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Public benefit guidance causes Commission to 'micro-manage' trustees, claims ISC

Governance | Tania Mason | 17 May 2011

The Charity Commission’s guidance on public benefit inevitably leads it to “second-guess and micro-manage trustees” about how to run their charity, in a way that is contrary to the law governing the regulator’s role and remit, tribunal judges heard this morning.

Nigel Giffin QC opened the case for the Independent Schools Council by outlining the umbrella body’s objections to the Commission’s guidance on public benefit, and saying he would be asking the judges to quash the relevant parts of the guidance should they agree with his arguments.

Mr Justice Warren asked Giffin whether the “opportunity to benefit” from a charity’s services that is mentioned in the guidance is a “theoretical, legal opportunity” or a practical one.

Told that the Commission meant ‘practical opportunity’, the judge responded: “If you insert the word ‘practical’, it is difficult to see how that fits with the proposition that it is not the case that people in poverty actually have to benefit.”

Giffin said the Commission has never suggested, in guidance or practice, that in order to be charitable an organisation must give literally everyone who is otherwise eligible the opportunity to benefit, regardless of financial means.

“Rather, the Commission’s position is that within a class or group of people who are prima facie unable to benefit because of financial means, you have to do what the Charity Commission necessarily characterises as what is ‘reasonable or appropriate’ in order to make sure that some proportion of that group is enabled to benefit, notwithstanding their lack of means.

Impossible to define 'sufficient section of the public'

“We say that one of the fundamental problems with this approach is that we find it difficult to reconcile with any principle or logical approach to what constitutes a sufficient section of the public, for the charity to be for the public benefit. We also say it is an approach which inevitably turns what ought to be an inquiry about charities’ objects into an inquiry about how the charity operates in practice.”

Another complaint, Giffin said, is that the test of whether a charity has done what is reasonable and appropriate, is “so vague and uncertain” that it leaves trustees unable to say with any certainty what they must or must not do in order to avoid being in breach of trust.

“And therefore there is an inexorable consequence that the Charity Commission gets pulled in to second-guessing and micro-managing trustees about how to perform their duties and run a charity.” Giffin added that examples of this had already been seen in the public benefit assessments that the Commission has conducted so far.

Widening access 'not a bad thing'

“That is why we are here,” Giffin declared. “The ISC has not brought these proceedings because it thinks that widening access to independent charitable schools is a bad thing or an unimportant thing. My client’s position is that widening access is an important thing, and the sector as a whole already goes to great lengths to widen access and engage in partnership activities.

“The practical problem that concerns the ISC is that by the Commission’s approach to what is a strict legal requirement, it has become very difficult, impossible even, for trustees to know what they can or cannot do. And the Commission has been drawn in to taking decisions for them in precisely the way the 1993 Charities Act says it is not its function to do.”

Who are the beneficiaries?

Mr Justice Warren told the parties to the case that he would want to hear arguments from each of them about who the beneficiaries are in a charitable school – “are they the children? The parents? Or society as a whole?”

The hearing is expected to last at least seven days. The Attorney-General is due to be heard next, followed by the Charity Commission and the two interveners, the Education Review Group and NCVO.

Mr Justice Warren is hearing the judicial review case with Judge Elizabeth Ovey and Judge Alison McKenna in the Upper Tribunal (Tax and Chancery).  A reference by the Attorney General to clarify the law is being heard in tandem.

Directory: The Charity Tribunal
Who's Who: Alison McKenna