PUBLIC BENEFIT REQUIREMENT FOR CHARITIES
New Draft Guidance from the Charity Commission- up for consultation
Greater clarity for stakeholders
The Charity Commission, which regulates the Charity sector, issued Guidance on ‘ Public Benefit’ in the wake of the Charities Act of 2006. It wasn’t a great success. Guidance is, rather obviously, supposed to deliver some clarity to help, in this instance, trustees to understand how their charity might satisfy the explicit public benefit requirement and to inform their decision-making. This it signally failed to do. With respect to schools, the Commission had created the perception that the number of bursaries offered by a school would provide the clearest indicator of public benefit. This managed, simultaneously, to alienate both the independent and state school sectors. State schools were worried that this would provide a licence for private schools to up their game in poaching their best pupils, harming their schools in the process. Private schools with charity status, on the other hand, were determined to preserve the independence of trustees to determine what measures would satisfy the public benefit requirement. Nobody challenges the idea that schools with charity status should demonstrate public benefit but defining this ,in practical form, was problematic. Private schools and one of the bodies that represents them, the ISC, believed that the Commission were giving too little weight to the range of charitable activities that they undertook, in favour of bursaries and a form of crude calculation involving fees and bursaries.
In May 2011 a judicial review was brought against the Commission’s guidance by the ISC, challenging the legal basis of that guidance. The Upper Tribunal gave its judgment in October and December 2011. In short, the judgement found that the Commission had failed in its efforts to provide clarity on this, albeit complex, issue. The Tribunal found that parts of the Commission’s guidance on public benefit were ‘obscure’ or ‘wrong’. The Tribunal ruled that it is for the trustees of a fee-charging charity to decide how best to meet that obligation in the circumstances of their charity (not for the Commission, the Tribunal or the courts), provided they did so in a way that any reasonable trustee would have done, and that support should not be tokenistic. This amounted to a severe rebuke to the Commission for not getting it right in the first place.
The Commission has now, suitably chastised, issued new draft guidance (as it was instructed to do by the Tribunal) ,for consultation . The revised guidance seeks to explain what the public benefit requirement means and sets out what all charity trustees need to know to make sure that they are running their charity for the public benefit. This makes it clear that schools will be given more freedom to decide how to open up to the poor without necessarily providing free places. It provides welcome clarification that charity trustees have the duty to decide what level of public benefit the charity can offer in its individual circumstances.
Under Labour’s 2006 Charities Act, fee-paying schools are no longer automatically entitled to charitable status and must prove they provide wider “public benefit”