The Charity Commission is on a collision course with judges following the publication of draft supplementary guidance on public benefit and fee-charging charities today, according to the Independent Schools Council (ISC).
ISC chief executive Jonathan Shephard (pictured) said: “The independent schools sector delivers enormous public benefit, and ISC shares the Commission’s wish for this to continue and increase.
“However, the latest guidance has drifted so far from the law that it comes close to ignoring – or even attempting to reverse - some fundamental legal authorities. The role of the Charity Commission is to apply the law, not to create it. Charity trustees need guidance from their regulator that is free from inconsistency, sound in law and workable in practice. The Commission’s latest draft guidance falls short in each of these areas.”
While the public benefit of independent schools is covered by the fee-charging guidance, the Commission has also published draft supplementary guidance on public benefit and the advancement of education. The largest percentage of charities on the register (47 per cent) exist for this purpose, though the Commission estimates less than 1 per cent are schools.
Shephard went on: “In its current form the draft guidance is heavily biased in favour of wealthier charities, which can fundraise or use endowments to widen access. These charities do a superb job, but are a tiny minority of the charitable estate.
“Most charities – including schools and retirement homes - have little spare cash. Indications from the current draft guidance are that the Commission does not fully understand this basic fact. It is fair to say that the guidance also contains some accurate statements, but these are lost in the general muddle. The Commission now has four months to sort out the inconsistencies and issue guidance which is legally and economically sound.”
The fee-charging guidance clarifies that not all fee-charging charities will have to meet the public benefit requirement in the same way, and sets out the framework of factors the Commission will consider in assessing this. It includes a summary of key issues for trustees to think about when charging fees, discusses the requirement that the opportunity to benefit must be available to those who cannot afford the fees, and provides key questions for trustees to consider in order to ensure this happens.
A section on setting and assessing the impact of charging fees looks at charities that provide ongoing services such as nursing care, which often requires a long-term financial commitment, and how such charities can ensure other opportunities to benefit are available. It also considers the impact of external funding of fees; the role of scholarships, bursaries, concessionary or other discount and subsidy schemes, and ways that a charity can provide opportunities to benefit other than direct access to its services. It emphasises that trustees should look at the total package of measures they undertake in order to meet the requirement, in the light of their own circumstances.
Elsewhere in the guidance the Commission says that independent schools cannot simply opt out of the charitable sector if they consider that their responsibilities to meet the public benefit requirement are too demanding.
It states: “It is not an option for the trustees of an existing registered charity simply to decide that the organisation will no longer call itself a charity, ask to be removed from the register of charities, and keep its charitable land, money and other assets. Nor can it simply give away its charitable assets to be used for non-charitable aims or activities.”
Some commentators have suggested that trustees of charitable independent schools that are unable to meet the public benefit requirement could sell their school as a going concern to a commercial or private enterprise to be run as a non-charitable school. However, the Commission says that such a sale could only take place if there is an appropriate power of sale, and if there was such a power, a sale could only take place for the best price reasonably obtainable.
Chair of the Charity Commission Dame Suzi Leather added: “Charities such as museums, theatres, independent schools, hospitals and care homes can legitimately charge fees, but cannot be, in effect, exclusive clubs. What we want to ensure is that they give access to a sufficiently wide section of the public.
“Although some debate has focused on independent schools, this new draft supplementary guidance is intended to help all charities that charge fees, whatever the particular focus of their work, to explain the public benefit they provide.”
All of the Commission’s guidance states that “no charity will be expected to make changes overnight and we will take reasonable account of how much time and resources might be needed by a charity that needs to make changes.” Any charity affected by a public benefit decision will be able to seek a review using the Commission’s internal decision review procedures and if necessary make further appeal to the Charity Tribunal and ultimately the courts.
Both documents are available on the Commission’s website at www.charitycommission.gov.uk and are open for consultation until 11 July 2008.
