On Friday the above clip was posted along with a transcript, a tumblr post , a paper and a discussion forum on the subject.
What follows is my summary of the paper in 16 shortish points. At the foot of this post are links to my posts summarising all the other recently issued reports by the CofE, plus other related posts on CofE matters/conferences/stats.
Summary step through of the facts and arguments
The funding situation
1) In 2013 the Commissioners spent £208m (15% of the CofE's total spend). (annex para 6).
2) Of this £122m was on pensions, £86m on non-pension costs (47% on supporting dioceses, 36% on bishops’ ministry and a further 11% supporting cathedral ministry) (annex para 6).
3) £97m of the £208m was met from income, the balance from funds. (annex para 6).
4) The Dioceses can't fund the proposals in the various papers.(para 2 page 2)
5) If the Commissioners pay for such they'd 'over-distribute' from their funds which pay for the spend in 2) above.(para 2 page 2)
Positives of a one off time limited Over-distribution
6) It helps generate church membership growth and local financial sustainability (annex para 21)
7) Thereby reducing the need for support from national funds in the long term. (para 39 pages 6&7).
8) Over-distributing knowingly with precautions in place is a legitimate strategy.(para 41 page 7).
9) A successful outcome, as a by-product, would be an increase in the Church’s financial strength. (para 4 page 1)
10) Such a one-off distribution would in principle be possible - subject to the Commissioners taking legal and actuary advice - without the need for further legislation (though legislation would be needed if new types of distribution - for example for clergy or lay training- were to be envisaged). (annex para 16 &18)
Negatives of Over-Distribution
11) ‘Over- distribution’ means an irreversible reduction in the size of the funds (not tied up in pension) available in perpetuity to meet the costs of the living church. (annex para 4 & 20)
12) For every +'nal £100m spent the funds available for distribution (see 2) above) reduces by £2-3m p.a.(annex para 19).
13) ‘Bad’ over-distribution led to a severe financial crisis in the early 1990s. (para 5 page 1)
14) Over-distributing without understanding the consequences is a sure road to disaster. (para 5 page 1)
15) If we over-distribute the risk is that instead of having a substantial endowment and few members - the Church might have neither. (annex para 21)
Conclusion
16) Andreas Whittam Smith therefore welcomes comment from Synod on the proposals and precautions he shall outline in the debate. (it isn't clear to me if these precautions are in addition to those discussed in the paper) (para 41 page 7)
Some Background information
1) For more than 20 now the Commissioners have adopted a rigid policy of distributing only such sums that will enable the value of the endowment to be maintained in real terms through time. In so doing they have observed the principle of inter-generational equity. (para 10 page 2).
2) They have achieved investment returns in excess of their target return of RPI plus 5% consistently over the last 20 years. This, plus a prudent distribution regime informed by independent actuarial advice, means the investment portfolio at the end of 2013 was some £6 billion. (If they'd only managed to keep pace with inflation it would be 1/2 of this). (para 36 page 6)
3) As the Commissioners are not encumbered with any borrowing and have been growing the value of the portfolio at a rate faster than simply maintaining it's real value ....SO financial support to the Church is greater than would otherwise have been the case had it merely kept pace with inflation. (para 38 page 6)
4) The highly diversified investment portfolio has shown itself resilient during recent economic turmoil. It has been able to maintain its level of distribution to the Church, in particular its support for poorer dioceses, and more recently for mission and development opportunities. (para 37 page 6)
5) Around £2 billion of the £6 billion is required to extinguish the pension obligation over the next 60 years. (annex para 2). The actuaries advice is there will not be any increase in money available for non-pension purposes once the pension liabilities have been met. (annex para 3)
6) The report sets out the key lessons learnt from previous mistakes:
- from 1974 onwards, over-distribution became a habit and the additional spending was targeted on recurring costs (stipends, pensions etc.), which could not be cut back when things turned sour;
- there was an over concentration of assets (Commercial property ='d 38% of assets and itself was made up of a small number of large schemes);
- The decision to borrow exacerbated the risks. Moreover interest rates doubled to 10% so in 1991 loan repayment spend was almost as much as stipends or pensions. (para 35 page 6)
7) If over distribution were chosen 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 commitments and to build long-term sustainability. (annex para 22)
8) And any such distribution would need to be tightly governed, in particular to ensure the
additional monies are being properly directed towards the change programme and
are not being mopped up by ‘business as usual’ activity. (annex para 23)
- there was an over concentration of assets (Commercial property ='d 38% of assets and itself was made up of a small number of large schemes);
- The decision to borrow exacerbated the risks. Moreover interest rates doubled to 10% so in 1991 loan repayment spend was almost as much as stipends or pensions. (para 35 page 6)
7) If over distribution were chosen 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 commitments and to build long-term sustainability. (annex para 22)
8) And any such distribution would need to be tightly governed, in particular to ensure the
additional monies are being properly directed towards the change programme and
are not being mopped up by ‘business as usual’ activity. (annex para 23)
Related CofE Posts
CofE Discerning & nurturing paper - with Green Report attached - from January 2015
Church Commissioners' funds and inter-generational equity - from January 2015
CofE Resourcing the Future - from January 2015
CofE Resourcing Ministerial Education - from January 2015
CofE Simplification paper - from January 2015
CofE Discerning & nurturing paper - with Green Report attached - from January 2015
Church Commissioners' funds and inter-generational equity - from January 2015
CofE Resourcing the Future - from January 2015
CofE Resourcing Ministerial Education - from January 2015
CofE Simplification paper - from January 2015
CofE Developing Discipleship paper - from January 2015
“In Each Generation” : A programme for reform and renewal - from January 2015
The Green Report - on CofE talent management - from December 2014
CofE typos in services - a compilation of a @OurCofE twitter hashtag - from December 2014
CofE 2013 mission stats - from November 2014
“In Each Generation” : A programme for reform and renewal - from January 2015
The Green Report - on CofE talent management - from December 2014
CofE typos in services - a compilation of a @OurCofE twitter hashtag - from December 2014
CofE 2013 mission stats - from November 2014
CofE Strategies - one of several posts summarising - from June/July 2014
Role of church in society conference - from June 2014
CofE church growth research conference - from January 2014
Role of church in society conference - from June 2014
CofE church growth research conference - from January 2014
