§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]7.15 pm
§ Mr. Martin Linton (Battersea)
I am grateful to Madam Speaker for giving me the opportunity to introduce this Adjournment debate on what may, at first, seem a rather recondite subject—the application of the construction industry training board levy to hard flooring firms. It is not a subject that is often discussed at bus stops and bars in my constituency, and it has not sent right hon. and hon. Members rushing into the Chamber to hear what it is about.
I am raising the subject because of an injustice in how the system operates. I understand that hard flooring firms all over the country suffer from it. I make no apology for the fact that I raised the issue with regard to a particular firm, Wright's Flooring, and its owner, Brian Wright, who lives in my constituency.
Many of us have green filing trays on our desks, marked "In", "Out", "Filing" or "Case work". I also have a tray marked "TD" which is short for "Too Difficult". That is where I put difficult problems that require too much work—problems that have a long history, that involve two or three Departments, or that have been described in an unnecessarily complicated way. I confess that I would have been tempted to put this problem into that tray, where it would have languished for a long time—probably for ever—were it not for the fact that Mr. Wright is such a palpably honest and hard-working man, and he has a very good case.
I have to do four things in my allotted time: explain the nature of the injustice; describe briefly the history that has led to it; suggest what can be done to resolve the problem; and suggest whose responsibility it is.
The nature of the injustice is simple. Mr. Wright is paying a training levy to the construction industry training board. His competitors, on the whole, do not pay it. He does not object to paying the levy. He is not a critic of the CITB; on the contrary, he sends apprentices to be trained in the arts of laying vinyl and other hard floors through the CITB at Erith. He thinks, by and large, that the CITB does a good job, as do I. However, he objects to paying the levy while others do not.
Mr. Wright does not claim that the money that he pays is extortionate. He pays about £3,300 a year on a turnover of about £500,000. Of course, that is rather misleading. The levy is a very small proportion of the wage bill, but a much higher proportion of the profits. He works in a highly competitive business, and if his profit margin is only about 5 per cent., that comes to about £30,000 a year. That is all that he gets from running the business, and out of that he has to find £3,300, which is quite a sizeable chunk.
It is not so much the percentage that matters as the principle. Why does he pay but not his competitors? To understand that, I shall briefly go over the history. Hard flooring firms are considered part of the construction industry, whereas carpet layers are considered to be part of the furniture industry. The law decided some years ago that sticking lino on the floor with glue constituted construction, whereas fitting carpets constituted furnishing. It is the glue that makes the difference. There 565 is an arcane argument about what happens with carpet tiles, which are also glued. I think that it was ruled that that glue was a removable adhesive and therefore did not count as proper glue. So hard flooring firms pay the levy and carpet layers do not because there is no longer a furniture industry training board. That is not a big problem. The significant problem is that firms are classified according to what they mainly do. Firms that lay fitted carpets will almost invariably also, if asked, fit hard floorings.
In this instance, Mr. Wright is a specialist hard flooring contractor. He prefers to remain with what he is best at, which is hard flooring. By and large, his competitors are carpet laying companies that also engage in hard flooring. They are usually much larger than Mr. Wright's firm. The hard flooring work that they turn over, though only a small part of their business, or at least less than half of it, is often much greater than Mr. Wright's. They do not pay the levy and he does.
It would be understandable if the smaller companies did not pay the levy and the larger ones did. In this instance, however, it is the smaller specialist companies that pay while the larger ones do not. The smaller companies have to charge the same rate per square metre as the larger companies. If they did not, they would be driven out of business. The smaller companies have to absorb the cost of the levy as well as the diseconomies of scale that they are bound to suffer.
When the system was set up originally, every firm had to pay a training levy, if not to the construction industry training board then to another training board. I do not need to remind you, Mr. Deputy Speaker, that there were 28 training boards covering all industry. If an employer did not pay to one, he paid to another. It did not matter that a firm was classified according to what it mainly did. There were no ragged edges because the whole of industry was covered.
However, in the 1980s all but two of the training boards were abolished. In my view that was a retrograde step, but as that is not my central argument, I shall not pursue it. The present situation is that the ragged edges matter. The House will understand that ragged edges are anathema to hard flooring layers. That is what they are paid to avoid. We like floor covering to go right up to the wall and we like the join to be invisible. I think that they are entitled to expect that the Government will deal with the ragged edges in the training levy system with the same care and precision.
What can be done to resolve the problem? I wrote to the Minister and he made a couple of suggestions. First, he said that it is open to a trade association to ask the responsible Minister to remove its sector from the scope of the CITB levy. It would have to satisfy the Minister that the majority of its members wanted to stop paying the levy, and that satisfactory voluntary training arrangements were in place. I have put the matter to the Contract Flooring Association, which is based in Nottingham. It replied:The Contract Flooring Association has not supported the retention of the CITB during successive reviews particularly because the method of applying the levy has always been seen to be very haphazard.The association asked me to make it clear that the objection has never been to the CITB itself, and that it is recognised to be doing an excellent job in many 566 construction skills. Scaffolding and steeple-jacking are good examples of that. The problem is not the quality of its work but the fact that some firms pay the levy and some do not. The situation seems haphazard and unfair.
The majority of the CFA's members are already outside the scope of the levy as a result of a case brought to an industrial tribunal by Tyndale Carpets. When that firm won its case, the CITB did not appeal. As a result, nearly all the flooring companies came out of the CITB, leaving only a few hard flooring companies in its scope. Ironically, Tyndale is now one of the competitors that Mr. Wright faces. It does far more hard flooring work than he does, but it does not pay the levy.
In any event, Mr. Wright does not want to come out of the scope of the CITB levy. Instead, he wants everybody to compete on a level playing field. The problem lies not with the levy but with the rule that it applies to firms mainly engaged in hard flooring. One obvious solution would be for firms to pay the levy on the proportion of their wage bill that relates to hard flooring. I put that to the Minister in my letter. He replied:Though the use of "mainly" in the definition can lead to some anomalies, it is difficult to think of another system that would not create more difficulties.I sympathise with his problem, but who has the responsibility for finding the solution? The remedy may be in the hands of the trade associations. I encourage them to pursue that—if possible—if they can agree that all hard flooring companies should come out of the CITB.
However, that might merely move the ragged edge further along. The real problem is that, since the abolition of almost all the training boards, it is the Government's duty to find a fair way of deciding who pays and who does not. It is not enough to observe that it is difficult to think of a solution that would not create more problems.
If Mr. Deputy Speaker, you hired people to lay vinyl in your kitchen and they did not lay it under the fridge because the fridge was hard to move, you would say that it was their problem; it would be their job to solve it. It is exactly the same for the Government. Since the abolition of all the other training boards, we have been left with a ragged edge around the construction industry. On our own admission, that creates several anomalies. The job of Government is not to say that the problems are difficult to solve, but to find ways of solving them.
Many firms find a way out of the problems through dishonesty. They have only to state that the majority of their work comes from carpet laying and they are in the clear; or, if they fail to declare their full wage bill, they do not need to pay the levy. In fact, they do not even need to tell the CITB of their existence. The onus is not on the business to pay the levy, but on the training board to collect it—unlike the Inland Revenue and Customs and Excise. As 30,000 firms join or leave the industry every year, that is hard to police.
However, the situation is also hard for small, specialist, long-established firms such as Wright's Flooring. Mr. Wright has been running the business since 1962. He employs about 10 skilled craftsmen. He believes in training youngsters and, as a result, has often had father-and-son teams in his work force. Such small firms are exactly what we need in my constituency; they are specialised, skilful and reliable, and do not try to do what they are not good at.
567 Mr. Wright has a strong belief in training people for the job, and in treating people—and being treated—fairly. That is why he objects so strongly to the situation in his industry. Why should he pay, while others do not? Sadly, he often thinks of giving up his firm—even though he has a full order book—because he feels unfairly treated.
What is especially galling is that everyone agrees that he is being unfairly treated. The CITB agrees that he has a case, although it still charges him the levy; the Minister agrees that there is an anomaly; and, as Mr. Wright's representative, I certainly agree that he suffers an injustice. The problem is that he can do nothing about that injustice; it can be remedied only by Parliament and the Government—he looks to them.
§ The Parliamentary Under-Secretary of State for Education and Employment (Mr. Malcolm Wicks)
I am grateful to my hon. Friend the Member for Battersea (Mr. Linton) for raising this important issue. I commend him for drawing the attention of the House to his serious concern on behalf of his constituent. He works hard for the people of Battersea—this is an example of that.
I am also aware that he is a strong supporter of training and of the CITB, which is a statutory training board. As he mentioned, it is one of only two that remain. It is a large training business whose role is to ensure that there is a skilled work force able to meet the needs of the industry it serves.
My hon. Friend raised several complex issues. They are not easy to resolve without creating other difficulties—he anticipated my argument on that point. It is important to keep in mind the wider benefits for the whole industry of the training board and the levy.
I shall set out the general context of the work of the CITB, before dealing with the particular concerns expressed by my hon. Friend. The board is regularly reviewed—most recently in 1997—and exists only because the industry wants it. The board is not an unwelcome imposition by Government. Employers, with the support of the trade unions, have consistently made a strong case that a mechanism for collective funding is necessary to train a national pool of highly skilled workers. They are clear that there would otherwise be a reduction in the total amount of training. That is because of the special circumstances of the industry, with its mobile work force, employment often on a project-by-project basis and the significant use of labour-only sub-contractors.
In such circumstances, the levy and training grant mechanisms spread training costs across those who train and those who do not train. Everyone contributes whether or not they are willing to train and all, ultimately, benefit in that trained labour is available to the whole industry. That describes the general position.
The benefits go far beyond the return of levy paid in the form of grants to those employers who train the industry's future work force. The levy also provides for the development of occupational standards, especially on health and safety which is critical. Furthermore, provides for the development of qualifications, the availability of export training advisers and for work with schools on careers advice and with the further education sector on improving course quality and on research on skills forecasting. All that activity and more is to the 568 competitive benefit of the companies within the scope of the training board. As my hon. Friend will appreciate, that includes those companies that decide to use the training board's services or to train and claim a direct grant for whatever reason. Nevertheless, they still benefit substantially from the work of the board.
Specifically, for firms engaged in floor covering, the CITB has developed national vocational qualifications and standards at levels 1, 2 and 3. They cover the full range of skills, including laying hard coverings. Grants are available to contribute towards the cost of achieving those qualifications. Floor covering training is delivered at three locations—in Kent, Salford and Glasgow. Again, funding is available from CITB for training costs and, if necessary, for travel and lodging expenses. If companies prefer to train themselves, there is help for that through the board's on-site assessment and training scheme. The Contract Flooring Association is involved in arrangements to make it easier for flooring companies to use that scheme. Many opportunities are in place for such companies to develop their training arrangements.
To ensure a level playing field between companies, demands have been made in recent months for there to be a law that would make it mandatory for every construction company to register with the CITB. The CITB is considering making such a proposal, and I have said that I will consider a change in primary legislation. However, a convincing case will need to be made. It will need to take full account of the costs and benefits and give full consideration to the administrative and bureaucratic implications. Whether a company is in scope to the levy can be a fairly complex decision, and that was the burden of my hon. Friend's remarks.
For example, it might surprise the House that plumbers, electricians and fence erectors are out of scope while bricklayers, carpenters and painters are in scope. I am not sure that we could reasonably expect companies to make that decision, and how do we wish to penalise them if they make the wrong one?
At present, it is the board's responsibility to identify and register firms. I know that it does that vigorously and will always follow up information given to it. The CITB is successful in improving levy collection—last year, it collected an extra £10 million.
My hon. Friend was concerned that firms whose main activity is not floor covering but which, nevertheless, do significant amounts of that work are not liable to the levy and he pointed out that that gives rise to anomalies. I have some sympathy with the point, but I cannot see a better way of identifying construction companies without creating further anomalies. To levy all firms that undertake any construction activity, no matter how small, would be very hard to implement. Where would the line be drawn—at 25, 30, 40 per cent. of a company's work load being a construction activity? It is a difficult question and he will understand the problems surrounding that. The CITB's approach of more than half seems, on balance, to be right.
I understand the point about the so-called "jagged edge" caused by different types of floor covering, only some of which are within the scope of the levy. It adds strength to the argument if one draws a comparison between the jagged edges that customers do not want to see and those that are apparent in this area of public policy. My hon. Friend's point was well made. 569 Until 1992, all floor-covering activity was potentially in the scope of the CITB, but an industrial tribunal took the view that carpet and carpet tiles are furnishings and therefore do not fall under the relevant statutory definition of construction. The CITB has operated on that basis since that decision.
That brings me to my conclusion and the way forward. As far as I know, there is no groundswell of opinion that we should revert to the pre-1992 position by bringing carpet laying back within the scope of the levy or, on the other hand, that we should remove hard floor covering from its scope. We do not know how many companies are affected, but there are about 200 that declare themselves to CITB as being mainly engaged in floor covering. It is for them, with their trade association, to make the case for change one way or the other based on a judgment of how best to ensure that quality training continues at least at the present levels.
I listened carefully to my hon. Friend and I shall re-examine his arguments in Hansard tomorrow. Obviously, the CITB can consider representations. I 570 assure my hon. Friend and his constituent that I shall discuss this very case with the CITB at our next meeting. My hon. Friend made his argument powerfully, and given the way in which he described what is clearly a small but successful business, I understand his points about margins and competition.
I conclude by underlining the main issue: it is about ensuring that effective arrangements are in place to provide a high-quality work force for the construction industry, including the floor covering sector. At the very time when we need to improve both the quantity and quality of training in our country, we do not want to do anything that would undermine our chances of achieving that objective.
I should be happy to have a follow-up meeting with my hon. Friend to discuss the matter further and I congratulate him on bringing to the attention of the House a matter that is, for some, obscure, but for those of us who understand it, very important.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-two minutes to Eight o'clock.