Scottish Budget Briefing 2023/2024

Key points 

The problem 

Action is urgently needed in the 2023/2024 Scottish Budget to secure the voluntary sector’s essential services.   

• The cost-of-living crisis will continue to increase demand for voluntary organisations’ essential services. 64% of organisations have reported that demand for their support has increased since April 

• Voluntary organisations are struggling with a running costs crisis as energy and other costs increase and organisations seek to pay their staff fairly. 93% of organisations have reported cost increases 
• Rising inflation, and the resulting cost-of-living crisis, threaten cash flow to the sector, undermining the funds that support essential services. 31% of organisations used their financial reserves in the last three months. 

Voluntary organisations are central to eradicating child poverty, transforming the economy to deliver net zero, and creating sustainable public services, the key aims of the budget. A lack of resources and support threaten voluntary organisations’ contributions to these aspirations as organisations struggle to keep the lights on, meet demand, support volunteers, uplift wages, and deliver quality outcomes. 

The solution 

Fair funding – a long-term, flexible, sustainable, and accessible approach to funding – is central to having a sustainable voluntary sector. The Scottish Government can begin to act by committing to: 

• multi-year funding of three years or more 
• annual inflation-based uplifts for grant funding and contracts to ensure that organisations:  
• can meet rising costs to stay open, including pay uplifts for staff 
• can meet the new Living Wage rate 

• Living Wage uplifts in grant funding and contracts as part of expanding Fair Work First criteria 
• timely communication and prompt payments of funds ahead of 1 April 2023 to prevent funding gaps and uncertainty 

To shield the sector from spiralling energy costs, the Scottish Government should also re-open the Electricity and Natural Gas framework agreements to voluntary organisation customers 

Action is also needed to ensure transparent monitoring and reporting on public sector funding of voluntary organisations, to help us understand the impacts of commitments in the budget on organisations across the voluntary sector. 

Briefing 

Multi-year funding and timely decision-making 

To support a sustainable and resilient voluntary sector, organisations need the Scottish Government to commit to a Fair Funding approach, including longer-term funding. 

Short-term funding impacts the effectiveness of the voluntary sector by creating ongoing uncertainty and insecurity on a scale no other sectors experience. Voluntary organisations:  

• struggle to plan for the long term  
• face barriers in recruiting, retaining, and developing staff and volunteers  

• are unable to offer secure jobs, undermining Fair Work aspirations    
• are trapped in a cycle of dedicating time and resources to sourcing funding  

Annual funding challenges distract from providing the services upon which people and communities across Scotland rely. Similarly, the Scottish Government dedicates significant time and resources to annual processing and decision-making when often there is little change year-to-year. 

As organisations struggle with rising costs – and, for many, increased demand – the security offered by multi-year funding is more critical than ever. Enabling organisations to plan their services and provide security for staff, volunteers, and those the sector works with is vital.  

It is also essential that any funding provided to the voluntary sector is committed to and paid on time. Decisions relating to funding can often slip into the new financial year, with an expectation that the work continues. Even when the Scottish Government and other funders decide, organisations are often left waiting months for the payment of funds to reach their accounts which means they rely on reserves for cash flow and trustees are left vulnerable.  

On multi-year funding and timely decision-making, the 2023/2024 Scottish Budget should: 

• commit to a longer-term funding model for the voluntary sector across all Scottish Government departments 
• define multi-year funding for voluntary organisations as a three-year minimum commitment 
• indicate where the Scottish Government plans to issue multi-year funding in grants and contracts  

• issue confirmation of a funding decision no later than December and pay funds no later than the tax year start date in April      

“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 

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

Registered charity 

“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 

Funding uplifts that keep pace with inflation 

Voluntary organisations are struggling with a running costs crisis while the cost-of-living crisis fuels the demand for essential services and undermines funds. Without inflation-based uplifts, the Scottish Government will foster an unsustainable environment with the expectation that voluntary organisations provide the same, or even more, support with less money. In SCVO’s research, many organisations reported receiving no increase in local or national government funding for over ten years. One organisation reported no uplift for 13 years, a 27% cut in real terms.  

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, but action is needed. SCVO’s latest research shows that almost two-thirds of organisations (64%) have seen demand for their support increase since April, with a quarter seeing significant increases.   

72% of voluntary organisations are struggling with staffing issues and shortages. Voluntary organisations will struggle to find other resources to fund wage uplifts for the 135,000 people it employs – 5% of the Scottish workforce – 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 exacerbate this issue, significantly impacting recruitment and retention. 

SCVO welcomes the Scottish Government’s Fair Work aspirations and agrees that Fair Work for Scotland’s voluntary sector workforce should be a priority. It is unclear, however, how the Scottish Government will support the sector to pay the real Living Wage to all staff engaged in grant-funded activity by July 2023. Years of underfunding, the pandemic, and the running costs crisis, mean that many voluntary organisations will not be able to pay an increasing Living Wage without additional resources.   

Urgent action is needed in the 2023/2024 Scottish Budget to provide annual inflation-based uplifts for grant funding and contracts to ensure that voluntary organisations can:   

• meet rising costs of staying open, including pay uplifts for voluntary sector staff on a par with those offered to the public sector 
• meet the new Living Wage rate  
• resource Living Wage uplifts in grant funding and contracts as part of the expansion of the Fair Work First criteria 

“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 

“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 

“Our income from the Scottish Government hasn’t changed over the past five of six years. It means that staff have received no pay rises in that time to meet the changing costs they face.” 

Voluntary sector intermediary 

Support for rising energy costs 

Inflationary pressures impact the voluntary sector and the communities the voluntary sector works with. Voluntary organisations, like households, are affected by rising costs. 

The Third Sector Tracker found that between July and August 2022, 93% of organisations reported rising costs. Common price rises reported included material and supplies (76%), transport costs (61%), staffing costs (43%), and energy costs (50%) (Third Sector Tracker). This data was collected before energy costs rose in October, and we expect the number of organisations experiencing difficulties to increase as outgoings continue to soar.  

The UK Government’s Energy Bill Relief Scheme will protect voluntary organisations from volatile and rising energy prices over the winter. Like households, it needs to be clarified what support with energy bills will be available from March. We also need the Scottish and UK governments to find a sustainable, long-term solution to protect our sector from current and future high prices.  

In the meantime, the Scottish Government should support the sector by reopening the Electricity and Natural Gas framework agreements to new voluntary sector customers. The government must also ensure it includes the voluntary sector in any measures taken to support businesses and the public sector with rising energy and other costs. 

It's incredibly worrying, we just received our gas and electricity quotes for the next two years, and they are going up 576% and 205%. No other options are available to us. 

Medium voluntary sector organisation  

“…running sport and leisure venues means that rising energy costs are a concern. Usage and income have not returned to pre-COVID levels and income will not cover the rising rates.” 

Large organisation, Culture and Sport 

“Keeping solvent without increasing charges to service recipients is proving to be a challenge.” 

Micro organisation 

Budget transparency 

Access to transparent data is essential to assess the positive, negative, or neutral impact of the Scottish Budget and other spending decisions on the voluntary sector.  

With transparent data, it is easier to understand the impact of budget changes on different parts of the sector and how funding flows from the Scottish Government to the sector. Work is underway within the Scottish Exchequer to improve fiscal data and the accessibility of information, providing a logical starting point.  

Similarly, the Scottish Government’s Open Government Action Plan commits to fiscal openness and transparency. Enhancing the accessibility of information relating to the Scottish Government’s voluntary sector funding fits these work plans. The Scottish Government should include sector funding as part of this work. 

Similarly, holders of budget lines and those involved in this work should be encouraged to engage with the Third Sector Unit to consider how voluntary sector data can be gathered and published in a way that is accessible. The Scottish Government should collect data across all government departments to generate an accurate picture. The Scottish Government should calculate how much funding flows directly to the voluntary sector, including what proportion of grants and contracts are:  

• delivered on a multi-year basis  
• uplifted to keep pace with inflation  
• accommodate payment of the Living Wage  

• model fair funding for voluntary organisations, their workforce and volunteers, and the services they provide 

Without transparent data, it will be difficult for SCVO and others to understand and assess the budget’s impact on the sector and progress towards Fair Funding. 

 
Conclusion 

The Scottish voluntary sector is an employer, a partner, and a vital social and economic actor central to the Scottish Budget’s ambitions of eradicating child poverty, transforming the economy to deliver net zero, and creating sustainable public services. Without support our sector, and the vital services and support it provides, will be threatened. 

The 2023/2024 Scottish Budget is an opportunity to recognise and support Scotland’s voluntary sector, our workforce, our volunteers and the vital services and support our sector provides. Action in the Budget is urgently needed to progress towards a Fair Funding environment that offers the 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.   

About SCVO  

The Scottish Council for Voluntary Organisations (SCVO) is the national body representing the voluntary sector (sometimes referred to as the third sector). We champion our sector’s social and economic contribution, provide essential services, and debate big issues.   

SCVO and our community of 3,000+ members understand that charities, social enterprises, and voluntary groups work with people and communities across Scotland to make Scotland a better place. Find further details about SCVO at scvo.scot.     

Our policy team work closely with the voluntary sector, the Scottish Government, COSLA, and the Scottish Parliament on a wide range of issues relating to the voluntary sector’s operating environment, including funding, partnership, and regulations. 

Contact 

Sheghley Ogilvie, Policy and Public Affairs Officer 

Scottish Council for Voluntary Organisations 

sheghley.ogilvie@scvo.scot | Tel: 0131 474 8000 | scvo.scot