SCVO Briefing: Scottish Government Debate: Public Service Reform: Empowering Staff, Service Users & Local Government

Our position

Scotland’s voluntary sector is crucial to delivering public services, supporting early intervention and prevention, and strengthening communities across Scotland.

Scotland’s voluntary sector must be at the heart of any serious programme of public service reform. The high-level commitments in the Scottish Government’s Public Service Reform Strategy are welcome, but greater detail is needed on what meaningful involvement of the voluntary sector will look like. This must include timelines, indicators, and reporting structures.

In the longer term, fundamental reform is needed to unlock the voluntary sector’s full potential to deliver for Scotland’s people and communities. The Scottish Government must embed SCVO’s Fair Funding principles and ethical commissioning practices across Scottish Government departments, agencies and public bodies. SCVO is also calling for the establishment of a new formalised partnership of equals between the voluntary sector and Scottish Government—one that is set in statute.

Failure to adequately involve the voluntary sector in Public Service Reform, and put in place fundamental longer-term reform, will mean that our public services, and crucially our communities, lose out on the ingenuity, experience, and reach of voluntary organisations. That is a missed opportunity Scotland cannot afford.

Scotland’s Essential Sector

Voluntary organisations provide services that are core — not peripheral — to people’s lives, including social care, homelessness support, disability services, food poverty interventions, community transport, work tackling social isolation, and much more besides

The sector’s trust, community reach, and expertise make it uniquely placed to deliver positive outcomes in communities up and down Scotland. The Scottish Government’s own Public Service Reform Strategy recognises that the voluntary sector provides “the very local, very in-depth and relationship-based support we aspire to”.

Public sector funding makes up around 40% of the sector’s income, including approximately £1.6 billion from local authorities and £1 billion from the Scottish Government. This investment resources key services and projects across Scotland.

The voluntary sector plays an essential role in the delivery of preventative services, which are recognised as key to improving health and wellbeing outcomes, while reducing expensive “failure demand”. or example, Cyrenians’ Hospital InReach service embeds homelessness specialists within hospital teams to support patients experiencing, or at risk of, homelessness with discharge planning, accommodation, and ongoing community support. Within the first 18 months of the pilot, the service reported a reduction in hospital readmission rates of more than two-thirds.

The voluntary sector and public service reform

The Scottish Government’s Public Service Reform Strategy includes welcome commitments relating to the voluntary sector, including on prevention, community planning, collaborative commissioning, and improving funding arrangements. However, it is not yet clear how these commitments are being realised in practice.

Many of these commitments remain broad in scope, but lack greater detail. While the Strategy includes proposals to monitor progress — including a new Public Service Reform Delivery Board and alignment with the National Performance Framework — greater clarity is needed how the voluntary sector will be meaningfully involved in practice. This must include timelines, indicators, and reporting structures, particularly for workstreams involving the voluntary sector.

Fair Funding

Where voluntary organisations are funded to deliver public services, too many continue to face poor funding practice from public authorities. This undermines delivery, workforce stability, and long-term planning.

Poor practice includes:

• Late payment of grants and contracts
• Short-term and inflexible funding arrangements
• Funding that does not meet the full cost of delivery
• Inconsistent processes across public bodies
• Onerous application, monitoring and reporting requirements

Recent findings from SCVO’s Scottish Third Sector Tracker highlight the impact of short‑term, competitive, and overly bureaucratic funding systems on voluntary organisations. Organisations report growing instability, funding delays, rising demand, and increasing pressure on staff and services. These issues are well recognised, underscoring the findings of all 11 waves of the Tracker, which has been running since 2021.

In the last parliamentary term, the Scottish Parliament’s Social Justice and Social Security Committee has highlighted the urgent need for reform of voluntary sector funding, including greater use of multi-year and flexible funding arrangements.

This is recognised by the Scottish Government too. The Public Service Reform Strategy identifies “short-term static funding” as key among the “real challenges” to voluntary sector delivery.

Early feedback from organisations benefitting from the Scottish Government’s “Fairer Funding” pilots, show that multi-year funding is already improving stability, supporting workforce retention, strengthening long-term planning, and helping organisations attract further investment.

Greater and faster progress towards Fair Funding is now required. SCVO’s Fair Funding principles, co-designed with the voluntary sector, must become the norm across government and public bodies. SCVO’s Fair Funding principles include:

• Multi-year funding: minimum three-year arrangements across public bodies
• Flexible funding: unrestricted funding that covers core costs and enables adaptation
• Sustainable funding: inflation-based uplifts and full cost recovery
• Accessible funding: proportionate and streamlined application, reporting and payment processes
• Transparent funding: clear decisions, accountability, and public scrutiny

Commissioning with Communities

Public sector contracts made up £1,810m of the voluntary sector’s income in 2023, demonstrating the scale of role that the voluntary sector plays in delivering commissioned services.

Yet, the Scottish Government’s Public Service Reform Strategy recognises that “limitations in procurement” continue to act as a barrier for the voluntary sector. To elaborate, too often, public bodies default to procurement, creating rigid and disproportionately bureaucratic processes. In practice, this excludes smaller, specialist organisations, with insufficient emphasis on quality, impact, and community need.

SCVO is calling for the Scottish Government to continue to embed ethical commissioning practice across its own departments, agencies, and bodies. This must include:

• Application of Fair Funding principles to all contracts
• Adoption of a collaborative commissioning approach, designing funding and commissioning processes that encourage joint working across sectors, rather than defaulting to competitive tendering, where possible. The planning, design and delivery of services must bring together people, communities and providers.
• Simplification of processes, reducing complexity in commissioning and tendering processes for small and specialist organisations, while avoiding applying procurement approaches to grant-making.
• Improving understanding of the voluntary sector within public bodies. 
• Ending the default to procurement within public bodies, recognising that commissioning should be flexible and proportionate, and that formal procurement is not always the most appropriate route. 
• Consistency of good practice across public bodies, ensuring that commissioning and procurement is guided by shared principles, and not a patchwork of different systems and expectations. 
• Investment in training and development for both voluntary organisations and public sector commissioners. 
• Greater use of lotting, breaking large contracts into smaller, more manageable parts to enable participation by smaller, expert organisations.

A Partnership of Equals

Too often, voluntary organisations are excluded from the planning, design, and delivery of public services, despite their expertise, reach, and close relationships with communities.

The Scottish Government’s own Public Service Reform Strategy recognises this, noting that the sector can “feel disconnected from how services are designed and delivered, and are regarded solely as a provider”.

The Auditor General for Scotland has similarly warned that “the third sector can feel like a poor relation to mainstream public services”.

The Scottish Parliament’s Finance and Public Administration Committee also heard evidence during its 2025/26 pre-budget scrutiny of the importance of treating the voluntary sector as an “equal partner” in reforming public services. The Royal Society of Edinburgh and Audit Scotland have similarly called for “a step change in levels of public and third sector engagement in the planning and delivery of public service reform”.

SCVO’s engagement with the sector has identified a range of barriers to effective collaboration between public bodies and voluntary organisations, including:

• Poor understanding of the voluntary sector within public bodies
• Unequal relationships between sectors
• Lack of trust and inconsistent communication
• Reluctance to share power with communities and service users
• Poor funding and commissioning practice
• Lack of accountability for partnership working

These challenges are not new. Scottish Government research published in 2022 — developed with SCVO, COSLA, and the TSI Network — identified trust, power, funding, and structure as persistent barriers to collaboration between the public and voluntary sectors.

Recent findings from SCVO’s Scottish Third Sector Tracker also highlight organisations’ experiences of weak relationships with public bodies, lack of trust‑based approaches, and insufficient involvement in decision‑making. Participants also called for more collaborative partnerships that recognise the sector’s expertise and essential role in supporting communities. Again, these findings underscore consistent issues identified in the Tracker, since its inception.

Prior to the election, SCVO welcomed the Scottish Government’s commitment to establishing “The Third Sector Partnership”. Now that a new government has been formed, SCVO is calling for work to begin on establishing this new, formalised relationship, in line with the principles SCVO has developed in partnership with the voluntary sector. These include a partnership arrangement that is:

• Underpinned in statute
• Accountable for delivery across all public bodies
• Outcomes-focused
• Protective of the sector’s independence
• Aligned with Fair Funding principles

Conclusion

Scotland’s voluntary sector must be at the heart of public service reform. To unlock the sector’s full potential to support people and communities across Scotland, the Scottish Government must deliver Fair Funding, embed ethical commissioning practice, and establish a new formalised relationship with the voluntary sector based on a partnership of equals.

Failure to do so will mean that our public services and, crucially, our communities lose out on the ingenuity, experience, and reach of voluntary organisations — a missed opportunity Scotland cannot afford.

About SCVO

The Scottish Council for Voluntary Organisations (SCVO) is the national membership organisation for the voluntary sector.

We're ambitious for SCVO, ambitious for the voluntary sector

Our mission is to champion the role of voluntary organisations in building a flourishing society and support them to do work that has a positive impact.

We're passionate about what the voluntary sector can achieve. Along with our community of 3,739 members and supporters, we believe that a thriving voluntary sector should be at the heart of a successful, fair and inclusive Scotland.