³ÉÈË¿ìÊÖ

I guess it is a question of whether it is a correction or an on-going cycle.

Wages and productivity are inextricably linked—if you want to drive one, you have to deliver on the other. The demographic is definitely an issue in Scotland, but the fact is that the fiscal framework is, to a degree, indexed, so average earnings growth is the fundamental issue.

I do not disagree with what you have said about productivity, and I think that the NSET does a good job of narrating the issue, but I would still take issue with the view that it focuses sufficiently on solutions. Going back to what Professor Ulph said in the previous evidence session, I think that Scotland has a particular issue with labour market participation. He admitted that it was not clear what the issue was, but, as he put it, the overall labour force is probably the correct size, but it is not necessarily in the right places. That suggests to me that we need interventions that allow us to redeploy and reskill people and ensure that they maximise their wages, which is not just a matter of focusing on people who are out of the labour market altogether—although it is in part.

In that case, I have to wonder about the priorities in the spending review. You have highlighted the employability fund, but that is not the entirety of the skills spend; a significant proportion of the budget of the Scottish Fiscal Commission—I am sorry, I mean the Scottish Funding Council; I am getting my SFCs mixed up—goes to colleges, but that is flat cash through the spending period, with an 8 per cent cut. Likewise, universities make a significant contribution to skills, and Skills Development Scotland’s budget falls within the same budget lines. Again, those budgets are flat cash throughout the spending period, with an 8 per cent cut.

Therefore, there are at least four budget lines—four areas of spend—that contribute to skills and ensure that, as Professor Ulph put it, people are in the right places in the labour market. However, only one of them is going up—the other three are being cut. Is that the right priority, cabinet secretary?

However, if you drive up earnings faster than in the rest of the UK—you cannot do that in the short term, but it is not an unreasonable medium-term ambition—you can increase the amount of money that you have to spend. That can certainly be done within a five-year time period. Is that unreasonable to expect? You certainly cannot do that if you cut skills funding.

I agree with all that, but we will make progress only if we do detailed research, both quantitative—we need more refined data about how the situation varies by sector—and qualitative, which involves considering what those transitions look like. You have described the problem, but we need to carry out research to identify the solution.

I will pick up on something that you just said, which is absolutely spot on—too many people in Scotland are stuck in low-wage jobs. Picking out what the Resolution Foundation has said in recent weeks, I find it slightly horrifying that, although headline wage growth is happening at pace, if we factor in inflation and remove extraordinary wage payments such as bonuses, the poorest paid are actually seeing their wages shrink quite considerably in real terms.

At a time when so many relatively well-paid areas of work are screaming out for people, is there not a role for much more focused and direct interventions? This is a rather crude example, but how many people with a truck driver’s licence could earn £40,000 compared with the minimal wage that they might be on now for want of a training course? Do we need to be a lot more direct, focused and surgical? Although I absolutely agree with what you are saying about the modern apprenticeship, it takes several years to complete and it is quite inflexible. Do we also need a more surgical labour market intervention to get people into work where they are needed and, critically, where they can earn higher wages?

I will make one remark about the hybrid working comment, because it is important to consider the issue holistically. Speaking as a former retailer, I know that people who work from home do not spend as much money during their working day. It is not just about how many widgets you produce. However, that is not the main thrust of my questions.

I will ask two questions to follow up Ross Greer’s questions about the labour market, labour activity and the impacts on low pay. What work is being done to unpack that first issue a bit more? As Ross said, that is not a new issue; we have been sending more people on to tertiary education for 30 or 40 years, and higher wages should be an outcome of that, but we are not seeing that. To unpack that a little more, about 40 per cent of people go on to higher education, including colleges; however, looking only at full-time university places, we have a slightly lower proportion than England, which has overtaken us.

What is going on? You would expect that, if a higher number of people were going on to higher education in the college sector, their education would be more vocationally focused and would translate into higher employment rates and higher wage rates. Is there work going on to unpack that? Is there work on whether there is a mismatch between skills and requirements and on whether those transitions are working correctly? We need to delve into those headline figures and understand what is happening at a sectoral level. Is that work under way?

Yes.

That would be a good start.

I want to go back to some of the points that the convener raised because, ultimately, success—and continued success—comes down to accountability and responsibility for taking the process forward.

It has struck me throughout our conversations that a great deal of enthusiasm for the national performance framework is coming from agencies, and particularly from the third sector. However, that is not necessarily being reflected in what they are being asked to do. You gave North Ayrshire Council as an example, and we have heard multiple accounts of organisations saying that they have found it useful to consult the national performance framework. However, they are also saying that they are not necessarily being asked by the Government to frame their plans.

I wonder whether there is a need to reexamine sponsorship and ownership at a Government level. Do we need to ask your colleagues around the Cabinet table to take specific actions with regard to their portfolios? One observation that has been made is that, when you held responsibility for both the national performance framework and the finance portfolio, that glued the NPF, as a priority, to the money, which is what ultimately tends to drive things. That does not necessarily happen when things are split from the money. Does there need to be a rethinking of responsibility at ministerial level and about where the performance framework is owned within the responsibilities across Government?

I really recommend the Scottish Leaders Forum’s work on how to apply the national performance framework. It has done work that goes beyond the level of the work that the Government has done.

On that note, I want to put to the cabinet secretary three suggestions that have been made and which I think make a lot of sense. First, although the point that John Mason was getting at with regard to responsibilities is important, I do not think it wise to ascribe particular measures to particular organisations, simply because of their very nature. However—and you could ask individual departments to do this—when strategies are published, it might be sensible to have, say, a policy of explaining in greater detail how they fit with and contribute towards the national performance framework. It would not need to be a statutory requirement, but could be just a matter of policy. It would make a lot of sense if we were to make explicit—front and centre—almost the first and last things that we are asking people in Government to do and report against, much as we do with sustainability targets.

Another suggestion, which seeks to eliminate the situation in which everyone broadly agrees that the national performance framework is good and no one takes responsibility for specific things, is to have agreements between the Government and agencies that make who contributes what a lot more explicit. That would not necessarily mean putting hard targets in place—a lot of it could be qualitative description—but it would be very much about putting in black and white some of the interdependencies and relationships with third sector organisations that the cabinet secretary has just alluded to. Could those sorts of agreements, which wrap around or sit on top of formal contractual agreements, be an idea to pursue?

Moving on to the third suggestion that was made, as has been pointed out a lot to us, no one is going to disagree with any of the outcomes. They are all good things—they are pretty unobjectionable and unarguable. However, the difficult bit is trying to come up with plans to influence them. Instead of just picking individual targets, do we not need to have some medium-term plan for influencing certain things in the framework? The other two suggestions—on reporting and having agreements—would flow from the plan that would be implemented. After all, having metrics with no sense of how you might influence them is potentially a recipe for making no progress at all.

I agree with that, and I think that we need to see that work being taken forward.

I wonder whether our approach to skills is too detached from our approach to enterprise support. More than 90 per cent of businesses are small businesses that have seen zero productivity growth over the past decade or more. Those are small businesses—a handful of people work in them—and you cannot divorce the employee from the business, because they are one and the same. It makes no sense to have an approach that looks at business investment and support separately from skills. Indeed, that approach forces us to shoehorn apprenticeships into businesses that cannot support or sustain them. There has been a lot of talk about apprenticeship sharing. However, as someone who has run a small business, I know that small business owners do not want to share their employees with their competitors, so that is a non-starter.

Do we need to think about small businesses more holistically instead of separating out investment in skills? Should we take a holistic approach to supporting the business skills of small businesses by treating the employee and the business as one and the same, in order to get productivity going in that sector?