Public sector funding to Scotland’s voluntary sector has dropped by 5% in real terms since 2021, according to a new report.
The report from the Scottish Council for Voluntary Organisations (SCVO) found that public money provided to charities in Scotland froze at an estimated £3.3bn between 2021 and 2023, but this represented a £177m drop when adjusted for inflation.
Public sector funding remained the largest source of money for Scottish charities but it dropped from 46% of their overall income in 2021 to 40% in 2023, SCVO reported.
Around half of public sector funding, £1.6bn, came from local authorities while a third of it, £1bn, came from the Scottish Government.
The rest came from the NHS, health and social care partnerships and other non-departmental public bodies.
SCVO called on public bodies to offer longer-term funding that includes inflation-based uplifts, full cost recovery, core operating costs, and pay uplifts.
‘Simply unsustainable’
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.”
One in 10 fear closure
SCVO head of policy and research Kirsten Hogg said that Scottish charities faced additional pressures in the coming months, with employer national insurance contributions set to rise in April.
“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,” she said.
“Against the backdrop of reduced real-terms budgets, and a lack of other sources of income, it is little surprise that nearly one in 10 of Scotland’s 46,500 voluntary organisations is unsure whether or not they will still be operating in 12 months’ time.”
In a separate recent report, SCVO found that charities were being forced to draw from cash reserves, particularly those that deliver public sector contracts, as inflation and expenditure increased.
It found that 45% of charities spent more than they generated in 2023.
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