Children in Scotland call for ‘urgent and radical rethink’ of third sector funding

22 August 2024

Children in Scotland’s response to the Social Justice and Social Security Committee Pre-budget 2025-26 scrutiny - Third sector funding principles has highlighted the significant challenges faced by children’s sector organisations in Scotland, and we are calling for an urgent rethink of funding models.

Representing 450 charities, statutory bodies, organisations, and individual professionals across Scotland, Children in Scotland has highlighted our key concerns, with short-term funding arrangements and no inflationary increases having the most impact on long-term planning and staff wellbeing and retention.

David Mackay, Head of Projects, Policy and Participation, said:

“The third sector in Scotland currently faces immense financial and operational pressures due to years of static funding, rising costs, recent high levels of inflation and the impact of the COVID-19 pandemic. Meanwhile an increase in demand for services has placed an increased strain on third sector staff and resources.

“Children in Scotland believes there needs to be an urgent and radical rethink about the way the third sector is funded and the Scottish Government’s relationship with them. Without this, many high-quality third sector organisations will simply not survive the coming years, and ultimately there will be a significant impact on the children, young people, families and communities that benefit from these organisations.”

A shift to longer-term funding, of three years or more, would help the third sector to plan for the future, spend more efficiently, and create better organisational stability, all of which would positively impact staff wellbeing.

Enquire, Scotland's national advice service for additional support for learning, is just one of Children in Scotland’s services affected by the current short-term funding model. Although this has been funded by Scottish Government over a period of more than 20 years, for most of that time, it has been done on a yearly cycle.

David said:

“We currently spend a disproportionate amount of time and staff resources on annual and bi-annual proposals, rather than the direct delivery of projects and services. Longer-term support would allow us to develop longer-term workplans with certainty, helping us to more efficiently co-ordinate our work.

“Short-term funding is also having a significant impact on recruitment and retention of staff, which in turn has an impact on relationships with service users as trusted relationships are broken. The third sector’s competitiveness with the private sector and public bodies is key to ensuring the success of our relationship-based practice."

The issues around short-term funding arrangements are frequently compounded by poor communication and delays around the funding, which can have significant implications for project delivery. Children in Scotland and their members have seen cases of projects being confirmed within days of, or even into, a new financial year.

One Children in Scotland member described the impact of this ongoing uncertainty:

“It impacts on our ability to function effectively, has a negative impact on staff, and we have seen staff move away from the sector, because of lack of confidence in funding decisions. Specifically, we found out about funding for a project for this year, six weeks into the financial year. Fortunately, we had been able to retain staff for the project in other work. Without this, we would have needed to make the staff redundant and lost the ability to deliver this key piece of work for the Scottish Government.”

Like many third sector organisations, Children in Scotland’s grant for core funds from Scottish Government has not kept pace with the rate of inflation. By committing to fair work, the Real Living Wage, and progressive employment practices, we have been left with a shortfall.

One Children in Scotland member reported:

“As the Real Living Wage increases automatically in line with inflation, charities who have signed up to the Real Living Wage have to budget for an automatic uplift to wage bills every year, which are often a very high percentage of their overall budget. If grant funding doesn't also increase in line with inflation, then the charity could end up running a service at a loss.”

Third sector funding needs a complete rethink, in order to continue to operate a fair working environment, and continue to support the service users. David reiterated the organisation’s appeal for change, saying:

“Children in Scotland and our members want to see a system that values the important contribution of the third sector and delivers the much need stability and sustainability third sector organisations need in order to continue to deliver their vital work supporting children, young people and families. We understand the current financial pressures on the Scottish Government and we are keen to work with them to deliver change. The current funding models are broken - undermining the stability of organisations, the wellbeing of staff, and ultimately the quality and quantity of work on the ground.”

Children in Scotland’s full response to the Third Sector Funding Inquiry consultation can be downloaded here.

Our thanks to the Children in Scotland members who contributed their valuable views and experiences into our consultation response.