Time to stop being intensely relaxed about charity fees

Time to stop being intensely relaxed about charity fees
Stephen Maxwell, TfN

This was a welcome if rather belated response by OSCR to the challenge it faced in interpreting section 8 2(b) of the Charities Scotland Act which requires the regulator to have regard in applying the public benefit test for charitable status to whether any condition on obtaining benefit ‘including any charge or fee’ is ‘unduly restrictive’. Belated because OSCR had already determined in the case of Dundee High School that its £8,000 plus annual fees were not ‘unduly restrictive’ without any inquiry into their affordability to the families of Dundee:

The commissioned consultants Virtual Worlds submitted a Phase I report in October 2008. Virtual World’s conclusion, entirely predictable, was that the broad notion of ability to pay is both meaningful and widely accepted and that implementing ability to pay measures is technically feasible.

The report described the use of ability to pay measures in some other services. Legal aid is one example. Both the Scottish and the English and Welsh legal aid systems apply a means test to establish the amount of disposable income to a family and hence their eligibility for legal aid. While people on Income Support are passported without the need for a detailed test others are subject to a test which takes their net income (gross earnings plus benefits minus direct taxes), and then subtracts from it fixed allowances for children and other dependants, housing costs and other essential expenditure such as travel to work and childcare. Subject to upper income and capital limits, one third of the remaining disposable income is deemed to be available to pay for legal costs.

The report recommends that OSCR implements three measures of ability to pay – residual income, which subtracts the charge imposed by the charity from the family’s net income and compares the result to the poverty line; ratio of the charge to gross income, to establish whether the charge takes up an unacceptable proportion of a family’s pre-tax earnings; and the ratio of the charge to disposable income, as with legal aid, to establish whether the charge takes up an unacceptable amount of the money available to a family after its essential bills are paid. This is the consultants’s preferred measure.

OSCR received a second consultants’ report providing models of how these measures could be applied two months ago yet we are told that the results of the research are unlikely to to be published until ‘after the summer’ , with a decision on whether to proceed with affordability proofing presumably some months later again.

There are hints in OSCR’s board minutes of a preemptive move to downplay the role of an affordability test. The minutes of the board meeting of 31 May last year record that the board noted that ‘the words ‘low incomes’ was an elusive term which could have a wide interpretation’ which the affordability research would not necessarily resolve and that an ‘absolute requirement for those with low incomes to benefit was therefore problematic’ .

It might be unjust to accuse OSCR of being intensely relaxed about the filthy rich hogging the public benefit available from some high-fee charging Scottish charities but there does seem to be a certain lack of urgency in applying what many in the charitable sector will consider a crucial element not just of the charity test provided for in the Scottish Charities Act but of the Scottish understanding of the purpose of charity itself.