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Industrial Training Levy (Construction Industry Training Board) Order 2022

My Lords, as the Committee will no doubt appreciate, the construction sector is broad and a significant part of the UK economy. It is responsible for delivering infrastructure and large construction, including transport, energy, social infrastructure and commercial buildings. It is also responsible for delivering new housebuilding and for the repair, maintenance and improvement work needed for existing buildings and the built environment.

The traditional image of the industry and its workers is shifting. New technologies are enabling more efficient and modern methods of construction. We recognise the role that construction plays in reaching the UK’s net-zero targets, which the House passed into legislation in 2019.

This is a broad sector, as I said, and it is a large and growing one. It is valuable to our economy, currently contributing £155 billion, which represents 9% of our national gross value added. It is also valuable economically due to the large number and wide range of employment opportunities that it provides, many of them well-paid, highly-skilled roles offering excellent progression opportunities. It is valuable to the individual too; it employs 3.1 million workers, 813,000 of whom are self-employed.

In research conducted by the Construction Industry Training Board, known as the CITB, the Construction Skills Network forecast indicates that the sector will grow at an average rate of 4.4% across 2021-25. Skills interventions will be critical in meeting existing and future construction labour market demands and addressing

skills deficits. New and existing workers will require interventions to retain, retrain and upskill as new regulations and technologies are introduced.

It is a broad, growing, and valuable sector, but it is a fragmented one too. Small and medium-sized enterprises make up more than 99% of all businesses, of which the majority are micro-businesses. It relies heavily on subcontracting and self-employment. This fragmentation creates long-held disincentives for employers to train and develop their construction workforce. This goes to the heart of what the CITB was created to do.

Established in 1964, the CITB is, at its core, industry led, and it exists to encourage the provision of construction training. It has a clearly defined role in identifying construction skills needs and plays a part, with others, in addressing them. It provides targeted training spend, as well as grants to employers, to encourage and enable workers to access and operate safely on construction sites, drive up skills levels and incentivise training that would otherwise not take place. It supports strategic initiatives to help to maintain and develop vital skills in the industry and to create a pipeline of skilled workers. It is developing occupational standards and recognised qualifications so that skills are transferable and increase productivity.

In all activity, the CITB is working in ways that will support the construction sector to develop an environmentally sustainable future, supporting the Government’s ambitions towards net zero. Over the coming three-year levy period, the CITB expects to raise around £502.2 million to invest in construction skills.

The recent 2021 levy order was for one year, not the usual three years. That order was more unusual still, as the levy rates that it prescribed were reduced to 50% of those prescribed by the three-year 2018 order. This was to accommodate the CITB’s decision to allow levy payers a payment holiday in response to cash flow pressures the industry was facing during the first Covid lockdown.

I now turn to the details of the draft order, and I thank the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee for considering this draft legislation. This three-year 2022 order returns to the levy rates prescribed by the three-year 2018 order—0.35% of the earnings paid by employers to directly employed workers and 1.25% of contract payments for indirectly employed workers—for businesses liable to pay the levy. However, the industry, having been consulted on the CITB’s delivery strategy and levy rate, supported the retention of the higher exemption and reduction thresholds for small employers contained in the 2021 order. Construction employers with an annual wage bill of up to £119,999—previously £79,999 in the 2018 order—will not pay any levy, while still having full access to CITB support.

It is projected that approximately 62% of all employers in scope of the levy will be exempt from paying it. Employers with a wage bill between £120,000—previously £80,000 in the 2018 order—and £399,999 will receive a 50% reduction on their levy liability while also receiving full access to CITB services. Approximately 14% of all employers in scope of the levy will receive a 50% reduction. Maintaining the increased exemption and reduction thresholds seeks to acknowledge and ease the budgetary pressures on SMEs.

The CITB has consulted industry on the levy proposals via the consensus process required under the Industrial Training Act 1982. Consensus is achieved by satisfying two requirements: that both the majority of employers likely to pay the levy, and employers that together are likely to pay more than half the aggregate levy raised, consider that the proposals are necessary to encourage adequate training. Both requirements were satisfied, with 66.5% of likely levy payers in the industry, which between them are likely to pay 63.2% of the aggregate levy, supportive of the CITB’s proposals.

This order will enable the CITB to continue to carry out its vital training responsibilities, and I beg to move.