About £600m held in National Fund must go towards national debt, not charity, High Court rules

The fund's managers had proposed the money should be used to create a new organisation that could make grants and loans through existing charities

The Royal Courts of Justice

About £600m held in a charity established almost a century ago to pay off the national debt cannot be diverted to help other charities, the High Court has ruled.

The Attorney General had brought a case to the High Court to settle how the sums that have accumulated in the National Fund should be used.

The fund was set up in 1928 with an endowment of £500,000 and the intention that the money should be released only when the government was in the position to use it to pay off the entire national debt.

While the sums in the fund have since grown to about £600m, the UK national debt has reached about £2.3tn.

In November, the High Court ruled that the charity could legally be disbanded and the money put to good use, but the court would need to make a further ruling to consider what for.

On Friday, Mr Justice Zacaroli, who had presided over the previous hearing, rejected an application by the fund manager Zedra Fiduciary Services, which is the sole trustee of the fund, that the money should be released for charitable purposes.

The ruling shows Zedra had asked the former Acevo chief executive Sir Stephen Bubb to examine possible uses for the funds, and both parties agreed that the best use would be to establish a “wholesaler” that would make grants and loans through existing charities.

But the judge ruled that the funds should be used to reduce the national debt, likely bringing to a close a case that has lasted for years.

“Applying the fund in reduction of the national debt is clearly close to applying it in discharge of the national debt,” the judgment says.

“It is common ground that any gift to the nation for the purposes of repaying the national debt is a valid charitable gift, irrespective of the amount of national debt that could be repaid by the gift,” it also says, noting that any reduction of the debt would be beneficial to the nation.

The National Fund was set up by Gaspard Farrer, who was a partner in bank and investment management company Barings until he retired in 1925.

He anonymously contributed the £500,000 to establish the fund in 1928, with Barings as the initial trustee.

There have been further contributions to the National Fund, the biggest being more than £400,000 bequeathed by Lord Dalziel of Kirkcaldy in 1935. But no contributions have been made since 1985.

Danny Kruger, the Conservative MP for Devizes, had proposed in September 2020 that sums from the fund could be used as emergency grants to support the voluntary sector through the Covid-19 pandemic.

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