SCVO Response: Scottish Government consultation on Water services - investing in and paying from 2027

About our response

The Scottish Council for Voluntary Organisations (SCVO) welcomes the opportunity to respond to this Scottish Government consultation on Scotland’s water services, focusing on the questions regarding the Water and Sewerage Charges Exemption Scheme in section 6.3 of this consultation. The exemption scheme for charities and Community Amateur Sports Clubs (CASC) is an important issue to the voluntary sector, providing vital support to organisations who would otherwise struggle to meet their water costs. As the sector continues to feel the strain of financial pressure, particularly in relation to core costs, it's important that these organisations receive the support they need.
We have provided a response to this consultation based on our previous member engagement on the scheme in 2017, in which we collected 1250 survey responses. We have also investigated more recent research conducted by our research team looking at financial data submitted by charities to the Scottish charity register from 2016 to the latest available year.

Our response

SCVO welcomes the opportunity to respond to this consultation and would like to contribute to the following questions:

Question 7a: To what extent do you agree or disagree that the current eligibility criteria for the charity exemption scheme remain appropriate?

Disagree

Question 7b: Please explain your answer to question 7a.

SCVO supports the Water and Sewerage Exemption Scheme and recognises the vital support it provides to charities and Community Amateur Sports Clubs (CASC). However, SCVO disagrees that the current eligibility criteria remain appropriate and believes the thresholds should be increased in line with inflation, backdated to 2016.
We are calling on the Scottish Government to increase the income thresholds that make organisations eligible for full or partial exemption to their water bill to ensure the scheme’s eligibility is adjusted in line with inflation.

The thresholds were set over a decade ago and have not been adjusted despite significant inflationary pressures. Since 2016, prices have risen by around 38% (based on the Consumer Price Index), including a 41-year inflationary peak in October 2022. Over the same period, the voluntary sector has experienced increased costs, increased demand, and a real-terms reduction in income – including public sector grants and contracts.

As a result, ‘fiscal drag’ has meant that more charities now exceed the outdated thresholds, as incomes have risen in cash terms between 2016 and 2026, even though their real-terms resources have not.

If we consider the income of a charity in 2016, near to the beginning of the scheme, earning £199,000 - if its income had increased in line with inflation (based on the Consumer Price Index from 2016 to 2026) – it would now have a turnover of £276,000 (an increase of £75,000). Similarly, a charity with an income of £299,000 in 2016, if its income had increased with inflation, would today have a turnover of £415,000.

OSCR data indicates that roughly 900 fewer charities fall below the water rates exemption (18,955 in 2016 compared to 18,056 in the latest available year). Meanwhile, over 650 more charities now report annual incomes above £300,000 (rising from 1,990 to 2,656) leaving them no longer eligible for any exemption. The number of ineligible charities is likely to keep growing by around 50 every year if inflation continues at current rates (based on the consumer price inflation at 3%).

This would suggest that the number of charities that have remained eligible for full or partial exemption has not remained the same, with over 650 charities no longer eligible. Our data shows that the types of organisations missing out on support include women's aid, youth projects, sports clubs, churches, community development, food banks, nurseries and out-of-school clubs, YMCAs, home-starts, and smaller citizens advice bureaus – all of which provide vital services for Scotland’s communities.

Charities today are facing increasing demand on already stretched services and financial challenges caused by unsustainable funding and increased core costs. This scheme provides a vital service for charities, who would otherwise find their water bills unaffordable. The gap between income and expenditure has narrowed in recent years and although the sector has seen rising costs across many areas, much of the sector’s increased expenditure is due to the sharp rise in the cost of basics such as utilities and insurance. We do not think it acceptable that more charities, every year, will continue to miss out on exemption where the income thresholds have not been adjusted appropriately over time in line with inflation.

We would also like to take this opportunity to highlight the importance of achieving Fair Funding for the voluntary sector. As part of SCVO’s member engagement, we have heard that many charities find that, despite receiving a large grant, the funding available for core costs such as utilities is often limited due to restrictions on spending. SCVO continues to call for funders, including the Scottish Government, to adopt SCVO’s definition of Fair Funding. This ask includes sustainable funding, for example: inflation-based uplifts and full costs, including core operating costs. Achieving this would provide a sustainable voluntary sector which can meet demand and deliver quality outcomes while supporting volunteers and employees. Until we achieve this, schemes such as the Water and Sewerage Charges Exemption Scheme are a lifeline for many organisations.

SCVO also disagrees with the exclusion of charities operating small-scale commercial activities such as small retail outlets and community cafes. Organisations operating these activities often do so as fundraising which supports delivery of their services. Additionally, these activities provide benefit beyond fundraising to the communities they work with. We support the principle of annual verification of eligibility to allow recipients who had become ineligible due to restricted funds to regularly reassess eligibility if their circumstances change.