I take my hat off to Alan Johnson: he’s managed to achieve a public profile far ahead of his Labour deputy leadership rivals this week with his brutal condemnation of Margaret Hodges remarks on housing, and now with his suggestion that independent schools should have to share their resources with the state sector if they are to retain their charitable status.
It’s clever, this, and clearly based on briefings he’s had as Education Secretary, because there is a real chance of a shift in public policy in this direction in the next http://www.gooakley.com/ couple of years. But it’s arguably superficial and opportunist, too, not just because it’s obviously designed to appeal to the class instincts of Labour members and trades unionists, but because under legislation his own government has brought in, Alan Johnson will have at best only indirect power, but in reality propably no power at all, to bring this shift of policy about.
Section 2 of the Charities Act 2006 when it comes into force will mean that an activity or institution can only be a charity if it is of public benefit; any dog’s home, hostel, hospice, aid agency or indeed independent school will have to pass this “public benefit test”, in charity law jargon, in order to keep its charitable status. And for some time now, there’s been keen debate among charity lawyers, and within the independent school sector, about whether fee-paying schools really can pass this test. The uncertainty is because the concept of public benefit is not defined in the Act. Nor is there even a power for ministers to make provision about it in regulations. Simply, what public benefit means, and how the test will apply, is left to the regulator, the Charity Commission, to decide. Section 4 requires it to publish guidance on how it will approach this, and indeed it is consulting right now on this very subject. Hurry, hurry, if you want to respond, because there are only a few days of the consultation left. Also worth reading is a speech by the Charity Commission chair, Suzi Leather, earlier this month.
From the consultation document it’s clear that, although the fact that it charges fees for places, so excluding many or most children, will not automatically mean the education that goes on at Eton is not of benefit to the public, the Charity Commission will look carefully at the nature of the scholarships and bursaries available to allow poorer children to study there, the access Eton gives state pupils to its lessons and resources, such as science and language labs, and the nature of its engagement and “partnership” with the state sector. So what Alan Johnson wants may well come to pass. Anyway, what he’s saying goes with the Ray Ban outlet Prezzi grain of the Charity Commission’s apparent thinking.
But what if the Charity Commission isn’t as tough with Eton as Alan Johnson would like? Interestingly, under the 2006 Act he or his successor as Education Secretary will have no say, and no means of guiding or directing Charity Commission practice. In fact the new section 1A(4) of the Charities Act 1993 which is to be inserted by the new Act prohibit it from acting under his direction.
It’s true that the Attorney General will have power to refer questions of charity law to the new Charity Tribunal, so it will be possible for him or her to challenge the regulator’s approach. But, firstly, the long-standing tradition is that the Attorney, when exercising his charity law functions, acts as an independent law officer of the Crown rather than as a member of the government. He is not subject to collective responsibility in this regard, and does not consult his ministerial Ray Ban outlet colleagues. So there’ll be no opportunity for Alan Johnson to have a word in his or her ear. Secondly of course the decision about whether the regulator’s approach is right will be for the tribunal, not for the Attorney.
Funny, then, that Alan Johnson should choose to speak out on a question that he and his colleagues have, by Act of Parliament, put beyond ministers’ policy reach. What’s the point? It seems to me there’s a lot of pure posturing just now from ministers who are all political mouth and no legal trousers.
The potential loophole there is that it is not the Charities Act that gives tax relief to charities, it is the taxation acts. There’s nothing in principle to stop the next Finance Act significantly altering the wording of, eg TCGA 1992 section 256(1) to say “well, the relief no longer applies to all charitable purposes within section 2 of the Charities Act, but only to those which also pass this new Treasury test, so tough”. Actually some of us in the ChBA argued that they should have had a separate test for the tax relief angle in the first place, rather than introduce the public benefit test in the Charities Act (because that would divorce the taxation &policy arguments from the pure chancery question of whether a trust would suddenly become void if it failed the public benefit test.
But I quite agree it’s a bit odd to start grandstanding about it now when the point was argued about over a considerable amount of parliamentary time in, if I remember correctly, not one but two sessions.