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Most universities are charities: so what?

  • 7 June 2023
  • By Mary Synge
  • This HEPI blog was kindly authored by Mary Synge, academic author and charity law specialist.

On the website of nearly every university, you will find an explanation that the institution is a charity. But what does this mean, apart from generous tax advantages? And why are universities not generally talked about as charities, in the same way as, say, Oxfam or Macmillan Cancer Support?

One reason might be that, historically, universities have been exempt from both registration and regulation as charities, though neither exemption made them any less ‘charitable’ and recent statutory reform has supposedly placed them on ‘a level playing field’ with other charities. Yet universities are still more likely to be seen as public sector organisations or large businesses, in competition with all ‘higher education providers’ and key to delivering economic growth.

In The University-Charity: Challenging Perceptions in Higher Education, I examine just how and why charitable status is significant, and how charity law – to which all charities (including universities) are subject – has a great deal to contribute to current controversies and challenges facing the university sector. From criticism of the way universities are run, and academics ‘managed’, to criticism of how our world-leading universities have ‘lost their way’ in the face of increasing government intervention, charity law offers both a fresh perspective and a robust legal framework.

The book is not part of the genre that follows Cardinal Newman’s seminal work, The Idea of the University, but scrutinising universities through a novel charity lens does prompt a certain degree of re-imagining. Charity law not only supports but demands the renewed focus on a university’s fundamental purposes that several authors and commentators have urged. It provides a robust challenge to university strategies which defer to metrics-driven practices and the pursuit of power and prestige. It favours collaboration over competition, and its requirement for purpose-based governance challenges the increasingly prevalent corporate model, where effective power and authority is shared, in varying degrees, between Council and Executive, and where academic participation is greatly diminished.

University leaders are duty-bound to act in the best interests of the charity, and those interests are not the same as the (so far undefined) best interests of the students. Placing the purposes of advancing research and education for the public benefit at the centre of all decision making can be expected to challenge many university practices, where quality in education and research risks being compromised by the maximisation of fee and research income, and growth in student numbers, and by the quest for improved REF-scores and rankings and delivering student-consumer satisfaction.

One of the issues that has received the most trenchant criticism is executive remuneration, where governing bodies, regulators and the government have done little to reverse the endless upwards ratchet of vice-chancellors’ pay that Jo Johnson complained of. The application of charity law principles, however, would make the prospect of restraining and justifying executive pay rather more achievable than under the OfS’s approach of looking to staff and students to push for change where they are unhappy. In the absence of Charity Commission guidance, The University-Charity sets out a robust charity law framework and applies it to various instances of pay in the sector.

Of course, the fundamental question is whether all our not-for-profit universities are charities at all. Charitable status is a matter of law, and that law is not straightforward. There is at least a strong argument that the 1988 and 1992 reforms, which saw the former polytechnics given both university status and an exempt charity label, were not effective in removing them from the public sector. The act of placing all higher education providers in one pot also obliterates the distinctiveness of those that are charities. The regulatory framework applies to all, but the restrictions on fees and imposition of conditions regarding access and participation pose significant challenges for the University-Charity, which is required to remain independent and not to implement government policy except where that is also in the best interests of the charity.

This critical and fundamental requirement to be (and remain) independent of government is under increasing strain in the charity sector generally, where conditions on public funding come perilously close to state control and undermine the government’s undertaking to respect and uphold charities’ independence, a quality that goes further than the institutional autonomy of the Higher Education and Research Act 2017. The current investigation into the independence (or otherwise) of the Office for Students further calls into question the wisdom of designating it as principal regulator of those universities that are exempt charities – making it responsible for promoting their compliance with charity law obligations – whilst others are registered charities and overseen by the Charity Commission. It makes little sense. Some comfort, then, that David Palfreyman OBE, a member of the OfS Board, has commented that The University-Charity ‘just might prompt the OfS to review its ‘Principal Regulator’ function under the Charities Act 2011’.

In A University Education, David Willetts describes the diligent and ingenious efforts of his team at the BIS in connection with the sale of the College of Law, a registered charity, to private equity in 2012 (now the for-profit University of Law) – a level of government involvement that would surely be surprising in respect of any other charity. Indeed, from a charity law perspective, one might have expected a far greater level of public, or even judicial, involvement than appears to have been the case. With the Charity Commission having chosen to make no information about the transaction publicly available, confidence in the various safeguards that charity law provides against the obvious dangers inherent in such transactions may feel low. Government, of course, has an interest in encouraging for-profit alternative providers, and in finding creative ways to further its policy agenda, but the Charity Commission has no such remit. The University-Charity examines this transaction, and the later conversion of Regent’s University from charity to for-profit, both transactions which have left a number of charity law experts feeling decidedly uncomfortable.

Leading charity lawyer, Hubert Picarda KC notes that ‘university lawyers will be grateful for the implicit assistance and guidance that this well thought out and impressive book provides’. The University-Charity is not purely a law book, however. It offers a new perspective for university governors, leaders and academics alike. As Matthew Harding (Dean of Melbourne Law School) notes, ‘asking the charity law question of universities promises to illuminate the university sector in ways that might otherwise elude’, not least in helping us ‘to grasp the sense in which university education is a public good in which we all share, quite apart from career and life opportunities that individual students might enjoy’. Belatedly, perhaps, the book also offers an important contribution to policy-based discussions.

The book is self-published. Not because no publisher was interested – on the contrary – but because it has become standard practice (in the UK) for major publishers to require the author to indemnify them, not only in respect of any breach of warranty, but also in respect of any third-party complaint or allegation, even if untrue or ill-founded. For many academics, that is a step too far.

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