Claris D'cruz explains what the Upper Tribunal's decision means for charitable independent schools.

Last Friday the Upper Tribunal published its decision on the two cases it heard in May which centre upon how the public benefit requirements apply in the context of charitable independent schools and the lawfulness of the Charity Commission’s guidance on this point.  So what does the decision mean for independent schools?

The main highlights are that:    

• Every charitable independent school must take positive steps to ensure that it makes more than a de minimis or token provision for poor children to satisfy the public benefit requirements.
• There is nothing definitive about what - beyond de minimis or token - might be the minimum a school must do to demonstrate public benefit. The Tribunal’s answers to the questions posed by the AG reference provide some guidance, but do not provide definitive rules because the Tribunal concluded that each school must be considered on its own merit, taking into account all the circumstances of the particular school.
• However for schools that charge high fees and/or provide education at the ‘luxury’ end a stringent examination of how the public benefit is satisfied is appropriate and more is to be expected of them so as to justify the "gold plating."
• The decision confirms that ‘poor’ in the context of fee-charging independent schools does not mean destitute – it extends to any child whose family cannot reasonably afford to pay the full cost of the fees. Thus it could include families of moderate or ‘some’ means. Thus the decision makes it clear that any family which could afford the fees is not within the definition of  ‘poor’; this encompasses any family with the means to pay school fees but that, as a matter of life-style, prioritise spending its resources on other things. Ultimately it falls to the governors to decide the thorny question of where exactly to draw the line, bearing in mind all the circumstances of their school and the general principles outlined above.
• Educating fully fee-paying pupils is a direct public benefit if there is also direct benefit for poor pupils beyond a tokenistic and de minimis level.  Without the second public benefit the first does not count. In the right circumstances the remission of fees for an existing pupil whose family has become unable to meet any of the fees due to changed circumstances, is not only a public benefit but also a benefit to someone who has become ‘poor’Indirect benefits also count, so if a charitable independent school collaborates with local state schools the resulting benefits to state school pupils come into the equation.
• It is permissible for some wider benefits to be brought into account. Thus where as part of a school’s citizenship education programme the students are involved in projects which deliver benefits to the community generally, those benefits will count either as wider or indirect benefits. The weight to be attached to any such benefits will depend upon the nature of thee benefits and the precise objects of the school – in some cases the weight may be slight.
• Some things a charitable independent school may do will never count towards the public benefit requirements for its educational objects, such as where a school opens its playing fields and sports facilities to the local community as a whole. 
• It is for the governors of charitable independent schools (not the Charity Commission or the courts) to decide how to meet the public benefit requirements, provided there is more than a de minimis benefit for the poor. Any policy decisions the governors make must be rational and justifiable rather than capricious.
• The Tribunal found that the Charity Commission’s guidance on public benefit was wrong or obscure in places and will therefore need to be corrected.
• It is only in the rarest of cases that a failure to meet the public benefit requirements might threaten the charity status of a school. If schools are failing the public benefit requirements, in most cases this will be as a result of the school and by implication its governors acting in breach of the duties which require the school to be operating for public benefit.

When advising schools on what they need to do to satisfy the public benefit requirements I have in the past used the metaphor of old-fashioned weighing scales. On one side of the scales rests the schools, its resources, location and the nature of education it provides. The benefits it delivers must be placed onto the other side of the scales; weights for direct, indirect and some wider benefits can be put onto this side of the scales, with the weight for some benefits such as bursaries being much greater than others. A school which has significant resources (because of the level of fees it charges its endowments or reserves) may have to do more than a school at the other end of the spectrum to demonstrate that it meets the public benefit requirements. However once the scales have been tipped beyond the minimum required, it does not matter how much more additional weight there is on the ‘benefits’ side of the scales – in terms of its charity status the school is doing all it needs to do.

I think the decision provides clarity for most charitable independent schools who are already delivering sufficient public benefit in the education they deliver to the children of fee paying parents and through bursaries for poor pupils. However schools which make no provision for poor children will need to review their public benefit, since it is only acceptable to have none on a temporary basis. Moreover all schools should reconsider how they report on the public benefit they deliver when the Governors’ prepare the next annual report, to provide the fullest picture possible.

Claris D’cruz is a charities consultant at Wrigleys Solicitors LLP and part of the team that acted for the NCVO on their intervention in the proceedings.