Supplementary memorandum from the Charity
Commission (DCH 357)
The Commission has considered the evidence presented
to the Scrutiny Committee, including from the Home Office, the
charitable sector and their legal advisers. The Commission has
and continues to liaise closely with the Home Office on this issue.
Set out below, the Commission:
— provides further detail on how it
would assess public benefit, particularly how it proposes carrying
out public benefit checks; and
— clarifies and explains further how
it sees the public benefit principles applying to fee-charging
charities, including independent schools, in the future.
OVERVIEW
1. The current law on public benefit would
be preserved in the Charities Bill, as presently drafted, with
the exception that the presumption of public benefit for charities
for the relief of poverty, the advancement of religion and the
advancement of education would be removed.
2. The current law provides that public
benefit is determined on a case by case basis and although in
every category of charity public benefit must be present, the
courts have not adopted the same measure with regard to different
categories of charity and different standards are required for
different charitable purposes. The Commission will follow the
court's approach when determining public benefit in any particular
case and have regard to the purposes of the institution and the
social and economic context within which it operates. As with
the law on charitable purposes, the law on public benefit will
evolve and develop over time, having regard to the relevant charitable
purposes, the charity's activities and the social and economic
context within which it operates. The removal of the presumption
of public benefit will also provide a basis for further development
of the law.
HOW THE
COMMISSION WOULD
ASSESS PUBLIC
BENEFIT
(a) At Registration
3. As is the case now, the Commission will
continue at the registration stage not only to assess whether
the purposes are charitable, but also whether the charity is for
the public benefit. After the enactment of the Bill, a positive
assessment will need to be established in every case, including
for those charities which may currently enjoy a presumption of
public benefit. Paragraphs 20-25 of the Commission's paper DCH
13 sets out how this would be done in further detail.
(b) Public Benefit Checks on Existing Charities
4. The Commission is committed to developing
an on going programme of checks to ensure that registered charities
are both established and operate for the benefit of the public.
Existing charities with purposes which had previously enjoyed
the presumption of public benefit, will come within the scope
of the public benefit checks in the same way as other charities.
5. The Commission's current intention is
to develop and carry out public benefit checks in the following
way:
5.1 First, the Commission will develop a
clear statement of what public benefit means in high level terms.
It intends to revise its publication, RR8 "The Public Character
of Charities", and then issue it for public consultation.
5.2 It will also consider how public benefit
might affect charities within each of the 12 charitable purposes
proposed in the draft Bill.
5.3 The Commission will begin with a research
exercise on how charities under each of the particular charitable
purposes consider they meet the public benefit requirement. These
scoping exercises should be undertaken in full consultation with
all relevant stakeholders and explore a wide range of views.
5.4. Because the Strategy Unit identified
fee-charging charities as giving rise to particular concerns,
the Commission proposes to start with the fee-charging sector.
The Commission will begin with research exercises on how fee charging
charities consider they meet the public benefit requirement. This
would include their fee-charging policies and practices, and other
factors relevant to their public benefit, such as any measures
they take to widen access to their services and facilities by
people who are deterred or excluded from taking up their services
because of the level of fees charged. Again, these exercises will
be undertaken in full consultation with all relevant stakeholders.
5.5 These exercises would enable the Commission
to identify how, and to what extent, fee-charging charities (and
their particular subsectors) are currently meeting public benefit
requirement, and how the requirement might be met in the future.
The Commission proposes to publish the results of these surveys
in a series of regulatory reports. The Commission's intention
is that generally accepted best practices in the provision of
benefits to the public may be developed from these, again in consultation
with the charities involved, and published.
(c) Regulatory Action In cases where the
Public Benefit Requirement is not Met
6 The nature of the steps the Commission
will take in any particular case, will vary depending on how the
public benefit requirement applies to a charity, bearing in mind
the nature of its charitable purposes and activities.
7. Where it is clear that an organisation
applying for registration, is not meeting the public benefit requirement,
the Commission may provide advice, where possible, about how to
alter or restructure the activities so as to satisfy the public
benefit requirements. If public benefit could not be demonstrated,
the application for registration would be rejected.
8. Where it is clear that an existing charity
is not meeting the public benefit requirement, as it applies to
their particular circumstances, then the Commission will consider
taking further regulatory action. Regulatory action in this context
might range from working with the charity to ensure that it organises
its activities to benefit a sufficient section of the public and
thus meet its charitable purposes, through to, in extreme cases,
making a legal scheme to ensure that the assets of the organisation
will in future be applied for other charitable purposes close
to any purposes that have ceased to be charitable.
9. Appeals against Commission decisions,
including decisions to refuse registration and decisions to make
schemes, may be made to the Charity Tribunal which is proposed
by the draft Bill.
HOW PUBLIC
BENEFIT WOULD
APPLY TO
FEE CHARGING
CHARITIES
10. In considering what regulatory action
the Commission may take, the Commission will assess how the legal
requirement that a charity must be established and operate for
the public benefit applies in the particular case. In considering
the impact of fee charging on public benefit, the Commission will
apply the broad principles and approach indicated by the court
in Re Resch:[6]
10.1
both direct and indirect benefits to the public or
a sufficient section of the public may be taken into account in
deciding whether an institution does, or can, operate for the
public benefit;
10.2
the fact that the charitable facilities or services
will be charged for and will be provided mainly to people who
can afford to pay the charges does not necessarily mean that the
institution does not operate for the public benefit; and
10.3
an institution which wholly excluded poor people
from any possible benefits, direct or indirect, would not be established
and operate for the public benefit and therefore would not be
a charity.[7]
The Commission will apply these general principles
accordingly in judging whether or not a charity is meeting the
public benefit requirement in cases of all fee charging charities,
whatever their particular charitable purpose.
11. The "schools cases"[8]referred
to in the Commission's earlier evidence to the Joint Committee[9]will
not prevent the Commission from carrying out public character
checks on them and the general principles above being applied
in the manner described. As with other legal authorities which
impact upon public benefit the cases will need to be considered
as part of the overall framework. The overall framework also includes
the overarching principles referred to above, the nature of the
particular charitable purpose, the charity's particular circumstances
and the current social and economic conditions under which it
operates.
12. As stated above, the law on public benefit
will evolve and develop over time, having regard to the relevant
charitable purposes, the charity's activities and the social and
economic context within which it operates. The Commission will,
in considering the application of the principles which apply to
fee charging charities, including independent schools, mirror
the court's approach and develop the law where this is appropriate.
ENHANCING THE
DEVELOPMENT OF
THE LAW
13. If the Scrutiny Committee wish to recommend
the formulation of statutory, non-exclusive, high level criteria
to be taken into account in assessing public benefit, which applied
across all charitable purposes, this would need careful drafting
and consideration. However, the Commission's view is that this
could enhance the future development of the law on public benefit
by the Commission, the proposed Tribunal and the court in the
context of modern society.
August 2004
6 Re Resch's Will Trusts (1969) 1 AC 514. Back
7
In the absence of any possible direct benefit to poor persons,
in a particular case, in might be arguable that they obtained
an indirect benefit eg by way of relief on the public purse. Back
8
Attorney General v The Earl of Lonsdale (1827); Brighton
College v Marriott (1926); and Malvern Wells v Ministry
of Local Government and Planning (1951). Back
9
paragraph 19 of evidence DCH 13. Back
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