A Dysfunctional Training Funding & Delivery Model

Funding of Training

An important feature of the UK construction industry is its industry training board and levy model. It is not the intention here to undertake a detailed critique of the CITB and the levy but it is worth understanding the effectiveness of this body and the levy system as a basis of further recommendations outside the scope of this review.

The CITB is triennially voted for by industry as a body which collects a levy from its member employers and is then charged with reinvesting and distributing the funds to positively influence industry-wide training and skills development. This is supported by the Industrial Training Act, which defines the scope and detail of the levy. The money is distributed through a combination of directly organised initiatives and a grant system that requires levy payers to submit applications for qualifying areas of expenditure. It is important to note that the mandate CITB works to focuses on skills and training and does not necessarily apply equal importance to innovation and technology. This must be considered a critical weakness.

Interestingly, the extent of 'in scope' levy payers is not a comprehensive representation of the whole construction industry. For instance, the building engineering services trades which represent over 10% of annual construction output, are not levy payers and stand outside the CITB registered employers. This is a legacy from circa 25 years ago, when it was felt by these trades that CITB was not representing their interests and was too skewed to more traditional building construction trade training rather than mechanical and electrical services related training. This is another unfortunate example of the fragmentation described earlier.

Figure 10: Levy Intake and Distribution, CITB, 2015

It is worth noting, housebuilders do fall within the scope of the CITB levy due to their hybrid model of directly managing the construction process, but subcontracting the labour, which delivers the assets they subsequently sell.

In the last year approximately £180 million was collected through the levy albeit only £140million was distributed back out in grants etc. There is also a significant reserve that has accumulated of historical unexpended levy funds.

The pattern of money paid in and levels of recovery back out in the last year is quite telling when segmented against turnover ranges for businesses (see Figure 10 above).

The clear correlation is that the smaller, SME end of the industry is recovering proportionately less than the larger employers. This may well reflect what the review has seen evidence of in terms of larger employers being able to dedicate full time staff to pursue grant payments and this has created a 'cottage industry' of recovery that might not ultimately be in line with the industry's long-term needs and welfare. It also does not adequately address and benefit the important 'tail' to the industry that is physically delivering construction rather than just managing the process. It is suggested that a disproportionate level of funding and investment support needs to be proactively 'injected' at this end of the supply chain, not the opposite which is currently the case.

The latest Triennial Review of CITB showed industry agreeing with the need for the functions that CITB performs but there exists a need to improve its effectiveness and in particular the level of support offered to SMEs. Perhaps not surprisingly, the levels of satisfaction expressed with CITB largely correlate with the size of businesses and the level of relative grant recovery achieved in line with Figure 10 above.

It is also worth recognising that many at the smaller end of the industry also see training as a 'loss leader' in terms of funding relative to costs. Low levels of post qualification retention, due to a draw towards self-employment, and the lack of long-term pipeline to de-risk payroll burden against are major barriers to seeing training related costs as a long-term business benefit. Smaller businesses often feel they are left 'holding the baby' in a downturn and bear the brunt of an ever increasing reskilling and recruitment challenge in an upturn without others shouldering the burden equally. This so called 'free-rider' concept, identified in the last Triennial Review of the CITB, is a major reason why there is a challenge around driving a more equitable system of payment and distribution of the levy.