Alternative Business Models for Charitable Independent Schools - responding to the Public Benefit Test Consultation

On 22 May Coutts Bank and law firm Fisher Jones Greenwood LLP hosted an enterprising seminar at Coutts Bank in the Strand London, entitled ‘Fee Paying Charities: An Alternative Model?’ The timing of the seminar was pivotal as most independent schools with charitable status will be aware, the deadline for submitting their school’s responses to the Charity Commission’s consultation on draft sub-sector guidance for fee paying and education charities, ends on 11 July 2008.

The aim of the seminar was to present a range of options to trustees of independent schools: Should they comply with the new obligations to meet the public benefit test? Should they make their feelings known to the Charity Commission through the consultation process? Or alternatively, should they be looking at alternative models of operating by selling off their school’s capital assets, redirecting the proceeds of sale to providing bursaries in accordance with the school’s charitable objects?

The opening presentation was made by Jane Hobson Head of Policy at the Charity Commission who provided an overview of the Commission’s rationale in producing the public benefit test and reinforced the importance of individual schools responding to the consultation to enable the Commission to fully appreciate the way in which the new test will impact on different types of schools.

Chris Woodhead, Chairman of Cognita and second speaker of the day, was keen to elicit an explanation from Jane Hobson as to how the Commission will interpret the first of the public benefit principles ‘the opportunity to benefit must not be unreasonably restricted by ability to pay any fees charged’? Jane’s response was that ultimately ‘unreasonable restriction’ will be a question to be decided in each case by  the new Charity Tribunal and the Courts.   

The highlights of Chris Woodhead’s presentation have already been widely published in national newspapers. In particular he expressed a personal view that many independent schools waste school fees on “frills and frippery”. In making his controversial comment he added schools are “locked into competition to provide ever more five-star facilities” with little education benefit for pupils.

There followed a presentation by Charles Robinson Development Director of Cognita explaining the Cognita business model and ideas as to how charitable independent schools might avoid the need to comply with the public benefit test. Some of Charles’ business model ideas were entertainingly challenged by charities law barrister Alison  Maclennan from Radcliffe Chambers. She observed “Cognita was not the only show in town” and illustrated how charitable schools might use charities law legislation to avoid the public benefit law test through their own trading companies.

In the course of her presentation Alison also gave her reasons why she disagrees with the arguments presented  by Peter Luxton Professor of Law Cardiff University at the ISC’s Symposium on the public benefit test in March 2008. Her view is that it would be a foolish if not dangerous path for charity trustees to take to avoid the new public benefit test.

Yvonne Spencer partner and education law specialist at Fisher Jones Greenwood LLP, called on the Charity Commission to re-think the restriction outlined in the draft consultation guidance whereby schools’ public benefit will be assessed by the Commission with strict reference to schools’ charitable objects. She highlighted many examples of the excellent initiatives independent schools provide within their local communities which under the current draft guidance would not be credited by the Commission towards the school’s annual public benefit test assessment. Yvonne also rounded off the event with a ten-point action plan for trustees to implement over the next eighteen months to prepare for the new Charities Act regime.

Commenting after the presentations, Tony Fisher senior partner at Fisher Jones Greenwood said “we are delighted to have co-hosted this event with Coutts Bank. The timing of the seminar was opportune for independent schools and we are delighted such eminent and entertaining speakers supported this popular event”.

[Photograph of Yvonne Spencer]