THE Church Commissioners have indicated that they are willing to
eat into their capital to fund the reforms outlined in this week's
reports, if they have the approval of the General Synod.
They warn, however, that such a move will reduce irreversibly
the Commissioners' ability to support the Church in the future.
At present, the Commissioners manage £6.1 billion of the
Church's money. On current calculations, £2 billion of this is
needed to meet the Commissioners' liabilities relating to historic
clergy pensions. Interest from the rest is used to fund the
Church's activities: the Commissioners are responsible for funding
bishops and many cathedral clergy, and contribute about £50 million
a year in subsidies to the dioceses.
In 2013, the total spend was just under £208 million, of which
£121.5 million went on pensions. Of the rest, 47 per cent went to
dioceses, 36 per cent to the bishops' ministry, and 11 per cent to
The Commissioners' report Inter-generational Equity, released
last Friday in response to the programme of renewal and reform
outlined in the task-group reports, is, in large part, a history
It begins positively. "The Church Commissioners strongly welcome
these initiatives, and wish to play a full and creative part in
It recognised that this is likely to involve a period of "over-
distribution" from its funds, so that it would need to spend not
only the interest on its investments, but eat into some of the
The report draws a distinction between "good" over-distribution
and "bad" over-distribution.
Good over-distribution "is undertaken for a clear purpose, in
response to plans that are evidence-based, fully costed, and is
entered into with the agreement and understanding of all parties".
Safeguards would be put in place, and, if the plans are successful,
a by- product would be an increase in the Church's financial
For a description of bad over-distribution, the report recounts
the story of the Church Commissioners in the 1990s. In a candid
account of that period, the report admits that unregulated
over-distribution to support increased stipends and pensions
coincided with an over-reliance on volatile investments in
commercial property, and unwise borrowing.
Two decades of prudence and, at times, spectacular success, have
turned the Commissioners' fortunes round. Had the return on their
investments merely matched inflation, the fund would be worth £2.9
billion, instead of double that.
"There is, therefore," the report says, "scope for the
Commissioners to contemplate some additional 'pump-priming'-type
expenditure over and above its current support for the Church -
even over a number of years - but only if the expenditure is to be
"The analysis suggests that, without this additional spend to
support diocesan growth plans, the Church will simply continue to
decline, and so there is an imperative to act."
In summary, it says: "Over-distributing without knowing it, or
without understanding the consequences, is a sure road to disaster.
Over-distributing knowingly, and with precautions in place, is a
In a blog to accompany the report, the First Church Estates
Commissioner, Andreas Whittam Smith, says that the Commissioners
are "rightly" the "go-to body for any church institution that is
seeking additional funding". To judge whether it can meet these
requests, the Commissioners rely on their actuaries to calculate
what can be given away while still preserving the capital value of
the Commissioners' funds.
"The question now arising is whether this admirable rule can
apply when the membership of the Church is shrinking. One doesn't
want to arrive in a situation when a small Church of England has a
huge endowment. Our successors might then wonder why we hadn't used
our financial strength to arrest the decline when there was still
"This is precisely the issue that is now up for debate."
Mr Whittam Smith's blog echoes the view that the Commissioners
"strongly welcome" the various reforms proposed in the week's
reports. But, he says, "Before the Commissioners can make a final
decision whether we should 'over-distribute', given our other
pressing commitments, and, if so, with what safeguards, we wish to
know what is the opinion of Synod as expressed in next month's
IT WOULD be important to be clear that any "over-distribution"
would have a permanent impact on what was available for
distribution subsequently. The figures would need to be validated
by the ac- tuaries at the time, but, in round numbers, for every
additional £100 million spent, the annual amount available for
distributions would reduce by the order of £2 million for ever
(and, historically, this reduction would have been greater at
nearer to £3 million per annum).
This would be the case even if, as intended, the distributions
helped to generate growth and greater financial resilience, since
the Commissioners' fund is closed to new contributions. While the
scale of future investment returns would influence the precise
numbers, the reality is that 'over-distribution' would, like the
spending out of capital for pensions, produce an irreversible
reduction in the size of the historic endowment.
The justification would be that it had helped to generate growth
in church membership and local financial sustainability, thereby
reducing the need for support from national funds in the long term.
The risk would be that, instead of having a substantial endowment
and few members, the Church might have neither.
There would be important questions to address over:
- the scale of the money released (if a special distribution is
to be made it has to be sufficient to make a difference);
- for what purposes it was to be used, and;
- how to distribute funding in such a way as to avoid a "boom and
bust" culture, or to create dependency.
The profile and purpose of the spending would need to be shaped
to avoid long-term operational funding commit ments, and to build
Any such distribution would need to be tightly governed, in
particular to ensure that the additional monies are being properly
directed towards the change programme, and are not being mopped up
by "business as usual" activity.