§ 8.48 p.m.
§ Lord Bach
rose to move, That the draft orders laid before the House on 16th December 1999 be approved [6th Report from the Joint Committee].
The noble Lord said: My Lords, it may he for the convenience of the House if I speak to these orders together.
The proposals before your Lordships seek authority for the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB) to impose a levy on the employers in their industries to finance their training activities, including grants schemes, and to fund the operating costs of the boards. Provision for this is contained in the Industrial Training Act 1982 and the orders give effect to proposals submitted by the two boards.
In each case, the proposals are based on employers' payrolls and their use of subcontract labour. Each board has included the 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. The other place has approved the proposals.
As required by the Industrial Training Act, both boards have provided for the exemption of small firms from the levy. The level at which this exemption takes effect aims to strike the right balance between helping small firms to grow and giving them unfair commercial advantage. However, the boards are committed to supporting the training efforts of small firms, whether or not they pay the levy. All companies need a skilled, competent workforce if they are to be competitive, and small firms in these sectors are encouraged to take advantage of the services offered by the boards and to provide opportunities for trainees and apprentices.
In the case of the Engineering Construction Industry Training Board, which assesses off-site establishments—that is, head offices—and construction sites separately, the proposed levy rates are 0.18 per cent of the total of payroll and net expenditure on labour-only subcontracting for off-site employers, those employers with combined payroll and net labour-only payments of £1 million or less not being liable to pay the levy; and 1.5 per cent of the total of payroll and net expenditure on labour-only subcontracting for site employers, those employers with combined payroll and net labour-only payments of £75,000 or less not being liable to pay the levy.
The proposals are different to those approved by your Lordships' House last year in that the small firms exemption levy for off-site employers is based on 751 payroll rather than on numbers of employees. This ensures a more reliable and accurate measure of a company's levy liability and brings the arrangements in line with those for site employers. The change has been introduced in such a way that there will be no drop in levy income for the board. Nor will any additional employers be brought into the levy net.
Turning to the Construction Industry Training Board, the proposed rates are 0.5 per cent of payroll for direct employees and 2.28 per cent of net expenditure by employers on labour-only subcontracting. Employers with combined payroll and labour-only payments of less than £61,000 will not be liable to pay the levy. This represents an increase for directly employed labour on last year's rate of 0.38 per cent. The board has explained that the increase is necessary because of important changes that are taking place within the industry.
New rules have been introduced by the Inland Revenue and the Contributions Agency which are causing major changes in patterns of employment. There has been a large swing from using labour-only subcontractors back to direct employment. Because the levy on labour-only subcontracting is charged at a higher rate, this swing has led to a reduction in the board's income. The industry has agreed to increase the PAYE levy to 0.5 per cent to maintain the necessary levels of income. This is part of moving to a single rate of levy for all employees over a five-year period to 2003.
At the same time, the industry is significantly increasing its investment in training. The CITB will be making additional grants and other resources available to support employers' efforts. This will be wholly financed by cost reductions, an increase in non-levy income and increased levy income from growth in the industry.
For both boards, the proposals involve levy rates in excess of 0.2 per cent, with no provision for exempting employers who make their own training arrangements. In such cases the Industrial Training Act 1982 requires boards to demonstrate that the proposals have the support of the employers in their industry. I am satisfied that each board has obtained that support. All of the key employer federations have been consulted about the levy rates and have agreed that these rates are necessary to fund the boards' training plans.
The proposals I have outlined are expected to raise between £75 million to £80 million for the Construction Industry Training Board and around £10 million for the Engineering Construction Industry Training Board. Both boards will use the money to fund a range of training activities, including grant and initiative schemes, new entrant training and operating costs.
Your Lordships will know from previous debates that these are the only two statutory industry training boards. They exist because of wide support from employers and employer interest groups in these sectors who believe that without them there would be a serious deterioration of training.
752 Both boards are committed to ensuring that employers in their industries receive a quality service and each places great importance on a forward-looking strategic planning process based, importantly, on regular analysis of the labour market. This is crucial if they are to ensure that the education, training, skills and qualification needs of their sectors—both now and for the future—are met.
Each board is also the government-recognised national training organisation for its sector and is fully involved with the national network of sector-level training organisations. They are making a significant contribution to workforce development. For example, the nationally recognised labour market assessment systems developed by the boards inform the important work of the National Skills Task Force, the regional development agencies and, from April 2001, subject of course to the will of Parliament, the new national and local learning and skills councils. That Bill, of course, is making its way, perhaps somewhat slowly, through your Lordships' House.
The draft orders before the House will enable the two boards to carry out their training responsibilities in 2000. 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 orders laid before the House on 16th December 1999 be approved [6th Report from the Joint Committee].—(Lord Bach.)
§ Baroness Blatch
My Lords, I am grateful to the Minister for his careful explanation of the two orders and for moving them together.
We all know that the engineering and construction industries are crucial to this country's economic regeneration and employment policies. We know that regulations which affect the industries can be a force either for progress or for inhibiting progress. As I understand it, these are the only two training boards in the whole of the country. Just as the previous government moved away from industrial training boards, the present Government are now moving away from the levy subsidy scheme and forward training.
The exemption for small firms is welcome, although I know that the levy still causes some grief to many small employers. I note from the debates in another place that there are still some small companies wending their way through the tribunal system in order to seek exemption.
I wish to emphasise a point raised in another place by my honourable friend Mr Tim Boswell, when he pleaded for more user-friendly language in these documents. I am sure that the Minister will agree with that. I have been reading regulations for many years and I have found them almost impossible to understand. Along with my honourable friend in another place, I do not plead for my own purposes but for small businessmen, particularly for those in the construction industry and sometimes for those in the engineering industry. Such people do not have access to expensive legal advice and to interpreters of legalese. Efforts were made by the previous 753 government, and will continue to be made by this Government, but it is important that we persuade the counsel who draft legislation to remember that, at the end of the day, it has to be read, understood and—a point often missed—that such legislation has a very practical impact on the workforce of many companies.
The increase proposed in the orders will be seen as considerable by some employers. Can the Minister say how many employers do not meet their levy payments? What loss to the training boards does this represent? I am fascinated also to know to what extent the increase is in place to compensate for such losses.
There are considerable new burdens on business as a result of much new legislation, which results in extra workloads that are costly for many companies; small ones in particular. I refer to the administration of the national minimum wage, the working time directive, the parental leave directive and many other pieces of legislation.
An important point was made in another place by Mr Richard Allan, the MP for Sheffield, Hallam, and endorsed by my honourable friend Tim Boswell, about the cost of engineering courses. I know that the issue will feature in the debates on the Learning and Skills Bill, but those courses are important. For obvious reasons they are relatively more expensive than many others for further education colleges and training providers to mount. During the Second Reading debate on the Learning and Skills Bill, I asked—and I shall certainly refer to the matter during the course of amendments to the Bill—on behalf of the Engineering and Marine Training Authority whether the Government will include proper differential funding for such courses under the new post-16 proposals. That is a vexed issue.
My final point was made in another place. None of us seems to be able to put his hand on the regulatory impact assessment. Alongside the regulatory orders it is important to have some understanding of what the impact would be on those subject to the order. I understand that it is not readily available in the Library or in the Printed Paper Office It will be helpful if it is made more available so that we may access it when we come to discuss these matters. I conclude by thanking the Minister again for the way he explained the two orders.
§ Lord Avebury
My Lords, I welcome the two orders. I am grateful for the explanation the Minister has given for them. Perhaps I may pick up one of the points made by the noble Baroness: the question of the exemptions for small businesses. If one looks, for instance, at the Engineering Construction Board Order, the exemption applies to businesses where the sum of the emoluments in respect of labour-only payments for all off-site employees does not exceed £1 million.
Has the Minister had any representations about that figure? Do small businesses believe that it is a correct figure as a cut-off point or would they prefer it to be somewhat higher? What exactly is the argument by which the cut-off point is determined, in relation 754 both to that order and to any other? I am not arguing that the figures are wrong; I simply point out that the Minister in his explanation did not specify how the Government had calculated that a "small" business was one which came below that limit and was therefore entitled to the exemption, whereas a business with payments of £1,000,001 could be labelled in the other category and would be subject to the full force of the levy.
I do not want to make suggestions that make life for businesses even more complicated than it is already, but I wonder whether it is right to have an absolute cut-off point as a result of which a business £1 below the cut-off point does not pay anything at all whereas a business £1 above it is subject to the full force of the levy. That seems rather anomalous. In the real world it might have been better to have a graduated system of payments phasing up to the full amount, just as, for example, happens in the income tax system. One does not pay the full rate immediately one comes within the income tax band; one pays a reduced rate on the first tranche of one's earnings.
If one looks logically at the philosophy of dealing with small businesses, a business does not suddenly graduate from being a small to being a large business once it passes a particular point in its operations. It moves slowly from being small to large over a wide range of activity. Therefore, one would have thought that the levies should take account of that fact of life.
§ Lord Bach
My Lords, I am grateful to the noble Baroness and to the noble Lord for their support for the orders and for their helpful remarks. It is good that the orders, which are important, are uncontroversial to the extent that they are.
I agree with the noble Baroness that these two industries are important. She is absolutely right about that. She is right also about the issue of using more friendly language. I am delighted to be able to tell her that the statutory instruments are being reviewed this year. It may be that those reviewing them had some prior notice that the noble Baroness was going to mention that point this evening. Both boards also issue plain English leaflets and guides at the same time, which is useful.
The noble Baroness asked, fairly, for figures with regard to the increases. I shall write to her in due course and place a copy of the letter in the Library. In relation to any shortfall that may occur if someone does not pay up or pay up in time, I understand that both training boards keep reserves in order that such an eventuality may be taken care of.
With regard to courses and their cost—both matters that we are debating this week in our proceedings on the Learning and Skills Bill—the last FEFC report found good quality facilities. The LSC, when it comes into being, will set tariffs to reflect different course costs.
The noble Baroness asked about the regulatory impact assessment. It was an omission, but it was placed in the Library immediately after the debate in the other place. I am again grateful to the noble Baroness for her comments.
755 I turn to the points raised by the noble Lord, Lord Avebury. He mentioned the £1 million figure in relation to the Engineering Construction Board Order. That is for off-site establishments; the head offices. The exemption is as high as it is because it concerns some extremely large firms and their offices. The people on the payroll in the offices of large firms are often fairly well paid. So the 0.18 per cent of their salaries, as it were, is a larger amount than perhaps it would be of the salaries of those who are not so well paid. As I understand it, there has been little complaint about—indeed there has been support for—the £1 million limit.
The noble Lord made one other important point. He asked why there is a cut-off point. The cut-off point simplifies matters. The noble Lord will know that when a firm moves gradually into having to pay the levy it will pay a percentage. As it gradually grows, the total amount that it has to pay will become larger and larger as its payroll increases. There is a gradualism about this, even though there is a specific cut-off point. I hope that my answer makes some kind of sense to him.
I once again thank the noble Baroness and the noble Lord for taking part in this short debate. I commend the orders to the House.
§ On Question, Motion agreed to.