The Opportunities and Challenges of the Changing Public Services Landscape for the Third sector in Scotland: A Longitudinal Study (2009 - 2013): Year 4 and Final Report

2 Policy Background - The Third Sector In Scotland

Chapter 2 outlines the policy environment over the previous four years of the study (October 2009 to September 2013) and briefly highlights some of the key issues affecting the third sector in Scotland. Major issues included: the Self-directed care agenda, welfare reform, public spending reviews and the Christie Commission and the introduction of the Work Programme.

Scottish and UK Public Spending Reviews

2.1 The SNP (Scottish National Party) Government has now been in office in Scotland as a majority administration since 2011 and has announced they will be holding a referendum on Scottish independence in September 2014. The UK Government continues to be a Conservative and Liberal Democrat coalition. Table 1 outlines the parties of government at UK and Scottish levels across the four years of the research.

	Scottish Government	UK Government
Year 1 report 2010	SNP minority Government	Labour Government until May 2010 election
Year 2 report 2011	SNP majority Government following May 2011 election	Conservative and Liberal Democrat Coalition
Year 3 report 2012	SNP majority Government	Conservative and Liberal Democrat Coalition
Year 4 report 2013	SNP majority Government	Conservative and Liberal Democrat Coalition

2.2 In 2010, the UK Coalition Government announced its plans to reduce the national deficit. The plans set out a strategy to reduce government spending with a focus on reducing welfare costs and wasteful spending (HM Treasury, 2010a). The aim is to bring public spending as a percentage of gross domestic product (GDP) back to levels seen in 2006-07. In addition to the planned reduction in government spending, the UK Government public spending review also highlights the role of the non-state sector in delivering public services as part of a broader programme of redistributing power away from central government, and improving the quality and outcomes from services. This developed role for the third sector in the delivery of public services may increase opportunities for the third sector to deliver public services at a time of deficit reduction, for example:

"The government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises. This approach will be explored in adult social care, early years, community health services, pathology services, youth services, court and tribunal services, and early interventions for the neediest families." (HM Treasury, 2010a: 34)

2.3 As a result of the UK Government Public Spending Review, the Scottish Budget (departmental expenditure limits) is being reduced by a cumulative 11.2% in real terms over four years from 2011/12 to 2014/15 (Scottish Government, 2010c). The Scottish Draft Budget proposes that the real-terms change year on year of the departmental expenditure limits will be -3.0% in 2013/14 and -1.7% in 2014/15 (Scottish Government, 2012c). Reductions in public spending are likely to continue beyond 2015. The Scottish Government has suggested that the Scottish total departmental expenditure limit for 2016/17 will be 17% lower in real terms than that for 2010/11 (Scottish Government, 2012c).

2.4 Local government, an important source of contract funding for the third sector, is increasingly dependent on grants from the Scottish Government. The Scottish Government provides a block grant to local authorities which provides around 85% of their net revenue expenditure (Scottish Government, 2013a). Over the period 2006/07 to 2010/11, revenue grants from the Scottish Government grew from 54% to 59% of local government revenue (Bell, 2012). The Scottish Draft Budget proposes no increase in spending for the third sector between 2013/14 and 2014/15. In this period the budget will remain at £24.5m however in real terms at 2013/14 prices this will mean a reduction to £23.3m by 2014/15 (Scottish Government, 2012c). This money is intended to build capacity and credibility of the third sector's contribution to public policy; ensure that the sector can develop programmes to meet the preventative spend agenda; and encourage a social enterprise model^[2] to increase the economic contribution of the sector. However, although the Scottish Government and non-departmental bodies contributed the greatest percentage of grant/service level agreement funding to larger Scottish third sector organisations, local authorities and non-departmental bodies contributed the greatest percentage of contract funding to larger charities. 57% of the total income reported for larger charities was generated from public sector sources (OSCR, 2011). Therefore, a fall in public spending is highly likely to impact on the third sector.

Key Policy Developments from the UK Government

2.5 The election of the UK Conservative and Liberal Democrat Coalition Government in May 2010 (after 13 years of a Labour Government), together with the continuing economic crisis, were significant changes which led to a range of new policies. Since June 2010 the UK Coalition Government has announced several reductions to the welfare and other budgets beginning with the June 2010 Emergency Budget (HM Treasury, 2010b) and more recently the 2012 Autumn Statement (HM Treasury, 2012) and the UK 2013 Budget (HM Treasury, 2013). The Coalition Government has also introduced a series of reforms to the welfare system. These reforms are designed to improve incentives to work, to help reduce poverty and reduce the cost of welfare at a time when spending reviews are taking place to address high levels of public deficit. Major changes affecting the welfare system include: the introduction of the Universal Credit^[3] for those who are seeking work; the Work Programme^[4]; the reassessment of incapacity benefit recipients for Employment and Support Allowance and the Work Capability Assessment to assess capability for work; reform to Housing Benefit with changes to eligibility for the size of houses and number of bedrooms; improving access to personalised services; and extending the availability of Direct Payments^[5] to individuals.

2.6 Some of the third sector organisations that participated in this study operate in areas covered by the UK Government (such as those working in the area of employment or other Reserved (non-devolved) issues). However, even in these areas the Scottish Government has some powers to implement complementary programmes, such as skills development programmes, which affect those third sector organisations working in employability. Scottish Government policies more directly affected those third sector organisations specialising in health and social care and/or who mainly dealt with local authorities.

Key Policy Developments from the Scottish Government

2.7 In Scotland the government shifted from being a minority SNP led Government (between 2007 and 2011) to a majority SNP Government following the elections in 2011. Over the period of the research, Scottish policy developments of particular relevance to the third sector included:

2.8 The Scottish Government's commitment to promoting high quality public services and the importance of the third sector in on-going public service reform.

2.9 The 2007 Concordat between the Scottish Government and local government which reduced ring-fencing and devolved control of some budgets to local authorities (LAs) and Community Planning Partnerships (CPPs). This fundamentally changed the relationship between national and local government in Scotland. This aimed to promote the alignment of funding and activities within local authorities and other areas of the public sector with the Scottish Government's Purpose and National Outcomes (Scottish Government, 2007).

2.10 A major programme of change in local third sector infrastructure with the announcement in March 2008 that as of April 2011 the Scottish Government would no longer fund networks of Councils of Voluntary Service (CVSs), volunteer centres, local social economy partnerships and social enterprise networks in their current form. This led to the development of new third sector 'interfaces' in each Community Planning Partnership/LA area in Scotland which typically involves the networks listed above. Interfaces are recognised by local Community Planning Partnerships as representing third sector organisations. They vary in legal form but all fulfil four functions: support to voluntary organisations operating in the area, both local and those national organisations that deliver services at a local level; support and promotion of volunteering; support and development of social enterprise; and connection between the Community Planning Partnership and the third sector.

2.11 The Enterprising Third Sector Action Plan (2008-2011) which aimed to support enterprising behaviour in the third sector, including the Scottish Investment Fund (£30M) and the Enterprise Fund (£12M) (Scottish Government, 2008).

2.12 The public-social partnership (PSP) model involving the public sector and the third sector working in partnership to design and deliver public services. The PSP programme was launched in November 2009 (Scottish Government, 2011).

2.13 The development of models and tools as a means of measuring how third sector organisations deliver social and environmental benefits. The Scottish Government funded Social Return on Investment project ran between 2009 and 2011. The findings and practical advice, along with a range of other measurement tools are available at www.socialimpactscotland.org.uk

2.14 The Joint Statement on the Relationship at Local Level between Government and Third Sector signed by the Scottish Government, COSLA, local government and the third sector; offers recommendations on working relationships in relation to funding, shared services, Best Value, application processes for grant funding, strategic commissioning and procurement, re-tendering, European procurement law, monitoring, reporting and evaluation and partnership (Scottish Government et al., 2009).

2.15 A consultation on Self-directed support (commonly referred to as 'personalisation') in Scotland in February 2010 was followed by the Social Care (Self-directed Support) (Scotland) Bill in February 2012 (Scottish Parliament, 2012). The Bill received Royal Assent on 10 January 2013. The Act provides service users (adults and children) with a high level of involvement in the way in which their care is arranged. The Bill states that 'A person must have as much involvement as the person wishes in relation to - (a) the assessment of the person's needs for support or services, and (b) the provision of support or services for the person'. The law stipulates the forms of Self-directed support (SDS) to be offered by local authorities to those assessed as having need for Self-directed support. Local authorities are required to offer one of four options for Self-directed support: making a direct payment to the supported person to enable them to purchase their own care; the supported person chooses the services they wish to access and the local authority makes the payment for that service; the local authority selects the appropriate service for the supported person and makes the necessary payment; the supported person chooses one of the previous three options for support and where it is provided by someone other than the local authority then the local authority makes the necessary payment.

2.16 To help Scottish organisations prepare for the introduction of Self-directed support (SDS), the Scottish Government created the National Strategy for Self-Directed Support in Scotland launched in November 2010 (Scottish Government, 2010b). The programme provides funding of £1.2m to support councils to prepare for the introduction of SDS.

2.17 The SNP minority-led Government set up the Commission on the Future Delivery of Public Services (Chaired by Campbell Christie) in November 2010 in order to 'examine how Scotland's public services can be delivered in the future to secure improved outcomes for communities across the country', despite the challenging financial environment. The Christie Commission reported in June 2011 (Christie, 2011).

2.18 Specific recommendations of the Christie Commission included:

• The introduction of a new set of statutory powers and duties, common to all public service bodies, focussed on improving outcomes. New duties are to include a presumption in favour of preventative action and tackling inequalities.
• Greater use of joined-up services, backed by funding requiring integrated provision, and the development of new inter-agency training to help build a common public service ethos.
• The application of consistent and transparent commissioning and procurement standards across suppliers of public services.

2.19 The Christie Commission anticipated that the third sector will, over time, take on an expanded role in delivering services directly. The Commission recognised that the third sector has the skills and expertise to address the complex issues that are a feature of modern societies. Services should therefore be 'delivered in partnership, involving local communities, their democratic representatives, and the third sector' (Christie Commission, 2011).

2.20 A key element of this new delivery model is a reconsideration of procurement and commissioning practices. The Commission highlighted the concerns of third sector organisations regarding the way in which commissioning practices placed too great an emphasis on the specification of service volumes and costs and there needed to be a greater consideration of outcomes and their measurement. The Commission stated that there needs to be 'a rebalancing of procurement and commissioning from cost efficiency towards effectiveness, with contracts focussing on promoting positive outcomes'. These findings are likely to lead to changes in the way third sector organisations bid to deliver public services, with perhaps an increasing use of co-operative commissioning models that seek to engage third sector organisations in the commissioning process at an earlier stage.

2.21 As part of the Public Services Reform agenda, the Cabinet Secretary for Finance, Employment and Sustainable Growth Mr John Swinney announced in the September 2011 Spending Review, that £500M would be made available over three years to invest in preventative approaches across three areas: supporting adult social care; early years and tackling re-offending (Swinney, 2011). These are known as the Change Funds.

2.22 In 2013 the Scottish Independence Referendum Bill made provision for the holding of a referendum in Scotland on a question about the independence of Scotland (Scottish Parliament, 2013). The referendum will be held on 18 September 2014.

2.23 In November 2012 Mr Swinney announced a new living wage of £7.45 for employees working in parts of the public sector and also urged private, public and third sector employers to follow suit (Scottish Government, 2012b).