THE charitable status of private schools and hospitals will be challenged by a powerful campaign led by MPs, charities and lawyers, and backed by the Charity Commission, when the Charities Bill returns to Parliament next week.

The Bill replaces the 400-year-old common law definition of charity and removes the presumption of charitable status from independent schools. Instead, it requires all charities that charge high fees to demonstrate that they are of “public benefit” if they are to retain tax breaks worth a total of £88 million a year.

As the Bill does not give any details of what constitutes the “public benefit”, critics believe that it is almost meaningless and want a stricter definition. Without it, the whole Bill could fall, taking with it changes that will modernise the legal framework within which charities operate, they say.

Stuart Etherington, of the National Council for Voluntary Organisations (NCVO), which represents 4,700 charities, said a tighter definition of public benefit was essential. “The Bill must protect and promote the charity ‘brand’ by making it clear that only those organisations that benefit the public can be charities,” he said.

He insisted that the NCVO’s stance, which is widely shared by leading charities, was not aimed at excluding particular types of charity. “It’s about ensuring that long-term trust and public confidence in charities is maintained and enhanced.”

The Charity Commission, which will be responsible for ensuring that all registered charities pass the public benefit test, is also calling for a clearer definition of terms. “It would be helpful to see an amendment to the Bill removing some of the uncertainty, particularly as regards fee-charging charities,” a spokeswoman said.

John McDonnell, MP for Hayes and Harlington, is one of perhaps 50 Labour backbenchers who want a more robust definition. He said: “Without it, the Government would have a problem.”

Martin Horwood, the Liberal Democrat charities spokesman, favours an amendment modelled on Scottish law, to ensure that charities charging high fees do not place “unduly restrictive” conditions on people wanting to use their services. Scottish law requires the regulator to weigh up the benefit to those that can access a charity’s service against the “disbenefit” to the general public who cannot, particularly where there is a charge involved.

Stephen Lloyd, Head of Charity and Social Enterprise at the law firm Bates, Wells & Braithwaite, said that without such an amendment there would be two types of charity: Scottish and English. “If the English public benefit test is less onerous than the Scottish one, you could see independent schools which might be under threat under the Scottish test setting themselves up as English charities but operating north of the Border,” he said.

A spokesman for the Cabinet Office, the department in charge of the Bill said that the government was happy with the way it was worded. He added: “Of course, it still has to be scrutinised.”

The Independent Schools Council argues that most independent schools that are charities already provide a public benefit, saying that for every £1 in tax benefits they get they provide £3 in assistance with fees. The Conservative Party seems implacably opposed to any kind of public benefit test. Andrew Turner, MP for the Isle of Wight, said such a test was unnecessary for schools, religious organisations or charities working for the poor.

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