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 Caledonian Exchange, 19A Canning Street, Edinburgh EH3 8EG.
Why subsidies are awarded
According to the Guidance, subsidies must pursue a clear public policy objective. To ensure that public financial support benefits society, public authorities may only give subsidies that address a market failure – where the market alone does not produce economically efficient outcomes – or that address a social inequity, by helping redistribute resources more fairly between different groups and areas.
Example: a rural community transport scheme
A regional transport partnership provides financial assistance to a community transport scheme run by a voluntary organisation in a rural area where commercial operators will not run services.
The financial assistance provided is likely to be considered a subsidy because the service is offered on a market meaning the activity is “economic” in nature, and it confers an economic advantage on the voluntary organisation which could have an impact on competition.
However, the market is not providing the service because no operator is incentivised to run routes on a commercial basis. This is not a market failure because the market is responding rationally to the fact that demand is too low to justify the cost of supply. However this is resulting in a social inequity (the under-provision of transport amenities to those in rural areas). Therefore, the subsidy pursues a clear public policy objective: remedying a social inequity in order to ensure access to public transport in rural areas. So, although there is a subsidy here, the authority can give that subsidy in order to remedy this problem.
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