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Lord Best: My Lords, I support the amendment. The link between the Bill's public benefit requirement and the charging policy of any charity is most notable in respect of fees charged by independent schools that are charities, as we debated earlier. The amendment tabled by the noble Lord, Lord Phillips, requires the Charity Commission to look closely at those cases. I believe that the outcome after consultation would be a more robust defence of the charitable status of those schools. In effect, the result of the Charity Commission addressing head-on this tricky issue would be that schools that charge fees—they are likely to be quite significant fees, affordable only by the relatively affluent—would be clear on the requirements that the public-benefit test would bring, and, having satisfied those, clear that their status as a charity was secure.
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I have made the point at earlier stages that independent schools that are charities are different—have different and extra responsibilities—from those run purely as commercial enterprises seeking to make profits for shareholders. By accepting those responsibilities, which will have been defined by the public benefit criteria, those schools will deserve the concessions, principally in relation to taxation, that society bestows on charities.

There are now private companies promoting purely profit-making, fee-charging independent schools. The previous inspector of schools, Chris Woodhead, is promoting the Cognita company, for example, backed by a £475 million fund from venture capital investors. Such schools will take their fees and do not accept a responsibility toward the wider community—no bursaries for those from less affluent households, no support from specialist teachers for the comprehensive school down the road, no opening up of facilities for pupils of state schools, no underlying tradition and ethos of educational service to the educational community. There is a difference between an independent school that is there to make money for its backers and shareholders, and one that has charitable objectives and must recycle surpluses—profits, if you like—for charitable purposes.

I strongly suspect that, when confronted with the phenomenon of private education, the public would much rather it were provided by charitable bodies, motivated by a philosophy of goodwill toward the wider community in which they exist, than by profit-making companies that turn their backs on the maintained sector and wish to operate in a way that polarises society between the rich and the rest.

As Jonathan Shephard of the Independent Schools Council said:

Charitable status, with the public benefit requirement, implies something special. The Charity Commission must consult on exactly what that will mean. I hope that there will be quite lengthy consultation, both about public benefit generally and about the specific sectors, which will lead to benchmarks that can be applied flexibly to each individual case. I guess that the commission would want to take a proportionate approach in looking at the size and resources of each charity, that it will not take a one-size-fits-all approach, and that there will therefore be no universal expectation of a set number or percentage of bursaries, for example. No doubt there will be some comparison of the fiscal benefits to the school with what that school gives back. Probably, if a school returns more than it receives, that is evidence that would tend to support the contention that it provides sufficient public benefit. But the commission needs to consult on all that.
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I can see a possible danger of overloading the requirements. If the requirement were to return substantially more than the fiscal benefits gained, that would negate the advantages of charitable status and give a competitive advantage to the commercial operators. That would be a logical nonsense and bad for society. The aim must be to ensure that the public benefit requirement is real. The noble Lord, Lord MacGregor of Pulham Market, suggested that some will fail the test, but we should not make that a large number of the schools in question. In other words, the Charity Commission will need to spell it out with a great deal of care. Those are the very issues that would be put into play in a consultation process of the kind that the amendment would require. It is an important ingredient and I support the amendment.

Baroness Warwick of Undercliffe: My Lords, I rise briefly to speak to the amendment, which would require the Charity Commission to,

when consulting on guidance. That makes a lot of sense and I am sure that the Charity Commission will do so in the normal course of issuing guidance.

However, I want to raise a point that I have made in earlier debates on the Bill in the previous Parliament. It relates to the university sector. I declare an interest as chief executive of Universities UK. It bears repeating that many universities are fee-charging charities, and it is clear that charging fees per se is not inimical to the principle of public benefit. Of course, the public benefit conferred by our universities is not narrowly related to the provision of tuition to students. In broadening research horizons, transferring the knowledge that they create, providing cultural and other facilities for the communities in which they are situated, they must all be considered to be providing public benefit. I hope that the universities' contribution to public benefit is not in any doubt.

Universities are complex organisations that are unlike any other charity. I urge caution when considering the question before us. I hope that the Minister will acknowledge the complexities of the university world in relation to charitable status. If the Charity Commission is to consider fees policies when consulting on new and revised guidance, it must also take a steer from the Higher Education Funding Council as the principal regulator for the higher education sector, about the impact of any such guidance on universities. I hope that my noble friend will confirm that that will be the case.

Lord Borrie: My Lords, the point made by the noble Lord, Lord Best, is probably one that can be broadly accepted. A purely commercial profit-making organisation should not be regarded as charitable. I do not believe that the Charity Commission would regard such an organisation as charitable even with the Bill in its present state.
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The noble Lord, Lord Phillips, has gone further in emphasising the case of Re: Resch, which is part of the common law. The Bill accepts that common law as determining what is in the public interest, unless there is some definition that goes to the contrary. In analysing Lord Wilberforce's judgment, the noble Lord made the point, for example—I shall not quote all his points—that a fee-paying school is beneficial to the public because it enables the state sector to be relieved of the task of educating those who go to fee-paying schools. That is an unsatisfactory argument to carry forward from this Bill into the indefinite future. The noble Lord is right to say that the Bill in its present state will be regarded in another place as rather astonishing for 2005 and that one wants some more guidance.—I would say more statutory guidance.

He has made an attempt to provide some by saying that in consultation the Charity Commission should have regard to the charging policy. Certainly, I do not disagree with that. The charging policy is important because it would indicate to what extent the fee-paying school is catering for a very tiny portion of the population rather than a larger portion, and whether the charges were sometimes reduced for certain numbers of students by bursaries, and so forth.

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But there are other factors that the Charity Commission or, indeed, the Bill ought to take into account, including the matters on which the noble Lord, Lord MacGregor, touched earlier; namely, the extent to which fee-paying schools provide some of their facilities to be available for others in the community and the state sector, including, of course, staff and laboratory facilities, and so forth.

So, while I accord with what the noble Lord, Lord Phillips, has said in his argument, I am not sure that it goes far enough. However, if it would attract wide support here, it is better than nothing. It is better than the very limited way in which the Bill currently deals with public interest, which is to rely entirely on the Charity Commission and, above all, on existing common law, which, as the noble Lord has explained very clearly, is so inadequate.

Lord Hodgson of Astley Abbotts: My Lords, this amendment addresses an issue that we have already debated several times during the various stages of the two Bills brought forward during this and the previous Parliaments. Therefore, I briefly will restate the position of these Benches. Nothing that I have heard causes me to change my view. As I have said several times in the past as regards public benefit, the Government should be congratulated on managing to achieve a delicate balance—not a fudge but a delicate balance—reconciling the various issues and interests involved.

As we have already said several times today, this Bill abolishes the old charitable presumption, so we create a level playing field in which all charities have to meet a public benefit test, no matter what their purposes are,
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and must do so on a continuing basis. We have ensured that the responsibility for that is passed to the Charity Commission under Clause 4(1). We have made the Charity Commission independent of the government in new subsection (1)(a). It may not be independent enough, but we will discuss that again when we come to Amendments Nos. 9 and 10. However, we have made a big step forward and the Government are to be congratulated on what they have done in taking us forward and increasing independence in that clause. In Clause 4(3), we require the Charity Commission to revise the public benefit objectives from time to time.

I therefore have no problem with what the noble Lord, Lord Best, said—that there needs to be consultation and benchmarks. That seems entirely appropriate. But it is the Charity Commission which carries it out. I hesitate to tangle with the noble Lord, Lord Phillips, over Re: Resch., because if he finds it dense, as a non-lawyer he may realise that I find it even denser. This, as an historic case, will presumably be moved forward by the effluxion of time as the Charity Commission carries out those public benefit consultations.

Having set the Charity Commission the task of revising public benefit from time to time, we should surely now leave the commission to get on with its new responsibilities. Surely, it is inappropriate that having set the Charity Commission free—I think that we all agree on how important that independence is—it is ridiculous immediately to turn around and restrict that freedom by the sort of amendment that the noble Lord puts forward.

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