An appeal for a fund worth £550m to be distributed to charitable causes instead of the government has failed in court.
The National Fund was established in 1928 by Gaspard Farrer, who was a partner in bank and investment management company Barings, with an endowment of £500,000.
The aim was that the funds would be released once they had grown large enough to pay off the UK national debt.
Although the value of the funds have since risen to £550m, the national debt is more than £2.5tn.
The fund’s managers Zedra Fiduciary Services, which is the sole trustee of the fund, had proposed the money should be used to create a new organisation that could make grants and loans through existing charities.
In November 2021, 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.
Zedra had argued that the money should be released for charitable purposes but the UK government, through the Attorney General, insisted the huge windfall should go to the Treasury.
In January 2022, the High Court said the money should go towards paying off the national debt.
Zedra appealed against that ruling but the Court of Appeal has this week upheld the original judgment.
The ruling concluded: “It cannot be said that it was any part of Mr Farrer’s intention to establish a permanent endowment fund for general charitable purposes.
“Once the National Fund is paid over to the National Debt Commissioners, the charitable purpose is fulfilled.”
It added: “Whether Mr Farrer would have made the same gift today can be no more than a matter of speculation. The fact is that he made the gift that he did, and specified the purposes for which he made it.
“It is not for us to question the wisdom of the gift.”
Robert Pearce KC and Daniel Burton from the law firm Radcliffe Chambers, which represented Zedra, said: “The Court of Appeal has now conclusively determined that the National Fund (a charitable fund of approximately £550m) should be applied in reduction of the national debt.
“The trustee’s appeal, which was brought with the authority of the court, raised significant questions of charity law, and in particular the operation of section 67 of the Charities Act 2011, which the Court of Appeal has now clarified.”
The trustees had received advice from Sir Stephen Bubb, the former chief executive of Acevo, on ways the assets could be used to fund charities.
He had identified three potential ways to give the assets to charity: distributing its assets immediately to existing charities; using the money to endow a new charitable trust; or creating a new “wholesaler” to make grants and loans through existing foundations.
Both Bubb and the trustee had recommended the third option.
Since Farrer established the fund, it has received further contributions, the largest being more than £400,000 bequeathed by Lord Dalziel of Kirkcaldy in 1935.
But no contributions have been made since 1985.
A review of charities led by the Conservative MP Danny Kruger had suggested the money could be used to endow a Community Recovery Fund to support community groups as they helped the country recover from the impact of Covid-19.