News & publications
Charities, fee charging and public benefit: Update- 26/07/2011
Introduction
Charitable organisations will already be well aware of the Charity Commission’s Public Benefit Guidance. The Charities Act 2006 requires charities to have regard to the Guidance and to demonstrate their compliance with the public benefit requirement.
The Commission’s Guidance sets out what it considers to be the public benefit test. The test includes the requirement that people in poverty must not be excluded from the opportunity to benefit. This has particular relevance for the education sector, because of the issue of fee-charging.
Following a series of public benefit assessments conducted by the Charity Commission, it emerged that some fee-charging charities did not appear to be doing enough to comply with the public benefit requirement. Some of the schools assessed were criticised for providing insufficient places that were affordable to "people in poverty". This sparked considerable debate about whether the Charity Commission’s approach was correct. Many commentators asserted that it was wrong in law.
The controversy was referred to the Upper Tribunal by the Attorney General and was heard together with an application for judicial review in May by the Independent Schools Council. Other interested parties, including the National Council for Voluntary Organisations and the Education Review Group, have also contributed.
At the time of writing, the resulting judgment has not yet been published, but this bulletin summarises the issues raised and the possible outcomes.
Issues
The main questions for the tribunal were:
- the legitimacy of the Charity Commission’s views on the public benefit requirement, and particularly its view that an essential element is the requirement that people in poverty must not be excluded from the opportunity to benefit;
- what steps a school must take in order to comply with the public benefit requirement (using hypothetical examples); and
- to clarify the issue generally.
The arguments against the Charity Commission’s interpretation of the public benefit requirement refer to historical statutes and cases (some dating back to the 17th century). These provide authority for the proposition that the advancement of education is self-evidently an exclusively charitable purpose providing benefits to the public. It follows that (so long as the establishment is not a profit-making venture for private gain, and that its beneficiaries constitute a sufficiently wide sector of the community) there should be no need for educational charities to provide any further evidence of the public benefit they provide. There are authoritative cases stating that the availability of benefits to people in poverty is not necessary.
Outcomes
Whatever the outcome, it is almost certain that the Charity Commission’s Public Benefit Guidance will have to be rewritten. We do not yet know the extent to which the Charity Commission will have to change its views on the issue of affordable access to services, particularly fees.
This will take some time, so the practical advice for now can only be to continue to consult the existing Guidance, follow it (unless there is a good reason to depart from it), and watch this space...
Further uncertainty is due to be clarified this Autumn, when another court case will deal with the issue of how wide the group of potential charitable beneficiaries needs to be, and whether it can be defined by reference to the beneficiaries’ relationship with a particular organisation.
In addition, a review of the Charities Act 2006 is due to be carried out this year, which may result in further changes. At Manches we will keep abreast of developments and publish further bulletins on significant issues.