The regulator announced last week that seven out of 11 schools assessed in the first phase of its 'rolling review' did provide sufficient public benefit to justify their charitable status.
Stephen Maxwell, associate director of the Scottish Council for Voluntary Organisations, said the decision was a "ludicrous and illogical" application of charity law and that a much harder line was justified by legislative intent and public expectation.
The Charities and Trustee Investment (Scotland) Act 2005 says there must not be "unduly restrictive conditions" on obtaining the benefit a charity provides. Maxwell said that some schools that passed the test spent considerably less than 10 per cent of their income on means-tested bursaries.
"The OSCR is telling schools they can spend more than 90 per cent of their resources on creating benefit accessible only to people who can afford to pay fees that are about 50 per cent of the average household income in Scotland," he said.
He criticised the regulator's failure to cite examples of disbenefit. He said: "Given the debate about the advantage pupils of fee-paying schools have in getting into top universities and jobs, I don't understand how the OSCR could disregard it."
The regulator concluded that the other four schools did not spend a high enough proportion of their incomes on means-tested bursaries for people unable to afford their high fees (Third Sector Online, 28 October).
Most of the schools that failed said they would comply with the direction to provide more means-tested bursaries. But Dr Michael Carslaw, headmaster of St Leonards School in Fife, said provision of high-quality education delivered enough public benefit by itself. "We will do our best to fulfil any reasonable objection," he said. He described the financial implications of losing charitable status as "minor".
Rosamund McCarthy, a partner at law firm Bates Wells & Braithwaite, said schools could refuse to comply with the OSCR without necessarily losing tax benefits, because tax law followed English law on what counts as charitable. But Maxwell said he thought HM Revenue & Customs had "come around" to applying Scottish charity law in Scotland.
Andrew Hind, chief executive of the Charity Commission, said OSCR decisions would not influence the commission's assessment of public benefit in England.
Michael King, head of charity and education at law firm Stone King Sewell, praised the OSCR for treating each case on its merits, but urged it not to disregard the benefits fee-paying schools produce.
The OSCR assessed 30 'priority' charities, including 11 schools, four residential care homes, three museums and five membership charities.
Four schools failed the test because the OSCR judged their high fees and few mean-tested bursaries to be "unduly restrictive conditions".
Another seven charities have to change their constitutions because their premises are used for non-charitable purposes or because they give government ministers control over them.
REACTIONS FROM THE FOUR THAT MUST DO MORE
HUTCHESONS' GRAMMAR SCHOOL, GLASGOW - 'We will not increase the burden on parents. We will make it possible for intelligent children from any background to come here through our bursary funds' - Dr Ken Greig, rector
2.6% of pupils receive means-tested bursaries
1.9% of income is spent on means-tested bursaries
LOMOND SCHOOL, HELENSBURGH - 'We look forward to increasing the number of bursary pupils at the school in line with our existing policy' - Angus Macdonald, headmaster
0.3% of pupils receive means-tested bursaries
0.4% of income is spent on means-tested bursaries
MERCHISTON CASTLE SCHOOL, EDINBURGH - 'It is vital that our boys learn about service to the community. We are glad the OSCR recognises the work pupils and teachers do to provide a benefit to the public'
Andrew Hunter, headmaster
3.7% of pupils receive means-tested bursaries
1.4% of income is spent on means-tested bursaries
ST LEONARDS SCHOOL, FIFE - 'I would prefer we stay a charity. The implications of not passing the test are minor; the benefits of being a charity are limited to partial relief on rates and relief on corporation tax'
Dr Michael Carslaw, headmaster
0.7% of pupils receive means-tested bursaries
0.5% of income is spent on means-tested bursaries.