Filling in the gaps: Why swift action needs to be taken to get Scotland's workforce planning right

Scottish Tory leader Douglas Ross could hardly contain his glee when, in one of his final appearances at First Minister’s Questions before he stood down, he took John Swinney to task over his government’s record on skills. Brandishing an OECD report titled ‘Future Proofing the Skills System in the Glasgow City Region’, Ross drew particular attention to the part where it says the link between skills policies and economic development has been “weak”. 

“The SNP launched a skills strategy in 2007,” he said. “During that launch, and as part of the strategy, they said this: ‘A smarter Scotland is at the heart of everything we want to achieve for this country’. Seventeen years on, we’ve got the report card on the SNP’s skills strategy. The OECD have published a report this week, and it says there were multiple barriers to developing skills in Scotland. […] In a damning conclusion the OECD state the link between the SNP’s skill policies and economic development is, and I use the OECD’s word, weak.”

To be fair to Swinney, who outright rejected the conclusion, saying the government has “invested heavily in the skills sector over many years”, the OECD report was focused specifically on the Glasgow City Region, but its findings can be extrapolated across the country as a whole. Indeed, in a report issued in 2022, Audit Scotland found that the Scottish Government, while recognising that workforce skills are central to the economy, had “not provided the leadership needed to achieve the intended benefits from joint working in skills planning and provision”. “Many obstacles remain and present risks to progress,” the report said. “The Scottish Government now needs to take urgent action to realise its ambitions for skills alignment.”

The point, Audit Scotland said, is to “align the relevant functions” of the government’s Scottish Funding Council (SFC) – which essentially pays for the higher and further education of Scottish students – and Skills Development Scotland (SDS) – which helps businesses work out the kind of skills they need to ensure growth – so Scotland’s people and businesses have “the right skills and experience to succeed in the economy, not just now but in the future”.

The problem, as was highlighted in an independent review carried out by former Scotland Food and Drink chief executive James Withers last year, is that both employers and potential employees are being failed by a fragmented system that is unclear on where the skills gaps currently are – or where they are likely to be in the future – and that as a result there is no clear view of who should fill those gaps or how they should be trained to do so.

The impact of that was highlighted by CBI Scotland policy director Tracy Black when she spoke on a panel at the SNP’s recent party conference in Edinburgh. 

Tracy Black, CBI Scotland

“We’ve got a large number of our employers telling us that they can’t meet demand, they can’t grow their businesses because they actually just can’t hire enough people with the right skills,” she said. “We have the highest educated population in the UK, but at the same time our economic growth isn’t where we want it and, without growth, we can’t actually invest in our services, such as the NHS, in education and in infrastructure. So, on the one hand, we’ve got lots of educated people; on the other hand, we’ve got employers saying they can’t find people with the right skills.”

Part of the problem, Black stressed, is that not enough youngsters are being funnelled towards the kind of courses that have a clear pipeline into jobs while in some areas there are not enough courses being offered to meet the demand for trained workers.

“How many times have we heard about how many planning officers we need in Scotland to match the demand from large infrastructure projects?,” she said. “I think there are only two institutions in Scotland that actually offer planning courses [but] we need dozens and dozens of planning officers coming through. Welding is another classic one that comes up all the time. I actually went to the graduation day at Forth Valley [College] and there were only four welders graduating when several of our members need hundreds.”

Speaking at the same event Colm Harmon, professor of applied economics at the University of Edinburgh, said the situation has arisen in part because of the tight funding model educational institutions are operating under, with the amount of money the government provides via the SFC stagnating and institutions being limited in what they can charge in tuition fees. That in turn is having an impact on the kind of courses that they offer.

“Funding arrangements in Scotland are putting intense strain on the sector across the board and, frankly, the newer universities probably have fewer options than others to diversify the way in which they fund their infrastructure,” he said. “That is a real deep concern. […] We have to take some of the things that we cling to off the table. […] We have to think about ways of doing things differently, about really thinking about what makes students want to go to university.”

Yet, speaking at the same event, Professor Liz Bacon, principal and vice-chancellor of Abertay University, noted that the skills misalignment is caused in part by students studying what interests them rather than what will lead to an obvious job. That, she said, is a challenge that needs to be addressed long before teenagers are making decisions about what they want to do with their lives.

The skills system needs to be as much about reskilling the workforce as equipping young people

“I think the fundamental problem with the skills mismatch between what employers want and what universities churn out, is that actually I’d be quite staggered if all the people coming to university wanted to study precisely what the economy wanted, especially knowing four years in advance what it will be,” she said. 

“We could train more, but if the kids aren’t coming through wanting to study that, that’s a challenge. So, in one sense I would go back to business and say, what can you do more of to try and help get into schools, to actually persuade kids that they want to do this? But the other challenge that I pick up from business is that they don’t necessarily know what the skills [they will need] are one year in advance, four years in advance, 10 years in advance, so it’s really not surprising that there’s a mismatch. There’s a question of, are you trying to train for the immediate graduate job, or are you trying to train someone who’s got the ability to survive change and adapt and thrive in a very dynamically changing workforce for the next 40 years?”

It is precisely the challenge that the Withers report wanted the government to address. In total it made 15 recommendations, including moving responsibility for national skills planning away from SDS and SFC and into the Scottish Government, and “substantively” reforming SDS to focus on the development of a national careers service that will “embed careers advice and education within communities, educational settings and workplaces across Scotland”. 

As yet the government has not said how it intends to respond to the report, although in his FMQs response to Ross, Swinney said  it is “taking forward the reform of post-school education as a consequence of that work to make sure that Scotland’s skills system meets the needs of the population of Scotland, most of the businesses of Scotland, and supports our approach to investment in our country as well”.

The Labour party, which has its sights set on winning power at Holyrood in 2026, is seeking to fill the gap, with shadow economy secretary Daniel Johnson talking a good game about skills shortages and how to address them. Speaking at a business leaders’ summit hosted by the law firm Lindsays at the end of August, Johnson, who ran a business prior to enter politics, stressed that the reason he is in the Labour party is that it is “the party of work” and that, as the party of work, it needs to “provide that very clear Labour vision about what a growing economy is for and why that’s progressive”.

Scottish secretary Ian Murray | Alamy

“It’s clear that we need a much more flexible skills system and one that enables businesses to bring the right training to bear at the right time for the right people,” he said. “We’re in absolute limbo now in the skills system. We had a review [the Withers review] but the government still hasn’t said what it’s going to do with that. […] The skills system needs to be as much about reskilling the workforce as equipping young people. At the moment it’s about taking people from schools, giving them skills and they only get to do that once. The reality is that they will need to reskill, and I just don’t think we’re doing that.”

Key to addressing skills shortages, Johnson said, is dealing with the impact of demographic changes, with the would-be economy secretary stressing – as his rivals in the SNP do too – that Scotland needs inward migration to mitigate against the impact of the country’s rapidly ageing population. “We need to treat demographics up there with climate change and tech disruption as one of the three key challenges that we need to get to grips with,” he said.

Immigration policy is reserved, though, and, despite its best efforts, the Scottish Government has been unable to convince the Westminster government that, as the population in Scotland is ageing faster than that of the UK as a whole, it needs a tailored system. It is a point that Black pressed Scottish Secretary Ian Murray on during CBI Scotland’s recent annual dinner, noting that there will be a 50 per cent increase in the over-60 age group by 2033 and asking him what the UK Government plans to do to reform the immigration system to ensure employers can find appropriately skilled staff.

“We’ve got the short-term problem of migration [in that] we have to fill the skills gap,” Murray said. “We’ve got the medium-term problem of what we do with our education and skills system to fill some of those gaps, and we have the longer-term problem of how we bring the workforce of the future through all of that. In terms of the nuts and bolts of it, the Scottish voice on the [independent non-departmental] Migration Advisory Committee has got to be strong. We’ve said that there has to be a Scottish place on that. And the entire focus of the Migration Advisory Committee needs to be refocused to make sure that we look at geographies, sectors and needs right across the economy, and that will drive what we need in terms of skills, rather than being about headline numbers.”

He added: “We’ve talked about this a lot in terms of Scotland’s need for people, and the big thing in terms of the devolved and reserved areas is that […] it’s also about housing, it’s about infrastructure, it’s about public services and access to health services. All of that’s got to come together, because we can find the people, but actually where our economic opportunities are in the future, whether it be space or renewables, are all in the places where people haven’t lived in large numbers before. How do we provide that infrastructure for them to want to go there and stay there? All of that has huge public-sector challenges.”