Economic Inactivity

– in the Scottish Parliament at on 27 March 2024.

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Photo of Elizabeth Smith Elizabeth Smith Conservative

1. To ask the Scottish Government what analysis it has undertaken to measure the extent of economic inactivity in Scotland post-Covid-19 pandemic. (S6O-03260)

Photo of Màiri McAllan Màiri McAllan Scottish National Party

The Scottish Government routinely analyses labour market data. Despite challenging conditions, the labour market remains resilient, with near-record numbers of payrolled employees in February this year. Scotland’s inactivity rate from October 2022 to September 2023 was 22.1 per cent, which was similar to the pre-pandemic rate. Data from the Office for National Statistics indicates that more people were inactive because of being students or because of illness, whereas fewer people were inactive because of looking after the family and home or because of retirement.

We are taking action to help people access and stay in the labour market. That includes employability support, health and work services and an investment in childcare.

Photo of Elizabeth Smith Elizabeth Smith Conservative

The cabinet secretary will know that, two years ago, her colleague John Swinney identified economic inactivity as the biggest challenge facing the Scottish economy, which I entirely agree with.

Since then, the economic inactivity rate has remained stubbornly high. Will she explain in a little more detail what policies the Scottish Government is enacting to address that problem, particularly given that the economic inactivity rate here is higher than that elsewhere?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

Tackling the inactivity rate in the economy remains an important part of the Government’s approach to economic prosperity. It is in our national strategy for economic transformation, which I am working to refresh.

As my initial answer suggested, there are a number of reasons for inactivity in the labour market—not least study, care, retirement and ill health. As I have set out recently in a number of fora, I am determined to tackle that high number, in particular through our employability work, to which £90 million has been dedicated in the coming year.

We are pursuing other policies to support that. One that is important to me, which I take the opportunity to highlight today, is childcare. Scotland is the only part of the United Kingdom to offer 1,140 hours of funded early learning and childcare per year to all three and four-year-olds and to eligible two-year-olds. That sits alongside the work that we have been doing with Public Health Scotland to understand the barriers that ill health—physical and mental—can create to having and sustaining work. I hope that a combination of all those factors will drive down the economic inactivity rate.

Photo of Willie Rennie Willie Rennie Liberal Democrat

The Scottish Women’s Budget Group’s recent childcare survey found that 55 per cent of respondents said that the challenge of managing childcare was impacting on their ability to work. In my constituency, after-school provision has closed in Newburgh and Newport, which is causing further problems for working parents. What further pressure is the cabinet secretary putting on her education colleagues to ensure that more is done, particularly with wraparound care and after-school provision?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I have just narrated the present childcare offer and will not do so again, but it is worth noting that that has been in place since 2021 and that, if families had paid for that themselves, it would have cost about £5,800 per eligible child per year.

The results of the 2022 ELC parent survey were in some ways encouraging, because 74 per cent of parents reported that accessing the 1,140 hours enabled them to work or to look for work. However, I agree with Willie Rennie that there is a strong case for expanding access to funded childcare, particularly for families who are on the lowest incomes and for those who are furthest from the labour market, and I am beginning work to develop an expanded national offer for more families with two-year-olds, which will focus on those who will benefit most. As Willie Rennie correctly points out, that is very much a cross-Government objective.

Photo of Michael Marra Michael Marra Labour

I am sure that the cabinet secretary will share Labour’s concern that the numbers of people who are economically inactive are rising, particularly among younger people. Given that habits are formed between the ages of 18 and 24 that can guide people’s participation in the labour market for a significant part of their life, what concerted effort is the Government making to understand the causes of that change in behaviour among younger people?

Photo of Màiri McAllan Màiri McAllan Scottish National Party

I do not disagree with what has been said at all. I will quote some of the most recent data. For 16 to 24-year-olds, the most common reason for inactivity is being a student, which accounts for 77.9 per cent of those who have presented as inactive. As Mr Marra notes, that is followed by inactivity due to being long-term sick.

I am reluctant to and will not generalise about the reasons why people find themselves economically inactive. That data speaks to some of those reasons. However, I am clear about the importance of the employability work that the Government is doing. That is why I am pleased that, despite very challenging financial circumstances, we have managed to back a package of measures with £90 million in the coming year. That sits alongside really important work to understand what creates difficulty with regard to ill health in respect of mental and physical health.

I should say that this is about working not just with those who are inactive but with employers to ensure that the right conditions, including flexibility of work, are in place to ensure that people can have and sustain work.