Examination of Witnesses (Question Numbers
329-339)
DAME SUZI
LEATHER, MR
ANDREW HIND,
MS ROSIE
CHAPMAN AND
MR KENNETH
DIBBLE
9 OCTOBER 2008
Q329 Chairman: I think we are going to
stop at that point and go into a second half, which I hope will
not be as long, to talk about the public benefit issues, because
we have devoted some time as a committee in recent months taking
evidence on this and you have produced your various guidances,
which I think we have been rather impressed by as they have dealt
with issues which have baffled philosophers for millennia, and
you have done rather well on it, but now what is the pay-off in
terms of where this has all led you in terms of these vexed issues
to do with whether charities can establish that they, in fact,
do have a public benefit? Can you tell us briefly where you think
you are at with this and what the key issues are that have arisen
along the way?
Dame Suzi Leather: Sure. Can I
start by just saying what our approach is to this? I want to say
this because it has been questioned in some of the responses to
our public consultations. We do have a statutory objective set
by you, set by Parliament, to promote awareness and understanding
of the public benefit requirement and to produce statutory guidance
in pursuit of this objective. So what we have had to do is to
draw up a coherent set of rules on public benefit, drawn from
not only the statutes but also from underlying case law, taking
into account the fact that the presumption of public benefit has
been removed for charities that advance education and religion
and prevent and relieve poverty. So that is in a sense what we
have had to do. We also have to interpret the law in the light
of modern social and economic conditions. Our role in bringing
all these elements together has been a really complex one, and
it is good to know what we have come up with seems to make some
sense to you, as, indeed, it has to I think the majority of the
people who responded to us. In doing that we have carried out
a fantastic amount of public consultation to get this right. We
have tried to present the ideas not in language that is only accessible
to lawyers but in language that is accessible to those of us who
are not lawyers. Our approach is going to be flexible. We understand
that large charities can and should deliver more than small charities
and we recognise that charities are independent and the way in
which they carry out public benefit is going to vary from case
to case. I think that is quite important to say at the beginning.
I said in my introduction that we had recently, this week, announced
the first tranche of the public benefit assessments. Those are
12 charities that we will look at in the next few weeks and months
to determine whether we think they are demonstrating public benefit
against their objects, and those assessments will be made public.
From March next year we will begin to see the first public benefit
reports in trustees annual reports. Trustees have 10 months from
the end of their financial year to put their reports in to us.
So by January 2010 we should have the public benefit part of all
the trustee annual reports for many[1]
registered charities above an annual income of £25,000, and
I think it is then that we will begin to be able to see the richness
of what the charity sector is doing, the public benefit that it
is bringing, and, of course, there is going to be a review of
the implementation of the public benefit requirement in 2011,
by which time you will have the assessments we will have done
by then, all the trustee annual reports, any consideration that
the Charity Tribunal may have made of decisions that we have made
on this. I think in a sense we are not going to have a good evidence
base until we get to that stage of how Parliament's ambitions
and decisions on public benefit have been delivered, but in that
period of time, I think, we will have an awful lot more. We will
have a vast amount more information available to the public on
what it is that charities are doing in return for their charitable
status. They do get the tax breaks, they do get the reputational
advantage; the deal is that they have to bring public benefit,
and I think we as the public need to know what that is.
Q330 Chairman: It has all been a bit
abstract and ethereal up to this point, but now it gets real,
does it not? Because what charities of all kinds want to know
from you is what have we got to do to satisfy you that we have
passed a public benefit test? Is it the case that having done
your series of assessments of particular organisations here that
the results of that will enable organisations across the sectors
to be able to answer that question in a reasonably concrete and
intelligible way?
Dame Suzi Leather: Yes, I think
it will particularly give an indication to charities who are very
like the charities that we have published the assessments of,
of the kinds of activities we have taken into account and what
we have regarded as sufficiency. We are not going to offer any
arbitrary levels at this stage. I think it would be wrong to do
that.
Q331 Chairman: The questions we have
been exploring, these vexed questions about fee-paying schools
and all the rest of it, do you think we are going to have concrete
answers to those questions very shortly?
Dame Suzi Leather: You will have
the description of the activities the charities are doing in order
to demonstrate the public benefit that they are bringing.
Q332 Chairman: We have had very contrasting
views put to us about benefit and disbenefit. Someone running
an independent school would still find it very difficult to know
what is going to get through this test and what is not. You have
read the evidence we have had. The headmaster of a leading public
school told us that he thought a bursary system was—and
these are my words not his—completely inconsistent with
the public benefit test. He thought it was creaming off children
from the state sector, and therefore producing larger disbenefits
to the system, and that it was not an appropriate thing to do
and in fact it was contrary to a public benefit test and you had
to do other things to meet it. How are we going to know what you
think about big questions like that in the very near future?
Dame Suzi Leather: We will have
to take into account any harm or disbenefit that an individual
charity is doing, because one of the things that charity law stipulates
is that there must be a net benefit that a charity is bringing.
That does not mean that if we find any harm it automatically says
that this charity is not for public benefit. We will have to take
that into account.
Q333 Mr Prentice: Can you give us
the names of the charities that are going to be assessed?
Dame Suzi Leather: Yes.
Chairman: We have a list.
Q334 Paul Flynn: The point made is
an interesting one, about the general disbenefit in society from
the division in schools between the private schools and the state
schools which deepens the divides that exist in society at the
moment. As the head teacher of the school said to us, the damage
being done by the alleged benefit of bursaries is that it takes
out the leaders, the pacesetters, from the comprehensive school
down the road. That does enormous damage to them, in that the
pupils do not have models, they do not have heroes to look up
to in school. If they were going to do something really worthwhile,
it has been suggested by some of the evidence we have had, they
would take some of the children who are living chaotic lifestyles
and provide boarding facilities for them, perhaps, or provide
teaching in specialist subjects, where there might be only one
pupil in a state school taking a subject and there might be ten
in a public school. There are real advantages there that the independent
schools can provide, but they are not: they are going for the
easy path of taking the brightest children and using them to bulk
up the intelligence quota of their own school, thus doing great
disbenefit to the state system. It this not a fair point? The
point made by another witness who has served on the board of two
private schools is that all they are interested in, as a board,
is doing down the state school, in being better than the state
school and commercially successful, and their charitable status
was never discussed at a board meeting. Are you giving enough
attention to the benefits as you are to the disbenefits?
Ms Chapman: First of all, it is
important to note that at the end of the day we are about regulating
charities, not about the rights and wrongs of education policy.
Our job is to look at individual charities. Is an individual charity
capable of demonstrating public benefit? That is at a micro level.
That is at an individual charity level. Some of these questions
could be interesting, but they are not relevant factors for us
to take account of. The second thing I want to say is that we
have been at pains to suggest in our guidance and in the consultation
on the supplementary guidance we have just finished on fee-charging
charities, that there is a range of ways in which charities can
give access to the direct benefits that that charity offers. Yes,
in some cases, talking about independent schools, it may be bursaries;
in other cases it could be a range of partnership working. Some
of that will depend on what that particular school's aims are,
but of course it will also depend on what the trustees decide
and the decisions they make. Of course, our job is not to fetter
trustees' decision-making. At the end of the day, it is for them
to decide what is best for their charity. The final thing I want
to say is that this process has been quite interesting. We are
finding—thinking about schools in particular—that
they are very keen, very enthusiastic, really interested in the
process, and coming up with lots of examples. I want to go on
record as saying that there has been quite a lot of enthusiasm
for how this process will work.
Mr Hind: Mr Flynn puts his finger
on a very important point, which relates to the whole charity
sector. If, indeed, there are boards of trustees—not necessarily
just in charitable fee-charging independent schools—who
are going through a whole cycle of a year not thinking about their
responsibilities as charities, that is what the new public benefit
requirement will completely eradicate, because, as Dame Suzi was
saying, every board of trustees now, in every charity, in whatever
they do, will have to report to the public and to us every year
in their trustee report about the public benefit that arose from
the activities they undertook. As a trustee sitting on the board
of a charity, you will no longer be able to go through the annual
cycle not having absolutely in the front of your mind, "What
are my responsibilities in steering and directing this charitable
organisation?"
Q335 Paul Flynn: It is very difficult
to get across to Mr Average Taxpayer that he should give a subsidy
through tax breaks and some of the other advantages to fee-paying
schools.
Dame Suzi Leather: There is no
bar on charities charging fees for services. That is the law.
Of course they do have to have charitable purposes—and advancing
education is a charitable purpose. But in carrying that out, Parliament
has said, I think very sensibly, that you have this two-stage
process: you have to have charitable purposes, but you must be
able to demonstrate public benefit. That means making your benefits
available in a material way to different sections of society,
so not just limiting those benefits to people who can afford them.
Q336 Paul Rowen: Do you accept the
point made in the evidence given to you by the Education Review
Group, that for fee-paying schools it should be providing direct
benefit to the public rather than direct access? They give a list
of examples of the sorts of direct benefit to the public. In other
words, it is not just a few isolated individuals that benefit,
but it is regular classes for state schools, accepting looked
after children, accepting statemented pupils. A whole range of
those activities as being direct benefit rather than direct access.
Dame Suzi Leather: Those, it seems
to us, are all very good examples of activities that will demonstrate
public benefit.
Q337 Paul Rowen: Rather than direct
access. Are you going to say that direct access is not going to
be acceptable?
Dame Suzi Leather: I think the
activities you have described and bursary places are both examples
of ways in which people can materially benefit from a charity
whose charitable purposes are advancing education.
Q338 Chairman: Are you saying that
simply giving bursaries is going to be okay?
Dame Suzi Leather: It is not for
us to say.[2]
Q339 Chairman: You are the regulator.
Dame Suzi Leather: It is not for
us to say what individual charities should do, but giving bursaries
is one way of doing it, but the activities that Mr Rowen has described
are also capable of demonstrating benefit.
1 Note from witness: This is quite complex-registered
charities have to provide annual reports within ten months of
their financial year-end, so timings will depend on when an individual
charity sets its financial year. Back
2
Note from witness: It is not for us to say in advance of
the finalised supplementary guidance, and the results of our first
twelve assessments, being published. Back
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