Speaker - Rosie Chapman

Thank you for asking me to speak to you today.

Some of you may also have attended the ISC symposium on public benefit last month which was, from my perspective as a speaker and panel member, fairly lively.  My reception today feels rather warmer - the clocks have gone forward and Spring appears to be on its way.

If you did attend the symposium, I’d like to reassure you, that I won’t be subjecting you to a re-run of my speech there. Not, I hasten to add, because I’ve lost my nerve, but because I wanted to use this as an opportunity to explore the nature of the public benefit which ETF’s members deliver, compared to that provided by schools.

Charitable independent schools are, without exception, set up with the charitable purposes of advancing education. They may, and many do, have additional purposes but advancing education is their primary purpose and goal. For them - given the level of fees needed to meet the costs of educating a child - demonstrating that those in poverty are not excluded from the opportunity to benefit will be key.

We have assured them that the ways in which they do this are for them to decide, that their resources will determine what they can do, and that bursaries, whilst an obvious route, are by no means the only way of providing a benefit. Having clarified this, we look forward to their contributions to our consultations on draft supplementary guidance on the public benefit of fee-charging charities and of those that advance education.

Inevitably, our draft supplementary guidance for fee-charging charities and those that advance religion have proved more attractive to the press than our draft supplementary guidance for charities which relieve or prevent poverty. I hope what I say today will go some way towards redressing that balance.

Whilst some of your charities have, I know, very close links to particular independent charitable schools, your charities tend to have a different emphasis.  Whilst most of you do have purposes which include the advancement of education, you are primarily about relieving poverty, alleviating hardship and meeting financial need. Demonstrating how your poverty objects are for the public benefit will be different to the ways that charities advancing education might meet that requirement.

Although the intention of the Charities Act is to create a level playing field for all charities, when it comes to the public benefit requirement charities for the prevention or relief of poverty are still something of an anomaly.  The relief of poverty is regarded in charity law as something so inherently beneficial that even helping a very narrowly defined group of people in poverty can still be for the public benefit.  But poverty charities still have to show that their aims are for the public benefit.  In essence that means meeting two key public benefit principles.

The first principle is that there must be an identifiable benefit or benefits from carrying out the charity’s aims.  The only benefits that count here are those that are related to the aims since the requirement is about showing that the aims are for the public benefit.  And each aim has to be for the public benefit.  It’s not enough if some are but others are not.

Sometimes charities’ do things that happen to give rise to benefits, but they are benefits that have nothing to do with their aims and so those sorts of benefits can’t count in a public benefit assessment of the aims

So, for example, while it’s laudable that a charity’s reclamation of a piece of waste land as a park for public recreation co-incidentally becomes a perfect habitat for a rare frog, the frog component doesn’t count when it comes to assessing the public benefit of the charity’s public recreation aims.

We all know that, too often, poverty also creates additional social problems. It can affect mental health, make it more likely that those experiencing it may start abusing alcohol or drugs, or increase the likelihood of people turning to crime to get the money they need.

So our draft supplementary guidance suggests that in the case of charities for the prevention or relief of poverty benefits that are related to the aims can include the benefits not just of relieving someone’s lack of financial resources, but also tackling the social and economic circumstances caused by that poverty.  

Similarly, many of your activities go way beyond simply advancing education. Much of your work is targeted at helping children who are vulnerable to distress and social, as well as educational, failure.

I read one of JET’s case studies of a boy crowded out of his own life and home by the needs of his severely disabled and disturbed sibling. Being funded to attend a boarding school away from this environment was slowly rebuilding his sense of self and confidence, as well as improving his life chances by delivering greatly improved academic achievement. His mother was no longer marginalised by the strain of trying to meet the wildly competing needs of the children’s domestic situation.

This case study, duplicated over and over again by the work you do, provides an interesting take on the public benefit you provide. It’s an aspect of your activities some of you may not have previously considered, but I would encourage you not to under report the impact of this type of benefit against your purposes to relieve poverty.

The second public benefit principle is that the benefits must be to the public, or a section of it.  In meeting this principle, this is where your charities benefit from a particular kind of leeway not shared by other types of charity.

The second key general principle of public benefit is that the benefit must be to the public or a section of it. It sounds like a statement of the obvious – who else, after all, but the public would benefit from public benefit? But, not all charities benefit, or have to benefit, the general public.  Charities can restrict who can benefit where the restriction is not unreasonable but, for charities with a restricted beneficiary class, who benefits and who doesn’t may require some unpicking.

Some restrictions are self-evident. Charities for premature babies benefit newborns, hospices benefit the dying and charity flood- funds benefit those whose homes have been ruined by flooding.

Some restrictions depend on resources, such as limited places being available at a school for children with profound learning difficulties. That the number of places on offer is small isn’t the issue, as long as – within reason - all those who could benefit from the school are able to be considered for these places.

And some restrictions, of course, are just plain inappropriate, such as the – I hasten to add - mythical charity set up to provide a bridge only for Methodists to use.

One way in which the benefits might be restricted might be where benefit is dependent upon a person’s ability to pay any fees charged and this principle is linked to the principle that people in poverty must not be excluded from the opportunity to benefit.  When it comes to these public benefit principles in relation to your educational purposes, the fact that your activities focus largely on providing grants, funding and financial packages to enable children in unexpected financial difficulty to complete the education path shows that much is already being done to meet this requirement.

Yet the purpose of relieving poverty allows you greater freedom to restrict your beneficiary class, enjoying as it does an exception in charity law which allows for a more narrowly restricted beneficiary class than charities which don’t relieve poverty.

This includes, uniquely, defining beneficiaries through a personal connection, being part of the same family, say, or having the same employer.

Your charities are a classic example of this. Individually, you cater for the children of travelling salesmen, actors, those working in the car industry, merchant seafarers, clothing and textile retailers and a host of others specialist industries.  Our draft supplementary guidance suggests that this sort of restriction would be reasonable in relation to your prevention or relief of poverty purposes but that in relation to your advancement of education purposes it possibly wouldn’t.

It would therefore be very interesting to get your views on this during the consultation, based on your considerable experience in this field. 

Before I move on to the reporting requirements of public benefit, I’d like to highlight another key way in which your charities could help meet the public benefit requirement in practice. And that’s through your close relationships with independent schools.

I know many of you work directly with a number of these schools, putting together packages of financial relief, subsidy and care. What you do could not be achieved with cash alone. Your model of co-operation and consultation with independent schools is probably unique in the sector and the nature of that relationship enables you to work together to the greater impact and effectiveness of both of you.

As you develop your thinking on public benefit and augment your activities you may well be in a position to identify tangible ways in which the schools with which you work can improve the scope of the public benefit they can deliver. I think you will be pushing at an open door. I hope too, you will continue to exchange suggestions and ideas with each other. We have long said our hope is that this kind of exchange within different parts of the charity sector will lead to a raising of standards across the sector as a whole, and it is just these types of relationships which are likely to facilitate this.

Now for the reporting requirement itself. You will probably have heard wildly different estimations of what this will involve – from overly onerous burdens designed to make independent schools throw in the towel to a requirement so light-touch it amounts to a get-out-of-jail free card. Of course it’s neither. For most of you, very little additional work, cost, or effort is likely to be needed to re-focus your report in the context of public benefit, but they may require a shift in thinking – to more explicitly deal with the need to explain your public benefit.

As is consistent with our proportionate approach to regulation, different levels of reporting are required for charities above and below the audit threshold of £500,000.

For charities below this threshold, trustees are required to include a brief summary in their Trustees’ Annual Report of the main activities undertaken to carry out the charity’s aims for the public benefit. That’s the minimum but trustees can, of course, provide fuller public benefit statements if they wish to, and this is something we’d encourage.

For charities above the threshold, more is required. From you, we require an explanation in your Trustees’ Annual Report of the significant activities your charity has undertaken to carry out your charity’s aims for the public benefit, as well as your aims and strategies. We want to see an explanation of what the charity has achieved, measured in the context of the aims and objectives set by your trustees.

We’re not being prescriptive about the level of detail needed here – it’s up to trustees to decide how much detail to provide to clearly show what the charity has done in the reporting year in order to meet the public benefit requirement.

But any charity that says nothing about public benefit, or dashes off only the briefest statement, won’t be held to have met the reporting requirement.

Public benefit reporting, for any type of charity, will not be something that is born fully-fledged. This will be a re-iterative process, both for you and for us. We expect to see year-on-year improvements in the level and standards of reporting. And we’ll be actively encouraging and supporting this by making good examples as well-known as possible.

But, although we don’t want you to have to reinvent the wheel, we don’t want to stifle innovation – either of the way the reporting requirement is met or of the development of new programmes and initiatives which help meet the public benefit requirement itself.

Our approach is not to assess every single charity on the register - with 190,000 registered charities on the register those methods are both beyond our reach and inconsistent with our proportionate approach. But we will be carrying out a few early individual assessments, helping to develop our thinking further and –hopefully – provide ever more examples of good practice on the ground. These examples will come from the sector, not from the Commission, and rightly so.

In three years time the Office of the Third Sector will carry out a review of how well charities have done in demonstrating that their aims are for the public benefit and, implicitly, of how well we have carried out our new statutory responsibility of promoting awareness and understanding of the operation of that requirement.

Ensuring this requirement is met is about protecting the integrity of charitable status. It is in our interest, and that of all charities, to show how well this has been achieved, not to set up insurmountable obstacles to doing so.

I think the EFT’s members do some wonderful work, often with resources quite disproportionately low compared to the considerable impact of that work. I think its work that deserves to be better known, amongst existing funders, potential funders and the wider public. A benefit for all charities of the public benefit requirement is the opportunity it provides for them to show the benefit of their work - not theoretically as it appears in a governing document, but in practice.

Rather than approaching it with reluctance or defensiveness, I hope you agree that demonstrating the public nature of charity is an idea whose time has well and truly come and a wonderful opportunity to breathe life into reporting the impact of what you do.

Thank you.