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Sun July 22 2018

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Change for the better?

7 Jan Widespread industry dissatisfaction has forced the CITB to undertake a radical review of its role as construction’s training provider. Mark Smulian reports

Any firm that optimistically thought it might save a few quid by no longer paying the industry’s training levy will have been disappointed that, following a government review and an industry vote, the Construction Industry Training Board (CITB) lives and breathes.

It will not quite be business as usual, though. In future, the CITB will be expected to focus more on small firms, on identifying gaps in skills requirements, on working with social housing providers and generally on being more accountable to the industry rather than simply demanding money from it.

It will still have plenty to achieve. The CITB’s employment forecast from early 2017 spoke of an annual recruitment requirement for the industry of 35,740 people until 2021.

Specialist trades in keenest demand included carpentry, joinery and interior fit-out (3,850 a year), electrical trades and insulation (2,250), and other construction professionals and technical staff (2,240), painters and decorators (1,900) and bricklayers (1,600).

The CITB is – with the exception of a similar body in the engineering construction industry – a unique survivor of the 27 training boards set up in 1964 to which employers are legally required to pay a training levy from which they receive grants if they invest in training.

This mechanism was intended to both encourage investment in training and to fill gaps where employers failed to train staff.

Contractors with long memories may recall that the industry fought a spirited campaign to keep the CITB when the Thatcher government abolished most of the other boards in 1988.

Although the CITB survived, its continued existence was henceforth dependent on the outcome of an industry ballot – held every three years with voting primarily conducted through trade associations – on whether it should continue.

This year a loud outcry of industry dissatisfaction led ministers to appoint former government chief construction adviser Paul Morrell to lead a review of the CITB.

The loudest voice calling for the discontinuation of the CITB was that of the Home Builders Federation (HBF), where 89% of members objected to the levy-and-grant system. Almost as vocal was the Federation of Master Builders, which demanded a final ultimatum: the board either reform fundamentally or be killed off.

Even the Civil Engineering Contractors Association (CECA), which supported the CITB’s continuation, said its backing was on condition of radical reform.

However, some things never change. The Morrell review put forward the case for continuing with the levy-and-grant system in terms that were more or less identical to those the industry deployed when seeing off Thatcher 30 years ago.

His report argued that: “Employers will often be reluctant to invest in skills, including apprenticeships, because they cannot be confident that they will get a return on that investment over the long term. 

“Skilled workers are often not directly employed, and even where they are, there is a risk that they will be poached by a competitor who is not investing in skills or that they will have to be laid off if there is an economic downturn.”

‘Poaching’ is at the heart of the argument in favour of keeping the levy system. For example if Company A trains a bricklayer who, when trained, leaves for Company B which can afford to pay more because it does not invest in training, Company A would be unlikely to want to train another bricklayer, or indeed anyone else. This would be most unlikely to happen if both companies are required to pay the levy.

Morrell was unimpressed by claims that the industry would continue to invest at its present level in training if the levy obligation were removed.

He admitted this could not be judged with certainty, but cited the industry’s woeful record of research and development investment as evidence. This investment was “lower than in other comparable sectors…and the levels of investment in R&D provides reasons to think that the industry would not maintain spending on skills”.

With the argument in favour of the CITB largely unchanged over decades and with a majority of industry still in support (albeit with grievances of varying kinds) what was the argument against?

The Thatcher-era claim that a statutory levy represented an unacceptable interference with the market was really only a peripheral argument; the main argument against the continuation of the CITB essentially boiled down to two key issues: what the CITB does and how it runs itself.

Before 2015, the CITB board was dominated by representatives of industry bodies who spoke at meetings on behalf of their ‘constituents’. Former CITB chief executive Adrian Belton replaced this with a system under which the board was much smaller and its members appointed for their expertise but without specifically representing, or being accountable to, any industry body.

Belton departed suddenly in December 2016 – his resignation being ‘announced’ for him by CITB chairman James Wates.

FMB chief executive Brian Berry says: “Among the CITB’s problems is that a few a years ago there were changes in its governance and they removed trade bodies from the board, and it is still a great concern that there is no small and medium firms’ voice at the top. CITB is not in touch with its grass roots.

“We had one representative until Adrian Belton became chief executive and greatly reduced the size of the board…I can see the logic of what he did but it went too far.”

The Construction Leadership Council (CLC) had similar concerns, declaring itself supportive of a reformed CITB whose “governing body must comprise industry leaders representing all tiers of the industry, providing the mechanism for the CITB to be industry-led and accountable”.

As to complaints about what the CITB did, some were straightforwardly financial, such as the National Federation of Demolition Contractors’ complaint that “major contractors are still getting the lion’s share of training grants”.

In similar vein, Berry says: “We think it should be far more focused on quality apprenticeships and more of the funding should come to SMEs. There is a perception that money goes to large contractors and that the CITB is too big. It employs about 1,000 people and that does not sit well with SMEs, who wonder what they all do.”

The National Construction College at Bircham Newton faces sale or closure following the CITB's proposed restructuring

The loudest argument came from the HBF, which said the requirements of residential construction put its members in the unsatisfactory position of paying a levy based on their total payroll but being unable to claim for roles essential to house-building but not part of construction – such as sales and marketing.

HBF director of external affairs John Slaughter says: “Long term there has been a feeling that house-building did not seem to get a great focus on its interests.

“The CITB seemed more interested in construction and infrastructure, while house-building has evolved into an industry with different consumers, products and risks. There are some roles in house building, like sales and commercial, that the CITB does not see as part of its core constituency but which home builders are still paying levy on, and from the point of view of our members that does not look good.”

Slaughter said another grievance for HBF members was the sector’s relatively high reliance on indirect employment, in which “subcontractors may not know how to access CITB support while house-builders pay into the CITB but are not responsible for training subcontractors’ staff.

“When you put all this together it led a majority of our members to question whether the CITB is good value. If house-builders got together, could we do something better?”

The CITB might have said the HBF speaks for a niche, but it could hardly shrug off the mighty Balfour Beatty.

In August the contractor’s chief executive Leo Quinn laid into the CITB saying that, faced with a growing demand for skilled labour and the potential loss after Brexit of workers from elsewhere in the European Union, “bluntly, the present skills shortage shows [the CITB] hasn’t been doing this for some time”.  

Quinn complained that while levy income gave the CITB a budget equivalent to that of a reasonably-sized public company “it is not closely and regularly accountable to the industry it exists to serve. 

“Those of us who regularly must explain to shareholders and bankers how we are spending their money take it as read that we must furnish, check and justify every line in the information we publish justifying our performance.”  

The CITB raises £200m a year via the levy, argued Quinn, yet “the lack of detail in the information it has provided to date is truly concerning…this is a level of accountability which would be deemed unacceptable in virtually any other public arena in the UK”. 

Who said what, and to whom, following this broadside remains matter of conjecture. But by September, Quinn had struck a more conciliatory tone. 

Following meetings with the CITB, Balfour Beatty announced that the board had “demonstrated that it understands the urgency and magnitude of change necessary to create a CITB which will better meet the needs of the UK construction industry and help create the skilled workforce necessary to deliver the enormous pipeline of planned works”. And thus Balfour Beatty withdrew its threat to oppose the CITB’s continuation.

Faced with criticism from several corners of the industry, the CITB could see it had a battle on its hands - it would almost certainly garner the votes needed for the levy system to survive another three years, but its future beyond that could be in doubt unless it responded to concerns.

It took the unusual step, once the votes were in to secure its next three years, of publishing comments from the industry which, while backing the CITB’s continuation, were hardly fulsome:

John Tutte, chief executive of Redrow Homes, was quoted saying: “The CITB need to modernise, particularly to meet the needs of the house-building industry. They should take this levy vote as a stimulus to update their business model so that it can better support our industry.”

Brian Morrisroe, chief executive of Morrisroe Group, said: “I hope to see greater openness and accountability in the new delivery model.”

Richard Beresford, chief executive of the National Federation of Builders, commented: “A training board that works with the industry to deliver skills when and where they are needed is construction’s best option. CITB’s reforms, coupled with better SME representation to better reflect our industry, could deliver on construction’s potential.”

However the CITB had some difficulty in making its promised reforms generally known at that time because they were contained within a response to Morrell’s report – which the Department for Education sat on, for unexplained reasons, until 6th November.

Morrell said the CITB board’s effectiveness should be judged by whether employers can attract, retain and develop people with the skills and knowledge they need, now and in the future, taking account of technological developments and the need to improve productivity. 

He said the board must become “more representative of the small businesses that make up the vast majority of employers in the sector” and that it should implement far-reaching reforms.

It should “play a lead role in helping the industry to respond to the government’s ambitions for housing”, including developing links with housing associations given their probable greater role in developing homes and providing training.

The board should help to monitor and drive improvements to the quality and quantity of skills, help to attract people into the industry, review apprenticeship needs, support in-work training and help small and micro businesses “to navigate the skills landscape”.

Morrell observed that small firms felt the CITB did not understand or represent them and he said that people with experience of smaller employers should be encouraged to apply to become board members.

Reform of the grant system needed “particular attention” said Morrell, as it was “too often…seen by the industry in transactional terms, with employers aiming to reclaim their levy payments as grant – even if that means that they fund training that has little wider benefit”. 

He added that employers should be aiming instead “to get out of the system the skills that they need, whether directly or indirectly, and holding CITB to account for that. A culture of ‘money in, skills out’, rather than ‘money in, money out’ should underpin the industry’s engagement with CITB”.

Thus, faced with Morrell’s findings and the industry’s earlier reactions, the CITB had to state – and loudly – that it would mend its ways.

Sarah Beale, who succeeded Belton as CITB chief executive, says: “The [Morrell] Review echoes what our industry has told us it wants from a future CITB. 

“We fully support its conclusions. We’ve heard the calls for change loud and clear so now, we look ahead to some tough but vital decisions to become the ‘levy in, skills out’ organisation that our industry needs.”

With the publication late last month of its position paper Vision 2020: The Future CITB we now know what shape those reforms will take – and they are certainly radical (see box, page 31).

After this saga of claim and counter-claim, lobbying and intrigue, construction still has its training board, at least for the next three years, firms must still pay the levy and those that invest in training can get money back.

Time will tell how well the slimmed-down and restructured CITB performs and whether the reforms it has signed up to are the right ones.

But one thing remains unchanged since the other training boards were killed off 30 years ago and that is construction’s chronic skills shortage. It’s the conundrum that has never been solved, and had faded only in periods of deepest recession. Its scale remains daunting.

As Morrell noted, construction has an ageing workforce, 30% of whom are aged over 50. Leo Quinn went as far as predicting that a million extra skilled workers would be needed by 2020. And Brexit might see the wholesale loss of workers from abroad.

According to the FMB’s latest state of trade survey, nearly 60% of firms have problems recruiting bricklayers and carpenters, while significant numbers struggle to find plasterers and roofers.

The over-arching Construction Leadership Council (CLC) has a ‘skills work stream’, which it describes as seeking to deliver trained people for “a more efficient, productive, lower carbon, more innovative construction industry”.  

It wants to attract a wider talent pool into the industry, support people to gain better qualifications, work out how to better retain industry staff, agree “key areas of focus for skills” and “educate the public” about the career opportunities construction offers.

Fine aspirations indeed, but ones that would have been familiar to anyone involved in the battle to keep the CITB in 1988.

The next three years will be crucial. Only then will we know if the proposed transformation of the CITB has made the vital difference to the industry’s supply of skilled labour that past initiatives have so conspicuously failed to achieve. 

CITB’s 2020 Vision

 

In the wake of the government’s review and the triennial consensus process, CITB published radical plans to restructure in a document entitled Vision 2020: The Future CITB. The document outlines a three-year plan to slim down the organisation, turning it into ‘a commissioner of outcomes’. 

The CITB will no longer deliver training itself except where it is unavailable on the market, or not good enough. The National Construction College at Bircham Newton in rural Norfolk now faces sale or closure.

CITB chief executive Sarah Beale said the restructuring of the organisation would create “the strategic, forward-looking and agile skills body that the industry is seeking”. 

In effect, the organisation will exist simply to collect and redistribute levy money, as a commissioner and to accredit courses.

It will no longer administer card schemes including the Construction Skills Certification Scheme and the Construction Plant Competency Scheme. These operations will now be privatised.

With its departure from Bircham Newton, the CITB is expected to set up a new head office in Peterborough with small co-located offices in London, Scotland and Wales. Around two-thirds of the workforce will remain ‘mobile’, as now.

Internal support functions such as finance, procurement and contract management, legal, human resources, business improvement, marketing and estates & facilities management are expected to be outsourced by the end of 2018. 

CITB chief executive Sarah Beale said: “Construction needs to modernise and CITB is no exception. We accept the challenges laid down by industry and government and we will deliver a future-fit training body by adapting and updating our business model.

“Some really tough decisions could be made under these proposals but I’m confident in our commitment to becoming a more representative, accountable and reliable ‘levy in, skills out’ organisation. We now have a clearly defined path, and we see a bright future for a modern, engaged CITB.”

The CITB currently has approximately 1,300 staff. Unions say that hundreds of these jobs are now at risk. Unite national officer for construction Jerry Swain said: “These plans are a hammer blow for the construction industry and for the workers at the CITB.

“It appears that the ‘reforms’ being proposed by the CITB are all about increasing profits for individuals and companies and not what is in the best interests of the construction industry.”

Unite regional co-ordinating officer Mark Robinson said: “These proposals essentially would slash, trash and privatise the CITB”.

He added: “For the CITB not to provide their own training on behalf of industry leaves the market wide open for less capable and reputable organisations to drive down the quality and standards that the industry expects.”

 

 

This article was first published in the December 2017 issue of The Construction Index magazine, which you can read for free at http://epublishing.theconstructionindex.co.uk/magazine/december2017/

UK readers can have their own copy of the magazine, in real paper, posted through their letterbox each month by taking out an annual subscription for just £50 a year. See www.theconstructionindex.co.uk/magazine for details.

 

MPU

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