As Sir Keir Starmer, Rachel Reeves, and their government settle into their roles, they’re facing some big challenges - challenges that will not only shape the economy but also define their time in office.

One of the most pressing issues, and one that arguably not spoken about enough, is the financial wellbeing of workers, especially in Scotland. Our research at the David Hume Institute has shown that financial insecurity isn’t just a personal problem, it’s a ticking time bomb for the wider economy.

Our recent report, The Great Risk Transfer, sets out how financial risk once burdened by the state and employers has shifted to individuals. This swing has left many workers, particularly those in hospitality, retail, and social care, feeling vulnerable and stressed.

Ironically, the very same workers that power our economy, are now those bearing the biggest burden of its perilousness. But the impact of this vulnerability goes far beyond individual hardship - it’s starting to weigh down productivity and, ultimately, economic growth, one of Labour’s key measures of success.

Read more

Take a look at what’s happening with sick pay, healthcare, and pensions in Scotland. More than a third of employers are only offering the bare, statutory minimum. While this might save money in the short term, it’s creating a workforce that’s tired, stressed, and less engaged. Who can blame them?

Over two-thirds of businesses in Scotland have noticed that financial strain is harming productivity, leading to a knock-on effect in the national economy. And when one in four Scots are losing sleep over money worries, it’s clear that something’s got to give.

Perhaps it is due to a complacency setting in that many do not see the challenges facing us, but if the UK economy is the thrive and realise its full potential, as I believe it can, the Government must take action to rebalance the risks that are being unfairly placed on individuals. The prime minister’s promise to “make work pay” is a good start, but it needs to be backed up with real, concrete measures that tackle the root causes of financial insecurity.

First on the list should be a thorough review and reform of the minimum standards for sick pay and pension contributions. Right now, the minimum pension contribution rate for employers in the UK is just 3%.

In Australia, the rate is set to rise from an already more generous 11.5% to 12%. If we don’t address this disparity, we’re setting up future generations for a retirement crisis that we simply can’t afford to ignore. The Labour government needs to prioritise raising these minimums so that all workers can save enough for a secure retirement, without the fear that today’s financial decisions will lead to poverty down the road.

Next, the Government must commit to enhanced funding and support for services like the Money and Pensions Service (MaPS). Our research shows that many workers aren’t even aware of the resources available to them, and employers often don’t have the expertise to offer the right support. A fit-for-purpose digital pensions hub would be a genuine game-changer, giving people the tools they need to make smart decisions about their financial futures.

Whilst the Government holds the handle on legislative change, these issues are not only theirs to bear responsibility for - employers have a critical role to play too. Businesses need to understand that there’s a direct link between financial wellbeing and productivity, the evidence is too clear to ignore. Those that choose to bury their heads in the sand will likely find themselves struggling in an increasingly competitive market.

One in four Scots are losing sleep over money worriesOne in four Scots are losing sleep over money worries (Image: Getty Images)

We should be encouraging employers to go beyond the bare minimums and think about how they can help ensure their employees' financial stability. Whether that’s through better pension contributions, payroll savings schemes, or access to financial advice, these aren’t just nice-to-haves - they’re smart investments in the future of their businesses and the broader economy.

Finally, it’s important the governments of Westminster and Holyrood work closely with the private sector to create an environment where personal financial wellbeing is seen as a cornerstone of economic success. Passing new laws is important, of course, but equally so is fostering a culture where businesses are encouraged and supported to take proactive steps in safeguarding their employees' financial health.

The path to a thriving economy runs through the financial wellbeing of its people. If we want to see a Scotland, and indeed a UK, where both businesses and workers flourish, we must act now. The Government has a chance to lead by example, but businesses too must rise to the challenge of creating a future where financial security isn’t a privilege but a right for everyone. A secure, engaged, and financially stable workforce isn't just good for those individuals - it's good for all of us.

Susan Murray is Director of the David Hume Institute