7 October 2009

Speaker - Dame Suzi Leather

Thank you.

It is a pleasure and, frankly, a relief to talk directly to you today about public benefit and your charities. After a summer dominated by alarmist and misleading press headlines about schools losing charitable status, there is a danger of losing sight of the whole purpose and importance of the re-emphasis of public benefit in the 2006 Charities Act. The timing of this conference is therefore particularly welcome.

Firstly, my role. I chair the Charity Commission. That means I chair the Board which has oversight of the work of the Commission; it is a non-executive role. I am also a beneficiary of both the state maintained and the charitable schools sector as I, and all our children, have benefited from both kinds of educational provision.

Let me assure you the Commission does not inhabit a parallel universe or stand aloof from the realities of running an organisation. We understand not all charitable independent schools have large endowments. That many parents find it difficult to pay the fees. That it’s not always easy to bridge the divide between the educational sectors and build relationships with neighbouring schools. That financial margins are tight and getting tighter. These issues are not academic, if you’ll excuse the pun, and we recognise what many of you are up against.

Despite this, there are some who seem determined to believe that the Charity Commission is politically motivated. That I am somehow on a mission to rid England and Wales of some of the brightest and best stars in the educational firmament. This is, as we have repeatedly said, untrue. The Commission, let me remind you, is independent of Ministers and accountable not to the Government of the day but to Parliament, and through Parliament, to the wider public.

Our motivation comes straight from one of the statutory objectives we are charged by Parliament to deliver - to promote awareness and understanding of the operation of the public benefit requirement. We are the regulator and under the Charities Act this is our responsibility.

I know there are those who continue to claim that the Commission has got the law wrong. Let me address that point directly.

The Act preserves the current case law, and our guidance is based on it. The law is not static, and we have had to consider how the legal authorities, many of which were decided in a different social climate, should be interpreted in a modern context. We have set out our legal reasoning clearly and carefully alongside our guidance. We have seen no legal argument to the contrary that causes us to change our analysis.

There is no doubt that, in due course, the law in this area will be reviewed and clarified by the Tribunal and the Courts. We accept and welcome this as part of the process of the rational development of the law. Unless and until this happens, and our legal interpretation is overturned, then we are all working with the public benefit reporting requirement and our guidance with regard to the operation of the principles as they stand.

There are others who suggest that, even though the Charities Act makes clear that the general principles of public benefit should apply to all purposes that are capable of being charitable, schools are in some way outside those general principles. That somehow a presumption should still apply to education, unlike any other charity. This argument is not only specious, it is unworthy. To be a charity must mean something, not nothing. Public benefit is the characteristic of all charities, and the principles of public benefit apply to all 180,000 charities in England and Wales.

For many of you, I believe, it is much more in keeping with the spirit and ethos of your schools to move away from an unhelpful discourse, towards a narrative of opportunity, confidence, and pride in the benefit you bring.

I believe most heads and governing bodies want to do that and to ensure that their school abides by the reasonable demands of charity law.

Most of the concerns we hear directly from schools, far from being a rejection of the public benefit requirement, express willingness to engage but frustration at what they perceive as a lack of specificity, and a focus solely on bursaries. I hope what I say today will help you and your governing bodies to understand better our approach and to feel more confident about what is expected of you.

As you know, this summer we published the first twelve assessments of charities: a mix of religious charities, care homes and schools. If you read the individual assessment reports, you will see the wisdom of our individual-based approach. For it is clear that once you have visited one independent school you have done just that, visited one independent school: each is different, so it is right to assess each individually.

Let me take you through some of the most frequently asked questions.

Firstly, ‘apart from bursaries, how much and which other sorts of educational benefits for children not at the school - work with state-maintained schools, sharing facilities, that kind of thing – actually count towards meeting the requirement?’ And secondly, in terms of bursaries, ‘how much is enough?’

Both are fair questions, although they do reveal a desire for a universal checklist or benchmark which is anathema to recognising and valuing individual schools operating in individual ways.

There is no across-the-board set value for public benefit to be provided. The case law is clear that both direct access and wider benefits are taken into account. In the case of Re Resch, a case involving a charitable hospital which you may often hear quoted in discussions about public benefit, the court identified subsidy or relief from fees as direct access, and relief and support of the facilities of the adjoining general hospital as being of wider indirect benefit to the community.

We are absolutely willing to recognise that lots of different sorts of opportunities to benefit may count and that all sorts of circumstances will affect the proportion of those benefits that is applicable in each case.

There have been some misguided attempts to draw universally applicable conclusions from our published assessments of individual charities. Unfortunately the accompanying document ‘Emerging findings for charity trustees’ has been almost entirely neglected.

Against each of the principles of public benefit we listed issues which had emerged from the assessments, for other charities to consider. The list for fee-chargers was the longest.

The list highlights the importance of awareness of the opportunities to benefit amongst potential beneficiaries. How can someone take advantage of an opportunity to benefit if they don’t know it exists? What steps do you take to publicise them? Should you do more?

We provide suggestions for a model fee-assistance programme, putting aside dedicated funds for fee assistance, operating a means-tested fee assistance scheme, and setting budgets for the fee assistance that can be offered.

The list is long. The options are many. Please do read ‘Emerging Findings for Trustees’ - it’s there to help you.

Now the sufficiency issue. How much is enough?

We understand why you ask this question, although of course we want to encourage charities to think about public benefit in terms of maximum capacity, not a minimum threshold.

In ‘Emerging Findings’ we are clear: there is no formula for calculating how much benefit should be provided. What matters is that the opportunity to benefit for those who cannot afford the fees is, overall – important word – more than minimal, tokenistic or occurring by chance. In other words it is an outcome we want to see, where charitable resources are used as effectively as possible for the benefit of the public.

The assessments are illustrative but they cannot and should not be taken as indicating a line on a graph which delineates who is in and who is out. What is a reasonable percentage of income to spend on bursaries depends on the circumstances of the individual school. What is reasonable for one school may not be suitable for another, and you who run independent schools know this better than anyone.

Take a relatively small, rural school like Manor House which spends 5% of its gross fee income on bursaries and has links with local state schools. Or Manchester Grammar, a much larger, urban school with considerable endowments, which spends 14% on bursaries and also helps prepare students at state schools for university entry, shares facilities with local schools and youth groups, and provides wider access to lessons and other educational events. We have judged that both these schools offer more than minimal or tokenistic opportunities to benefit to those who cannot afford the fees. But – and this is a hugely important but – these are indicators of the combination of bursaries and other educational benefits we considered to be sufficient in the context of those individual schools. We are not imposing bursary thresholds for all schools.

These are individual assessments that take into account the total package of direct access and wider benefits, and the particular circumstances of the school. The assessments are initial examples and through ‘Emerging Findings’ we give useful pointers. If, on these and other aspects of interpreting the guidance and assessments, it would be helpful to have additional conversations with the Independent Schools Council, let’s have them – much more constructive for your schools than exchanging soundbites through megaphones.

We have not ignored or downplayed the wider benefits that independent schools offer, and we are not trying to duck the question but giving you an honest answer when we say it is inherently difficult to value those wider benefits. And this is where we have come in for some criticism. It has for instance been claimed that we are obsessed with bursaries. That is unfair.

Make no mistake; bursaries are important – they are the clearest example of providing direct access and reflect the approach indicated in Re Resch. But look also, at the pages of guidance we dedicate to wider benefits. They exist so that schools and other fee chargers may be reassured that a wide variety of adjacent activities do count. Indeed, they could in principle count on their own – although in fact we didn’t in our recent assessments see any schools doing enough to do so. But this should not normally be an “either/or” matter. Wider benefits would have to be robust, effective and extensive if no direct access was available.

Re Resch indicates that "indirect as well as direct benefit enters into the account”. Some of the schools we assessed clearly provided sufficient direct access even without taking into account the wider benefits they offered, while others provided insufficient amounts of both.

But for example in two of the schools we assessed, bursary provision amounted to less than 1% of income, and the other opportunities for children not at the school to benefit were also relatively limited. In our judgement, while they are making efforts to do so, they do not currently provide enough opportunity to benefit for those who cannot afford the fees, and so the purposes are not currently operating for the public benefit. To conclude otherwise is really to claim a registered charity has a free ticket to ride, and this is not, and cannot be, the case.

The assessments have already provided some inspiring illustrations of significant ways in which schools have offered wider benefits. But it would help to have many more examples of schools providing extensive wider benefits.

So I would like to take this opportunity to invite anyone here who would like to work with us to help collate and develop best practice models. This might include for instance how schools undertake local partnerships. Such models would not be guidance as such, but they would be helpful examples for schools and the Commission to draw on. I will say more about assessments in a moment but because assessments for any particular group of charities will be so rare, collating examples of what schools do other than bursaries will be important in showing both that the sector, as well as the Commission itself, values other opportunities to benefit.

Next question: what happens if my school doesn’t currently show public benefit? How long have we got?

I’d like to correct one colossal misapprehension: this is not a pass-fail test. We have been assiduous in not using the ‘f’ word ourselves and in challenging reports that do so.

Charities which on assessment do not demonstrate that their purposes – in your case advancing education – are operating for the public benefit will, we hope, embark on a journey towards being able to show that they do. Only in the event of a charity being absolutely unwilling to formulate and implement workable plans for demonstrating that its purposes are for the public benefit would we take more robust action. With the goodwill I believe exists on both sides it need never come to that.

So this is about as far away from a ‘one strike and you’re out’ scenario as it’s possible to get. The charities in the first assessments that did not demonstrate to us that their purposes are currently operating for public benefit have been given three months to undertake to commit to doing so.

They then have a further nine months to provide the Commission with a plan telling us exactly what they intend to do. Providing that this plan is acceptable to us, we will give them more time to implement it.

We recognise developing partnership activities or building up a bursaries fund will take time. We also recognise that in the current economic climate it is more difficult. We know you can’t pull a rabbit out of the hat.

While we are certainly looking for a demonstrable commitment, year on year, to satisfying the public benefit requirement, where we judge that a charity needs an extended period of time to make the necessary changes, we will be prepared to give that charity time. We would not normally expect that period to be longer than five years.

Of course, this timetable isn’t only for schools. Many types of charity we assess will have their own particular issues to address, be they arts charities or membership organisations. This kind of assessment is new to all charities and all charities will be given time to respond.

We have been asked how frequently a charity can expect to be assessed by our staff. For all but the handful of charities which feature in our ongoing assessment programme, the answer is never.

We don’t have an inspectorate and there is no desire, plan or resource to create one.

There are 180,000 registered charities in England and Wales alone: as the Americans say; you do the math. It is not principally by individual assessments that we, or the public, will know about the depth and breadth of public benefit being delivered by these thousands of charities - but by what these charities tell us in their Trustee Annual Reports.

Since the publication of the initial assessments, it seems that the external focus has, unfortunately, been much more on the assessment process and less on public accountability through the normal mechanism of trustee annual reports.

This is a shame. While assessments are clearly very important for each charity concerned, and while they throw light on the Commission’s thinking and approach, it is actually the year in-year out reporting of public benefit in trustee annual reports which will really demonstrate the independent school sector’s public benefit.

Public benefit reporting will be far more important in challenging and changing public perceptions of what charitable independent schools do than many people realise. Trustee annual reports are public documents and they are the official record of what charities achieve year by year. They will be pored over by the public, by parents, by the press.

To help charities we have put on our website a whole suite of fictitious examples of Trustee Annual Reports - including one for a school - so you can see how yours might be presented.

Defining public benefit is, and always has been, something of an evolutionary process. When Parliament was debating the Bill which became the Charities Act 2006, the Minister at the time made a commitment to review the implementation of the public benefit requirement in 2011. I expect any new government would want to carry out that review.

I expect that review to focus very much on how the Commission has done its job in terms of providing guidance, implementing the requirement and looking at the impact it has had.

I believe that by 2011 we will have a much richer evidence base of what different parts of the charity sector are doing for public benefit. We will, for example, have carried out more assessments. In the next round we will focus on a wider range of fee charging charities together with charities where private benefit issues appear to arise. And we will have all the trustee annual reports to draw on – the real vehicle for showing why you are charities and why you therefore may have and deserve the reputational and other privileges which charities enjoy.

The coming squeeze on public expenditure will certainly focus the public mind on charities. Not only because - as in the case of debt and poverty relief charities and community regeneration charities - they have such a vital role to play in supporting the vulnerable in our society, but because in the light of public expenditure cuts financial support and subsidy for charities will require greater justification.

Charities enjoy unrivalled public trust, confidence and support. But none of these are unconditional, none are to be presumed, and none should be taken for granted. A key underpinning of public confidence in charity is precisely that charities exist to benefit the public, not just a particular person, club or narrow segment of our society. If the public believes that the benefiting community is too narrowly drawn, the basis of the bargain between charity and the public could collapse. If this happens, all charities will suffer in the long run and future generations will inherit a sector materially, as well as reputationally, much poorer.

That is why many people, both in the charity sector and outside it, feel that it is right that the long-standing legal principle that charities should be for the public benefit should be re-emphasised, refreshed and clarified by clearer thinking and reporting by charities themselves.

Far from being something to resent, your public benefit reports should generate the public trust and confidence without which no charity can truly thrive. They will also show how with no fanfare so many of you have quietly, long before the new Act, been getting on with the business of widening access to the life-changing opportunities that education at your school brings. I promise you the Commission will not crow at the increased emphasis of these tremendous efforts. They are your achievements. What we do is to provide the guidance, the reporting structure, carry out occasional assessments against that guidance and work with schools to ensure that they can remain charities. You I am sure will far exceed our expectations.

Thank you.