Official Report 768KB pdf
Welcome back. We will now hold our first evidence session as part of our annual pre-budget scrutiny. Each year, the committee reviews potential considerations for the Scottish Government’s budget planning. This year, our focus is on how the Scottish Government’s approach to fair and efficient funding can support the on-going effectiveness of the third sector. During the summer, we ran a call for views and held workshops with third sector organisations to hear about the funding difficulties in the sector.
I welcome our first panel of witnesses. We have Sheghley Ogilvie, public affairs officer for the Scottish Council for Voluntary Organisations; Sarah Latto, senior policy officer at Volunteer Scotland; Douglas Westwater, chair of Social Enterprise Scotland; Tim Frew, chief executive of YouthLink Scotland; and Ian Bruce, who is representing the Third Sector Interface Scotland Network. Thank you for accepting our invitation and for taking part in our call for views.
Before we start, I have a few points to mention about the format of the meeting. We have roughly an hour. Please wait until whoever is asking the question says your name before speaking. I ask everyone to keep their questions and answers as concise as possible. I now invite members to ask questions, starting with Roz McCall.
Hello, everybody. Thank you for coming along. The first question theme is funding stability and longer-term funding. Pretty much everybody who responded to the call for views underscored the instability that is caused by the lack of multiyear funding. Equally, however, Social Enterprise Scotland highlighted that there are potential drawbacks to multiyear funding, such as missing deadlines, the possibility of failure to secure funding and the possibility of longer wait times before reapplying. That is an interesting juxtaposition—obviously, it is important that we consider multiyear funding but, equally, there is that juxtaposition—and I am interested in what the panel thinks about both sides of the issue. I am going to work my way down the line, so I invite Sheghley Ogilvie to start.
One of our concerns is that multiyear funding on its own is not the answer to fair funding. It is one element of fair funding, but fair funding involves a much broader package of reform; it is not solely about multiyear funding. One of the risks would be that, although there is multiyear funding, it is not flexible and does not include any sort of uplifts or all the other elements of fair funding that are essential to make the sector more sustainable.
Multiyear funding does not need to exclude any other type of funding. Generally, for a lot of organisations, their funding is very similar each year. For those organisations, it makes sense that funding should be multiyear, because each year they get very similar amounts. However, we are not saying that there should be only multiyear funding, because we acknowledge that there is a need for small amounts of project funding and that there are areas that benefit from more flexible types of funding. There are situations in which there are reasons for shorter-term funding, but the majority of funding should be multiyear.
We want to be clear that the benefits of multiyear funding far outweigh any potential drawbacks. From a volunteering perspective, single-year funding is challenging. That is the case in volunteer-led organisations, in particular, but also in organisations that involve volunteers. That is because of the lack of stability and the challenges with recruiting volunteers, which we know is becoming more and more challenging.
There are potential ways of addressing the challenges of multiyear funding that Social Enterprise Scotland has identified. For example, you could stagger your funding so that not all of your funding starts in, say, 2024 and finishes three years later; you could hold some of the funding back and have more of it starting the next year instead. It is fairly easy to do that. You could also have annual review periods to ensure that the funding is still relevant and still something that organisations are looking for.
For most organisations, multiyear funding is still, as Sheghley Ogilvie has said, the best approach, but there are ways around the potential challenges that you could bake into the design.
That suggests to me that there are added benefits, but equally there is the possibility of increased red tape, more processes and different ways of doing things. Is that not just going to create a really muddy pool when we look at funding? I am sorry, Sarah; I know you raised the point, but I need to speak to everybody. Mr Westwater, could you answer along those lines? Does that approach not just muddy the water?
It probably muddies the water for the funder. Everybody will say that three-year funding or, if necessary, 10-year or longer-term funding is better; it creates stability, allows people to be creative and innovative and actually allows people to start to generate some of their own money and use their resources to make things much more sustainable. It is really important.
The concern is with cycles of funding. We might get three-year funding, but it might be announced for a certain date, and then there might be no more funding for another three years. If a really lovely, amazing and innovative group appears in year 1 and then has to wait two years, they will probably go elsewhere or disappear. I think that you are right: that sort of situation causes problems for the funder and the Government—it absolutely does. It is not neat or easy to manage, but it has a much greater impact on the third sector. Of course, the sector itself brings long-term savings for the Government, because the beneficiaries provide health and social care and all sorts of things. In the long term, therefore, there is a financial saving for the Government, but you are absolutely right that it creates an administrative headache.
For me, whether the funding is multiyear or annual, the issue is how well managed it is. We see good and bad practice in both. Some big funders such as the Big Lottery Fund and Robertson Trust have good success stories around longer-term funding, but that does not mean that they do not provide short-term opportunities, too.
As far as the children and young people sector is concerned, there has been a lot of uncertainty around the children, young people, families and adult learning third sector fund. That is an example of a fund that has not been well managed, given that entrants over seven years ago were looking at a three-year fund, and it is still continuing. It just kind of rolls on and rolls on. One challenge in that respect is that existing grantees have speculated on the basis of a budget that they did six or seven years ago, and as a result, they have to make adjustments as they go. That can be quite challenging when it comes to the impact that they have or if they want to change other outcomes. It is also a barrier for new entrants to that fund, with people who have put in for their charity not able to get into it.
We need to see that against the wider challenge of children and young people funding in particular and the need for a collaborative approach, with parity of esteem between local government and other central Government funding in order to plan ahead. I would say that we need multiyear funding to do that and to be on an even keel, but it needs to be well resourced and managed to ensure that there are no barriers to new entrants.
Other people have talked about staggering the release of funds, which I think is an option. I do not think that that will necessarily mean lots of red tape; it is just a matter of being clear about the options right from the beginning. The guidance is very clear. However, one of the challenges for us in the third sector is that the conditions and the hoops can change as we go through the process. If the process is clearly marked out, I do not think that there needs to be additional red tape—it just needs to be well managed.
Mr Bruce, we have heard a lot of information and I accept that there is a lot of overlap. Again, I have a specific question. Would shifting the timeframe to early in the financial year make a difference, or does any multiyear process need to be looked at again, right from the start?
That comes back to Sheghley Ogilvie’s point that fair funding is part of a wider set of issues. Decisions being made earlier in the financial year is absolutely helpful, but, with regard to annual funding, the reality—particularly for organisations that provide services to the public and that generally work with people who may be vulnerable or disadvantaged—is that, when we talk about insecure funding for third sector organisations, we are talking about insecure services for people. The reality is that providing funding for one year means that an organisation spends a significant amount of time at the start of the year setting something up, has reduced time in the middle of the year and then has to anticipate an exit. Therefore, absolutely, making a decision earlier in the process is helpful, but that is not the same as giving organisations confidence that their project can run for an extended period of time.
Staggering funding is a logical solution that fits with the way that most third sector organisations are funded, which is that they have multiple funders. If you are very lucky, you will have a few three-year funding programmes and they will not all finish on 31 March in the same year.
That makes a lot of sense. Does anybody else want to pop back in on any of the additional points, before I finish up?
Please be brief.
On the idea that there would be more red tape, it is important to highlight that the funding model is inefficient. A lot of time and resources are wasted—by the Scottish Government and people in the third sector—when people are constantly applying for funding. Therefore, multiyear funding will be more efficient, even if there has to be scope for flexibility within that. A lot of that is about building relationships with people in the sector and working together to find solutions if there are any hiccups.
I will try to squeeze in a supplementary question to Roz McCall’s question, and I will come to Ian Bruce first. The Scottish Government has indicated that it is sympathetic to, and would like to find a way forward for, multiyear funding. It would also indicate that it still does not know what its finances are going to be in this year, yet it has had to set a budget for this year, let alone budgets for future years.
Other than getting more certainty from the UK Government, can you see any other workaround for that, Mr Bruce? I am thinking of, for example, guaranteed funding in year 1 but a guaranteed funding floor in year 2 of 80 per cent, going forward to year 2 and year 3, as we wait to see what the UK Government settlement looks like for Scotland. I am not suggesting that that is a specific solution; my point is to highlight the challenges and ask whether there are workarounds. It might well be that only Mr Bruce gets to come in on that, because I want to move on to my other line of questioning. However, do you have sympathy for the situation that the Scottish Government finds itself in in that regard?
Yes, and we work an awful lot with the local government network across Scotland, which has a similar challenge with regard to where its funding comes from. It would be a substantial improvement if we were to get to a point where organisations knew that they at least had a baseline, while recognising that additional resource might become available. I would reflect on it in that way—that you would set a baseline and that there might be more, rather than that you would set a baseline and there might be less. That is probably quite a critical point with regard to how both parties would think about that.
If anyone else wants to respond on that question—incredibly briefly, because I have another line of questioning—feel free to come in, but you do not have to.
I would just make the small point that the UK Government has said that it is looking to have three-year spending reviews in the future. Therefore, I am hopeful—I hope that you all are, too—that, at some point, we are going to enter a situation in which the Scottish Government has a bit more confidence in what it will get from the UK Government and that that will flow down to the sector. It would be great to get to that point, and we are hopeful.
That really helps, because that is an acknowledgement that the lack of three-year spending reviews is a barrier to multiyear funding settlements for the third sector.
Mr Westwater, hold on to your thought, because I will ask my next question and, if you can squeeze your comment in during your answer to that, please do.
This question is not about the amount of funds that the third sector gets or whether there is multiyear funding. Irrespective of the funds that the third sector gets, we are hearing that the balance between core funds, restricted funds and project-only funds and a real lack of flexibility are putting at risk the sustainability of some third sector organisations and that we need to do better on that. Do you have any comments or reflections on what those barriers are? For example, do they include the lack of flexibility and not being able to vire some money over to core funds in order to do something innovative? I see you nodding your head, Mr Frew, so I will start with you.
During Covid, in particular, there was a lot more unrestricted funding and some of the conditions that we had in place were removed. That provided an opportunity to have a more needs-led approach to some of those outcomes. We were also an agency that provided funding, via the Government, to critical things that were happening for children and young people.
10:00I recognise that there may be concern for some funders about the overall picture and how they manage that. However, when we have intermediaries, especially in Scotland, who are often very closely connected to the sector, there is an opportunity for them to use their knowledge to get the money to where it needs to go, especially when it comes to the proportionality of funding for projects with a small base, where the amount of investment is quite low.
If the relationships are there, there is an opportunity to trust that it will be delivered. We are not talking about huge procurement contracts going to private business, but about third sector organisations who are partners in the delivery of public services and who have a long track record and history of delivering. So, it would make a lot of sense to remove some of the restrictions, so that we can reallocate funds proportionately.
Mr Westwater, you can squeeze in your other reply, if you wish, at this point.
I will be really brief.
I was thinking about other models and how there is potentially a middle ground in relation to long-term funding. I understand that maybe nobody will buy lottery tickets tomorrow morning, and so it is quite hard for all funders to plan. However, there could be something like what happens in the contractual world, where you can say, for example, “You’ve won a two-year tender, but there might be extensions into year 3 and 4 if things go well.” The organisation will then say, “Okay, we know it’s only guaranteed for two years, but we know that there’s a possibility and a commitment in thinking.” There is then a relationship between the funder and the fundee. Such a longer-term commitment, with break clauses and an understanding that there are external issues, is a potential model.
I could not be more positive about unrestricted funding and flexibility. In my experience—both with my Community Enterprise chief executive hat on and in our organisation—working with community groups and social enterprises right now, there is a huge crisis out there and people are closing at a rate of knots. Giving them project funding is, in fact, damaging rather than positive, because it just creates another project to run.
I have asked some funders who are really committed to giving unrestricted funding how they feel about an organisation just putting that money into its reserves, and they have said, “Well, we trust them. We get to know them. We build a relationship. If that is what they need to feel secure and therefore be creative with their other work, then we trust them to do that.” There is a creativity and a trust and a risk around all that. It is different from saying, “There is your £100,000; we need 10 people in jobs.” It is a different relationship.
That is really helpful.
Ms Latto, the mood music that we were getting at our away day with the third sector was very much, “Yes, we’d like more money, but please free us up to do better with the funds that we’ve actually got”.
Yes, absolutely. A point that came out when we were consulting with the policy champions network is that one of the key strengths of the voluntary sector is that it can be nimble. Tim Frew mentioned that the voluntary sector was provided with much more unrestricted funding during Covid, which meant that we were able to show our strengths and respond and meet needs quickly in a way that other public services perhaps would not be able to.
We can think about it from a volunteering perspective as well. In the past couple of years, we have relaunched the volunteer charter, which sets out 10 principles for the sustainable engagement of volunteers. The reason that we chose to launch it at that time was that we were seeing an increase in the number of volunteers involved in activity that was not of the best standard, or who were not getting the support that they required. All of the infrastructure that supports sustainable volunteer involvement—and other forms of activity as well—is reliant on core infrastructure such as the support network and training, which is often not covered by project funding.
It looks like there is broad agreement across the panel on that point.
Mr Bruce and Ms Ogilvie, if you have something specific to say that we have not heard already, please come in and say it briefly. Otherwise, I intend to leave my line of questioning there, but I assume that there is broad agreement among the witnesses.
There is very broad agreement.
For me specifically, there are two interconnected points. One is about organisations having the resources to run the central functions of their organisations, which is tied into some of the language that we hear from funders, including in the public sector, around reducing management costs, 10 per cent overhead caps and those sort of things, and supporting people to recognise that that is actually an investment in the organisation.
The connected point is the capacity of organisations to build reserves, which is fundamental. At the moment, local authorities are able to use some of the funding that they are given to build reserves, so that they can function. How do we shift the mentality around funding third sector organisations to say that it is not unreasonable for them to use a small amount of that funding to increase their reserves? That is how to build sustainability.
Sheghley Ogilvie was nodding her head vociferously at that.
Yes. I agree with it. The points that I would make have been covered.
Good morning. I smiled a fair bit when Sheghley Ogilvie mentioned three-year spending reviews, because UK three-year spending reviews did not always formulate into logical budgets over those three years.
I will go on the trust aspect, because that is very important. Ian Bruce talked about how local authorities are allowed to build reserves. The reality is that, in Scotland at this moment, some local authorities have huge reserves that they should be spending, but others have next to nothing. Would it be easier to garner trust if there was multiyear funding, with the ability to see what organisations were doing over three, five or however many years?
Yes. Multiyear funding will allow organisations and the Scottish Government to build relationships together, which creates trust—as long as flexibility is built into the funding so that risk is shared between the funder and the sector. At the moment, a lot of the risk is on the sector and there is no flexibility. Over the past few years, a lot has come up—for example, Covid and inflation—that has had a big impact on the sector and has led to a need for more funding. Multiyear funding will foster trust.
Yes, absolutely. Trust is pretty fundamental. In 2023, research that was undertaken by the Scottish Government looked at the response of the third sector to the Covid-19 pandemic, and recommended that it should be an opportunity to reset the relationship between the third sector and the Government. However, it feels as though we have gone in the wrong direction and that that trust is starting to wane, just because we have not had multiyear funding.
Has that trust waned because funding is not so readily available—because we are in a belt-tightening situation due to continued austerity?
It is partly that, but it is also about transparency and communication between the funders and the organisations that they are working with.
Another thing that came up as we were preparing for this inquiry is the power imbalance between the Government—or funders—and the organisations that are supported. We heard from organisations that were not keen for their name to be put to any kind of response to the inquiry, because they were concerned about being seen to bite the hand that fed them—just in case that had an impact on their funding. At the moment, we need a recognition of that power imbalance, which is probably more acute now because there is so little money to go around.
There is definitely an element of there being less money. That creates tension. However, if we looked at the process and at communication and transparency, a lot of that trust could be built back up again.
Gentlemen, do you have anything to add to that?
The point about trust, and how it fits with long-term and unrestricted funding, is interesting. You need to get to know somebody before you can trust them. Just getting an application and scoring it and giving people money is not based on trust. Trust needs a longer-term relationship between funder and fundee.
It is also about impact. The programme for government came out yesterday with a whole load of things about poverty and community wealth building and all sorts. The Government needs that to happen. That has been set out and the third sector in Scotland is one of the major elements in making it happen. It is about partnership and trust and the impact that they can have. We, in the third sector, are delivering that difference and making it a reality on the ground. That is where that trust can work.
I agree. In a time of diminishing resources, there is a danger that we start bean counting and focusing on very detailed outputs. Understanding that we are talking about national performance frameworks and bigger outcomes, if we start to overprescribe outputs at a top level rather than listening to the needs of those who are delivering the activity, we might see unintended consequences. Some of the targets that we set are unhelpful.
I have perceived that, over time, since Covid, there is more stepping in. Intermediaries and other funding groups are not trusted as much as they were and more prescription is coming in. One of the challenges for us is that we have a long track record of success through peer evaluation and young people with accreditation being involved in taking decisions, so we need to remember that what we want to do with participatory budgeting is to ensure that communities get involved in funding decisions, supported by intermediaries who have good trust and a long track record of delivering the activity.
When I was a minister, I used to get into trouble for being derogatory about the bean counters.
Mr Bruce, do you want to add anything?
No.
I want to go off at a tangent here.
Can you do it briefly?
I will be very brief.
You have highlighted some of the Government’s ambitions for delivery. Let us take the ambition to meet the Promise. Earlier, Mr Westwater talked about some longer-term agreements. Should framework agreements with organisations for the delivery of policies such as the Promise be established? Short answers would be great.
Well, the short answer is yes. It is about that trusted relationship. Sarah Latto and others talked about what happened during Covid, when funders just said, “There’s a lump of money. We’re worried about what is happening in this field”—whether that was children and young people or the environment or poverty or whatever—“so get on with it and go and sort it.” With a few minor exceptions, the third sector will get on with it. Yes is the short answer.
Would the sector be supportive of the Scottish Government’s battle with the UK Treasury to get longer-term funding to achieve that?
As you said, if the funding is stuck somewhere else and we can support the removal of any blockage, then of course—absolutely.
Grand. Does anyone else want to come in on that? I am taking it that you are all answering yes.
Thank you. I now invite questions from Marie McNair, who is joining us remotely.
Thank you, convener, and good morning to the witnesses. Thank you for your time.
I get the point about inflation and the real living wage, and the challenges that they bring. Is there anything that you would like to highlight about those challenges?
You have highlighted what we all know and what everybody in the committee knows—the sector is facing unprecedented challenges through cost increases. For example, in the latest third sector tracker, which came out in April and which covers the three months prior to that, 47 per cent of organisations reported cost increases in their top three challenges. Over the years, we have heard repeatedly about organisations not getting any uplift at all. One organisation did not have an uplift for 13 years, which meant a real-terms decrease in their funding of 27 per cent at the time, and it will be even more than that now because of the amount that inflation has risen. Organisations are under real pressure. Having uplifts within funding more broadly—we hope that it is multiyear funding—is essential to the sustainability of organisations.
Since Covid, organisations have also dealt with increased demand, as the committee is aware. They face increased demand, less resource and rising costs with no uplift, and that needs to be tackled. If we do not tackle the issue now, when we are in the worst position that we have ever been in, with rising inflation, the need to pay staff more—indeed, the need to pay the real living wage—and increased demand, when do we tackle it?
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I completely agree with Sheghley Ogilvie that fair funding is a complete package, but, for us, inflationary uplifts have probably been the most damaging to the experiences of volunteers across Scotland. We have seen a significant decrease in volunteer participation in just a couple of years—it is down 4 per cent—but more worryingly, we are also seeing an increase in the number of volunteers reporting that their volunteering is becoming too much like paid work and that the organisations’ expectations of them are too high.
Those things are really concerning for us. I have already mentioned the volunteer charter, and we are really pushing that in an attempt to encourage organisations to adhere to it. However, if they do not get sustainable funding, it will be increasingly challenging for them to provide sustainable volunteering opportunities.
Our concern is that, without sustainable funding, there could, as Mr Stewart suggested earlier, be a race to the bottom. There will be so much competition between organisations that people will put in unrealistic funding bids to try to secure their funding, and that will mean that other things—for example, standards—will slip.
One thing that we are really keen on—and it is part of the volunteer charter—is ensuring that all volunteers get their travel expenses paid. That just seems like a given, yet the Scottish Government is funding a major organisation—MCR Pathways—that does not provide travel expenses to its volunteers. It might result in other organisations being squeezed out that could provide such services while also providing a positive experience for their volunteers.
Do you mind if I chip in briefly? The real living wage and inflationary issues have been mentioned, and I have to say that we are finding that the organisations that we support are facing almost a perfect storm. There have not been any inflationary increases for a very long time—we have had a stand-alone grant for 10 or more years now—but in their most recent grant offer letters, the organisations have been told that, as a condition, they must pay a real living wage.
All of us in this room would massively support such a move—indeed, nobody will be against it—but, to take one example, I know of people who get a core grant to run a particular service. As part of that, they run a retail outlet and a cafe, and they employ people. They match fund their grant with their own self-generated income, but if they had to put up their wages to the real living wage, much as they would want to do so, it would push their cafe into a deficit budget and insolvency. Such a move would likely close the cafe. On the one hand, they have to accept the core grant, as they cannot work without it, but the conditionality of having to pay the real living wage without any inflationary increase means that they might have to stop generating income through that element, because they cannot make that business work.
None of this is perfect, but that is the reality on the ground for some organisations.
That was the next question that I was going to ask. Are funders expecting you to provide the real living wage without giving you the funding to do so? Does anyone else have any other examples of that happening?
I very much concur with what has been said. We have rising demand and rising costs. According to the UKGrantmaking survey, there was a real-terms cut of 33 per cent in grant-making spend from UK central Government to charities, and that situation was reflected in Scotland. If we do not build in inflationary increases year on year, we are left with more and more disparity, especially in comparison with the public sector. For those trying to keep up with the public sector on wages, the agreement often comes quite a few months in and goes back the way.
The realisation that we cannot in some ways keep pace with increases for employee security and staff morale brings real pressure. Indeed, I have a graph in my office, as I am sure that many do, that shows the difference between core grant giving and cumulative inflation and other wage increases in the public sector over the period, and the lines go in different directions. This is a longer-term thing—it did not just appear post-Covid. Having fair funding—and, indeed, more multiyear funding—could help us plan ahead a little bit better in that respect.
I agree about the challenge of a race to the bottom. In contracting, there is sometimes a pressure not to consider overheads and management fees. I have to say that that is not coming from our bigger charitable trusts or big funders. They get the need for core cost recovery, but I have sometimes found myself in conversations with public officials where there is no appreciation or understanding that we need that money for overheads, management fees and operational costs. I am concerned about that.
I am also concerned about the lack of contingency budgets. When we were given funds in the past, there used to be a line for contingency and contingency planning, but that does not seem to be there so much now.
Very quickly, the real living wage is the absolute baseline that we should expect. Many people in the third sector do very difficult and challenging jobs, and their salaries should reflect that. A couple of years ago, our research into fair work demonstrated a number of things, including that pay in the third sector is regarded as sitting well behind comparable jobs in other sectors. We need to be addressing that, not perpetuating it.
The last point about inflation is the impact that it has on staff in other ways. In our experience, when organisations do not get inflationary increases, they try to pay their staff a bit extra, but to compensate for that they have to stop doing staff training and investing in extras and additions, which creates challenges.
Good morning, everybody. I have two very brief questions. I will start with Sarah Latto. The Scottish Government has consulted on Disclosure Scotland fees and has suggested that they should fall on the charity or organisation to pay, rather than being picked up by the Government. What effect do you think that that would have on volunteering, particularly for smaller charities?
It would be devastating, particularly for organisations that support children and vulnerable groups. Given the Scottish Government’s commitment to addressing child poverty, that is a particular challenge.
If you are a paid employee, there is often an assumption that you will cover the cost of your protecting vulnerable groups scheme membership, but most organisations will cover that cost for volunteers. The likelihood is that that cost will be transferred on to the third sector. We have estimated that the cost to the third sector would be around £1 million, which might not seem like a huge sum of money, but it is a challenge for organisations that have had 20 or 25 per cent real-time cuts in their funding.
It is also a worry if organisations have not budgeted for that. For organisations that have only a couple of their volunteers in PVG roles, it would not necessarily have a huge impact, but as Jeremy Balfour says, for a small organisation that is working with children or vulnerable adults, that could lead to the closure of that service or to the organisation having to look at alternative approaches.
Another concern that we found when we were consulting with the sector on this is that some organisations, particularly smaller ones, would try to fly under the radar and not seek PVG membership for volunteers who really should have it, which could put children and vulnerable groups at risk.
From a funding perspective, it is a bit of a perfect storm. The removal of the fee waiver for volunteers in qualifying voluntary organisations could have a devastating effect for services, particularly for children and vulnerable adults.
I concur with that. When I met national voluntary youth work organisations, everybody identified that as a concern. Many of them are working with thousands of volunteers across Scotland, especially our uniformed groups and others. They have already had the situation post-Covid of volunteer numbers dropping overall, and they are trying to build back numbers of volunteers, especially for younger adults, to replace people who have retired or moved on from volunteering.
Extra costs, especially for younger adults who are coming into volunteering for the first time, could be a significant barrier for those organisations.
We have heard from the deputy convener, and we hear from the Scottish Government over and over again, that, because it does not know how much it is getting from Westminster, it cannot guarantee funding. Interestingly, we do not say to doctors, nurses or even MSPs that they might not have a job in two years’ time. What message does treating the third sector very differently from the public sector send to the third sector?
It sends the message that there is no parity between the third sector and the public sector. The third sector provides many public services that are very similar to, if not the same as, those provided by the public sector, but we are not treated in the same way when it comes to multiyear funding and uplifts. For example, in several emergency budget responses, there have been uplifts for staff across the public sector, but there have been no inflationary increases for third sector funding, so the gap is widening. There is definitely a sense that there is no parity in the sector, and there is frustration about that.
There is a feeling that the sector is underappreciated and that the value of the work that the sector provides is not appreciated in the same way as that of the public sector. That is frustrating for organisations, staff, volunteers and people and communities who benefit from voluntary sector services.
There has been a lot of frustration, especially during the past few years, because a lot of effort has been made to help the lowest paid in the public sector, but the same has not been done for those in the voluntary sector.
I agree. For us, it is about the impact of youth work. Not just for the third sector but also for local authorities, there is a challenge to keep parity, because doing so is seen as less statutory. Although there is statutory guidance, it is not strong enough. It comes after other key decisions to protect funding for some of the big initiatives have been taken, and that leaves the sector quite vulnerable.
Investing in the third sector often means investing in the capacity of communities at the local level. Investment in prevention and early intervention is the language that is used repeatedly in policy around public services in Scotland, and that is challenging. I am reluctant to get into a direct comparison with nurses and the like, but there is a fundamental frustration because, if we genuinely want to create a society where we are intervening early and preventing bad things from happening rather than responding to them when they do, it strikes me that we would invest in communities on a fundamental rather than an ad hoc basis.
I will touch more on the inefficiencies in the funding processes. That includes how burdensome the funding application form and the reporting requirements are. In our workshop, the committee heard from several people that there is good practice with some application forms; I cannot recall, but it might be the Robertson Trust that has an excellent application form. What could we do to try to streamline the process?
Standardisation across the various application reporting mechanisms is needed. The process also needs to be made a lot simpler. There should be recognition that 72 per cent of charities in Scotland do not have any paid staff—they are entirely volunteer led, so quite often volunteers undertake those processes. Therefore, making sure that each process is incredibly easy to understand, using plain English as a matter of course, is incredibly important.
Based on what we have heard, when the Government is reporting, consistency on outcomes and the indicators that are being used would also be incredibly useful.
You mentioned the Robertson Trust. Another example that is particularly good is Impact Funding Partners, which administers the Scottish Government’s volunteering support fund. We work closely with Impact Funding Partners and we know the level of support that it provides, particularly to very small organisations that have limited staff. Such organisations will not have a designated person who deals with funding: it will be part of somebody’s job—if the organisation has a paid member of staff. The model that Impact Funding Partners has adopted is incredibly good, and it provides an awful lot of on-going support to organisations, so it would be good to replicate that for other funding models.
10:30
We have been involved in a lot of small-grant-based funding for organisations and charities. Again, we have learned from those organisations how they report. We have been communicating with them, and we spend a lot of time trying to simplify some of the jargon and new policy initiatives to make them real for that level of funding.
The word “proportionate” is really important in that regard. For example, you would expect far more scrutiny for funding of £100,000 than you would for grants of £5,000 and £10,000, but sometimes the nature of quick-turnaround funding means that all the application forms require you to fill in 35 pages of detail, which is not appropriate. I am exaggerating to make a point, but the burden can feel like that.
Something that is fed back quite a lot is that there is not always trust in, or understanding of, how that level of detail of reporting will be used. There might be a check or a visit to see what is happening and its impact, but it sometimes feels as though there is a lot of detailed reporting without an overall summary of that. In one or two cases, independent evaluations have been conducted but have not then been used in the next funding stage or round, which is also a concern.
I have mentioned the issue a few times. It partly comes back to the issue of trust. A funder that does not trust an organisation gives it 35-page application forms. In part, what is needed is to begin to build a relationship of being in partnership. That already happens—the situation absolutely is not terrible. However, we need to build that relationship with the Government, the Robertson Trust and the National Lottery so that there is a feeling that support agencies, funders, groups on the ground—which Ian Bruce has spoken about—and communities are all in partnership to deliver a better Scotland, and that we are equal partners.
Some organisations have money, some have contacts on the ground and lovely projects, and some have support to give, but at the moment there is, as Sarah Latto mentioned, a feeling of power disparity. That is where the point about the application form comes from. We need to build trust so that funders say, “Let’s sit together and work out what you are doing, what the impact is and how it fits with the national planning framework, policies and community wealth building” and then, “That’s brilliant—how can we make that happen?” We also need to look at what safeguards we put in place to ensure that public money is spent and monitored properly, because that has to happen, too.
In that way, the relationship would improve and that would affect the requirement for paperwork. As most of us have said, with annual funding you spend six months of the year filling in forms and reporting on them. If there was 10-year funding, I would not mind spending a month filling in a funding application, but people are having to do that every year.
Social Enterprise Scotland’s experience, from speaking to people across the sector—we have talked a lot about the third sector—is that there is perhaps an assumption that there is a third sector division in Government. However, organisations are getting grants from the areas of housing, regeneration and economy, now that social enterprise has moved into the economy. I do not have a scientific answer to that situation, but people have told us that there are different relationships and different demands across different departments. Sarah Latto spoke about the lack of consistency, and we see that across different divisions in Government, so it would be good to tidy that up.
That is really helpful.
There is an equalities issue at the heart of this situation. We have a competitive process—it was designed that way—that, fundamentally, assumes that people are confident about going through a mechanism in the style that they use. However, there is less capacity in some communities in Scotland, so the result of our funding processes is that those communities receive less funding because they do not have robust third sector organisations that are able to apply for the funding. That is a fundamental issue.
There is also a wider equalities issue. We know, for example, that many of the organisations that we would expect to be led by people from disadvantaged backgrounds are not led by people from disadvantaged backgrounds. Some of that comes from the fact that, to be successful, you need to be able to play the game of how to get an account for funding.
My other point is about how we build the capacity of organisations and civil servants to understand good evaluation. A lot of organisations feel that they are putting a lot of work into monitoring and evaluation—feeding the beast, if you like—without having any real sense of how that turns into learning for either them or the Government.
That is interesting. I do not know what experiences any of you have of getting on to a tender framework. In my previous role, I sat on Scotland Excel and looked at tender submissions that came through. One tick box—which I think someone alluded to—was that, in order to get through, organisations had to pay the living wage. Have any of you experience of that? I also want to ask about the reporting mechanisms for Scotland Excel when an organisation is on such a framework.
It would be remiss of me not to say that, usually, what really stands out in organisations’ feedback to us is insurance requirements. Commissioners and Scotland Excel place on organisations—particularly for things such as professional indemnity—exceptionally high insurance requirements that are significantly higher than most organisations of the size that would bid for such a contract would be likely to have. That is a very practical issue.
We, in Social Enterprise Scotland, quite commonly talk about the tendering and procurement side of things. We are keen to significantly grow it and to grow the proportion of the third sector that delivers services. Interestingly, in some of the things that others have spoken about, there is a lot more freedom to add in things such as core costs. Organisations say, “We will do it for this price—take it or choose someone else,” and they are able to include enough of a profit margin to put some money into reserves. That is good.
I could tell you a thousand things about procurement, but if I were to choose one that we would like to see, to go back to the equalities thing that Ian Bruce mentioned—again, that is about process and Government and how that might be a challenge—it is about breaking things down, to help us as a sector to create co-operatives so that we have time to think things through and create partnerships so that the larger bodies can tender for larger contracts but still get local and community benefit. That would be hugely supportive. People have talked about it, but the capacity for it does not exist.
Alternatively, contracts could be broken down into smaller lots, so that organisations that have particular thematic or geographical skill sets are able to tender for smaller things.
Those things have been spoken about for a long time—neither is new—but they have not yet quite been resolved.
We have talked about funding processes being proportionate. However, it is important to remember that volunteer-led organisations can deal with quite significant sums of money, particularly in community asset transfers. Those are fairly sizeable capital projects for which lots of money is on the table. It is important to be proportionate but also to recognise that a level of simplicity and accessibility is required across the piece.
In process-based improvements, there are areas that do not cost money, although often when we talk about improving funding for the sector, the idea is that everything costs money. All those improvements to processes would greatly help the sector, which is in a difficult position. They are essential to fair funding and they do not have a cost. It would be good if some of those things could be incorporated and moved along to create a more sustainable situation for the sector.
Thank you. I pass to Paul O’Kane for the last line of questioning.
The challenge of being the last questioner is that we have covered a lot of ground. However, it is important to pull together some of what we have heard this morning.
In our conversation, we have focused on multiyear funding, as is right—it is at the core of the discussion. However, fair funding principles go beyond that, and a number of different things need to happen in order to move the issue forward. Witnesses might want to touch on anything that we have not covered on relationships or structures. We have heard about parity of esteem. What sorts of things need to be not just put forward but implemented and sustained in order to really help to renew that relationship?
One issue that we have not really spoken about is transparency. At the moment, we have some commitments from the Scottish Government about fairer funding, and SCVO is keen that the Government map that on to our fair funding work, which is being developed with the sector.
One issue is that we are not able to measure progress on some commitments that the Scottish Government has made, or will make in the future. First, we need the Scottish Government to define exactly what fairer funding is and what its goals and timelines are. However, we also need transparency on Scottish funding at the moment. How much funding flows to the sector, how much of it is multiyear and how much includes inflation-based uplifts and covers the living wage or any other thing that we do not have information on?
It is important that creating a fair funding environment includes creating a place in which we can hold the Scottish Government to account on its commitments and see where there has and has not been progress. We do not have that at the moment, which is a real problem in making progress and understanding what has or has not improved. That is also essential to the trust that we spoke about. Of course, there will not be a lot of trust if no one understands what progress has or has not been made or what the aspirations are.
To build on what Sheghley Ogilvie said, interesting work is going on in Wales that might be worth looking at. Wales has already baked in a compact with the sector—it was set up in 2014, I believe. Wales is currently consulting on a code of practice for funding the third sector. For us, there is potential to formalise principles such as fair funding, and we might look to Wales for some inspiration on that.
I have a couple of minor points to make. I do not think that there is an easy answer to this, either. I am sorry—I keep thinking of things to which there is no easy answer. However, it is a wee bit about having very solid thinking on innovation and new ideas versus investment in success. Organisations that have consistently provided excellent services over a very long time, that are embedded in their communities, that understand their beneficiaries and that make a huge difference begin to feel a bit boring to funders. Real thought is needed on how much the Government or other funders invest in innovation and new ideas—allowing space for that is needed—and how much they use their resources to invest in those trusted organisations.
We, in community enterprise, certainly deal with some very serious situations. We provide an emergency service—we help people—and it is really challenging out there.
My final message is about the Government, as a funder, understanding the cost to itself of its funding decisions. Some organisations—not all, I hasten to add—that have lost Government funding have closed; they have been unable to carry on and have gone insolvent. For the sake of relatively small amounts of money, that has cost the state—the Government—very large amounts of money, because people are back at their community psychiatric nurse, back at the doctor, or going to day care. There is a cost to not funding things.
Some of the evidence that we heard when we met organisations over the summer was about the challenge between innovating and trying to sustain something that works. They said that, very often, people get stuck in a cycle between things having to be new and things that have been proved to work. You touched on that. Do you recognise it?
Absolutely. That is why I wanted to finish on that point. If those trusted organisations stop being funded, we lose not just an organisation but a lot from our community. We lose a lot of capacity and it costs the nation a lot of money.
It is about prevention, which Ian Bruce mentioned. Our approach is to try to be preventative and to build capacity. That can feel quite distant—it is not about doctors and nurses and bobbies on the beat—but it makes long-term savings to the nation. It is about early investment in something that will save the very tight budgets that you guys, local authorities, the NHS and all the other public services deal with. One way to resolve the situation is to fund early and small at that level, because very large savings could be made in the longer term.
I will pick up on prevention, universal services and core services at community level. A national conference on prevention is coming up in November, with a focus on public health, education and policing. The third sector in particular is very good at looking across the portfolios and seeing the bigger outcomes that we are trying to achieve through prevention and seeing the social return on investment in that.
10:45One challenge is that we get into a siloed and target-based bean-counting focus, especially from some of our policy departments, through their very much doing the things that they want to do in their own worlds. The danger is that people jump into those brackets instead of protecting some of the core delivery at local level.
Therefore, when it comes to fair funding principles we need senior-level buy-in, an action plan and, I suggest, training, because we do have brilliant models of funding, some of which we have mentioned. Some corporate bodies, too, have given two-year or three-year funding and have changed and adapted their expectations of what they get from communities and the way that reporting might happen.
We need to avoid a situation in which there is too much exceptionality—“Okay, there is multiyear funding, but it’s not for this Government department, because we are looking at attainment, so we’ve got to do it differently.” When you allow for too much exceptionality, particular agendas are pushed that do not see the bigger picture or the national performance framework outcomes.
Again, I will say that I have seen fantastic examples of young people’s peer evaluation. It is some of the most detailed scrutiny that any application, especially an application for a small grant, will get. Many of the young people are trained in participative budgeting and grant-making processes. I am sure that that applies to other community groups, as well. There is real detail and real scrutiny. It is very frustrating, sometimes, to see that process happen then get overruled at a more senior level. I encourage that process and I encourage training for some of the key public servants who are involved in decision making on funding processes, so that they understand the independent monitoring that happens.
In addition, there are evaluation and learning frameworks. We have not mentioned agencies such as Evaluation Support Scotland, which have done a lot of work to support and consider good outcome-based measures. We need to use the material that we already have.
Ian Bruce, when you comment, will you say something about the connection and relationship with local government, about which we have also heard? We heard a lot about good and positive relationships from TSIs that are helping to manage funds for whole-family wellbeing, for example. That does not work everywhere, and there is no consistency. What do you want to see in that space?
You read my mind, because that is exactly where I was going.
The Scottish Government gives money directly to third sector organisations, but it also allocates significant pots of resource, nominally, to partnerships at a local level—for example, local employability partnerships and children’s services planning partnerships. However, in reality, those funds are held by local authorities and there is a real tension in that, because the aspiration of Government is that the money will be used in a collaborative way to redesign the system but it often ends up being tied into the structures of the local authority, and we do not get flexibility and innovation.
Again, that comes back to power imbalances: the person who holds the purse strings has control over the process. The challenge for the Scottish Government is that, in order to achieve the change that its agendas seek, we need to think about the governance of how that resource is used, because that is where the critical difference will start to be made.
That concludes our question session. I thank the witnesses for sharing their views with the committee today. We will hold a further evidence session over the coming weeks, so we will have heard from a host of people in third sector organisations.
That concludes our public business for today. We will move into private session to consider the remaining items on our agenda.
10:48 Meeting continued in private until 11:23.Previous
Housing (Scotland) Bill: Stage 1