Has all of the Commission's public benefit guidance been withdrawn?

No. Most of the Commission's public benefit guidance still stands, and most charities are not directly affected by the sections that have been withdrawn.

What has happened to the Charity Commission's public benefit guidance following the Upper Tribunal's decision?

As required by the Upper Tribunal, we have withdrawn those aspects of our public benefit guidance that require rewriting to ensure that the guidance is consistent with the Upper Tribunal's decision.

The parts of the guidance that are affected are:

a. The whole of our guidance Public Benefit and Fee Charging.

b. On page 19 of our guidance The Advancement of Education for the Public Benefit, the cross-reference to Public Benefit and Fee Charging.

c. Sections F10 and F11 of our guidance Charities and Public Benefit.

d. In section H4 of Charities and Public Benefit, The 8th and 9th bullet points.

e. In sections C3 and F1 of Charities and Public Benefit, the second bullet point in principle 2 (b) (including the reference to section F10), and the reference to section F11 in principle 2 (c).

f. In section F3 on page 19 of Charities and Public Benefit, the reference to section F10 and the fourth bullet point in the second box.

All the guidance is on the Charity Commission's website with the withdrawn sections clearly marked. The withdrawn guidance no longer forms part of the Commission's statutory guidance on public benefit to which charity trustees must have regard when carrying out any powers or duties to which the guidance is relevant.

Does this mean that charity trustees no longer have to have regard to the Commission's public benefit guidance?

No. Charity trustees continue to have a duty to have regard to our public benefit guidance when exercising any powers or duties to which the guidance is relevant. Where passages of our guidance have been withdrawn, trustees do not have a duty to have regard to them. Pending revised guidance being issued, interim advice for trustees is given in these Q&As.

Q4.

When will revised public benefit guidance be available?

A.

The Commission had already stated that it would review its public benefit guidance both generally and to take account of the Upper Tribunal's decision. It has already established a working party to do this.

We aim to produce draft guidance by the end of March 2012, which will be publicly consulted on for three months, before being published in summer 2012.

Q5.

Does the withdrawal of aspects of the Commission's public benefit guidance only affect fee-charging educational charities?

A.

Although the Upper Tribunal's decision was made specifically in relation to fee-charging educational charities, all trustees are required to have regard to the Commission's public benefit guidance when carrying out any powers or duties to which the guidance is relevant,and when reporting publicly on the public benefit that they provide. All charity trustees will need to be aware of the changes to our guidance that have been made in consequence of the decision.

Q6.

What are the key points in the Upper Tribunal's decision that charity trustees should be aware of?

A.

The key points which arise from the Upper Tribunal's decision which charity trustees should be aware of are as follows:

Generally

• All charities must have expressed aims (or purposes) which are for the public benefit.
• An organisation with aims that expressly, or by implication, exclude the poor cannot be a charity.
• All charity trustees have a duty to administer their charity for the public benefit.

For fee-charging educational charities

• Charity trustees of educational charities which charge high fees, in consequence of their duty to administer the charity for the public benefit, are required to take into account the whole of the class of beneficiaries the charity is set up to provide for.
• Accordingly, they have a duty to make provision for the poor. That provision must be more than minimal or tokenistic and must be related to the charity's aims.
• Beyond that, the level of provision to be made for people unable to pay the full fees is to be decided by the trustees in the context of their charity's circumstances. There are no objective benchmarks about what is appropriate.
• In deciding what provision to make for people who cannot afford the full fees, the charity trustees must act in a way that a reasonable body of trustees would in their charity's circumstances.
• If educational charities provide 'luxury' or 'gold-plated' facilities, it will be even more incumbent on them to demonstrate a real level of public benefit.
• There are different types of benefits that charities can provide for people who cannot afford the full fees - direct, indirect and wider benefits. All types of benefit can be taken into account (although some may have greater significance than others) provided that the benefits are related to carrying out the charity's aims.

Q7.

The Upper Tribunal's decision says it only applies to fee-charging educational charities. How does it affect other types of fee-charging charity?

A.

Although the Upper Tribunal's decision was decided specifically in relation to fee-charging educational charities, the key points set out in answer to Q6 are also relevant for trustees of other high fee-charging charities.

Q8.

How do charity trustees know what is sufficient benefit for people who cannot afford the charity's fees?

A.

There are no objective benchmarks that can be applied in every case about what is sufficient benefit for people who cannot afford a charity's fees. Trustees have to address and assess how their obligations may be best fulfilled in the context of their charity's own particular circumstances.

However, in considering how this might be assessed in the context of a charitable fee-charging independent school, the Upper Tribunal set out some relevant factors to be considered which trustees may find helpful. These include:

• The level of fees charged
• The charity's financial situation and business plans (including the level of salaries for professional staff and their required level of qualification)
• How the charity operates on the ground
• Whether the charity provides a 'luxury' or gold-plated' service and what facilities it offers
• Whether the charity has any endowments
• The charity's geographical location and other relevant local factors (such as whether it is in an area of social deprivation).

Trustees may find it helpful to look in this respect at how the Upper Tribunal answered the hypothetical questions put to them by the Attorney General. These are reproduced in Q11. They may also find it helpful to look at examples of how such provision for those who cannot afford the fees can be made and how other charities have addressed this question. Some illustrative examples can be found in Q12.

It is, however, for trustees to make their own decision in the circumstances of their own charity. They have to consider not only the payment of fees but also the question of access to benefits generally and how to treat all their potential beneficiaries fairly.

Q9.

What would the Charity Commission expect trustees of high fee-charging charities to be able to demonstrate with regard to ensuring that people who cannot afford the fees are benefitting?

A.

Where this is relevant, the Charity Commission would expect the charity trustees of charities which charge high fees to be aware of their duty to administer their charity for the public benefit. We would also expect them to be able to demonstrate that the poor are benefiting in a way that is more than minimal or tokenistic, and that their decisions with regard to the benefits for people who are unable to pay the full fees are such that a reasonable body of trustees of a charity in their charity's circumstances could have reached.

Q10.

Do charity trustees still have to report on their public benefit?

A.

Yes. The Upper Tribunal's decision does not change the duty of charity trustees to report on their charity's public benefit and to declare in it that they have had regard to the Charity Commission's public benefit guidance.

In the case of high fee-charging charities, that still means demonstrating in the report what the trustees have done to provide benefits for people who cannot afford the full fees.

Q11.

What were the Upper Tribunal's answers to the hypothetical questions put to it by the Attorney General?

A.

In paragraphs 237-258 of the Upper Tribunal's judgment, the Tribunal answers some questions posed by the Attorney General which consider some hypothetical examples of educational institutions and whether they are operating for the public benefit. The Reference Questions, and the Upper Tribunal's answers to them, are reproduced here.

A1: The answer to this question is Not necessarily, provided that it does not exclude the "poor" altogether. If the basis of the question is that the institution charges full fees for all of its students without providing any identifiable public benefit other than the general benefit to the public of an educated population, the answer is No. But if the institution, although charging fees, has in its student body a not insignificant number of persons whose fees are funded from other charitable sources, the answer is Not necessarily: it will depend on whether there is a sufficient degree of public benefit.

A2: The answer to this question is Yes.

B: As to B generally we note that we are asked whether charity law operates so as to cause the school identified in Questions B1 to B10 to be (i) not operating within the terms of its constitution and (ii) not operating for the public benefit. We do not see those as different questions. If a school is a charity, it is obliged to operate in a way which is for the public benefit; it is part of its constitution, either expressly (as in the hypothetical constitutions in the example: see Schedule 4 to the Reference) or implicitly, that the school will act for the public benefit as we have explained earlier in this Decision. A different question - not one we are asked and not one it is our function to determine on a reference - is whether a school with that constitution would be acting in accordance with its constitution if it operated in accordance with the factual scenarios set out in the Questions.

Under Schedule 4 to the Reference, the objects of the school are restricted to the advancement of education "by the provision and maintenance at the premises known as ABC school or elsewhere of a…school… or schools for the education of children or young persons…." It is not clear that all of the provisions listed in B.2.1 to 2.6 are within the constitution of the school quite apart from any question of public benefit; indeed, in relation to B.2.6 it is clear that they are not. We shall address the point in relation to each paragraph as we go along.

B1: This school is acting in accordance with its objects. As to the £12,000 fee, see paragraph 180 above. This school appears to exclude the poor in practice. Unless this situation is temporary because of special circumstances the answer to question B1 is Yes.

242.

B2 to B10 appear to be designed to draw from us conclusions about where the lines can be drawn between what is, and what is not, a sufficient element of public benefit to determine whether a charitable school is acting properly. Although we will make some remarks about each of the hypothetical scenarios, we decline to give any sort of ruling which is intended to be definitive. Each real case will depend on its own factual circumstances. A tribunal addressing an actual school would need to have all sorts of detailed information: for example, it would need to see detailed accounts, to know the school's business plan, to know what its staff are paid and their level of qualification, to see how the school operates on the ground (is there any gold-plating for instance?), to know what its class-sizes are; and to know what facilities it has (such as playing fields, sports halls, art rooms, music rooms, laboratories, computer rooms, to name but a few). These are only examples.

243.

Further, schools with different levels of endowment might be expected to make different types and different level of provision so that there is no "right" answer to what two otherwise similar schools should do. It may be that geographical location and the levels of deprivation in the local community have a part to play. The Attorney General presumably thinks that that might be the case since the hypothetical schools are all placed in Greater London or the Home Counties. But we wonder whether a school in Hackney is to be treated the same way as a school in Guildford.

244.

It must be borne in mind that, according to our analysis earlier in the Decision, the "poor" cannot be excluded from benefit either as a matter of the school's constitution or, other than purely temporarily, in practice. But that is not all. Provision for the "poor" going beyond a de minimis or token benefit may be present, but it is not necessarily enough; the level of provision for them (taken with benefits to the not-so-poor who would otherwise be unable to afford the fees) must be at a level which equals or exceeds the minimum which any reasonable trustee could be expected to provide. The question therefore in all cases is whether the trustees are acting consistently with their obligations, not whether they have provided a particular level of benefit for the "poor", although some such provision must, on any footing, be made.

245.

With those words of (heavy) qualification, we turn to Questions B2 to B10.

246.

Question B2:

We do not think that any significant weight can be attached to B.2.1. It is in any case doubtful (and not for us to decide) whether this provision falls within the objects clause, but this has nothing to do with charity law.

B2.2 and B2.3 are, it seems to us, within the objects clause; B2.4 may not be. However, assuming that all of these are within the constitution, B2.2 to 2.4 are a start to the provision of public benefit but the extent to which the poor are benefited is unclear. We do not know whether the pupils from the state school are poor or whether their parents could afford the fees in question but have chosen not to. We remark that there must be many parents in England and Wales who could afford to send their children to private schools if they were prepared to prioritise their family expenditure to do so. The fact that a family chooses to spend its resources on other matters does not mean that it is poor; and there are doubtless many citizens who share the views and concerns of the ERG and who send their children to their local state schools as a matter of deliberate choice and conviction. How they are spread between Hackney and Guildford we have no idea. We rather suspect that the marginal cost to the school of making this provision is not large.

B2.5 is a more substantial public benefit. We think that the objects clause is probably wide enough to allow this provision to be made but do not decide the point. We assume, of course, the academy itself will apply the funds from the school for charitable purposes and that there is no question that its own activities might give rise to doubts about the proper application of funds. Whether expenditure of £200,000 p.a. is to be seen as significant in the context of the school's overall financial position we do not know. But assuming it has no endowment, it looks quite considerable in the context of a turnover of £6.7m (£12,000 x 70 x 8: ie, fee p.a. x pupils per year x number of school years) or almost £5.9m similarly calculated if only 7 rather than 8 school years are included, and on the hypothesis of the question that the fees cover costs of running and maintaining the school, with allowance for future maintenance and improvement.

B2.6: we do not consider that this can be taken into account. Although the provision of facilities for adult education is an educational purpose, it is clearly not for the benefit of children or young persons.

Taking B2.1 to 2.5 together and in addition to the main benefit of education to fee-paying students, we think that this school probably is operating for the public benefit.

247.

The school in Question B3 is the same as in Question B1 but unlike the school in Question B2, does one or some only of the things listed in Question 2. We consider that B2.5 alone is probably enough to show that the school is acting fully in accordance with its obligation in giving effect to the public benefit requirement. But none of the other matters, even if all taken together, is in our view likely to be enough.

248.

The school in Question B4 is the same as in Question B1 except that it has an endowment fund out of which it provides scholarships meeting the full amount of fees to a number of entrants each year. It asks, in effect, whether the provision of various levels of scholarship is sufficient to show that the school is operating for the public benefit. Scholarships are awarded on the basis of an entrance examination. Whether scholarships are then awarded "blind" on the basis of the results, we do not know. Nor do we know the extent of the publicity for these scholarships. We think it unlikely in practice that a student would be selected without a reference from his or her existing head teacher or class teacher or without an interview. Whether the entire process from application to award is biased against "poor" people in favour of the "people like us" at the school and therefore possibly discriminatory against persons of small means, does not appear from the scenario. We imagine it is intended to address a hypothetical "blind" situation however unreal that may be and we will proceed on that basis. Even so, we would suggest that it is not possible to ascertain whether the school is in fact being operated for the public benefit without having an idea of what the practical outcome of the entrance examination has been. If all the scholarships have gone to students whose families could afford to pay the full fees, it is not at all clear that the school could be said to be operating for the public benefit.

249.

Quite apart from those matters, it is difficult to address the issues without knowing the size of the endowment: different answers might be given if the fund was enough to provide scholarships for 25% of the entrants but was utilised so as to provide scholarships for only 10%. We will assume for the purposes of the question that, taking one year with another, all of the income of the endowment fund is applied but no capital. Given that there are about 70 entrants per year, the specification of 1%, 2.5% and 5% of entrants cannot be precise: we will assume the number of scholarships to be 1, 2 and 3 respectively; the 10% and 50% figures assumed give 7 and 35 scholars respectively.

250.

Subject to all of those matters and on the basis of those assumptions, we do not think that it could be maintained that 50% was insufficient to satisfy the requirement of public benefit. We also think it difficult to argue that 10% would not also be enough.

251.

At the other end of the scale, the question is whether the trustees of the school would be acting properly if they failed to make any provision over and above the provision of a scholarship to one person each year, on an on-going basis. We do not think that it would be enough, even if that single person was "poor". Where the line is to be drawn between 1% and 10% is not possible to answer on a hypothetical basis. The answer will depend critically on a number of factors some of which we have already identified.

252.

Question B5 repeats the scenario in Question B4 but adds in that the school does one only or some of the things listed in Question B2. We cannot usefully add much to what we have already said. Let us suppose that provision of scholarships by the school at a particular level, say X% (somewhere between 1% and 10%) is sufficient to satisfy the public benefit test; then provision of the additional benefits is not relevant. However, if the school provides less than 10%, the other benefit, taken with the actual level of scholarships, may take the school above the necessary level of public benefit over and above the provision of education to fee-paying students. Clearly, from what we have already said, the provision in B2.5 will be enough. But just as it is very difficult to give an answer in relation to Question B4 about where the line is to be drawn in the case of scholarships, it is even more difficult to say what additional provision is necessary when not only is the starting point not known (ie what is the figure for X%) but it is necessary to make an assessment of how to bring the other matters into account.

253.

Question B6 concerns a scenario similar to Question B4 save that means-tested bursaries are given rather than merit-based scholarships. The relevant student has to be capable of benefiting from the education (a qualification which applies also to fee-paying students given that all of the education provided by the school needs to be for the public benefit if the school is to be a charity). Question B7 modifies that scenario in the same way as Question B5 modified Question B4. The granting of bursaries to "poor" students is probably to be seen as more likely to result in compliance by the trustees of a school than the provision of corresponding scholarships. As with scholarships, we think that 50% is almost certainly enough and 10% probably so. We consider that 1% remains too low. Possibly, the line is to be drawn at a lower figure than the X% for scholarships but precisely where we cannot say any more than in relation to scholarships.

254.

As to Question B8, a school with a (charitable) endowment might be expected to provide more by way of benefit other than to full-fee-paying students than an identically placed school with no endowment. But here again it is not possible to say that "this much" is enough but "that much" is not enough. Each case needs to be judged on its own particular facts.

255.

Question B9 focuses on a case where bursaries are given as in Question B7 and B8 but where they are less than 100% of the fees. There is no reason why such scholarships should not be taken into account in deciding whether, overall, the school is operating in accordance with its public benefit requirement and its obligations as a charity (provided, of course, that it provides at least some benefit which is more than de minimis or token for the "poor"). Less weight is to be attached to a bursary of less than 100% than to a full bursary, but both are relevant to the overall assessment of whether trustees are acting within, or outside, the range within which trustees can properly act. We would only add, in relation to Question B9, that a bursary of 75% would result in fees of £3,125 pa on the basis of £12,500 pa full fee. It is at least arguable that a family which could afford that reduced fee, but no more, should be seen as "poor" in the context of this sort of educational charity. If that is right, 75% bursaries should carry the same weight as a full bursary.

256.

Question B10: we do not think we can usefully add much to what we have already said. The application of 50% to improving facilities and services rather than bursaries means that the 50% is being applied for the benefit of all present, and to some extent, future students who will benefit from the improvements. This is all part and parcel of assessing the overall exercise by the trustees of their functions and of the appropriate allocation of resources, whether derived from endowment or fees, in the provision of facilities and services (including decisions about class sizes, extra-curricularactivities and improvement to buildings).

257.

Question C: this asks the same question as Question B in relation to a different objects clause. The only difference which this makes is that it is clear that the school is acting within its powers in providing the benefits under B2.1 and 2.6. Those matters would be make-weights in assessing whether trustees are acting in accordance with the overall public benefit duties. Our answers are no different.

258.

Question D. this, too, asks the same question as Question B in relation to a third objects clause. This time, the school specialises in music education but provides, nonetheless, a general education. We do not see this case as raising any separate issues from Question B subject to the following points. First, it may be - this would be a matter for factual enquiry - that specialist schools of this nature are more expensive to run, for instance because of the specialist nature of the teachers required or for other reasons. Secondly, in contrast with mainstream schools where there is universally available an education in the State sector, specialist schools of this nature fulfil a need (at least, we think that is the case) which the State generally does not meet. Talented musicians need a specialist environment in which to learn, and that is so whether they are rich or poor. We leave aside such impenetrable questions as to whether children of "rich" families are more likely, on average, to have sufficiently talented children than "poor" families, although we see no reason why this should be so. In these circumstances, the need for such provision would lead us to be more ready to think that the minimum provision for the "poor" going beyond de minimis or token provision is less than in the case of an ordinary school. But subject to a lower threshold, the same principles fall to be applied to the specialist school as to the ordinary school.

Q12.

Are there any illustrative examples of how fee-charging charities might make provision for those who cannot afford the fees?

A.

Here are some illustrative examples.

Fee-charging charitable educational establishments (eg schools, colleges, universities)

The following are some specific examples of ways in which fee-charging charitable educational establishments, such as charitable independent schools, might make provision for people who cannot afford the fees:

Offering free or subsidised access:

• offering bursaries or other types of assisted places;
• a funding arrangement between an independent school and a separate, and possibly linked, grant-making body.

Other types of provision:

• allowing pupils from local state schools to use its educational facilities (including sports facilities, such as swimming pool, sports hall, astro and playing fields, design technology or arts and concert facilities for example);
• allowing pupils from local state schools to attend certain lessons or other educational events at independent schools;
• collaboration between independent schools and state schools, including city academies;
• formalised ways of sharing knowledge, skills, expertise and experience with other educational providers, for example, state schools, colleges or city academies as a form of non-financial sponsorship;
• the formal secondment of teaching staff to other state schools or colleges, for example in specialist subjects such as individual sciences or modern languages;
• working with schools overseas that provide education to children from families that cannot afford to pay for the child's education;
• supporting state schools to help them prepare A-level students for entry to universities;
• hosting joint schools events with other local state and independent schools, such as sports days, maths, spelling, music, dance and drama competitions or productions;
• a charitable independent school and a state school working together on a project to improve the quality of teaching and learning for pupils;
• a charitable independent school and a state school collaborating to share their respective skills and experience;
• a charitable independent school working in partnership with a non fee-charging school overseas to share knowledge, skills and expertise and arrange cultural exchange visits for pupils at both schools.

Other fee-charging charities for the advancement of education and fee-charging charities for the promotion of the arts (eg theatres, concert halls, museums, art galleries)

The following are some specific examples of ways in which other sorts of fee-charging charities for the advancement of education (such as charities advancing education in a particular subject, or museums), and fee-charging charities for the promotion of the arts, such as charitable theatres, concert halls and art galleries, might make provision for people who cannot afford the fees:

Offering free or subsidised access:

• offering concessionary tickets;
• offering free or reduced membership fees;
• lottery-based or ballot systems for allocating places for cheaper tickets for concerts or performances;
• offering free or concessionary rates for state school parties at performances;
• offering free or concessionary rates for state school parties at exhibitions, museums.

Other types of provision:

• putting on additional free, low cost or understudies' performances of a play or concert or using other media such as videos, films, DVDs or CDs to enable others to enjoy the event;
• offering free tours of a theatre or other similar venue;
• drama workshops for students;
• free lectures;
• providing educational opportunities for writers or performers;
• performing in local state schools or other community facilities;
• using the internet to publish or transmit events and publications to a wider audience;
• in addition to offering concessions on ticket prices, a local theatre might also have an exhibition space for local people to view works of art and an amateur dramatic society that local people can join;
• offering additional jobs or volunteer places, for example at exhibitions, museums or events, specifically for people unemployed, who are students or for other reasons have limited incomes and providing them opportunities to enjoy the exhibition, or event, freely;
• providing mentoring schemes, which could be offered in person, by phone or via the internet for example;
• providing networking schemes to share educational knowledge and information, for example to increase understanding of safer working practices in a particular field.

Fee-charging charities for the advancement of health/relief of sickness (eg charitable hospitals)

The following are some specific examples of ways in which charities for the advancement of health/relief of sickness, such as charitable hospitals, might make provision for people who cannot afford the fees:

Offering free or subsidised access:

• offering treatment for free or at a reduced rate;
• the existence of accessible medical insurance or other benefit schemes. (This would depend, though, on the cost of such schemes and what sorts of services people are entitled to receive under them.)

Other types of provision:

• offering free access to specialised medical equipment not available in the local NHS hospital, or through a number of beds in the charitable hospital being made freely available to NHS patients;
• providing medical training to nurses or doctors at an NHS hospital which benefits the non-fee-paying patients at that hospital;
• developing new technologies and undertaking medical research the useful results of which are made publicly available and shared with non-fee-charging hospitals and medical practitioners.

Fee-charging charities providing residential care

The following are some specific examples of ways in which fee-charging charities that provide residential care might make provision for people who cannot afford the fees:

Offering free or subsidised access:

• funding, offered by a local authority, to pay for a place in a care home.

Other types of provision:

• inviting local people who are elderly and in need, but living in their own homes, to join the residents for meals, or attend outings with them, or join in organised recreational activities in the care home.

Fee-charging charities for the advancement of heritage or environmental protection or improvement

The following are some specific examples of ways in which fee-charging charities that for the advancement of environmental protection or improvement might make provision for people who cannot afford the fees:

Offering free or subsidised access:

• offering free or reduced membership fees or entry fees;
• providing free open public access to land, such as commons, open countryside, public footpaths, coastal paths, harbours and woodlands.

Other types of provision:

• offering learning opportunities, active mentoring and coaching opportunities to schools and other educational establishments;
• providing free publications and newsletters about preservation and conservation projects;
• providing free information and advice on protecting buildings, conserving land, reducing carbon footprints, and on other environmental and climate change issues;
• providing information and 'virtual tours' of historic buildings and other educational material via the internet;
• providing free information and advice on archaeology.

Top of page