Fair Funding Inquiry

Last week, on behalf of SCVO, I was invited to give evidence to the Social Justice and Social Security Committee as part of the Committee’s Pre-budget Scrutiny focused on third sector funding principles.  

As the Committee shared in June, this inquiry examines, “how the Scottish Government’s approach to fair and efficient funding can contribute to the continued effectiveness of the third sector”. 

SCVO welcomes the Committee’s recognition of this issue, their inquiry is very much needed. 

The voluntary 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 - 77% of organisations now experience financial challenges. Similarly, as costs have risen for voluntary organisations so have demands on the services that they provide for the most vulnerable people in society with 63% reporting increased demand for core services and activities by April 2023. 

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. These ambitions have come into renewed focus over the last 18 months, following Scottish Government commitments to achieving fairer funding for the sector by 2026, and explore options to implement multi-year funding deals. 

Despite this, there has been little progress: Scottish Government’s “Fairer Funding ambitions remain unclear; many issues SCVO previously raised with the Committee unresolved; and the Committee’s recommendations to the Scottish Government unactioned. 

At the session, SCVO stressed the need for Scottish Government to align their “Fairer Funding” principles with SCVO’s definition of Fair Funding, which was developed through significant research and engagement with Scotland’s voluntary sector. 

SCVO’s calls for Fair Funding, a long-term, flexible, sustainable, and accessible approach to funding, were echoed by the other guests on the panel; Volunteer Scotland, Social Enterprise Scotland, Youthlink Scotland, and the TSI Scotland Network, each of whom described the costs of unsustainable funding practices on voluntary organisations, their staff, their volunteers, and the people and communities who rely on voluntary sector services. 

To support Scotland’s vital voluntary sector and secure our essential services and support for the future, urgent action is needed.  

To make meaningful progress to achieve Fair Funding by 2026, SCVO have asked  the Committee to recommend the Scottish Government’s 2025/2026 Budget commits to aligning the Scottish Government’s “Fairer Funding” principles with SCVO’s definition of Fair Funding. This includes: 

• 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. 

• Transparent delivery goals, timelines, and accountability mechanisms – such as reporting and stakeholder groups - to ensure progress on “Fairer Funding” can be scrutinised by the voluntary sector and Parliament. 

These actions will recognise and support the many contributions of voluntary organisations, their staff and volunteers, and lead to better outcomes for people and communities.  

Investing in a sustainable voluntary sector is also central to achieving the Scottish Government’s aspirations to eradicate child poverty and deliver better public services and reduce the time and resources that Scottish Government departments waste through annual inefficient funding processes. 

SCVO looks forward to the Committee’s report in November, but without action from Scottish Government the goal of achieving fairer funding by 2026 becomes increasingly unlikely, threatening our sectors vital contribution to communities across Scotland, wider society, and our often underappreciated role in the Scottish economy. 

Additional information 

Watch the Committee session here. 
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