The Scottish Council for Voluntary Organisations is the membership organisation for Scotland's charities, voluntary organisations and social enterprises. Charity registered in Scotland SC003558. Registered office Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB.
Scottish Government Debate Briefing: Tackling Child Poverty and Inequality Through the Scottish Budget
Summary
Scotland’s voluntary sector plays an essential role in supporting people and communities across Scotland experiencing poverty and inequality and is central to the Scottish Government’s plans to eradicate child poverty and inequality.
To support this work and build a sustainable voluntary sector, Fair Funding -a long-term, flexible, sustainable, and accessible approach to voluntary sector funding- is urgently needed.
Fair Funding should also recognise and support the 136,000 employees in Scotland’s voluntary sector’s – 5% of Scotland’s workforce - by supporting Fair Work and covering the full costs of employing staff.
SCVO welcomes the Scottish Government’s continuing commitment to deliver Fairer Funding for Scotland’s voluntary sector in the 2025/26 Scottish Budget and their calls for the UK Treasury to fully fund any increases to employer National Insurance costs (NICs) for organisations delivering public services. On both issues, however, the Scottish Budget must go further.
To create a sustainable sector which can offer Fair Work and continue to support people and communities across Scotland, the Scottish Budget should recognise, resource, and support the voluntary sector, our staff, and our essential services by:
- Aligning the Scottish Government’s “Fairer Funding” principles with SCVO’s definition of Fair Funding.
- Ensuring grants and contracts Scottish Government, their agencies, and other public bodies award support Fair Work and cover the full costs of employing staff, including at least the Real Living Wage, any increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
Fair Work
The voluntary sector is a significant employer, employing around 136,000 people in Scotland - 5% of Scotland’s workforce. Fair Work for Scotland’s voluntary sector workforce is both an SCVO priority and is central to the Scottish Government’s ambitions to eradicate child poverty.
The voluntary sector workforce includes more women (64.5%), more part-time workers (37%), and more people with a disability (23%) than the public and private sectors. Women and people with a disability are at greater risk of living in poverty. Our workforce makes a huge contribution across Scotland, offering a lifeline to people, families, and communities as the cost-of-living crisis bites. This lifeline shouldn’t need to be extended to voluntary sector staff.
The Scottish Government have recognised the impact of the cost-of-living crisis on public sector staff and took action to provide wage uplifts, particularly for the lowest paid. The Scottish voluntary sector provides similar essential services and support, despite this, action has not been taken to ensure voluntary sector staff can receive pay increases equal to their public sector counterparts. Shockingly, recent research by CCPS reveals a 20% pay gap between NHS support workers and voluntary sector social care support workers who are starting out in their career.
It must be recognised that poor funding and procurement practices undermine voluntary organisations aspirations to offer Fair Work.
To eradicate child poverty, the Scottish Budget should ensure grants and contracts accommodate at least the real Living Wage and offer pay uplifts for voluntary sector staff on par with those offered to the public sector, supporting the sector to be Fair Work employers and the Scottish Government’s ambitions to become a Fair Work Nation by 2025.
Ultimately Fair Funding is central to Fair Work for voluntary sector staff.
Fair Funding
The essential public services delivered by the voluntary sector – like social care and youth work – and the variety of other services and support offered by the voluntary sector across Scotland, are essential to plans to eradicate child poverty and tackle inequality and should be valued as such.
SCVO welcomes the Scottish Government’s continuing commitment to deliver fairer funding for Scotland’s voluntary sector in the Scottish Budget, however clarity on the actions that the Scottish Government will take to meet their commitment to fairer funding by 2026 is urgently needed.
SCVO continues to call for this approach to be aligned with SCVO’s definition of Fair Funding, much of which was endorsed in the Social Justice and Social Security Committee’s Pre-Budget Scrutiny report 2025/26.
As the Committee recognised, despite a renewed focus, 18 months on from the policy prospectus, there has been little progress on the Scottish Government’s “Fairer Funding” commitments and previous calls from the Committee are yet to be actioned.
The Committee’s 2025/26 Pre-Budget scrutiny report focused exclusively on voluntary sector funding recognising the sectors essential contribution to Scottish society. The Committee received extensive evidence from voluntary organisations on the impact of unsustainable and uncertain funding on voluntary organisations, their staff and volunteers, and ultimately the services and support they provide people and communities across Scotland.
We welcome the Committee’s recommendations. These include:
- Prioritisation of multi-year funding, exploring options for progress in advance of the UK Government’s Comprehensive Spending Review.
- Work towards parity of the voluntary sector with the public sector by providing three-year funding as the default arrangement.
- Ensure funding arrangements include provisions for inflation-based adjustments to ensure that organisations can maintain their service levels and meet wage commitments.
- Take action to support the implementation of the Real Living Wage through its grant funding, including full cost recovery.
- Streamline application and reporting processes and introduce a level of standardisation.
- Take further steps to address delayed notification of funding for the forthcoming financial year.
- Improve the transparency of grant funding decision-making processes.
- Draw the Scottish Government’s attention to oral evidence on the Scottish Government’s recent consultation on Disclosure Scotland fees.
These recommendations overlap considerably with SCVO’s Fair Funding work and the 2025/26 Scottish Budget should offer clear commitments to action these recommendations.
Instead, a standstill budget for third sector infrastructure, suggests that rather than further resources to ensure organisations can adapt to cost pressures, pay and meet increases to the real Living Wage, and uplift wages more broadly, voluntary organisations funded through that part of government can expect another year of standstill budgets.
Testimonials
| “Planning in the current climate is extremely difficult - funding agreements which cover 3 - 5 years would enable us to plan staffing and resources to meet needs.” Registered Charity “The longer-term funding allows us to give much better value for money, we can plan long term, employ staff on more secure contracts therefore allowing us to utilise staff more efficiently.” Registered Charity “The lack of inflationary increase to our funding is the most unfair aspect of our current arrangements, we effectively suffer a cut in funding year on year.” 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 |
National Insurance Contributions (NICs)
As a significant employer, the increases to employers’ National Insurance Contributions (NICs) set to go ahead in April, will have a significant impact on medium and large voluntary sector employers, as SCVO shared with the Chancellor ahead of the Budget.
SCVO estimates that these changes will cost voluntary sector employers in Scotland over £75 million per year, plus inflation. Despite this, the Chancellor has confirmed the intention to limit relief for these increases to the public sector and government departments.
Our sector continues to face unprecedented challenges. Voluntary organisations’ costs are climbing, funding is falling, and demand for services continues to increase. As a result, eight out of ten organisations report that financial difficulties rank among their most significant challenges. NICs increases are additional costs the voluntary sector simply can not afford and will impact organisations, their staff and volunteers, and the support and services people and communities rely on.
SCVO continue to urge the Chancellor to change course. We welcome recognition from the First Minister and MSPs across the Scottish Parliament, that the Chancellor’s intention to increase employers’ National Insurance Contributions will have a significant impact on the voluntary sector in Scotland and the First Minister’s call for support for the sector.
If the Chancellor cannot be convinced to change course, the Scottish Government must ensure that their financial commitments to voluntary organisations cover these new costs – and that other public bodies have the funds to do the same.
In the 2025/26 Budget, the Scottish Government can take a Fair Funding approach to these changes by:
- Ensuring grants and contracts Scottish Government, their agencies, and other public bodies award, cover the full costs of employing staff, including at least the Real Living Wage, any increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
Case-study
| Turning Point Scotland is a large social care provider working across 18 local authority areas. Supporting between 8,000 and 12,000 people at any one time. We employ 1,200 people, and have an annual turnover of £44 million. We are entirely commissioned to deliver public services on behalf of Local Authorities and Scottish Government. The National Insurance increase will cost us £1.1 million per year; £274,000 in relation to the rise in employer NI contributions, £778,000 associated with the lowering of the NIC threshold. This equates to a 2.7% increase to our payroll costs. Every service that we operate will go into budgetary deficit – none of our services will receive enough money to cover the costs of providing that service. One service we provide is already looking at a £60,000 deficit for next year – with these changes that deficit will become £160,000. Without a radical change, none of our services will be financially viable. Many will face closure in the very near future. If that change does not come from the UK or Scottish Government, we will need to make those changes with our service commissioners– what will be lost? Will we have to reduce the number of staff? Will we have to disinvest in training, development and support? Will we have to cut pay? Every cut will impact on the number of people we can support, the quality of the support we provide, the attraction and retention of our workforce, and the safety and viability of our services. We consider ourselves a financially healthy organisation in terms of both cash and reserves, but without action to address the impact of these changes, we will not survive in our current state. We risk losing many of the services that we deliver, and we know that our sister organisations in the social care sector are facing the same, if not a worse outlook. The impact on Scotland’s social care system and the people who rely on it cannot be overstated. |
Conclusion
Scotland’s voluntary sector works with people and communities across Scotland experiencing poverty and inequality, and is central to the Scottish Government’s plans to eradicate child poverty and tackle inequality.
The 2025/2026 Scottish Budget is an opportunity to recognise and support the sector’s contribution and address the pressures facing the sector.
The Scottish Budget can and should take much needed and meaningful steps towards a Fair Funding system that offers long-term, flexible, sustainable, and accessible funding by aligning their Fairer funding principles with SCVO’s definition of Fair Funding and actioning the many recommendations in the Social Justice and Social Security Committee’s Pre-Budget Scrutiny report 2025/26.
Fair Funding can and should accommodate Fair Work and cover the full costs of employing staff. Scottish Government must ensure grants and contracts they, their agencies, and other public bodies award support Fair Work and cover the full costs of employing staff, including at least the Real Living Wage, any increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
Additional information
SCVO Briefing: Scottish Budget 2025/2026
Letter to Scottish MPs - UK Budget: Impact of NI changes on charities in your constituency
SCVO, NCVO, NICVA, and WcVA letter to Rachel Reeves, Chancellor of the Exchequer: Autumn Budget 2024 – employers’ National Insurance contributions
Letter to Scottish MPs: UK Budget: Support the voluntary sector in your constituency
SCVO letter to Rachel Reeves, Chancellor of the Exchequer
