When we look back on this period of lockdown, the role charities, voluntary organisations and community groups have played will be difficult to over-emphasise. I know from my own constituency that many people would have struggled to get food and household basics were it not for their rapid response. Without charities, the inevitable delays and gaps in government response for many in self-isolation would have left the vulnerable and the struggling completely cut off.
I received an email in the last few days from an organisation I visited with the Justice Committee which supports families with a family member in prison. Incarceration often punishes families more than the person sentenced and so this is vital work. Through the crisis they have turned their focus to supporting families struggling with lockdown, but this email was asking for a donation. Like many charities, they had got on with doing the right thing and funding has been a secondary consideration.
Many charities who have responded to the call to action during the lockdown will be having to assess where this crisis has left their finances. Like other parts of the economy, charities have had their usual sources of income dry up. Yet, while some organisations providing critical frontline support have received significant sums through Scottish Government emergency funds, most others have found that they do not qualify. As a result there are concerns in the sector that many charities face a financial black hole as a result of Covid-19.
Back in April, the Scouts, Guides, Outward Bound and Boys Brigade wrote to John Swinney outlining their situation. As charitable organisations providing outdoor education they do not meet the criteria for critical service provision. Nor are they sufficiently close to the financial edge to qualify for other funds aimed at struggling third sector organisations. Yet the Roadmap published by the Government means they will be unable to resume their activities. As the furlough scheme is withdrawn this leaves them with increasing costs, dwindling cash and the prospect of the closure of outdoor centres.
These organisation are not alone. I spoke to SCVO, the umbrella body for the voluntary sector in Scotland, and according to Anna Fowlie, their Chief Executive, the overwhelming majority of the sector finds itself in this financial predicament. According to SCVO research, there are few charitable organisations that hold more than two to three months’ cash reserves, nor would they be expected to. They are faced with four or five months in various stages of lockdown and disruption until the end of the year, and SCVO shares the concern that significant number of voluntary sector organisations are facing a difficult if not impossible financial situation.
If these fears prove correct there will be a number of impacts. First, it is very likely to alter the shape and nature of the sector. The organisations most likely to weather the storm are the large national charities. Many charities providing services in communities have found themselves squeezed in recent years by public-sector tendering processes where they have been undercut by the big corporate charities. A cash crunch could accelerate this process and push small community-based charities over the edge – charities whose finances have been stressed by bidding processes.
Secondly, this could challenge wider public policy and government delivery. Over the last two decades, governments of all stripes have looked to the voluntary sector to deliver key services rather than maintain or create new services run by national or local government. This can make sense in terms of creating services that benefit from the expertise and understanding these organisations have (though others would contend it has more to do with the application of financial pressure discussed in the previous point). Significant levels of failure within the voluntary sector could have very serious impacts on the Government’s ability to deliver policies, from childcare through to prisoner release mentoring.
Thirdly, there is a very serious economic issue. The ‘Voluntary’ in voluntary sector can be a little misleading. Charities are employers, tenants, service providers and customers. Community museums, cafes, sports clubs and all manner of other activities are formally constituted as charities. There isn’t a community in Scotland that does not have a network of charities as a vital component of its economy. If charities start to fail, there may be much wider consequences, not to mention loss of jobs.
Finally, there is a political dimension. We hear much of ‘Civic Scotland’ – indeed the network of third sector organisations played a significant role in the drive for devolution in the 90s. More recently the SNP have viewed the third sector as strategically important and have managed a relationship that has meant there have been few critical voices from the sector through their 13 years in power.
However, the letter from the youth organisations has been sitting in John Swinney’s inbox since April. No response has been forthcoming, despite two follow-ups. In response to questions in parliament, ministers express confusion that charities may not qualify for their schemes despite direct evidence that this is the case. This is not behaviour likely to endear ministers to people struggling to keep their charities afloat.
If third sector organisations do start to fail, this seeming inaction from ministers could well have political consequences. There is frustration among many in the sector at the lack of engagement from ministers, or even an acknowledgement of the problem.
A few weeks ago, I wrote a blog for Reform Scotland outlining the financial black hole in University finances. My interest in that issue is in part because of the importance of universities to Scotland, but also because it was an example of the economic impact of Covid-19. It strikes me that these looming problems in the third sector may be another. The economic crisis is likely to be as bad if not worse than the health crisis. How ministers acknowledge, approach and deal with these early emerging issues will be instructive as to how we will cope with the broader challenge. So far the signs are not encouraging.
Daniel Johnson is MSP for Edinburgh Southern