Holyrood Committee calls on the Scottish Government to prioritise three-year-funding cycles for the third sector

13 Nov 2024

A new pre-Budget report by the Scottish Parliament’s Social Justice and Social Security Committee has highlighted the growing financial concerns currently faced by many third sector organisations, and has called on the Scottish Government to prioritise longer-term funding models to create more stability and better use of resources across the sector.

Bringing together evidence and expertise from charities, social enterprises and voluntary organisations, including Children in Scotland, the Committee’s Pre-Budget Scrutiny 2025-26: Third sector funding principles report, published on 13 November, said that prioritising three-year-funding and including provisions for inflation-based adjustments in the next Budget would be vital for addressing the significant challenges impacting Scotland’s third sector.

As outlined in the report, the third sector has seen a decrease in Scottish Government funding, with £21.1 million allocated in the 2024-25 year budget compared to £21.2 million in 2023-24 – marking a 0.5% cash decrease and 2.1% real terms reduction during a time of high demand for services.

Recognising the critical role the third sector plays in supporting Scottish society, the report said fair and efficient funding could contribute to its continued effectiveness, as witnesses to the Committee raised concerns about inconsistency, complexity, and a lack of transparency in the application process for funding.

What’s more, the Committee’s report recognised that short-term funding cycles also divert significant amounts of time and resources away from the delivery of services, which was raised as particularly concerning for organisations working to address long-term, complex social issues, such as poverty, youth engagement, and social care.

Short-term funding, it outlined, not only prevents organisations from engaging in meaningful, long-term strategic planning but impacts on service delivery, which is key to the implementation of Scottish Government policy.

Representing 450 charities, statutory bodies, organisations, and individual professionals across Scotland, Children in Scotland CEO Judith Turbyne gave evidence to the Committee and backed widespread calls for a multi-year funding approach to address issues ranging from staff turnover to financial instability.

Commenting on the report, Judith Turbyne said: “As a membership organisation representing a wide range of third sector voices, Children in Scotland was really pleased to be involved the Social Justice and Social Security Committee’s inquiry, which made space for positive and important discussions about our future.

“Between the cost-of-living crisis and inflation, the third sector is facing a multitude of challenges, and many organisations are struggling to meet demand as children, young people and families face their own financial struggles. This report sends a clear and concise message – third sector funding needs to be urgently reviewed to ensure that we can continue to support those most in need across our society.

“The Scottish Government needs to tackle this issue head on, and the third sector needs to see proactive action in the forthcoming budget. Without an urgent rethink of funding, focusing on longer-term models of three to five years, many vital third sector organisations will simply not survive the current economic climate.”

Bob Doris MSP, Deputy Convener of the Social Justice and Social Security Committee, said: “The Scottish Government has a commitment to provide fair funding for the essential work done by Scotland’s charity sector. We make it clear in our report that this commitment should be recognised in the upcoming budget, so that the sector’s vital work can be safeguarded. We call on the Government to prioritise strengthening its approach to multi-year funding and improving its processes.

“Whilst we acknowledge the Scottish Government's ability to agree to multi-year funding when it does not know what funding it will receive from the UK Government for subsequent years, our committee has made practical suggestions to overcome these challenges.

“We believe that implementing the straightforward measures outlined in our report, including multi-year funding, could positively impact the effectiveness of a sector that does so much to help so many.”

Click here to access the full Pre-Budget Scrutiny 2025-26: Third sector funding principles report