RSE calls for stronger recognition of third sector in party manifestos
The Royal Society of Edinburgh (RSE) has written to the leaders of Scotland’s political parties urging them to recognise the essential contribution of the third sector to the economy and society in the run-up to next year’s Scottish Parliament election. The RSE’s Economy and Enterprise Committee highlights the sector’s vital role in areas such as social care, climate, and technology, and calls for it to be treated as an equal strategic partner in shaping Scotland’s future.
Open letter
I am writing to you as Vice President of Economy and Enterprise of the Royal Society of Edinburgh (RSE), Scotland’s National Academy. In 2023, the RSE Economy and Enterprise Committee, with support from the Fraser of Allander Institute and the Scottish Council for Voluntary Organisations (SCVO), investigated the contribution of the third sector to the Scottish economy. The report highlighted some barriers to a broader recognition of the third sector’s economic contribution and to stimulate debate on how these barriers might be overcome.’
The report concluded that ‘despite the inherent complexity of measuring its economic output, the third sector’s economic contribution, through employment, commercial activities, and its wider support for the economy and public services, remains substantial. For example, the SCVO’s Sector Stats for 2022 estimated there were 46,500 charities, community groups and social enterprises active in Scotland and that between them, they had income of £8.5 billion and spent £7.9 billion. These organisations also employed 135,000 paid staff and were supported by 1,182,000 volunteers.
The report was well-received by the sector, and the findings were discussed in a Scottish Parliament members’ debate. However, the context has changed since the report was published. The RSE Economy and Enterprise Committee has discussed these changes and their impact on the third sector. As a result, the committee agreed to contact the leaders of all the political parties in Scotland to urge consideration of the emerging issues when planning manifestos for next year’s Scottish election.
CHANGING CONTEXT
In the last year, public sector funding reform has increased fragility for many third sector organisations (TSOs) and social enterprises (SEs). This has had the most significant impact on those TSOs and SEs in the mid-band. Worryingly, charities are increasingly using their reserves to survive. In addition, the recent unanticipated NI increase- estimated at £75m in Scotland’s third sector – will result in reduced services and levels of employment in the sector.
Large national TSOs are more likely to survive due to their economies of scale, major contracts, and high public profile. A passion for a local benefit drives small grassroots charities and is more likely to persist if they have enough volunteers. The most vulnerable TSOs – and those making a significant contribution to local communities – are in the mid-band. These are regional charities that depend on a combination of grants, contracts, trading, giving, and volunteering.
Most of these organisations are not ‘voluntary organisations’ in the traditional sense. They have to consider trading income in their business plans and operate in an intensely tight financial context, with precarious employment contracts and all that implies. They are efficient and effective because they have to be.
MANIFESTO PRIORITIES
The recent Scottish Government announcement about reviewing the National Performance Framework is an ideal opportunity to redefine the third sector’s role in the economy and Scottish society.
The government has limits. There are roles/services/jobs that are best served by the third sector, for example, in climate, technology, and social care. A future Scottish government should be clear about how the third sector—as an equal strategic partner—will deliver these roles in each area of the economy.
The NPF review could include the role of the sector in relation to existing community planning partnerships, health and social care partnerships and the enterprise agencies. The word ‘community’ is frequently used without definition. There is no statutory framework for gathering a ‘community voice.’ A clearly defined intermediary could streamline the relationship of the government with the community/third sector(s). It should answer the question ‘What is the role of the third sector(s) in ‘place leadership’?
The third sector is, in fact, not one sector. TSOs make a significant contribution to several economic sectors; for example, tourism, renewables, social care, mental health support, housing and construction. A consistent approach to measuring impact across the economy would not only confirm the sector’s enormous contribution but would simplify much of the bureaucracy which currently plagues TSOs. Pilots are underway, which may provide a solution, but they will need ‘buy-in’ from the sector to be successful. The government should resource the implementation of the pilots, but not with more unnecessary bureaucracy.
This review will require a significant effort by politicians and civil servants to better understand the third sector and then to be clear about their strategic relationship with it. If it is to be a truly equal partner there will have to be changes in culture (in the sector itself as well as government), legislation and procedure.
The committee believes that the role of the third sector in urban and rural economies is different. The third sector is more ‘interconnected’ in the rural context; it impacts on a larger percentage of the population in terms of services and employment. The links of the rural third sector into local communities are deeper and its loss has more significant implications. The NPF review should consider this.
Post Brexit, we are now advancing the new UK subsidy rules. They make supporting enterprises in local markets far more challenging. There are pilots to implement a subsidy scheme which would help agencies work with communities and SEs more strongly in local markets. This should be promoted in the context of the NPF review.
The RSE, EEC members and I, welcome the opportunity to further discuss the wider recognition and future role of the key Sectors, opportunities and challenges with government and party leaders ahead of the Scottish Elections.
Kind regards,
Dr Poonam Malik, FRSE
Vice President, Economy and Enterprise, RSE
Chair, Economy and Enterprise Committee, RSE
The Royal Society of Edinburgh (RSE)