Scots charities hit by £100m cash squeeze

SCOTLAND’S charities and voluntary organisations are under “extreme pressure” with many having to lay off staff and dip into their lifeline reserves to ensure services are not cut back as the spending squeeze continues to bite, a new report warns today.

The voluntary sector has seen incomes fall by almost £100 million in the past year. But as demand for their services continues to increase as more people look to charities and other voluntary groups for assistance, many organisations have had to turn to their emergency reserves to stay afloat.

The survey by the Scottish Council for Voluntary Organisations (SCVO) found that 90 per cent of the organisations it represents expect their economic situation to worsen or stay the same in the coming year. And 76 per cent expect demand for their services to increase.

Two-fifths of respondents said their expenditure exceeded their income, forcing them to use their reserves to make up the shortfall, while a quarter (25 per cent) of organisations said they had reduced in size. Almost half of organisations are unsure or concerned about their survival, while most believe things will get worse in the year ahead.

The state of the sector survey to be released later today reveals a £96m drop in income in 2010. SCVO chief executive Martin Sime said: “Confidence in the third sector is low despite the fact that politically the third sector is becoming more prominent and its role in public services is being promoted.

“The sector can’t perform without a degree of stability so in this difficult climate the case for three to five-year funding agreements is even stronger.

“Voluntary organisations need a new and better deal from the public sector which delivers on the high level of rhetorical support. Local government in particular needs to start doing things differently.”

The Scottish Government is backing growth of the third sector and its role in preventative public services.

The sector currently has a turnover of about £4.4 billion a year and employs 137,000 people in thousands of organisations.

Charities are pessimistic about the fate of the whole sector. Even if the country manages to stay out of recession, the majority believe the financial situation for the third sector will get worse in the next 12 months, while 86 per cent are planning to look at new ways of raising income.

Some 47 per cent of organisations are unsure or concerned about the overall future of their organisation. Three-quarters of charity chief executives are not planning to offer pay rises to staff this year, while 9 per cent are predicting staff pay will fall.

SCVO director of public affairs John Downie said: “It’s one of those pivotal moments. The sector has been under extreme pressure. It’s backed up by bodies like Citizens Advice Scotland who have seen rising numbers of people coming forward for advice on a whole range of subjects.”

He added: “It does show a sector in a state of flux in terms of less money, rising demand, but the opportunity with public service reform to try and do more.”

Susan McPhee, head of policy at Citizens Advice Scotland Bureau, said the rise in demand meant offices were more stretched than ever before.

“Resources are being squeezed drastically in many areas,” she added.

Labour health spokeswoman Jackie Baillie said: “The SNP government say they value the work of the voluntary sector but the rhetoric does not match the reality.

“The SNP has underfunded local government, who use a lot of voluntary sector services and the social care sector which is why they are facing financial difficulties.

“They must listen to what they’re being told by those who deliver these vital services.”

Liberal Democrat leader Willie Rennie praised the “tremendous value for money” provided by third-sector bodies.

“They are flexible, innovative and respond well to demands from service users,” he said.

“However, they are clearly getting squeezed out because of the Scottish Government’s choices.

“We recognise that there isn’t much money to spend because of the need to tackle the economic and debt crisis but the Scottish Government are making matters worse.”

The Scottish Government’s budget for councils is facing progressive falls over the next three years from £11.5bn this year to £10.8bn in 2014-15 as the impact of the spending squeeze starts to bite.

Between 2010-11 and 2014-15, Scotland faces a real-terms cut of 12.3 per cent – £3.7bn – in its budget from Westminster. The coalition wants to slash the UK’s £130bn annual deficit between public spending and taxes raised.

Homelessness charity Shelter Scotland is among the bodies that have reported a rise in demand for its services over the course of the economic slump.

Director Graeme Brown said: “Many people think that homelessness is reserved exclusively for the poor or those on the edge of society, but we’re seeing a sea-change in the people needing our help. The number of people contacting the advice centre is on the rise, and the number of professionals and families with children contacting us is particularly striking.

“Repossessions are an increasingly common problem faced by families. In the last two months, Shelter Scotland’s law service has seen a 40 per cent increase in the number of households seeking help for the threat of repossession by their lender.”

Fears emerged earlier this year that more than £200m could be cut from the voluntary sector in the coming years if Holyrood follows the route of austerity cuts taken by the UK government.

A Scottish Government spokesman said: “Scottish Government core spending for the third sector remained stable in the recent spending review, despite challenging circumstances and budget cuts imposed by Westminster. This underlines our commitment to supporting a capable, sustainable and enterprising third sector.”