In a landmark legal decision last week, the Upper Tribunal ruled that parts of the Charity Commission’s guidance on private schools and public benefit were wrong and should be rewritten.
The verdict marked the latest stage in a long-running legal battle between the Independent Schools Council and the Charity Commission, in which the ISC has claimed that the commission’s guidance, which says fee-charging schools must not exclude those in poverty from the opportunity to benefit from what they do, is wrong in law.
The ISC claimed victory in a statement saying the commission’s guidance had been "overturned". But the 150-page decision document from the tribunal, comprising Mr Justice Warren and judges Alison McKenna and Elizabeth Ovey, presents a more complicated picture.
It said two key parts of the commission’s guidance are wrong – one that says that "where benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted… by ability to pay any fees charged", and another saying "people in poverty must not be excluded from the opportunity to benefit".
But its messages on provision for those who cannot afford the fees are complex. One section says: "The actual exclusion of the poor, other than temporarily, is not permitted… In all cases, there must be a benefit for the poor which is not
de minimis or merely token."
Another passage says: "Apart from provision of a benefit for the poor going beyond the merely de minimis or token, we do not see that there is necessarily any obligation to give the poor the opportunity to benefit. It is entirely up to the trustees how they decide to operate their school, subject only to acting within the range within which they may properly act."
Kenneth Dibble, executive director of legal services at the Charity Commission, said the regulator had been vindicated by the verdict. "We won all the principal legal arguments," he said. "The ISC argued that you could have a school that excluded the poor and this could still be charitable. The tribunal has said this is not the case."
Sam Macdonald, a lawyer at Farrer and Co, which represented the ISC, said he was shocked by the commission’s claim. "I simply fail to see how the Charity Commission can say that the tribunal has agreed with its interpretation of the law," he said.
"What the ISC wanted from the case was a ruling that the way the commission put its guidance together is wrong and leads to too much interference in trustees’ decisions, and that it what we have got."
The ISC had argued in the hearing that there should be no requirement for independent schools to support anyone other than their fee-paying pupils because they constituted a "sufficient section of the public" to which a benefit was offered. It argued that it should be entirely up to trustees to decide whether to offer wider benefits.
Macdonald said this point was a small part of a much broader argument. "We’re not saying we
won on every single legal point, but we’re happy that the commission’s guidance was ruled to be wrong and that trustees will now have more power," he says.
While the protagonists wrangle over who was proven right by the case, charities will be able to use it to find some clarity about the public benefit requirement, which has been widely perceived as ambiguous since it was introduced in the Charities Act 2006.
The decision document makes it clear that bursaries are not always necessary as a way of providing public benefit, and says fee-charging charities should place a "primary focus" on offering benefits that are directly linked to their charitable aims.
It also offers a detailed breakdown of specific situations in which fee-charging schools would, and would not, be deemed to offer a public benefit. This is likely to help schools – and, by extension, other charities that charge high fees – to decide what to do.
Extract from the decision
What the judges said about provision for the poor being 'reasonable'
Although there must be more than a de minimis or token benefit for the poor, once that low threshold is reached, what the trustees decide to do in the running of the school is a matter for them. That is something entirely different from imposing on the trustees the view of anyone else about what is ‘reasonable’.
In some circumstances, it may be that the trustees would be acting properly if they provided a quite modest benefit for the poor in excess of the de minimis level. The public benefit requirement applicable to the school would then be fulfilled; and in that context, we repeat that provision of education to the full-fee-paying students is itself for the
public benefit. The error of the approach of the Charity Commission as we read the guidance is to view the public benefit test as satisfied if, and only if, the provision for the poor (or as it might say, for those who cannot pay fees) is reasonable.
Read what the lawyers have to say about the case
See Editorial about the judges' decision