Construction Industry Training Board

Ministerial Statement – in the Northern Ireland Assembly at 10:30 am on 13th October 2009.

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Photo of William Hay William Hay Speaker 10:30 am, 13th October 2009

I have received notice from the Minister for Employment and Learning that he wishes to make a statement regarding the outcome of the review of the Construction Industry Training Board (CITB).

Photo of Reg Empey Reg Empey UUP

With your permission, Mr Speaker, I will make a statement. However, before I do that, I thank you for the flexibility that you demonstrated yesterday when we had particular pressures in our programme.

I am pleased to inform the Assembly of my Department’s publication of a review of the Construction Industry Training Board. During an Assembly debate on 25 February 2008, I announced that, although the next review of CITB was due in 2009, I was bringing it forward to start in 2008. My decision was made in acknowledgement of the serious and persistent concerns that were expressed by the construction industry here and by political representatives on the value for money that employers receive in return for their levy payments. That review has concluded, and I have accepted the recommendations and asked my officials to work together with CITB on their implementation.

The review took place in two stages. At the first stage, the consultants were asked to address the question of whether there was a continued need for CITB and the levy. They concluded that the CITB and the levy were necessary interventions for the well-being of training in the construction sector. At the second stage, the consultants identified four options: option 1, CITB to remain unchanged; option 2, CITB to remain as a non-departmental public body but with a rationalisation of its activities; option 3, CITB Northern Ireland to merge with CITB-ConstructionSkills in Great Britain; option 4, CITB to be funded with a voluntary rather than statutory levy. Those options were assessed, and the conclusion was reached that the CITB should remain as a non-departmental public body with rationalised activities.

The review recommends that the CITB retain its non-departmental public body status and the statutory levy; that the CITB and ConstructionSkills — one of the sector skills councils — fully merge under one management structure and one brand and operate from one location; and that the levy threshold be increased from £15,000 to £80,000, thus exempting small businesses from paying levy. The review also recommends that the legislation be changed to remove air conditioning, refrigeration, plumbing, utilities and gas installation from the scope of the levy; that the administrative burden be reduced on employers and the CITB, with grants to be applied for by training providers; that the CITB stop delivering direct training and contract that work out and form strategic partnerships with centres of excellence; and that the CITB running costs be significantly reduced so that levy payers get a greater proportion of their contributions back via training grants or other benefits.

I have introduced the necessary legislation to increase the levy threshold to £80,000. From 1 September 2009, smaller employers no longer must pay a levy. That accounts for almost half of CITB levy payers. That is an important measure to support small businesses, particularly in the current economic climate. Other legislative changes will follow over the next two years to allow for the other changes that I have outlined.

To reduce overheads, the CITB anticipates that it will reduce its staffing level by around one third, and it is currently assessing the skills profile required for the new organisation. Departmental officials are working with the CITB, and they will keep the implementation of the changes under close review. To assess the impact of the changes on the construction sector, I anticipate another formal evaluation in the two to three years after the report has been implemented.

The various efficiencies recommended in the report will result in a significant year-on-year increase in the proportion of levy returned to our construction industry. The report provides an important blueprint for the future of the CITB, which has a crucial role to play in supporting our construction sector during and after our recovery from the recession.

Photo of Sue Ramsey Sue Ramsey Sinn Féin

Go raibh maith agat, a Cheann Comhairle. I thank the Minister for his statement. Furthermore, as the Chairperson of the Committee for Employment and Learning, I praise the Minister’s willingness to bring such issues to the Committee and to the House. I know that several Committee members will be interested in the statement, as its subject matter has been discussed several times in Committee.

I welcome the increase in the levy threshold from £15,000 to £80,000, because, as the Minister indicated in his statement, small employers — a group that accounts for more than 50% of those who currently pay the levy — will no longer have to pay it. With that in mind, will the Minister outline what impact the review of the CITB will have on the quality of construction industry apprenticeships, which, up until now, have been seen as less than perfect? Furthermore, will he outline the rationale behind the changes that he intends to make to the appointment of members to the CITB board? Have any objections been raised so far?

Photo of Reg Empey Reg Empey UUP

Raising the levy threshold will remove approximately 1,200 employers from the levy regime. As the Chairperson will know, I have received several representations from Members who have brought delegations to meet me.

This was a continuous theme throughout. A threshold of £15,000 is very low: it effectively means one employee. We felt that that was unreasonable and the bureaucracy unnecessary. It takes almost half of those people out of the frame altogether, and members of the public — employers in particular — will be happy to have it in place in the current circumstances.

The Member raised the issue of board members. As a non-departmental public body, the board is appointed under OCPA guidelines. However, it represents various sectors; some board members represent employees and some represent employers. I have had representations in this regard, and the principal issue that has been raised is that perhaps the small and medium-sized enterprise sector may not have the representation that some people think that it ought to have. It has been drawn to my attention that the larger organisations in the construction sector may have a disproportionate influence on events. I cannot confirm the veracity of those points, but the Member asked me directly whether I had received any representations on the matter: I have, and they are along the lines that I have outlined. In appointing members to the board, I will take into account the representations that I have received. I am not in a position to confirm the veracity of those representations, but I certainly have received them. I suspect that the Member may also have had similar lobbying, because people who would come to me would go to the Committee frequently or vice versa. It may be something that we can take up together and discuss in the future.

The Member asked about the quality of apprentice­ships, and I will give a pen picture of where we are. As of 8 October, there were 1,629 apprentices registered in construction-related occupational areas, which represents about 15% of the total people registered with the Department on its funded apprenticeships. However, that is about 50% less than it was before; the previous levels were much higher. However, as the Member knows, the construction sector in particular has been hard hit by the downturn. We have just over 1,600 apprentices, but that represents only 50% of what it has been previously.

We have introduced measures to try to help apprentices who have been made redundant in the downturn, and the Member will be aware of the Skillsafe scheme. There are defined apprenticeship frameworks for construction training which have operated successfully for some years. I am aware that the Construction Employers Federation, in conjunction with the Construction Industry Training Board and the joint council, has come forward with proposals for a revised scheme. We will consider those and respond in due course.

There is a particular difficulty in the industry because of the high percentage of people who are self-employed, and that, undoubtedly, creates an issue with apprentices. It also creates an issue with health and safety. The CITB has a mobile unit, which will continue to operate under the CITB’s direction. However, it will probably buy in some training capacity. There is no doubt that construction is one of the more difficult industries. The rationale for retaining was that, because of the unique nature of the industry, it was felt that if we just relied on the normal regime a lot of people could well slip through the net and not get the proper access to the necessary training and apprenticeships.

Photo of Thomas Buchanan Thomas Buchanan DUP 10:45 am, 13th October 2009

I thank the Minister for his statement. Of the four options, the second, which includes a number of recommendations, is preferred. One of those is that the legislation be changed to remove air conditioning, refrigeration, plumbing, utilities and gas installation from the scope of the realigned Construction Industry Training Board (CITB). Can the Minister tell us how those training needs will be catered for? Can he also confirm whether any companies or firms have been identified to deliver the direct training that is normally delivered by CITB but which is now to be contracted out?

Photo of Reg Empey Reg Empey UUP

With regard to the latter point, those companies have not yet been identified, but the CITB will have to contract for that service to be provided in the normal way. I can write to the Member on the issues, but I presume that the CITB will indicate a public requirement, so it will be a procurement exercise in the normal fashion. The CITB will indicate that it needs the provision of particular training and can then contract out for it. Instead of doing it all in-house, the training provision will be contracted out to various providers. As far as I am aware, those providers have not, as yet, been identified, and I am not aware of any contracts having been awarded, but that is part of the process in which we are engaged.

The removal of air conditioning, plumbing and other trades from the scope of the CITB will bring us into line with the rest of the UK, where that has already occurred. Training in those sectors will be provided in the same way as training in every other sector. Construction is the only sector left where there is a specific levy option. As the Member will know, there used to be four or five boards with a levy power covering retailing and other sectors, but it was felt that, in the current circumstances, the unique nature of the construction sector meant that it was still important to have a board with a levy power.

Photo of David McClarty David McClarty UUP

Like my Committee colleagues before me, I thank the Minister for his statement. Does he agree that it is important and timely to consider the scope of which firms are defined as liable to pay the CITB fees?

Photo of Reg Empey Reg Empey UUP

That issue is possibly one of the most contentious, because a levy is a form of tax, and no company likes to be eligible to pay a tax; therefore being in or out of scope, as it is called in the sector, is very significant. I suspect that the Member is aware that people have been lobbying significantly in the past on the issue of which firms should be in scope and which should be out. There are, however, complications.

First, some companies engage in some activities that are in scope and some that are not. For example, if more than half the payroll of a company happens to be in an activity that comes under the auspices of the CITB, that company’s entire wage bill is deemed to be included. Many such companies feel that that is unfair because not all their activities are in scope yet they are charged as if they were. I will review that issue to assess whether it continues to be fair and reasonable and see what alternative means and methodologies could be adopted. I am considering whether changes are required to what is called the “50% rule”. I have received representations from the Mineral Products Association in Great Britain and have planned meetings with that organisation and with ConstructionSkills in Great Britain, where similar arrangements exist. We will consider that to see whether some changes can be made to satisfy those who have made known their concerns.

Photo of Pat Ramsey Pat Ramsey Social Democratic and Labour Party

I welcome the Minister’s statement. In response to a question from the Deputy Chairperson of the Committee for Employment and Learning, the Minister referred to the outsourcing of some of the training programmes. Will the Minister outline the steps that his Department could take to ensure that locally based organisations have an opportunity and will be available to conduct training on the programmes?

Photo of Reg Empey Reg Empey UUP

Members regularly reflect that concern about outsourcing generally and not only outsourcing that is specifically to do with training. I am sure that most Members, at some stage, have been concerned about that sort of issue. The Member will be aware that the Central Procurement Directorate (CPD) of the Department of Finance and Personnel carries out procurement exercises on behalf of all Departments. I am not sure whether the CPD carries out procurement exercises on behalf of the CITB or whether the CITB carries them out itself. I assume that the CPD carries them out on behalf of the board.

Everyone is governed by European rules on procurement, which are explicit. One cannot favour a company because of its physical location. Some local companies may have cost advantages because they are already here, and that should be reflected in their bid. However, the Member will know that it is not possible to direct, to localise or to give advantage to a local company over a company that might bid from outside Northern Ireland. That consideration has been made regularly on all types of procurement issues, and the law in that area is very complicated. The Department of Finance and Personnel has the expertise, and it conducts most procurement competitions on behalf of Departments.

The process, however frustrating, must be followed, because, when people feel that they have been discrim­inated against, they often take their case to court. The Member will be well aware of that; contractual issues are still being fought over in Departments. The Department for Employment and Learning cannot guarantee that any outsourced contracts will be directed to local companies; it is up to a company to make the best bid. That is the only way in which such matters can be determined, and the Member, as an enthusiastic European, will be well aware of where the rule comes from.

Photo of David Ford David Ford Alliance

I also thank the Minister for his statement. I am sure that his speedy action on increasing the threshold for the levy to £80,000 will be extremely welcome to a number of very small employers. Will he indicate the timescale in which the merger of the CITB and ConstructionSkills will be achieved and the likely impact on the total number of jobs in the merged body?

Photo of Reg Empey Reg Empey UUP

It is estimated that the CITB will reduce its staff complement by around one third. The merger of the two bodies onto one site is already under way, and the joint operation will be based at the current CITB site at Nutts Corner. The bodies are looking at the new skills profiles that will be needed so that they can assess the qualifications and the type of personnel that they will require. That process will be settled before long. I cannot give the Member precise timing, but, if it would be helpful to him, I will inform him as soon as possible. The number of personnel has been reduced by around one third, and amalgamation on the Nutts Corner site is taking place.

Photo of Trevor Clarke Trevor Clarke DUP

I join other Members in thanking the Minister for his statement. He said that direct training will now be contracted out. Does he have any concern that, when that training is contracted out, it will not be of the same high standard as that which the CITB delivered? I am sure that part of the rationale for contracting out is that it is cheaper. However, the word “cheaper” sometimes raises concerns that the same level of training will not be delivered.

Photo of Reg Empey Reg Empey UUP

The Member made an important point. Throughout the consideration period and when Members brought their delegations to me, a number of employers made the continual criticism that they did not get the return that they should have because the CITB’s administration and running costs soaked up too many of their resources. Clearly, in recent years, the pattern has been that contracted-out services are, by and large, in most cases, more cost-effective than those that are delivered in-house. Therefore, that balance must be struck.

I assure the Member that my Department would not be interested in maintaining a board if its training standards were unsatisfactory. Indeed, it is fair to say that the Education and Training Inspectorate has a role to play in examining the training that is provided and reporting thereon. There must be quality control; there is no point contracting out unsatisfactory training. Therefore, I take the Member’s point. I assure him that the Department would not go down that route if it thought that the level of training was unsatisfactory. However, I am sure he accepts that we must ensure that the minimum amount of money is taken up by administration and that the maximum amount goes back into the sector.

We are most concerned about the small and medium-sized enterprises, which make up the vast majority of businesses in the sector. The Member will know of companies in his area that are of that type and size. They are very small companies. It is our job to ensure that the maximum amount of resource is redirected to them. The Department believes that those companies and their employees would not necessarily get training if that mechanism were not in place.

I assure the Member that we will keep quality under constant review, because that will determine whether the board is working. As I said in my statement, we will look at the situation in two or three years’ time to ensure that it is working. I assure the Member that that will be one of my Department’s top priorities.

Photo of Claire McGill Claire McGill Sinn Féin

Go raibh maith agat, a Cheann Comhairle. I thank the Minister for his statement. My question is about value for money, which the Minister touched on in his previous response. Just one quarter of the survey’s respondents believed that the CITB offered value for money. Can the Minister reassure the House that the review’s recommendations will provide value for money, particularly for those small organisations and businesses that do not believe that they received it previously?

Photo of Reg Empey Reg Empey UUP

That question is at the core of the matter. If the answer to that question is no, we have wasted time and effort and must, therefore, move on. Value for money provides the rationale for what we do. The Department has responded to the fact that too many people were involved. We tried to deal with that. We have cut down to 1,300 the number of companies that will be included, compared with double that number previously.

As regards quality and identifying the right service to deliver, we are trying to reduce administration costs so that as much as possible of the levy is redistributed in training grants to various companies.

We have said that we want that to go to smaller companies. The delegations that a number of Members brought to see me continually reflected that theme. They said that the CITB was a bit top-heavy, that its administration costs were too high, and that it should be amalgamated with the other body to ensure that it was more streamlined.

Only time will tell whether we have been successful; however, we will continually monitor that. In view of that fact, I think that the Committee broadly agreed that changes had to be made so that people feel that they are getting value for money. Between us, we will monitor this.

If there is another review in a couple of year’s time and things are not satisfactory, we will have to take a different view. Value for money is certainly at the core of the issue. That will be the determining factor as to whether we are successful in the changes that we are proposing today.

Photo of Robert Coulter Robert Coulter UUP 11:00 am, 13th October 2009

I, too, welcome the Minister’s statement. Does the Minister agree that many construction firms, especially small ones, will welcome the increase in the levy threshold? How will that help them on the ground to come back from the recession?

Photo of Reg Empey Reg Empey UUP

I am sure that the all those companies, of whatever size, that will not have to pay a bill that they currently do will be happy about that. The increase in the levy threshold will be of small assistance to a number of small companies. There are a lot of small companies just above that level, and they will still be covered by this. Our objective is to try to redistribute the training resources for their benefit. The nature of the construction industry is different; it is very difficult to track apprentices, because people move around the country continuously. We, therefore, felt that there needed to be a specific and unique solution to this case. That is the rationale for retaining the board.

Our aim is very clear: first, to remove an unnecessary burden from a lot of very small employers, which we are doing, and, secondly, to ensure that those small employers that must continue to pay the levy will see the positive impact of their contributions. Effectively, resources from the larger levy-payers are being redistributed among some of the smaller ones. That is what we are trying to do. The key to that will be the quality of the service that is delivered. While we set out with a very clear aim, only the passage of time will determine whether we succeed.

The House will have an opportunity to revisit the issue. In two to three years’ time, we will be formally monitoring and assessing whether those changes are producing the results that we anticipate.

Photo of John Dallat John Dallat Social Democratic and Labour Party

I add my thanks to the Minister for his statement and, in particular, for increasing the levy threshold from £15,000 to £80,000. However, I question whether £80,000 is such a large amount in the construction industry.

I am sure that the Minister is aware that many small businesses in the construction industry face bills of £30,000 or £40,000. Is there any hope for those businesses that have suffered setbacks such as bed debts and other difficulties since the recession? Is there any hope of their being able to negotiate with the CITB on the real cost of the benefits that they have received? Many of them have received nothing. The Minister will know that some small businesses had a very high turnover of staff because they subcontracted out to other small businesses, and they have received no real benefit.

Photo of Reg Empey Reg Empey UUP

The Member needs to be aware that one of the downstream consequences of the current recession is that the Construction Industry Training Board receives its revenue on the basis of wages paid in the previous year. The year that we are about to enter will be a very difficult one, because last year was the year when the crash came in the construction sector. Consequently, the levy will be reduced substantially. In a sense, that is forcing some of the decisions that we are making, such as staff reductions and the need to rationalise. Clearly, the percentage that people are being charged will not change this year. No increase is being made to compensate for the reduction in the levy. The levy was designed not to add an additional burden, and we are trying to get as many people out of paying it as possible.

The Member said that £80,000 is not a lot of money, and that is true. However, what we have done means that there is a consistent approach between Northern Ireland and the rest of the UK. We will keep that under review in so far as there are inflation issues and other issues that we need to take into account, because inflation in the construction industry tends to be different from inflation in other sectors. There are no plans to increase the levy to make up the shortfall in the current year. However, there will be a substantially reduced budget produced by the levy, not simply because of the removal of a lot of people from paying that levy, but because it is based on the payroll of the previous year. As we know, large numbers of people in the construction industry have been made redundant. There will be a dramatic drop in income, but the rate at which people are being asked to pay will not be increased.