The Scottish government will cut its annual budget for the third sector by 24 per cent from £35.5m this year to £27m in 2011/12, according to its draft budget, published yesterday.
Funding for the Office of the Scottish Charity Regulator will fall by 11 per cent, from £3.6m to £3.2m.
Most of the cut will come from the budget of the Scottish Investment Fund, a three-year £30m loan and grant fund to build capacity in the sector, which was allocated £14.8m in the current financial year.
However, the Scottish Council for Voluntary Organisations said that because the fund was due to close, and has instead been allocated an additional £3m, this could be seen as a success for the sector.
In a budget analysis published on its website, the SCVO said the ‘core’ third sector budget would rise by 16 per cent, from £20.7m to £24m.
The SCVO said it was good news that spending from other departments would be available at least in part to the third sector organisations, including: a £70m change fund aimed at supporting public and third sector organisations helping elderly people remain in their homes; a £5m early intervention fund for third sector organisations supporting children and young people; an extra £1m for the Climate Challenge Fund, which supports voluntary and community groups to take local action on climate change.
Martin Sime, the chief executive of the SCVO, said: "In a budget of cuts, some small but important steps are being taken towards a culture of prevention and reform.
"Our public services face huge challenges, but the measures announced today make it clear that the Scottish government recognises the crucial role that the third sector plays in supporting the people of Scotland."
But the SCVO warned that there was still uncertainty over local authority funding for charities, which makes up 21 per cent of the sector budget in Scotland and is dut to be announced in March.
Antonia Swinson, chief executive of the Scottish Social Enterprise Coalition, welcomed much of the budget but said she was concerned that a one-year budget made long-term planning difficult.
The budget will be formally agreed by the Scottish Parliament in February, after scrutiny from the finance committee.