SCVO briefing to Scottish Parliament - Programme for Government 2022/23: Cost-of-living Debate

Key points

The problem

• The cost-of-living crisis is, and will continue to, increase demand for the essential services voluntary organisations provide
• At the same time, voluntary organisations are struggling with a running costs crisis as fuel and other supplies increase in price and organisations seek to pay their staff fairly
• Rising inflation and the resulting cost-of-living crisis, threaten cash flows to the sector undermining the funds needed to protect and develop essential services
• Without resources and support organisations will not be able to keep the lights on, meet demand, support volunteers, and uplift wages to protect the living standards of the skilled and experienced voluntary sector workforce.

The solution

The Scottish Government must recognise these issues and their long-term effects will impact Scotland economy and society for years, not months. A mix of short and long-term solutions are urgently needed.

In the short term the Scottish Government can commit to:

• annual inflationary uplifts for grant funding and contracts to ensure that organisations:

1. can meet rising costs to stay open
2. can pay the Living Wage as part of the expansion of the Fair Work First criteria

• timely communication and prompt payments of funds to prevent funding gaps and uncertainty.

While in the long-term our sector needs:

• a commitment to a longer-term fair, sustainable, multi-year funding model

• transparent monitoring and reporting on public sector funding of voluntary organisations to enable a better understanding of how the sector is funded by government and public bodies

• public sector procurement reformation to ensure that social, environmental, and well-being factors are on an equal footing with cost

• support for the sector to transition to net-zero and reduce the impact of future shocks from the energy market

Briefing

Inflationary pressures impact both the voluntary sector and the communities the sector works with. Voluntary organisations, like households, are affected by rising costs. The voluntary sector, public services, and businesses are also exposed to uncapped energy prices which leaves them completely exposed to the wholesale costs of energy on the market. Between December 2021 and April 2022 86% of organisations reported rising costs. Common price rises reported include, material and supplies (63%), transport costs (53%), staffing costs (47%), and energy costs (45%) (Third Sector Tracker). This data was collected before the energy market collapsed, and the number of organisations experiencing difficulties is expected to increase as outgoings soar.

Rising inflation also threatens cash flows to the sector as:

• people have less money available to donate or spend in charity shops

• funding pledges, regular donations, and grants are devalued

• money held in reserve (a legal requirement for charities) is at risk of losing value and being used to prop up public services.

Voluntary organisations are struggling with a running costs crisis while the cost-of-living crisis fuels demand for essential services and undermines funds. Without support in the Programme for Government, the essential support and services our sector provides will be threatened.

Voluntary organisations will struggle to find other resources to fund wage uplifts for the 135,000 people it employs – 5% of the Scottish workforce – and meet additional service demand as the cost-of-living crisis impacts people and communities across Scotland.

To support a sustainable and resilient voluntary sector, organisations need the Scottish Government to commit to:

• fair, flexible, and accessible multi-year funding

• annual inflationary uplifts for public grant funding and contracts
• a Living Wage uplift in public grant funding as part of the expansion of the Fair Work First criteria.

In the Spending Review Framework, the Scottish Government recognised that rising inflation and the resulting cost-of-living crisis will drive higher demand for public services and that the essential work of voluntary sector partners will require an increase in grant funding. We welcome this recognition.

The Scottish Government should also recognise that the annual funding cycle causes additional challenges which distract, and divert valuable resources, from providing the services upon which people and communities across Scotland rely. For example, the wasted capacity of navigating funding applications and reporting processes annually. Annual processes and resulting wastage also impact Scottish Government and other funders who must assess applications and undertake decision-making every year. Multi-year funding is even more critical during this crisis, as it gives organisations additional predictability to plan their way through.

To continue to provide essential services and support the voluntary sector workforce, inflationary uplifts are needed. Without inflationary uplifts, we risk an unsustainable environment with the expectation that voluntary organisations provide the same support with less money. In SCVO’s research, many organisations reported having had no increases in local or national government funding for over ten years. One organisation reported no uplift for 13 years, a 27% cut in real terms. Similarly, voluntary organisations struggle to uplift wages when the public sector and other funders do not uplift grants and contracts to keep pace with inflation. Rising inflation and the resulting cost-of-living crisis are exacerbating this issue, which significantly impacts recruitment and retention.

As the cost-of-living crisis bites, Fair Work for Scotland’s voluntary sector workforce must be a priority. SCVO welcomes the Scottish Government’s plans to become a Fair Work Nation by 2025 and to extend the Fair Work First criteria to include the Living Wage. Years of underfunding, followed by Covid 19, and the running costs crisis, however, mean these ambitions cannot be achieved without additional resources. To support organisations to pay the Living Wage, public grant funding and procured contracts should build in a Living Wage uplift to ensure organisations delivering public services are able to pay the Living Wage. This will support the voluntary sector workforce, 135,000 people, which includes more women (64.5%), more part-time workers (37%), and more people with a disability (23%) than the public and private sectors. Women and people with a disability are at greater risk of living in poverty, an inequality the Poverty Alliance stressed has deepened during the pandemic. The sector must be resourced and supported to pay our essential workforce the Living Wage and support them through the cost-of-living crisis.

Testimonials

"Rising costs are not matched by increases in contract funding leading to loss making across the board and subsequent pressure on reserves or sustainability." - Large voluntary sector organisation

“[Rising costs] are increasing [the] cost of delivering our services (running costs) to an increasing client base…” - Medium voluntary sector organisation

“We want to look after our staff and provide cost of living increases to their wages to ensure they can continue to work for us and aren’t too stressed.” - Medium voluntary sector organisation

“Due to annual funding from Scottish Government, which doesn’t cover our core costs, recruitment is often on short-term contracts or is subject to ongoing funding, of which there is no guarantee". - Voluntary sector intermediary

“Like all voluntary organisations, we have very short-term funding, so while our contracts are on paper secure, everyone knows their job is only as secure as the current piece of short-term funding". - Registered charity

“Funding issues ensure that no one has security of employment. Sustainability for voluntary sector organisations is fundamental to progressing positive change in our communities and in employment security”. - Social enterprise

“We are a small organisation within an uncertain funding environment. It is just not possible to provide predictable work in the longer term”. - Registered charity

“Everything we do is dependent on funding, and amounts are often not confirmed until very late in the financial year”. - Registered charity

Conclusion

The Scottish voluntary sector is an employer, a partner, and a vital social and economic actor.

The 2022/2023 Programme for Government is an opportunity to recognise, support, and strengthen Scotland’s voluntary sector. The actions outlined in our proposals are urgently needed to create the funding security essential for a sustainable voluntary sector which can survive the running costs crisis, support people through the cost-of-living crisis, offer Fair Work, and deliver quality outcomes.

Together we can create a sustainable voluntary sector.

Contact

Sheghley Ogilvie
Policy and Public Affairs Officer
sheghley.ogilvie@scvo.scot