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.
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, who 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.
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