News in focus: Scots law a threat to public schools

Fee-charging institutions could lose their charitable status under new legislation, says Mathew Little.

The alma maters of princes and prime ministers are facing some tough challenges from the modernising sweep of charity law reform in Scotland.

The Charities and Trustee Investment (Scotland) Bill, which was passed by the Holyrood Parliament last week, contains uncompromising new rules on public benefit.

Famous institutions such as Fettes, which educated Tony Blair, and Gordonstoun, where Prince Charles spent his teenage years, are at risk of being stripped of their charitable status and the tax perks that go with it.

Satisfaction

The Bill says all existing charities must satisfy a new regulator that access to the benefits they provide is not "unduly restrictive". After a backbench amendment, any fee or charge they demand must also now be taken into account. Elite schools such as Fettes, with its fees of up to £21,000 a year, are getting nervous.

Umbrella body the SCVO has spent a decade campaigning for the Bill. Associate director Stephen Maxwell says: "We needed a strong public benefit test and our view is that it is pretty robust. A significant proportion of existing fee-charging schools will have difficulty meeting it."

The Conservatives think so, too, and made a last-ditch attempt to amend the Bill to lessen its apparent focus on fee-charging schools. Mary Scanlon, the party's communities spokeswoman, tabled an amendment to remove the fees and charges reference. When that was voted down, the party's 15 MSPs abstained from voting for the Bill.

Scanlon believes private schools are now vulnerable. "The phrase 'unduly restrictive' can be interpreted in any form or manner an individual wants," she says. "People will bring their own social ideas to it."

One person's ideas will carry more weight than any in deciding how the Bill is interpreted in practice. Jane Ryder is chief executive of the Office of the Scottish Charity Regulator, the body set up by the Scottish Executive to compile a register of the nation's charities. A Yorkshire-born lawyer and former director of the Scottish Museums Council, it falls to her to decide what "unduly restrictive" means.

Ryder initially opposed the inclusion of public benefit criteria in the Bill, but changed her view as it took shape. At present, however, the OSCR is keeping quiet about the way it plans to interpret the Bill, stating that negotiations with different groups of charities will begin once Royal Assent is given.

As in England, though, the regulator must take into account the intentions of legislators - and these seem to point in one direction. John Home Robertson, the aristocratic Labour MSP who tabled the amendment on fees and charges, says: "I don't think the provision of any service or benefit that is only accessible to the wealthy could satisfy any objective public benefit test.

It will be up to the OSCR to apply the rules fairly, but it would be very surprising if it was to accept as a charity any organisation that provides benefits primarily for the rich."

The Scottish Council of Independent Schools still maintains that "most, if not all, independent schools will pass the test". But director Judith Sischy seems to implicitly accept that the tide could be turning against the more exclusive schools.

"The general view is that day school charges of between £4,000 and £7,000 are not unduly restrictive and are accessible to large swathes of the population," she says. "But is £20,000 for a boarder unduly restrictive?

I don't know the answer to that."

However, private schools may take some comfort from the fact that "unduly restrictive" is just one factor that the OSCR must consider. As the Scottish Executive says: "High fees will not necessarily mean that an organisation will lose its charitable status. The regulator must take into account public benefit as a whole."

But the fact that the debate is even happening shows how politics can dramatically shift. The Executive-sponsored commission on charity law reform first made its recommendations in 2001, but these were relegated to the back burner by ministers worried about "controversial" proposals on private schools. At the time, First Minister Jack McConnell said he would "strongly resist" any moves to strip them of charitable status.

Strange, then, that the public benefit rules in the Bill are actually more radical than the commission's initial proposals. Maxwell believes McConnell had to concede "that the case for a robust public benefit test was strong", and that Labour MSPs made clear they wouldn't pass the Bill unless such a test was included.

With Labour at Westminster adjusting to a reduced majority of 67 and the increased need to placate troublesome backbenchers, the reintroduced Charities Bill for England and Wales could be a very different document by the time it reaches the statute book.

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