SCVO Briefing to Scottish Parliament: Programme for Government 2024/25

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.

Despite this renewed focus, 18 months 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 deliver multi-year funding and progress Fair Funding to support of voluntary organisations, their staff and their volunteers, and the people and communities our sector works with.

Background

For over 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, including within several Scottish Budgets and Programmes for Government, and the Economic Strategy.

In April 2023, the Scottish Government’s policy prospectus, New leadership - A fresh start, renewed these ambitions, committing to delivering Fairer Funding for the sector by 2026, including exploring options to implement multi-year funding deals. This was followed in May 2023 by a commitment in the Medium-Term Financial Strategy to adopt multi-year spending plans.

Despite this renewed focus, 18 months on from the policy prospectus, there has been little progress. The most recent Scottish Budget made no further commitments, deferring action on any multi-year funding to the upcoming Medium-Term Financial Strategy, and making no reference to voluntary sector funding.

The problem

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. The Third Sector Tracker found:

• From August 2021 to April 2024, the proportion of voluntary sector organisations reporting financial challenges has increased from 47% to 77%.
• Over a third (36%) of organisations have reported having made use of their financial reserves in the 3 months leading into April 2024, a 4% increase compared to the same period in 2023. Depleting reserves for recurring costs is not sustainable, with 60% of the organisations sharing that continuing to use reserves was unsustainable for their organisation.
• Some organisations have responded to the cost-of-living crisis by providing their staff with an increase in pay, also often from organisations’ financial reserves, a situation that is clearly unsustainable.
• As costs have risen for voluntary organisations over the past three years, so have demands on the services that they provide for the most vulnerable people in society. In August 2021, 56% of organisations reported an increased demand for core services and activities, rising to 63% by April 2023.

The most recent Third Sector Tracker results were published earlier this month and cover the three months to April 2024. By April 2024, the Third Sector Tracker found:

• 62% of organisations believed that rising costs had affected the ability to deliver core services or activities since December 2023.
• 47% of organisations reported cost increases in their top three challenges.
• 33% of respondents had not been able to deliver all their planned services in the preceding 3 months.
• Only one third (32%) of respondents have been able to meet all of the increased demand for their services in the preceding 3 months. For the organisations who had been unable to meet increased demand, the main difficulties included: staff capacity (54%); raising funds to meet the demand (50%); and volunteer capacity (41%.).

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.

The Emergency Budget Response has also left organisations awaiting confirmation of Scottish Government funding vulnerable.

The solution

SCVO and colleagues across the sector welcomed the Scottish Government’s commitment to delivering Fairer Funding for the sector by 2026, including exploring options to implement multi-year funding deals. Without action in the Programme for Government (PfG), achieving this target becomes increasingly unlikely.

To make progress, the  PfG should commit to aligning the Scottish Government’s “Fairer Funding” principles with SCVO’s definition of Fair Funding– which was developed through significant research and engagement with Scotland’s voluntary sector. This includes commitments 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
• Accommodate at least the Real Living Wage and uplifts on par with those offered to public sector staff.
• Full costs recovery, which includes core operating costs.

Long term funding should also be provided to local authorities, to allow them to enter into multi-year agreements with voluntary organisations. Between one quarter and one third of voluntary organisations receive funding from local authorities.

Without these commitments, achieving “Fairer Funding” by 2026 becomes increasingly unlikely.

To make and monitor progress, it is also essential that the PfG takes action on transparent funding, including developing timelines, goals, and actions to both monitor progress, and ensure progress can be scrutinised by the voluntary sector and Parliament.

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

Scotland’s voluntary sector is an employer, a partner, and a vital social and economic actor central to delivering on the Scottish Government’s three missions of equality, opportunity, and community.

The Programme for Government is an opportunity for the First Minister and the cabinet team to recognise and support the many contributions of voluntary organisations, their staff and their volunteers across Scotland by making progress towards the Fair Funding our sector desperately needs.

To achieve this the Scottish Government must commit to progressing multi-year funding, develop timelines and goals, and make plans to monitor progress. To support a sustainable sector, multi-year funding must also recognise and incorporate essential Fair Funding elements.

Additional information

SCVO's full proposals for the 2024/2025 Programme for Government cover two areas and can be found here:

1.    Delivering Fair Funding by 2026
2. Transparent funding

About the voluntary sector in Scotland

The voluntary sector in all its diversity is a powerful force for positive change and a significant part of our economy. From grassroots volunteer-run community groups like village halls and playgroups to major providers of public services in social care and housing, the voluntary sector is present in every aspect of our society and is the glue that holds communities together, with over 46,500 voluntary organisations and over 1 million volunteers. 

Together these organisations employ over 133,000 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 £80k. Many deliver vital services and work with some of Scotland’s most marginalised communities. SCVO’s State of the Sector statistics for 2023 are available online.  To find out more about the voluntary organisations in your constituency visit the Geographical information section (pages 7-11) of SCVO’s State of the sector statistics.

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 3,900+ 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.