Editorial: This guidance avoids confrontation but does not solve the problem

The Charity Commission's general guidance on the application of the public benefit test was published last week, clearing its biggest hurdle yet.

Stephen Cook
Stephen Cook

There was some sniping from the railings - The Daily Telegraph, unsurprisingly, called it a war on public schools - but nothing that really hit home. There are still a couple of laps to go, but Dame Suzi Leather and her team are entitled to feel that they will achieve what was asked of them and get this horse to the finishing post. 

The principal remaining obstacle is - as ever - the detailed application of the guidance to fee-charging charities. The formula in the draft guidance of "people on low incomes must be able to benefit" has (contrary to speculation in this column two weeks ago) evolved into "people in poverty must not be excluded from the opportunity to benefit". This subtle but significant change is another example of the commission responding to consultation: the solicitors Farrer & Co had argued that the earlier formulation mis-stated the law as expressed in the key case re Resch, which said that "the poor must not be entirely excluded" (Third Sector, 4 April 2007). The new wording is much closer to re Resch and will no doubt open the way to much dancing on pinheads by angels, aka m'learned friends; but it means, surely, that the test has been softened. Private schools, pace The Daily Telegraph, can breathe that bit more easily.

There is also more work to do on clarifying exactly how fee-charging charities should demonstrate public benefit, as the specialist charity lawyers have pointed out. What, for example, does "the opportunity to benefit" really mean in practice? The guidance says that the benefits must be more than "token": how high is the bar labelled 'token'? It also says that it is legitimate for charities to supply services "mainly" to people who can afford them: again, how is this term to be defined?

Maybe these questions will be answered satisfactorily through the imminent consultation on guidance for the four sub-sectors, including fee-paying charities. If they are not, no doubt the High Court or the new Charity Tribunal will be called upon to pronounce in due course. That might come sooner rather than later if Odstock, the private hospital recently set up in Salisbury, decides to appeal against denial of charitable status by the commission.

It's safe to predict, however, that nearly all fee-charging charities will be able to keep their charitable status. They will just have to show that they share their specialist expertise with public institutions and provide some free places or bursaries - something that the majority of them already do. That will mean the new legislation will have achieved its political purpose of avoiding a confrontation with the private charitable schools and hospitals and the powerful lobby that supports them. Dissenters will be shown the improvements that some of the more recalcitrant institutions will have made in order to comply with the public benefit requirements.

But avoiding a confrontation is not the same as dealing with the problem, which is that private education and healthcare benefit wealthy recipients, not the public in the generally understood sense of the word. The long-term solution is to let them be businesses like any other, without the tax breaks - which, in the case of private schools, are anyway said to be minimal.

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