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Industrial Training Levy (Engineering Construction Board) Order 2005

rose to move, That the draft order laid before the House on 18 May be approved. [5th Report from the Joint Committee, Session 2004–05]. The noble Baroness said: My Lords, the proposals before us seek authority for the Engineering Construction Industry Training Board (ECITB) to impose a levy on employers in the engineering construction industry. Skills are vital to succeeding in an increasingly competitive global economy. We have made, and continue to make, major investments in training. This year the Learning and Skills Council will support further education and training to the value of   £6.5 billion. We have established a network of 23   sector skills councils (SSCs) to ensure that we have a strong, clear voice from employers informing the provision of education and training. The engineering construction industry does not meet the minimum size criteria for having an SSC, but I am pleased to say that a memorandum of understanding has been agreed with the Sector Skills Development Agency that will position the ECITB clearly within the Skills for Business Network. We also recently published our adult skills and workforce development White Paper setting out our vision for lifelong learning in the future. We will ensure that employers have the right skills to support the success of their businesses, which still lag behind many of our key competitors. We will also help individuals to gain the skills that they need to be employable and personally fulfilled. We have promised that where both sides of industry in a sector agree, we will help to set up a statutory framework for training. The Engineering Construction Industry Training Board is a model of such a framework. It is, as noble Lords will know, a non-departmental public body set up under the Industrial Training Act 1982. Its role is to ensure that the quantity and quality of training are adequate to meet the needs of the engineering construction industry. It provides a wide range of services, including setting occupational standards and developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards. The Industrial Training Act contains provision for a levy on employers to finance an industry training board’s activities and to share the cost of training more evenly between companies in an industry. It is for the employer members of a board to make proposals for the rate of levy and for the Secretary of State to make an order giving effect to those proposals. That is the purpose of the order before us. It gives effect to proposals submitted to us for a levy to be collected by the ECITB in 2006. The levy is based on employers’ payrolls and their use of subcontract labour. It involves the imposition of a levy in excess of 1 per cent of payroll on some classes of employer. The Industrial Training Act requires such orders to be approved by affirmative resolution of both Houses. The proposals involve a levy rate in excess of 0.2 per cent with no exemption other than for small firms. In such cases, a levy order can be made only if the proposals are necessary to encourage adequate training in the industry and if one of three conditions is satisfied. The first condition is that the proposals have the support of organisations representing more than half the employers who together are likely to pay the majority of the levy. The ECITB’s proposals meet that condition. The Act also requires ITBs to exclude small firms from the levy but does not set a minimum size threshold. The ECITB’s proposals set exclusion levels that the industry considers to be appropriate. In the order before us, the ECITB proposes to impose the same rate as last year on site contractors—that is, 1.5 per cent of total payroll and net expenditure on subcontract labour. Contractors whose combined payroll and net expenditure on subcontract labour is £275,000 or less will not have to pay the levy. That equates to an employer who employs 15 to 20 persons full-time throughout the year. It is estimated that it will exempt 48 per cent of sites. Last year the board decided to concentrate on activities at the craft, supervisory and first-line management levels and no levy was raised on head offices. In these proposals, it will reintroduce the head office levy at the same rates as in the 2003 order—that is, 0.18 per cent of the total of payroll and net expenditure on subcontract labour. However, head offices whose combined payroll and net expenditure on subcontract labour is £1 million or less will not have to pay the levy. That equates to an employer who employs around 40 persons full-time throughout the year. It is estimated that it will exempt 80 per cent of head offices. The Government recognise the vital need for employers to develop their workforce in a manner that meets their current and future skill needs. I therefore congratulate the ECITB on recognising the need to secure increased employer engagement at all levels of its activities. It is taking action to achieve that by restructuring its own management and operations to become more regionally focused. The benefits of this are already becoming apparent and I have no doubt that it will result in a step change in the commitment to training from employers throughout the industry. These proposals are expected to raise between £9   million and £10 million. It is worth pointing out that in 2004 the ECITB returned to the industry £1.45   in direct and indirect training support for every £1 levy received. Noble Lords will know from our annual debates that the ECITB exists because of wide support from employers and employer interest groups in the sector. There is a firm belief that without it there would be a serious deterioration in training in the industry, leading to a real fear that its skill needs would not be met. That was confirmed by a review of the board carried out by the department in 2003, which found that the principle of the levy is still strongly supported. The board’s own annual employer surveys demonstrate equally strong support for the principle of a levy system. The draft order will enable the board to carry out its vital training responsibilities in 2006. I believe that it would be right for the House to approve it. I commend the order to the House. Moved, That the draft order laid before the House on 18 May be approved [5th Report from the Joint Committee, Session 2004–05].—(Baroness Crawley.)