As public funding is slashed, the public step up - but can it last?

Swingeing cuts of £185m mean Scotland’s third sector is having to use “extraordinary creativity” to continue to deliver its raft of essential and often life-saving services.

This week TFN exclusively reveals new figures showing that since 2010 plunging public sector income is making organisations – particularly smaller ones – far more reliant on public donations and trading.

Charities have been praised for their resilience – but there are dire warnings about the consequences if cuts continue.

Research released by the Scottish Council for Voluntary Organisations (SCVO) shows trading income and donations are growing as cash from local and central government sources plummet.

Despite sector income marginally increasing by 6% to £4.9bn in the period 2012-2013, government funding plunged from £1.87bn in 2010 to £1.68bn in 2013 – an 18% cut in real terms.

Increased donations and self-generated income is helping shield many organisations from this shortfall – but not all organisations are coping.

Ewan Aitken, chief executive of care charity Edinburgh Cyrenians, questioned the sustainability of diminishing public funds.

He hit out: “Austerity politics and a narrative that stigmatises state support for those who are struggling means the public sector is under pressure like never before,

“Charities like Cyrenians instead will have to use their extraordinary creativity to generate new sources of income from things like social enterprises, innovative events and digital fundraising to allow them to continue to support those in need.”

In effect the sector now receives only 34% of its funding from the state, down from 42% in 2010.

At the same time there has been an astonishing 40% rise in public donations – an increase of £106m on 2010.

However many smaller charities – which make up the vast majority of organisations in Scotland – express concern they either don’t have the resources to fundraise or don’t have the expertise to create trading subsidiaries.

“Over our 45 year history we have had a massive impact on the community here in Aberdeen. But without public sector support we had to close - Jenny Thomson, Send-it

The research notes that while two thirds of regulated organisations in Scotland have an annual income of less that £25,000 – accounting for less than 1% of the sector’s income – these 12,000 organisations nevertheless make significant contributions to local communities and wellbeing.

Aberdeen-based mental health charity Send-it closed last week after a third of its funding was pulled by the council.

Despite running a successful trading operation, manager Jenny Thomson said the local trading environment was too competitive for a small organisation to bridge this shortfall.

“Although it amounted to around £80,000, we were stretched to our limits as an organisation,” she told TFN.

“Mental health charities don’t do well in terms of donations so we couldn’t fundraise and expanding the business was unfeasible.

“Over our 45 year history we have had a massive impact on the community here in Aberdeen. But without public sector support we had to close.”

Ruchir Shah, SCVO policy manager, said despite the sector responding well to the drop in public sector income, there remained big question marks over how it will respond in the longer term.

“Many charities are generating more income themselves and attracting more support from members of the public,” he said.

“Charities have proven time and again that they make a positive difference to the lives of the most vulnerable people in our communities and that they can find new ways to respond to ever rising demand despite drops in public sector funding.

“But this can’t continue indefinitely.”

Fraser Hudghton, Institute of Fundraising Scotland manager, said the third sector was viewed as the first responder to what’s happening in wider society but needs support at all levels to enable it to continue this vital role.
“Where public life in Scotland is becoming more engaged and more active in responding to community need, then you will see an increase in fundraising,” he said.

“This is positive in the short-term, but it’s not a long-term solution.

“This drive needs to be matched at every level – from local and central government and Westminster if the sector is to respond effectively.”