A £600m UK charity fund, which had the goal of paying off the national debt entirely, will now be wound down. This is a waste of charity money – the UK national debt is currently around £2,277.6bn. The fund will disappear almost without trace.
The future of the fund has been settled once and for all. The High Court in England and Wales said that paying even a very small fraction of the UK national debt would respect the wishes of its original donors.
Paying off the national debt seems like a lost cause to modern eyes. Few contemporary donors would voluntarily give money to the chancellor of the exchequer. But when it was established in 1928, the charity was a patriotic way of paying off war debts.
The charity founder, who remained anonymous until last year, has been revealed as Gaspard Farrer – a partner at Barings Bank. Farrer had hoped that over time, the National Fund would attract other donors. He started it off with a £500,000 donation of his own. When it became clear that no modern donor would contribute to the fund, the court was asked to decide what to do with the cash. It gave it to the chancellor as a small payment towards the national debt.
Money will now have little impact
The court missed an opportunity. The money will now have very little impact. The law is flexible and would have permitted a more imaginative outcome. So long as the fund was spent on charitable purposes, the judge had a wide legal discretion to do something better.
The judge could have ordered that the fund be given away to good causes. Quick, no-strings-attached philanthropy is currently in vogue. Mackenzie Scott, formerly married to Jeff Bezos, gave away £4bn in just four months. The £600m could have been broken up and distributed to charities around the country.
But something better could have been done. The court missed the opportunity to benefit future generations in the long term. The capital could have been made into a permanent charitable foundation. The current trustees requested a broad power to invest and grow the fund. This would have allowed them to make charitable grants on a discretionary basis.
In the United States, large flexible foundations of this type are common. In Europe there are far fewer. £600m would not create a global-league charity like New York’s Ford Foundation – that has assets of $16bn. But it could still establish a significant national player.
The Wolfson Foundation, based in London with a £800m endowment, is an example of what might have been done with the cash. With a careful investment strategy, Wolfson has given over £1bn to good causes since it was established in 1955. Permanent foundations ring-fence and grow capital for the benefit of future generations. They are the opposite of a national debt.
It is true that a new foundation would not be in line with the letter of Farrer’s original wishes. Other wealthy people in his generation, like Andrew Carnegie, set up permanent foundations in their own name. If Farrer had wished to do the same, there was nothing at all to stop him at the time.
Future generations will now miss out
So, turning Farrer’s fund into a grant-making foundation would mean stretching his wishes to the limit, and possibly beyond. But the world that Farrer knew has long disappeared. It is not possible to do what he wished.
When Farrer set up the National Fund, the UK debt was relatively small, at just £7bn. Now, a much larger national debt is taken as red. After the financial crisis and large state borrowing in the wake of Covid-19, the debt has ballooned.
Farrer had a patriotic motivation but the way that people see national debt has changed. It is now considered an ordinary fact of life.
After many decades of accumulation and investment, the National Fund will now be lost to charity. This is a shame. The High Court missed a chance to make Farrer’s money count for future generations.
John Picton is a senior lecturer in law at University of Liverpool
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