A fund set up nearly a century ago and now worth £600 million will be used towards paying off the national debt rather than being distributed through charities following a High Court ruling.

The National Fund was set up by a deed of trust with a gift of half a million pounds from a partner at Barings bank in January 1928, which was to be held until it had grown large enough to pay off the debt.

Although the national debt is now many times larger, currently standing at more than £2 trillion, a High Court judge ruled in 2020 that the fund could be used to reduce it.

Lawyers representing Attorney General Suella Braverman, who has a duty to protect charitable interests as part of her role, argued at a hearing in December last year that this is what should happen with the fund, as it was closest to the original intention of the donor, Gaspard Farrer.

But lawyers representing the trustee of the fund argued it should instead be used for “general charitable purposes” as it would result in such a small reduction in the national debt that it would be “a futile, symbolic gesture” for it to be used for that purpose.

In a ruling on Friday, Mr Justice Zacaroli ruled in favour of the Attorney General and said the fund should be used to reduce the national debt, which it is estimated will have reached nearly £2.4 trillion.

The judge said that, if the funds were distributed in the way suggested by the trustees, it would not benefit “the nation” as originally intended, but only those citizens who received charitable grants.

He also concluded that the £600 million, if divided between every existing charity in England and Wales, would be of minimal value.

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.”

Mr Farrer, a partner in Barings until he retired in 1925, made the gift of £500 million in the wake of the First World War, when the national debt had increased from £0.6 billion to more than £7 billion and measures were introduced by the government of the day to reduce the deficit.

A note from Mr Farrer’s close friend, Sir Otto Niemeyer, sent to Winston Churchill, then chancellor of the exchequer, in March 1927, said Mr Farrer’s idea was “that if such a trust existed and its accounts were published every year so that people saw a fund heaping up in this way for redemption of the debt, other rich men would be induced to follow his example”.

In a statement to the press at the time of the fund being set up, Mr Churchill said: “The nation has just received a benefaction of a character hitherto exceptional in the relations between the state and its citizens.

“The chancellor of the exchequer states that action of this kind is inspired by clear-sighted patriotism and makes a practical contribution towards the ultimate, though yet distant, extinction of the public debt.”

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.