Covid-19 is the biggest challenge that we have faced in our lifetime. It is first and foremost a public health crisis, and this Government makes no apologies for focusing squarely on the health challenges. It is only by suppressing the virus that we will enable the economy to recover and thrive.
We know that many economic indicators, such as Scotland’s gross domestic product and available job vacancies, have deteriorated since lockdown measures were introduced. The latest official labour market statistics, released this morning, show that in the period from March to May this year, Scotland’s unemployment rate rose to 4.3 per cent, which represents 120,000 people out of work, and Scotland’s employment rate fell to 74.1 per cent, which represents a total of 2,642,000 people in work. The claimant count rate has risen slightly over the past month, to 7.7 per cent in June, after a steeper increase over the past few months. The rate has roughly doubled since March, with a rise of more than 100,000 claimants.
However, those statistics do not reflect the full picture of our labour market, because the furlough scheme has protected many jobs. The latest information from HM Revenue and Customs shows that 736,500 workers in Scotland have been furloughed and 155,000 eligible self-employed people in Scotland made claims to the self-employed income support scheme. The support schemes have been vital in keeping people in work. We estimate that, without them, unemployment could have risen to around 14 per cent.
Take-up rates for the job retention scheme have been highest for accommodation and food services, with 74 per cent of jobs furloughed; construction, with 72 per cent furloughed; and arts, entertainment and recreation, with 66 per cent furloughed. Those numbers make it even more disappointing that the Chancellor of the Exchequer did not announce an extension to the job retention scheme, particularly for the hardest-hit sectors.
We know that many people have already lost their jobs and that household incomes have fallen. People are understandably anxious about what the future holds. Scottish Government analysis shows that unemployment could rise to around 10 per cent, which is approximately 275,000 people.
I welcome the announcement that the chancellor made last week on support for the economy and jobs, including the job retention bonus and the kick-start scheme. The chancellor’s jobs plan might have a headline value of up to £30 billion, although I note that the Office for Budget Responsibility has since provisionally estimated it at around £20 billion. In any case, we should be clear that those estimates are highly uncertain and contingent on demand, and some measures might prove to be poorly targeted.
The reality of last week’s announcement is just £21 million of consequentials for the Scottish Government, for the economy and skills area. Let me be clear: those measures will not be sufficient to meet the scale of the challenge that remains and they offer very little room for flexibility.
In Scotland, we have already acted quickly to put in place a business support package worth more than £2.3 billion, but we know that more needs to be done. That is why we took the decision last week to make an extra £100 million available in 2020-21, on top of the £33 million that has already been committed for employability support this year and the millions that are already in the skills system. We did that in order to help more people get the support that they need to move back into work or retrain.
Today, I want to outline how we will use that funding to help thousands of people back into work and boost the Scottish economy, focusing on three areas.
First, I recognise the impact that this crisis is already having on our young people. I also understand the potential long-lasting impacts for those who suffer periods of unemployment early in their working life. That is why I have asked Sandy Begbie, who has a wealth of experience in supporting youth employment through the Edinburgh guarantee and the developing the young workforce group, to offer industry leadership to develop an implementation plan for a job guarantee. That was one of the key recommendations of the advisory group on economic recovery, and we will set out more detail on the implementation plan in early August.
We know that we have to act quickly to protect the future of our young people and, to that end, I have decided to invest at least £50 million to support youth employment. That includes delivery of the job guarantee, and we will work with the United Kingdom Government, local authorities, the third sector, trade unions, Skills Development Scotland and other partners to ensure that no young person is left behind during this crisis.
That initial commitment will not create any new structures or bodies but will build on the successful structures and partnerships that we already have in place, using the principles of “No One Left Behind: Next Steps for the Integration and Alignment of Employability Support in Scotland”. It will also include additional investment in developing the young workforce, our internationally recognised youth employment strategy.
As we shape the guarantee, we will listen to young people and, in particular, to those groups whom we know are more likely to suffer disproportionately from a more challenging labour market. Our approach will be based on a set of ambitious principles that will support the aspirations of our young people. Those principles will make it clear that the job guarantee will be inclusive, with a clear focus on tackling inequalities and supporting young people into fair and sustainable jobs.
Secondly, I know that this is a hugely difficult and worrying time for thousands of people who have already been made redundant or who face the threat of redundancy as the furlough scheme unwinds. It is vital that we provide people with the support that they need to retrain and move into new jobs and, potentially, new sectors. We cannot ignore the need for additional support for people of all ages who are currently in precarious employment, or the need to skill up sectors of our economy as they restart. We need to develop a new retraining offer that can build on the existing skills, experience and expertise of our current workforce and help them to move quickly towards new jobs.
Ensuring that training is relevant, reflects regional and sectoral demands and supports effective transitions in our labour market is important, but so, too, is the opportunity to reinforce our ambitions for a greener, smarter and more digitally enabled economic recovery. I will therefore bring forward proposals for a new retraining offer focused on helping those in sectors where there is the greatest risk of job losses. That new offer will help people to gain the skills that they need to move into new jobs in key growth sectors. That work builds on recent recommendations from the advisory group on economic recovery and the Enterprise and Skills Strategic Board, and we will respond to both reports fully by the end of this month.
As I have already highlighted, I know that this is a hugely worrying time for many people who face the threat of redundancy as the furlough scheme unwinds, so, thirdly, I am committed to supporting people who find themselves in that situation and ensuring that they can access timely and effective support. Partnership action for continuing employment is the Scottish Government’s initiative for responding to redundancy situations. Through the provision of skills development and employability support, PACE aims to minimise the time that people who are affected by redundancy are out of work, with support tailored to meet their needs and local circumstances. Through a true partnership approach involving the public, trade unions and the third and private sectors, we will look to maximise resources to provide tailored support for those facing redundancy.
We know that the most vulnerable in society and those furthest from the labour market suffer most in times of recession, and we must do all that we can to support them to progress towards and into work. To that end, the Minister for Business, Fair Work and Skills has today announced the extension of Fair Start Scotland services for a further two years, to March 2023. That will provide support for unemployed people who have disabilities or health conditions or who face other barriers to moving into fair and sustained work. That extension period is an opportunity to provide stability and continuity as we respond to the current Covid-19 crisis and move into our economic restart and recovery phases.
We are facing unemployment on a scale not seen since the 1980s, and we are ready to rise to the challenge through initiatives such as a youth guarantee and a new national retraining scheme and through the provision of more funding so that we can provide immediate support and advice if someone loses their job. Of course, that significant package of employment and training support can be effective only if it is aligned with a renewed commitment to fair work and is embedded in a co-ordinated plan to support jobs growth and help businesses retain jobs through the period of on-going uncertainty.
We have already introduced significant measures such as the £230 million economic restart stimulus package that was announced last month. We are working closely through a range of sectoral forums, including those in hospitality and tourism and aerospace, to retain and protect jobs, where possible. Our response to the report of the advisory group on economic recovery will expand further on our approach for boosting employment, as will this year’s programme for government.
The relationships between Government, business, unions and agencies that have been forged or strengthened during this crisis will help to underpin a new national effort to grow jobs and embed fair work.
Today’s statistics confirm the scale of the impact that the pandemic has had on Scotland’s workers, businesses and communities. There is no doubt that meeting that challenge will require a national effort. The Scottish Government will rise to the challenge, but there is no monopoly on good ideas. I want to work constructively with parties from across the chamber to protect our constituents.
We are passionately committed to building a wellbeing economy for Scotland—one that is environmentally sustainable, supports local communities, enables businesses to thrive and innovate, provides good jobs and fair work, and delivers inclusive growth that meets the needs of people across all of Scotland’s communities.
Even alongside the chancellor’s youth employment scheme, that is unlikely to be all that we will need to do to support employment and skills over the next year, but it is a first step.