³ÉÈË¿ìÊÖ

Good morning. I am grateful for the opportunity to appear before the committee for the first time to discuss the pandemic’s impact on the labour market and key reasons for economic inactivity.

It is worth starting with a brief look at the labour market in Scotland overall. It remains in strong shape, with low unemployment rates—it is welcome that we have not seen the significant increase in unemployment rates after the pandemic that we might have feared. However, many businesses across the country and the economy still face labour shortages, even if vacancy rates are more stable now than they have been at points in recent months. The wider economic context is also concerning—the effects of Brexit are still being felt, there is an acute cost crisis and there could be a recession on the horizon.

It is important to put economic inactivity in the right longer-term and international perspective. Scotland’s inactivity rate is not a significant outlier in comparison with the United Kingdom or other countries, but our population is increasingly older and less healthy, and inactivity has increased over a number of years, which means that we need to take the issue seriously.

In the medium-term picture, the UK and Scotland may be experiencing different effects from Covid. There are significant increases in inactivity rates in the UK, which have reversed the previous downward trend. Scotland’s rate pre-pandemic was higher than that for the UK, and the rate has increased in recent years—between 2019 and 2021, the net increase in inactive people was 42,000, which is 5.5 per cent. However, we have not seen the dramatic reversal in trends that other places have seen.

I emphasise that the data for the very short term is volatile and is subject to many dynamics, which makes it difficult to pinpoint and be totally accurate about some issues that we will discuss today. However, the latest data suggests that the inactivity rate may be falling in Scotland, which is good news, whereas it is still rising in the UK. The gap has been closing over the past year or two.

All of that means that we should be cautious about assuming that all the commentary about and analysis of economic inactivity elsewhere automatically reads across to Scotland—it may or may not. However, that does not mean that we can rest easy—inactivity has still increased in Scotland in recent years, and the longer-term picture remains of some concern.

Long-term sickness appears to be the main driver of the recent increases in inactivity in Scotland. It was the largest single contributor to the increase in inactivity between 2019 and 2021, when it accounted for 24,100 people out of the total increase of 42,000. I welcome the committee’s engagement on the topic and I look forward to seeing your report and recommendations in due course.

The picture on early retirement is less clear than the picture on long-term sickness. It is too early to draw strong conclusions, but we do not see clear evidence of significant recent increases in the number of people who are inactive because of early retirement in recent years. Inactivity has increased among 50 to 64-year-olds, but that increase appears to be driven more by sickness and caring for others than necessarily by retirement. Our emerging sense is that early retirement is not on the same scale as long-term sickness as a driver of increasing inactivity.

On the health side, our emerging sense is that Covid and long Covid are not directly driving the increase in inactivity because of ill health, although they could be indirect factors. Health and health services are enormously important, but we should not forget that the drivers of inactivity overall can be complex and multifaceted and vary for each person. We cannot take a one-size-fits-all approach to the problem or the solutions.

I could talk about what we are doing to address some of those issues, but I think that the convener wanted my remarks to be relatively brief. I will therefore say only that I look forward to working with the committee on these issues, which are important to Scotland’s future.

Yes—health ministers have been looking at that issue and taking it into account as part of the overall approach to women’s health. I have seen references to that, but I would have to come back to the committee on how that is being done. However, I know that that has been a particular topic over the past year or two, and health ministers are engaged in it.

That is a good question. We have spent a lot of time looking at the issue over the past year. Clearly, employment and a lot of related issues are reserved to the UK Government but, under devolution, as you are aware, we have responsibility for offering support to people who are furthest from the labour market. We do that through two channels, one of which is a national scheme called fair start Scotland, and you will have heard about that during your visits. It is good to hear that you were impressed by what you saw. It is very humbling and impressive to visit those programmes around the country, as I have done, from the islands to various parts of mainland Scotland.

Fair start Scotland offers pre-employment support for, if I recall correctly, up to 12 to 18 months, and in-employment support, where a case worker will stay in touch with the individual who has perhaps got on to the job ladder for the first time in several years after long-term illness, mental health issues or disability. It could be a range of reasons. In-work support means that the case worker is available to speak on the phone and help people as they get back into a life of work.

We are satisfied that those programmes are working well. We have that national one, and there is a local one. That all comes under the umbrella of no one left behind. We have devolved a lot of resources and decisions to local employability partnerships in each local authority over the past year. That is where joined-up thinking happens at a local level; the DWP, devolved services, local authorities and other local players in the employability scene get round the same table and decide how to allocate resources to take into account local circumstances. There may be schemes for helping women get back into work, or schemes to recruit local organisations to help people with disabilities. That work is very local and joined up.

The question that you asked about joined-up approaches is very important. That work is happening at a local level; it has been rolled out over the past 12 months, and we are monitoring it to make sure that it is working. Services are now being commissioned at a local level with the extra resource that local partnerships have.

Fair start Scotland, which is national, as you will have seen when you met the various organisations that deliver that, is increasingly introducing mental health support to help people. It is becoming more of a one-stop shop. It is not just about getting people into a workplace but about giving them the support that they need to be ready for the workplace.

We are speaking about people who are very far from the labour market. We have had an evaluation report done, which I am happy to send to the committee after the meeting. When any person who has been out of the labour market for several years with various issues gets back into the workplace, that is a big success, first and foremost for that person but also for Scotland, as getting people back into work helps the economy.

I thank Alex Rowley for that question. It is a big question, and it is timely because we are about to publish a refreshed fair work action plan as part of our policy to ensure that Scotland is one of the world’s leading fair work nations by 2025. I have been working on these issues for the past few months. Again, I am happy to ensure that the action plan is copied to the committee as soon as it is published.

The latest figures indicate that, in the five years between 2016 and 2021, the disability employment gap in Scotland has reduced by 6.2 percentage points, and it currently stands at 31.2 per cent. That suggests that we are currently on track to achieve our ambition to halve the disability employment gap to 18 percentage points by 2038. Work is under way on various policies to work with employers on tackling these issues. In addition, the employability schemes that we have discussed, in particular fair start Scotland, play an important role in helping people with disabilities to get back into the workplace. We also have a workplace equality fund that helps employers to adapt to help people get back into the workplace.

You also mentioned the gender pay gap and employment issues. We have outperformed the rest of the UK on the gender pay gap since 2003, and we continue to work on that. We are about to publish the plan—for the first time, we are bringing everything together in one fair work action plan, because there are many intersectional issues to be addressed. For example, a disabled female will face various challenges. We have therefore brought all the policies around gender, racialised minorities—which you also mentioned—and disability, and the general fair work policy, into one action plan. That means that employers can go to one policy to get practical advice and support to tackle all these issues at one time, to enable their workplaces to become much more inclusive and equal.

Alongside the imminent publication of the fair work action plan, we are publishing our anti-racist employment strategy. That strategy will focus on racialised minorities and the employment gap that they face—which you mentioned, quite rightly. It will give practical advice, tips and pointers to employers on how to make sure that all their policies, including their recruitment and personnel policies, lead to a much more diverse workplace, because too many people in racialised minorities in Scotland face enormous hurdles. There is institutional racism in Scotland, as there is in all countries, and we have to face up to that. We hope that the strategy that we are publishing will help.

The Climate Change Committee’s report is a clear signal of the urgent need for transformation across our economy and society in order to achieve our targets. There are strong messages in the report for the Scottish Government on the pace that is required to achieve our targets. There are also comments in there on the role of the just transition and pointers towards the progress that we are making in that area. For instance, it highlights the role of skills in meeting our net zero ambitions for energy, transport, construction, manufacturing and so on. The report recognises that there has been good progress on the funds that we have brought forward, such as the green jobs fund, the just transition fund, which I mentioned in my opening remarks, and the national transition training fund, which has been in place for some time.

Your question about how we will take those strong messages into account in the formation of our just transition plans is a good one, because we will have to take those into account. We are being told that we have to go further faster, but that has an impact on the just transition debate, because it means that a radical transformation of the economy in the years ahead has to happen to achieve our targets.

Next year, we will outline our plans for construction, agriculture and land use and transport, as well as a place-based plan for Grangemouth, which alone is responsible for between 8 and 10 per cent of our national emissions. We will then carry out a massive exercise across Scotland to ensure that the detail in those plans is co-designed with the communities that will be most affected.

Next spring, we will outline our initial plans and begin that debate, which will take into account the need to be transformational.

Yes. Every part of what we are discussing will be a massive challenge for Scotland and for society, given what we are facing and what we have to do in the coming decades to 2030 and to 2045.

According to reports, Scotland has the second-best electric car charging point infrastructure in the UK outside London. Other parts of the UK are trying to catch up and, as Graham Simpson said, we have to do better. Of course I accept that, and I accept that the challenge is massive, but we are making progress on that agenda. We are trying to achieve the transformation of our economy and our society, but where we got to today took us several hundred years and we are trying to cram the equivalent transformation into the next two or three decades, so it is a big challenge.

All I can say is that some of the changes that we require to make to reduce our emissions and to decarbonise Scotland are so challenging that we need to have political consensus to support those measures.

We also need the tools.

Your question goes to the heart of what the just transition is about. When people ask me what the just transition is, I am always keen to emphasise that, as we go through the economic transformation to decarbonise Scotland in the decades ahead, we should use that as a window of opportunity to tackle inequalities and not repeat past mistakes. After all, if we are going to rebuild and redesign our economy, we want to make it better for everyone and to tackle inequality. That is at the heart of the just transition.

Co-design is a very important principle of the just transition. I know that there is a lot more to do, but I always emphasise to any community that I visit and to any organisation that I meet, whether it is in the public sector or the private sector, that any policies that are put in place and any projects that come forward should be co-designed with local communities, because we want to have buy-in.

We have the wider challenge relating to who pays for the just transition. That is why the Government, through its use of public sector funding, is ensuring that we support people on low incomes by, for example, retrofitting their homes or tackling fuel poverty. You will be aware of various funds that have been introduced to support people on low incomes, who are the hardest hit.

Overall, we want to ensure that everyone benefits from the just transition and the prosperity that is available to us. Tackling fuel poverty through deploying Scotland’s massive energy resources will be a key outcome in the next few years, especially in the light of the current energy and cost of living crises. We live in an energy-rich country, yet people are paying through the nose in energy bills. If people in a country that is producing several times what we require for energy are still paying through the nose for energy in 10 or 20 years’ time, the just transition will have failed.

I am up front about those tests. A lot of work and challenges will be involved in getting there, but we have to aim for that. We cannot live in an energy-rich country where people are fuel poor. That is the test of the just transition.

No, I am not hearing enough of that. It would be great to have political consensus on the major steps that have to be taken to transform Scotland’s economy in the years ahead, and consensus that we need the powers to do that. We are held to account for not implementing radical transformational projects, but we need the support of all parties to get the powers to do that in the first place. Other constitutional debates are taking place right now, but borrowing powers are the obvious example.

The more I think and talk about it, the more I realise how important political consensus is, because there are examples of issues that are considered to be important, but which are not necessarily the big issues that we will have to deal with. Those issues become huge storms in the Scottish Parliament and in political battles. We must have more national political consensus about what needs to be done if we want to save the planet, reach our net zero targets and save humankind and civilization, because those are the problems that we face.

Maggie Chapman mentioned keeping the temperature increase to below 1.5°C, but some people are talking about an increase of 4°C by the end of the century, which has major ramifications for our children, grandchildren and great grandchildren. If we are to tackle the issues that cause that increase, we will need more political consensus

The Government will publish its hydrogen policy in the next few weeks, and a lot of that information will be in there.

Various aspects of the hydrogen debate are being considered around Scotland. For instance, we have talked about CCS and the Acorn project, which has a hydrogen element to it. In Grangemouth in particular, people are looking at how to produce hydrogen.