SCVO Response: Finance and Public Administration Committee Inquiry into the Scottish Budget Process in practice

About our response 

SCVO welcomes the opportunity to respond to questions 2, 3, 9 and 10 of the Finance and Public Administration Committee’s Inquiry into the Scottish budget process in practice.

Question 2: Please set out any barriers to meeting the four core objectives of the budget process and suggestions as to how these might be overcome. 

In our response to this question, we will focus on objective 2, improved transparency and increased public understanding and awareness of the budget.

Fiscal transparency is essential for everyone’s understanding of Scottish Government’s investment in the voluntary sector. Fiscal transparency would enable voluntary organisations, civil servants, scrutiny bodies, and others, to better understand Scottish Government decisions, funding flows, and budget changes, and to fully engage with government on the potential impacts of the Scottish Budget on voluntary organisations, their staff and volunteers, the communities they work with, and the Scottish Government’s wider ambitions.

Transparent funding data is also essential to measure progress towards the Scottish Government commitment to Fairer Funding for the voluntary sector by 2026.

In the current environment it is difficult to truly understand the impact of the Scottish Budget on the voluntary sector. The voluntary sector is hugely diverse, and organisations receive funding from many different Scottish Government departments.  How funding flows to the sector from departments is not broken down, and as a result, an overall picture of what the Budget invests in the sector, and if this investment increases or decreases year on year, is not available.

The Third Sector Budget Line is one of the few lines in the Scottish Budget which funds the sector and where comparable figures are available year on year. This Budget funds SCVO and other voluntary sector infrastructure organisations and projects and is a very small part of the government’s overall investment in the sector. As an example, in 2025/26 the Third Sector Infrastructure & Development Budget Line was £14.1 million. SCVO estimates the Scottish Government invested over £1 billion in the voluntary sector in 2023 (the most recent year for which accounts data from voluntary organisations is available).  Ministers and civil servants regularly use SCVO’s estimates to highlight the scale of government investment in the voluntary sector. Official figures are not available from the Scottish Government, a significant gap in the Scottish Government's understanding of funding flows to the sector.

Similarly, while the Scottish Government committed to Fairer Funding for the voluntary sector by 2026 in 2023, data on Fairer Funding criteria, such as how much funding is delivered on a multi-year basis or includes uplifts, is not centrally collected. That the Scottish Government does not centrally record how much funding it provides to the sector is a significant barrier in our ability to assess how the sector fares from year to year. Funding to the voluntary sector comes from across Scottish Government departments, so to understand the Scottish Government’s investment in the sector it essential that this information is both collected and published in accessible and understandable formats.

Over the last year the Scottish Exchequer has restated its commitment to increase civic trust through timely, understandable, accessible, and reusable fiscal information to enable scrutiny and progress the commitments in the Open Government Action Plan. SCVO welcomes the focus and progress on the Open Government fiscal transparency commitments, and the wider ongoing programmes of work to improve transparency, such as the move to Oracle. Currently it is unclear how these programmes can be utilised to improve the understanding of the Scottish Government’s investment in the voluntary sector. We encourage the Exchequer to engage with the Fairer Funding team within the Third Sector Unit to ensure data to support the sector and others to monitor progress towards Fairer Funding is included and accessible. Similarly, there is a need to work across government departments to ensure transparent reporting on funding flows to the voluntary sector and to understand the extent to which departments across government are implementing the Scottish Government’s Fairer Funding commitments and SCVO’s Fair Funding principles. The Third Sector Unit should also be consulted on wider transparency initiatives. Ensuring investment in the voluntary sector is considered and included within the Exchequer’s work- and other programmes to improve funding transparency - will avoid duplication in the future. Engagement with the sector is essential to ensure that the sector is included in efforts to shape transparent, accessible financial systems and data and that outputs support the sector to understand and engage with fiscal events and data.

To support these aspirations the Scottish Government should: 

• Adopt, and publish awards to, the 360Giving Data Standard, including basic identifier core fields such as recipient name, organisation, and charity number.
• Include all spending in the Scottish Government’s monthly reports and improve categories to ensure data is useful and accessible.
• Collect funding information across all government departments and produce a breakdown of Scottish Government funding to the voluntary, public, and private sectors by department and budget line.
• Publish the Scottish Government’s total direct investment in voluntary organisations annually from grants and contracts, with detail on the proportion that deliver on our Fair Funding principles.

To make and monitor progress on the Scottish Government’s Fairer Funding commitments, it is also essential that action on transparent funding includes developing timelines, goals, and actions to both monitor progress, and ensure progress can be scrutinised by the voluntary sector and Parliament.

The Committee’s previous Inquiry into effective decision making in March 2023, emphasised transparency as essential to political accountability. SCVO have made significant calls around the need for greater transparency in Scottish Government funding to the voluntary sector, which have been endorsed by the Social Justice and Social Security Committee, and would welcome further support from the Finance and Public Administration Committee. The lack of transparency in the Budget continues to be a significant barrier to the ability of SCVO, the wider voluntary sector, and others to assess the impact of budget decisions and to hold government to account.

Question 3: To what extent does the MTFS support a more strategic approach to the Scottish Government’s financial planning?

Multi-year funding is an essential element of Fair Funding, and essential to the sustainability of the voluntary sector, the services and support we provide people and communities, and security for staff and volunteers.

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. 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. Similarly, in the 2024/25 Scottish Budget decisions about multi-year funding were deferred to the Medium-Term Financial Strategy.

Following the most recent Scottish Budget, in February 2025 the Scottish Government launched a Fairer Funding pilot committing more than £60 million to pilot projects focusing on essential services and eradicating child poverty. The pilot offered 45 multi-year funding grants to organisations across Scotland committing £61.7 million in 2025/26 and £63.2 million in 2026/27. The pilot recognises the voluntary sector’s need for more security and stability to enable organisations to plan and develop and to support the sectors contribution to the Scottish Government’s ambitions to eradicate child poverty and the need for longer-term interventions. The Scottish Government described the pilot as the first step in mainstreaming multi-year funding agreements more widely across the voluntary sector.

While welcome, the pilot is a very small part of the government’s overall £1 billion investment in the voluntary sector. To make continued and more substantial progress on multi-year funding over the next five years, and broader progress on Fair Funding, it is essential that multi-year funding is included within the Medium-Term Financial Strategy. The Strategy should also consider other Fair Funding elements and how these can be progressed over the next five years, such as ensuring grants and contracts cover the full costs of employing staff, and inflation-based uplifts to grants and contracts. The strategic approach of the financial strategy should support action in these areas, recognising the many benefits of a sustainable voluntary sector for Scotland’s society and economy and the extent to which the sector is central to achieving progress on the Scottish Government’s missions to end child poverty, grow the economy​, tackle the climate emergency, and i​mprove public services.

The Strategy, like the Scottish Budget, should also take action to offer transparent and understandable fiscal information to support voluntary organisations, civil servants, scrutiny bodies, and others, to better understand Scottish Government decisions, and funding flows, and to engage with government on the potential impacts on voluntary organisations, their staff and volunteers, the communities they work with, and the Scottish Government’s wider ambitions. The process for engaging in the MTSF is also less clear and defined than the Scottish Budget process. In addition to transparent fiscal information, further transparency in how to engage in processes around the Medium-Term financial Strategy is needed.

The upcoming UK Government Spending Review should support the Scottish Government to take on action their Fairer Funding commitments in the MTFS and provide the Scottish Government a welcome opportunity to demonstrate its commitment to a more strategic approach to financial planning, including voluntary sector funding.

Question 9: How effective is current public engagement in the budget process and are there any ways in which this can be improved?

The way the Scottish Budget is constructed and delivered makes it difficult to assess, partly, as has been discussed, due to a lack of transparency but also because of the timing of the process.

There are limitations to how much SCVO, voluntary organisations, and wider civil society can contribute to the Budget Process. Opportunities to engage with the process often takes place during times when the sector is stretched. For example, many organisations, like the Scottish Parliament itself, are closed over the Christmas break limiting the amount time available to engage with a Scottish Budget delivered in December, and to prepare written and oral evidence, which is often requested early in January. Similarly, Committee Pre-Budget Scrutiny takes place over the summer break when many voluntary sector staff, like those across all sectors, are on holiday. Committee Pre-Budget Scrutiny consultations often open and close at very similar times, as a result voluntary organisations often need to prioritise which Committees to engage with due to staff capacity, particularly at a time when staff resource may already be low.

In previous years, delays to the Budget process have also inevitably resulted in delays to funding allocations within Scottish Government departments, and, in turn, delays in funding confirmation for voluntary organisations. This has resulted in some organisations not receiving confirmation of their funding until several months into the new financial year, leading to them having to issue redundancy notices to staff.

For the current budget process, 2025/26 SCVO welcomes both the commitment from Scottish Government to multi-year funding and the commitment to ensure that all key partners and stakeholders for 2025/26 receive confirmation of funding as soon as possible after the Budget statement. SCVO will continue to monitor the extent to which these ambitions are realised, as we understand that the Scottish Government may not yet be able to centrally gather or publish data on the extent to which different government departments are meeting this target.

SCVO recognise that the release of the Scottish Budget is influenced by the UK Government’s Autumn Budget. The upcoming UK Government Spending Review should offer the Scottish Government some Budget certainty over the next few years and the welcome opportunity to make longer term decisions and consider the Budget process.

Question 10: What adjustments do you consider are required to enhance the overall effectiveness of the budget process?

Fiscal transparency is essential for everyone’s understanding of Scottish Government’s investment in the voluntary sector. Fiscal transparency would support SCVO and other voluntary organisations to:  

• Understand Scottish Government decisions.
• Assess the impact of budget changes.
• Understand any Scottish Government action to mitigate risk and the extent to which these actions are successful. 
• Measure progress towards the Scottish Government commitment to Fairer Funding for the voluntary sector by 2026.

To support aspirations to increase civic trust through timely, understandable, accessible, and reusable fiscal information and to enable engagement and scrutiny with the Scottish Budget the Scottish Government should: 

• Adopt, and publish awards to, the 360Giving Data Standard, including basic identifier core fields such as recipient name, organisation, and charity number.
• Include all spending in the Scottish Government’s monthly reports and improve categories to ensure data is useful and accessible.
• Collect funding information across all government departments and produce a breakdown of Scottish Government funding to the voluntary, public, and private sectors by department and budget line.
• Publish the Scottish Government’s total direct investment in voluntary organisations annually from grants and contracts, with detail on the proportion that deliver on SCVO’s Fair Funding principles.

To make and monitor progress on the Scottish Government’s Fairer Funding commitments, it is also essential that action on transparent funding, includes developing timelines, goals, and actions to both monitor progress, and ensure progress can be scrutinised by the voluntary sector and Parliament.

On the Budget process specifically, there is a need to recognise the impact of the timing of the Budget and subsequent opportunities to engage, on the sector both in terms of Budget delays and periods of stress on staff resource.

Budget delays, as is well understood, impact financial planning, creates insecurity for volunteers, and at times service users, and can result in the issuing of redundancy notices to staff, rescinding them if funding is granted, or losing skilled and experienced staff, only to recruit again if the money comes later. While stress on staff resource can limit the ability of organisations to engage both broadly across Committees and with the full detail of budget announcements and their impact on organisations, staff and volunteers, and the services and support the sector provides people and communities across Scotland.