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Tribunal fails public benefit test

Finance | Andrew Hind | 2 Dec 2011

Former Charity Commission chief executive Andrew Hind offers his verdict on the recent public benefit Tribunal judgment.

The Upper Tribunal’s recent judgment on charitable fee-charging schools and public benefit was a seminal moment in the development of charity law. Or, rather, it should have been.

However, instead of a clear judgment that forever made it plain that with the benefits of charitable status must come real responsibilities, the Tribunal handed down a densely-worded 116-page document with no summary. No wonder that lawyers are still debating what the judges have actually decided.

Before going any further, I must declare an interest. From 2004 until 2010 I was chief executive of the Charity Commission, the body charged with issuing guidance on the new public benefit clauses in the Charities Act 2006.

It was always my strong view that the public benefit “test” introduced by the Act was not about party politics. It was about establishing confidence in the charity brand.

It is surely obvious that, in today’s increasingly cynical world, maintaining public trust and confidence in charity depends on the public being clear about what a charity is. They must know what a charity has to do in order to earn the very significant reputational and fiscal benefits that come from charitable status.

That’s why clarifying what charities which charge high fees have to do, to ensure some of their services are made available to those who can’t afford the fees, was never a crusade against independent schools.

This is also a public-confidence issue for care homes, hospitals, opera houses, sports clubs and any other feechargers with charitable status.

The whole charity sector needed the Tribunal judgment to be clear on what a charity of this sort has to do to pass the public benefit test.

The irony is that, although the judgment has given rise to much confusion about how it should be interpreted, buried at various points within it some clear guidelines can be found. The judges said, much as the Commission’s guidance had done, that:

• A fee-charging school must not exclude from benefit those who cannot afford the fees;
• Provision to this group must go beyond a “de minimis or token level”;
• A school operating at the “luxury end of education” must do more;
• The primary focus must be on the “direct benefits” the school provides; and
• While it is for trustees to decide, they are under the ultimate control of the courts.

Missed opportunity

These points, taken together, would have provided some much-needed clarity if the Tribunal had grouped them together in a concise and accessible summary.

They would have been even more powerful if the judges had followed through on their important observation that the legal concept of charity should not be “frozen at some time in the past”.

But, with a judgment that is rooted in an analysis of case law now decades old, the judges missed a wonderful opportunity to modernise the rules relating to public benefit in the context of changing social attitudes. That is how the courts traditionally operate, and such an opportunity is unlikely to come again for many years.

The public benefit rules in the 2006 Charities Act can be traced back to NCVO’s Charity Law Reform Advisory Group, established in 1998, and chaired by Winifred Tumim. The group’s report called for a public benefit test to be introduced that applied to all charities and which would be understood by the public. “When the law attempts to speak to the public it should speak clearly,” urged Tumim.

Assessed against that standard, the Tribunal has unfortunately failed its own public benefit test.

Andrew Hind is the editor of Charity Finance magazine 

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