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Private schools and public benefit

By Simon Baughen


The charitable status of private schools raises strong passions, both for and against. Those in the ‘anti’ camp were heartened by the Charity Act 2006. Section 3(2) explicitly provided that there was to be no presumption that purposes in the first three headings listed in s.2(2) – education, religion, prevention and relief of poverty – were for the public benefit. The Act also required the Charity Commission to provide Guidelines on what amounted to public benefit. Section 4(6) required trustees of charitable trusts to ‘have regard to’ such guidance. The Guidelines duly appeared in 2008 and in 2009 the Commission conducted an assessment of five schools to test whether they were satisfying the requirement of public benefit. Two of the schools failed to satisfy the Commission which in 2010 accepted plans increasing the percentage of financial assistance as a percentage of gross fee income from zero to 4.9% for Highfield Priory and from 2% to 3.7% for St Anselm’s.

In 2010 the Independent Schools Council applied for judicial review of the following parts of Commission’s published Guidelines on public benefit.

- 2b Where benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted by geographical or other restrictions; or by ability to pay any fees charged
2c People in poverty must not be excluded from the opportunity to benefit

The Attorney General also initiated a reference to consider how the public benefit requirement might be satisfied in respect of a range of scenarios concerning a hypothetical school charging fees of £12,000 p/a. Both proceedings were heard together before the Tax and Chancery Chamber of the Upper Tribunal. The lengthy, and somewhat elliptical, decision given on 13 October reached the following conclusions.

- the law on public benefit remains unchanged from before the 2006 Act and the removal of the presumption is not relevant to the key issue of whether a sufficient section of the public benefits from the charitable purpose as this was never subject to any presumption.
– the Charity Commission’s Guidelines in 2(b) and (c) do not accurately reflect the pre-existing law with their reference to ‘unreasonable’ restrictions. Provided there is a more than merely token benefit, there is not necessarily any obligation to give the poor the opportunity to benefit. The Tribunal’s further decision of 2 December details exactly which parts of the Guidelines will need to be rewritten.
– However, a trust which excludes the poor from benefit cannot be a charity. Although no case decides the point, the Tribunal ‘…consider it is right as a matter of principle, given the underlying concept of charity from early times. (para 178)’
– ‘The poor’ for this purpose does not necessarily mean the same as it does in charitable trusts for the relief of poverty.
– A trust which by its constitution does not exclude the poor must still operate for the public benefit, ie to make ‘adequate provision other than the provision of education to fee-paying students’( para 214).

The devil, of course, is in detail. This is where the analysis of the reference at the end of the decision is particularly useful. The Tribunal gave no definitive ruling on the various hypothetical scenarios but its remarks give the following indications as to how educational charities that charge fees can show they are operating for the public benefit.

- Providing scholarships and bursaries at a figure between 1% and 10% of entrants, depending on the circumstances of the particular school, such as the size of its endowment fund, if any, its geographical location, and whether it provided a ‘luxury’ education. A higher percentage would be expected for scholarships than for bursaries.
– A 75% remission on fees of £12,000 p/a would be acceptable – a family which could afford 25% fees but no more would arguably be ‘poor’.
– Provision of all of the following: making available its internal examination papers to the public on-line; providing some forms of teaching assistance to local state schools; allowing local state schools free use of its football pitches; co-sponsoring a local academy by paying £1m over five years to its endowment fund. However, only the last of these, on its own, would suffice, assuming such payments fell within the school’s constitution.

The message for fee-charging schools is this. If you are a charity you will need to show that you are operating for the public benefit, either by providing bursaries and scholarships to between 1% and 10% of entrants or by investing heavily in co-sponsoring a local academy. Although the Charity Commission’s Guidelines are flawed and will need rewriting, it seems its 2009 assessments of Highfield Priory and St Anselm’s were correct.

Simon Baughen is a Reader of Law at the University of Bristol and as a qualified solicitor practiced in maritime law as a claims adjuster at A. Bilbrough & Co Ltd. He co-authored The Law of Unincorporated Associations with Nicholas Stewart QC and Natalie Campbell.

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