The Great Risk Transfer: employment and financial wellbeing

20th August 2024

This research examines the impact of the Great Risk Transfer on individuals and society through the changing relationship between employer and employees.

What are the implications on productivity and aspirations for economic growth?

The report shows that a third of employers only provide the bare minimum when it comes to sick pay and pensions.

It also highlights how staff in hospitality, retail and social care are the most financially vulnerable and that over a quarter of Scots lose sleep over money worries.

The research finds:

• more than two-thirds of employers (70 per cent) are concerned over the impact of financial strain on their employees and their productivity, citing increased stress on managers and other staff (35 per cent) and a rise in absenteeism due to poor health (28 per cent)

But

• a third of employers (33 per cent) in Scotland do not offer any enhanced benefits as part of their employee benefits package

• more than half (56 per cent) do not currently include financial wellbeing in strategies to support employees.

The Great Risk Transfer report recommends the need to:

• Recognise employers’ power to drive change. Employers should recognise the connection between financial wellbeing and productivity and how their actions might alleviate employee’s pressures 

• Increase understanding of Living Pensions: Government and employers should work together to increase understanding of the need for Living Pensions and that employees on auto-enrolment minimums are not currently likely to be saving enough to live well in retirement

• Complete the Pension Provision Review. The review of pensions provision signalled by the Labour Party before the 2024 election should go ahead and include a specific focus on potential improvements and innovations in workplace pensions.

This is the second piece of research the David Hume Institute has produced in partnership with the Institute and Faculty of Actuaries about the Great Risk Transfer.

As part of this research the David Hume Institute commissioned the Diffley Partnership, to investigate employer attitudes to the Great Risk Transfer. The survey was conducted in May and June 2024 and is based on responses from 550 businesses. The full survey results were published as an appendix to the main report.

Read more:

• Press release - Bare minimum from many employers driving poor productivity.

• Watch the event launch recording here.

Understanding Scotland Economy Tracker - February 2024

Our survey shows two in three Scots (67%) have resorted to reducing non-essential purchases, while significant proportions continue measures such as cutting back on energy use (64%) and leisure activities (62%).

Additionally 45% report decreased savings contributions, and over a third are tapping into them for everyday expenses. These coping mechanisms are particularly prevalent among younger age groups, underscoring the disproportionate impact of the high cost of living on working-age individuals.

The Understanding Scotland Economy Tracker survey tracks economic attitudes and spending intentions from more than 2,000 members of the Scottish adult population every 3 months.  The fast turnaround time, as the data is published two weeks after collection, means early identification of changes in trends to support decision-makers.    

The study reveals a cautious outlook among Scots regarding future spending. Both essential and non-essential spending expectations show little change, indicating ongoing caution amidst economic uncertainty.

Furthermore, the latest findings highlight generational divides in priorities.  Healthcare and the NHS are paramount among older age groups, whilst younger individuals are more focused on addressing rising living costs.

The study also reveals growing doubts among Scots about Scotland's trajectory, with the majority (58%) believing that the country is heading in the wrong direction. This marks a three-percentage-point increase from the previous wave and reflects an increasing sense of pessimism about the future.

Read more:

• Press release - Two thirds of Scots continue to reduce spending.

• David Gow’s blog - Scotland’s Generational divide - the economy.

• Watch the launch event recording here.

Understanding Scotland Economy Tracker - November 2023

The Understanding Scotland Economy Tracker, produced by the David Hume Institute and the Diffley Partnership, marks its second birthday, showing many Scots continue to take extreme measures to navigate turbulent economic times:

• 1 in 6 people (17%) report skipping meals

• 1 in 5 people are using ‘buy now pay later’ payment plans

• 2 out of 3 people (67%) are not putting the heating on to reduce costs

For many, the ongoing challenges with the cost of living are dominating their lives with:

• 3 in 10 (29%) Scots telling us they are losing sleep due to their personal finances

Many Scots are living with severe financial precarity:

• 3 in 10 people (28%) are not confident of covering a £100 emergency expense – up three percentage points since February 2023

• This rises to 1 in 2 (49%) for an emergency expense of £500

The survey also shows 8 in 10 Scots perceive the economy as favouring the wealthy (78%), while 53% believe it primarily serves business interests.  Only 1 in 10 (10%) believe that the economy works in their own interest.

Healthcare (48%) and cost of living (42%) remain among the top concerns for Scots. 

Over three-fifths of Scots (62%) view the cost of living and inflation as a key economic priority, though this is down five percentage points from August. Poverty has become a significant concern for 32% of respondents, up three percentage points from August.

The Understanding Scotland Economy Tracker survey gathers economic attitudes and insights from more than 2,000 members of the Scottish adult population every 3 months to track changes over time. 

Read more:

• Press release - Two years of tracking shows Scots struggling with turbulent economic times.

• Shan Saba’s blog - Avoiding the cost of living carnage.

• Watch the event recording here.

Understanding Scotland Economy Tracker - May 2023

The most recent data from the David Hume Institute and Diffley Partnership’s regular economy tracker reveals a mixed picture of public opinion on the economy.

The economic outlook from Scots remains bleak with 62% thinking that general economic conditions will be worse in a years’ time (although this is down very slightly from 66% in February) and 45% think their personal financial situation will be worse in a years’ time (down from 48% in February).

However, while we have seen a reduction in the number of people thinking that things will be worse, optimism is not rising. Many Scots think that the economic outlook will remain the same over the next 12 months suggesting that they think that the costs and challenges they face are here to stay.

Is this a sign of people adjusting to a new normal?

In order to meet increased costs, many Scots are running down their savings, turning to credit and stopping paying into pensions:

• 4 in 10 Scots (42%) report having taken money out of their savings to
  cover higher costs

• 1 in 4 have used a credit card to make for purchases that they wouldn’t
  usually

• 1 in % have used ‘buy now pay later’ schemes to cover everyday
  spending

• A small but increasing number of Scots have stopped contributing to a
  pension (7%)

Turning to high-cost borrowing options for everyday essentials can cause the accumulation of substantial debt which will affect people’s lives for many years to come.

The Understanding Scotland: economy tracker is produced in partnership between the David Hume Institute and the Diffley Partnership. The survey gathers economic attitudes and insights from more than 2,000 members of the Scottish adult population every 3 months to track changes over time.

Read more:

• Press release - The cost of living is driving difficult choices.

• Blog by Shona McCarthy - Budgeting to save a global asset.

• Watch the event recording here.

Is trust an undervalued ingredient for a thriving economy?

Discussion paper by Charlie Woods

Published May 2023

Labour market disputes, concerns about public contracts and declining trust in government and institutions have risen up the news agenda in recent times.  All of these things impact on our economy but the importance of trust in building thriving economies, as an issue in its own right, feels under-explored. 

When governments talk of increasing productivity and economic growth, are they focusing sufficiently on the challenges posed by an unhappy workforce or the hours lost in contract disputes?  This paper argues that, although improving levels of  trust can take time, it is time well spent as it saves resources in the long term.

This paper aims to stimulate discussion about the role that trust and more collaborative relationships can play in strengthening the economy. It is written from the perspective of experience in working to stimulate economic development, help resolve commercial conflicts, facilitate dialogue and develop more effective relationships. 

This paper builds on previous David Hume Institute work on the labour market including the 2020 briefing paper on the Danish model of Flexicurity. 

About the Author

Charlie Woods has wide-ranging experience of industry, commerce, and public and private sector organisations, ranging from SMEs to government. He was previously Director of Strategy and Chief Economist at Scottish Enterprise and is now executive director of the Scottish Universities Insight Institute and Vice-Chair of the Economic Development Association Scotland (EDAS).

Charlie is an Associate of Core Solutions and has extensive mediation and facilitation experience in a wide range of fields including planning, family business, management, PPP contracts, transport infrastructure, government policy and professional services.  

Scotland's land information system: what is it and why does it matter

A new report, written by land reform expert Andy Wightman, commissioned jointly by the David Hume Institute and Built Environment Forum Scotland, says the lack of a fully functioning land and building information system is holding Scotland back.

The paper discusses Scotland’s land information service - what it is and why it matters - and what still needs to be done to fulfil a 2015 Scottish Government commitment in 2015 to deliver a comprehensive Scottish Land Information Service (SCOTLIS).

Information about land and buildings is used everyday by businesses, policy-makers, academics and ordinary citizens. This information ranges from land ownership to valuation, from energy efficiency ratings to building types and from vegetation cover to flood risks.

All of this information exists in some form, however much of it is not easily available and virtually none of it is made available in an integrated form. As the impacts of climate change intensify, there is even greater need for more timely, more comprehensive and more accessible information about land and buildings in Scotland.

This briefing originated from conversations as part of our largest piece of research to date, the Action Project and also connects to our work with Open Data Scotland on the potential of open data and our briefing on levelling up access to high speed broadband.

Read the press release.

About the author:

Andy Wightman is a writer and researcher focussing on land governance, land ownership and community land rights. He is the author of publications including Who Owns Scotland (1996), Scotland: Land and Power (1999), Community Land Rights: A Citizen’s Guide (2009) and The Poor Had No Lawyers (2010). He runs the Who Owns Scotland project. From 2016 to 2021, Andy was a Member of the Scottish Parliament. Andy was a Specialist Adviser to the House of Commons Scottish Affairs Committee Inquiry on Land Reform 2013-15 and was a member of the Commission on Local Tax Reform in 2015.

Research: The Great Risk Transfer - have we got the balance right?

How many people have the knowledge and time to manage the financial risks they face in life? To what extent does it matter?

We partnered with the Institute and Faculty of Actuaries (IFoA) to explore these questions. We aimed to find out more about what people in Scotland understand to be the key risks in relation to their long-term financial wellbeing and what helps and holds them back from addressing them.

Our engagement with people in Scotland was designed to build on recent work carried out by the IFoA which has been exploring the ongoing trend of transferring risks from institutions – such as employers, the state, and financial services providers – to individuals.

The IFoA calls this the ‘Great Risk Transfer’ describing it as posing one of the most significant yet little understood social, financial, and political challenges of our time. The changes described in this work show that far greater responsibility is being placed on individuals for managing their lifelong financial wellbeing than has been the case for most people living in Scotland since the establishment of the modern welfare state.

The Great Risk Transfer research showed that the causes of this trend are complex. They include increasing life expectancy, technological advances, changes in financial regulation and political choices. The IFoA highlighted four important areas of risk transfer: pensions, work, health and insurance. Our work was designed to find out more about relevant perceptions of risk in the Scottish population and how people respond to risks which can affect their financial wellbeing.

We explored people’s awareness of the Great Risk Transfer and their ability to manage and respond to financial risks. This revealed two interlinked themes which have implications for policymakers and others interested in either mitigating against or rebalancing responsibility for the relevant risks.

• Cultural – what people know, how they feel and what they do to manage risk

• Structural – the wider social and economic system

Our work commenced in December 2021 and concluded as inflation grew to levels not seen since the early 1980s, with rapidly-increasing fuel, energy and food prices dominating the headlines. This comes at a time when wages and social security payments have generally not kept pace with inflation, leading to widespread acknowledgement of a significant rise in the cost of living.

Not surprisingly, many of the people we spoke to were focused on immediate financial challenges. These included high housing costs, insecure tenancies and jobs, low incomes and debt, and, for some retired people, the challenge of living on a fixed income. This report is structured around four key areas which emerged strongly in our research:

• Knowledge and awareness of risks to financial wellbeing

• Trust in information providers

• Stress, fear, stigma and embarrassment

• Ability to access and understand guidance and information

Research: What do business and investment leaders bring to Team Scotland?

Faster growth in diversity at the top level is needed if Scotland is going to benefit from a wider spectrum of thought leadership to maximise the country’s ability to overcome challenges such as increasing productivity, innovation and improving risk management.

Research from the David Hume Institute looking into the education and diversity background of over 220 business and investment leaders shows that there is little diversity - and less than other sectors analysed in the Institute’s previous work.  

The analysis found that: 

• There are still more leaders called John than there are female leaders (7% John and 5% female)

• One in four (26%) have held positions at four services companies (Accenture, EY, McKinsey, PwC)

• 2 out of 3 (65%) of investment company leaders attended an elite university with 1 in 5 of these attending Oxford or Cambridge.  This compares to 49% of Angel Investment leaders who attended an elite university.

• 9% of investment company leaders are female - falling behind the UK average (13%)

• 20% of angel investor leaders are female - higher gender diversity than others in the business sector

• 31% of the top business leaders also hold positions on other boards, showing a narrow pool of decision makers has significant influence beyond their own companies.  

The David Hume Institute’s research clearly shows limited diversity of Scotland’s top business and investment leaders. Scotland needs its business leaders to not only champion diversity across their organisations, they need to be open to more immediate change at the most senior levels to reap the benefits of more diverse thinking now.

Every business leader must choose to prioritise diversity of thought as we recover from the pandemic if Scotland’s businesses are to increase productivity and resilience to future risks.  For Scotland to be in the Champions League for business and investment we need a more diverse squad available for selection.

Report: A Scotland of Better Places

A new report by Professor Duncan Maclennan, commissioned by the David Hume Institute, examines how the country can move forward to A Scotland of Better Places.

The report is part of the Institute’s Action Project investigating the actions needed for Scotland to move faster towards being a country that is more prosperous, sustainable, inclusive and fair.

A Scotland of Better Places examines actions needed for places to deliver faster social, environmental and economic benefits. 

Covid shone a light on the places in which we live, work, study, play and grow.  The events of the last year have dramatically changed many people’s relationships with the places in their lives.  

Our places will play a central role in Scotland’s recovery. They are inter-connected, inter-dependent and impact on every aspect of our lives.

The report is based on conversations with over 600 people in webinars. The conversations revealed a broad range of ideas that individuals, communities and organisations are ready to share and enact with governments.

There is not a single magic action to make all of Scotland’s Places thrive. Over the years there have been many policies, strategies and initiatives, often top down and not involving local people.

This is an opportunity to build forward better from Covid-19 and recognise the connections within and between places.  There are major long-term changes required, and much agreement about what needs to change and how to change it. Bold policy choices could remake the sub-national governance and government of Scotland to match modern place challenges.

Professor Maclennan suggests “Using reformed financial and tax structures, listening to communities and individuals, (and especially younger and poorer Scots) in the democratic processes that will make Scotland a more prosperous, sustainable, inclusive and fair country.”

The report is part of the David Hume Institute’s Action Project which engaged more than 4,500 people from across Scotland, bringing together a broad range of perspectives on how Scotland can build forward better from the Covid-19 pandemic. 

Scottish Independence and Financial Services – an Industry Observer’s Perspective

Research Paper 5/2012 Scottish Independence and Financial Services – an Industry Observer’s Perspective

Owen Kelly

2012

ESRC Conversation 1 – “Macro-Economic Policies and Constitutional Change” In November 2012 the DHI held a seminar for the first of four ‘conversations’ on topics related to constitutional change in Scotland. The first topic relates to macro-economic policy issues, including ‘what currency’, fiscal and monetary policy under different regimes and the complex world of financial sector oversight and regulation. Papers have been prepared by Dr Gavin McCrone (formerly Chief Economic Adviser to the Scottish Office), Paul Johnson (Director of the Institute for Fiscal Studies), Owen Kelly (Chief Executive of Scottish Financial Enterprise, Brian Quinn (formerly acting Deputy Governor of the Bank of England) and Prof Cesar Colino from UNED, examining relevant Spanish experience.

Devolution-Max á la Basque: A Model for a Scotland within the UK?

Research Paper 4/2012 Devolution-Max á la Basque: A Model for a Scotland within the UK?

César Colino

2012

ESRC Conversation 1 – “Macro-Economic Policies and Constitutional Change” In November 2012 the DHI held a seminar for the first of four ‘conversations’ on topics related to constitutional change in Scotland. The first topic relates to macro-economic policy issues, including ‘what currency’, fiscal and monetary policy under different regimes and the complex world of financial sector oversight and regulation. Papers have been prepared by Dr Gavin McCrone (formerly Chief Economic Adviser to the Scottish Office), Paul Johnson (Director of the Institute for Fiscal Studies), Owen Kelly (Chief Executive of Scottish Financial Enterprise, Brian Quinn (formerly acting Deputy Governor of the Bank of England) and Prof Cesar Colino from UNED, examining relevant Spanish experience.

The Scope for Economic Policy after Independence

Research Paper 2/2012 The Scope for Economic Policy after Independence

Gavin McCrone

2012

ESRC Conversation 1 – “Macro-Economic Policies and Constitutional Change” In November 2012 the DHI held a seminar for the first of four ‘conversations’ on topics related to constitutional change in Scotland. The first topic relates to macro-economic policy issues, including ‘what currency’, fiscal and monetary policy under different regimes and the complex world of financial sector oversight and regulation. Papers have been prepared by Dr Gavin McCrone (formerly Chief Economic Adviser to the Scottish Office), Paul Johnson (Director of the Institute for Fiscal Studies), Owen Kelly (Chief Executive of Scottish Financial Enterprise, Brian Quinn (formerly acting Deputy Governor of the Bank of England) and Prof Cesar Colino from UNED, examining relevant Spanish experience.

Further Education, the Scottish Labour Market and the Wider Economy

HOP 94. Further Education, the Scottish Labour Market and the Wider Economy

Kristinn Hermannson, Ewart Keep, Patrizio Lecca, Jeremy Peat, Lesley Sutton, J Kim Swales

Three research papers on the role of Further Education colleges within the Scottish labour market and wider economy. Includes analysis of the College sector, finance vs benefits and the role of incentives.

The Economics of New Immigration to Scotland

HOP 77.The Economics of New Immigration to Scotland

Robert Wright

Tilting at Windmills: The economics of wind power

HOP 65. Tilting at Windmills: The economics of wind power

David Simpson

The Political Economy of Pension Provision

HOP 2. The Political Economy of Pension Provision

Alan Peacock, Norman Barry

These papers were first presented at a Conference on Pensions arranged by The David Hume Institute which took place in Edinburgh in June 1985 but have been modified in the light of the government's White Paper which appeared in December 1985.

Professor Peacock's paper argues that the debate has concentrated too narrowly on the provision of pensions rather than on the provision for retirement and that the government's own arguments point towards the complete abolition of the State Earnings Related Pension Scheme (SERPS) coupled with the raising of the basic pension.

Professor Barry's paper argues that the 'consensus' over SERPS is a convenient myth perpetuated by the interest groups seeking to maximise the utility of their members by an ever growing public sector. The fact that the British system of government helps to create such groups results in a legacy of problems, such as the burden of pensions, which are virtually insoluble; any major changes in policy impose significant costs on those affected by such changes.