Programme for Government proposal 2024/25: Delivering Fair Funding by 2026

Summary of proposals   

Our proposals for the 2024/2025 Programme for Government cover two areas: 

1. Delivering Fair Funding by 2026
2. Transparent voluntary sector funding

This paper focuses on Fair Funding, a long-term, flexible, sustainable, and accessible approach to funding essential for a sustainable voluntary sector which can offer Fair Work, support volunteers, and deliver quality outcomes for the people and communities the sector works with.

In 2023, the Scottish Government committed to achieving fairer funding for the voluntary sector by 2026. SCVO urges the Scottish Government to align its commitment to fairer funding with SCVO’s definition of Fair Funding – which was developed through significant research and engagement with Scotland’s voluntary sector. 

Summary

SCVO and colleagues across the voluntary sector welcomed the Scottish Government’s commitment to deliver Fairer Funding for the sector by 2026, including exploring options to implement multi-year funding deals. More recently, as part of the fairer funding approach Scottish Government has suggested priorities including prompt notification of funding, outcome-based flexible funding, and proportionate administration around applications and reporting.

Despite this renewed focus, one year on from the policy prospectus, there has been little progress.

Our sector continues to face unprecedented challenges.

In the Programme for Government (PFG) action is urgently needed to define, deliver, and measure Fair Funding progress to support voluntary organisations, their staff and their volunteers, and the people and communities our sector works with.

For the Scottish Government to achieve Fairer Funding by 2026, the 2024/25 Programme for Government should, as a minimum, commit to:  

Context

In 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”. 

These commitments complement commitments from the previous Minister for Social Justice, former Deputy First Minister, and current Cabinet Secretary for Finance and Local Government, Shona Robison MSP, who recognised the importance of multi-year funding to the voluntary sector, both within her portfolio and across Government: 

 “Under fairer funding principles, multiyear arrangements for third sector organisations are preferred where appropriate, so we want to move to multiyear grants being the default position…I would like to move to multiyear funding being the default, and I am committed to progressing that in my portfolio.  

Similarly, the Scottish Government’s Medium-Term Financial Strategy commits to adopting multi-year spending plans, recognising that these will both offer greater transparency on the impact of annual budget decisions on future years’ spending plans, and support financial planning and sustainability. 

During Pre-Budget scrutiny 2024-25 the Social Justice and Social Security Committee made several recommendations on how the Scottish Government could progress their fairer funding ambitions following evidence for SCVO and others. Voluntary sector funding will be the focus of the Committee’s Pre-budget scrutiny in 2025-2026.

Fair Funding

SCVO has advocated for Fair Funding for the voluntary sector for many years. We welcome the Scottish Government’s fairer funding commitments. However, over the next year, significant progress is needed to build the foundations necessary to achieve fairer funding by 2026.  

For almost a decade, the Scottish Government has committing to longer-term funding for the voluntary sector across multiple government strategies, including within several Scottish Budgets and Programmes for Government, and the Economic Strategy, but this rhetoric has not been met by action. Similarly, despite a renewed focus on fairer funding, one year on from the policy prospectus, there has been little progress. Action is increasingly urgent.

Beyond multi-year funding, prompt notification of funding arrangements, and improvements to grant making processes, what the Scottish Government’s commitment to fairer funding includes is unclear. To make an impact, the Scottish Government’s multi-year funding ambitions must go further than an increase in the number of two-year grants delivered or providing funding notifications by the end of the financial year. To progress, the Scottish Government should align their fairer funding plans with SCVO’s Fair Funding calls developed through significant research and engagement with the voluntary sector.

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

To support Scotland’s essential voluntary sector to adapt to current and future societal and economic challenges, and to address years of poor funding practices, Fair Funding that incorporates the following is urgently needed:

• Longer-term funding of three years or more.
• Flexible, unrestricted core funding, which enables organisations to provide security, plan effectively, and fulfil good governance requirements.
• Sustainable funding that includes inflation-based uplifts and full costs, including core operating costs.
• Funding that accommodates paying staff at least the Real Living Wage and pay uplifts for voluntary sector staff on par with those offered in the public sector.
• Accessible, streamlined, proportionate, and consistent approaches to applications and reporting, timely processing and payments, and partnership between the grant-maker and grant-holder.
• A comprehensive and proportionate approach to financial transparency around grant funding to support organisations and the public to understand spending decisions.

Fair Funding is essential for a sustainable voluntary sector which can offer Fair Work, support volunteers, and deliver quality outcomes for people and communities.

The need for urgency

It is widely understood that our sector is facing 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.

The running costs and cost-of-living crises continue to put pressure on voluntary organisations – with demand for services increasing, costs rising, and financial uncertainty ongoing. In April, the Third Sector Tracker found:

• Demand for support had increased for 63% of voluntary organisations.
• 92% of organisations working directly with the public highlighted worsening emerging needs.
• 45% of organisations reported cost increases.
• 71% of organisations reported that financial issues were amongst their top three challenges.

By November 2023 the Third Sector Tracker found:

• Almost 6 in 10 (57%) organisations believed that rising costs had affected the ability to deliver core services or activities since May 2023.
• 44% of organisations reported cost increases.
• 57% of organisations believed that the third sector would be in a less positive place in 12 months’ time.

As local councils fund far more voluntary organisations than Scottish government, the fallout from the local government settlement will also have a significant impact on voluntary organisations, further exacerbating these pressures. Similarly, any reduction in local services will result in further increased demand for some voluntary organisations.

Short-term funding cycles and ingrained operational issues, such as delayed decision-making and payments, inconsistent processes, and poor communication, further exacerbate these issues. significantly impacting the effectiveness of voluntary organisations by creating ongoing uncertainty and insecurity on a scale unparalleled in any other sector.

Testimonials

“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

Conclusion

A sustainable voluntary sector is central to the Scottish Government’s aspirations to eradicating child poverty and deliver better public services. Fair Funding, including multi-year funding, timely decision-making and payments, and annual uplifts, are all central elements of a sustainable sector.   

To support Scotland’s essential voluntary sector to adapt to current and future societal and economic challenges, and to address years of poor funding practices, Fair Funding is urgently needed.

SCVO’s Fair Funding principles will lead to better outcomes for organisations, their staff, volunteers, and the communities they work with and reduce the time and resources that Scottish Government departments waste through annual inefficient funding processes.

To achieve fairer funding by 2026 the Programme for Government should share the action the Scottish Government will take to define, deliver, and measure fairer funding.