Finance and Constitution Committee

Meeting date: Wednesday, May 8, 2019

Official Report 604KB pdf

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Earnings

Good morning and welcome to the 10th meeting in 2019 of the Finance and Constitution Committee. I ask those present to do the usual with their mobiles.

Under agenda item 1, we will take evidence on earnings in Scotland from Derek Mackay, the Cabinet Secretary for Finance, Economy and Fair Work, and from Victoria Beattie, head of the workplace equalities team, and Simon Fuller, deputy director, economic analysis, at the Scottish Government. I warmly welcome our witnesses to the meeting this morning and I invite the cabinet secretary to make an opening statement.

Good morning, convener. Recognising that this is an exploratory topic, I am happy to go straight to questions.

That is helpful—thank you.

Our adviser has told us that, in 2017 and 2018, average wages grew less quickly in Scotland than they did in other areas of the United Kingdom and that understanding the causes of that relative Scottish earnings slowdown should be an on-going priority for us, given its potential impacts. Are you concerned about the potential impact of that slowdown on the size of your budget? What measures could you implement to respond to the situation? I recognise that any measures that you can take or levers that you might have might not be significant.

Yes; we want to increase earnings across the private and public sectors. We have a specific public sector pay policy. As some of the statistical analysis will have shown, over the medium term, the oil and gas downturn will have been one significant factor in the slowdown.

On economic growth, we are making a range of interventions. On my appointment as economy secretary, that included the economic action plan. We are doing more on productivity, innovation and investment, we have set out what we want to do on infrastructure and internationalisation and we are welcoming more investment in research and development.

All that gives us the right approaches to support the enhancement of earnings potential in the public and private sectors. Further work will take place on retraining and upskilling. As the economy transitions—it is clearly transitioning—we need to make the right interventions, to make sure that we focus on quality as well as the quantum.

For reasons that this committee understands better than any other committee, the fiscal framework has an impact on the relative position of earnings in the UK and in Scotland.

The key issue is productivity, which is why we are very focused on that.

We held a panel session on the living wage. Some of the noise about what the Scottish Government is doing was positive. However, although we might be ahead in terms of the number of living wage accredited employers, that number is very small in relation to the overall number of businesses. Can we do more in the living wage arena to encourage more employers to be involved?

Absolutely. We have launched the fair work action plan in support of the living wage. Of course, employment law is reserved and the setting of the national minimum wage is a matter for the UK Government.

The Scottish Government was the first Government to be accredited with living wage status. Through our procurement and other policies, we have tried to create a culture in which accreditation is the expectation. We cannot necessarily compel employers, but we have tried to encourage accreditation as appropriate; for example, the business pledge has a focus on encouraging the private sector to follow such practice. We also create that culture of expectation through our own employment policies—we pay the living wage and encourage other parts of the public sector to do the same.

By encouraging as many businesses as possible to pay the living wage, more people are paid the living wage in Scotland than in any other part of the UK. That is a good sign, but we want to get that number to 100 per cent; we also want to continue to improve the level of the living wage.

Therefore, there are actions by way of encouragement and there is a culture of expectation. Where we can compel payment of the living wage through our own employment policies, we have been doing that, recognising that that is the minimum that we can do.

On average wages, there is more to do across the composition of employment, but we have certainly been proactive on the living wage and we will continue to look at that. For example, we are reviewing the small business bonus and looking at how businesses supported by the enterprise agencies can further support fair work first. There are a range of interventions.

You mentioned productivity and I know that a couple of members want to explore that issue more deeply. James Kelly will begin that discussion.

In our last session, we heard that the wage growth issue has been around for some time. For example, median hourly earnings are 1.9 per cent below what they were in 2009. As you said, cabinet secretary, that becomes a concern when it feeds into the fiscal forecasts. If weak wage growth is forecast, that can compromise the budget. As you said, one of the reasons for the wage growth issue is to do with weak productivity. What does the Government see as its main task in increasing productivity? How do you link that to improving wage growth?

That is a fair analysis. Over the period of devolution, productivity in Scotland has improved—we have been closing the gap over the period of devolution and there have been further improvements since 2007 specifically. Not every year has seen big leaps in productivity but 2018 was a much stronger year. I am mindful that in eight minutes’ time, further productivity statistics will be available for the last quarter, but there has been improvement over 2018.

We recognise that productivity is an issue for output, and that is why the Government has introduced some of the interventions that I mentioned earlier.

The economy is transitioning, so we want to look at the economy of today and the economy of the future, which is more around digitalisation. We recognise that automation is an issue, but there are positives and opportunities as well, in coding, design and digital jobs of the future.

Enhanced productivity can also come from upskilling and focusing on quality in manufacturing as well as on spend on innovation and R and D, which are important for industry. That is why we are supporting the national manufacturing institute for Scotland, expending more on our innovation centres and working with universities. On education and the economy more widely, we support an education system that is clearly focused on skills as well.

The retraining partnership will be important, as many jobs will be changing. That partnership will focus on productivity. We will be working with the Scottish Council for Development and Industry on productivity clubs, because we recognise that a lot of best practice might be found in companies, which can share that best practice with other companies. Sharing good practice in relation to productivity is a key issue. In strengthening the economic strategy, the four strands of infrastructure, internationalisation, inclusive growth and investment will all play a part in enhancing productivity.

In relation to the living wage, what we pay is important and focusing on quality is important. There is an expectation that the childcare sector will pay the living wage and we are encouraging the living wage to be paid and we are trying to improve quality; quality and productivity go hand in hand.

There are a range of actions in the economic action plan that show that we see productivity as a serious issue and want to tackle it. However, the signs are that, over the period of devolution, we have made progress on narrowing the gap between the UK and Scotland, and 2018 was a stronger year.

Oil and gas will have impacted on the productivity figures, but there is now some resurgence, which will feed through to the wider economy.

There will be further information coming on productivity for the most recent quarter, but I think that we have made progress in 2018, so we need to keep that up.

You mentioned technology, which is clearly a big advantage. What are the key sectors in which you see technology improvements boosting productivity? How do you balance those advances in technology with the fact that automation will produce job losses in some areas? You will want to have a policy that counters that with an increase in jobs and opportunities in other areas.

That is a good question. We recognise that the economy is transitioning and we already know that there will be a shortage in digital jobs. There are already great employment opportunities in the digital sector but we must make sure that our workforce is trained and has the necessary accreditation and skills to be able to fill those jobs, so that we can attract more of them.

There have been some big, really welcome announcements on jobs—2,500 jobs at Barclays Bank in Glasgow and 400 jobs at KPMG—and there are other financial institutions looking right now at how they invest in Scotland. Naturally, they want assurances that we will have people with the appropriate skills to populate those jobs.

Although industry and manufacturing are changing, there are jobs in design, innovation, coding and digital. Through the city deals, and the investments that they make, we are looking to the industries of now and the future. Edinburgh is a good example of that, with the city deal investing in big data, technology and robotics.

Therefore, although automation is a challenge, with the jobs that it displaces, it is also an opportunity, with the new jobs that it creates. That is why we need to calibrate the enterprise and skills system, to make sure that we create as many jobs as possible.

It will not be lost on the committee that we have record low unemployment, at 3.3 per cent; we are outperforming the rest of the UK, which is on 3.9 per cent. Of course, we want unemployment to be as low as possible; and we want employment to be as high as possible, as well, because beneath those figures, there will be issues of underemployment.

Focusing on quality means investment in manufacturing.

On the question about sectors, we can do more around exports and we have launched the new export strategy. Food and drink is a very successful sector, and whisky is an example of an industry that has really focused on productivity. One of the fastest packaging and bottling lines in the world is at the Shieldhall plant in my constituency, which I visited for its 40th anniversary. It has invested in productivity and has sustained high-quality, high-paid jobs. We want to share good technical expertise in relation to productivity.

All sectors matter to the Scottish economy, but there are real opportunities in life sciences, production and manufacturing. That is why the national manufacturing institute will be so significant for us. That is about the Government working with the private sector and academia to make those leaps in productivity. It is about commercialising the academic outputs that we are investing in and trying to bring all that together through the enterprise and skills system.

You mentioned academic outputs. When I am speaking to businesses, one of the issues that I pick up on is the gap between the information technology skills that graduates come out of the system with and the skills that business and industry actually need. What is the Government doing to bridge that gap?

One of the recommendations from the enterprise and skills review was about ensuring that the education system delivers what business and industry actually need. Some of the work will be around having the necessary professional or company-recognised accreditation—in the digital sector, that might be Microsoft accreditation, for example.

A lot of companies in Scotland are doing fantastic work, but they hide their light under a bushel. Partly because of their clients’ commercial confidentiality, they do not want to shout about their success, but there is a lot of good work going on in Scotland right now.

Businesses have said that the focus should absolutely be on the skills that are required now and in the future, and digital skills are a good example of that. The Government is ensuring that we have the right partnerships between higher and further education and business and industry to build accrediation and other such considerations into courses.

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Foundation apprenticeships and particularly graduate apprenticeships are important. If a student who is going through the education system is being paid by a company—it might guarantee them a job, too—that is good for the academic institution, good for the student employee and good for the company. In real time, that gives business and industry the skills that they need and ensures that the person is educated. Those involved are not necessarily young—apprenticeship opportunities are open to many, not just to young people.

Graduate apprenticeships give people the necessary qualifications and accreditation and give them pay in their pocket, which is good for retaining people. People come out work ready and have been trained in the academic institution at the same time. Sometimes, businesses tell me that people have become work ready some time after they have gone through an academic course, but many of the interventions and recalibrations of the system, such as graduate apprenticeships, are intended to ensure that people are work ready as they go through their education.

Scotland does well at having a highly educated population—we have more graduates per head than most other nations, which is good. Ensuring that people have the necessary accreditation—accreditation that is professionally recognised or which is what business and industry want—is a helpful development.

It is making a difference to our economy and is partly why some companies are choosing to invest in Scotland now and why Scotland is attracting more big companies to come here—because we have an ecosystem of growth, a talented workforce and ways into education. Some such companies are engaging with colleges and universities on bespoke courses that are right for their sector. That is the right kind of partnership to connect the education system’s needs with the needs of business and industry, to give people the best start in employment.

I am glad that the cabinet secretary mentioned the digital economy. I do not want to drop us into a Brexit discussion immediately, but the UK Government’s stated intention is to leave the digital single market, which could be worth about €400 billion a year throughout the European Union—Scotland’s share of that is roughly €4 billion a year. If we are pulled out of that market, what effect will that have on the Scottish economy and particularly the digital economy?

It is well appreciated that a no-deal Brexit would be catastrophic for the economy because of its wider economic impacts. The published advice from the chief economist about the impact on the wider economy refers to recession, gross domestic product contraction, business failure, the effect on Scotland’s finances and fewer exports. Beneath all that is greater stress for companies because of the challenge of finding available staff and the effect on investment in universities and research programmes.

The panoply of impacts on the economy would be sorely felt, which is why we are trying to avert a no-deal Brexit, although any form of Brexit will have an impact on the economy and individual sectors—we have published information on sectoral impacts, too. Brexit will affect our economy adversely, as opposed to the growth that we would enjoy if Brexit did not happen.

The digital economy will be hit because education and the wider economy will be hit and business and industry will be affected. That is partly why the digital sector is so concerned about Brexit. People in the digital sector are highly mobile, and the impact on freedom of movement will affect employability and the availability of skills, a talented workforce, students and research. For all those reasons, Brexit will have a negative impact on the economy.

I recognise the link between the digital single market and productivity, but the session is primarily about pay, so talking in that context would be helpful.

My questions are about the link between productivity growth and pay.

In our wide-ranging round-table discussion a few weeks ago, Russell Gunson said:

“we need to focus our productivity policy as much on the everyday parts of the economy as on the growth sectors that the Scottish Government has picked out”—[Official Report, Finance and Constitution Committee, 24 April 2019; c 12.]

I am interested to hear the cabinet secretary’s response to that view. What does he consider to be the “everyday parts of the economy”, and how does the Government demonstrate support for those? It is easier to demonstrate support and inputs for high-growth sectors; it would be good to have a better understanding of how the Scottish Government is using its levers to support the everyday parts of the economy.

The badge that I am wearing today is about the national performance framework, which is underpinned by the United Nations sustainable development goals. It tries to calibrate all the Government’s actions to focus on our purpose, which is a flourishing society that realises the opportunities that we have.

With regard to the day-to-day economy, a way to raise quality is through what is paid. What we pay directly for day-to-day services is important for paying the living wage and trying to support a public sector pay policy that properly remunerates staff. That can raise quality, because investing in skills is the right thing to do, as well as making sure that good practice is shared.

An example of big new commitments is our childcare policy, which sets out that we want all staff to be paid the living wage. We have made the resources available to do that. In day-to-day spending, the Government’s biggest spend is on the payment of salaries and the remuneration of our staff, and we want that to reflect quality, investment and good practice.

Right across Government, we focus on good practice, productivity and proper remuneration for day-to-day services. I have focused on growth opportunities because they have great potential to create high-quality jobs, partly to replace those that might no longer be there. An example of the day-to-day economy in the private sector was the announcement that Michelin would be leaving Scotland. It is a good example because there will no longer be any industrial manufacturing at the Dundee site, and that is why we have worked proactively with the company on opportunities for employment now and into the future.

We asked where the entrepreneurship is, how we can support the transition to the circular and low-carbon economy, and how we can create jobs through our investments and partnership approach. Michelin agreed to stay to help us with that exercise because of our vision for the country—the national performance framework. We set out our vision for the country, the investments that we are willing to make and the outcomes that we are focused on, which cut across portfolios, to make sure that we make the right investment for the gender pay gap, fair work first and what our enterprise companies are doing to create the right culture to approach those, whether in the businesses or services of the day or the opportunities of the future.

I have a few more points, particularly on how to improve our productivity in the service sector. I am thinking about the care sector, whether for older people or childcare, which the cabinet secretary has mentioned. Digital services is an enabling sector as well as a sector that upskills staff in its own right. There is something quite distinct about productivity, and what improving productivity means, in people-orientated services, which is not the same as improving productivity in a big manufacturing sector. It means something different and has to be measured differently, and it would be good to understand more about that, particularly as the Government has made a clear commitment to reducing the gender pay gap, and the care sector predominantly employs women.

That theme came through strongly in our evidence session, cabinet secretary, particularly with regard to the care sector. As Angela Constance has described, it has been a challenge to increase and drive productivity at the same time as finding and matching the living wage elements, particularly in the third sector element of the care sector.

The health secretary or the communities secretary would be better placed to go into the forensic detail of that. As to the decisions that I can make as finance secretary, an area where interventions can make a difference is telecare. The appropriate use of digital technology can enhance care, and that will affect staff.

Arguably, the challenge that you describe comes up in finance when the third sector is under pressure to drive efficiency, while at the same time—because we want quality, too—paying the living wage, all with the same contracts and money.

There is health and social care integration, so it is about ensuring that the money is in the system and that resources are specifically identified in local government for payment of the living wage in childcare and social care, for example. It is also important that the uplift to pay for that follows through to the third sector, because that sector needs to be resourced to pay for that quality. The question of how we ensure that the resources are there is a fair one.

That takes us back to the debate on ring fencing that this committee has often had. Should we ring fence resources locally for such a cause? Many third sector organisations ask the Government to ring fence resources so that they are guaranteed to receive those resources. Local government resists ring fencing because it prefers the general payment. We support the agenda, but there is a question about how much we should ring fence when we have clearly identified the resource to achieve a policy outcome such as payment of the living wage in the social care sector.

Tom Arthur, I know that you want in, but that would mean that we have had quite a number of Scottish National Party voices in a row.

That is not necessarily a bad thing.

I need to try to keep a balance. I will let Tom Arthur ask a quick supplementary question.

Cabinet secretary, you talked about the jobs of the future. The First Minister recently declared a climate emergency, which will precipitate a review of all policies across government. Clearly, our first priority is to meet the climate targets by 2045. That will generate a range of areas for innovation and entrepreneurship, not only in policy but in ecology, rewilding, conservation, and, of course, green energy. Although Scotland cannot solve the climate crisis by itself, it can be a pioneer. It can develop and innovate, and export those developments and innovations across the world. Meeting the environmental challenge also presents economic opportunities. How can we capitalise on that in Scotland? In what way can we innovate and develop technologies that will help us to meet our climate change goals while also capitalising economically?

The environment secretary will return to Parliament with more to say abut the Committee on Climate Change report and the need to look at our policies and respond to even more ambitious climate change targets. Scotland has a good track record in reducing emissions and we have the most ambitious climate targets in the world. That requires us to look at our policies and our actions.

However, there is also economic opportunity in those policies. I just gave the example of Michelin in Dundee not continuing to manufacture tyres in Scotland. However, when we expressed what we wanted to do around the circular economy, low-carbon transport and entrepreneurship, Michelin decided to continue its presence in Scotland.

I absolutely agree with Mr Arthur that we should seize the economic opportunities of the agenda, which is why we have been investing directly in policies that will make a difference to carbon emission reductions and in future opportunities such as renewables. Last Thursday, I convened a summit with many companies and stakeholders interested in renewables, particularly offshore renewables. There is a view that, although we have been encouraging and consenting to renewables, and enhancing our capacity in the renewables sector, we have not had the onshore industrial jobs that should have come along with that. Although the UK Government has shared that ambition, we have not seen the jobs that we would like to have seen.

We are looking at how we can use our levers to encourage companies to invest in supply chain and industrial jobs in Scotland that match the renewables capacity that we are delivering. That is a good example of ambitious climate change targets going hand in hand with the creation of jobs and employment and economic opportunities.

On the wider issue of our response to the Committee on Climate Change, the Cabinet Secretary for Environment, Climate Change and Land Reform will address Parliament on that shortly.

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When you announced the public sector pay policy in December, you said that it

“continues the journey of restoration of public sector pay.”—[Official Report, 12 December 2018; c 35.]

How far will we get on that journey and how quickly will we get there?

I cannot set out future budgets or what percentage increase there might be in future budgets, but we have departed from the 1 per cent pay cap. There is divergence between UK Government policy and Scottish Government policy. If we had gone much further on an uplift in pay, that would probably have impacted on head count. We have tried to retain as many people as possible. While protecting the head count, we wanted to give workers in the public sector as fair a level of remuneration as possible within the bounds of affordability.

We have also had a policy of no compulsory redundancies and have targeted low pay through payment of the living wage and the cash underpin. Significantly, we have maintained progression. That sometimes gets lost when people look at the headline figure of a pay increase, but progression is important to those who benefit from incremental increases in their pay.

We have suspended bonuses. The UK Government continues to pay bonuses, but the Scottish Government no longer does that as a matter of course in its public sector pay policy. There are further flexibilities that allow employers in the public sector to target inequalities and equalities issues. There has been a departure from UK Government policy. We have tried to respond to issues around the remuneration of our staff. For the past two years, the public sector pay policy has targeted a higher uplift for people who are paid less, with those who earn less than £36,500 receiving a 3 per cent increase and those who earn more than that receiving a 2 per cent increase. There is a cap at the top, too.

As far as the journey of restoration of public sector pay is concerned, we have moved away from the 1 per cent pay cap. We have tried to increase the uplift within the bounds of affordability so that we have not had to reduce the head count. It has been a careful balancing act. We have been mindful of the inflationary position. Given the situation with the consumer prices index and the retail prices index, many people will have had an above-inflation increase when all those factors are considered together.

The journey of restoration is about fair remuneration for workers in the public sector, but the percentage by which we can increase people’s pay will depend on the budgets at the time and the decisions that we make about head count.

I accept completely that there has been a departure from UK Government policy. That is welcome. I am questioning whether the phrase,

“journey of restoration of public sector pay”,

is strictly accurate. It would be wrong to give people who work in the public sector false expectations. Do you accept that public sector pay in Scotland remains lower than it was, in real terms, 10 years ago?

Yes. That is a consequence of the recession and UK Government austerity. We want to go further, but I do not want to make people compulsorily redundant. There has been a trade-off in order to maintain head count and not to make people redundant. We have been employing more people while there has been pay restraint. That is well understood. There has been pay restraint in the private sector, too, but we have been trying to protect the workforce in the public sector.

The journey of restoration involves us departing from the 1 per cent pay cap and looking at inflation when we make decisions on public sector pay policy. As I said, for the past two years, there has been a differential, with increases of 3 per cent and 2 per cent—those increases are, of course, more than 1 per cent. Within that, there are sectoral bargaining arrangements. Different categories of workers have had different pay awards. Because of the timing and character of the negotiations, different members of staff will have received different pay awards.

Our overall pay policy has departed from the pay cap, which was in place because of the restraint that was necessary at the time.

The balance that you have described between head count and above-inflation pay settlements was debated throughout that decade and more. When your predecessor, John Swinney, was trying to figure out how to respond to the economic crisis and its impact on Scottish public finances, he brought all the political parties together. At that point, there was consensus that we did not want to see lots of redundancies in the public sector and that pay restraint was, unfortunately, something that people would live with for a time.

We have now moved beyond that to the point at which the loss of public sector pay has become intolerable and unacceptable. The fact that some unions, such as teaching unions, have had to work so hard to get the beginnings of restoration in the value of pay shows that. Do you accept that, if the phrase

“journey of restoration of public sector pay”

is going to accurately describe to people who work in the public sector what they can expect, it has to mean a sustained period of above-inflation pay increases across the board, not just for particular sectors?

I do not want to attach a definition to the phrase, but I understand the sentiment of your question. We want remuneration that is fair and affordable and that protects head count. It could be argued that the approach could be totally different, with fewer people who we pay much more. We have taken the balance, when executing the Government’s responsibilities, of properly remunerating our staff and recognising issues of low pay. It is well recognised—because of our efforts around low pay generally and with regard to the pay differential and capping increases at the top—that a range of interventions have given us a much fairer pay policy. I understand the sentiment of your question and do not wish to attach a definition to the phrase, other than working through the pay agreements that we have made with our staff and that we will continue to do in the light of the financial circumstances that we face. We enjoy relatively good relations with the trade unions with which we engage on pay, and I will continue to take that approach.

My final question is about the discussion in our recent round-table session on this topic about the indirect effect of the public sector pay policy—not just the Scottish Government’s but that of local government as well—on wider earnings in Scotland and the impact on the private sector? There was discussion about whether the Government or the more general public sector have ways of maximising the impact of public pay on the rest of the economy, particularly given that some sectors in which poverty pay is most severe are where procurement and suchlike are less relevant, such as retail or hospitality. Are there things that the Government can do to maximise the impact of public sector pay policy on the wider economy?

That is a fair question. I am looking at the evidence before me, and I will be frank that there is an issue about how much public sector pay has an impact on what the private sector pays, because there is competition for people. Low unemployment is good—I am sure that we all agree on that—but there is an issue about the availability of people and skills, and what we pay through public sector pay policy will have an indirect impact on private sector pay policy. The culture of expectation or the raising of quality around the living wage is significant.

Our efforts, whether through accreditation or campaigning for payment of the living wage, is probably why more people are paid the living wage in Scotland than in any other part of the UK. That is significant in light of the composition of the rest of the UK economy, especially the stratification and composition of the City of London economy. The practices that we engage in and our public sector pay policy have an impact on the private sector, including specifically on rates of pay and uplift. We have tried to show leadership in our public sector pay policy through how we tackle equalities issues and low pay and also how we have tried to ensure employment through our policy of no compulsory redundancies.

My question is also about public sector pay policy. We have recently seen different sectoral agreements, which you acknowledged a few moments ago, and an example is the one for teachers, who have had quite a generous settlement, which I think was 9 plus 3 per cent—Mrs Fraser is a teacher so, for the avoidance of doubt, I am not complaining about that. However, at the same time, further education college lecturers, who would regard themselves as providing a very similar service, have been taking industrial action on the pay settlement on offer to them. There is a disparity. Do you really have a public sector pay policy, or are you just making it up as you go along?

There is an established public sector pay policy, which acts as a guide. Each trade union, sector and segment of staff is entitled to engage with the relevant employer, part of Government or part of the public sector as appropriate, so there can be departure from the public sector pay policy.

The pay policy is a guide. It is progressive, fair and affordable. Some parts of the public sector will have adhered more closely to it; because of the nature of negotiations, other parts will have a different arrangement. I very much see the public sector pay policy as a benchmark. I set it out in the budget, as I have done every year, but trade unions and employees still have the right to negotiate with their employer to depart from the policy.

I expect public sector employers to deliver all the measures to address low pay, equalities and proper remuneration. Many look to the policy as a guide, but it is not the final say on pay.

You seem to be saying that sectors with better negotiators can get better deals and therefore break or at least push the boundaries of your policy. Do you appreciate the frustration currently felt by, for example, further education college lecturers? They are not being offered a deal anything like as generous as the one that has just been given to teachers.

The language that Murdo Fraser used was not at all the language that I used. Pay negotiations are undertaken based on an organisation’s history and circumstances, which may include issues to do with service delivery and transformation. The deal that was reached on teachers’ pay was in recognition of education as a Government priority and the transformation that is going on in that sector, which includes issues to do with the empowerment of teachers and skills. There was a lot in those negotiations.

Each cabinet secretary leads on pay in their own portfolio and looks at the relevant issues in order to arrive at a conclusion. As I said, the public sector pay policy is a guide, and each category and segment of staff is entitled to negotiate, and that is what has been happening.

Different pay awards come down to the negotiations at the time, which take into account the information and the pay claim that is put forward by the representatives of the employees. I say again that the public sector pay policy is a very strong guide, and it sets out the Government’s position.

That sounds more like a muddle than a policy, but thank you for answering my questions.

And thank you for your comment, Murdo.

I am interested in wages in rural areas. My region is one of the lowest paid in Scotland; some salaries there are £2 an hour lower than the average hourly wage. The first thing that came up when I googled “rural wages” was farmers and agriculture. However, there are more than just farmers and agricultural workers in rural Scotland, including one-woman and one-man microbusinesses and small businesses. I am interested in hearing about the challenges relating to the cost of living in rural areas. Transport is an issue, too. Citizens Advice Scotland has done food pricing comparisons across Dumfries and Galloway, which show massive differences in the price of identical baskets of groceries from the main supermarkets. What can be done and what is being done to support rural wages and growth?

Fergus Ewing leads on the rural economy. The National Council of Rural Advisers has given the Cabinet recommendations, many of which are to do with the vibrancy of rural Scotland and its ability to realise the available opportunities through economic growth, entrepreneurship and building the infrastructure that can unlock the potential of rural areas.

I know that the point was made about farmers. One reason for ensuring that loan arrangements were in place was so that farmers who were receiving common agricultural policy payments were able to benefit from even earlier payment through the loan scheme. We recognise that what farmers contribute to the economy runs right through the supply chain, so ensuring that those loan payments and then the CAP payments were in place was good for the rural economy, representing about £0.5 billion of investment in the rural economy.

10:00  

The enterprise agencies have been working in rural areas, whether that is HIE or Scottish Enterprise, which currently operates in the south of Scotland. In the south of Scotland, of course, we will have the new south of Scotland enterprise body, which will invest in sustainable employment opportunities.

There are other, wider investments in the rural economy that will make a difference in terms of infrastructure and education. The public sector pay policy is supporting public sector pay in rural areas, where it can have a disproportionately positive impact.

Other tax levers such as the small business bonus have helped small towns and villages to survive the last recession. There have been some difficult times for our town and village centres. Other tax support has encouraged those entrepreneurial smaller businesses in rural areas that benefit, for example, from the small business bonus.

A range of interventions have supported rural communities and there is more that we can do in that regard. That is why we are engaging with the National Council of Rural Advisers.

I found it difficult to find out the number of living wage employers in Dumfries and Galloway; 20 are registered, but I am sure that there are more than 20. What can we do to encourage living wage employers to register as such so that Dumfries and Galloway could perhaps not be seen as having the lowest number of living wage employers?

There are probably many businesses in Scotland that fulfil all the criteria for Scotland’s business pledge but do not seek the accreditation to get the credit for doing that. The same goes for the living wage. Not every employer that pays the living wage is seeking living wage accreditation. I will give further thought to how we might be able to enhance the recording and reporting of employers that are paying the living wage. However, it might be largely about encouraging the private sector to showcase companies that are delivering the living wage and might want to get accreditation for doing so. I will give further thought to how we could capture that figure more fully.

We have just discussed the role of trade unions in negotiating different settlements in different sectors. What role can trade unions play in driving economic policy and productivity and wage growth? For example, the Council of Economic Advisers, which I presume is one of the main advisory bodies to the Government on these issues, does not have any representation from the trade union movement. If we are serious about wage growth and productivity growth, should we not have a meaningful partnership at the highest level of Government between industry and labour to drive this agenda forward?

I understand the question that Neil Bibby is asking about representation but the trade unions have direct access to Government through the range of meetings that we have with them. We have regular meetings with the Scottish Trades Union Congress. The cabinet secretaries regularly meet the trade unions within their portfolios. I regularly meet civil service trade unions and, alongside the First Minister, I regularly meet the STUC on an issue-by-issue basis, so members should not think for a minute that, because there is not a designated trade union representative on the Council of Economic Advisers, trade unions are not engaging with our economic policy and advice, because they are, whether that is engaging on pay, engaging on the economic strategy or engaging directly with the highest level of the Scottish Government.

We have biannual arrangements and trade unions have regular meetings with cabinet secretaries. There are arrangements for the trade unions to meet the First Minister and the cabinet secretaries as appropriate so that they can feed in regularly to our policies.

I appreciate what you are saying, but you are having meetings with the Council of Economic Advisers separately from your meetings with the trade unions. Do we not need a proper partnership between Government, trade unions and labour, and industry and economic advisers to drive forward the wage growth and economic growth agenda? I hear what you are saying about engagement, but do we not need to get them all in the same room at the same time to drive the agenda forward rather than you meeting people on different occasions to discuss different things?

I conceded that I understand the rationale behind the question, but what is probably more important than who is in which meeting is whether we engage with the trade unions, to which the answer is yes. Do we say that it is a good thing for employers to engage with trade unions? Yes—we say that in the fair work nation policies and the fair work agenda, which the trade unions whole-heartedly welcomed. We engage with trade unions in many forums; they have shaped and contributed to our economic policy in many ways.

I understand the request for representation, but I am not aware that the STUC has made such a request. There are well-established arrangements for engaging with Scotland’s trade unions, which have led to a good relationship that is different from the UK Government’s relationship with trade unions. In the Scottish Government’s relationship with trade unions, we have channels of communication and appropriate forums to discuss matters that are of interest to employees and the wider economic strategy. That has been satisfactory.

Even more important than meetings are our actions, through which we have shown that we can take the trade unions’ views on board—not least in our employment policies, in as much as employment law is devolved to Scotland; in our economic strategy; in the fair work agenda and the fair work convention; and in our wider policies.

We need to discuss the gender pay gap, which came up in the round-table discussion. We had evidence that the gap fell reasonably quickly until about 2011 but has closed more slowly since then. What levers for action are available to the Scottish Government to address the issue?

Many of the legislative levers lie in Westminster, but our policy actions include the gender action plan to address the gap in employment, although we recognise that progress has been made and that we have narrowed the gap. On international women’s day, 8 March, we published “A Fairer Scotland for Women: Gender Pay Gap Action Plan”, which covers the range of cross-Government approaches that we are taking to tackle the inequality that women face in the labour market. We are also tackling other forms of discrimination and inequality, but I can revisit the plan and present to the committee the detailed actions that we have outlined, if it wants me to. Jamie Hepburn is the minister who leads on the subject and who is tasked with seeing through the action plan.

It would be useful to get further information from the Government—whether it is from you or Jamie Hepburn—on exactly what it is doing, so that our consideration of the matter is as full as possible.

Sure.

My colleagues have no more questions, so I thank the cabinet secretary for his contribution to the discussion, the other witnesses for their time and my committee members for their questions.

I suspend the meeting to allow a changeover of witnesses.

10:08 Meeting suspended.  

10:11 On resuming—