Measuring up

It is not for the Charity Commission or the courts to impose on trustees of a school their own idea of what is for the 'public benefit' so as to qualify for charitable status, the Upper Tribunal has ruled. Provided they run their charity to ensure that the poor are able to benefit in a way that is more than minimal or tokenistic, it is a matter for the trustees themselves to decide how their obligations might best be fulfilled.

Driving seat

The decision follows a challenge by the Independent Schools Council (ISC) to the lawfulness of the Charity Commission's guidance on public benefit for fee-charging schools. In a detailed assessment of the law on charitable status both before and after the Charities Act 2006, the appeal panel concluded that the legislation has not introduced any legal requirement on schools to act in a way prescribed by the Charity Commission or anyone else; they should be free to make their own considered assessment of what is for the 'public benefit' in the circumstances pertaining to their own institution.

The appeal judges also ruled that benefits for non fee-paying students ?may be provided in a variety of ways, such as the remission of all or partial ?fees to 'poor' students and the sharing ?of educational facilities with the maintained sector.

The ruling does not deliver the absolute clarification of charity law that some may have expected. But this case nevertheless has very real implications for the regulation of education in this country, mired as it is in the bitter controversy over state versus private education. This is still a weeping sore for which there is no salve. But the tribunal's firm steer towards autonomy at least puts paid to the efforts of the past government to micromanage schools behind the smokescreen of charity law.

The crux of this case (Independent Schools Council and the Charity Commission for England and Wales (defendant), National Council for Voluntary Organisations and the Education Review Group (interveners); Attorney General v Charity Commissioner for England and Wales (referrer) and the Independent Schools Council (respondents) [2011] UKUT 421 (TCC)) was the interpretation of the public benefit requirement as expressed in the Charity Commission's Guidance on the 2006 Act, which suggested that independent schools might forfeit their charitable status if they did not make bursaries available to people who could not pay their fees.

Of course the concept of what is and is not for the public benefit (as seen by society generally, and as reflected in judicial recognition of the views of society) changes over time. The debate is therefore a political one and the conclusion cannot have the hard-edged clarity the parties might have wished for. But the judges have taken an important position in rejecting the argument that there are dis-benefits in the private schools' sector generally.

The 2006 Act has made little difference to pre-existing law. For example, it does not increase the burden on private schools to prove public benefit before they can qualify for or retain their charitable status. All it has done is to bring into focus what the law now requires by way of the provision of benefit and to whom it must be provided.

Indeed, the tribunal was not concerned with the question of whether a particular purpose is a charitable purpose: the advancement of education clearly is capable of being characterised thus. The real issue about public benefit in the proceedings related to the question whether, as a matter of fact, the class that stood to benefit from those objects '“ those able to afford to pay school fees '“ was a 'sufficient section of the community' when it comes to public benefit in that sense.

Social divide

The essentially political agenda behind the Charity Commission's assessment is laid bare by the intervention of the Education Review Group (ERG), an association of individuals 'concerned in one way or another in the field of education'. Their attack was on the whole system of private education and its allegedly socially divisive effects and detrimental consequences for social mobility. This argument seems to have lost some of its traction since the change in government '“ the backdrop to these proceedings was the Charity Commission's investigation in 2009, when they found that two schools in the north of England failed the public benefit test by not offering full bursaries. Now, the commission's insistence on the link between bursaries and public benefit has come under heavy criticism, particularly as schools cannot be expected to predict what proportion of their turnover has to be given over to such bursaries in order to clear the commission's hurdle.

The tribunal pointed out that a 'clear case' would have to be made to show that an object, which would ordinarily be charitable, is not so, because of the consequences it has for society. An enquiry into whether there is a public benefit cannot be determined beforehand simply because the institution levies charges. This question has to be approached pragmatically. A hypothetical school may have as its sole object the advancement of the education of children whose families can afford to pay fees and this would certainly not qualify for charitable status as lacking the requisite public benefit in terms of 'sufficient section of the community'. But in the real world such a school simply wouldn't exist.

Therefore, concluded the tribunal, the schools involved in this particular case did have purposes for the public benefit. This was because the panel was satisfied, on the evidence before it, that the nature of the education that they provide is for the public benefit, and that the material advanced by the ERG did not displace that conclusion. The charging of fees does not per se exclude charitable status.

Cherry picking

As with many judicial rulings on politically sensitive matters, both sides have claimed a victory of sorts, with the ISC welcoming this clarification of their autonomy and the Charity Commission cherry-picking the lengthy judgment for the bits that support their interpretation of the law (their website quotes the tribunal's comment that 'a trust which expressly excludes the poor from benefit cannot be a charity', but excludes the preceding observation, that such a trust in reality would not exist).

The ISC draws a broader message of comfort to charities across the board, noting that 'schools are no different to many thousands of charities which provide high-value services and have no option but to recover their costs through levying fees'.

Apart from this, there is little by way of specific guidance in the tribunal's findings. The only level of detail to which the tribunal was prepared to descend was with reference to the frothier end of the private school prospectus; the 'gold-plated' facilities on offer that would make it 'more incumbent' on the school to demonstrate a real level of public benefit.

The parties failed to extract from the panel any conclusions about where the lines could be drawn between what is, and what is not, a sufficient element of public benefit to determine whether a charitable school is acting properly. Such a line could not be drawn as the tribunal declared itself constitutionally incompetent to do so (a self-denying ordnance that applies with equal force to the Charity Commission): 'Our decision... will satisfy neither side of the political debate. But political debates must have political conclusions, and it should not be expected of the judicial process that it should resolve the conflict between deeply held views.
We venture to think, however, ?that the political issue is not really ?about whether private schools should ?be charities as understood in legal ?terms, but whether they should have ?the benefit of the fiscal advantages ?which parliament has seen right to ?grant to charities. It is for parliament ?to grapple with this issue.' n

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Rosalind English is an academic consultant at 1 Crown Office Row ?and co-editor of the UK Human ?Rights Blog (ukhumanrightsblog.com) ?where a version of this case ?comment first appeared