Committee asks how voluntary sector funding can be improved

Last week, after a discussion a few weeks ago with the Clerks of the Social Justice and Social Security Committee, SCVO received the very welcome news that the Committee would focus their Pre-budget scrutiny on voluntary sector funding.

The Committee want, “to examine how the Scottish Government’s approach to fair and efficient funding can contribute to the continued effectiveness of the third sector”, having heard about the funding challenges facing the sector.

SCVO encourage organisations across the sector to respond to the Committee, share experiences of good and bad practice, and support SCVO’s Fair Funding calls.

The inquiry is very much needed.

For almost a decade, the Scottish Government has recognised the need for multi-year funding, committing to longer-term funding for the voluntary sector across multiple government strategies.

In April 2023 the Scottish Government’s policy prospectus New leadership - A fresh start, the Cabinet Secretary for Social Justice, Shirley-Anne Somerville MSP committed to achieving fairer funding by 2026:

“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”. 

A commitment welcomed by SCVO and organisations across the sector. Similar commitments followed in the Programme for Government (PfG) and the Scottish Budget.

Despite this renewed focus- and the urgent need within the sector- one year on from the policy prospectus, there has been little progress.

Our sector faces unprecedented challenges. Years of underfunding and poor funding practices, and crises such as the pandemic, and the cost-of-living crisis have put the sector under increasing pressure, exacerbating financial and operational challenges - 76% of organisations now experience financial challenges, while the number of organisations reporting that rising costs are having a negative impact on their ability to deliver services continues to grow.

To support voluntary organisations, our staff and volunteers, and the people and communities our sector works with, the Scottish Government must both take action and develop timelines and goals to monitor progress towards fairer funding.

SCVO defines Fair Funding as a long-term, flexible, sustainable, and accessible approach to funding.

To make meaningful progress towards Fair Funding the Scottish Government 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. 
• Record progress by collecting and publishing what proportion of grants and contracts are delivered on a multi-year basis and accommodate other essential Fair Funding elements. 

To be meaningful and support a sustainable sector, multi-year funding must also recognise and incorporate other essential Fair Funding elements including: 

•  Flexible, unrestricted core funding 
•  Inflation-based uplifts 
• Timely notification and payments
• Full costs recovery, which includes core operating costs. 

As local councils fund far more voluntary organisations than Scottish government- between a quarter and a third of voluntary organisations receive funding from local authorities- mulit-year funding should also be provided to local authorities, to allow them to enter into multi-year agreements with voluntary organisations. 

Our sector is an employer, a partner, and a vital social and economic actor central to delivering the Scottish Government’s aspirations. To recognise and support the many contributions of voluntary organisations, their staff, and their volunteers across Scotland urgent progress is needed or the goal of achieving fairer funding by 2026 becomes increasingly unlikely.

Additional information

As part of the Committee’s Pre-budget scrutiny inquiry the Committee will hold two workshops in Dundee on Wednesday the 21st of August for voluntary organisations who receive funding from statutory funders (such as Scottish Government, health boards, local authorities). To register your interest contact: PACT@parliament.scot by the 2nd of August.

Find out more about SCVO’s Fair Funding work here: https://scvo.scot/policy/fair-funding-procurement/fair-funding

Find SCVO’s engagement with the Scottish Budget process here: https://scvo.scot/policy/fair-funding-procurement/budget