largely is extremely important.
Against that background, quite obviously more money must be raised via the levy, and we do not object to that. However, I believe that the industry generally is unhappy that the threshold exempting small builders from paying the levy is to be increased from £45,000 to £61,000 of yearly emoluments. The effect will be to decrease income to the board. The view of the Federation of Master Builders, with which I agree, is that no one should be exempt from paying the levy since all construction industry employers use skilled craftsmen and therefore all should contribute to the training costs. Moreover, the intended uplift in the threshold will exacerbate competitive problems between smaller employers represented by the federation.
The federation says that the margins are tight and the combined effect of raising the CITB threshold and the new VAT registration threshold announced in the last Budget will add to the problems of numerous firms of roughly the same size being able to compete on an equal basis. It also says that from the financial standpoint, by moving to a £60,000 exemption threshold, the CITB's income will decline by about £1 million over the next year. A nil threshold would yield an estimated £8.5 million per annum at the current rates of levy, with an extra 35,000 firms being involved.
I have always thought it unfair that firms which do not invest in training should be able to poach staff from those which do. That is one of the drawbacks of a voluntary system and one which the ITB grant and levy system was meant to obviate. I can understand the Government's concern about not putting too much upon small firms, but in the construction industry, where there are many small firms, it is often in those firms that safety standards are less good than in the larger ones and therefore training is that much more important. If good standards are to be obtained and maintained, everyone should make a contribution. I accept that we are unlikely to persuade the Minister tonight to accept a nil threshold because a threshold already existed, but I suggest that serious consideration is given in the future to the representations made by the industry about the inadvisability of raising the threshold exemption figure.
Much the same considerations apply concerning the Engineering Construction Board. Again I say how much I regret the demise of the former EITB. I believe that that board and the CITB performed their functions extremely well. That argument has been accepted by the 1104 Government in the case of the CITB but not for the EITB except for that section concerned with construction, and that also is under review.
The EITB had some very important initiatives, including a programme directed specifically at women and designed to attract more women into engineering as a career. That coincided with the campaign initiated by the Equal Opportunities Commission when I was a member and the noble Baroness, Lady Platt of Writtle, was Chairman—the WISE Campaign (Women Into Science and Engineering). I have not seen very much since then to indicate that similar initiatives are being continued under present arrangements.
We do not oppose the orders since that is not the custom of the House, and in any event of course we would not want to deprive these bodies of the funds they need. However, I ask the Government to pay more attention to those who work in the industries concerned. I know that the Government prefer the so-called voluntary system to the one inherited via ITBs, but at the same time I believe that the grant and levy system was a good one and ensured that everyone bore part of the burden of training in the industries concerned. I regret that that concept has been abandoned except in the CITB case, and in that case, as I indicated, there are anxieties about the exemption of small businesses However, I do not oppose the orders.
§ Lord Rochester
My Lords, I should like to join in thanking the noble Lord, Lord Henley, for having explained the orders so clearly. As he said, the proposals are almost exactly the same as those approved by the House a year ago. It is good to know that they have the support of the employers, trade unionists and educationists who comprise the respective boards.
Like the noble Baroness, Lady Turner, I am glad that after these matters were last discussed in the House the Government decided to reconstitute the Construction Board for a further five years in recognition of its achievements. Having had the opportunity to read the 1992–93 report of the Engineering Construction Board and also the document detailing its strategy for the next three years, I hope that, following the current review, the Government will decide to reconstitute that board as well. I say that because the workforce moves from job to job just as frequently in the one case as in the other and individual employers are therefore equally unable to provide training for the broadly based skills that are needed.
I welcome both orders and have only one reservation to express. It is one to which the noble Baroness referred. As the Minister said, the Construction Board order provides for the payroll threshold for payment of the levy to be increased from £45,000 to £61,000, the intention apparently being to exclude firms with four employees whereas the number was previously three. The Federation of Master Builders took the view that all employers should contribute to the cost of training, as the noble Baroness said. I do not go so far as that because I recognise the burden that that would impose on very small firms. However, at a time when the need for more training is so widely acknowledged, I wonder whether it is right that as many as an estimated 35,000 1105 businesses should now be exempted from the levy and therefore in effect be subsidised by the rest of the industry. I shall be grateful if when the noble Lord, Lord Henley, replies he can relieve me and the noble Baroness, Lady Turner, of our doubts on this matter so far as he can.
§ 4.30 p.m.
§ Lord Henley
My Lords, I am grateful for the support that the noble Baroness, Lady Turner, and the noble Lord, Lord Rochester, gave to these orders. Perhaps I may deal with one or two points that they made.
The noble Baroness regrets that most industries used to have these statutory arrangements and that they have now disappeared. We believe that there are major differences between the construction and engineering construction industries—they have very different workforces. We also feel that statutory levies were not welcomed by all sectors. Many sectors felt that they should be given responsibility for their own training arrangements; and the Government certainly support those voluntary arrangements wherever possible. However, we believe that a different arrangement is necessary in this sector.
The noble Baroness also regretted that the CITB was to be reconstituted for only five years. It is normal for all non-departmental public bodies and not just ITBs to be subject to periodic review. As I said in my opening remarks, the review of the ECITB is currently under way and we believe that five years for the CITB is perfectly fair.
More importantly, moving to the question of relief for small employers, I understood the noble Baroness to say that she would prefer a nil threshold to bring in all employers. I am not quite sure how far the noble Lord, Lord Rochester, would go but he believed that the increase from £45,000 to £61,000 might be excessive. We believe that there is a strong need to protect small firms and to give them some advantage. We believe in the importance of small firms and in their importance to the economy. It will always be difficult to get the balance right. As the noble Lord said, the increase to £61,000 excludes those firms with four workers or fewer. Obviously these have to be rough approximations depending on levels of pay. That amount maintains very approximately the same level as existed in real terms in 1971 when the exclusion level was £6,000.
1106 I accept that within the industry there are many deeply held views on the issue of the balance between training needs and the pressure on small firms. I can give the assurance that we shall certainly keep the level of exclusion under careful review. However, as noble Lords will know from other legislation that has been or is before the House—one thinks of the Statutory Sick Pay Bill—it is always important to offer some protection to the smaller firms which are less able to cushion those costs.
Perhaps I may say a few words about help for women within the construction industry. The CITB has set targets for the training of women and has a range of initiatives to promote training of both women and ethnic minorities. Certainly we should very much like to see that go forward. We are as committed as the noble Baroness to equal opportunities in that field.
I stress, as the noble Baroness did quite rightly, the importance that we attach to training. I made that clear yesterday when I answered a Question from the noble Lord, Lord Rochester, on TECs. But we believe that training is absolutely vital. That is why the Government are committed to training and provide a great deal of money for it. We also believe that it is important for employers to make a contribution for training. That is why I quoted the figure yesterday of employers paying,something of the order of £20 billion",to train their workforce. It will always be the employers who are the major contributors to training.
I conclude by stressing yet again that the proposals have the support of the respective employers and have been approved by both the boards. It is not therefore in dispute—I believe that the noble Baroness accepted this —that they should be approved by this House. I commend the orders to the House.
§ On Question, Motion agreed to.