Last week, the Scottish Government’s 2024-25 Budget Bill passed its final Parliamentary vote. Marek Zemanik, Senior Public Policy Adviser at the CIPD, outlines some of the key decisions that impact the people profession.
Headlines
Nearly £54 billion will be distributed across a broad range of areas under the Scottish Government’s responsibility.
Perhaps the most significant change for the world of work is the further differentiation in Scottish income tax. The Budget creates a new 45% advanced rate of income tax for those earning between £75,000 and £125,140, freezes the higher rate (42%) threshold at £43,663 and increases the additional rate to 48%. Those who work in Scotland and earn more than £28,500 pay more income tax than they would in other parts of the UK.
Additional funding raised from these changes, especially taking taxpayer behavioural impacts into account, still leaves the government in a difficult overall position. While some areas have been prioritised – the NHS gets an extra £500m, £6.3bn is invested in social security, with increases in the Scottish Child Payment – others have to bear the brunt of reductions. Most notably, the affordable housing budget lost almost £200m (26%) and councils signal very difficult decisions ahead on local services.
Skills and training
The 2024-25 Budget also includes disappointing reductions in funding relevant to skills development – Further Education, Higher Education and Lifelong Learning and Skills budgets are reduced. Skills Development Scotland (SDS) sees another drop in its funding after last year’s cuts. Since SDS is responsible for funding the majority of apprenticeships in Scotland, this is of growing concern.
Given Scotland’s labour market challenges, as well as the skills shortages and gaps identified by employers over the last few years, the vocational/technical aspects of skills development systems need to play a much more significant role in public policy. Apprenticeships in particular, combining on-the-job training with vocational qualifications, have the potential to significantly reduce the gap between skills demand and supply.
Beyond apprenticeships, however, we have long made the case for a boost in lifelong learning in Scotland. To its credit, the government and its National Strategy for Economic Transformation recognises the importance of upskilling and reskilling, highlighting the Flexible Workforce Development Fund (FWDF) and Individual Training Accounts (ITAs) as key interventions in this space.
Both were independently evaluated just over a year ago. The FWDF evaluation in particular, was very positive, finding a ‘clear and strong continuing rationale for the Fund’.
In stark contrast to the evaluation, the Scottish Government decided to discontinue the Fund, putting the entire purpose of an independent evaluation in question. The FWDF was, in the past, hailed by the government as a key intervention to support upskilling across the Scottish economy and it has become firmly established in the skills landscape. In addition, it is a unique offer for Scottish Apprenticeship Levy payers, which the CIPD recommended be boosted and replicated in Wales and Northern Ireland.
As things stand, there is also no clarity over the future of Individual Training Accounts or, indeed, the long-gestating Lifetime Skills Offer. The withdrawal of key upskilling programmes, without an announcement of any replacement initiatives, undermines the priorities set out in the National Strategy for Economic Transformation.
The discontinuation of these programmes, as well as overall budget reductions, have to be seen in the context of ongoing uncertainty over deep structural reforms to our skills landscape. Employer investment in training – as evidenced by the recent Employer Skills Survey – needs a considerable boost. Public policy should serve as an enabler and not a barrier to this.
Fair work
Job quality is at the heart of what the CIPD does. An increasing body of evidence shows that good work is fundamental to individual wellbeing, supports a fair society and creates motivated workers, productive organisations and a strong economy. Policy-makers and employers need to take action if they are to improve job quality across the workforce – not only aiming for more jobs, but better jobs.
One budget line in particular stands out in this area – Fair Work and Labour Strategy - which has seen a 51.4% budget cut (£3.7m). This in itself is part of the Employability budget portfolio, which has fallen by over £30m or 23%. Budget documents justify the cuts as follows:
“Reduction in resource reflects planned closure of the Workplace Equality Fund and Disability Public Social Partnership, retirement of the Scottish Business Pledge and decisions not to start the Centre for Workplace Transformation or private sector 4 day week pilots.”
All five of these initiatives were promoted by the Scottish Government as either having made, or planning to make, a difference to Scottish workplaces:
- The Workplace Equality Fund, among other things, funded projects around age inclusion and supporting older workers. This is a stated priority of the government, given concerns around the rise of economic inactivity among those aged 50-64.
- The Apt Public Social Partnership – of which the CIPD is a member - supported the recruitment and retention of disabled workers, tackling Scotland's stubbornly high disability employment gap.
- The Scottish Business Pledge has been regularly hailed as pushing fair work into organisations. It is important that its retirement does not lead to less support for the Fair Work Convention and the government’s commitment to supporting employers to create better workplaces.
- The Centre for Workplace Transformation was to explore and support post-pandemic changes to ways of working. CIPD research suggests that improving job design and a focus on flexible working options has the potential to boost not only employee wellbeing, but also employee and – by extension – employer productivity.
- While it is good that four-day week trials are continuing in the public sector, it is the private sector – and particularly non-service industries - where much more evidence is needed to understand its potential impact.
In the context of a £54bn Budget, this is a miniscule budget line, but its parts were designed to either directly help or add to evidence around labour market participation, inclusion or workplace practice. The post-COVID world of work needs more of that.
In the past, the Scottish Government has recognised that smaller pots of funding can make a difference to workplaces and individual employee working lives. It is disappointing to see this approach discontinued.
Conclusion
This has undoubtedly been a difficult Budget under challenging circumstances. Of course, the UK Government’s upcoming Spring Budget may well result in additional consequential funding that the Scottish Government could use to augment the plans it just passed.
Regardless of this, conversations with CIPD members and research evidence overwhelmingly point to a need to provide more support for education and skills development more broadly, but for upskilling, reskilling and work-based learning in particular. Employability support to remove barriers to labour market participation, reducing economic inactivity, as well as boosting fair work across the working population, should also be high up the list.
Rest assured that we will continue to engage with Ministers, civil servants and government agencies on your behalf.
