Public benefit test will go all the way to court, say lawyers

The Charity Commission can expect legal challenges to its decisions on charities that charge fees, writes Paul Jump

Independent schools must prove public benefit
Independent schools must prove public benefit

The Charity Commission admits it is still learning about public benefit, but it already seems inevitable that its decisions last week about fee-charging will not go unchallenged.

The commission's verdict that two schools and one care home did not spend enough on means-tested support has re-opened the debate over whether its insistence that public benefit must be accessible to people unable to afford fees is legally correct.

To the surprise of some, the commission has made very clear in its Emerging Findings document, published at the same time as the public benefit test reports, that charities charging high fees must budget for and advertise a "reasonable and appropriate" number of means-tested bursaries.

But it insists that what is reasonable depends on each charity's circumstances, and this is borne out by the fact that it passed one care home that spent about 3 per cent of its income on means-tested fees assistance, but failed another that spent slightly more.

Simon Weil, a partner at law firm Bircham Dyson Bell, argues that case law makes it very clear that people who can afford fees are already a sufficiently wide beneficiary class.

"The Charities Act 2006 did not charge the commission with redefining public benefit," he says.

Stephen Lloyd, a senior partner at Bates Wells & Braithwaite, says the commission's view is "not unreasonable", but admits it is an extension of case law and is open to challenge.

The assessed charities cannot appeal at this stage: they must wait until the commission uses its regulatory powers to force them to comply with its directions. But a point of law could be referred to the Charity Tribunal by the commission or the Attorney General.

Francesca Quint, a barrister at Radcliffe Chambers, says some of the confusion and bad feeling could have been avoided if Parliament had included a definition of public benefit in the Charities Act.

This was done in Scotland, where the law says that conditions on obtaining benefit must not be "unduly restrictive". Last October, the Office of the Scottish Charity Regulator ruled that four schools did not provide enough means-tested bursaries. Weil says the Scottish approach makes fee-charging a political football.

Meanwhile, there has been no indication that the Conservatives would do anything differently from Labour if they won the next election. Shadow charities minister Nick Hurd has said only that the Tories were "watching the process very carefully".

Jonathan Burchfield, a partner at Stone King Sewell, says the commission is the body best qualified to rule on public benefit and commends it on its "reasonable" approach so far.

Quint also praises its efforts to analyse "chaotic" case law. But she also hopes a test case will be brought before the Charity Tribunal in due course. Given the level of feeling involved, no one would be surprised if this controversy ultimately went all the way to the Court of Appeal.

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