CITB to slash levy by a third
The industry training board told Construction News its board had approved a deal for the industry that would see the amount of levy paid by qualifying construction firms cut from 0.5 per cent of PAYE bills to 0.35 per cent from 2018.
The decision comes ahead of the CITB seeking a Levy Order from the government to allow it to continue to receive money from construction firms.
As part of the Levy Order process, the CITB is required to receive consensus from the sector that it should continue to collect levy from construction firms.
This process will take place between August and September this year, with a decision expected in February 2018.
Sources have told Construction News that the CITB faces one of its biggest challenges yet in persuading the federations and CITB levy-payers to back its continued existence, amid discontent with the organisation throughout the industry.
The new proposal for a reduced levy for nearly all firms across the construction industry will form a major part of the new deal offered to federations and levy-payers later this year.
Firms with a payroll under £80,000 will continue to be exempt from paying any levy. A rate of 1.25 per cent will remain on payments to Construction Industry Scheme (CIS) subcontractors.
CITB policy director Steve Radley said he hoped the new deal would improve the perception of the body ahead of it seeking consensus later this year.
“I think this helps us in three ways,” Mr Radley said.
“One is that we have listened to what industry has said. Secondly, it would be seen by most people as the fairer option because we are treating everyone the same.
“Thirdly, I think it gives us more space to work out what industry needs and work out what we aim to deliver.”
The organisation did admit that the proposals would lead to a reduction in the funds available to the CITB.
Mr Radley said that while he couldn’t give a definitive figure on the reduction in income, his early estimates were that it would mean a £25m drop in the levy funding available for the CITB. Current levy income is about £200m annually.
The CITB also confirmed that it would be aiming to increase efficiencies over the coming years and that the drop in income would not automatically mean a cut to the CITB’s services.
The organisation also expects some of the loss to be covered by “industrial growth” over the next couple of years, with the CITB expecting levy-payers’ wage bills to grow over the coming years.
The plan to cut the CITB levy is the culmination of months of work by its levy working party, which consulted with industry on the future structure of the levy.
The organisation was initially presented with four options last year, but these were whittled down to two before Christmas.
The other option up for consideration was a two-tiered system in which firms paying the government’s apprenticeship levy would have been given a reduced CITB levy rate.
The government’s economy-wide scheme will see all companies with a PAYE bill above £3m pay 0.5 per cent of anything above £3m into the government apprenticeship levy fund.
The CITB believes the new “reduction for all” approach represents the fairest and simplest option and ensures a clear distinction between the CITB levy and the government apprenticeship tax.
Mr Radley said: “The advantage with this option now is that when we start consulting industry from next month, we are not spending time debating thresholds and changing rates and anything that is complicated.
“The conversation will be, ‘This is the proposed business plan, this is the reformed grant scheme and this is how we would fund it through the levy: does this deliver value for money?’”
Construction News understands that federations and employers will be fully briefed on the changes this week.
FMB chief executive Brian Berry said: “The ‘reduction for all’ option will be welcomed by the vast majority of SME levy-payers who fall below the pay bill threshold for the government’s apprenticeship levy.
“However, it’s still not clear exactly which products and services the CITB will cut to allow for the reduced funding – we need to know that critical services will remain.
“Also, the CITB needs to do more than make the case for this levy option – the CITB needs to make clear its vision for meeting the skills needs of the construction sector and how the organisation intends to reform itself so it’s able to lead us there.”