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24th January 2013

Fettes College fails Scottish charity test

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The Office of the Scottish Charity Regulator has recently revealed that Fettes College has failed to meet the Scottish charity test. OSCR is prioritising the assessment of independent schools and three have failed this assessment, including Fettes College, which has the journalistic attraction of having been Tony Blair’s school. OSCR’s ruling was published on 11 January. The schools have been given 18 months to improve access or risk losing their charitable status.

Under Scottish charity law (the Charities and Trustee Investment (Scotland) Act 2005) the test of charitable status is similar to that for English and Welsh law, although it is slightly more prescriptive. To be a charity a body must have exclusively charitable purposes and provide public benefit. The Scottish Act, unlike its English and Welsh counterpart, sets out factors OSCR must consider when deciding whether the body provides public benefit, including whether any condition on obtaining the benefit (including any charge or fee) is unduly restrictive. Fettes’ fees were found to be unduly restrictive. The senior school’s annual fees for 2010-11 were £25,860 for boarders and £19,050 for non-boarders. In addition to non-means tested scholarships, bursaries of up to 100% of fees were given and represented in total 9.6% of the number of pupils and 7% of available income. OSCR decided the means-tested assistance Fettes offered was insufficient to mitigate the level of fees.

In England and Wales, the Charity Commission’s approach to assessing charitable status is similar although there are crucial differences. The statutory definition of a charity is very similar, however public benefit is not defined, nor are factors listed which must be considered when assessing public benefit. In the void this arguably creates (but which admittedly has always existed), the Charity Commission has published extensive and controversial guidance as to its interpretation and trustees are bound by the Charities Act to consider this. In brief, this guidance creates a prescriptive regime for charities in seeking to ensure they comply with the public benefit requirement. However, as the Fettes case shows, Scotland has a stricter regime. If Fettes had been considered for a school in England and Wales, it is likely to have passed the legal and regulatory test.

The Charity Commission’s guidance, together with published public benefit assessments on independent schools, has strongly suggested that bursaries of up to 100% of fees and representing 7% of income are sufficient to demonstrate the fee charging aspects of the public benefit requirement to be met. In fact, the position is likely to relax further in England and Wales. The Commission’s guidance was successfully challenged by the Independent Schools Council in the Upper Tribunal in 2011: the Tribunal judged the Commission’s guidance to be too prescriptive and ruled that fulfilling the public benefit requirement, including as to fee charging issues, is a matter for the school’s trustees and not for the Commission. As a result of the decision, in 2012 the Commission withdrew, then revised the guidance and published this for consultation. The Commission is still considering the responses, thus the regulatory position in England and Wales is somewhat in limbo.

Although speculation is not always helpful, it is interesting to see this Scottish case and compare the situation in England and Wales. Not only might Fettes have passed the charity test if it was in England or Wales, but it also seems the variance may grow as a result of the Independent Schools Case and the ensuing redrafting of Charity Commission guidance on public benefit.

For further information, please contact Chris Knight on 01604 463103 or click here to email Chris.