Public pressure

The Charity Commission’s first public benefit reports have received wide coverage in the press. The initial shocked reaction has subsided. But the consequences of the findings could be serious, as Sam Macdonald reports

Three charities were judged to be failing to meet the test, and these included one care home charity and two independent schools. (A fourth, another care home, was deemed not to be operating within its objects, and so failed to get out of the public benefit starting blocks.)

All are fee-charging charities, and it is the impact of fee-charging on accessibility that attracted most of the commission’s attention. In this article, we shall look at the independent schools, although the same principles were applied to the care homes and will be relevant to all charities that charge “high” fees (meaning, according to the commission, fees that “many” people could not afford).

The starting line
The commission’s starting position is that if a charity charges high fees for its core services, there will be a significant proportion of the public that is excluded from the opportunity to benefit by dint of the fact that they cannot afford those fees. In its guidance on public benefit, the commission expressed the view that the best way to address this is to provide subsidised access to the charged-for services. It acknowledged that there would be other ways of providing broader public benefit, but it was fairly clear from the guidance that the commission viewed these as second best.

That approach has been applied in the live cases. The commission has placed great weight on the total value of bursaries that a school awards, as well as whether the school offers any fully-funded places. The three schools that passed the test awarded bursaries of between 5 per cent and 14 per cent of total fee income. Of the two that failed, one awarded bursaries worth less than 1 per cent of fee income and the other offered no bursary support at all. The three schools that passed also offered some (though not necessarily very many) fully-funded places. Neither of the two failed schools did this.

Fee support
Looking at fee assistance in isolation, then, the commission’s findings are unsurprising. But public benefit as a legal concept is more complex and flexible than that.

Both of the schools that failed operate partnerships with local schools and other projects designed to provide educational opportunities to children other than their pupils. Indeed, the commission accepted that these programmes did provide broader public benefit in a way that was compatible with the schools’ objects. But it ruled that they did not go far enough.

In a recent letter to schools, the commission has stressed that there is no fixed threshold in terms of the value of bursaries or number of fully-funded places. That may be so, but it does appear that the commission regards means-tested fee assistance as an essential component for any fee-charging charity. Whatever the policy reasons for such an approach, it is not a principle that appears in the law.

Squaring the circle
The commission refutes the suggestion that introducing or enhancing a bursary programme will necessarily lead to higher fees. However, in the case of one of the schools that failed, the annual fees were kept deliberately low so that they were affordable to as many people as possible. It is hard to see how the introduction of a bursary programme would not lead to an increase in fees at such a school, which of course would disrupt the affordability principle. It must be hoped, therefore, that the commission can be persuaded to recognise that the ways in which the broader public can benefit are many and varied, and that there is value in letting schools (and other charities) decide which work best for them.

Sam Macdonald is a partner at Farrer & Co LLP.

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