Judge resolves dispute over former banker’s efforts to pay UK national debt

Gaspard Farrer set up the National Fund in 1928 with a £500,000 cash pot

A judge at the Royal Courts of Justice, London, ruled that the Gaspard Farrer bequest should be used to pay off a miniscule fraction of the national debt. AP

A £600 million fund set up nearly a century ago by a former partner of one of the UK’s oldest merchant banks will be used to pay off a tiny fraction of the country’s national debt, a judge has ruled.

Gaspard Farrer set up the National Fund with a gift of £500,000 in 1928 saying that it should be held until it grew big enough to pay off the growing national debt after the First World War.

Farrer, who retired in 1925 from the defunct Barings Bank, hoped that other philanthropists would join his campaign to end the debt that had risen from £0.6 billion to more than £7 billion when he made his bequest.

The pledge was warmly welcomed by Winston Churchill, then chancellor of the exchequer, as a symbol of “clear-sighted patriotism” towards the ultimate, if distant, aim of ending public debt.

In a statement at the time, Churchill said: "The nation has just received a benefaction of a character hitherto exceptional in the relations between the state and its citizens.”

In the following decades, others added to the fund, including Lord Dalziel of Kirkcaldy, who died in 1935 and bequeathed his residuary estate, worth more than £400,000, but the last contribution to the fund was made in 1982.

Barings Bank

Barings, one of Britain’s oldest investment banks, was
founded in 1762 and operated for 233 years before it went bust after a trading
scandal.

Barings Bank collapsed in February 1995 following colossal
losses caused by rogue trader Nick Lesson.

Leeson gambled more than $1 billion in speculative trades,
wiping out the venerable merchant bank’s cash reserves.

Farrer’s bequest had remained secret for 92 years until he was named in court papers amid legal action over what should be done with the money that would never be enough to pay off the UK’s debt.

Farrer’s ambition was stymied by surge in national debt that stood at nearly £2.3 trillion at the end of October last year.

Lawyers representing the trustee of the fund had argued that the money should be used for general charitable purposes rather than go towards paying off the national debt. They said that such a small reduction in the vast scale of the debt would be “a futile, symbolic gesture”.

But Mr Justice Zacaroli ruled in favour of the UK’s Attorney General, Suella Braverman, and said the fund should be used to reduce the debt.

In a statement after the ruling, Ms Braverman said: "At the heart of my submissions before the High Court was a fundamental principle of charity law: a donor's wishes must be respected."

Updated: January 24, 2022, 4:55 PM
Barings Bank

Barings, one of Britain’s oldest investment banks, was
founded in 1762 and operated for 233 years before it went bust after a trading
scandal.

Barings Bank collapsed in February 1995 following colossal
losses caused by rogue trader Nick Lesson.

Leeson gambled more than $1 billion in speculative trades,
wiping out the venerable merchant bank’s cash reserves.