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Public Benefit - Test or Riddle?

The poor will always be with us. That much we know. What we now don’t know is who the poor are - particularly since they now seem able to include the “quite well off”. While on the one hand this might seem an engaging socio-economic conundrum, on the other it presents a real practical difficulty for governors and staff in private schools.

Historically there were four distinct heads of charity - the relief of poverty, advancement of education, advancement of religion, and purposes for the benefit of the community. All but the latter were presumed to be carried out for the public benefit. The introduction of the public benefit test by the Charities Act in 2006 brought an end to this presumption and placed an obligation on all charities to pass the test. Not a problem for state schools, but certainly one for schools charging fees usually in excess of the average annual wage. Those who fail to pass face the possibility of being stripped of their charitable status and losing the tax benefits which come with that status - the effect of which would be to dramatically increase the already substantial fees.

In relation to charitable schools, the Charity Commission issued guidance stating that students should have the opportunity to receive a private education regardless of their ability to pay school fees. The Commission applied their guidance to a number of schools and discovered that only one of the five private schools passed this test. This led to accusations that the Commission had misinterpreted the law; viewing the provision of means-tested bursaries as the only way of ensuring access to the poor. What about the many other ways in which schools strive to ensure that poorer students can benefit from their services?

The judicial review into the Commission’s guidance concluded in October 2011 and schools will be pleased with the decision: it is they (rather than the Commission) who have the freedom to determine the level of provision their school should make in order to satisfy the test. What the review failed to establish, however, is a clear and concise set of rules which schools can use in their decision making.

The test requires schools to ensure that the poor can access their services. It is perhaps obvious to say that this means no school can be charitable and exclusively for those who can pay full school fees. But beyond that it is much more difficult - particularly in trying to work out who the poor actually are and ensuring that adequate provision is made for them.

So…

Question 1 - describe “The Poor”

The outcome of the review gives some help - families who can afford substantial school fees (certainly those in the region of £12,000 per year) will not be considered poor. So far so good. However, poor does not necessarily mean “destitute” and can even include those who are “quite well off”. Unhelpfully neither of those terms is defined.

Maximum 50 marks for the governor who works it out!

Now move on to question 2.

Question 2 - for an additional 50 marks and using your answer to question 1, suggest ways that your school can make more than a token gesture for the poor.

This might include offering exam-based scholarships and means-tested bursaries - the latter carrying more weight than the former. In the case of a school with an intake of 70 children a year, the provision of scholarships to 10% of them would probably be enough, but 1% would probably be too few. And so the confusion continues…

Schools should not feel too disheartened however. A more positive outcome of the review is the decision that bursaries and scholarships are not the only way in which schools can pass the test. Other acceptable provisions include entering into arrangements with state schools where students have the opportunity to attend classes in subjects not otherwise available to them. It might also include sharing teachers or teaching facilities with local state schools. Substantial contribution to an associated academy would also be sufficient to pass the test. Failure, however, will await those schools who simply make playing fields available to children from state schools or publish exam papers online.

Question 3 - for a bonus 10 marks, suggest the way forward for private schools.

Whilst the review has certainly provided schools with some food for thought, it is still not entirely clear how they are to ensure that their school passes the test. The law in this area remains complex and we will have to hope that the Commission is able to draft new and user friendly guidance which will help solve the public benefit riddle for good.

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