Debate: Can the third sector survive the recession? Evidence from Scotland

The media in both Scotland and the UK as a whole has seen a spate of stories recently heralding the demise of the third sector. Many have predicted a ‘double whammy’ of a decline in voluntary giving together with the withdrawal of state funding for the sector as a result of the current global economic recession. One response to this could be to say that this just does not matter—we all have to tighten our belts as the result of the recession, so why should the third sector be different? I would argue that there are good reasons both why the sector is an important element of society in the nations of the UK and why we should all care, as citizens and not just as academics, whether it survives or not. On the one hand, it is vital voice for the vulnerable, powerless and disenfranchised in our society, championing unpopular groups and causes and articulating social needs that might otherwise go unnoticed (Heuser, 2005). On the other hand, over the past decade, the sector has become a key provider of essential public services (Kelly, 2007)*. In England, the Big Society agenda has promoted a key role for the third sector in this controversial policy agenda (Alcock, 2010), while in Scotland, the Christie Commission on public services reform certainly saw the sector as an important engine of transformation for public services (Christie Commission, 2011). In light of these issues, and notwithstanding the concerns expressed over the sector from some critics, the third sector has become a core element of public services provision and reform across the UK and the devolved nations within it. This role is now apparently challenged by the recession and its impact upon the sustainability of the sector. Given this, now is a good time to ask ‘can the third sector survive the recession? ’ Recent research in Scotland led by the University of Edinburgh (in partnership with Edinburgh Napier University), on behalf of the Scottish Government, provides some of the first evidence to interrogate this question. The research comprises a three-year longitudinal study of the third sector, public policy and public services delivery in Scotland over 2009– 2012. The study has focused on those third sector organizations (TSOs) that provide public services. It has tracked 20 TSOs from across a range of localities and service areas, as well as engaging in iterative discussions with key sectoral and governmental stakeholders over this period. The reports on the first two years of this study are now available (Osborne et al., 2011, 2012). This study suggests that the sector is reacting positively to the challenges of the recession. It may not be thriving, but it is responding in ways that should ensure its survival—and allow it to continue to be a key part both of civil society and of public services reform in Scotland. Five main themes emerge. First, the funding picture is not entirely gloomy across the sector as a whole in Scotland. It is true that voluntary donations have declined as a result of the recession, as has funding from charitable trusts as their own investment income has come under pressure. Many TSOs also reported reduced or terminated local government and UK government funding (in such areas as social care and employability), as these bodies have sought to limit their spending in these areas. However, this has been countered by a Scottish Government commitment to maintaining its own funding of the sector in its public service provision roles, the growth of new sources of funding through social investment schemes, and by an increase in public funding from government bodies wanting to divest themselves of areas of work (in fields as diverse as libraries and, again, social care). These income streams do not appear to have equated to the income sources lost, and many parts of the sector are hurting— but, equally, they do suggest that the overall picture is not one of total gloom. Second, for TSOs that are finding their income reduced, many have so far prevented this from adversely affecting services to local communities by absorbing the ‘hit’ themselves. This absorption has sometimes been at an organizational level: for example reducing ‘back office’ support of their organizations, or by a rationalization of capital resources, or drawing on reserves. Frequently, though, it has come at