Story on the BBC website today that the English Charity Commission has started looking in to the charitable status of a number of private schools. This raises questions of how tightly the state should regulate the charity sector – some say ‘not at all’, others point to the generous tax breaks that charities receive as a privilege that needs to be justified.
US law is pretty lenient on the definition of what constitutes a charity. English law in this area, which dates back more than 400 years, was changed in 2006 to tighten up the definition to ensure that there is some ‘public benefit’ from the tax breaks that charities receive. In the past, the Charity Commission had occasionally intervened in charities that did little good for the community (you can read about the Panacea Society case in the book) but the basis in law for these actions was not strong. One of the big changes in the 2006 Act was to take away the assumption that supporting education was necessarily charitable. As some proponents of the change argued, why do some of the most elite private schools in the country attended by the super-rich need a tax subsidy?
We wait and see what will happen to the schools under investigation. The threat of removing charitable status seems to have had an effect: the poshest school of them all, Eton College – attended by Princes William and Harry and would-be Prime Minister David Cameron – apparently responded to the new legitlation by raising an endowment to bring in more pupils from poorer backgrounds. Maybe this is just a shot across the bows of the private schools to get more of them to do the same.
Some legislators in America, led by Sen Chuck Grassley , have also jumped on the issue of the possible abuse of tax breaks by charities offering little of no public benefit. Cases of individual wrongdoing are shocking of course, but it’s less clear whether there is a widespread problem.