DCH 357 THE CHARITY COMMISSION
PUBLIC BENEFIT AND PUBLIC BENEFIT
CHECKS
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 twelve
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:-
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.
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" referred
to in the Commission's earlier evidence to the Joint Committee
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.
13 August 2004
Re Resch's
Will Trusts (1969) 1 AC 514
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 e.g. by way of relief on
the public purse
Attorney General
v The Earl of Lonsdale (1827); Brighton College v Marriott (1926)
; and Malvern Wells v Ministry of Local Government and Planning
(1951)
paragraph 19 of evidence DCH 13
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