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April 23, 2014

Confusion reigns

The Third Sector has a habit of tying itself in knots when it comes to self-definitions. Many hours have been wasted trying to decide who’s in and who’s out. Charities are easy to define – OSCR makes that call. But then not all charities are part of the Third Sector. Private schools? Universities? The blurring of the edges has just been further blurred by some research conducted for Big Lottery into social enterprises. Maybe it’s better not to try to seek clarity where none exists.


Stephen Naysmith, The Herald

IF the size of Scotland’s charitable sector leaps by 136% in the space of just a few years, you might expect charity leaders to be happy about that.

Even if the figures turn out to be exaggerated, that hardly seems to be a problem.

But the recent publication of figures mapping social enterprise activity north of the Border has been greeted with near-alarm in some quarters and a degree of bafflement in others.

Whether the conclusions are accurate (they are based on figures from the Office of the Scottish Charity Regulator, or OSCR, and published by the Big Lottery Fund) depends a lot on what you are counting.

In concluding that the gross annual income of Scotland’s charities rose from £8.8 billion in 2006/7 to £20.8bn by last month, compilers included not just traditional charities but also social enterprises and used a broad definition that counted businesses such as the arms-length organisations (Aleos) set up by Glasgow and other councils to deliver services.

The inclusion of universities further enhanced the rosy picture the report presented, with Edinburgh University alone accounting for nearly 10% of the claimed increase.

A final factor that explains the leap in the sector’s turnover is a push by OSCR to encourage cross-Border charities to register in Scotland as well as in England.

This has brought recognition of the Scottish income of some of the UK’s largest charities into the calculation. There’s certainly a case for doing that but it doesn’t represent an increase in activity.

Meanwhile, a broad definition of social enterprise means the turnover of businesses with a social purpose is estimated at £6.9bn.

To put that in perspective, it is bigger than the turnover of Scotland’s approximately 19,000 charities. The sector’s own body, the Scottish Council for Voluntary Organisations (SCVO), puts their combined turnover at £4.9bn.

One of the worries about this is the impact such an arguably misleading picture might have on public support for charities and the willingness of donors to reach into their pockets.

Likewise, it could lead to an overestimate of the health of the sector among policy-makers.

“Suggesting that the Scottish charity sector has boomed like some dot com giant isn’t helpful and doesn’t send funders the right message,” says Ilse Mackinnon, SCVO’s research officer.

The real picture is quite the contrary, she points out. The average Scottish charity did grow last year, but by just 0.8%; in effect, a loss in real terms.

The goal of this piece of work was to map social enterprises and their activity across Scotland, enabling funders to understand their prevalence and financial health.

Establishing a baseline means the impact of an increasing number of social-investment type funding initiatives can be measured.

That’s a laudable goal but neither charities nor social enterprises are well served by huge or misleading estimates of their size. A more than doubling of Scotland’s charitable sector might be welcome. But it isn’t really true.