CHARITY STATUS AND PRIVATE SCHOOLS
Why not look at Trust law
Lack of confidence in Commission
As the ISC seeks legal clarification on the public benefit criterion for schools to qualify as charities a correspondent to the Telegraph, last week, suggested a different route for private schools which might free them from the heavy handed regulation of the Commission and what many in the independent sector see as political meddling.
The vast majority of independent schools are not-for-profit organisations and technically non-trading in terms of their education provision. The simple solution to the problem suggested the correspondent is to take them out of the charity law and into trust law. They should specifically be exempted from any tax on investment income — as the £100 million is neither here nor there in the present circumstances. In addition they should be encouraged to provide more scholarships and free places in return of gift aid status. Their commercial activities will attract both corporation tax and VAT and normally these are conducted within separate legal entities anyway, but the gift aid status will be a powerful incentive for them to help those less fortunate.
One further consideration to ease the pressure on the education budget would be to give basic rate relief on all school fees up to the level of state school place subsidy. This will reduce the pressure in the state sector for places and the attended state budget allocation.
Many believe that the Charities Commission has mishandled this issue and has lacked transparency and clarity from the very start. The Independent Schools Council says that the entire sector is at the whim of the Commission’s prevailing and subjective view as to what is “sufficient” for a school to get the all-clear. This they claim is an appalling situation for schools to be in, and jeopardises the future of beacons of educational excellence educating almost half a million children annually. Furthermore it is convinced that Charity Commission is interpreting the Charities Act 2006 and long-standing case law incorrectly, and believes that its view is supported by most prominent charity law experts. In short, the Commission is making it up as it goes along.
It is surely plain wrong to focus on encouraging independent schools to offer more bursaries to qualify as charities as there are two significant negative consequences. First it will serve to remove from state schools the brightest pupils, who are important role models and drivers for improvement in other pupils performance in their respective schools, while concurrently signalling that the state system cannot educate the brightest pupils. Secondly by definition it will benefit the few rather than the many. If the aim of the public benefit requirement is to maximise public benefit then it is much better surely to encourage meaningful partnerships between state and private schools so that they can share resources, facilities and specialist teaching. The Charity Commission though has signalled that it wants the system to benefit the few rather than the many an inversion of what its role should be. The Tories in opposition promised an early meeting with the Commission to clear the air, on this issue and the sooner this happens the better. As things stand many in the independent sector believe that the Commission was transformed into a political arm of the last Government which wanted it to cut the sector down to size. Probably not fair, but the Commission has done little to build confidence with the sector in the quality of its decision-making. Any vetting system must be simple, transparent, consistent and predictable. Currently it has none of these characteristics.