Third sector scheme annual report 2023 to 2025

I am pleased to present the Welsh Government’s Third Sector Annual Report, covering the period between 1 April 2023 and 31 March 2025.

Over the past 2 years, we have seen more clearly than ever the importance of partnership working and for many in our society, they see the third sector at the very heart of that partnership. It is with great pride and a deep sense of responsibility that I present this annual report

As a government, we have set out clear and ambitious priorities: building a healthier Wales, creating green jobs and sustainable growth, ensuring opportunity for every family, and connecting communities across the country. These priorities are not achievable by government alone. Delivering these priorities depends on the full engagement of our communities, and the third sector remains pivotal. The sector’s ability to give voice to lived experience, to co-create solutions, and to reach those most in need is more vital than ever.

We are acutely aware of the pressures the sector faces. Demand for services continues to rise, financial uncertainty persists, and the strain on staff and volunteers is significant. Yet, despite these challenges and those of recent years, including austerity, the pandemic, and the cost-of-living crisis, the third sector has shown remarkable resilience, adaptability, and leadership.

What has stood out during this period is the strength of our partnership. Together, government, public bodies, and the third sector have built a shared vision and a long-term plan for change. We have worked to ensure that this partnership is not just symbolic, but practical and impactful. This includes the development of a revised Code of Practice for funding, which will underpin all our funding relationships with fairness, transparency, and sustainability. We are also co-designing a New Approach for Volunteering in Wales, recognising the essential role volunteers play in the fabric of our society.

We have continued to invest in the third sector infrastructure, ensuring that organisations of all sizes can access the support they need. Initiatives like Newid, a partnership between Promo Cymru, Cwmpas, and WCVA, are helping to build digital capacity across the sector. Meanwhile, the Strategic Volunteering Wales grant is enabling organisations to take a more strategic approach to volunteer engagement and development.

Looking ahead, we must continue to innovate, collaborate, and empower. Ensuring our policies are shaped by those they affect, and that our support is targeted where it is needed most. 

This is why I have asked officials to begin to look at a Communities Policy. One which is co-designed from the grassroots up and recognises that there are assets in every community.

Despite the obstacles we face, I believe the Welsh third sector is well placed to thrive. The knowledge, creativity, and commitment within the sector are extraordinary. Our challenge and our opportunity is to unlock that potential, building a stronger, fairer, and more resilient Wales for all.

Jane Hutt MS.
Cabinet Secretary for Culture, Social Justice, Trefnydd and Chief Whip.

Over the past 2 years, voluntary organisations and volunteers across Wales have once again demonstrated their indispensable contribution to the nation’s wellbeing. The sector’s ability to respond quickly, reach those most in need, and bring communities together has never been more visible or more vital.

Across every community, voluntary organisations have been at the forefront of addressing deepening social and economic pressures. From food poverty and housing insecurity to loneliness, mental health, and the climate emergency, the sector has delivered where the need is greatest. This response has been powered by volunteers, trustees, and staff who continue to give their time and expertise despite growing financial and operational pressures.

While the sector’s role in delivery remains critical, its impact as a partner, advocate and innovator has also strengthened. The Third Sector Partnership Council has continued to provide a space for genuine collaboration between the Welsh Government and the sector, rooted in openness and shared purpose. The revised Funding Code of Practice is an example of this partnership and is a positive step towards fairer, more sustainable relationships that recognise the true costs of delivery.

The work to co-design a New Approach to Volunteering in Wales, led jointly by the Welsh Government and WCVA with partners across Voluntary Sector, marks a significant shift towards a shared national vision. This will help ensure that volunteering is accessible, inclusive and valued as a foundation of community life.

Despite these successes, the sector faces mounting pressures. Inflation, the cost-of-living crisis, recruitment and retention challenges, and shrinking core funding are testing the sustainability of organisations large and small. Volunteers are stretched, reserves are depleted, and the need for long-term, flexible funding is urgent.

Yet, through these challenges, the partnership between the Welsh Government and the third sector remains strong. It continues to be grounded in the principles of the Third Sector Scheme of mutual respect, accountability, and a shared commitment to social justice and equality.

As we look ahead, WCVA and its County Voluntary Council partners in Third Sector Support Wales (TSSW) are committed to deepening this partnership. Our focus is on strengthening the infrastructure that supports voluntary action, advancing equality, diversity and anti-racism, and ensuring that the sector’s voice shapes the decisions that affect our communities.

Together, we can create the conditions where voluntary organisations and volunteers not only survive, but thrive to help build a Wales that is fairer, greener and more connected for all.

Dr Neil Wooding CBE, Chair WCVA.

Dr Lindsay Cordery-Bruce, Chief Executive WCVA.

What is the Third Sector?

The third sector spans virtually every facet of human interest. It includes community organisations, self-help groups, voluntary organisations, charities, faith-based organisations, social enterprises, community businesses, housing associations, co-operatives and mutual organisations, and more.

The third sector comes in a range of institutional forms, including registered and unregistered charities, companies limited by guarantee (which may also be registered charities), community interest companies, industrial and provident societies, and unincorporated associations. Each organisation has its own aims, distinctive culture, set of values and way of doing things.

Despite this great variety, third sector organisations all have some important characteristics in common. They are:

• independent, non-governmental bodies, established voluntarily by citizens who choose to organise.
• committed to reinvesting their surpluses to further their social, cultural or environmental objectives.
• 'value-driven' and motivated by the desire to further social, cultural or environmental objectives, rather than simply to make a profit.

We remain convinced of the case for viewing organisations with these characteristics as a distinctive "sector".

The sector is known both as the third sector and the voluntary sector and both terms are used in this report.

Some key numbers:

• 47,116 voluntary organisations active across Wales. (Data from WCVA’s data hub)
• The National Survey for Wales 2024 to 2025 found that 32% of people aged 16+ volunteered, showing an increase from previous year (from 26% in 2019 to 2020, to 29% in 2021 to 2022 and 30% in 2022 to 2023). (Data from the National Survey for Wales).

The Third Sector Scheme

The Third Sector Scheme is made under Section 74 of the Government of Wales Act 2006. This legislation requires Welsh Ministers to make a scheme, which is a statement of their intent to support and promote, in the exercise of their functions as Welsh Ministers, the interests of relevant voluntary organisations.

This annual report for 2023 to 2025 shows how proposals set out in the Third Sector Scheme were implemented in those financial years. 

The purposes of the Third Sector Scheme:

• sharing views and information
• monitoring and evaluating programmes and schemes
• a shared interest in the way wider public services interact with the third sector
• joint planning and design
• ensure funding across policy areas
• cross cutting themes of the scheme:
  • tackling poverty
  • sustainable development
  • equalities
  • Welsh language

The Third Sector Scheme is designed to deliver a partnership between the Welsh Government and the third sector which is intended to help us to develop and support processes which will ultimately lead to:

• stronger, more resilient, communities: the way most people make a voluntary contribution to the vibrancy and regeneration of their communities, provide care and help build people’s confidence and skills; and the opportunities the Third Sector creates for employment and local enterprise
• better policy: the knowledge and expertise the third sector offers through its front-line experience to help shape policies, procedures and services
• better public services: the innovative and transforming role the third sector can play in making public services reach more people and become more sensitive to their needs

All Cabinet Members, Deputy Ministers and officials are expected to promote the interests of the third sector in their work and decision making. The Third Sector Scheme commits the Welsh Government to:

• maintain arrangements for meaningful engagement and consultation with the third sector
• maintain arrangements for supporting communities and volunteers
• maintain arrangements for supporting structures that allow the third sector to flourish
• seek to adhere to the code of practice for funding the Third Sector (contained as an annex to the Scheme)

It covers arrangements for consultation, working in partnership with the sector and also funding. These arrangements continue to be supported by the WCVA and the Welsh Government.

The Scheme sets out the formal arrangements for engagement across 5 areas:

Dialogue and cooperation

This activity involved agreeing practical arrangements, dialogue and exchange of information. One good example of where this has worked in practice, and delivered positive outcomes for stakeholders during this reporting period is the development of a new Education Training Network.

Case study: building stronger relationships between education and the third sector

Background

Through the Relationships workstream of the Third Sector Partnership Council’s (TSPC) COVID Recovery Report, a pilot programme was launched to strengthen collaboration within government between the third sector and education officials. This initiative aims to ensure that joint working informs agendas and discussions at the formal statutory Third Sector portfolio meeting, chaired by the Education Cabinet Secretary.

Approach

Following constructive discussions led by the Third Sector team with members of the Third Sector education network and senior Welsh Government education officials, all parties agreed to establish a joint Welsh Government–Third Sector Network. Leadership was secured through the appointment of a Sector Chair and Deputy Chair, alongside a senior Welsh Government education lead.

Key actions:

• Formation of a joint working group with shared leadership.
• Agreement on three priority areas of work.
• Development of a collaborative workplan to guide delivery.
• Plans to present these priorities for endorsement at a formal ministerial portfolio meeting.

Impact and next steps

Learning from this pilot will be rolled out across all portfolio areas. It will also inform guidance and support documents for creating a robust framework for engagement between the third sector and the Welsh Government.

Third Sector Partnership Council (TSPC)

The Third Sector Partnership Council helps the Welsh Government to work with third sector organisations to develop better policies and services. 

During the reporting period the TSPC was chaired by Jane Hutt MS, then Deputy Minister and Chief Whip. The Council included representatives of third sector networks who worked across 25 areas of third sector activity along with the Chief Executive Officer of Wales Council Voluntary Action (see annex a).

Between 2023 and 2025, 6 TSPC meetings were held under the auspices of the Third Sector Scheme.

Below are some examples of the Cross-Sector topics discussed:

• The Anti-Racist Wales Action Plan.
• Progress updates against the TSPC Covid Recovery Reports ‘Support’, ‘Relationships’ and ‘Volunteering’ work streams.
• The new Funding Code of Practice.
• The new Volunteering Vision.
• Social Partnership and Public Procurement (Wales) Bill.
• Newid Partnership.
• A new TSPC Framework for Engagement and piloting a new way of working within the Education Portfolio
• Wales Draft Budget engagement sessions.
• The impact of National Insurance increases on the Sector.

Ministerial meetings

Wales rightly has an international reputation as a country where access to policy makers and Ministers is such that it promotes good governance. Third sector representatives meet regularly with each Welsh Government Minister to discuss issues relevant to their portfolios.

These Ministerial meetings complement day-to-day engagement between Welsh Government officials and third sector representatives, by focusing on strategic policy issues.

Under the auspices of the Third Sector Scheme, 12 meetings between Welsh Ministers and third sector organisations took place in 2023 to 2025. Topics discussed included, for example:

• The challenges and significant funding pressure on the sector.
• Overnight Visitor licensing scheme.
• The Education and Training Network piloting the new way of working as part of the new Framework for Engagement.
• Foundational Economy and Renewable Energy.
• Cost of living crisis.
• Welsh Language.
• New Funding Code of Practice.
• Local Authority Funding and Shared Prosperity Fund.
• Draft budget engagement.
• The importance of the sector as key partners in service provision amid budget cuts.
• Fighting health inequalities in health and care provision/coproduction and equal partnership working amid a fragile voluntary sector.
• The future of the Sustainable Social Services Grant.
• Resourcing volunteering in health and social care/challenging racism in health and care settings.
• The Women’s Health Plan/the Mental Health and Wellbeing Strategy.
• Winter demand and the sector’s role in the health and care system.

Furthermore, Welsh Ministers engaged with third sector organisations in many different ways outside these formal meetings, including visits to organisations, attending events and conferences, and via direct correspondence or meetings with individual groups or organisations to hear more specifically about issues which affected them. 

Consultations

Welsh Ministers have committed to procedures for consultation on policy changes and new policy developments which affect the third sector including:

• opportunities for continuing discussion between third sector, volunteering interests and the Welsh Government to foster early understanding and involvement in policy development
• consultation arrangements that normally allow adequate time for wider consultation with networks and service users
• supporting the role of umbrella bodies and intermediaries in facilitating consultation
• feedback to respondents on the replies to and outcomes of the consultation
• opportunities for the sector to continue to be involved at the implementation and evaluation stages of the policy

Why the Welsh Government consults

Consultation helps us to understand how things like a new policy or law may affect you. Better understanding by finding out your ideas and suggestions helps us to make policies more effective.

Consultation is a more formal way of gathering views. It is a way for Ministers to seek a wide range of views on a proposed course of action or policy. We also use other techniques to involve you in decisions. We want to understand different views and perspectives on what we propose to do and your input helps improve government services.

In certain cases, the law states that we must consult with individuals, groups, or partners that could be affected.

Who we consult

We aim to reach as many stakeholders as possible. We target groups and communities who may not normally respond. We want their views.

The Well-being of Future Generations Act says we must involve a diverse range of people in our decisions.

How we consult

When a new consultation is launched, we make the relevant documents available on our website so that anyone can read them and contribute.

We normally allow a minimum of 12 weeks for stakeholders to respond to a consultation, unless in there is a good reason not to. All consultations will have a clear start and end date.

We may also seek information and expertise with a call for evidence. This is not a formal consultation. A call for evidence happens earlier in policy development and may be followed by a consultation.

Engagement with the third sector on consultations 

Welsh Government officials actively encourage third sector participation in consultations by promoting opportunities through established third sector networks, including the Third Sector Partnership Council and Third Sector Support Wales.

All Welsh Government consultations, together with their outcomes, are published on the GOV.WALES website.

Between April 2023 and March 2025, the Welsh Government undertook 138 consultations. The third sector contributed responses to many of these, either as individual organisations or through collaborative submissions representing multiple third sector bodies.

Information on the level of engagement and responses from the third sector is available on the Welsh Government website.

A comprehensive summary of the responses was also published on the consultation web page.

Policy development

Under the Third Sector Scheme the Welsh Government is committed to ensuring that it takes into consideration, at a formative stage, the implications for the third sector of any new policies or changes. This engagement with the sector is key to informing policy development and helping to shape services to meet the needs of people in Wales. An important example of this engagement and the benefits it can bring in practice to third sector organisations being funded by Welsh Government was the development of a new Code of Practice for Funding:

Case Study: Refresh of the Code of Practice for Funding the Third Sector

Overview

In 2025, the Code of Practice for Funding the Third Sector, part of the Third Sector Scheme, was refreshed and relaunched to ensure it remains fit for purpose, clearer to use, and aligned with the evolving needs of the sector and public funders. The refreshed Code provides a shared framework for fair, effective, and consistent funding relationships across Welsh Government and relevant public bodies.

Background

The original Code of Practice plays a key role in guiding how public funding is allocated to voluntary organisations in Wales. Feedback from the sector and public bodies highlighted the need to update the guidance to improve accessibility, strengthen partnership working, and reflect current funding challenges and opportunities.

Approach and engagement

The refresh was led by the Third Sector Partnership Council’s Funding and Compliance Sub-Committee. A co‑production approach was central to the process, with several engagement events held involving third‑sector representatives and Welsh Government officials. These sessions provided opportunities to gather feedback, test emerging proposals, and ensure the updated Code reflected shared priorities and practical realities.

The Refreshed Code of Practice

Launched in 2025, the refreshed Code of Practice for Funding the Third Sector sets out 5 core principles to underpin funding relationships:

1. Early and Continuous Dialogue: regular, meaningful engagement between funders and third‑sector organisations to support shared understanding and effective planning.
2. Valuing and Outcomes: funding decisions that recognise the full social, economic, and environmental value delivered by the sector, rather than focusing solely on outputs.
3. Appropriate Funding Mechanisms: the use of funding tools and models that are proportionate and well‑matched to the agreed outcomes.
4. Equity: fair access to funding, with efforts to remove barriers and promote inclusion across the sector.
5. Flexibility: scope for funders and organisations to agree changes when circumstances evolve, supporting resilience and delivery.

Together, these principles aim to strengthen partnerships, promote consistency in funding practice, and improve outcomes for communities.

Outcomes and next steps

The updated Code provides clearer, more accessible guidance for both funders and voluntary organisations. Following its launch, the Funding and Compliance Sub‑Committee will focus on promoting the Code and supporting its effective implementation across Welsh Government and associated public bodies.

This work marks an important step in reinforcing collaborative, equitable, and outcome‑focused funding relationships with the third sector in Wales.

The Welsh Government, through its core funding of Third Sector Support Wales (TSSW) a partnership comprising the Wales Council for Voluntary Action (WCVA) and the 19 County Voluntary Councils (CVCs) across Wales, supported a Third Sector Infrastructure which, during 2023 to 2025, represented, promoted, supported and was accountable to the third sector at all levels.

This support was focused around 4 key pillars of activity: volunteering; good Governance; sustainable funding; and engagement and influencing with public service partners.

Over the last 2 years, high-level impacts being delivered by TSSW with Welsh Government support include:

• 6,468 organisations were supported with direct information and advice.
• 37,603 hours spent supporting the sector with the four areas of activity as well as brokering other support needed.
• £66,309,089 of grants were awarded to organisations through TSSW.
• 1,751 online courses provided training to 19,254 participants.
• 969 partnerships, forums, networks, and events were facilitated involving 12,319 participants.
• 6,710 Volunteers registered on the Volunteering in Wales 
• 1,247 organisations registered on the volunteering in Wales with 2,706 new volunteering opportunities advertised. 
• By the end of 2024 859 funders were listed on the Funding Wales portal with a total of 876 funds advertised. 31,201 users were registered.

For more information on TSSW you can visit their website.

Other support for the Third Sector

TSSW funding was not the only funding provided by the Welsh Government to third sector organisations across Wales. The Welsh Government provided support, core funding and project funding to many other third sector organisations.

In many cases these funds related to specialist areas of work and the funding was agreed by the appropriate Welsh Government Minister. 

You can see details of this funding in the Welsh Government Consolidated Annual Accounts. This does not include procurement expenditure or indirect payments made to third sector organisations where the Welsh Government provided funding to another organisation, for example a local authority, which may have subsequently funded third sector organisations.

The Welsh Government’s Managing Welsh Public Money guidance sets out the framework and principles which must be applied by the Welsh Government, its sponsored bodies, the NHS in Wales, its commissioners, the Education Workforce Council, Estyn and the Welsh Government’s subsidiary bodies. Further detail can be found at Managing Welsh Public Money.

The Welsh Government’s Code of Practice for Funding the Third Sector (the Code) governs how the Welsh Government, and its agents should approach funding of the third sector.

The Code sets out the types of funding the Welsh Government provides, the principles upon which funding decisions should be based, and the terms and arrangements under which funding should be offered.

Third Sector Scheme

No breaches of the Code were reported during this reporting period.

Further information

Welsh Government Support for the Third Sector

For information about Volunteering

Visit your Local County Voluntary Council or Volunteer Centre

Alternatively contact the Third Sector Unit at thirdsectorqueries@gov.wales

For information on other grant programmes, please contact Wales Council for Voluntary Action (WCVA) on 0300 1110124

For further information on Third Sector Support Wales, visit their website.

• Advice and advocacy, Independent Advice Providers forum
• Animal welfare, Animal Welfare Network for Wales
• Arts, culture and heritage, Creative Lives
• Asylum seekers and refugees, Welsh Refugee Coalition
• Children and families, Children in Wales
• Community, Building Communities Trust
• Community justice, Community Justice Cymru
• Disability, Wales Disability Reference Group
• Education and training, Adult Learning Wales
• Employment, Keep Wales Tidy
• Environment, Wales Environment Link
• Ethnic minorities, Race Council Cymru
• Ethnic minorities, Ethnic Youth Support Team (EYST)
• Gender, Women's Equality Network Wales
• Health, social care and wellbeing, Health, Social Care, Wellbeing Planning Group
• Housing, Homes for All Cymru
• Local and regional intermediaries, CVC Cymru
• International, Welsh Centre for International Affairs
• Older people, Age Alliance Wales
• Religion, Interfaith Council for Wales
• Sexuality, Stonewall Cymru
• Social enterprise, Social Enterprise network
• Sport and recreation, Welsh Sports association
• Volunteering, Volunteering Wales network
• Welsh Language, Mentrau Iaith Cymru
• Youth, Council for Wales Voluntary Youth Services
• WCVA Chief Executive, WCVA representative