Exploring Employability Funding Allocation in Scotland

Employability services in Scotland play a key role in supporting individuals into and sustaining employment, aligning with the Scottish Government’s National Strategy for Economic Transformation (NSET) and the Tackling Child Poverty Delivery Plan (2022-2026). The No One Left Behind (NOLB) strategy is the cornerstone of Scotland's employability framework, designed to promote local flexibility, person-centred support, and integration with wider public services. Under this model, Local Employability Partnerships (LEPs) led by local authorities coordinate funding and service provision, working collaboratively with third-sector organisations, private sector partners, and national agencies. The Employability Strategic Plan (2024-2027) sets out priorities for employability services, including increased awareness, partnership working, and streamlined funding mechanisms1.

Employability funding in Scotland has evolved through a combination of devolved and national funding streams, with the No One Left Behind (NOLB) strategy(2018-Present) at its core. Alongside NOLB, targeted funding streams such as the Parental Employability Support Fund(PESF) (2019-Present) and the Young Person's Guarantee (YPG) (2020-Present) have sought to address specific labour market needs. However, their ring-fenced nature and fluctuating availability have led to gaps in service delivery. The discontinuation of Fair Start Scotland (2018-2024) and the impending end of the UK Shared Prosperity Fund (UKSPF) in March 2025, which replaced the European Social Fund(ESF) in 2022, further underscore the fragility of the funding landscape.

The 2024-25 Scottish Budget saw a 23% reduction in employability funding, with allocations falling from £133.6 million in 2023-24 Scottish Budget to £102.9 million, following earlier reductions in the 2022-23 Emergency Budget Review. The Autumn Budget Revision (ABR) for 2024-25 provided £155.9 million in additional funding to local government, though it did not explicitly allocate further resources to employability-specific programmes such as PESF or YPG. The fragility of the funding landscape has exacerbated existing challenges within the sector raising concerns regarding delays in the allocation of funding to delivery organisations, which in turn has affected the overall effectiveness of employability programmes.

This research examines the impact of Scotland's employability funding model on service delivery, particularly in the context of a challenging budget settlement. It analyses funding flows from the Scottish Government to local authorities and delivery partners, identifying bottlenecks and assessing their implications for service provision. Additionally, the study explores how local authorities, third-sector organisations, and other delivery partners navigate these mechanisms, highlighting regional variations and the operational challenges posed by funding delays.

This report uses a mixed-methods approach, integrating survey data (n=156) with interviews across 19 local authorities, including 21 employability leads, 15 third-sector representatives, and 4 national organisations. It examines how funding delays disrupt staffing, programme delivery, and long-term planning, revealing barriers from short-term cycles, disbursement delays, and administrative complexities. Geographical variations further underscore the need for systemic reforms to improve service effectiveness.

Key Findings

Systemic Funding Challenges:

Funding Delays: All local authorities reported experiencing delays in accessing funding within the last two years, with 75% of these delays tied to Scottish Government funding streams. 85% cited delays in grant award letters as a significant issue, with allocation delays averaging 12–24 weeks in some areas​.

Geographical variations: Rural councils face deeper funding cuts along with higher operational costs due to geographic isolation and dispersed populations, fewer providers making it difficult for these councils to absorb delays, leading to severe planning and staffing difficulties.

Impact on Service delivery:

Fragmented Procurement Processes: 78% highlighted issues with procurement timelines, with piecemeal or short-term contracts dominating. 68% reported post-procurement delays, due to internal processes, that further limited effective service implementation.

Staffing challenges: 97.2% of Local Authorities and 93.1% of Third Sector organisations reported difficulties in staff recruitment and retention caused by funding delays.

Program Disruptions: Delayed program start dates affected 91.7% of Local Authorities and 82.8% of Third Sector organisations, with reduced program duration cited by 83.3% and 75.9%, respectively.

Planning Barriers: 100% of Local Authorities and 93.1% of Third Sector organisations cited long-term planning challenges due to unpredictable funding timelines.

Poor Coordination: 72% of respondents noted ineffective communication between local authorities and the Scottish Government as a barrier to timely and transparent disbursement.

Sector-Specific Impacts:

Local Authorities face heightened accountability pressures, with 86.1% citing difficulties in meeting funders’ expectations.

Funding delays and annualised funding cycle disproportionately affect Parents and Disabled individuals. Only 28% believed current funding mechanisms effectively address the needs of marginalised groups, including disabled individuals and parents, underscoring systemic gaps in service provision.

Third Sector organisations reported greater variability in their ability to mitigate funding delays, reflecting resource and structural constraints.

Emerging Policy Recommendations For Scottish Government, Local Authorities and Third Sector Partners in Employability Service Provision

Emerging from survey responses and stakeholder interviews, these recommendations provide insights for the Scottish Government, Local Authorities, and Third Sector organisations on ways to strengthen the coordination, responsiveness, and sustainability of employability service delivery:

Adopt Multi-Year Funding Models:

The transition to multi-year funding is widely recognised as the most critical reform required for effective employability service provision. A significant 91.0% of respondents identified this as their most important recommendation, underscoring the urgent need for greater financial stability. This recommendation is aimed primarily at the Scottish Government, which sets funding cycles, but also at Local Authorities and third-sector organisations, which require longer-term financial commitments to plan and deliver sustainable services.

Address the Cascade Impact of Funding Delays:

The misalignment between funding cycles and service delivery creates a knock-on effect that disrupts the entire employability ecosystem. Late grant allocations delay procurement and commissioning, preventing services from being properly mobilised and leaving providers with insufficient time to recruit staff, develop programmes, or engage participants. This results in fragmented support, service gaps, and reduced effectiveness in reaching those most in need. 88% of respondents highlighted the need to simplify administrative processes, reduce bureaucratic delays, and reform procurement practices to improve efficiency. Tackling these systemic delays requires the Scottish Government to ensure timely funding allocations and Local Authorities to develop more flexible commissioning processes that mitigate disruption to service users.

Enhance Communication Between Key Stakeholders:

Improved communication between Local Authorities and the Scottish Government is critical, with 85.3% of Local Authorities reporting neutral or ineffective experiences, highlighting significant gaps in clarity and timeliness. Establishing more structured engagement mechanisms, clear guidance on funding allocations, and consistent feedback loops will ensure that policy decisions are better aligned with on-the-ground service delivery needs.

Ensure Funding Reflects Regional and Demographic Needs:

There is strong consensus among Local Authorities, third-sector organisations, and other stakeholders that employability funding mechanisms must better reflect regional disparities. This is particularly crucial for rural and island communities, where higher costs and logistical challenges create additional barriers to service delivery. 76% of respondents advocated for funding models that incorporate regional cost adjustments and flexibility to address localised challenges. This requires policy adjustments from the Scottish Government, in collaboration with Local Authorities and regional economic development bodies.

Develop Streamlined, Strategic Commissioning Frameworks:

Fragmented procurement processes and funding delays significantly hinder employability service provision. Moving towards a more strategic commissioning model with longer contract durations, fewer piecemeal contracts, and reduced administrative burdens, would particularly benefit third-sector providers, who often face disproportionate challenges in securing and managing funding. This requires action from both the Scottish Government and Local Authorities, ensuring that commissioning processes align with service delivery needs and minimise bureaucratic inefficiencies.

Conclusion:

This report has examined the structure, distribution, and challenges of employability funding in Scotland, highlighting key findings from survey responses and stakeholder interviews. The No One Left Behind (NOLB) approach has introduced greater local flexibility, but findings suggest variation in implementation across local authorities, leading to inconsistencies in service delivery (Sections 1 & 2). While NOLB has streamlined funding structures, the transition from multi-stream funding to a localised model has raised concerns, particularly regarding the loss of the European Social Fund (ESF) and the forthcoming conclusion of the UK Shared Prosperity Fund (UKSPF) in 2025 (Section 2). These challenges are further compounded by delays in grant offer letters, which create additional financial uncertainty for service providers, affecting their ability to plan and sustain employability programs effectively (Section 3). Moreover, these funding constraints contribute to fragmented commissioning processes, where short-term contracts and misaligned procurement timelines disrupt service continuity and long-term workforce planning (Section 4).

One of the most prominent findings is the strong consensus on the need for multi-year funding, with 91% of respondents ranking it as the most critical reform (Table 6.1a, Section 6). Annualised budgets were identified as a key challenge, limiting long-term planning, staff retention, and program sustainability (Section 5.1). Additionally, funding delays and disbursement inefficiencies were reported across all sectors, impacting the timing and continuity of service delivery (Section 3.1& 3.2).

Coordination between Scottish Government, local authorities, and third-sector providers was another recurring theme, with respondents identifying communication and administrative burdens as barriers to effective employability service provision (Section 3 and 4). Administrative complexity and multiple funding streams were cited as increasing the workload for organisations, diverting resources away from front-line service delivery (Section 5.1).

While these challenges present ongoing concerns, the findings suggest that enhancing coordination, introducing greater funding flexibility, and addressing procedural inefficiencies could support a more sustainable employability funding model (Section 6). Moving forward, ensuring stability in funding cycles, improving engagement between funding bodies and service providers, and aligning funding structures with local labour market needs will be critical to enhancing Scotland's employability services