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10 October 2018

A big idea to support small charities

Imagine your charity had £500m in the bank, but couldn’t spend a penny of it. And it’s not just that you can’t spend it immediately, or this quarter, or even this year, but that there is almost no chance that the charity can spend it in your lifetime, the lifetime of your children, or even of their children. The money must remain untouched for centuries.

It would be particularly galling at a time when unrestricted funding seems ever harder to come by for many charities.

But for one charity, this isn’t a hypothetical scenario, it’s the very real situation they face. The trustees of the National Fund are required by their founding documents not to spend their money until it reaches a certain level. A prudent investment strategy, you may think. But the trigger they’re waiting for is that the level of their investments grows large enough to pay off the UK’s national debt.

The National Fund was established in 1928 with an anonymous £500,000 donation – around £30m in today’s terms – and its trustees were bound over to manage it until it grew large enough to pay off the debt. A notion that now seems whimsical but was in fact quite earnest.

Since then, diligent management has seen this sum grow and grow. Compound interest has been described as ‘the most powerful force in the universe’, and the National Fund is an example of what can become of an investment if you’re prepared to wait long enough. The fund’s assets today stand at over £480m.

But while it has grown, so has the national debt. To the extent that the chances of this fund ever becoming sufficient to satisfy it are vanishingly small. Economists would likely quibble the wisdom of paying off the debt in one fell swoop in any case. The trustees think it’s time to give up and have been exploring their options.

Read the suggestions from NCVO…

 

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