The Office of the Scottish Charity Regulator (“OSCR”) has announced plans to review the charitable status of all of the independent schools which it regulates. OSCR is reportedly concerned that the fees charged by the schools represent an undue restriction on the public’s ability to access the benefit these schools provide i.e. the charity test. The test requires that all charities have only one or more of the charitable purposes set out in the Charities and Trustee Investment (Scotland) Act 2005 and that they provide ‘public benefit’. The review process will begin this Autumn and will involve OSCR considering whether around 60 fee-charging schools meet the charity test.
While the scale of this review may raise a few eyebrows, the decision to look at independent schools is unsurprising given developments over the last few years. In 2007 OSCR undertook a review of eleven schools, of which it identified four that had not demonstrated that they met the charity test. As we reported, after further investigations these schools eventually had their charitable status confirmed last November.
OSCR has a general duty to review charities which are on the Scottish charity register to ensure they are still meeting the charity test. To do this, the regulator now identifies charities which it believes are at risk of failing to meet the charity test and undertakes individual reviews of these charities.With the 2007 exercise exacerbating concerns about fees being a disproportionate restriction on the benefit provided, it is unsurprising that OSCR considers independent schools an at-risk group.
As well as the 2007 reviews in Scotland, there has also been a recent decision of the Upper Tribunal in England about public benefit in the context of independent schools south of the border. As we explained in this article, the Charity Commission (the “Commission”) (which has an equivalent role to OSCR south of the border), incurred the wrath of the Independent Schools Council (“ISC”) by issuing guidance on what independent schools should do in order to provide public benefit. The ISC, who represent around 1,200 independent schools, argued that this was outwith the powers of the Commission and took issue with the Commission’s approach of centering the question of public benefit around the level of fees versus the level of bursaries. The Attorney General referred the matter to the Upper Tribunal who found for the ISC and concluded that public benefit could only be decided by the trustees of each charity but that those who could afford fees should be a “sufficient section” of the public. However, the level of benefit for the poor should be more than “de minimis’” and the poor should not be entirely excluded from benefit. This decision rejects the idea of a prescriptive assessment of public benefit and compelled the Commission to revisit its guidance, which perhaps contributed to OSCR’s decision to undertake this individual review process.
OSCR does not propose to enter into a full scale individual review of each independent school at this stage. Instead, it will begin by examining the information already submitted to it as part of the normal reporting requirements which every charity must satisfy, namely, each school’s accounts and annual reports. It will then work with individual schools to fill in any gaps in information and make a decision as to whether that school meets the charity test. Those schools which do not pass this initial review will then have a period of grace to implement changes in order to have their charitable status confirmed.
The independent schools concerned will undoubtedly be keen to learn lessons from the four schools which were considered to have failed to meet the test in 2007. It is worth bearing in mind that the measures which the schools subsequently put in place were the product of three years of collaboration between these schools and OSCR, so there is clearly no ‘quick fix’ where OSCR considers that the charity test is not being met. Also, as the ISC decision confirms, the question of public benefit is not a prescriptive one. Nevertheless, the changes made by the four schools are likely to be of broad interest in the context of this new review. Briefly, the changes included:-
- putting in place more means-tested bursaries and scholarships for prospective students;
- keeping fee increases below the rate of inflation;
- assisting local state schools by sharing facilities, having their staff provide training and allowing senior pupils to assist;
- marking public examinations; and
- hosting placements for student teachers.
We understand the initial review of papers is already underway, and OSCR will also be consulting with school governors and bursars. An initial update on the review is expected in September and we will keep you up to date on progress. We will also be watching out for announcements of other similar reviews of charitable status, as OSCR has identified other groups of charities such as those working overseas, those affected by the requirements of the Equality Act 2010, care homes, universities and private hospital as ‘high risk’.