The Church Commissioners have published their investment result from 2022 along with their annual report for the year, and both can be found online here.
The investment results are quite remarkable. Although the headline return last year was only 5.0% last year (compared with 13.3% in 2021), which means a real-terms reduction in the value of their assets during a year when inflation averaged around 10%, this is an astonishing result when compared with investment funds overall. According to this report, the FTSE 100 index grew by less than 1%; the US stock market fell by 20%, and only 17% of the UK funds they tracked made any positive return at all. The Commissioners’ investment team have, once more, out-performed the investment market quite significantly. At a meeting last year, I asked (only half in jest) what I needed to do to pass my savings on to them so that they could invest them for me.
Where does that leave the Commissioners’ assets, and the contribution from those assets to support the ministry of the Church?
The short press announcement notes that the returns have averaged 10.2% over the last ten years, giving a net cumulative growth of 164%; over that time, UK inflation has been around 47%, so the assets have grown in real terms by 80%—that is, it has nearly doubled. [I originally calculated this incorrectly, subtracting rather than dividing by inflation; the value is approximately 264%/147%, though for accuracy this should be done year by year.] Over the last 30 years, the average return has been 10.0%, giving a net cumulative growth of 1,645% (that is, a 16-fold increase, the result of the power of exponential growth) during a period of total inflation of just 100% (due to the long season of low inflation from 1993 under Labour). So in real terms the Commissioners’ assets have grown 8-fold (1,645/200)—and they thus have a much more significant role in supporting the wider Church then a generation ago.
This fantastic success story raises two questions, one about the assets themselves, and the other about their use—questions that I explored previously at a similar time last year.
In relation to assets, the investment growth has been extraordinary—but raises the question ‘When is enough growth enough?’ The distributions of assets has been significant, totalling £186.8m in 2022 (an increase of 27% over 2021) plus £117.1m towards clergy pensions, the historical liability on past pensions (more recent pensions being funded by dioceses to the Pensions Board).
But each year a balance must be sought between paying money out and retaining funds to grow the asset base—which in turn will allow greater contributions in future. So the question is: how do we balance the needs of the present with the anticipated needs of the future? Which has the more urgent claim on the assets? The summary comment on p 12 of ‘Our Purpose’ states:
The Church Commissioners support the Church of England’s ministry, particularly in areas of need and opportunity. We do this through responsible and ethical management of a diverse investment portfolio which enables us to grow our support for the Church, by helping to ensure funding is intentionally used for mission and growth, by managing our costs effectively, and by embracing our principles of accountability and service.
On what grounds, then, should any funds be held back from distribution this year in order to allow greater distributions in future? What level of assets are the Commissioners actually aiming for, after which they will say ‘We don’t need to grow any more; we will distribute all the real-terms growth in the fund to current ministry needs’?
If the Commissioners continue with their excellent investment performance, then we might expect long-term real-terms returns of 7% per year, which would amount to distributing around £700m a year, which after the pension contribution would be more that £500m to the dioceses and parishes. So why are we not doing that now? An obvious response is that the Commissioners need to protect the fund from a possible future catastrophe—perhaps like one we have been through, where some funds lost 20% of their value. But isn’t an £8bn fund enough, giving a continued annual distribution of £450m? If so, then we have already reached the safety margin. If not, then what is the goal?
One thing is for sure: it is not credible to say ‘There is no limit; we aim for continued, substantial, real-terms growth, and will therefore limit the distributions to the current level in order to allow that growth.’ The reason why this is not credible is because of the financial state that the dioceses find themselves in—which leads to my second question.
How do we determine the best use of these assets? There is a fascinating phrase tucked away in the purpose statement: ‘by helping to ensure funding is intentionally used for mission and growth’. It appears as though the Commissioners themselves have a role in determined how the assets should be spent, and whether or not certain uses of the funds are being used well in ministry. I wonder if this is wise?
The Commissioners investment team are clearly doing an outstanding job in what they are good at—investing money to get an excellent, sustainable, long-term return. But on what grounds might the Commissioners make decisions about whether the funds are being well used in the context of ministry?
I suspect they have a statutory duty to do so—but this raises a serious tension between them and those in dioceses and parishes, not least the clergy themselves, about who makes these judgements. Are the Commissioners staffed with people who have long experience in parochial ministry, mission, church planting and growth? The clear answer is ‘no’—but of course those who work with them, including from the Archbishops’ Council, do in fact make the decisions about actual allocation and release of funds, in the past through the SDF (Strategic Development Fund) board, and in future through the more integrated Strategic Mission and Ministry Investment Board (SMMIB). But this still leaves the larger question: why not simply hand over larger sums of money to dioceses and let them make their own decisions?
On the one hand, there is a clear and urgent need to do this. Yesterday I was in a meeting of our deanery chapter where clergy were sharing stories of the pressing financial situation they are facing a parish level; heating costs have soared, for one parish from £8,000 a year to £26,000 a year, and it meant they would not be able to pay their parish share. We are running more than a £1m deficit in our diocese, and we are far from being the worst. Bath and Wells is running at a £2.2m deficit, and joins other dioceses (Sheffield, Leicester, Chelmsford, and others) in cutting the number of stipendiary clergy posts, in this case from 178 to 150. These reductions are not because of a shortage of clergy, nor for missional reasons (research says that such reductions will lead to further decline, not church growth) but in order to balance the books. I understand that Manchester are also looking at redundancies of both central and clergy posts—and I suspect there are others in a similar situation.
On the other hand, there is some evidence that dioceses are not making good decisions in their deployment of ministry. The scheme in Leicester Diocese had been in the news again, and some claims about what is happening are contested. But, as I noted when it was first announced, the evidence all points to this kind of approach leading to further numerical decline, not growth.
And yet, there is a sense in which the Commissioners’ assets are not their own; they originated in the parishes, largely through Queen Anne’s Bounty, which was established to augment the stipends of poorer livings. Some argue that the money should simply be handed back—but there is no guarantee that parishes would manage their assets as well, and part of the reason the Commissioners have had such a good return is because of their size. The two questions of managing assets, and control over distribution, do not need to be held together—so why not hand the latter decision back to the parishes, whilst the Commissioners continue with their investment responsibilities? (One major difficulty with any conversation here is that criticism of the distribution policy is heard as criticism of the Commissioners as a whole, who then feel as though their excellent investment performance is not recognised.)
The language throughout the Commissioners’ report is of ‘supporting the Church’, as though the two were separate entities. They are, legally and organisationally—but not affectively and emotionally. I believe that it is becoming increasingly unsustainable to have one part of the Church of England so well resourced, and other parts in such dire financial difficulty—hence the picture at the head of this piece. The Commissioners are committed to funding the Church ‘now and for the long term’, but unless more happens ‘now’ there simply will not be a ‘long term’ to support.
Last year I identified four areas where greater funding is need now, and these have become no less urgent in the last 12 months.
First, with the cutting of stipendiary ministry we are facing the real possibility of the C of E withdrawing from large parts of the country. Perhaps that needs to happen, in order for new and effective ministry to be re-established at a later date—but we cannot just ignore this reality.
Secondly, clergy stipends have been in long-term decline, and there is a real sense of hardship amongst those clergy with children and without a second income. Given the overall financial situation, including the Commissioners’ assets, I think this is a scandal.
Thirdly, in 2015 the clergy pension was unilaterally reduced by a third, by what I regard as a sleight of hand. Questions in Synod have confirmed that this would cost a mere £25m per annum to rectify. (I say ‘mere’ in the light of the numbers above). This must surely be put right, and better provision made for housing for clergy in retirement who were not able to buy their own property during ministry. If you are a member of General Synod, please sign my Private Members’ Motion proposing that we address this.
Fourthly, our residential theological colleges are under threat and financial pressure, for a range of reasons, but principally because of the disaster of the RME changes, and because of the unmanaged growth of other forms of training. Historically, these have been vital sources of theological learning; we have already lost what was the largest college, and it would be a tragedy to lose another. These are assets which can never be regained once they are lost.
We need to talk now about making these things happen. The maths is not complicated; what is needed is the will.