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Industrial Training Levy (Construction Board) Order 2006

rose to move, That the draft order laid before the House on 9 January be approved [14th Report from the Joint Committee] The noble Lord said: My Lords, with the leave of the House I will also speak to the Industrial Training Levy (Engineering Construction Board) Order 2006. These orders seek authority from the Construction Industry Training Board and the Engineering Construction Industry Training Board to impose a levy on employers in the industries which they cover. Skills are vital to succeeding in an increasingly competitive global economy. The Government have made, and continue to make, major investments in training. This year, the Learning and Skills Council will fund further education and training to the value of £7.6 billion. Last year, we published our White Paper Getting on in business, Getting on at work, which set out our plans for the next major phase of reform for making this country a world leader in skills. We want to ensure that employers have the right skills to support the success of their businesses, and that individuals gain the skills they need to be employable and personally fulfilled. In support of that aim, we have established a network of 25 sector skills councils—SSCs—to ensure that employers have a strong, clear voice to influence the provision of education and training. We have also promised that, where both sides of industry in a sector agree, we will help set up a statutory framework for training, as we are currently working with the film industry to do. The two industrial training boards—ITBs—are models of the successful application of such frameworks. They are non-departmental public bodies set up under the Industrial Training Act 1982. Their role is to ensure that the quantity and quality of training are adequate to meet the needs of the industries they cover. They provide a wide range of services, including setting occupational standards, developing vocational qualifications, delivering apprenticeships and paying direct grants to employers who carry out training to approved standards. In fact, the CITB, in partnership with CITB Northern Ireland and the Construction Industry Council, operates as ConstructionSkills, the sector skills council for the construction industry. It has developed one of the first sector skills agreements, and that now underpins every facet of CITB’s operations. The engineering construction industry does not meet the minimum size criteria for becoming an SSC. I am pleased to say however that it has a memorandum of understanding with the Sector Skills Development Agency that firmly locates it in the Skills for Business Network. The board’s status as a valuable sector body was further recognised last year when it won an award from Sector Skills Alliance Scotland as the:"““Most Effective Sector Skills Council or Sector Skills Body in Scotland””." The Industrial Training Act contains provision for a levy on employers to finance an ITB’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 for the industry it covers, and for the Secretary of State to make an order giving effect to the proposals. That is the purpose of the two orders before us. They give effect to proposals submitted to us for a levy to be collected by the CITB in 2006 and the ECITB in 2007. Both involve 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 in both Houses. It is that affirmation which I seek today. In each case, the levies are based on employers’ payrolls and their use of sub-contract labour. For both boards, the proposals involve levy rates in excess of 0.2 per cent, with no exemptions 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 proposals from both boards meet that condition. The Act requires ITBs to exclude small firms from the levy, but it does not set a minimum-size threshold. Each of these proposals sets a level that the industry considers to be appropriate. Employers who fall below the threshold are not however precluded from benefiting from grant and other support from the boards, and many of them do so. In the order before your Lordships, the CITB proposes that both its levy rates this year should stay at the same level as that approved by the House last year. The rates will be 0.5 per cent of payroll for direct employees and 1.5 per cent of net expenditure on sub-contract labour. Employers whose combined payroll and net expenditure on sub-contract labour is less than £69,000 will not have to pay the levy. This figure represents an increase from last year’s threshold of £64,000 to reflect wage inflation within the industry. The level equates to an employer who employs three people full time throughout the year. Forty one per cent of employers come into this category. A further 22 per cent of employers will not be assessed for, or will not pay, the levy for other reasons. For example, they may be in their first year of registration with the CITB or have ceased trading all together. This means that around 60 per cent of employers will not be required to pay the levy. The higher levy rate on sub-contract labour is due to the fact that, according to the industry, the vast majority of training is carried out by those employers who have a directly employed labour force. Employers who opt to use sub-contract labour tend to have a transitory arrangement with their sub-contractors and are not normally involved in their training. It is encouraging to see that the large contractors, who use significant amounts of sub-contract labour, are recognising their responsibility to contribute more than just cash to tackling the skills shortages in the industry. They have initiated action to encourage firms in their supply chains to recruit and train apprentices. The ECITB also proposes to make no changes to last year’s rates. The rates for sites will be 1 per cent of total payroll and net expenditure on sub-contract labour. Contractors whose combined payroll and net expenditure on sub-contract labour is £275,000 or less will not have to pay the levy. The level is unchanged from last year and equates to an employer who employs 15 to 20 persons full time throughout the year. It is expected that 62 per cent of sites will be exempted. For head offices, the rates will be 0.18 per cent of the total payroll and net expenditure on sub-contract labour. Head offices whose combined payroll and net expenditure on sub-contract labour is £1 million or less will not have to pay the levy. This level also is unchanged from last year and equates to an employer who employs around 40 persons full time throughout the year. It is expected that 80 per cent of head offices will be exempted. These proposals are expected to raise between £145 million and £150 million for the CITB, and £10.5 million to £11 million for the ECITB, which covers a much smaller industry. It is worth pointing out that the CITB currently returns £1.74 in direct and indirect training support for every £1 of levy received. For the ECITB, the figure is £1.45. Noble Lords will know from our annual debates that the CITB and the ECITB exist because of the support they receive from employers and employer interest groups in their sectors. There is a firm belief that without them there would be a serious deterioration in the quantity and quality of training in these industries, leading to a deficiency in skill levels. This was confirmed by reviews of both boards carried out by the Government in 2003, which found that the principle of the levy is still strongly supported in each industry. The boards’ own annual employer surveys also demonstrate strong support for the principle of a levy system. The orders will enable the two boards to carry out their vital responsibilities in 2006. I beg to move. Moved, That the draft order laid before the House on 9 January be approved. [14th Report from the Joint Committee].—(Lord Davies of Oldham.)