The number of new charities set up in 2017 was higher than ever, but financially it’s a mixed picture of winners and losers. Growth has been in the right direction, but for many it’s been pretty anaemic.
Our new interactive data hub has pulled together the latest financial data available on the Scottish third sector.
In 2017 the total income of the Scottish third sector continued to grow, albeit at a slower rate than in previous years. Income grew from £5.6billion in 2016 to £5.85 billion in 2017, so around 4.5%.
However, under the top-level figures sits a more complex picture.
Some organisations showed high annual turnovers last year which when you dig down into turn out to be purely down to the transferal of assets from one organisation to another, eg £7million transferred from the old Irvine Bay Urban Regeneration Company to the North Ayrshire Ventures Trust. The Trumps of this world might want to call it ‘fake’ income but it’s just a quirk of charity accounting.
It happens when one charity closes and its assets are transferred to another, but also when a charity converts to a new legal form, for example the new SCIO (Scottish Charitable Incorporated Organisations) legal form. For example, the Dunard Fund (SC039685) was a Trust which in 2017 transferred its £68million assets to the new Dunard Fund (SC046889), a Company. Not only does this make life difficult for us poor researchers, it also means that the sector’s growth is overinflated – instead of the robust £250m growth the figures show, we actually only saw £140m real growth in the total Scottish third sector’s turnover, so only 2.5% growth, not 4.5%.
Public sector cuts, low interest rates, and a generally tough economic environment continue to make life challenging for many organisations. 43% of smaller charities saw their spending outstrip income, meaning once more dipping into ever-dwindling reserves. Two-thirds of small charities and half of medium-sized charities saw their incomes stand still or drop between 2016 and 2017. And although the many did see their incomes grow, average growth was well below 1%, at a pretty tepid 0.17%.
Before you start thinking that large charities are thriving at the expense of smaller ones, the figures show that over a third of large charities spent more than their income in 2017. While 58% saw their incomes grow, for many their spending and overheads grew at an equal or faster rate. The largest charities saw a combined income growth of £51m which at first glance looks healthy. Digging down into that figure shows that three large international charities funded primarily via international sources account for most of that growth. For other large charities, such as social care providers reliant on local authority contracts, the majority may have been able to grow their incomes, but only at the same lukewarm rate as smaller charities.
But there are also many things in these new figures to celebrate. Some organisations have flourished thanks to large-scale investments in build projects, with new charities energising and transforming local communities. Many of these come on the back of community land buyouts and asset transfers.
A couple of examples include:
Broomhill Gardens and Community Hub, a new community resourcesled by Inverclyde Association for Mental Health and Greenock residents.
We are also seeing new charities being set up at an unprecedented rate, with 961 new charities approved by OSCR in 2017-2018. Many of these new charities are meeting the needs of a modern Scotland, and include mental wellbeing, groups tackling loneliness (including men’s sheds), groups challenging poverty (including food banks and food projects), equalities groups, and groups regenerating and invigorating local areas. We also continue to see new philanthropic foundations being established.
Economically and politically we are living in uncertain times, and money for third sector activities remains exceptionally tight. But despite these challenges, the latest data shows that many charities – new and old – are continuing to do more with less.