I have just returned from the second session, in London, of the new Synod which first met last November. Some commented that the agenda looked rather dull, but (to coin a phrase) ‘the devil is in the detail’, and in amongst the boring-but-important discussions about faculties, boilers, and internet cabling, there were some startling insights into people being shouted at in meetings, irregular appointments processes, and persistent episcopal secrecy. And of course there were really significant, outward looking debates about race and modern slavery.
One of the returning items, postponed from the previous quinquennium (the five-year ‘fixed term’ period for which each Synod sits) was a report on clergy remuneration. (As Synod is a public body, you can find all the papers here if you so wish.) I have been pressing questions about clergy stipends and pensions in meetings of the Archbishops’ Council for several years, and was also involved in the last serious report on clergy remuneration, Generosity and Sacrifice, though I did not agree with all its conclusions, especially regarding differentials.
It is worth noting from the outset that the whole subject of clergy remuneration is a bit awkward and needs to be handled rather carefully. The most obvious challenge is that, in recent times, no-one seeks ordination because of the pay! When the Church was a respectable bastion of society, and when some livings (the money and assets attached to a ministry post) were substantial as a result of the generosity of a wealthy benefactor, then many clearly did ‘go into the church’ as an attractive career prospect. But those days are long gone.
The more awkward personal issue is that clergy are acutely aware that, in the end, their own remuneration depends on the giving of those in their congregation, and it is quite hard to detach the claim that clergy should be paid more from the suggestion that congregants ought to be giving more. This is a particularly challenging link to be confronted with for those ministering in less well off areas and amongst those who are older, who might already be giving sacrificially, and where clergy might enjoy better housing and job security than those they are ministering to.
There are also some serious paradoxes involved in the whole task of assessing the ‘clergy remuneration package’, which I explored in more detail four years ago. A classic example of this is the issue of housing: is being out of the housing market, and having a house provided, over which you have little choice or control, and which you might struggle to afford to run, a benefit or a burden?
I actually have little ‘interest’ in this question, since I do not draw a stipend, since beginning ordination training in 1989 have only had three years of stipendiary ministry in a parish, so have very little pension from this, and I have never lived in diocesan tied housing. I am, perhaps, therefore more free to ask some of the hard questions—and hard questions there are.
The first hard question to ask is about the level of actual stipend. In the summary of the report on remuneration, Richard Jackson, who is bishop of Hereford, makes several comments which appear to be in tension with one another. First, he notes that the value of clergy remuneration has actually been declining.
We are aware that the value of the package has declined in real terms over the last 20 years, as a result of stipends not being able to keep up with inflation and changes to the pension scheme. This emphasises the importance of ensuring that future aspirations are realistic and affordable (para 4).
Despite this decline, the overall judgement of the Remuneration and Conditions of Service Committee (RACSC) was that the package was still ‘adequate’:
Given that the existing package is still adequate and appropriate for the majority of clergy, although it has not kept pace with inflation, there needs to be a commitment on the part of the Church to maintain the overall value of the stipend against inflation in the future (para 15).
This raises the question: what was the package like 20 years ago? If it is ‘adequate’ now, was it really ‘more than adequate’ 20 years ago? I think we would be hard pressed to find clergy who believed that at the time. And in between these two claims, we find information from a survey of clergy that was carried out as part of the review.
62% of respondents reported to be living comfortably or doing all right, but 13% were finding it quite or very difficult to manage and 25% were just getting by.
Just pause for a moment there: fully 38% of current clergy, nearly 2/5 of the whole ordained ‘workforce’, are either finding it ‘quite or very difficult to manage’, or are ‘just getting by’. (Note too that a proportion of the 62% will be those on higher stipends in posts of ‘seniority’, so those struggling are a larger proportion of parochial clergy.) What impact might that be having on clergy morale, not least after the last two years of pandemic? What state will they be in to take on the challenges of new forms of ministry in response to calls from the centre? Will they be equipped to engage in damaging and divisive conversations about contentious issues, on top of all the other demands currently being made? It is hard to imagine so.
There are two unhealthy dynamics at work here. The first is poor decision making. Each year at Archbishops’ Council we are presented with a recommendation from RACSC for the rate of increase of the clergy stipend. And each year I have laid down two challenges: that we need to think more theologically, rather than merely pragmatically, about the level of provision; and that we need to be thinking medium and longer term, and not simply year to year. I am pleased that my second question is getting some response, and that in future assessment will be made in the light of several years’ data, not just from year to year. The problem is that, in a period of low inflation, the year-on-year judgement is not fine enough; you only have to be wrong by a couple of tenths of a percentage point, and over a ten-year period that accumulates into a slow but steady erosion of the value of the stipend—and that is precisely what has happened.
This analysis, from 2019, shows that, over the last ten years, stipend value has actually decreased by a full 10% in relation to RPI, and 6% in relation to the now preferred measure of CPI. As a result, stipends have steadily slipped down the earnings percentile chart over the same time period. (NSM stands for ‘national minimum stipend’ and NSB stands for ‘National Stipend Benchmark’.)
I confess that, revisiting these figures from 2019, I find this pretty shocking. Either the annual stipend review process has not been working well, or we have all taken our eye of the ball—or, worse still, there has been a deliberate plan to reduce stipends by stealth, and it has worked. Whatever the answer, there needs to be some serious change—and I am pleased that Richard Jackson is committed to that.
The second unhealthy dynamic that emerges from the first is the response: ‘Well, we got it wrong in the past—but I am afraid that there is nothing that can be done in the future’. Despite the quite substantial reduction in stipend that we have seen, and though there is now a commitment not to let that happen again, there is not the slightest mention of righting this historical wrong.
The net result is actual hardship. After watching my contribution to the debate in Synod, a clergy friend emailed me to say:
I wanted to write to thank you so much for your impassioned comments around the issues of clergy remuneration. Living on stipend has been hell over the last 14 years leading to living with slowing crippling debt, which the Clergy Support Trust are now helping us with. I love the parish but financially it is very difficult to the point that I feel trapped by debt, the situation with housing and the complete inability to build up assets on a stipend.
Of course, clergy are far from alone in feeling these things—another of the challenges and paradoxes of this whole debate. But is this really the situation we want to create for a substantial proportion of our clergy?
The second hard question relates to the clergy pension. One of the key activities of Synod is allowing the asking of questions—key because it is a vital opportunity to press issues of accountability and transparency. One of the question related to the historic reduction of clergy pensions and the cost of restoring them.
The Revd Dr Patrick Richmond (Norwich) to ask the Church Commissioners:
Q111 Given the actuarial assessment on p 45-6 of the Church Commissioners’ last annual report of 2020, that £1.6bn of their £9.2bn assets would be sufficient to cover all current and future pension contributions for which they are liable, what would be the current cost of restoring the clergy pension to the level prior to the adjustment made at the time of the Government’s introduction of SERPS?
Mr Alan Smith to reply as First Church Estates Commissioner:
A Clergy pensions for pre-1998 service are met by the Commissioners. Post-1998 service obligations fall to the Responsible Bodies in the scheme (mostly Diocesan Boards of Finance, with the Commissioners responsible for pensionable service of bishops and cathedral clergy). The Government introduced SERPS in 1978 and replaced it with the State Second Pension (S2P) in 2002. S2P was replaced by the higher rate State Pension in 2016. Clergy pensions were contracted into S2P in 2011 as a cost-effective way to provide additional benefits. At the same time, the full clergy pension accrual was reduced from 2/3 to 1/2 of stipend. We assume the question relates to this latter change.
Actuarial advice would be required to assess the cost of reverting to the pre-2011 benefit levels for future service. A rough estimate would be a 1/3 increase in pension contribution rates, i.e. an annual cost to the Responsible Bodies of over £25m.
What Alan Smith is alluding to is a reduction of the value of the pension by what appears to many to have been a sleight of hand. When S2P was introduced, it was believed that this would offer additional pension to retired clergy, so that the Church’s own pension scheme could be reduced. We need to remember that this was in a period when there was serious concern about the affordability of pensions, and uncertainty in investments was leading to actuarially driven increases in contributions, which dioceses could ill afford.
So the clergy pension was unilaterally reduced from 2/3 of stipend to 1/2 of stipend, and at the same time the number of years needed to contribute to the full pension was increased from 38 years to 43 years. If you do the sums (1/2 ÷ 2/3 x 38 ÷ 43) then the value of the pension has been cut by a third—hence Alan Smith’s answer that restoration would need about a 1/3 increase. At the time, the claim was made that this change would not affect clergy, since the loss would be made up by S2P.
But when S2P was dropped five years later, and that gain was lost, was the clergy pension restored? No! And the argument was ‘We cannot afford it’. Once again, we meet the ‘We got it wrong in the past—but I am afraid that there is nothing that can be done in the future’ argument.
For both these hard questions, the issue is, do we have the resources to right these wrongs? Richard Jackson responded to me in correspondence:
What we kept crashing up against in the review is the near bankruptcy of many dioceses. For the Diocesan secretaries we spoke to it’s a stark choice more stipend = less clergy.
This corresponds to the finding from the research done as part of the review process:
60% of respondents disagreed that there was capacity for funding stipend increases through increases in parish share (para 10).
(It is worth noting, though, for comparison, that from the table above whilst stipends have increased by 19%, and CPI has increased by 24%, contributions from parish share have only increased by around 10%, that is, they have dropped in real terms by 14% over ten years.)
So neither stipend nor pension can be restored by increasing parish share contributions. But is there money elsewhere? Another of the questions in Synod enquired about assets in dioceses and parishes.
The Revd Dr Ian Paul (Southwell & Nottingham) to ask the Presidents of the Archbishops’ Council:
Q16 What is the current total of known diocesan reserves, and what is the likely or estimated value of total parochial reserves across the Church of England?
Canon Dr John Spence to reply on behalf of the Presidents of the Archbishops’ Council:
A According to Diocesan Boards of Finance’s financial statements, at the end of 2019 the total of unrestricted funds held by dioceses was £798m, £184m of which was held in cash. Since then, diocesan reserves have been adversely impacted by the pandemic, although deficits have been mitigated to some extent by sustainability fund grants totalling £24m across 2020 and 2021 combined.
According to data compiled for Parish Finance Statistics 2020 which will soon be made available on the Church of England website, at the end of 2020 the estimated aggregate of parishes’ restricted and unrestricted reserves were £1,545m, of which £824m was held in cash and £721m in investments.
And the other large holder of assets is the Church Commissioners, whose assets have doubled over the last 20 years to £9.2bn, and who in 2020, through astute investment and management of their portfolio, saw growth in 2020 of 9.4% or £868m.
The £25m that would be needed in increased contributions each year to restore the clergy pensions amounts to 2.9% of their annual growth in assets, which would have left their net growth in 2020 9.1% overall instead of 9.4% overall. If the Commissioners took on this additional contribution for the next 20 years, then the total cost would be no more than 5% of their total asset base.
In the light of this, I think it is very hard to sustain the argument ‘We cannot afford it’. Given the situation of 38% of clergy, given the impact on clergy morale, given the historical unilateral reduction of the pension by one third, and given the importance of stipendiary ministry for the future of the Church, the question is rather: can we afford not to right these historical wrongs?