Inquiry into the Scottish Government’s Public Service Reform programme - SCVO response

About our response

The Scottish Council for Voluntary Organisations (SCVO) welcomes the opportunity to submit evidence to the Finance and Public Administration Committee's inquiry into the Scottish Government’s Public Service Reform programme. The Scottish Government’s commitment to public service reform can only be effective with the voluntary sector at its heart.

Our response to this specific call for views builds on our submission to the Finance and Public Administration Committee in August 2022. Here, we focus on the sector's vital role in public service reform and updates on progress towards SCVO’s call for Fair Funding and the Scottish Government’s ambitions around Fair Work. Our submission draws upon:

• The Scottish Third Sector Tracker - wave 5 summary report (Winter 2022)
• SCVO's State of the Sector 2022 (August 2022)
• Fair Funding for the Voluntary Sector (January 2023)
• A collection of SCVO engagement and research activities into Fair Funding (2022)
• SCVO's response to the Scottish Government’s latest commitment to progress Fairer Funding (April 2023)
• SCVO and TSI Scotland Network letter on the Children, Young People, Families and Adult Learning Third Sector Fund (April 2023)
• SCVO letter to the Cabinet Secretary on the implementation of Fair Work First criteria (April 2023)
• SCVO response to the inquiry into Public Administration – Effective Scottish Government decision-making (Finance & Public Administration Committee) (February 2023)
• SCVO response to the Finance & Public Administration Committee: Scotland's public finances in 2023-24 - the impact of the cost of living and public service reform (August 2022)

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Summary

Our response

SCVO welcomes the opportunity to respond to the Finance and Public Administration Committee’s call for written views on how the Scottish Government’s Public Service Reform programme is working in practice and how its aims of delivering effective and efficient public services are being met. Our response relates directly to question one of the consultation questions for non-public service organisations.

SCVO wants to see the Scottish Government and other public bodies value the voluntary sector as an innovative service provider, an economic actor, and a key contributor to thinking on the future of our society. Decisions about Scotland’s future must be designed with us and our beneficiaries in local and national partnerships. That starts with the Scottish Government’s commitment to public service reform, which can only be effective with the voluntary sector at its heart.   

In our response to the Committee’s pre-budget scrutiny inquiry, Scotland's public finances in 2023-24 - the impact of the cost of living and public service reform, we said that ‘the lack of recognition of the contribution of our sector to Scotland's society and economy in the 2022 Spending Review was a missed opportunity’. The Spending Review largely ignored voluntary organisations' vital role and the many services they provide for people and communities.

SCVO cautiously welcomes the latest prospectus from the Scottish Government, Equality, opportunity, community: New leadership – A fresh start; the publication outlines the First Minister’s commitment to work in ‘partnership with Local Government, trade unions and the third sector, amongst others…’ to reform public services. Scotland’s voluntary sector must be at the heart of public service reform in practice as it is here in words.

Our response to this specific call for views builds on our submission to the Finance and Public Administration Committee in August 2022, where we outlined our response to key areas of the Spending Review; digitalisation, maximising revenue through public sector innovation, Reform of the public body landscape, and improving public procurement. Here, we focus on the sector's vital role in public service reform and updates on progress towards SCVO’s call for Fair Funding and the Scottish Government’s ambitions around Fair Work. 

Role of the sector

Finance and Public Administration Committee members are aware of the voluntary sector's essential contribution to Scotland's society and economy. Voluntary organisations provide tailored support in local communities, deliver vital services and work with some of Scotland's most marginalised communities. In this submission, explaining the sector’s financial footprint in more depth, and as outlined in SCVO’s State of the Sector statistics, is appropriate.

In 2021, Scotland's voluntary sector spent £7.9 billion supporting people and communities in Scotland and overseas. Although a real terms drop in expenditure from 2020, which we can by and large attribute to the impact of the pandemic, the voluntary sector invests significantly in Scotland's public delivery landscape – including services, projects, and the necessary infrastructure to reach people and places that the public sector cannot.

This spending was supported by an income of nearly £7.2 billion in 2021, with £3.2 billion coming from the public sector. While income from the public sector rose from £2.1 billion (£2.3bn when adjusted for inflation) in 2018, mainly because of the additional spending from the UK Government and Scottish Government during the pandemic, both figures are significant and highlight that improvements in public services cannot happen without the voluntary sector.

The public sector's investment in the voluntary sector supports the capacity and sustainability of voluntary organisations, which in turn enable the voluntary sector to leverage greater levels of funding in from other sources - such as added income generation through donations, fundraising, sales, independent funders and more - to deliver critical services.

Supporting Scotland's voluntary sector's ever-changing and growing role in public service delivery is essential to ensure voluntary organisations can meet demand, support volunteers, uplift wages, and deliver quality outcomes. The economic context is challenging, but so are the needs of people and communities across Scotland. The public sector can only hope to manage this balancing act by working with Scotland's voluntary sector. 

Still, charities are in a running costs crisis, with organisations closing their doors and others facing a perfect storm of rising costs, reduced donations, and funding and contracts that either remain static or disappear at a time of increasing demand. The Scottish Third Sector Tracker reveals this has affected the ability of one-in-five organisations to deliver their core services or activities at a time when 89% of organisations providing services to the public highlight that their communities' needs are worsening.

Fair Funding

SCVO welcomes Ministers’ latest commitment to progress a version of Fairer Funding across the Scottish Government's support for the voluntary sector, including the commitment to multi-year funding. The Scottish Government can only deliver public service reform if it gets a handle on the longstanding problems in how it and other public sector bodies fund the vital work of Scotland's voluntary sector. 

SCVO has been campaigning for Fair Funding for Scotland's voluntary sector for some time, yet, despite similar statements made by previous governments, progress to date has fallen far short of what is required. Real action is needed for this commitment to materialise. The difference between SCVO’s call for Fair Funding and the Scottish Government’s commitment to Fairer Funding is unclear, but Fair funding is central to a sustainable voluntary sector in Scotland.

We need to see the Scottish Government take concrete steps to incorporate SCVO's call for Fair Funding, tackling short-term funding cycles and ingrained operational issues. Fair Funding includes, but is not limited to, longer-term funding of three years or more, flexible unrestricted funding, timely payments, more accessible application processes, sustainable funding with inflation-based uplifts, and transparent approaches to monitoring and reporting.

Unfortunately, SCVO holds major concerns relating to the Scottish Government's approach to grant-making at this current time. More than in previous years, organisations are contacting SCVO about substantial delays in decision-making, inconsistency across government departments and poor communication, compounding the already well-known and acknowledged problems caused by short-term funding.

There is a building feeling of frustration and disillusionment in the sector, with several organisations telling us that this year has been the worst ever in terms of the process for applying for funding across a range of policy areas. That is despite numerous reports and recommendations in recent years, often coming from the Scottish Parliament, calling for the Scottish Government to address how it funds the voluntary sector.

By way of example, SCVO and the Third Sector Interface Scotland Network have written to express significant concerns and frustration around the Children, Young People, Families and Adult Learning Third Sector Fund (CYPFAL) and its predecessor funds, the Children, Young People and Families Early Intervention (CYPFEI) and the Adult Learning and Empowering Communities Fund (ALEC).

This letter, which raises further concerns about how the Scottish Government made decisions about the fund and how the government communicated those decisions, follows other letters sent in 2022. Those letters detailed the impact of so many challenges, delays, and changes to these funds over the last seven years; a chronology of this funding sets out what has happened over this period, impacting children and families and the organisations that support them.

Faced with these funding challenges, the ability of voluntary organisations to deliver essential services across Scotland will continue to suffer, impacting their staff, volunteers, and the people they support. We need a new approach to funding the voluntary sector that is long-term, flexible, sustainable, and accessible. Our recent paper, Fair Funding for the Voluntary Sector, clearly outlines the standard that SCVO sets for Fair Funding.

Hearing Ministers' commitment to achieving a version of Fairer Funding for voluntary organisations is encouraging. The latest prospectus, New leadership – A fresh start, says:

As the Cabinet Secretary for Social Justice, working with my Cabinet colleagues, I commit that by 2026 I will have... Progressed Fairer Funding arrangements, including exploring options to implement multi-year funding deals, enabling the third sector to secure the resilience and capacity it needs to support the transformation and delivery of person-centred services for Scotland's people and support our thriving social enterprise economy.

Shirley-Anne Somerville MSP, Cabinet Secretary for Social Justice, in Equality, opportunity, community: New leadership – A fresh start, page 16

However, SCVO's concerns are more than just about political decision-making or choices but also about administrative processes. The previous Deputy First Minister and various Ministers have made explicit commitments, and now so too have the recently appointed First Minister and Cabinet Secretary for Social Justice. The changes set out at the ministerial level will only be possible if the supporting processes work effectively and consistently across all departments.

The Scottish Government and other parties look to support SCVO's call for Fair Funding or, at the very least, the building blocks of fairer funding to get there. We now need to pursue real progress in rectifying the issues, many of which do not require more money and would likely result in greater efficiencies. We need Scottish Government officials and the voluntary sector to work together to identify and overcome the root causes of these issues.

Fair Work

While only just over a quarter (28%) of Scottish charities employ staff, in 2021, the voluntary sector in Scotland directly employed over 135,000 people, meaning that the voluntary sector employs 5% of Scotland's 2.67 million workers. Diversity and equality statistics outlined in SCVO’s State of the Sector Statistics further highlight the importance of ensuring that voluntary organisations can provide Fair Work to their paid employees. In 2020:

• 64.5% of the voluntary sector's paid staff were women. This is consistently significantly higher than the private sector (42.2%). While this year the sector is level with the public sector (64.7%), it usually sits a few percentage points higher.

• 37% of the sector's workforce work part-time. The voluntary sector consistently has a higher proportion of part-time workers than the private (25.1%) and public (27.6%) sectors.

• 22.6% of the sector's workforce has a disability as defined by the Equality Act. The voluntary sector employs a higher proportion of people with disabilities than the public (13.7%) or private (12.8%) sectors.

Many of these people play crucial roles in the delivery of public services or projects and services funded through the public purse, and SCVO believes that for them and everyone else who works in the voluntary sector, the Real Living Wage should not be an aspiration or a ceiling – it is the bare minimum anyone should expect. If those people are to be paid the Living Wage (often still less than their counterparts in the public sector are paid) then grants and contracts must have a built-in Living Wage uplift.

The Living Wage Foundation’s report, All Work and Low Pay, confirms that voluntary organisations want to pay their staff at least the real Living Wage and to be good employers, but the system we work in puts up more barriers than enablers. In 2021, 13.9% of people employed by 'not for profit' organisations were paid below the Real Living Wage. Although a 3.7% decrease from 2018 (17.6%), highlighting improvement, this figure is higher than the public sector (2.7%) but below the private sector (22.6%).

Added to this, the median non-profit hourly pay in Scotland is £14.52, 48p below the Scottish average, and £3.19 below the median hourly pay in the public sector in Scotland. These figures all come before the significant pay deals offered to public service workers based in the public sector in recent months. The Scottish Government must address the disparities that have widened over many years and continue to widen between public services led by public bodies and those delivered by voluntary organisations.

SCVO’s latest findings from the Scottish Third Sector Tracker revealed ‘additional funding’ to be the most important form of additional advice, information, and support they would like to see made available to voluntary organisations to help with managing rising costs. For those respondents (41%) that mentioned additional funding, around a quarter said that they would like to see inflation-based uplifts included in grants and contracts, which specifically connects to the need for funding to pay staff a fair wage.

A medium-sized health organisation said:

“We cannot pay our staff decent wages as public sector grants are either reduced year on year, or we are expected to deliver on the same funding each year with no increases in the grants to reflect rising costs. We were only able to provide a 2% pay rise this year which goes no way to meeting the cost of living increases our staff are facing. The lack of ability to secure funding to provide decent salaries for staff has also had a detrimental impact on our recruitment.”

Scottish Third Sector Tracker: Wave five findings, Winter 2022, page 11

A large law and advocacy organisation said:

“Organisations who have a fixed non-negotiable income stream, as with local authority contracts, which are not linked to inflation and therefore have no inflationary uplift, leave the provider organisation with no options to increase pay or benefits leading to significant hardship for staff or significant losses of staff that cannot be replaced and subsequent loss of the contracts.”

Scottish Third Sector Tracker: Wave five findings, Winter 2022, page 11

As part of the Scottish Government's reforms, at the end of last month, the Scottish Government released the Fair Work First Guidance, which states that for organisations seeking public sector grants:

All UK-based staff aged 16 and over, including apprentices, who are directly employed by the grant recipient, must be paid at least the real Living Wage; and any UK-based workers who are not directly employed but are directly engaged in delivering the grant-funded activity, whether they be sub-contractors or agency staff, must also be paid at least the real Living Wage.

Fair Work First Guidance: Supporting the implementation of Fair Work First in workplaces across Scotland, page 15

From the guidance, we understand that all grant recipients awarded a public sector grant from 1 July 2023 must pay at least the real Living Wage and provide effective workers' voice as a minimum standard. While this is a well-intentioned policy and is, by and large, one we support, the implementation of this policy provides us with genuine concern. As we see it, the policy needs resourcing. Still, the Scottish Government has yet to commit to raising grant funding to ensure that voluntary organisations can pay people delivering public services and publicly funded services the real Living Wage.

We are also concerned about the timescale, as the guidance has only recently been released after several delays. Implementing a policy just two months after publishing generic guidance and without a commitment to uplifts in funding to accommodate the real Living Wage in line with these changes does not reflect the decision-making and partnership working that needs to sit behind public service reform.

It is another example of poor collaboration and engagement with the voluntary sector, similar to the issues that SCVO raise in our latest response to the Finance and Public Administration Committee's Inquiry into Public Administration - Effective Scottish Government decision-making. In this submission, we identify four main themes that underpin the relationships between the public and voluntary sectors: time, power, trust, and value. The recommendations we set out in that response are just as crucial to ensuring the effective decision-making in public service reform.  

It is unclear how the Scottish Government will support the sector to pay the real Living Wage to all staff whose roles are funded through public sector grants by July 2023. Years of underfunding, the pandemic, and the running costs crisis mean that many voluntary organisations can only pay an increasing Living Wage with additional resources. Urgent action is needed to provide annual inflation-based uplifts for grant funding and contracts to ensure that voluntary organisations can contribute to Scotland's Fair Work ambitions.

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About SCVO

The Scottish Council for Voluntary Organisations (SCVO) is the national membership organisation for the voluntary sector. SCVO represents the sector at a national level and provides advice and services to voluntary organisations. We champion the sector, provide services, and debate big issues. Along with our community of 3,500+ members, we believe that charities, social enterprises, and voluntary groups make Scotland a better place.

About Scotland’s voluntary sector

Scotland relies heavily on its voluntary sector and volunteers to deliver a range of services, to provide tailored support in local communities, and to promote community connection and resilience. The sector is hugely diverse, ranging from tiny volunteer-run community groups like village halls and play groups to major public service providers in social care and housing. In Scotland, we enjoy the benefits of 46,500+ voluntary organisations.

Together these organisations employ over 135,000 paid staff. A quarter of charities employ staff, and the average income of these charities is around £900k. However, three-quarters of charities are run entirely by volunteers and have an annual turnover of less than £100k. Many deliver vital services and work with some of Scotland’s most marginalised communities. SCVO’s State of the Sector statistics for 2022 are available online. 

Contact

Paul Bradley, Policy and Public Affairs Manager – paul.bradley@scvo.scot