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Bank bail-out ‘might not be enough’

09 October 2008

by Bill Bowder

Upbeat: the towers of Lincoln Cathedral, seen from the castle wall PA

Upbeat: the towers of Lincoln Cathedral, seen from the castle wall PA

THE Government’s “Special Liquid­ity Scheme”, announced on Wed­nesday, which could cost up to £500 billion, might not be enough to trigger fresh economic activity, investment ad­visers were warning this week.

This was already being indicated in the United States, said James Bevan, chief investment officer of the London-based CCLA, which looks after more than £3 billion of pa­rochial and diocesan investments.

The bail-out of UK banks would not necessarily save the UK economy from a further slowdown, as the financial strain was affecting eco­nomic activity, Mr Bevan warned. “There isn’t the necessary stimula­tion needed to end the downward mo­mentum in the economy. Equity and home prices have continued to de­cline rapidly.”

The markets were “gripped by terror”, and the economic outlook “may be even worse than expected”. But policy-makers and central bankers “understand that we are on the edge of the abyss, and thus we should assume an extraordinary policy response”.

Mr Bevan also warned that some ob­servers questioned whether all the European governments that had decided to guarantee deposits were capable of meeting their promises.

Cathedrals are looking at their endowments, as the stock market con­tinues to drop.

Lincoln, for example, has seen its capital reserves drop in value from £16 million last year to £12 million this year, its chief executive, Roy Bentham, said on Tuesday. The Cath­edral spends £1.5 million each year to maintain its fabric.

But despite having to find a total income of £4.1 million each year, Mr Bentham said that the Cathedral and its staff were “upbeat”, because they had learned to live within their in­come from stock dividends and donations.

“Our observation is that the ups and downs of the stock market are not reflected in dividends. Those tend to be more or less stable, and we are hoping that same pattern will con­tinue. The real problem would be if that instability crosses over into the real economy. If com­panies make less profits then they will pay less dividends, and that would hit us.”

Receipts at the Cathedral door, where entry costs £4 a head, were down five per cent this year. Last year, the Cathedral had started to “cut back at the margins”, Mr Bentham said. It had a worldwide appeal, and its staff were “very energetic in raising money”, but some donations were from the US, and that could be a problem. It had also received £5 million from English Heritage since 1991. “We’ve been here a thousand years and we don’t intend to dis­appear,” he said.

The Dean of Christ Church, Oxford, the Very Revd Dr Chris­topher Lewis, said last week that cathedrals were well placed to face a recession because they lived increas­ingly “hand to mouth, and will con­tinue to do so”.

Those cathedrals that did have investments (“fewer than you might think”) invested for the long term and would “wait and see”, he said.

Canterbury Cathedral is in the middle of a £50-million programme to restore its ancient fabric. A spokes­man said: “It’s actually rela­tively fortunate for us: a significant part of the appeal’s reserves are at present held as cash.”

Regulation. Tighter and and more transparent regulation must be imposed on the banking sector, the congregation at the annual Church of Ireland service for the opening of the new law term heard on Monday, writes Gregg Ryan, Ireland Corres­pond­ent.

In the service in St Michan’s, Dublin, Fr God­frey O’Donnell, head of the Ro­manian Orthodox Church in Ireland, said: “We seem to be living through the death throes of raw capitalism — please God — with its appalling greed, recklessness, lack of account­ability and complete disre­gard for any ethical behaviour.”

Should capitalism survive, it would have to be a new model, displaying “equality, responsibility, ethics and more open accessibility and account­ability”.

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