Board Talk: How fee-charging charities meet public benefit rules

Malcolm Lynch and Patrick Walker consider how charities can comply with the law

Malcolm Lynch: In my opinion, the judgment made in 2011 by the Upper Tribunal, which ruled that Charity Commission guidance on fee-charging was wrong, should have shaped discussions in all fee-charging organisations, but perhaps the majority will have found they were already doing what the judgment said was required of them. However, there will have been some fee-charging charities that required rigorous discussions on how they might comply with the judgment.

Patrick Walker: I agree that most fee-charging schools did find they were doing what was expected of them. After all, the challenge was brought by the Independent Schools Council. In respect of whether the judgment changed the way in which trustees of schools set their fees, I believe the answer to be no. An independent school, regardless of charitable status, has to be run as a business. Fees are set against what is required for the school to continue operating and what the market will bear. That is difficult in the current financial climate. Public benefit, in the principal form of bursaries, will continue to be awarded, but will not be a main driver in the fee-setting.

ML: It would seem that trustees have looked at the costs of running a school and set fees accordingly. Any other fee-charging charity would take a similar approach. However, the judgment found that a school would not be charitable if it excluded the poor. Some schools were excluding poor pupils and would have had to make provision for them.

Patrick WalkerPW: When the Charities Act 2006 came into force with its statements on public benefit, independent schools had to look closely at how they were meeting the requirement. This led to an increase by the majority of schools in the number of means-tested bursaries they were awarding. I think the 'exclusion of the poor' issue will have been addressed successfully in the majority of cases. Since 2006, governors have taken a close interest in this topic and the ruling that public benefit is at trustees' discretion is welcome.

Malcolm LynchML: The commission has, in interim advice after the judgment, suggested other types of provision that could assist a school in meeting the public benefit requirement. The question for many schools that are not able to find bursary provision is whether it is realistic to second teachers to state schools. Perhaps not.

PW: In terms of guidance on fee-charging for trustees, I am not convinced it is relevant to independent schools. It remains to be seen how it is covered in the new guidance. In most cases, governors will be trustees of the charity and directors of the company. Wearing their directors' hats, their principal responsibility is to maintain the school as a viable concern. You make a good point that public benefit is not just about bursaries, as it was often taken to be before the judicial review. Public benefit can be dispensed by sharing facilities and resources with local maintained schools and we, in the Association of Governing Bodies of Independent Schools, have witnessed an increase in this.

ML: Might I express surprise that the trustees are not considering the Charity Commission's guidance? Or are you distinguishing fee-charging advice from public benefit advice? There is a duty on trustees to have regard to the commission's guidance on public benefit. Clearly, this guidance does not look at how a charity should set about charging fees for its services but is more about how it can ensure the charity can deliver public benefit when its fees are high. The challenge that the judgment, or perhaps the commission and some elements of public opinion, gives to trustees is what a charity does to enhance public benefit separately from relief from the fees.

PW: I hope I have not given the impression of any complacency in the independent school sector, because this is not intended, nor is it true. Of course, the governing bodies and trustees pay very careful attention to the guidance on public benefit and will undoubtedly continue to do so once the latest guidance is published.

Malcolm Lynch is a partner at Wrigleys solicitors, specialising in charity law

Patrick Walker is training secretary at the Association of Governing Bodies of Independent Schools

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