Public sector spending on the third sector in Scotland has frozen
Public sector funding to Scotland’s voluntary sector has dropped by £177 million in real-terms since 2021, a new report has found.
Research by the Scottish Council for Voluntary Organisations (SCVO) shows the amount of public money provided to third sector organisations froze between 2021 and 2023.
The SCVO Public Sector Funding research report found a five per cent cut in real terms funding, meaning organisations across Scotland are being asked to continue providing vital frontline services with a pot of money now worth less.
SCVO has consistently called for public bodies to implement a new Fair Funding model to help charities, voluntary groups and social enterprises to thrive and provide greater security for workers, services and service users.
The national membership organisation for the voluntary sector said this must include longer-term funding of three years or more, and sustainable funding that includes inflation-based uplifts, full cost recovery, including core operating costs, and pay uplifts.
Public sector funding - around half of which comes from local authorities, and a third of which comes from the Scottish Government - should also accommodate paying staff at least the Real Living Wage, which organisations in receipt of public money are required to pay their staff.
SCVO also continues to push for funding to include provision for the additional costs that medium and large voluntary sector employers will face as a result of increases to Employer National Insurance Contributions.
The calls for Fair Funding come at a time when voluntary sector organisations are increasingly required to make use of their reserves, with SCVO research showing a decline in cash reserves - particularly in those organisations who deliver public sector contracts.
These pressures, including the real-terms cut in public sector funding, underline the need for the Scottish Government and other public bodies to implement Fair Funding across the country.
SCVO chief executive Anna Fowlie said: “We know the times are tight for the public sector, and we appreciate that in that context even standstill funding is sometimes seen as a win.
“However, at a time when demand for support from voluntary sector services is rising, including as a result of cuts in public services, it is simply unsustainable to expect the voluntary sector to find the £177m shortfall that these figures tell us our sector is facing.
“Voluntary organisations do not have ready access to other sources of funding: public fundraising and trading income has also been impacted by the cost of living crisis. That leaves many organisations using their reserves to fund this deficit, which may provide a temporary solution, but over the long term is wholly unsustainable.”
Kirsten Hogg, SCVO's head of policy and research, added: “In addition to rising demand and rising costs, voluntary sector employers face additional pressures going into the new financial year.
“Medium and large voluntary organisations that employ staff will be hit by changes to employers National Insurance contributions, leaving the sector to find at least an additional £75m annually.
“Against the backdrop of reduced real terms budgets, and a lack of other sources of income, it is little surprise that nearly one in ten of Scotland’s 46,500 voluntary organisations is unsure whether or not they will still be operating in 12 months’ time.”
