Examination of Witnesses (Question Numbers
320-328)
MR DAVID
MOBBS, MS
RUTH JARRATT
AND MR
STEPHEN LLOYD
8 JULY 2008
Q320 Mr Walker: But where is the
additional charitable work? They are going to be educating children
from the state system but being paid to do it.
Mr Lloyd: They would probably
be paid less because the average state fees are less. When they
did this comparison, OSCR, the Office for the Scottish Charity
Regulator, did an interesting analysis of Dundee High School for
charity law purposes, because they are looking at public benefit
there. What that showed was that Dundee High School, an independent
charitable school, was charging £8,800 a year for day pupils;
otherwise it was £6,800 roughly for the state, so it is a
bit more expensive for a pretty well run day school if you pay
for it than what the state would charge, so in your example, I
think the Charity Commission would say that that is fine.
Q321 Mr Walker: It is doing it at
a discount.
Mr Lloyd: Yes, it is doing it
at a discount.
Q322 Mr Walker: Or assisted places.
Mr Lloyd: Assisted places.
Mr Mobbs: May I just add to this
point? I think this is one of the points that gets confused in
the guidance because it mixes up the delivery of public benefit,
and the access to that public benefit. In the example the organisation
continues to deliver the public benefit in whatever set of circumstances.
The real issue is, is it entirely excluding a section of society
from enjoying that public benefit? If a section of society can
enjoy that public benefit, for example, those in poverty, because
they are paid for by the State, then it has not got an issue of
access. If a section of society can enjoy that public benefit
because the fees charged are reasonable then it has not got an
issue overall, and I think this is where the guidance keeps confusing
"for the public benefit", the range of activities and
the accessibility of public benefit. I think they are all separate
issues and they need to be addressed in the right order.
Q323 David Heyes: Mr Lloyd, I was
a bit surprised when you suggested that this Committee might want
to endorse the guidance and the approach that the Charity Commission
has taken with the public benefit test. It is very contradictory
to what lots of other witnesses have said to us. They have drawn
attention to the serious flaws, in their view, to the guidance.
Do you really think that the Charity Commission can ever hope
to get sufficient clarity and agreement on the meaning of public
benefit to be able to avoid endless wrangling through the courts
until it finally gets settled in that way, or should the Government
think again about the task it has given to the Charity Commission?
Mr Lloyd: The thing about charity
law is that it has evolved over time. It is a classic example
of common law. It has evolved through a range of court cases over
a range of activities and areas. One of the great things about
it is that it is an area of, if you like, fantastic legal biodiversity.
Constantly new charities are being created, new people are thinking
about charitable purposes, and it has expanded by analogy. A hundred
years ago nobody cared much about the environment and then the
National Trust was created and it was recognised as being a charity
and the number of environmental charities that have been created
since is phenomenal. Why I endorse that sort of common law system
for evolving what we mean by charity (and the Charity Commission
is part of this) is that it has got a flexibility that any statutory
definition would inevitably constrain, so I think there is something
glorious if rather uncontrolled about the common law approach
to what we mean by charity. Therefore, I would not recommend that
Parliament looks again at defining public benefit. I think what
has happened through the process over the last three years, and
this Act was put through a huge amount of scrutiny—two committees,
et cetera—is that I think we need to settle down and make
sure it can work. There are flaws in this document. It is a consultation.
On previous Charity Commission consultations they refined the
official guidance quite a lot in the light of responses, but I
think the broad approach, which is that fundamentally Parliament
has said to the Charity Commission in section 4 of the Act, "You
draw up guidance and you work with trustees to do that",
is correct.
Q324 Chairman: Can I finally come
back to Mr Mobbs for a moment? I was not sure from your answers
whether you were saying that your public benefit is so intrinsic
to what you do that in a sense you are not troubled by the new
requirements of the Charities Act in relation to public benefit
or whether it is the case that you are having to look again at
the range of things that you do to ensure that you can satisfy
the public benefit test.
Mr Mobbs: I think the guidance
from the Charity Commission brings a new rigour to reflecting
all the time on how you deliver your public benefit. The point
I have been trying to make is that when you are established as
a charity you essentially are for the public benefit. What you
have to ensure is that your activities, the activities you pursue,
reflect the aims of your charity, which are for the public benefit,
and finally you have to ensure that those activities are accessible
and you are not entirely excluding a section of society.
Q325 Chairman: So how are you more
rigorously doing it now than you were before?
Mr Mobbs: I think the Charity
Commission guidance gives you a framework in which to consider
those three levels of the test. Is your purpose for the public
benefit, do your activities reflect the aims which are for the
purpose and are you accessible? Are you entirely excluding a section
of society? I think it is pretty straightforward when you get
it down to those points, quite honestly, but the debate generally
wraps them all up together and says, "You are not providing
a public benefit because there is an issue about access".
No. You still provide a public benefit. You just have to sort
the issue of access out. That is where the whole debate gets confused.
Q326 Chairman: This case with the
Salisbury Health Trust, Odstock, that set up the charitable enterprise
to do private work, was ruled by the Charity Commission not to
be a charity.
Mr Lloyd: That is right.
Q327 Chairman: I understand the argument
from your firm, was that the Charity Commission misapplied the
law in that case.
Mr Lloyd: Yes. Going back to this
case of Resch, which I referred to at the beginning, it
was quite expensive, no doubt about it and they said, "The
Commission would need evidence that the opportunity to benefit
was in principle available to the public generally", though
in the Resch case there was some evidence that people could
afford the service of the comparable hospital but only through
insurance, and when you looked at the insurance—this is
a 1963 case—and at what the weekly charges were in Australia
and then adjusted them for inflation, they are pretty expensive
by modern prices. Currently weekly charges would be £463
and £654 and so forth. In relation to the Charity Commission's
decision, I think it is a brave decision. I have categorised it
as a red rag to a bull decision. I think it is a decision that
is going to be taken probably to the tribunal, because the Charity
Tribunal has now been set up, and I think it will give a lot of
clarity to how the tribunal then interprets the law. What I am
saying is that I think on the law as it stands the Charity Commission
has gone further than the law really allows it to do. They have
stuck their neck out but if the tribunal upholds them that will
become the law.
Q328 Chairman: But if I were running
Nuffield Health, would I not be worried about what the Charity
Commission had done in that case because I would think I was a
pretty comparable organisation, charging fees for healthcare?
Mr Lloyd: I do not advise Nuffield
and I do not know all the facts of their particular set-up, so
I find it difficult to answer that. The other thing though that
the Charity Commission did say in their judgment was that they
distinguished it from Resch because they said that in that
case the degree of complementarity between the private hospital
provision and that of the public hospital was closer and clearer.
For example, the evidence in that case was accepted, that the
separate private hospital facilities were such as to attract a
high calibre of medical staff who might treat the patients in
the public hospital. Possibly those arguments might apply to Nuffield;
I do not know. All I am saying is, as with all lawyers, that you
have to look at the facts in the individual case and then decide.
I would not necessarily draw a general broad principle out of
Odstock that means that Nuffield is in trouble.
Mr Mobbs: We are fairly relaxed
about the Odstock decision. There is not much explanation behind
the decision by the Charity Commission to determine the argument
that they have applied so you can only speculate, but if there
is an NHS trust establishing a private patient unit, clearly to
raise revenue for the NHS trust, then you could argue that it
fails on the first test because it is not for the public benefit;
it is for the private benefit of that NHS trust to raise revenue,
so you could even go down that course of action if you wanted
to, so we are pretty relaxed about that.
Ms Jarratt: I would like to add
a little bit to the question which was what would we want the
Committee to do. I think it is, as both my colleagues have said
fundamentally, to uphold and support the approach that the Charity
Commission has taken, and I probably am repeating what I said
earlier, on two bases. One is that I think that encapsulating
the spirit of public benefit feels right. If you move away from
a lawyer mentality, frame of mind or approach, if you like, it
makes sense. It will, I am sure, encourage more good to go to
more people. It is helpful; it makes sense; it is real life. The
second thing is that I would encourage the Committee to remember
who the guidance is meant for. It is not meant for specialists.
It is not meant for expert lawyers. It is meant for the trustees
and I would have thought senior executives, and to people like
those I think it makes sense, it is pretty coherent, and those
are the grounds on which I would support both the gentlemen here
in saying that there is some good stuff in this.
Chairman: That is the kind of uplifting
note we should end on. We are grateful to all three of you for
helping us to explore some of the issues in this area. Thank you
very much for your time this afternoon.
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