A look ahead to the Scottish Spending Review

Having entered the New Year, the long-awaited UK Government Autumn Budget – Labour’s second since taking office- may seem like a distant memory. As a reminder, it was a Budget preceded by a stream of leaks, but which still offered a surprise on Budget day when the Office for Budget Responsibility (OBR) leaked their verdict in full before Chancellor Rachel Reeves reached the dispatch box.  

Such dramatic scenes are, thankfully, unlikely when the Scottish Government share their draft Scottish Budget and Scottish Spending Review on the 13^th of January 2026. The UK Budget’s late timing, which in turn has delayed the Scottish Budget has, however, been causing disquiet across Scotland’s voluntary sector for months. 

Content aside, UK Budget delays present challenges for the Scottish Government and uncertainty for local authorities and voluntary organisations due the risk of delays in funding. 

As colleagues across the sector know, the Scottish Government have committed to ‘Fairer Funding’ for the voluntary sector by 2026. It is essential that the UK and Scottish Government’s work together to ensure UK Budget decisions support the Scottish Government to realise this commitment.  

For its part, as we enter 2026 its clear the Scottish Government must move further and faster. 

The voluntary sector is a key part of Scotland’s economy, employing 5% of its workforce, and providing essential services and support. In Spring 2025, despite our sectors significant contribution 81% of voluntary organisations reported financial challenges in the Third Sector Tracker, 10% higher than in spring 2023. Similarly, uncertainty about the future and cash flow constraints have also reached record highs, and 56% of organisations say access to reserves is essential for short and medium-term survival — rising to 63% for organisations with paid staff. 

The Scottish Government launched its “Fairer Funding” pilot in February 2025 - which commits more than £120 million to pilot projects focusing on essential services and eradicating child poverty over two years. SCVO welcomed the initiative, while recognising it falls far short of SCVO’s “Fair Funding” principles which we developed in partnership with colleagues across the voluntary sector.  The initial feedback the Scottish Government has received from those participating is positive, over just the first six months the two-year pilot has already been shown to offer many of the organisations participating some of the benefits of multi-year funding:  

• stability 

• supporting their ability to plan into the future 

• consistency of service provision 

• supporting staff recruitment and retention 

• and attracting new funding investment.  

SCVO and colleagues across the sector have shared these, and many other benefits of multi-year funding for many years. A wealth of recent evidence on the benefits of multi-year funding, and Fair Funding more broadly, is also already available through the Third Sector Tracker, the  Social Justice and Social Security Committee’s Pre-Budget Scrutiny report 2025/26, and SCVO’s Fair Funding work. 

Even at this early stage the Fairer Funding Pilot Feedback Survey highlights where the pilot does not go far enough, funding is static, notifications delayed, and longer funding cycles needed to ensure the full benefits are realised.  SCVO have raised these issues within our Fair Funding asks, developed through significant engagement with the voluntary sector. The Scottish Government described the pilot as the first step in mainstreaming multi-year funding agreements more widely across the voluntary sector, it is already clear the Scottish Government must go further. 

To deliver the reform to our funding landscape that is so desperately needed the 2026 Scottish Spending Review and Scottish Budget must include further action and recognise that multi-year funding is only one element of Fair Funding. Delivered alone, or badly, multi-year funding will not be sufficient to deliver the sustainable funding landscape needed by voluntary organisations, our staff and volunteers, and the communities we work with. 

By aligning their plans with SCVO’s definition of Fair Funding the Scottish Government can support both the many contributions of our sector and their own ambitions to end child poverty, grow the economy​, tackle the climate emergency, and i​improve public services. 

It is also clear that to make progress the UK and Scottish government’s must work together to understand the consequences of UK Budget decisions on the Scottish Budget and actions needed to avoid funding delays. 

Read our Scottish Spending Review briefing here.