SCVO additional evidence to the UK Government's Energy Bills Relief Scheme Review

SCVO is calling for the Energy Bills Relief Scheme to be extended to voluntary sector non-domestic customers beyond March and for an urgent announcement of how off-grid voluntary organisations will be supported under the current scheme.

If, as suggested, changes are to be made to the type of support available, we hope the UK Government will consider the different aspects of vulnerability that organisations experience, covered in our supplementary evidence and in individual responses to the survey.

Our Response

The impact of rising costs

Inflationary pressures impact both our sector and the communities we work with. Like households, voluntary organisations are affected by rising energy prices and other rising costs. The introduction of the Energy Bills Relief Scheme has offered a much-needed lifeline for voluntary organisations whose energy bills have rocketed in recent months as non-domestic customers. It is vital that support for this much affected sector is continued beyond the six month period to give voluntary organisations the certainty they need, many of which will still be struggling to pay bills that are far higher even with the Energy Bills Relief Scheme in place.

The ongoing cost-of-living crisis, including escalating energy costs, is increasing, 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 energy and other costs increase and organisations struggle to meet outgoings while continuing to provide vital services. Without resources and support, voluntary organisations will not be able to keep the lights on, meet demand, support volunteers, or uplift wages to protect the living standards of the skilled and experienced voluntary sector workforce.

The findings from the latest wave of the Scottish Third Sector Tracker from summer 2022 show the impact of rising costs is becoming increasingly apparent, both for voluntary sector organisations and the communities they work with. Overall, 93% of organisations said they were experiencing rising costs in at least one area of their business, compared with 86% in April. Organisations reported sharp rises in costs across almost all operating areas, with 50% stating that the most pressing issue at present is that of rising energy costs. Other pressing costs included:

• The cost of materials and supplies (76% of the sector),
• Transport costs (61% of the sector),
• Staffing costs (43% of the sector).

Of organisations seeing rising costs, 43% felt this was having a negative impact on their ability to deliver their core services or activities.

In the Scottish Third Sector Tracker’s Third Wave, published in Spring 2022, 62% of organisations said that financial difficulty and concern caused by rising costs was the main challenge that they faced. Organisations working in the field of culture and sport (37%) were more likely to report facing financial challenges due to rising costs – this is likely due to the additional costs required to heat and light buildings. 30% of respondents mentioned some aspect of service delivery as the main challenge rising costs are presenting their organisation, with small (25%) and medium-sized (30%) organisations more likely to report this as a challenge than large organisations.

This is a significant finding, as small charities with incomes under £100k make up 80% of Scotland’s voluntary sector, and medium-sized organisations make up 16.5% of the sector. However, large organisations – with incomes over £1m – are not immune from the challenge of rising costs. In Scotland, we have seen a number of these organisations with large buildings severely hit by rising costs, with the closure of Edinburgh Film House and Aberdeen’s Belmont Filmhouse, as well as the part-closure of organisations such as the Edinburgh Modern Two art gallery.

A quarter of respondents (25%) mentioned some aspect of staff and volunteers as the main challenge rising costs were presenting their organisations. Again, small (33%) and medium-sized (31%) organisations were more likely to report this as a challenge due to rising costs. In addition, organisations working in the fields of Families, Children and/or Social Care (25%); Health (20%); and Community, Economic and/or Social Development (20%) were more likely to mention an aspect of staff and volunteers as a challenge posed by rising costs. Overall, 16% cited specific challenges with recruitment, retention, and paying staff wages. A small number of respondents also mentioned that rising costs were impacting the health and wellbeing of their staff, volunteers or service users.

Escalating energy costs

The fieldwork from wave four of the Scottish Third Sector Tracker suggests that energy costs are incurred by 65% of the voluntary sector in Scotland, with transport costs at around 72% of the sector. For the around two-thirds of voluntary organisations with energy costs, 76% reported an increase since April 2022. This increase was more evident in organisations employing more than ten FTE paid staff members (83%) and was particularly acute in Ayrshire and Arran (90%), and the Highlands and Islands (85%) – more rural based organisations. In addition, 83% of very small organisations with an annual turnover of under £25,000 were more likely to report an increase than larger organisations. Third Sector Interfaces (92%), which provide a single point of access for support and advice for the third sector within local areas, and faith organisations (89%) were also more likely to report an increase in energy costs.

For the 43% of organisations that reported rising costs having a negative impact on their ability to deliver services or activities, there again appears to be a worsening impact in rural areas such as Ayrshire and Arran (59%), and the Highlands and Islands (56%). Social enterprises (51%) also seem to be slightly more affected than other types or organisations.

It is vital that the UK Government understands that the issue of rising energy costs is faced by large swathes of the sector, and not just those with energy costs associated with owned buildings, community centres, museums, and other venues. Organisations faced with extortionate energy costs in relation to their buildings and facilities will, of course, require support, but only by viewing this crisis, and the impact of escalating energy costs and increased demand, in the context of each individual organisation can the true impact be recognised. Many organisations who are now vulnerable as a result of rising costs are not necessarily organisations faced with the highest costs. It is vital that we continue to view this crisis proportionately where even the smallest community groups, who do not own their own premises or facilities but make a huge contribution, may be struggling as rising costs have an impact on the specific services that they provide.

While the Energy Bills Relief Scheme will provide a lifeline in the typically colder months through to March, average temperatures in April and May can be much lower in many parts of Scotland compared with those in other parts of the UK, with temperatures as low as 2°C in April, 3°C lower than London. We already see a worsening impact in the Highlands and Islands, and it will be important to reflect on geographical-led needs. Shetland is closer to the Arctic circle than it is to London, reflecting the very different experiences faced by organisations and people across the UK. Organisations in these areas will often use off-grid energy, yet we are still awaiting details of support for off-grid organisations to be announced. The needs of rural communities cannot be overlooked.

Increased customer demand

As the cost-of-living crisis continues to impact communities across the country, it is no surprise that there has been an increase in demand for and pressure on voluntary sector organisations and the services they provide. Voluntary organisations have seen a significant rise in referrals and people accessing their services, as individuals and families across Scotland and the United Kingdom face fuel poverty, food poverty, stress, anxiety, mental health issues, and a myriad of other concerns, either as a direct or indirect result of the current crisis and the continued effects of the pandemic.

In the latest wave of the Scottish Third Sector Tracker, 80% of organisations reported that they were seeing increasing financial hardship in the groups and communities they work with, with 64% stating that demand for their services had increased and 23% saying that demand had increased significantly. For many organisations, this means that they are faced with increased costs associated with the delivering of services to a consistently increasing client-base, something which is logically unsustainable. Many organisations have said that that they expect demand to increase significantly in the winter.

Steps taken by organisations

At the same time as increasing demand for services and rising energy costs, and other costs faced by voluntary sector organisations, income from fundraising has also stalled. For example, in the current climate people have less money to donate or spend in charity shops, while funding pledges, regular donations, and grants are devalued, and money held in reserve is at risk of losing value or is used to prop up already underfunded public services delivered by the sector. We also know that not all funders are responding to increasing costs. As a result, many voluntary organisations have been forced to try and find solutions or take steps to protect their existence and the crucial services they provide to our communities.

Data collected for the Scottish Third Sector Tracker has shown that 40% of voluntary organisations faced with rising costs have applied for funding from new funders and one in three have used their financial reserves. One in ten organisations have had to reduce their services or work, curtailing or cancelling projects and other initiatives in order to cover increasing costs. Anecdotally, we also know of organisations who have given up property in an attempt to cut costs.

Across the sector, there appears to be a perhaps understandable reluctance to pass costs on to clients and service users by increasing prices; in many cases, it is simply impossible to do so. As highlighted previously, many voluntary organisations across the country are responsible for providing vital services to those affected by poverty, as well as other vulnerable groups. For these organisations in particular, passing costs on to those in need of services could be considered the very last resort or, in some cases, totally unpalatable or impossible. For example, a lot of services provided by the voluntary sector are free at the point of access and so there is no mechanism to pass on costs to customers even if the desire was there. However, we do know of some organisations who have confirmed that they have looked to increase costs but, again, this can often only be made possible by the nature of the service or amenity provided by the organisation in the first place. And in these cases, organisations that have gone down this avenue tell us they have done simply because they have no other option.

The impact on the sector and wider society

The value of the voluntary sector has perhaps never been as clear as it has been over these last few years. During the COVID-19 pandemic, voluntary organisations were crucial in providing the support our communities needed, and this contribution has remained just as important through the cost-of-living crisis. As people across the country struggle with rising costs, the voluntary sector continues to play a crucial role in challenging inequalities, with many organisations directly tackling the issue of poverty and thousands more addressing related issues. The positive contribution of voluntary organisations is also felt by many more than those who access the sector’s vital services and programmes. Voluntary organisations employ around 135,000 people – 5% of the Scottish workforce – and work with approximately 1.2 million volunteers annually.

The voluntary sector in Scotland is an employer, a partner, and a vital social and economic actor. Voluntary organisations were already under significant strain before the pandemic, and now COVID-19, inflation, and the resulting cost-of-living crisis have all put enormous pressure on sector finances and increased demand for services. As voluntary organisations continue to face both rising costs and increasing demand, the situation is simply unsustainable without vital governmental support. In the three months since April, 72% of voluntary organisations reported shortages and issues with staffing and volunteers, and one in three said they were facing difficulties planning for the future. Only one quarter of organisations reported being able to award staff a pay rise since April, leaving the majority of the workforce in the voluntary sector facing the cost-of-living crisis without a cost-of-living increase to their salaries.

Without adequate support to meet energy costs going forward, voluntary organisations will be forced to eat up reserves that are already dwindling (60% percent of organisations hold less than 6 months of financial reserves), lose skilled and experience staff, pass costs onto those who themselves desperately need support, scrap vital projects and services, and turn vulnerable individuals and families away. For some, no support from the UK or Scottish Governments will almost certainly mean having to close their doors, leaving communities without access to the vital support they need.

Conclusion

If the last few years have highlighted anything, it is that the voluntary sector is invaluable. As we go through another crisis, one that is having a detrimental impact on that very sector, it is of paramount importance that assistance is given to voluntary organisations to ensure that they can navigate these troubling times and continue to provide the crucial support required to people all over the country. Ultimately, the impacts of the cost-of-living crisis on our communities can only be effectively alleviated with the input and dedication of the voluntary sector across the United Kingdom, but that sector is very starkly feeling the strain of the same crisis and will require the security of further assistance as we move forward.

We are calling for the Energy Bills Relief Scheme to be extended to voluntary sector non-domestic customers beyond March and for an urgent announcement of how off-grid voluntary organisations will be supported under the current scheme. If, as suggested, changes are to be made to the type of support available post-March 2023, we would hope to see the UK Government consider the different aspects of vulnerability that voluntary organisations find themselves in. We have covered this in the evidence above, supplementary to any responses to the survey, which SCVO has promoted widely, that the UK Government receives from Scottish voluntary organisations.   

Contact

Jason Henderson
Policy and Public Affairs Officer
Scottish Council for Voluntary Organisations (SCVO)
jason.henderson@scvo.scot