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Exclusive: Firms to pay full CITB and apprenticeship levy next year

More than 900 contractors will be forced to pay two training levies next year while an industry consultation is carried out by the CITB, Construction News can reveal.

Officials from the Department for Business, Innovation and Skills and industry skills body the CITB have come to an agreement on the proposals, following nearly four months of talks over how both levies would work alongside each another.

Companies with a payroll of over £3m will now be expected to pay into the government’s apprenticeship levy fund as well as the full rate of the CITB’s training levy from April 2017.

This means contractors will end up paying one per cent of their total wage bill, of which 0.5 per cent will go to the government fund and 0.5 per cent to the CITB.

The double levy will last for at least 12 months while the CITB carries out a consultation with the construction sector on the amount firms should contribute to the training body in future.

A new levy arrangement will then be brought into law in the spring of 2018, when the CITB’s Levy Order is signed off by the government, as it is every three years.

Construction News understands more than 900 construction firms across the UK will end up paying the double rate as a result.

The CITB is setting up a “transition package” to mitigate the financial impact for companies hit by both levies.

“Our grants scheme must have a laser-like focus on helping employers to build a qualified workforce”

James Wates, CITB chairman

CITB head of policy Steve Radley said: “The way it will probably work is that firms currently claiming grants for training activities will receive an enhanced rate of grants for these activities next year.” 

The package is expected to cost the CITB £38m, which will be funded through the CITB’s cash reserves as well as “efficiencies” created through the restructuring of the organisation.

The government’s new apprenticeship levy was unveiled by chancellor George Osborne last July and comes into operation in April 2017. The government said it will help to create three million new apprentices by 2020.

CITB Levy working party members

  • Diana Garnham (Chair, and CITB Board Member)
  • Ian Rogers, Scottish Decorators Federation
  • Craig Bruce, Pert Bruce Construction
  • Liz Bridge, Joint Taxation Committee
  • Jemma Carmody, CECA
  • Simon Nathan, Build UK
  • Gareth Davis, Knox & Wells
  • Annie Summun, Kisiel Ltd
  • Hannah Warburton, Laing O’Rourke

BIS had urged the CITB to consult with industry on how the two levies would work together before the government’s apprenticeship levy comes into force.

But the CITB argued it would not have had enough time to carry out a full consultation with industry over any changes to the levy.

The organisation also believes that a “full and thorough consultation” over the next year will leave it less open to the possibility of legal challenges.

Last year, BIS and the CITB won a judicial review against Hudsons Contract Services after the firm claimed that changes made to the CITB levy in 2015 were illegal.

It is expected that the full consultation process will take around 18 months, with the official consultation having started in January and running until the spring next year.

When a proposal is finalised, it would then be put in front of the CITB board and federations for approval next July.

“Firms currently claiming grants for training activities will receive an enhanced rate of grants for these activities next year”

Steve Radley, CITB head of policy

These groups would then vote on the proposals, before it was put to the government for approval as part of the CITB’s three year Levy Order renewal in spring 2018.

The CITB confirmed that it had already begun its pre-consultation process by setting up a levy working group which would meet throughout the year.

The working group will be chaired by the CITB’s Diana Garnham and includes representatives from Ceca, Laing O’Rourke and Build UK (see box).

Mr Radley said: “The working party’s job will be to scrutinise the proposals and get the views from people in the industry.”

CITB to reform levy grant system

CITB has begun work to reform its levy grant system.

Construction News revealed in April that partners had been picked for £7.6m in new funding through specialist industry partnerships.

The organisation has been making cutbacks as part of an ongoing restructure, and will now set about tackling the levy grant system.

Consultations will run throughout the year with an agreement on the new structures of grant funding expected by the end of 2016.

Writing for Construction News today, CITB and Wates chairman James Wates said: “Our grants scheme must have a laser-like focus on helping employers to build a qualified workforce with the cross-industry skills that will benefit construction as a whole, now and in the future.

“This includes looking for new avenues of supporting employers, who will be in the driving seat on apprenticeships, but also paying for the petrol.”

CITB head of policy Steve Radley said the skills body was exploring making changes to the way it invests in training.

Ideas being considered include simplifying the way SME firms can claim grants; providing bigger financial incentives for providers of training in areas where skills are in particularly short supply; and commissioning training providers to provide free “at the point of access” health and safety training.

“These are the ideas we want to explore with employers and their represented bodies in the coming months to see how well they could work,” said Mr Radley.

The CITB plans to increase the proportion of employer funding it gives out from 83 per cent to at least 90 per cent over the next three years.

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