Public benefit under the spotlight

Public benefit is under the spotlight: the Charity Commission has just published its latest findings of public benefit assessments, and in February last year independent schools triggered a judicial review of the Commission’s guidance on public benefit, followed by a reference from the Attorney General asking for a clarification on what independent schools (and, by extension, fee-charging charities generally) need to do in order to meet the public benefit requirement.

So, what were the various parties arguing?

Independent Schools Council

After getting over my slight confusion caused by the ISC’s description of their submissions being ‘a dog that didn’t bark in the night’, it became clear that their main criticism of the Charity Commission’s approach to assessing public benefit is that, by looking at what is ‘reasonable’ and ‘appropriate’ for the charity to do in the circumstances, it is basing the test on vague notions that cannot be measured. This has caused considerable confusion among trustees who have been left uncertain about what they are legally required to do.

Another key argument was that trustees of educational charities are under no obligation to offer their services to everyone. The purpose of the charity is to provide education, not to relieve poverty, so trustees are not legally required to ensure access to those who cannot in practice afford the fees set.

Attorney General

The Attorney General was very eager to be seen as not taking any sides, referring to himself as ‘sitting on the fence’. However, he urged the judges to adopt what he called a ‘mish mash’ approach when assessing public benefit: in other words, throw everything into the pot, and see if on balance public benefit is provided. On this basis, it would be necessary to take into account not only direct benefits but also wider and indirect benefits. In the case of independent schools, this would mean not only the benefits to the pupils, but the wider benefit to society that comes from having an educated group of persons.

Charity Commission

The Charity Commission’s key argument – and what effectively causes the most disagreement with the ISC – is that, when assessing whether a sufficient section of the public benefits from the charity, there is a further requirement. The poor must not be excluded, so there has to be sufficient opportunity to benefit in practice for those who cannot afford the fees.

NCVO

In the whole debate about public benefit, it has always been clear that NCVO’s key concern is to preserve public trust and confidence in charity. Public benefit is the main justification for the tax relief and public support that charities receive, so it is essential that:

• all organisations are able to demonstrate that they provide on-going public benefit;
• the public benefit test is easily understood and robust enough for the public to have confidence in it, particularly with respect to charities that charge high fees.

NCVO has never been interested in targeting particular types of charity, and our position is one of principle: if the public believe that access to a charity’s services is unduly restricted because of high fees, or indeed for any other reason, the case for charity is undermined. We therefore agree with the Charity Commission’s principle that every charity must demonstrate it provides identifiable benefits to the public or a section of the public.

However, we were also critical of the Charity Commission’s guidance on public benefit, and how it was applied in the first round of assessments. NCVO’s concern is that there is widespread misunderstanding the guidance and the assessments, which could make compliance more difficult and ultimately cause a decline in public confidence.

What next?

It has now been announced that another reference by the Attorney General will to be heard in mid November. In this case, the Attorney General has asked the Tribunal to consider whether certain charities for the relief of poverty (and particularly those with a restricted class of beneficiaries, such as employee benevolent funds) meet the public benefit test following the removal of the presumption of public benefit in relation to relief of poverty charities by the Charities Act 2006.

It is likely that this controversy over public benefit will surround the review of the Charities Act 2006, which is due in the Autumn. So is it time for a rethink?

As for the case between the Charity Commission and the ISC, beyond the legal jargon of ‘dead parrots’, ‘blancmanges’, ‘sledgehammers cracking nuts’ and ‘dogs not barking in the night’, I must say that it raised some very interesting questions, not only of charity law but also of broader social justice. Now I am really looking forward to seeing what decision the Tribunal will reach, although this is in no way easy to predict: after all, the judges have no legal precedent to which they can refer, and there are various implications that are undeniably politically sensitive. This seems to be confirmed by the rumour that a decision is not expected until the end of July – clearly the judges have to grapple with some tough choices.

What is Public Benefit?

If you’re not clear about what it is, read our briefing on public benefit.