David Ainsworth: The strange story of the National Fund

22 May 2018 Voices

After almost a decade of coverage, David Ainsworth finally sees government take some action on one of the country's strangest charities.

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Today, the Attorney General announced to the nation that he plans to seek to close down the National Fund – a 90-year-old charity with £475m of assets, which has never spent a penny on the cause and has been saving up to pay off the entire national debt.

It follows on from research carried out for Civil Society News, which revealed that deliberations about the fund had been going on for nine years without action, including seven years in which the fund appears to have been at the bottom of a slush pile in the Attorney General’s Office. 

We decided that nine years was probably long enough, and that it was time that £475m was put to good use. We contacted Steve Reed, the shadow minister for civil society, and asked him to pursue the issue, which he very kindly did. 

It was then picked up independently by members of the House of Lords, and other media outlets ran pieces on it. This pressure seems to have done the trick, and the Attorney General has now taken action, and referred the issue to the courts for a decision. 

It’s a very encouraging step forward, although it’s not exactly a victory for Civil Society News. We feel the fund should remain as a charity and change its purposes to become a grant-giver, and we'll continue to argue that the charity sector is the right place for this money. But at least the fund’s resources are being put to use.

Once upon a time…

I’ve actually been writing about the National Fund for almost a decade, and its story is an interesting one. It was established in 1928 by an anonymous donor – probably Stanley Baldwin, later the prime minister, who had long advocated that private citizens donate money to the government to pay off its debts. The idea never caught on, surprisingly.

The fund has actually had some creeping success. It’s doubled in size ten times over that 90 years, which is quite impressive. But sadly, the national debt has ballooned too, and the fund is still well under a tenth of 1 per cent of the debt. So success in its endeavour seems unlikely in the near future. 

At current trajectories I’d have expected the fund to reach the size of the UK national debt in around 400 years, although who knows if it would be relevant by then. After all, there wasn’t even really such a thing as a nation state 400 years ago, let alone a national debt or a stock market, and the UK didn’t exist. If in 400 years the national debt and the stock market are still relevant ideas, the National Fund would need to own almost all of the latter to pay off the former. Selling all its shares at once would pay off the national debt but probably crash the economy in all sorts of other ways.

So by the time I became aware of the National Fund, it was obvious the fund was never going to meet its objectives. It had carried on so long largely out of inertia. It wasn’t really in anyone’s interest to stop it.

The fund doesn’t have any human trustees, just a financial services firm looking after it as the sole corporate trustee. In 2009 it had recently passed to a new firm, Barclays Fiduciary Services, as part of a larger acquisition. The new trustee had approached the Charity Commission to ask what it should do with this strange entity it had inherited.

The Commission’s approach was that the money was sitting there doing nothing useful, and that it should close down. The Commission’s preferred option was to transform it into a grant-giving foundation, but there were concerns inside the regulator that this was legally quite complicated, and in 2011 the decision was taken to seek an opinion from the Attorney General’s Office.

The AGO came back with a different viewpoint. It wanted to shut down the charity and transfer the funds to the Treasury. The Commission accepted this – I believe with some reluctance, reading between the lines – but budget cuts were biting, and I suspect the regulator’s legal staff were happy to have the issue off their plate, and onto someone else’s.

Years passed…

Some time went by, and we asked the AGO when they planned to actually do something. They offered the standard political press officer’s response: “In due course”.

And there, for a while, we left it. I don’t actually know what happened next, but I can construct a plausible narrative. I’d guess that as there were personnel changes and budget cuts at the AGO, the fund passed from one to-do list to another, slipping lower down each time, until someone forgot it was even to be done in the first place. The Charity Commission lawyers, suffering from budget cuts of their own, cannot have been highly motivated to chase the issue down. Meanwhile the fund’s trustees, earning significant sums to provide the service, cannot have been too worried that it was taking time to move the charity off their books.

A couple of years ago, we started writing about the National Fund again, producing an annual story marking its latest increase in funds, remarking that still, nothing had happened. It was a curiosity, and it always attracted interest from our readers, but it took a while for us to realise that we were the only people paying attention to it, and that everyone else had forgotten. So we asked some people to give the Attorney General a nudge, and Steve Reed obliged.

I’d guess that when the shadow minister asked his questions, the Attorney General himself must have asked someone to find out what the fund was, decided he could realise the best part of £500m for the exechequer, and tasked someone with making something actually happen. The idea that it should remain in the sector was quietly shelved.

What now?

There’s still plenty of scope for this latest initiative to wind to a halt. The wheels of justice grind exceedingly fine, but they grind exceedingly slow, and the courts could take a different view again and send it all back to the drawing board.

The question is what should happen. Steve Reed wants to see the National Fund money remain in the sector, and I agree.

It’s too hard to complain too much about the money going to the government. That’s what it was intended to do. But this is charitable cash, after all. It’s not unreasonable to say to the government that it should remain charitable in nature, and be spent in our sector. As Reed points out, this is chicken feed for government, but it would be one of the 20 biggest grant-givers in the charity sector if it followed the regulator’s initial plan. 

So for us, and the sector, it’s something worth fighting for.


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