The High Court has recently considered the question of whether NHS Foundation Trusts are charities. The case arose in the context of ratings legislation; if charitable, NHS Foundation Trusts would qualify for an 80% reduction on the amount payable by way of non-domestic rates under the Local Government Finance Act 1988 (the ‘1988 Act’).
Five questions were before the Court:
- Is a ratepayer required to be subject to the control of the High Court exercising its jurisdiction relating to charities in order to qualify for mandatory relief from non-domestic rates pursuant to sub-section 43(5) and 43(6) of the Local Government Finance Act 1988?
- If the answer to question 1 is in the affirmative, is each of the Claimants so subject?
- What are the purposes of the Claimants?
- Does each of those relevant purposes fall within section 3(1) of the Charities Act 2011?
- Are the Claimants “established” for charitable purposes only notwithstanding that their assets on dissolution might not be applied for charitable purposes?
- Are each of the purposes identified in answer to question 3 above for the public benefit within the meaning of section 4 of the Charities Act 2011?
Questions 3 and 4
Morgan J first considered questions 3 and 4. To be charitable, each of the Claimants must be ‘established for charitable purposes only’ (that test being the same in both the 1988 Act and the Charities Act 2011).
Morgan J held that the Claimants’ purposes are found in sections 43(1), 43(2)(a), 43(2)(b) and 44(6) of the National Health Service Act 2006, those purposes being:
- Section 43(1) – the provision of goods and services for the purposes of the health service in England;
- Section 43(2)(a) – the provision of goods or services for any purposes related to the provision of services provided to individuals for or in connection with the prevention, diagnosis or treatment of illness;
- Section 43(2)(b) – the provision of goods or services for any purposes related to the promotion and protection of public health;
- Section 44(6) – enables an NHS Foundation Trust to make accommodation or further services available for patients who give an undertaking to pay for the accommodation or further service.
Section 43(1) was held to be charitable, falling within the Charities Act 2011, s3(1)(d).
Sections 43(2)(a) and (b) would have been charitable had the phrases ‘related to’ and ‘in connection with’ not been used.
- ‘Related to’ enables an NHS Foundation Trust to pursue any purposes, provided they are related to the purposes specified in sections 43(2)(a) and (b). There is no guarantee that those additional purposes, even though they have a relationship with the specified purposes, will fall within the Charities Act 2011, s(3)(1)(d).
- ‘In connection with’ is too wide a phrase and can refer to the provision of services otherwise than for the purpose of the prevention, diagnosis or treatment of illness.
Section 44(6) permits an NHS Foundation Trust to carry on further activities which are not necessarily for the purpose of advancing the charitable objects in section 43 (in so far as section 43 contains charitable objects).
Therefore, at paragraph 78 of the judgment, Morgan J held that NHS Foundation Trusts are not established for charitable purposes only and cannot be charitable for either the purposes of the 1988 Act of the Charities Act 2011.
Nonetheless, Morgan J proceeded to consider the powers contained in section 47(1) of the National Health Service Act 2006, which permits an NHS Foundation Trust ‘to do anything which appears to it to be necessary or expedient for the purpose of or in connection with its functions’. Morgan J held the language of the provision is wide, and that even if the ‘functions’ referred to were themselves charitable, the things permitted by section 47(1) need not be for those functions, and may only be in connection with them. As such, section 47(1) permits an NHS Foundation Trust to do things that are not a means to an end of securing its objects (not all of which are charitable anyway).
Questions 1 and 2 also engaged the question of whether an institution that carries out a governmental purpose can be charitable. To that end, three sub-questions arise (paragraph 95):
- Is there a relevant distinction between charitable and governmental purpose?
- If there is a distinction, what specific test should be applied to distinguish between such purposes?
- When the relevant test is applied, what is the result in the present case?
Morgan J declined to answer the governmental purpose question, it being unnecessary to determine the issues in the case, but did indicate his inclination towards the view that an NHS Foundation Trust could be a charity notwithstanding the governmental purposes on the basis of the decision in Construction Industry Training Board v Attorney-General.
Other questions
With the case being determined on questions 3 and 4, the other questions were given limited treatment. In particular, with the authorities being in an irreconcilable state, no decision was made in respect of question 5. Therefore, no judicial guidance is offered as to whether it is a fundamental requirement of a charity that its assets are dedicated to charitable purposes in perpetuity.
Conclusion
The purposes of an institution that is intended to be charitable should be drawn narrowly. Charitable purposes can be defeated by the inclusion of phrases such as ‘related to’ or ‘in connection with’, which cause the institution to not be for charitable purposes only.
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