SCVO submission to the Finance Committee on Scotland's public finances

About us

The Scottish Council for Voluntary Organisations (SCVO) is the national membership organisation for the voluntary sector. We champion the sector, provide services, and debate big issues. Along with our community of 2,600+ members, we believe that charities, social enterprises, and voluntary groups make Scotland a better place.

About the Scottish voluntary sector

Scotland’s voluntary organisations are focused on delivering vital services and empowering some of Scotland’s most marginalised communities. The sector has a role in all aspects of Scottish society, from tourism and housing to the justice and social care systems.

The sector is an essential part of Scotland’s economy, encompassing an estimated 40,000+ organisations, from grassroots community groups and village hall committees to over 6,000 social enterprises, and approximately 25,000 registered national charities.

About our submission

SCVO welcomes the opportunity to respond to questions 1-3 and 5 of the Committee’s call for views on Scotland’s public finances and the impact of covid.  

Our submission draws on evidence from:

• SCVO support services (funding, employability, digital, Covid support hub).
• Parliamentary records and SCVO meetings with the Scottish Government.
• SCVO policy submissions and engagement with the sector throughout 2020-21.
• A focus group with sector colleagues to review our position for this submission. 

Summary

The voluntary sector and the services the sector provide are under pressure. Covid 19 has put enormous strain on sector finances and, for many, increasing demand on services.

To secure the essential services our sector provides for the future, and to deliver a fair and equal recovery, SCVO calls on the Committee to recommend the Scottish Government:

• invest in and recognise the voluntary sector as a significant employer, a partner, and a vital social and economic actor in Scotland’s recovery from the pandemic, alongside the public and private sectors in the 2022-23 Scottish Budget
• follow up on its commitment to meet with the Social Renewal Advisory Board and investigate the Board’s Calls to Action; explicitly outline how the Board’s report has influenced the 2022-23 Scottish Budget; and make resources available to progress the Calls
• share how it plans to build on the success of the Connecting Scotland Programme to support continued and solid infrastructure for digital inclusion
• extend and fund programmes, such as Community Jobs Scotland, for another year until Local Employment Partnerships (LEPs) are ready to deliver more employability programmes locally and ensure the voluntary sector is included in a comprehensive and inclusive whole system response
• make progress on the Equalities and Human Rights Committee’s request (from 2020-21) that the government works with the sector to develop new funding models and report on these to the parliament, drawing on innovative approaches developed with the sector during the pandemic
• embed flexible funding arrangements available during the pandemic in its non-covid related funds and standardise its annual funding decision making to ensure timely payments to voluntary organisations in time for the new financial year
• work with the sector to understand and address the challenges caused by the current competitive procurement environment and recognise the benefits of a more partnership-based approach.
• adopt formal procedures and guidelines across government and communicate these to mitigate the impacts of delayed UK and Scottish budgets on the voluntary sector
• work with the UK Government, Scottish Parliament, and experts on Scotland’s public finances to agree arrangements to support a shift to multi-year spending plans, and ensure good practice on multi-year funding currently in place is replicated across Government.

SCVO also call on the Committee to:

• investigate the Scottish Government progress in moving to multi-year funding. In particular, how the new Delivering Equally Safe and Supporting Equality and Human Rights funds have worked in practice and whether similar methods can be adopted elsewhere.
• revisit what progress the Scottish Government has made in working with the sector to co-design new processes for funding applications.

Our response

SCVO welcomes the opportunity to respond to the Finance and Public Administration Committee’s call for views on Scotland’s public finances 2022-23 and the impact of the Covid pandemic.

As the national membership organisation for the voluntary sector, our priority is to see a Scottish Budget that recognises the vital role that the voluntary sector plays in Scotland’s economy, both in short to medium term recovery and in the longer-term economic transformation that Scotland needs.

Q1: How should the Scottish Government's Budget for 2022-23 address the need for a fair and equal recovery from the Covid crisis?

SCVO and colleagues across the voluntary sector were frustrated by the sector's omission from the Cabinet Secretary's budget statement in 2021-22. While the Cabinet Secretary recognised many other parts of society for contributing during the pandemic, the sector was overlooked. The Scottish Government frame Scotland's recovery as a joint endeavour, yet statements repeatedly refer to the importance of "business."

While the 2021-22 Scottish budget included funding for areas where the sector makes a vital contribution, including mental health, regeneration, employability, and others, the voluntary sector is often uncertain what funds will flow to it. It is impossible to know what overall funding increases will mean when reviewing the budget, particularly for areas dependent on local government following national spending directions.

Across the board, there is a pattern of the voluntary sector not being recognised for its substantial economic contribution. The voluntary sector’s huge role in Scotland’s economy extends well beyond the 100,000 plus people our sector employs and an annual turnover of over £6 billion. The Scottish voluntary sector works with 1.4 million volunteers and plays a crucial role in ensuring that the Scottish economy supports people and communities to live fulfilled lives.

Similarly, the sector’s potential to be part of the transformational shift to a wellbeing economy is not appreciated. There is currently no place for the voluntary sector, or indeed lived experience, on Scotland’s Council for Economic Transformation, tasked with developing Scotland’s new 10-year economic strategy. During the Scottish Parliament debate on economic recovery in June 2021, there was no mention of the sector from the front benches.

Our sector supports people to become active in the economy through employability programmes, voluntary organisations provide care, digital skills and devices, and research-based charities offer crucial contributions to social, economic, and environmental discussions. The Advisory Group on Economic Recovery noted the importance of culture to how Scotland is portrayed at home and overseas. The voluntary sector is responsible for many theatres, museums, galleries, sports clubs and more. Voluntary organisations also provide greener active-travel services better for health, allowing people to access their local economies.

Despite this, the voluntary sector’s economic contribution is often unnoticed, and its value to the economy is not understood.

The Scottish Budget will enhance our national recovery if it recognises the potential of, and invests in, the economic, social, and environmental solutions the voluntary sector offers, including those of the Social Renewal Advisory Board.

At a roundtable with various sector leaders on 25 May, the Deputy First Minister outlined the need for a “broad-based, inclusive approach that leads to decisive and emphatic action.” SCVO agrees and supports calls for practical solutions in what the Scottish Government term a ‘joint endeavour’ to transform Scotland’s economy and society post-pandemic.

The sector has a rich history of doing just that – see SCVO’s ‘Charities, Scotland & Holyrood: 20 Years Delivering Change’ - and most recently the report, “If not now, when?” published by the Social Renewal Advisory Board in January 2021. This report recognised that additional funding allowed the voluntary sector and community groups to deliver support and services swiftly in challenging circumstances. It highlights the sector’s compassion, ingenuity and innovation, and the success of partnership working. As a result, during the pandemic, real change at scale was possible when organisations from different sectors worked together at pace and flexibly to deliver positive outcomes for people and communities. 

While this report, amongst others, does not have all the answers, its numerous calls to action - on money and work, rights and equalities, and communities – are focused on a fair and equal recovery. The report adds to a bank of recommendations that mark watershed moments yet often stall at implementation. The voluntary sector has said what it needs and what to do – together, we must act. The 20 Calls to Action, if implemented in full, have the power to transform Scotland. Time and collaboration will be required.

The Scottish Government have recognised the report’s 20 Calls to Action as ambitious. To ensure they are realised, the Committee should urge the Scottish Government to:

• action their commitment to investigating the calls and meet with Board members early in the parliamentary term
• explicitly outline how the report has influenced the 2022-23 Scottish Budget
• make resources available to progress solutions, support co-design, and measure progress

Without resources, we risk yet another report failing to have the impact it should ten years on from the Christie Commission. 

Q2: How should the Scottish Government’s Budget address the different impacts of the pandemic across age, income and education groups and across places?

To ensure a fair and equal recovery from the COVID-19 crisis, the Scottish Government and Scottish Parliament should give greater weight to progressive economic systems like human rights and gender budgeting and the wellbeing and caring economy.

Taking a human rights-based approach (HRBA) to the budget would ensure equality is at the heart of the process, emphasising the greater risk to the most marginalised people and communities. The Committee can find detailed information on the HRBA to budgeting in the Human Rights Budget Work Steering Group briefing.

Voluntary sector organisations contribute to every aspect of Scottish society and have a wealth of insight into the different impacts of the pandemic across age, income, education groups and places. SCVO urge the Committee to carefully consider the concerns and proposals raised by voluntary organisations working with these groups during this budget cycle, in addition to those presented by the Social Renewal Advisory Board.

Appreciating the range of expertise across the voluntary sector and the many impacts the sector will cover in some depth, SCVO will focus our response on two areas where we have provided services to people and communities for many years. These examples highlight the importance of resourcing the sector to translate the Scottish Government’s ambitions into action.

Connecting Scotland demonstrates public investment sense. Voluntary organisations, translating national ambitions into local action creates a fairer and more equal Scotland.

The pandemic has shone a light on the disadvantage faced by the least digitally engaged. The voluntary sector has worked in partnership with the Scottish Government and independent funders to make sure people and communities are connected during the pandemic and can access vital support.

Full digital inclusion is achieved when people and communities have:

• Fast infrastructure
• An affordable internet connection in home and access to relevant devices (not just a smartphone)
• The basic digital skills to enable them to realise social and economic benefits
• The confidence and motivation to go online

SCVO have been working on digital inclusion and capacity building for many years.  We work with a wide partnership of voluntary organisations, social housing providers, local authorities, and other public sector bodies to develop practices that embed passing on the essential digital skills for life in ways that are meaningful and practical.

Funded by Scottish Government, as a direct response to the pandemic, we currently coordinate the Connecting Scotland programme. We work with all 32 councils and hundreds of voluntary organisations to bring devices, connectivity, and skills to the people who most need them. The programme is frequently described by those involved as the most successful partnership work they’ve ever been involved in.

The Connecting Scotland programme has achieved great things in the last year including:

• 40,000 devices are in the hands of those in most need and this will rise to at least 46,000 in October and more beyond
• Over 2,700 Digital Champions trained and supporting multiple people 

Connecting Scotland is a welcome response to both the pandemic and achieving digital inclusion for all. Over the next year further work will be needed to blend the device first approach with the existing skills first approach to create a solid infrastructure. Over the next two, we must focus on consolidating activity in both areas and work in partnership to learn and deliver what is needed to ensure digital inclusion.  

The Committee should ask the Scottish Government to share how it plans to build on the success of the Connecting Scotland Programme to support continued and solid infrastructure for digital inclusion.

In addition to skills, the pandemic has highlighted the extent to which affordable internet access in the home is essential. Without this, individuals have limited access to public services, channels for civic and democratic participation, knowledge and information tools, opportunities for social engagement, the labour market, and learning opportunities, essential to the fulfilment of civil, political, economic, and social rights. Older people, those with disabilities, people in lower income brackets, and those in social housing, including younger people, are all more likely to be digitally excluded.  

The Scottish Government must not put successful youth employability programmes delivered by the voluntary sector at risk as we approach Phase 2 (March 2022) of No One Left Behind. Transformational change must be balanced with the immediate need for existing employability infrastructure that works.

Supporting people into or back into employment is a significant area of expertise for the voluntary sector. Charities, social enterprises, and infrastructure organisations at a local and national level deliver high-quality support to people facing barriers to employment and provide good quality jobs and skills development.

SCVO makes one of the many voluntary sector contributions to this work through delivering the Community Jobs Scotland programme (CJS). The success of CJS over the last ten years has been remarkable – offering a unique route into work for over 10,000 young people who faced the most significant barriers to entering the labour market.

Under the NOLB implementation plan, CJS is due to end by March 2022 with funding being transferred to local government. Many questions remain on whether local authorities will distribute funding to the voluntary sector under the local arrangements. We are concerned by the lack of clarity and opportunities for the voluntary sector to engage meaningfully in Local Employability Programmes (LEPs). We would welcome clarification from the Scottish Government on what role the voluntary sector can play in a comprehensive and inclusive whole system response to employability.

As it stands, we believe there is a great risk in winding down this programme with no sign of an effective replacement. While we agree with the aims of NOLB, programmes, like CJS, should be extended and funded for another year until LEPs are ready to deliver more employability programmes locally. An extension will have a positive impact on the life chances of some of Scotland's most disadvantaged young people and make it easier to deliver the Young Person's Guarantee.

As raised by the Third Sector Employability Forum (TSEF) and its partners (i.e., Scottish Training Federation and Employment Support Scotland), the end of European Social Funds due to Brexit, and national funds being rolled into No One Left Behind local budgets, are a ‘devastating blow’ to the voluntary sector. Sector surveys anticipate 620 redundancies and job losses across organisations as a result of national programmes ending. It is also a blow to the people the voluntary sector support. TSEF highlight that ending Skills Development Scotland’s Employability Fund will mean that £2.3m will not reach young people, many from low-income households.

Q3: In 2022-23, it is likely that there will be reduced levels of available Covid-related financial support for the public and private sector. Given this, what should be the priorities for the Scottish Government’s Budget?

If the level of resources available across sectors for specific Covid-related support is to reduce, the Scottish Government must consider the steps it can take on an ongoing basis to address the financial sustainability of voluntary organisations.

The voluntary sector's absence from the Committee's question is a concern and again demonstrates that the sectors contribution to Scotland’s people, society and economy remains unrecognised and undervalued. The voluntary sector's role and needs must be central in the government's and parliament's thinking on all work post-pandemic.

The voluntary sector in Scotland has played a vital part in supporting the country through the coronavirus pandemic. However, the sector is vulnerable, hit by a perfect storm of loss of diverse income sources at a time when voluntary sector services were already stretched. These funding challenges are further exacerbated by the removal of European Structural funds and other European funds and ongoing uncertainty surrounding their successor fund.

The Scottish Government’s and the UK Government’s financial support for the sector has been greatly appreciated, including the most recent funds focused on the sector’s recovery from the pandemic. The Adapt and Thrive strand of the Community and Third Sector Recovery Programme closed to new applications on Monday 19 July and has played an important role in helping the voluntary sector move to recovery. By the time the final awards are made it will have made in the region of £30.6m available to provide both funding and business support for organisations to change to new operating models. This partnership approach is one that has shown great benefit to the sector.

As we move beyond Level 0 the funding needs of the voluntary sector will be an emergent picture with some areas anticipating a surge in demand: physical and mental health; sport; communities; children; and families and youth services, while others struggle to adapt. The Committee should ask the Scottish Government how it plans to work with different parts of the voluntary sector to understand their funding situations post-covid – SCVO is happy to play a role in facilitating this.

Emergency funding to the sector ensured many organisations could operate during the pandemic, however it is important to recognise that the pandemic intensified existing challenges in the areas of funding and procurement.

What is more certain is that covid-related funding, however vital for the sector and communities during the pandemic, was only ever a sticking plaster. A secure and sustainable future for the voluntary sector is needed to play its part in Scotland’s social and economic transformation.

SCVO is currently conducting several research and engagement projects concerning funding, including better understanding the challenges and solutions for improved funding experiences of voluntary sector intermediary bodies. SCVO would be happy to share a summary of our findings when finalised this September.

Whilst there is no one size fits all approach, a series of changes to the way funding and procurement processes in Scotland are administered could alleviate the pre- and post-pandemic funding challenges faced by voluntary organisations.

Long-term funding models

The Scottish Government should pivot to a new model of funding delivery for the voluntary sector that moves beyond the annual cycle. There is a body of knowledge from voluntary organisations, funders, and areas of the Scottish Government and local government that we can use to co-design new models and longer-term funding approaches.

The Sottish Parliament’s 2020-21 pre-budget scrutiny inquiry on sector funding recognised that short-term public funding, sometimes for one year or less, creates a situation where organisations can struggle to deliver projects and plan their workforces. The Committee should urge the Scottish Government to make progress on the Equalities and Human Rights Committee’s request (from 2020-21) that the government works with the sector to develop new funding models and report to the parliament.

Supporting partnership

Similarly, the Committee recommended in 2020-21 that the Scottish Government works with partners and other statutory funders to explore effective partnerships across competitive funding environment. These plans should be set out by Scottish Government.

Despite voluntary organisations' enthusiasm for greater collaboration, existing funding processes see organisations pitted against each other. We have seen far more collaborative work over the last 18 months, and we must not lose these new ways of working. Scottish Government funds can enable this through longer funding application windows and resourcing the infrastructure needed to support new connections in local areas and across themes.

Unrestricted funding

Unrestricted core funding for voluntary organisations is a long-standing but critical issue the sector faces, with funding often restricted to specific projects and outcomes. Unrestricted funding enables voluntary organisations to feel more secure and plan for the long term while responding quickly to a changing environment. A willingness to be flexible and do things differently during the pandemic is welcome, the Committee should ask the Scottish Government how it intends to embed the flexible funding arrangements we have seen during the pandemic across its non-covid related funds.

Timely decision-making and payments

In the early months of 2021, SCVO heard from several organisations that were still waiting on confirmation of funding for the upcoming financial year, without a clear indication of the timescale or process. Many voluntary organisation's face the annual cycle of uncertainty as they wait to learn whether their funding will be continued next year and are left only to assume it will.

Throughout the pandemic, the Scottish Government offered welcome extensions to funding. Now, many organisations will face uncertainty around their primary sources of government funding for the next financial year. The Committee should ask the Scottish Government what efforts it is making to standardise its annual funding decision making and timely payments to voluntary organisations.

Funding process

The Scottish Government can strike a balance between the speed of decision-making that was necessary during the pandemic but unsustainable in the long term and more straightforward and timely processes that did not exist pre-pandemic. The approach to applications, assessment, monitoring, and due diligence needs to be streamlined and simplified to ensure that no organisation is disadvantaged in the process.

The Scottish Government delivered many of its Covid-related funds through co-designing innovative models with the sector. SCVO worked with the Scottish Government and partners to establish a shared grant-making platform for example, to manage the Wellbeing Fund and the Adapt and Thrive Programme. This made the funding process simpler for applicants, as well as funders and sector bodies tasked with working collaboratively. Some parts of the Scottish Government are interested in utilising the platform for other government funding, this could be one part of the solution.

The Scottish Parliament regularly hears evidence from voluntary organisations that say the Scottish Government can make applications more accessible. The Equalities and Human Rights Committee asked the government to address this during 2021-22 pre-budget scrutiny. The Committee should revisit what progress the Scottish Government has made in working with the sector to co-design new processes for funding applications.

Procurement

Sector experiences of procurement during the pandemic have varied significantly, but, as our response to the Economy Committee in January 2021 made clear, we believe comprehensive reform is needed, replacing competitive tendering with greater collaboration. The current competitive tendering system is creating undue strain and uncertainty for the voluntary sector and its workforce and is failing to deliver a rights-based, person-centred approach.

The Committee should recommend that the Scottish Government work with the sector to understand and address the challenges caused by the current competitive procurement environment and recognise the benefits of a more partnership-based approach. This would drive up the delivery of public services, ensure the sustainability of the voluntary sector and realise the Fair Work principles. By good practice, we refer to favourable contract arrangements, such as inflationary uplift, multi-year funding, and full cost recovery.

Q5: How has the Fiscal Framework worked in managing response to the crisis?

Organisations and institutions with expertise in the fiscal framework are best placed to offer a thorough analysis in response to this question. SCVO is limiting our response to three areas where we can provide insight.

We welcome that the Scottish Government committed emergency funding to the voluntary sector at pace, despite no decisions finalised on the financing of voluntary organisations in England and limited knowledge of what consequentials would flow to Scotland.

The UK Government implemented many of the significant economic policy responses to the pandemic, which covered the whole of the UK (the Job Retention Scheme, the Self-Employment income support scheme, and changes to Universal Credit). However, the Scottish Government did make several welcome financial policy commitments in response to the pandemic, including support for voluntary sector organisations.

Scotland's voluntary sector called for urgent support early in the pandemic. In the initial stages of the pandemic, the Scottish Government could flex and offer vital emergency funding to the sector that pre-dated UK Government funds. As a result, in March 2020, a £350m package of support for the Scottish voluntary sector was announced by the Scottish Government's Cabinet Secretary for Communities and Local Government.

SCVO and colleagues across the sector welcomed this development. Not only did the funding package recognise the vital role of charities and community groups in mitigating the impact of coronavirus, but the Scottish Government also recognised the need to work alongside and trust voluntary sector intermediaries in the management and delivery of these funds.

The back-to-front timing of the Scottish and UK budgets for the second year in a row provided uncertainty moving into 2021-22. Formalised mitigation measures across the whole of government are needed for future budget cycles to control the level of risk that a change to the budget order places on the voluntary sector.

SCVO understands that public finances in Scotland are complex and that there are limitations to how the Scottish Government can respond to the varied impact of external events. However, the Scottish Government should prepare to manage risks and challenges through more formal, well-prepared, and better communicated mitigation measures.

The UK Government’s decision to defer the UK Budget for the second year in a row meant that the Scottish Budget was constructed and scrutinised without certainty over key elements that determine the Scottish Government’s funding levels for the following year. As a result, many voluntary organisations were asked to wait until April for clarity on their annual funding arrangements. Budget delays cause significant uncertainty for voluntary organisations in Scotland and those who work for them and rely on them.

SCVO is concerned by the repeated delays to the budget cycle and the impact on organisations across the sector. We welcome Scottish Government mitigation measures, such as extending funding arrangements for organisations for several months. These actions do not take place consistently across government portfolios, and the Committee should ask the Scottish Government to adopt formal processes to mitigate the impacts of delayed UK and Scottish budgets on the voluntary sector.

Additional confusion stemmed from COVID related consequentials and knowing what might eventually flow to the voluntary sector in Scotland. As above, we understand this is complex and welcome the UK Government’s decision to set a guaranteed funding floor that enabled the Scottish Government to act with the confidence that funding would be available. However, it was unclear which COVID related consequentials would flow to the sector once announced by the UK Government or whether the Scottish Government had already allocated this money.  

In addition to the pressures of covid, many voluntary organisations face the annual uncertainty as to whether the Scottish Government will choose to renew their regular funding. Further consideration of multi-annual budgetary planning and how this could work in practice is urgently needed.

The Scottish Government often uses the annual budget cycle as the primary reason for the one-year funding of voluntary organisations. As mentioned in our response to question three, this arrangement significantly hinders voluntary organisations' planning and delivery of vital services. The Advisory Group on Economic Recovery (AGER) called on the Scottish Government to 'take action to protect the capacity and financial sustainability of the third sector' and specifically cites longer-term funding arrangements as a solution.

The upcoming review of the Fiscal Framework provides the perfect opportunity for both the Scottish and UK Government’s to work together to agree arrangements that support a shift to multi-year spending plans. The guaranteed funding floor in place during the pandemic is a good example of how greater confidence in the levels of resource available in the future enables the Scottish Government to make smart decisions for the benefit of people and communities.

SCVO welcome The David Hume Institute’s latest paper on multi-year budgeting in Scotland, which has identified as an ‘enabling action’ following facilitated conversations with over 5,000 people across Scotland as part of the Institute’s Action Project. The paper emphasises the point that the Scottish Government should work with the Scottish Parliament and Audit Scotland to explore a move from single-year budgets to multi-year indicative budgeting.

Ministerial responses to committees during last year’s budget cycle specifically addressed the importance of long-term funding stability to organisations, re-confirming the government’s commitment to seeking to extend rolling funding where possible. The Committee should ask how the Scottish Government plan to ‘actively progress’ multi-year funding for the voluntary sector, in which areas, and how good practice can be replicated across government.

The Scottish Government is making progress in some areas, and we welcome this. Responding to the Equalities and Human Rights Committee, the Minister acknowledged the importance of streamlined funds, three-year funding, and the option to apply for core and project costs. The Committee should investigate how the Scottish Government’s move to multi-year funding, as part of the new Delivering Equally Safe and Supporting Equality and Human Rights funds, has worked in practice and whether similar methods can be adopted elsewhere.

Conclusion

The Scottish voluntary sector and the services it provides are under pressure. Covid-19 has put enormous strain on sector finances and, for many, increasing demand on services. To provide security for staff, volunteers, and the many people and communities the voluntary sector works with, we need the Scottish Government to invest in and recognise the voluntary sector as an employer, a partner, and a vital social and economic actor.

In our response to the Committee’s call for views, we have shared clear actions that the Scottish Government could take to create a more sustainable voluntary sector. Our sector needs recognition, resources and, crucially, new approaches focused on creating sustainable multi-year funding.

These challenges and their solutions are not new but are essential to secure the vital services our sector provides people and communities across Scotland for the future. Collaboration, implementation, and resources are what is now required to realise change and create a fair and more equal Scotland. We hope that the Committee share our aspirations for the sector and will urge the Scottish Government to act on these issues. Together we can achieve a fair and equal recovery.

Contact

Sheghley Ogilvie                                                                                                     

Policy & Public Affairs Officer

Scottish Council for Voluntary Organisations,

sheghley.ogilvie@scvo.scot

Tel: 0131 474 8000