SCVO Response: Finance and Public Administration Committee Pre-Budget Scrutiny 2026-27 Responding to Long-Term Fiscal Pressures

Question 1:  What actions should the Scottish Government be taking now to start to address these ‘Scottish specific fiscal sustainability challenges’? 

The voluntary sector is and should be recognised as part of the solution to Scotland’s long-term fiscal challenges. The voluntary sector is an essential partner in the delivery of public services across Scotland and should be recognised and engaged as an equal partner in mainstream public sector provision. To achieve this the Scottish Government must:

• Embed Fair Funding principles, including multi-year funding and full cost recovery, so that voluntary organisations are not held back by short-term, inadequate, delayed or poorly managed funding. Fair Funding is essential to ensure organisations can plan, retain staff, and deliver high-quality services.
• Treat the sector as an equal partner in the design and delivery of public services and policy.

We elaborate further on these themes in more detail in our responses to questions 2, 3, 5, and 9.

Question 2: To what extent does the Scottish Government’s 2025 MTFS and its FSDP demonstrate effective medium- and longer-term financial planning? Can any improvements be made in future years?

The 2025 Medium-Term Financial Strategy (MTFS) presented a significant opportunity to progress the Scottish Government’s own long-standing commitments to “Fairer Funding” and multi-year funding arrangements for voluntary organisations. Action on multi-year funding is much needed and  would have supported voluntary organisation in receipt of public funds with the opportunity to undertake longer-term financial planning. This opportunity was missed despite the Scottish Government repeatedly recognising the need for multi-year funding, including through numerous strategies and public commitments, including: 

• April 2023: New leadership – A fresh start policy prospectus committed to delivering Fairer Funding by 2026, including exploring multi-year funding deals. 
• May 2023: The MTFS committed to adopting multi-year spending plans. 
• December 2023: The 2024/25 Scottish Budget deferred decisions on multi-year funding to the 2025 MTFS. 
• June 2025: The 2025 MTFS again failed to deliver a multi-year funding framework. 

Instead of long-awaited multi-year spending plans, following the MTFS 2025 the voluntary sector is, again, waiting for progress.  

The Scottish Government’s “Fairer Funding” pilot, launched in February 2025 committed more than £120 million to pilot projects focusing on essential services and eradicating child poverty over two years, a welcome step. The pilot is, however, a very small part of the government’s overall £1 billion investment in the voluntary sector. The Scottish Government has described the pilot as the first step in mainstreaming multi-year funding agreements more widely across the voluntary sector, with the most recent Programme for Government committing to an interim evaluation by May 2026 to inform future approaches.

Multi-year funding is only one element of Fair Funding for the voluntary sector, as defined by SCVO. Multi-year funding delivered alone, or badly, will not be sufficient to deliver the fair, flexible, sustainable, and accessible funding landscape that voluntary organisations, our public services, people and communities need. Fair Funding for the voluntary sector is central to achieving Fair Work, grants and contracts should cover the full cost of employing staff, including at least the real Living Wage and inflation-based uplifts. While the MTFS recognised the value of multi-year pay deals for public sector workers, it failed to acknowledge the voluntary sector’s essential role in public service delivery or the need for parity in funding practices. 

The MTFS could also have taken 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. 

In summary, this lack of clarity makes it harder for voluntary organisations to plan, retain staff, and, crucially, deliver for communities across Scotland. 

Question 3: How adequately does the MTFS and the FSDP address the Scottish-specific fiscal sustainability challenges?    

Scotland’s voluntary sector is an essential social and economic actor which supports the delivery of public services and picks up demand that statutory services alone cannot meet. Voluntary organisations also bring additional value to Scotland’s systems through fundraised income and volunteer time — resources not available to other sectors.

Crucially, the voluntary sector plays an essential role in the delivery of preventative services, which are recognised as key to improving health and wellbeing outcomes and reducing expensive “failure demand”. For example:

• Cyrenians’ Hospital InReach service: Within its first 18 months, this pilot project reduced hospital readmissions by over two-thirds.
• Children’s Hospices Across Scotland (CHAS): Working with the University of York’s Health Economics Consortium, CHAS demonstrated that for every £1 of statutory funding received, they delivered £6.24 in public value — generating over £49 million in economic benefit annually from an £18 million spend.
• Place2Be: A study found that for every £1 spent on early intervention services for children’s mental health in Scottish primary schools, society benefits by £5.50 — highlighting the value of preventative support in under-resourced areas.

These examples demonstrate the capacity of the voluntary sector services not only improve outcomes but also deliver significant public value and cost savings.

To address Scotland’s fiscal sustainability challenges, the Scottish Government must act to safeguard the resilience of Scotland’s public services and the wellbeing of its communities. Essential to this is a resilient voluntary sector — one that is supported through Fair Funding and treated as an equal partner.

Question 5: What should the next Scottish Spending Review prioritise?

The Scottish Spending Review must prioritise a resilient voluntary sector that can continue to provide essential services and support for people and communities across Scotland. The Scottish Government must:

• Embed Fair Funding principles into grants and contracts awarded to voluntary organisations in receipt of public funding, across all departments, agencies and public bodies. This must include full cost recovery, inflation-based uplifts, and multi-year funding, which we hope can be facilitated by a multi-annual spending outlook. A full outline, if the Committee needs it, of SCVO’s Fair Funding principles, are here. These commitments have largely been endorsed by the Social Justice and Social Security Committee in their Pre-Budget Scrutiny report on Third Sector Funding Principles.
• Ensure voluntary sector staff are treated equitably, with grants from the Scottish Government, its agencies, and other public bodies, to publicly funded voluntary organisations, cover the full cost of employing staff. This must include payment of at least the Real Living Wage, increased employer National Insurance Contributions costs, as well as inflation-based uplifts on a par with those offered to public sector staff.

The Spending Review is the final opportunity before the Scottish Elections for the Scottish Government to take action to embed long-promised reforms and secure the future of essential services delivered by Scotland’s voluntary sector, and the sectors contributions to Scotland’s society and economy more broadly. It is vital that this opportunity is not missed and that action is taken to progress Fairer Funding commitments ahead of 2026.

Question 9: To what extent does the Scottish Government’s PSR Strategy demonstrate the vision and leadership required to drive progress? How well does it enable progress to be tracked, and outcomes measured?

Scotland’s voluntary sector needs to be at the heart of any serious programme of public service reform. To deliver the best outcomes for people and communities, the Scottish Government must:

• Treat the voluntary sector as an equal partner in the design and delivery of public services and policy.
• Embed Fair Funding principles across all reform workstreams, including multi-year funding, full cost recovery, and inflation-based uplifts.
• Support meaningful collaboration through formalised, consistent frameworks that enable joint working across all government departments, agencies, and public bodies.
• Track progress transparently, including sector engagement, funding reform, and outcomes for people and communities.
• Protect the sector’s independence, recognising its unique role, voice, and accountability to communities.

The Scottish Government’s 2025 Public Service Reform Strategy makes welcome commitments in these areas, including a recognition of the voluntary sector as an essential delivery partner. The Strategy also includes a dedicated workstream on “strengthening Community Planning and realising the potential of the third sector”. Pledges include strengthening engagement through Community Planning Partnerships; supporting collaborative commissioning and system leadership; improving integration of services at a local level; developing work with third sector interfaces (TSIs); and continuing to improve the Scottish Government’s own “Fairer Funding” arrangements.

While the PSR Strategy includes positive signals, these must now be backed by action. Too often, the voluntary sector is recognised on paper without meaningful change being put in place by decision-makers in practice. The experience of the Covid-19 pandemic showed what is possible when barriers to collaboration are removed. However, as the crisis receded so too have many of the enabling practices that made this collaboration effective.

While the PSR Strategy sets out high-level commitments to track progress — including the establishment of a new Public Service Reform Delivery Board and alignment with the National Performance Framework — SCVO would welcome greater detail on timelines, indicators, and reporting structures, particularly in relation to those workstreams involving the voluntary sector. Without this clarity, it will be difficult to assess whether commitments are being met.

SCVO looks forward to working with government, public bodies, and other partners to realise the strategy’s ambitions. To make progress a shift in culture, funding, accountability, and ambition is needed. Reform also cannot succeed without an empowered voluntary sector.

In the longer-term, to ensure consistency and longevity, the Scottish Government should formalise its partnership with the voluntary sector. Scotland can look to models elsewhere, such as the Third Sector Scheme in Wales, which provides a statutory basis for engagement and sets out clear expectations for collaboration. A similar approach in Scotland would help embed mutual trust, parity of esteem, and shared accountability across all departments and agencies.

Question 10: How transparent and ‘joined up’ are the Scottish Government’s key strategic financial planning documents? What improvements in this area can be made? 

Fiscal transparency is essential for everyone’s understanding of Scottish Government’s investment in the voluntary sector. 

The Scottish Exchequer recognises that the current presentation of fiscal information is not accessible or presented in a way that meets most users' needs.  SCVO welcomes this recognition and the aspirations shared in the Scottish Exchequer: fiscal transparency discovery report and the Open Government Action Plan (2021-25) to improve financial transparency by providing clear and more accessible fiscal data for budgeting to enable users to “follow the money”. These reports discuss the many benefits of fiscal transparency for all stakeholders. 

Similarly, during pre-Budget scrutiny for the 2023-2024 Scottish Budget, the Equalities, Human Rights and Civil Justice Committee, the Finance and Public Administration Committee, and the Social Justice and Social Security Committee all discussed the need for budget transparency to ensure data transparency, participation, and accountability and progress towards the National Outcomes. These concerns continued to be raised by Committees scrutinising the 2024-2025 Scottish Budget, including by the Finance and Public Administration Committee, and, most recently, in the Finance Committee Inquiry into the Scottish budget process in practice. 

The Social Justice and Social Security Committee have also stressed that better data collection is needed to help target new and existing social justice policies and that data sharing needs to be improved to anticipate service delivery needs, a view shared in the voluntary sector. 

SCVO welcome these contributions. In the current challenging financial context, fiscal transparency is essential to enable the Scottish Government to collaborate more effectively with the sector on solutions based on expertise, experience, and evidence, leading to more effective policy decisions and better targeted resource allocation, improving outcomes. 

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.