The impact of rising costs on third sector organisations in Scotland.

“Budgets have been stretched to go further in order to cover increasing costs and so other activities have been curtailed or cancelled.”

Inflation may have finally hit the Bank of England’s target rate, but only after three years of rising costs. The focus of much of the research and commentary has (correctly) been on the impact rising costs and inflation is having on people, particularly people on low incomes and marginalised groups. There has been less consideration for the impact of these cost increases on Scotland’s voluntary organisations, many of whom support the most vulnerable in society.

Fortunately, the Scottish third sector tracker started to collect data and information from the sector about this issue the same month that inflation began to rise above 2%, August 2021. That’s almost three years’ worth of data. Three years of tracking the challenges organisations are facing and the support they need. So, what does the data tell us?

“Rising costs are not matched by increases in contract funding leading to loss making across the board and subsequent pressure on reserves or sustainability.”

• In December 2021, only 14% of Scottish third sector organisations told us that rising costs and inflation was a top challenge. By Spring 2024, this number had risen to 44%.
• Sixty percent (60%) of organisations report rising costs and inflation having a negative impact on their ability to deliver their core services or activities (Spring 2024).
• Over half of organisations (52%) told us that they had needed to look for additional funding to help with rising costs and over a third (36%) had reduced or stopped services and activities due to cost increases.
• Seven in ten (71%) organisations say that their staffing costs have increased. Organisations have responded to the cost-of-living crisis by providing their staff with an increase in pay. This extra money is often from organisations financial reserves, a situation that most organisations say is unsustainable.
• Only 8.7% of organisations thought that the practical and financial support available to them to help with rising costs was sufficient.
• When asked what support organisations would find useful, two thirds (65%) said additional funding and well over a third (38%) said support with energy costs specifically.  
• Despite these challenges, 60% of organisations have reduced the cost of their services or made them free of charge to support the people and communities they work with as they too struggle with the cost-of-living.

“Cost of living [is] not matched by income received meaning that staff are disadvantaged, and staff retention and recruitment are seriously adversely impacted upon.”

For some, the impact has been devastating, curtailing or cancelling vital services; staff losing their jobs; and organisations having to close their doors. People deserve better, organisations deserve better, and the sector deserves better. The sector is an essential part of peoples’ lives, and while there is no panacea, implementing Fair Funding would go a long way to providing security for voluntary organisations, their staff and the people and communities they serve.