A parliamentary committee chaired by Alan Milburn has concluded that independent schools and private hospitals should lose their charitable status.

Fee-charging schools would be regarded as a normal service industry, but given special tax breaks if they could prove they offered quantifiable public benefits.

The proposal came in the report of a joint committee of MPs and peers which has been examining the government's draft charities bill.

The MPs and peers said: "We believe the government should consider reviewing the charitable status of independent schools and hospitals with a view to considering whether the best long-term solution might lie in those organisations ceasing to be charities, but receiving favourable tax treatment in exchange for clear demonstration of quantified public benefits."