My Lords, engineering construction as a label is not easily understood, but as the country responds to and recovers from the impact of Covid-19, there can be no doubt about how reliant we are on a skilled engineering workforce.
I ask your Lordships’ House to consider how different our lives would have been in recent months without the electricity, oil, gas and nuclear industries being able to cope with the shifts in demand on power supply; without access to clean, healthy water systems; or without the right infrastructure to enable the food industry to meet an unprecedented demand from the public—and, critically, to consider how much our hopes lie with the pharmaceutical industry being able to identify and roll out a vaccine to this terrible virus. All this is enabled by the engineering construction sector.
As noble Lords know, this House passed legislation only last year to ensure that Britain meets the Committee on Climate Change’s ambitious target to reduce emissions to net zero by 2050. These challenges, whether brought about by Covid, climate change or clean growth, mean that investment in skills and training and supporting young people into jobs in engineering construction are now more important than ever. This goes to the heart of the Engineering Construction Industry Training Board, known as the ECITB. The order before your Lordships will enable the ECITB to continue to play its role in securing and maintaining a sufficient supply of highly skilled labour in the engineering construction industry.
Established in 1964, the ECITB—then named the Engineering Industry Training Board—is industry led and is there to ensure that the engineering construction industry has a highly skilled workforce. It provides targeted training grants to employers to enable workers to access and operate safely on engineering construction sites, drive up skill levels and incentivise training that would otherwise not take place. It also supports strategic initiatives to maintain vital skills in the industry and create a pipeline of skilled workers.
The ECITB is responsive to the needs of the engineering construction industry. During lockdown, it swiftly introduced a package of support measures including a scheme to retain apprentices and graduates and a new scholarship to support new entrants. Over the coming three-year levy period, the ECITB expects to raise around £80 million, to be invested in skills training. The latest available figures show that in 2018, 99.4% of the levy raised went directly into supporting training.
Turning to the detail, I wish to thank the Secondary Legislation Scrutiny Committee for considering this draft order. The key change from the previous 2017 levy order is an increase in the levy rate for offsite employees. These offsite workers are defined by the geographical location of their work, which is mainly at a distance from an engineering construction site such as a chemical works or power station.
My Lords, when we look at something that deals with training across such a wide field, the obvious question that comes to mind is: how have the groups the Government are supporting been set? We need a bit more of an idea about the exact criteria for where you get the support from. That would help us in future.
Also, if you are going across these sectors, when will we decide how to encourage the necessary people in? The noble Baroness has already expanded my knowledge of this slightly by suggesting that we interact with both apprenticeships and graduates. There cannot be many other bodies doing that degree of consultation and trying to bring people into the construction sector. It is quite reassuring to hear that, and to hear that we are not only training people but encouraging them to work in the field and telling them how to access training.
Another steady subject of mine when it comes to these issues is: what about people with special educational needs or other disabilities? How are we encouraging them to get involved? The range of skills that has been suggested here is mind-blowing, going from the most basic forms of apprenticeship to postgraduate qualification and bringing them together. Presumably, that includes people training in colleges. A huge number of people can take on the training, provided they get over the initial hurdle.
I declare my interest—I did not do so earlier—as the president of the British Dyslexia Association, as someone who is dyslexic and as someone who uses technology to enable them to write more easily; I certainly use it all the time. How are we working these things to make sure that we get the right people through? We have a skills shortage in these places. What is the current outreach capacity? There are other groups that you will want to look at, but are you looking at the people who have a problem not with the initiation or even considering it but with taking the exam?
I think that is it. I apologise; I thought I was going to be unmuted.
My Lords, I first thank the Minister for setting out the background of the draft industrial training levy order. I am certainly not, in principle, against employers contributing via a levy, but I have several concerns about the background to the order.
The first matter that strikes me is that this really seems to come from a different, pre-Covid world. For example, the consultation exercise was carried out by the Engineering Construction Industry Training Board between July and October last year. The situation facing the country and industry now is massively and dauntingly different from then.
The questions I wish to ask are not on the micro-aspects of the order itself but on what I believe is the massive leap of imagination needed by the Government, and awesome extension of ambition, in relation to apprenticeships in general. We face a position now where many apprentices have not, for understandable reasons, been getting the work experience that they normally would have received and which they, and we, expected. Many people have of course been furloughed, and many more, alas, will lose their jobs. Against this background, we really need to address the situation we are facing in relation to apprenticeships, rather than looking at a bit of a mouse of a measure of what is really needed.
I believe that we need an apprenticeship guarantee scheme. This has been echoed in the other place by Robert Halfon, the chair of the Education Committee and the right honourable Member for Harlow. The Prime Minister has committed to look at this; he has said that this is something we should be doing, and I agree. I would like to hear from the Minister how far down this road we now are, because that was said in June. What progress are we making on this?
Before calling the next speaker, the noble Lord, Lord Hain, I would like to clarify that all speakers will have seven minutes, not six minutes as was indicated earlier, apart from the Minister, who will have 10 minutes at the end. I now call the noble Lord, Lord Hain.
My Lords, I very much agree with the points made by the noble Lord, Lord Bourne, especially on the vital necessity for new skills on green projects. Wales, of course, has many to offer, not least the Severn barrage, which is capable of harnessing the enormous power of the Severn estuary, but also the tidal lagoons and other forms of tidal power and marine energy. Anglesey has developed a marvellous strategy as an energy island. I hope that the skills needed for that will be supported by the Government in the UK, by providing the funding to the Welsh Government. I also welcome the Minister’s acknowledgement at the outset of the vital role of key engineering workers in keeping going the essential infrastructure of the country during the Covid lockdown.
Although the Explanatory Memorandum is candid about the policy background to the order, it is hardly comprehensive in its coverage and it is short on significant detail. It is indeed true that industrial training boards have operated in the UK since 1964—since March 1964, in fact, because industrial training boards were originally set up in the dog days of Alec Douglas-Home’s Conservative Government.
Today’s Tories seem shy about acknowledging one of their party’s more important initiatives aimed at tackling UK skills shortages. We know why: the noble Lord, Lord Tebbit, put 16 of the 23 industrial training boards to the sword nearly 40 years ago. The Engineering Construction Industry Training Board was one of the few that survived his cull. It also survived a more recent review, in 2017, by shrinking its board and taking the nonsensical step of cutting its training levy.
There are several reasons why the Engineering Construction Industry Training Board has lived on where others have been sacrificed; some are identified in the Explanatory Memorandum, and others are acknowledged in the board’s 2019 annual report. The overwhelming reason is market failure, which Ministers never seem willing to acknowledge. There are few incentives for individual employers to train, since the work is often short-term and the labour force highly mobile. This means that long-term skills needs get overlooked, and these are vital, in engineering especially. The board is right to claim that it helps to make the labour market in engineering construction more efficient and more effective.
My Lords, this order is not contentious, but it is worthy of some discussion. The construction industry is alone in continuing a training levy, as the noble Lord, Lord Hain, just set out. Some years ago, industry training boards were transformed from statutory to non-statutory bodies, and as the Minister stated, the Construction Industry Training Board, or CITB, and the Engineering Construction Industry Training Board, or ECITB, retained their statutory status and powers. They make annual proposals for the levy for their respective industries. The Secretary of State, having been satisfied that the proposed levies meet the statutory criteria, lays orders before Parliament to give effect to the proposals. This is the routine order we are now considering. The ECITB training levy is specific to the engineering construction industry. The ECITB determines how the money is invested in training and other projects for the benefit of the sector and is a registered charity. There might be advantages in other industries having such well-regulated training requirements.
However, issues now arise with the introduction of the apprenticeship levy. I agree with what the noble Lord, Lord Bourne, said. Employers with a pay bill of more than £3 million per fiscal year relating to employed labour have been required to pay the apprenticeship levy since April 2017. This payment is made to HMRC through the PAYE process and is in addition to any industrial training levy charged by the ECITB. The apprenticeship levy is ring-fenced to support apprenticeships in England across all sectors and occupations. However, we know there have been many issues with this levy, with it being applied to programmes of learning which could in no way be described as apprenticeships, such as master’s degrees and other advanced learning. In my book, an apprentice is somebody who is starting out on their career. Employers have long asked to be able to use the levy for a wide range of training, not just apprenticeships. Does the Minister have any update for us on whether that change might happen?
My Lords, I thank the Minister for the clear and concise manner in which she laid out this statutory instrument and what it seeks to achieve. The Opposition welcome the introduction of the latest version of the Engineering Construction Industry Training Board levy.
The levy has gained the status of a most venerable instrument. As my noble friend Lord Hain, an esteemed historian, said, it was first introduced in 1964, at a time when the UK was ending 13 years of Tory misrule by welcoming the Government of Harold Wilson and the white-hot heat of the technological revolution. The levy that we are considering today has certainly stood the test of time, although, as my noble friend Lord Hain also highlighted, the representation on the board unfortunately has not.
In a previous life, I was a trade union official involved in negotiations in the manufacturing sector. That involved regular dealings with some of the various industrial training boards then in existence. From memory, there were in excess of 20, until being significantly reduced in number by the Industrial Training Act 1982 —the legislation under which this order is issued. Today, there are just three boards, each of which is a non-departmental public body sponsored by the Department for Education, and thus accountable to Parliament.
The ECITB website reveals, to my surprise, the importance of the sector. It directly supports around 190,000 jobs and accounts for more than one-fifth of the total UK economy. The board raises its funds through training levies, and we learn from the Explanatory Memorandum to this order that, in 2019, the ECITB made grants of just under £20 million to subsidise employers’ training costs. Inevitably, that figure will be substantially lower this year, and it would be helpful if the Minister could indicate what estimate the ECITB has made to her officials about what it expects it to be.
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The offsite rate is increasing to reflect the substantial growth in demand for training grants for offsite workers in recent years. Last year, offsite training took out almost 25% of total grant expenditure, yet paid in only 13% of the total raised. The ECITB considers that the demand for offsite training is likely to increase further still as companies harness opportunities from new technologies and more work is conducted remotely. This increase from 0.14% to 0.33% of an employer’s annual payments to workers for services is being phased in over the three-year period of this levy order to minimise its impact on employers. Noble Lords will be reassured to learn that the sector affected gave overwhelming support for the increase. The rationale for a fairer split between who contributes to the pot and who can take from it is clear.
This order also recognises that SMEs are a critical part of the engineering industry but at the same time are less likely to have an in-house training budget. As such, it retains the exemption thresholds from the 2017 levy order, which ensure that smaller engineering construction firms can access the support that the ECITB provides without having to contribute financially. The ECITB expects that around 25% of all establishments within the scope of the levy will be exempted from payment.
The ECITB has consulted industry on the levy proposals via its consensus process. Consensus consists of two tests: both the majority who pay the levy and those who pay more than half the levy raised must agree to the proposals. I assure noble Lords that both tests have been overwhelmingly met. To summarise, 75% of all companies in scope of paying the levy, which together are likely to pay 87% of the value of the levy, voted in favour of the proposals before us. This is testament to the value in which the ECITB is held by industry and the recognition that there is a long-term skills challenge, which can be addressed only through collective action.
This order will enable the ECITB to continue to carry out its vital training responsibilities. As the country responds to the Covid-19 pandemic, this is now more important than ever. I beg to move.
Here, a wide-ranging body has a very good opportunity to set an example by saying, “This is what you can do practically to go on and do this, using the flexibility of examination boards and institutions.” We often have a problem with one small aspect of this training: the English language. I remember somebody in apprenticeships training saying, “Oh, don’t worry about that, I wouldn’t pass the English language test”—and they were doing the training. There are certain arbitrary barriers. What are we doing to make sure that we get the right people into these positions? Here, the levy is supporting an organisation that is perfectly placed to undertake some of this work. It would be interesting to know whether this is being considered.
As a nation, we had made some progress on apprenticeships over the last few years, though that had stalled a little bit, even pre-Covid. We need to ensure that we do something for some of the disadvantaged youngsters who will fall behind because of the education stutters—rather more than stutters, to be honest—that we have experienced. What are we doing in relation to that? That has got to be done against the backdrop of an apprenticeship guarantee scheme, to help the people who will suffer because of the economic consequences of the pandemic. The Chancellor has moved very nimbly on the furlough scheme, but we need to address the education gap and the apprenticeship problems that we face.
The apprenticeship scheme will need to be backed up with infrastructure projects—particularly green projects—on a nationwide basis, to give support to the apprenticeships guarantee that we would bring in. I am sure that the noble Lord, Lord Hain, will have something to say on this in relation to, for example, the Severn barrage tidal lagoon project. These are the things which will be needed to provide training for our youngsters for the future, so that we can address our productivity gap and some of the real problems and challenges that we face. This will certainly involve the public sector playing its part. Some rebalancing of the levy may be needed to ensure that we are getting the appropriate help for the more disadvantaged youngsters who have suffered; they really will suffer through this crisis if we do not make some real efforts to address these problems.
These are the issues I wish to raise against the backdrop of the order. As I say, I have no particular problem with the order, but it does not begin to address the scale of the problem that we have, as I am sure the Minister will acknowledge. I will not be opposing the order, but I certainly think we need to come up with some bolder solutions. It would be good to hear from the Minister how she sees that going forward.
The board’s chair, Lynda Armstrong, is also right that it faces an emerging skills shortfall as an ageing workforce retires. The 137% rise in the number of recruits starting apprenticeships in 2018—to 1,171—is a positive development, and I welcome the priority that the board is attaching to promoting the recruitment of a more diverse workforce.
I also welcome the fact that the board has an advisory council that includes trade unions and not just employers, trade associations and other stakeholders. However, I note that this falls a long way short of the provision made in the Industrial Training Act 1964 for equal numbers of representatives of employers and employees. Perhaps the Minister will say something about that.
The Engineering Construction Industry Training Board is an example of successful intervention that the Government are reluctant to build upon in other industries. It is a love-child that the Government are too embarrassed to acknowledge openly. Its very success highlights the discomfort that the Tory party feels when its free market ideology comes up against the practical consequences of free market failure. I hope—although I fear my expectations are very low indeed—that the Government will take heed of this story and begin to invest properly in the vital skills we need for the future. They have not done so for more than 10 years.
With not only the green projects of which the noble Lord, Lord Bourne, spoke, but with robotics and artificial intelligence coming up fast, surely the Minister must agree that the Government should start investing massively in skills now, or see Britain continuing to fall behind badly on productivity and the new jobs of the future.
As we have said before, the apprenticeship levy system means that the electrical and construction industries have a double bill of training levies. Can the Minister say whether this is contentious in the industry? What discussions are held to ensure that those in the engineering and construction industries are happy to pay twice for training in this way? We know that the ECITB consults widely and we hope that it would pick up such concerns.
We know that the construction industry’s workforce is around only 2% female, yet women who are practitioners can earn an excellent living and enjoy their work. What efforts are the Government making to attract more women and girls into construction? How, for instance, does careers advice and guidance in primary schools, as well as in secondary schools, portray this industry as attractive and accessible to all? The image of construction is of burly men with hods in muddy fields, and of engineers with spanners and greasy overalls. The reality is so very different. My daughter was an oil engineer for a number of years, yet she never had greasy overalls. Early in her career, she was the most senior woman at Esso’s refinery, which said less about her meteoric career and more about how very few women there were at the refinery—yet most of the jobs there could equally have been done by men or women.
The Prime Minister has expressed his intention to “build, build, build”, but without qualified builders, this is a hollow promise. Vocational, practical, technical education should be right at the heart of the political agenda, yet this Government have driven a coach and horses through long-standing, well-understood, highlyrespected vocational qualifications by bringing in the untried, untested and flawed T-levels. I declare an interest as a vice-president of City & Guilds, an organisation for which I worked for 20 years. I am very well aware of the value of and respect for City & Guilds qualifications, and indeed of BTECs, which are highly regarded but are sidelined by curious, non-expert decisions with this new qualification. How do the Government hope to encourage and train construction workers when they are set on destroying the very training and qualifications which have been the bedrock for generations?
A further aspect of the apprenticeship levy is that Liberal Democrats would seek to expand its scope to a wider skills and training levy and to add flexibility that works for employers and trainees. While keeping the contribution at 0.5%, we would use the cash raised not just for apprenticeships but for a wider training programme, and ensure that 25% of the funds raised would go into a social mobility fund, which we would use to feed into the regions and the cold spots and to make sure that we have diverse apprenticeships in the parts of the country and the sectors where they are most needed.
The electrical and construction industries are vital to our economic revival. As we agree this order—because we have no other option—can we keep in mind the vital importance of explaining and selling these exciting industries to children and adults? If we continue the obsession with academic qualifications and achievement, we shall never be able to restore the economy as the country needs.
Given the effects of the pandemic, does the Minister know whether the ECITB intends to return or retain levies paid this year that are currently unable to be used for training purposes? If the latter, does it intend to reduce the amount taken from employers in levy payments in 2021 as a consequence?
The annual priorities letter sent to the board by the predecessor of the noble Baroness in January this year—it now seems a lifetime away—states:
“The ECITB has a vital role in ensuring that our country has the technical skills needed to deliver critical infrastructure and energy projects.”
The letter set out the Government’s six priorities for the ECITB for the current year. While all are important—even more so because of the pandemic—the one that stood out for me was this:
“Help the industry to tackle current and future skills issues, with a primary focus on supporting employers to recruit a diverse and inclusive workforce, engage with the apprenticeships programme and to develop the training that best meets their needs, supporting the implementation of the new engineering and manufacturing T levels and the provision of industry placements.”
I emphasise that priority because it links to the need to ensure that more young people, particularly females, understand the importance of the engineering construction sector and the fact that it offers sustainable and well-paid employment, and embrace the STEM subjects at school to enable them to follow that path. There remains a serious and distinct market failure in the development of skills in the construction industry as a whole, something that stems in part from the fact that trading conditions, incentives and culture do not, it seems, lead to a sufficient level of investment in skills by employers. That is not by any means a failing restricted to the construction sector, but the ECITB also has a vital role in providing support in reskilling and upskilling, a factor that will increase in importance after the break with the European Union.
The introduction of the apprenticeship levy in 2017 was a clear sign that the Government accepted that employers would not in sufficient numbers invest in skills of their own volition but required a firm hand on their shoulder to encourage them to do so. As other noble Lords have said, that levy has not yet been as successful as many had hoped, but I believe that no purpose is served by criticising an initiative that is a positive step and ultimately will raise significantly the number of apprenticeships undertaken. The question now is how long that will take, with so much of industry in difficulty.
There is no mention in the Explanatory Memorandum of how the ECITB levy interacts with the apprenticeship levy. There are many apprentices in the engineering construction sector whose employers are being asked to pay two training levies, albeit that they are differently focused. Given that in general many apprenticeships are taken up by people aged 25 and above, it is perhaps surprising that greater resistance from employers in engineering construction is not evident. The Explanatory Memorandum tells us that 25% of employers registered their opposition to the levy in the ECITB’s consultation but gives no hint as to the reasons for that sizeable minority position. On a point touched on by the noble Baroness, Lady Garden, can the Minister say whether being asked to pay two levies was an issue in the sector?
The so-called consensus process to which the Minister referred—it is the name given to the way in which the board seeks the industry’s approval for its proposed levy rates—gained acceptance for the existing levy rate being maintained for onsite employees but being raised on a phased basis over three years for offsite employees. I was going to ask the Minister about this, so I was glad that she explained in her opening remarks why such differential rates are deemed appropriate.
The consultation demonstrates that engineering construction employers strongly support the levy, clearly valuing the payback from their contributions. I wish both the organisation and the industry that it represents well and I look forward to hearing of progress in the development of the skills that are required when Parliament comes to consider the effectiveness of the levy from this year until 2022.
If I may, I should like to finish by paying tribute to my noble friend Lord O’Neill of Clackmannan, who very sadly passed away last week. I feel it appropriate to do so here because my noble friend campaigned long and hard against the construction industry’s failure to pay subcontractors on time, too often causing the bankruptcy of small companies. The noble Lord, Lord O’Neill, argued for the establishment of a retention fund to avoid such events, but to no avail. Such a scheme would give subcontractors a measure of security and provide more security in the industry and I hope that it will soon be established, forming, as it would, a fitting tribute to a fine man and a good friend to so many.