Apprenticeship Levy Construction Scotland Response

Transcription

1 Apprenticeship Levy Construction Scotland Response 10. Should a proportion of the apprenticeship funding raised from larger companies be used to support apprenticeship training by smaller companies that have not paid the levy? No. It is not clear how funds raised in the devolved Countries will be spent and while the Scottish Government has yet to outline its response to the Apprenticeship Levy Construction Scotland will respond to this question by assuming that the voucher system will be adopted throughout the UK. Construction Scotland recognise that the large majority of the apprentices that are currently trained in Scotland do so through employment by companies that would not be within the scope of the proposed levy. As such, Construction Scotland can see the attraction of these companies being able to recover their costs for this apprenticeship training from vouchers generated by the levy. However this proposal would punish large employers by reason of the size of their company. By its very nature, this proposal would mean that large employers as a whole would not be able to recover as much in voucher payments as they pay in levy. The construction industry in Scotland has been well served by its own industry Training Board for over 50 years. The Construction Industry Training Board (CITB) has collected a statutory levy from all construction companies that are in scope and has used the funds to sustain apprenticeship and upskilling training by companies of all sizes in the sector. Additionally, those sectors of the wider construction industry not in scope to the CITB, mainly the specialist building engineering services industry, have long standing and very successful arrangements that deliver substantial apprenticeship numbers. These processes continue to meet the requirements of a modern construction industry and any change from the existing arrangement is highly likely to be detrimental to the capacity and capability of the industry in Scotland. Yes. 11. Do you have any comments on the proposed mechanism for collecting the levy via PAYE The construction sector would face challenges should the decision be taken to establish a regime whereby a company s PAYE return was used as the basis for setting Levy payments. Contractors operating in the Scottish construction industry have a range of different business models. Some have large direct workforces whilst others make more extensive use of sub-contracting. The resultant issue is that some large employers workforces will be PAYE, while others may use more labour-only sub-contracting. The proposed model will result in similarly sized organisations paying different levels of levy depending on their PAYE profile. Construction Scotland believe that the long-term effect of the proposed mechanism will be to disincentivise recruitment of employees on PAYE.

2 12. In your opinion how should the size of firm paying the levy be calculated Organisations will always look to mitigate their exposure to any tax. The Apprenticeship Levy will be viewed no differently. If the number of employees an organisation employs is used as the basis for calculating Large Company Apprenticeship Levy (LCAP), those organisations may not look to expand if doing so will take them over the threshold for paying levy. One obvious measure of whether a company is large would be the EU standards under which a large company is one that has more than 250 employees, and either has a turnover of greater than 50 million or a balance sheet of more than 43 million. Construction Scotland recommends that a sliding scale of Apprenticeship Levy payments is introduced once a company s turnover rises above 50 million or employee headcount is greater than 250. No. 13. Should employers be able to spend their apprenticeship funding on training for apprentices that are not their employees It is not clear how funds raised in the devolved Countries will be spent and while the Scottish Government has yet to outline its response to the Apprenticeship Levy Construction Scotland will respond to this question by assuming that the voucher system will be adopted throughout the UK. All apprentices should be fully employed by the company that is funding their apprenticeship. Any other arrangement risks failure due to a possible lack of commitment to the training by either the young person or the training funder. A system where an employer can fund an apprentice that is not an employee is open to abuse where companies may seek to make commercial gain from selling on their vouchers. This could be a particular problem if this was forced on supply chain companies. The successful Scottish construction apprenticeship model is based on every apprentice being fully employed from the first day of their apprenticeship by the organisation that is responsible for the funding and direction of the apprenticeship training. 14. How should the England operations of employers operating across the UK be identified Construction Scotland believe that this situation presents one of the more fundamental problems that will be experienced with the Apprenticeship Levy, and it will be a problem that will be particularly acute in the construction industry, given its highly mobile workforce. It is unclear how companies that operate across the UK could be expected to identify their English workers. The obvious choice would be to use the contracted place of employment to determine where a given employee is based. This, however, invites abuse of the system, with workers being relocated across the border into England to allow them to take advantage of vouchers that might be unavailable to them in Scotland - depending on the decision made by the Scottish government.

3 This would result in an unacceptable bureaucratic challenge for companies to ensure that their workers nation of work home base is always maintained and correct. This model would also unfairly punish companies who are based in Scotland but who operate in England. This situation is very common, particularly at times when the market in the south east of England draws companies from north of the border. Under these circumstances, the companies would pay the levy but these workers may not attract vouchers meaning that they would not be able to undergo the same apprenticeship training that English contemporaries benefit from. The proposed model creates a scenario whereby a large Scottish-based contractor could be competing for work against a smaller English company. The Scottish company might be paying the Apprenticeship Levy but might not receive any apprenticeship voucher support. Meanwhile the smaller company could be paying no Apprenticeship Levy but could (potentially) receive support through being in the supply chain of a larger England-based firm. There is an assumption that the Scottish Government would not wish to set their homegrown firms at a disadvantage, so Construction Scotland would assume that similar arrangements would be set up in both nations. However the consultation document is not able to provide any certainty on this issue, so it remains a major concern for industry. Construction Scotland believe that before the Apprenticeship Levy is introduced there must be a memorandum of understanding with the Scottish Government to confirm how the Levy is treated in all devolved countries. Other. 15. How long should employers have to use the levy funding before it expires Companies should not be punished for scaling back their apprenticeship numbers during periods when market conditions tighten, as long as they maintain an intention to reinstate apprenticeship numbers as market conditions allow. The Scottish construction apprenticeship system is characterised by numerous 3 and 4 year craft apprenticeships - and longer in some cases - where many companies take on apprentices on a rolling basis as apprentices complete their training. A period of less than 4 years will seriously undermine the existing apprenticeship training culture in the Scottish construction industry. Under these circumstances Construction Scotland would recommend that companies are allowed to retain their vouchers for a period of at least four years before they expire. This period should cover the period from the date the voucher was issued to the date that the new apprentice is taken on, rather than the date when payment is made. Once an apprentice has been taken on the voucher funding associated with them should be ringfenced and not subject to clawback due to being timed out. This is to allow for any variation on when payment comes due from the apprenticeship training provider. 16. Do you have any other views on how this part of the system should work The opportunity to reward companies for delivering the apprentices that are needed by industry is something that should be welcomed. As such, proposals to allow overrecovery of Levy seems to offer benefits. However Construction Scotland can envisage scenarios where is becomes financially advantageous for a company to develop a factory approach to apprentices, training large

4 numbers as a means to recruit significant volumes of relatively low cost labour. This must not be an unintended consequence of the proposed system. The Scottish construction industry also requires clarity on what will happen in situations where an apprentices drops out of the programme. Industry will need to know what will happen to voucher payments under these circumstances, as there is a risk of significant liability issues, particularly in the first year. 17. Do you agree that there should be a limit on the amount that individual employer s vouchers can be topped up A situation where there is more demand for vouchers than can be funded through the money available from the Levy would be unacceptable. Equally, there should not be a situation where industry recovers less in vouchers than it has paid in Levy. It therefore makes sense to allow those companies that are over-delivering to recover their costs by topping up their vouchers. Industry will need certainty about the likely level that they will be able to top-up each year. It will be impossible for companies to plan their training if they cannot be sure whether or not they are able to recover part of their costs. As such, Construction Scotland would propose that there should an initial allocation of vouchers at the start of the year. Companies should then be able to report on whether they plan to use the vouchers, whether now or in the four year period Construction Scotland propose. The proposed Apprenticeship Levy will result in a complex and bureaucratic system. A better alternative for construction companies would be to retain the CITB. The existing construction levy system avoids the complex issue detailed above, as do the arrangements that are in place for those sectors not covered by the CITB levy. 18. How do you think this limit should be calculated? As previously stated, the proposed Apprenticeship Levy will result in a bureaucratic system. A better alternative for construction companies would be to retain the CITB. The existing construction levy system, together with the long standing arrangements for the wider building engineering services industry, avoids all of the complex issues outlined above. 19. What should we do to support employers who want to take on more apprentices than their levy funding plus any top-ups will pay for? This appears to be an area where the Government is in a position to act. It is clear that the funds available for vouchers will be limited by the income from Levy. If there is a desire to deliver more apprentices than the voucher system can fund, the funds must be found elsewhere. Currently construction companies are able to receive supported funding for as many apprentices as their business needs through CITB grant funding and other mechanisms. As such, the proposed Apprenticeship Levy will act as a constraint on delivery of apprenticeships in the wider construction industry. Given the current pressing need to raise recruitment in the Scottish construction sector through expansion of apprenticeship provision the Government may wish to consider

5 providing additional support to further top-up funding for apprentices to a level that meets the demand of the sector. The current CITB levy arrangement and that of the specialist building engineering services sector allows for innovative approaches such as shared apprenticeship schemes and specialist apprenticeship programmes to meet local industry requirements. The maintenance of these existing arrangements is the fairest method to support employers who want to take on more apprentices. 20. How can we ensure that the levy supports the development of high quality apprenticeship provision The wider Scottish construction sector has benefited from the fact that responsibility for management of apprenticeship standards sits with a small number of long standing and recognised industry training organisations, providing an independent and authoritative body that oversees the quality of apprenticeships. This activity is self-sustaining and efficient as it is funded jointly by government and industry, meaning that all but the very smallest Scottish construction contractors contribute financially to the maintenance of apprenticeship standards for the sector. Construction Scotland would see that for our sector the continuation of the current arrangements, including the existing quality assurance role played by Skills Development Scotland (SDS). Their role will be crucial to ensuring the quality of apprenticeships. Construction Scotland believe that this provides a model that other parts of UK plc may wish to replicate to oversee management of quality for their own apprenticeships. 21. How should these ceilings be set, and reviewed over time Construction Scotland believes that there is a desire by the UK Government to avoid sector-based approaches. Scottish construction apprenticeships are far more costly to deliver than equivalents in other sectors. This position is confirmed by the Government s own research. As such, if there was a ceiling on the cost of an apprenticeship, this would disproportionately impact Scottish construction companies who might be unable to secure full funding for their apprenticeships due to a cap that would not affect those in other sectors where cheaper apprenticeships would sit under the ceiling. This would have the impact of reducing the number of Scottish construction apprenticeships that are available at a time when there is strong demand for such positions. It needs to be recognised that construction apprenticeships are not uniform across all the nations of the UK. For example a Carpentry and Joinery apprenticeship in England takes 3 years and results in a NVQ level 2 qualification whilst a Carpentry and Joinery apprenticeship in Scotland takes 4 years and results in a SVQ level 3 qualification. CITB currently secures economy of scale and value through its position as a Managing Agency for the industry, working closely with the other long standing Managing Agents in the building engineering sector. As noted above, this strong negotiating position would be lost were the CITB to cease to operate. Again, Construction Scotland struggle to see how structures would develop to recreate this buying power in the absence of CITB and its partner BES Managing Agents. 22. How best can we engage employers in the creation and wider operation of the apprenticeship levy

6 Construction Scotland wish for construction to remain outside the remit of the Apprenticeship Levy. The CITB in Scotland has a significant resource dedicated to working with Scottish schools, employers and training providers to encourage young people to take up an apprenticeship in the construction industry. Construction employers inform and direct the content of apprenticeship training through long established local networks and national apprenticeship registration bodies. An exemption from the Apprenticeship Levy to allow construction companies to continue with their levy to the CITB is the best option. However, should the Apprenticeship Levy go forward the differing education and training landscapes in each of the nations must be recognised and accommodated in any engagement with employers. 23. Does the potential model enable employers to easily and simply access their funding for apprenticeship training It is not clear how funds raised in the devolved Countries will be spent and while the Scottish Government has yet to outline its response to the Apprenticeship Levy Construction Scotland will respond to this question by assuming that the voucher system will be adopted throughout the UK. Most construction craft apprenticeships in Scotland have a duration of 4 years where training provider costs vary over the period of the apprenticeship. The potential model does not seem to easily and simply track and fund an individual apprentice over the duration of the apprenticeship. While the basic model appears to be simple, there is no information regarding the underlying systems and IT platforms that will allow it to operate. There is also no certainty about precisely how payments to providers will operate, and how this will be linked to the evidence submission required to unlock funding. Construction Scotland also have concerns about the impact the proposals would have on the current Scottish systems and IT platforms that currently deliver very effectively in these areas. Construction Scotland strongly recommend that prior to further development of the Apprenticeship Levy, clarity is given to all parts of industry as to how they will be impacted. This should include case study examples that work through how small and large businesses in Scotland would pay Levy, draw vouchers and pay for apprenticeships. 24. Should we maintain the arrangement of having lead providers or should employers have the option to work directly with multiple providers and take this role themselves should they choose to do so The current arrangements for the Scottish construction industry are simple and well tried. The established employer-led scheme has one main qualification body with training provision being offered by local FE colleges who are the recognised centres of excellence for construction training. The Scottish industry s preferred option would be to retain the existing CITB Levy and wider Scottish industry arrangements. 25. If employers take on the role themselves what checks should we build in to the system to give other contributing employers assurance that the levy is being used to deliver high quality legitimate apprenticeship training It is not clear how funds raised in the devolved Countries will be spent and while the Scottish Government has yet to outline its response to the Apprenticeship Levy

7 Construction Scotland will respond to this question by assuming that the voucher system will be adopted throughout the UK. Construction Scotland would expect that any organisation that carries out this role should be subject to the same level of checks to ensure that voucher funding is being used in a way that provides value for money, and that the resultant apprenticeships meet the appropriate quality standards and wider industry needs. Construction Scotland have real concerns about who will be responsible for delivering these checks. Construction Scotland do not believe that there is a current body that has the resources to deliver this function. As such a new body in Scotland will be needed to deliver this. This clearly will require significant funding with no clarity on where this will come from. Yes. 26. Should training providers that can receive levy funding have to be registered and/or be subject to some form of approval or inspection? Again, Construction Scotland state that there is a lack of clarity as to who will provide approval or inspection of training providers and how they will be funded. In Scotland there is an established mechanism through the CITB and other sector Managing Agencies for the inspection and approval of construction training providers. This protects the working and learning conditions of apprentices and is funded through the existing CITB levy and other mechanisms. 27. If providers aren t subject to approval and inspection, what checks should we build in to the system to give contributing employers assurance that the levy is being used to deliver high quality legitimate apprenticeship training? The established mechanism in Scotland of the CITB & BES Managing Agencies should be retained to provide the necessary employer-led quality control over providers. Since 2003, the Scottish construction industry through the CITB and BES Managing Agencies have supported over 35,000 apprentices, providing over 130 million in funding. Sweeping changes to the well-established and successful Scottish construction apprenticeship system will hinder the ability of the sector to grow and develop at a time when many employers are looking to increase the number of apprenticeships on offer to meet present and future workload. 28. What other factors should we take into account in order to maximise value for money and prevent abuse? Construction Scotland believe that every apprentice that is trained through the new system should, on completion of their apprenticeship, have the skills required to deliver a necessary role in the Scottish construction sector. Construction Scotland would expect that these apprenticeships would continue to be developed and controlled by employers rather than providers where commercial interest in what is most cost effective to deliver rather than what is needed may be the over-riding driving force. At the risk of repetition, this is a role that the CITB and other Scottish building engineering services bodies have been delivering for the Scottish construction industry for over 50

8 years and it is one that they are ideally placed to deliver for employers in our sector under any new regime. 29. How should the new system best support the interests of year olds and their employers? The Scottish construction apprenticeship system requires all apprentices to be employed for the full duration of their apprenticeship. This has protected young persons by ensuring that the training that they receive is meaningful and is valued by the sector. The fully employed status of a Scottish apprenticeship is the best method to support the interests of year olds and their employers. Additionally, our number one priority as an industry is to ensure that every person who comes into contact with our industry each day goes home safely with no impact on their long-term health and wellbeing. For this reason, some existing construction apprenticeships are not open to 16 and 17 year olds due to the additional safety issue on sites around some construction plant and equipment. While Construction Scotland recognise the need to provide additional support to companies that do take on apprentices in the age groups, the fact that there will be no funding for adult apprentices will inevitably mean that the Scottish construction industry is financially disadvantaged due to the fact that it has to fund these key apprenticeships without the benefit of any funding. No. 30. Do you agree that apprenticeship levy funding should only be used to pay for the direct costs of apprenticeship training and assessment? 31. If not, what else would you want vouchers to be able to be used for and how would spending be controlled or audited to ensure the overall system remains fair? Construction Scotland recognise that the Apprenticeship Levy is intended to support the delivery of the UK Government s target of 3 million apprenticeships within the current parliament. An exemption from the Apprenticeship Levy to allow construction companies to continue with their levy to the CITB is the best option in assisting the UK Government to meet their goal. The wholesale dismantling of the current Scottish apprenticeship support infrastructure by the removal of the CITB would not serve the best interests of the sector or the Country. A whole new system would have to be put in place to carry out the functions currently delivered by the CITB and others. It is difficult to understand how this could be controlled or audited via a voucher system. Yes. 32. Are there any other issues we should consider for the design and implementation of the levy that haven t been covered by the consultation questions we have asked you?

9 Construction Scotland would like to take this opportunity to reiterate our grave concern about the impact that the proposed Apprenticeship Levy would have upon companies operating in the Scottish construction sector. The recently published Scottish Construction Sector; Skills Investment Plan reveals that there is a total forecast requirement for 82,000 jobs in Scotland between 2012 and This is made up of 21,000 new jobs and 61,000 replacement jobs. Construction Scotland know that construction companies are planning for a significant expansion of their recruitment of apprentices in the coming 5 years. There is optimism that the Scottish construction industry can build capacity, and apprentice numbers, under the existing system. There is a fear that by introducing sweeping changes at this time will be detrimental to apprenticeship training rather than supportive. Construction Scotland s current assessment of the proposals based on the facts available from the consultation document lead us to believe that the Apprenticeship Levy will dramatically reduce the number of apprentices that our sector is able to deliver. This assessment is based on Construction Scotland s judgement that the Apprenticeship Levy s implementation will lead to the loss of industry support for the CITB levy, despite the strong support that this levy still has among the vast majority of our contractors in Scotland. While the CITB is widely backed by industry, it is equally clear that in a low margin sector it is unlikely that the majority of large employers will be willing to pay two levies at a time when the rest of UK plc only pays one. This loss of support from large companies is likely to lead to the industry as a whole withdrawing its support from the CITB levy and grant system, defunding the CITB and leading it to no longer being viable as an organisation. Such an outcome would have a devastating impact on our sector, removing support for a wide range of training activities at exactly the time when this backing for industry will be most needed. Looking specifically at apprenticeships, in the Scottish construction industry 90% of apprentices in 2014 are trained by small and medium-sized companies. For many years these companies have been supported to train apprentices by CITB, and by building engineering services managing agents. If this support is removed following the demise of CITB, it is likely that many smaller companies will simply chose not to use apprenticeships as a means of training, or reduce the numbers they take on. This is because the model as proposed would mean that they would end up paying a much larger proportion of the cost of each apprentice, as they will no longer be able to draw support from CITB and other apprenticeship grants. With the removal of the support structure provided, Construction Scotland fear the collapse of the apprenticeship system in the Scottish construction industry. While companies would benefit from no longer paying the cost of the CITB levy, it is expected that many will simply use this saving to add to their bottom line rather than redeploy to fund their own self-managed training functions. This dilemma, faced by many low margin construction companies, is precisely the reason why the CITB was established in 1964, and why it has sustained industry support ever since. Construction Scotland have additional concerns about the continuing safety of our workforce if the CITB was to be wound up. One current role of CITB is to oversee the

10 industry s health, safety and environment test. This test is intended to ensure that any worker in the industry meets at least a minimum standard for awareness of the risks posed by our industry. This role would be lost if the CITB ceased to operate, potentially jeopardising the safety of operatives across the sector. The construction industry in Scotland would also lose the many safety courses that have been developed by industry for industry through the CITB s Site Safety Plus scheme. The above is just one example of the support that would be lost to industry should the Apprenticeship Levy lead to the loss of CITB. Other areas where the industry would be damaged would include: The loss of cross-industry research on future supply and demand for skills The loss of construction training groups that allow employer-led local and subsector specific training to be provided efficiently The loss of a wide range of activities to engage with new entrants and school leavers The loss of support and leadership for our sector on fairness, inclusion and respect issues The loss of direct support for small and medium sized businesses to assist with their training planning, and wider business support for SMEs The UK Government should consider the impact that the Apprenticeship Levy will have on the competitiveness of UK firms when bidding against foreign rivals. The model proposed would mean that a UK firm bidding against a European competitor would start that bid with a defined financial disadvantage over these overseas competitors. Construction Scotland have already seen with other business taxation where Scottish firms have lost out on work because they are not competitive as a result of the additional costs they face compared with continental and Irish rivals. Construction Scotland believe that the UK Government must ring-fence those companies that currently pay the CITB levy by keeping them outside of the scope of the Apprenticeship Levy. This would allow the CITB to continue to provide the support that is valued by industry. 33 Do you have any other comments that might aid the consultation process as a whole? Construction Scotland regrets that there is little evidence of inter-governmental discussion on the introduction of this new levy and how it will operate in the devolved nations before it was announced in the Chancellors budget. This is deeply regrettable and unhelpful for those companies and organisations working exclusively in the devolved countries or across the UK as a whole. Construction Scotland wish to state that the consultation lacks clarity throughout on how the Government intends the new Levy to operate. This has made it very difficult to provide concise and informed responses to many of the consultation questions. Additionally Construction Scotland consider that there are potentially serious unintended consequences to the whole UK training sector by the introduction of the Apprenticeship Levy and the removal of the existing levies paid by employers to the various ITBs.

11 One example of a potentially catastrophic effect of removing the current statutory industry levy arrangements relates to the ITB Pension Funds. This is a multi-employer pension scheme. The potential demise of CITB and/or ECITB, as seems likely with the introduction of the Apprenticeship Levy, would likely risk triggering the s75 pension debt of both organisations (perhaps some 250 million), seriously putting at jeopardy the other training organisations that participate in the ITB multi-employer pension funds. This may have the consequence of the PPF undertaking the liability or other mitigating government interventions having to be put in place.