Charities in Scotland have drawn from their reserves “unsustainably” in recent years as high inflation has meant their income has declined in real terms, according to new figures.
The Scottish Council for Voluntary Organisations (SCVO) estimates that charities’ overall income declined by 4% between 2022 and 2023 to £9.7bn, when adjusted for inflation.
According to SCVO’s latest State of the Sector report, published this week, the value of the funds looked after by Scottish charities fell by £1bn between 2021 and 2023 as organisations drew on reserves to cover funding shortfalls.
Costs up
Unlike charities in England, which are primarily funded by the general public, public sector funding is the largest source of income (40%) for those in Scotland.
This source declined in real terms in 2023 as temporary Covid-19-related funds ceased, according to SCVO’s research, while funding from the public and voluntary sector increased.
Meanwhile, Scottish charities costs increased with the sector spending £9.3bn overall on carrying out its activities in 2023.
The report says the key driver behind Scottish charities’ increased expenditure is a “sharp rise in the cost of basics such as utilities and insurance”.
Staff costs have also increased over the past five years from £2.4bn to £3.2bn in 2023, the report says, with the incoming rise to employer national insurance contributions likely to push these higher.
‘Sobering’
Ilse Mackinnon, SCVO research officer, said: “It’s been sobering looking at charities' accounts this year and seeing just how tight finances are for many.
“People have been telling us via the tracker and anecdotally that things are tough, but it’s another thing seeing the figures in black and white.
“It’s great that many income streams have recovered but we also saw essentials like energy bills, rents and staff costs shoot up, sometimes to double what they were the previous year.
“We can see the impact of that on reserves, with many charities struggling to meet costs and keep enough cash back for emergencies.”
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