2 AN OVERVIEW OF THE THIRD SECTOR IN SCOTLAND
2.1 Introduction
2.1.1 This chapter provides an outline of the literature concerned with the size, scope and structure of the third sector in Scotland. It also discusses the literature relevant to establishing the context to recent policy developments regarding the third sector.
2.1.2 The intention of this chapter is to set the scene for the subsequent chapters examining the literature dealing with the third sector's contribution to the Scottish Government's five Strategic Objectives. Consequently, the material included focuses less on third sector impact and more on the context in which the research we have examined takes place.
2.2 The literature
2.2.1 The literature included in this section has been drawn from a variety of locations. Contextually, a number of policy reviews undertaken by scholars interested in Government policy towards third sector in Scotland, and the impact of devolution, have proved useful in providing commentary on the policy environment relevant to the third sector.
2.2.2 Elsewhere, a significant amount of the literature that is relevant to this theme has emerged from the public sector, and from the third sector itself. In particular, there is relatively rich data on the size and scope of the third sector, which often takes the form of surveys and statistics collated at a national level.
2.2.3 Some of the relevant material focuses not on the third sector in its entirety, but deals with, for example, specific organisational form, geographical location, or focus of activity. As such, we have been able to identify a range of data dealing with social enterprise, and with rural organisations in Scotland.
2.3 The changing policy context in Scotland
2.3.1 Within the scholarly literature, there is a growing body of work which addresses the particular conditions of the third sector's relations with the State in Scotland. Typically, this work concentrates on recent trends in government policy towards the sector and their implications, emphasising the growing importance of the third sector. This literature is complemented by a vast range of policy documents and briefings emerging from the public sector and from third sector organisations.
2.3.2 It is important to note that this literature does not take the recent rise to prominence of the third sector in public policy in Scotland in isolation, and almost all of the scholarly literature aligns itself with some of the more relevant work dealing with the UK and global contexts. Fyfe et al, (2006) for example, place their analysis of their discussion of the third sector's place in policy post-devolution in the context of New Labour's activities in Westminster since 1997.
2.3.3 Aside from the wider picture of state-third sector relations, voluntary activity has a rich history in Scotland. Prochaska (1990) and Anheier and Leat (2006) highlight the importance of Scottish philanthropy to social life at the turn of the twentieth century. In some cases, this influence has spread globally, through the work of charitable foundations.
2.3.4 From this basis, a significant point of departure in contextualising the place of the third sector in policy discussion is the Report of the Commission on the Future of the Voluntary Sector in Scotland (Kemp, 1997), which prompted the adoption of the Scottish Compact. Published in 1998, the same year as its Westminster counterpart, the Compact was one of the first of a series of policy developments that has been heralded as reframing the place of the voluntary sector into the 'mainstream' of government policy (Kendall, 2003; Murdock, 2005).
2.3.5 Since devolution in 1999, the range of responsibility for domestic, economic and social policy devolved to the Parliament and the Executive (since 2007, the Scottish Government) means that reframing relations with the third sector is now a high priority. Fyfe et al (2006) suggest that the Government has paid increasing attention to the third sector in recent years, with the then Deputy Minister for Communities declaring in 1999 that the third sector 'has enormous potential to help us to achieve our shared goals of promoting community development and active citizenship' (Scottish Parliament, 1999: col. 767).
2.3.6 As academic commentators have noted, the third sector has played a significant role in the policy thinking of the newly-established Scottish Parliament. In their analysis, Burt and Taylor (2002) point out that the growth in rhetoric towards the sector has increasingly been solidified into policy commitments.
2.3.7 This has been signalled by a large amount of grey literature - material that has not been produced specifically for research purposes. Most significantly, this takes the form of initiatives and policy documents. These include attempts to promote volunteering through the then Scottish Executive's (now Scottish Government) 'Volunteering Strategy' (2004), the Scottish Social Enterprise Strategy (2007) and the Enterprising Third Sector Action Plan (2008), which provides a detailed outline of support for the third sector's innovative capacity.
2.3.8 The grey literature also directly links good working relations between the state and the third sector with successive Governments' objective of achieving economic growth. In 2005, the then Scottish Executive published its 'vision' for the voluntary sector, highlighting the importance of the sector to the government's social programme, reaffirming close relations as a theme of policy based on fair funding arrangements, promoting the sector's contribution to social life, and encouraging consistent and strong relations between the Government and the sector.
2.4 Understanding the third sector in Scotland
2.4.1 Defining the third sector is no easy task. A perennial occupation for scholars interested in the field, and for those working in and with the third sector, it is well-established that attempts at universal definitions of the third sector are fraught with problems. Consequently, most of the definitions we encountered in the literature are purposive - they are tools used in particular studies or for a particular purpose (such as establishing a regulatory framework around nonprofit action). Definitions of the third sector are also relational - they are products of the context in which they were developed.
2.4.2 Because of this approach, many of the studies we have included in the review maintain slightly different starting points in their approach to understanding the third sector. The variety of definitions reflects the sheer diversity of material available, and the differing focus of many studies.
2.4.3 Therefore, a clear finding from our analysis was that there are a number of approaches to understanding of the meaning of the term 'third sector' in Scotland (in the literature, the term 'voluntary sector' is often substituted). Indeed, across the different sources of material included in this review, it is possible to trace contrasting approaches to definition, dependent on the approach, purpose, and intended audience.
2.4.4 In some cases, the definition adopted is necessarily broad. In framing its policy 'vision' for relations with the third sector, the Scottish Executive (2005) imagined the sector as primarily driven by a social, cultural or environmental purpose, governed by individual volunteers who do not get paid for governing the organisations, and independent from the state.
2.4.5 Elsewhere, SCVO (2008) focus on organisational form, referring to voluntary organisations as 'non-profit distributing, non-statutory and independent of the state'. A far wider definition, this bears a close relation to the 'structural-operational definition' (Salamon and Anheier, 1997), now almost a default for academic studies of the third sector, which suggests that these organisations are:
- Formally organised
- Nonprofit distributing
- Constitutionally independent from the state
- Self-governing
- Benefiting from some form of voluntarism
2.4.6 In the scholarly literature that specifically deals with Scotland, some attention has been paid to international distinctions in definition, in order to analyse the development of policy trends towards the third sector. Harrow and Vincent (1999; 2009), distinguish between the third sector in Scotland and England by use of a metaphor, distinguishing between 'thistles' and 'roses' when examining the differences between the third sector in Scotland and England, suggesting that the sector maintains a distinct character in each country. Focusing primarily on third sector organisations working in the health sector, they raise distinctions in the roles played by third sector, with organisations more heavily involved in service provision in Scotland than England.
2.4.7 The growth in interest in social enterprise has raised some interesting distinctions in approach. SCVO (2001b) notes that the 'third sector' is used to emphasise the distinction between the sector and the private and public sector'. Conversely, Communities Scotland (2002) suggest that the notion of a third sector as entirely distinct from the public and private sectors is 'too crude', and that the importance of social enterprise means that the boundaries between the private and third sectors are less distinct.
2.4.8 However, the same authors do discuss the utility of distinguishing between voluntary organisations and social enterprise, basing their analysis in the idea of the social economy, adopting a narrow definition which focuses solely on social enterprise, and a wider definition which also embraces other voluntary organisations.
2.4.9 SQW Limited (2002) focus on the idea of 'social economy' in their work examining the contribution of the third sector in the Highlands and Islands. The authors recognise the difficulties of universal definition and establish a very broad approach to understanding the social economy specifically for their study, taking in neighbourhood and self-help groups, as well as community and social enterprises. Significantly, the authors note the difficulties of specifying organisational structure as part of a definition, due to the dynamism of the sector and the emergence of new and hybrid organisational forms.
2.4.10 In all, definition is undoubtedly important. Different approaches to understanding the third sector have an impact both on the measurement of its size, but also on the focus of activity (for example, service provision, or advocacy) considered. Beyond this, definitions of the third sector have something to tell us about the context in which the third sector operates in Scotland, given its development from a rich background of voluntary action.
2.4.11 A further finding from the literature is the undesirability of rigid approaches to definition. The various approaches we identified, including those sketched above, illustrate the diversity of the third sector, its work, and also new and emerging organisational forms. Hard definitional boundaries applied to the national context would run the risk of marginalising these insights.
2.5 The size and scope of the third sector in Scotland
2.5.1 The literature that concerns itself with identifying the size and scope of the third sector comes primarily from statistics and research undertaken by the public sector, or from the third sector itself. Within the third sector, most commonly it is infrastructure bodies who undertake this kind of work (see SCVO, 2005; 2008; VDS, 2005). There has been little scholarly attention on research of this kind as part of comparative studies of the third sector, primarily because of the tendency to focus on the UK as a whole.
2.5.2 This literature indicates that the third sector operating in Scotland is large and diverse. SCVO (2008) suggest that there are 45,000 formally-organised organisations contributing £4.7 billion to Scotland's GDP. The sector employs around 129,000 paid staff, some 5% of Scotland's workforce, and engages around 1.2 million adult volunteers.
2.5.3 The literature agrees that myriad organisations are undertaking activities in areas ranging from community organisation to the delivery of public services. As the diagram below illustrates, the type of organisation involved varies considerably, from ad hoc local groups to large multinational organisations that are major employers. At the same time, a particular area of growth has been the varying forms of social enterprise. The contribution of these groups to public services has been recognised by the government, and they are a focus of investment (Scottish Government, 2007; 2008).
Figure 1: The size and diversity of the third sector in Scotland ( SCVO, 2009)
2.5.4 The focus of work of the third sector has also been subject to attention. SCVO (2008), in their statistical digest for the sector, identify a broad range of areas of work. Interestingly, they note the dominance of organisations working in 'social care and development', some 45% of total work. This tallies with academic analysis of the sector in Scotland (Vincent and Harrow, 2009) and more widely across the UK (Kendall and Knapp, 1996; Kendall, 2003).
2.6 Third sector funding
2.6.1 There is a significant evidence base concerned with the funding and income of the third sector. Aside from official statistics, infrastructure bodies within the sector have undertaken considerable work in this area. There is, however, markedly less attention paid to this issue in the scholarly literature.
2.6.2 Broadly, the data reveals that the income of the third sector is growing, and has done so for a number of years. The SCVO maintains panel data on finances, including funding levels and sources, for 5000 organisations, dating back to 1991. Projections based on the panel data suggest that sector income reached £3.21 billion in 2006, up from £2.63 billion in 2004, and controls over £8.6 billion of community assets ( SCVO, 2008). Forthcoming figures from the SCVO place the sector's income even higher, at £4.1 billion. As the diagram below indicates, the origins of third sector funding vary greatly, with a significant proportion, although not a majority, coming from the state.
Figure 2: Voluntary sector income ( SCVO, 2008)
2.6.3 The SCVO (2005) note that 'the funding mix of the Scottish voluntary sector takes on a different balance to the UK average'. As illustrated above in Figure 2, in Scotland, the sector has a high proportion of funding from self-generated sources, that is income from trading, rents and investments. Collectively, these account for 50% of total income, compared to the UK's 15.5%.
2.6.4 Despite this, the Scottish Voluntary Sector Almanac ( SCVO, 2005) records that post-devolution, public sector funding has risen considerably. Above and beyond directly funding service provision, Futurebuilders Scotland, mirroring the initiatives in other parts of the UK, provided £18 million over two years aimed at improving the capacity of the third sector to deliver public services. Additionally, the Third Sector Development Fund allocated £11.85 million to local Councils for Voluntary Service ( CVS) and £8 million to the enterprising third sector, part of a £63 million commitment to third sector development over the three years 2008-11.
2.6.5 In common with the picture across the UK (see NCVO, 2005), third sector income is distributed unevenly between organisations. A relatively small proportion of very large organisations (2%) report an income of over £1million, collectively enjoying more than 62% of the sector's total income ( SCVO, 2005). Conversely, the majority of third sector organisations (64%) exist on under £25k, approximately 2% of the sector's income.
2.6.6 Despite its growing income, the sector's expenditure has also been rising. The figures for the financial year 2006-7 (included in the SCVO's Scottish Voluntary Sector Statistics, 2007) suggest that expenditure was at £3.18 billion. Of this, some 47% went towards staffing costs. The SCVO point out concerns over the long term sustainability of the third sector in the present funding environment, with the gap between income and expenditure narrowing dramatically in recent years. Currently, this gap represents £24m, or 0.7% of the third sector's income.
2.6.7 The issue of organisations obtaining full cost recovery ( FCR) when contracted by the state to provide public services has been specifically addressed in research commissioned by the Scottish Executive (Hayton et al, 2007). This work was based on a wide range of different methods, including a literature review, surveys of third sector organisations (on relatively high incomes) and public sector agencies, focus groups, and detailed case studies. It aimed to:
- Measure and consider the benefits, risks and costs to both the public and voluntary sectors;
- Create a realistic picture of FCR's impact given its non-compulsory nature, and the support that both voluntary organisations and public service providers will require going forward
- Produce recommendations on implementing FCR in a realistic way
2.6.8 The study highlighted both the importance of FCR to service providing organisations, and the cost implications to the state, making a range of recommendations for promoting FCR, and the access to broader infrastructure funding for third sector organisations.
2.7 The rural third sector
2.7.1 A distinctive feature of the literature is the focus of some work on Scotland's large rural third sector. There is a body of scholarly work in this area, although it varies greatly in quality, with some studies basing their analysis on a brief search of web-based literature. Elsewhere, organisations within the third sector have undertaken original research in the area, normally in the form of case studies of a small number of organisations.
2.7.2 SCVO (2003) suggest that many rural third sector organisations tend to be unregulated (that is to say, not registered charities or housing associations). However, there is a large proportion of regulated organisations at work in these areas (rural areas are home to around 40% of regulated organisations).
2.7.3 The literature also suggests that the rural third sector suffers from a number of difficulties that are, if not profoundly distinct, then perhaps more acute, than those borne by organisations in more populous settings. Broadly, these include a lack of material and financial resources, as well as problems in recruiting and training volunteers in rural areas (Skerratt et al 2008).
2.7.4 Sartain (2006) examines future possibilities for the rural voluntary sector in Scotland, using Futures techniques - policy-development tools intended to identify possibilities for future policy direction. While there are clear distinctions between this and much of the original empirical work that exists, this approach is useful in illustrating a unique approach to developing solutions to the specific issues suffered by rural organisations.
2.7.5 As well as the literature that focuses discretely on rural issues, the rural third sector regularly appears thematically in other areas of work. Examples of this work have been included in the subsequent chapters where these are relevant to the themes we discuss in the context of the five Strategic Objectives.
2.8 Social enterprise
2.8.1 A particular feature of recent government policy towards the third sector in Scotland is the emphasis on the more entrepreneurial aspects of voluntary action, with a particular focus on social firms and innovation within the sector. The Scottish Government's Enterprising Third Sector Action Plan (2008: 8) suggests that it wants to 'create a country where an enterprising third sector is valued and encouraged'.
2.8.2 This reflects a growing social enterprise sector across Scotland. Much like the rest of the UK, the social enterprise sector is held in the literature to have been growing rapidly in recent years, although this is area where the evidence is relatively sparse. Depending on definition, Communities Scotland (2002) identify between 10,000 and 44,000 social enterprises active in Scotland.
2.8.3 Social Economy Scotland maintain 2 a wide range of different studies and evaluations of social enterprise across the country. This includes a number of evaluations of specific organisations and initiatives. Largely in the form of research briefings and short evaluations, the material suggests that social enterprise plays a significant role in providing services to communities in Scotland, and can have a number of distinctive virtues, including a close connection to service users, and innovative approaches to service delivery. However, beyond this kind of work, it should be noted that some substantial pieces of detailed research are available, focusing on cross-cutting issues such as social return on investment (Durie et al, 2007), and profiling rural Scotland (Natural Scotland, 2006).
2.8.4 Other studies trace the growth of social enterprise in Scotland as part of studies of the UK as a whole (Baker, 2007; CEIS, 2008). Baker (2007), as part of a programme of national mapping of the social firm sector, found that the environment in Scotland was particularly vibrant, with the country maintaining one of the highest numbers of social firms across the UK.
2.8.5 CEIS (2008), examining Social Enterprise Business Models, consider whether established models found across the UK and internationally might be applied to social enterprises in Scotland.
2.8.6 Their study was based on a blend of primary and secondary research. The authors initially undertook desk-based secondary research to gather information about the motivations and principles of business replication, and their application to social enterprise. This drew on a range of sources including internet searches, journals and other relevant reports. The primary research was carried out with Scottish social enterprises. Fifty organisations responded to a single question email survey examining the application of business models to social enterprises. Additionally, the report contains a number of case studies, which were supported by four telephone interviews.
2.8.7 The study found that replication, licensing and franchising can be a successful strategy for growth for social enterprises, highlighting examples from the case studies. It also suggests that these strategies are relatively new, and would benefit from future examination.
2.8.8 There are also a number of other small scale studies of social enterprise in Scotland available through Social Economy Scotland. These studies indicate that the enterprising third sector forms a significant part of the social economy in Scotland. However, we must leave a caveat that this is an area where the research evidence is in need of development, in spite of the number of different studies undertaken, due to problems of varying definition, methodological approach, and scope in the different pieces of research.
2.9 Conclusions
2.9.1 It is possible to trace a significant body of literature concerned with the size and scope of the third sector, as well as its relations with the state. It is clear that different areas are subject to attention from different sources. The third sector's place in policy, for example, is almost solely of concern to the scholarly literature, although this body of work is not extensive.
2.9.2 From the literature, it is obvious that Scotland enjoys a vibrant and strong voluntary life. It is also clear that the public and third sectors increasingly find themselves working in partnership, and that the third sector organisations in Scotland have, much like the rest of the UK, moved increasingly to centre stage in policy discussions.
2.9.3 The following chapters examine the literature dealing with the contribution of the third sector to the Scottish Government's five Strategic Objectives. In each, we have drawn out themes of literature that are particularly strong. These themes are by no means exhaustive, but are intended to emphasise areas of literature where the contribution of the third sector to each objective is either clearly defined, or, in some cases, in need of further investigation.