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Mr. Bernard Jenkin (Colchester, North): Does my right hon. Friend agree that the work of clergymen of all faiths in the inner cities is significant, but that that of the Church of England is especially significant because of the peculiar constitutional position that professional clergymen and the Church of England have: they have a statutory responsibility for universal coverage of the country, which no other faith has?
Mr. Alison: I am much obliged to my hon. Friend for reminding us of that and for putting it on the record; the Church of England is unique. The very fact that we are discussing the Church Commissioners' affairs underlines the fact that that statutory duty and responsibility is vastly underpinned by the Church Commissioners' funds--the parliamentary charity with which we are concerned today. The two go together. I take my hon. Friend's point.
During the 1980s, however, the commissioners' resources have became overextended and their need for more income has led them in recent years to invest too heavily in property. Both the Select Committee's reports on Church of England affairs have had some harsh things to say about that, and the lessons have been taken to heart. The property portfolio is being slimmed down on a controlled programme and the proceeds switched into equities here and abroad, which offer the best long-term prospect of promoting income growth in line with projected expenditure.
The proportion of assets in commercial property has halved from a peak of more than 50 per cent. in 1990 to 23 per cent. at the end of 1995. In the same period, borrowing has fallen from more than £500 million to just £23 million. In the past three years, the value of the total fund, which was written down by the notorious figure of £800 million between 1989 and 1992, has risen by £600 million. Expenditure has been cut to the same cash level as in 1989 and a further £18 million is being cut this year and in 1997. Those reductions have not only helped to reduce the income deficit; they have enabled the commissioners to start rebalancing the investments.
That recovery should reassure Parliament of the commissioners' renewed competence and professionalism under the leadership of Sir Michael Colman, who took over as First Church Estates Commissioner in 1993, but the longer-term structural imbalance between assets and liabilities, which was crystallised by the investment losses to which I have referred, must still be rectified.
The Church of England has accepted that the commissioners' assets cannot stretch to carrying the whole cost of pensions and honouring their other trusts and commitments, of which my hon. Friend the Member for Colchester, North has just reminded us. The
implications of the present situation are dramatically illustrated by the pattern of expenditure on stipends and on pensions. In 1986, the two categories of expenditure were in balance, at £35 million a year each. By 1995, the ratio had moved almost two to one in the direction of pensions, the cost of which more than doubled in that decade. That was a deliberate improvement in the pensions position and a reflection of what the Church of England felt was right and proper for its retired pensioners. It was associated with the introduction of a compulsory retirement age for clergy, who had in many cases simply soldiered on since the stipend was their only source of income. If the change in the ratio were allowed to continue, the commissioners' ability to fund ministry in poorer parishes would be wiped out.
In essence, the Church of England's proposals for funding clergy pensions are to split the liability in two, with a closed and ultimately self-liquidating scheme for past and current beneficiaries and a new fully contributory scheme for future entrants. The dividing line would be some fixed date in the future--for the sake of illustration, 1 January 1998.
Under the new arrangement, the commissioners will meet the cost of past service liabilities accrued up to the date of change--pencilled in for 1998--and dioceses will raise funds from parishes to meet the cost of pension contributions after that date. The General Synod in York approved the continuation of the current scale of pension benefits for future service last Monday, with the support of the diocesan boards of finance. For the record and to remind colleagues, in the round, the pension represents two thirds of the previous year's national stipend per 37 years of service. The national stipend is in the region of £14,000 a year, in addition to which a lump sum of £26,750 is also available for the retired clergyman.
The General Synod has endorsed and committed itself to continuing that frame of pension provision. It is accepted that the Church Commissioners will have to make transitional provision to reinforce the limited impact of pension contributions for the new scheme in early years. Discussions about that interim help are at an advanced stage between the commissioners and the diocesan boards of finance. The latter are planning to take on the full cost over six or seven years.
One key principle for shaping the new arrangement that has been of particular interest to the Select Committee is that the commissioners should be empowered to use capital for pension purposes. That is a radical innovation and an unprecedented departure from the basis on which Parliament originally legislated to set up the commission. Until now, only income flows from the capital, and not the capital itself, could be disbursed by the commissioners. I shall say more on that sensitive issue.
A draft pensions Measure to give effect to the new contributory proposals was approved by the General Synod of the Church of England last November. The Measure is now before a Revision Committee of the Synod. Recognising Parliament's particular interest in draft legislation that involves the commissioners' assets, the Synod has invited interested parliamentarians to submit suggestions for the Revision Committee's consideration so that Parliament can influence the drafting of the Measure before it is set in concrete. This debate is one of the obvious opportunities for that input, and the Select Committee's report is another primary source of input to the pension Measure's revision stage.
The first recommendation of the Select Committee is that the new powers that the Church of England is seeking should provide for the full application of the more general, secular legislation passed by Parliament recently to regulate and control pension schemes in the round, particularly matters relating to the so-called minimum funding requirement. The Church of England intends that the new arrangements should offer the same safeguards as secular schemes, subject essentially to the same regulations and controls, but adapted where necessary to reflect the practical realities of the Church of England's fund-raising arrangements--essentially through parish donations--and, in the case of clergymen, the technical lack of an employer. The pensions board is in discussion with Government Departments about those issues.
The Select Committee's second and fourth recommendations concern the use of the commissioners' capital. Parliament has an interest in that matter, since roughly one third of the capital derived from the Crown and was given in trust for the maintenance of the clergy of the Church of England in the deployment to which my hon. Friend the Member for Colchester, North referred. The other two thirds of the capital derive from Church sources. Parliament set up the Church Commissioners in 1947 to consolidate and hold in trust those capital sources and resources on behalf of Church and state for the same common purpose: the maintenance of the clergy of the Church of England in that national and statutory deployment to which my hon. Friend referred. The Select Committee is understandably cautious, therefore, about the expenditure of capital.
Hon. Members may wonder why capital has to be spent at all. I am afraid that the answer is sheer practicality. The commissioners' projected pensions expenditure, including transitional help for the dioceses, would greatly exceed their likely income unless they suspended other expenditure--breaching their trusts and imposing additional burdens on dioceses--or repeated the errors of the 1980s by moving back into high-yielding investments, such as property and gilts, at the expense of future capital and income growth. The power to spend capital, if given to the Church of England by Parliament, would enable the commissioners to meet their obligations while pursuing a prudent and fruitful investment policy.
Another aspect needs to be borne in mind, however, especially by those who may suspect that the use of capital is an exercise in selling the family silver. Under the proposed arrangements, a new fund of contributions from dioceses will build up as the commissioners spend the capital needed to satisfy the past service liability. Although not an exact symmetry, as the sand flows out of one hourglass, fresh sand will be flowing into another.
Rev. Martin Smyth (Belfast, South):
I was puzzled when the right hon. Gentleman referred to the six-year period. I come from another Church background. We realised that the change would take longer. Secondly, is there a place for the clergy contributing to their pensions, which is what we have done in our Church? That has resulted in a marked improvement in the pension schemes.
Mr. Alison:
The time frame to which I referred relates to pension liabilities that will arise from the new entrants contributory scheme. In the early years, although vast sums will not be flowing in, there will not be a vast
The difficulty with the hon. Gentleman's second point is that Church of England clergy are not exactly highly paid. They receive a stipend of about £14,000 a year to bring up a family. If they were asked to make a pension contribution, their stipend would have to be raised to offset the extra cost, and that would place further obligations on parishes to supplement the stipend. There would be the additional disadvantage of further national insurance contribution liabilities for the extra money given to clergy to offset pension contributions. On balance, it was felt that a contributory scheme from the parishes only was the most rational proposal. It was simply an exercise in how to use resources most efficiently, given the overarching presence of that dark shadow--the state tax and national insurance collector.
The Select Committee's second main recommendation would enable the commissioners to meet their obligations for the first five years, including the transitional support needed to cushion the introduction of pension contributions. Leaving aside for a moment whether these changes should be effected by a Church of England Measure or by a Bill in Parliament, the Committee's proposals would go quite a long way to meeting the Church of England's requirements. I know that many in the Church of England would prefer the commissioners to acquire a permanent power to spend capital on an unlimited scale, including the power to transfer capital to a new pension fund. It must be admitted that the Select Committee's recommendations inevitably leave some uncertainty about how the commissioners could manage their commitments after the recommended five years. It is in this context that some in the Church of England find a major attraction in being allowed to have a fixed and final capital transfusion; it would cost about £1.2 billion or £1.3 billion to wipe out future liability in one fell swoop.
Sir Michael Colman's evidence to the Select Committee, and his note reproduced on pages 25 to 30 of the Committee's report, underline the commissioners' reservations about draconian transfers of capital, at least until there is an established contribution flow into the future service fund. An initial limitation on their power to spend capital would effectively defer the issue of a wholesale transfer of capital, and I hope that the Church of England will accept that what the Select Committee proposes in this, its most significant recommendation, can be the basis on which the Measure is revised and moved forward.
If it is possible to secure an accommodation with those who have drafted the General Synod's propositions and members of the Revision Committee, I suspect that the Church of England might press for the stipulated period to be not five years, as recommended by the hon. Member for Birkenhead, but a period to tie in with the likely required transition period for support for the new fund, which is more likely to be seven years. The Revision Committee favours inserting a seven-year maximum on the length of the transition period. That might be a more appropriate time frame, chiming in with the harmony that may arise if the Select Committee is happy for its five-year recommendation to be extended to, say, seven years.
At the end of the transition period, if all goes well, the Church of England will be able to show that the new arrangements are working smoothly and that parishes
have proved their ability and willingness to meet the cost of pension contributions. Further legislation might then be simply a matter of finishing off what had already been well begun.
I turn finally to the Select Committee's comments about the implications of the Turnbull commission's recommendations for the control of Church Commissioners' assets under some future structural framework of change. Turnbull recommended in the report, "Working As One Body", that the proposed archbishops' council should take over the Church Commissioners' responsibility for applying their income. The commissioners' role would ultimately be reduced to managing assets and declaring, so to speak, an annual dividend to the new council.
Work on Turnbull is more complex and less far forward than the pension proposals. The steering group under the aegis of the two archbishops is charged with the follow-up to the report, and this follow-up group is addressing a wide range of key issues using the Turnbull report more as a vision than as a cut-and-dried blueprint.
The evidence given to the Select Committee by Philip Mawer, Secretary-General to the General Synod, was a clear exposition of the case for reforming the commissioners and their role by Measure as opposed to Bill. This is the way in which Church legislation has been handled for more than 75 years, and it enables the Church to design its own proposals in its own time with its own internal and external consultations. The Church is alert to the fact that, on issues affecting the commissioners' assets, Members of this House and of another place would like input into the drafting, as is in effect provided for by the Select Committee's recommendations on the forthcoming clergy pensions Measure and by this debate.
The Select Committee's report sets out with equal clarity and robustness the opposite case: that proposals affecting the independent control of the commissioners' assets--in this case the application of their income--should be legislated for by Bill rather than by Measure. This suggestion has, I am bound to say, caused considerable anxiety in some quarters of the Church of England, who fear that it would represent retrogression from the devolved powers granted by Parliament in 1919.
I hope that colleagues in the House today and members of the Select Committee will allow me, for the moment at least, to sidestep this, the Committee's fourth and most controversial recommendation--effectively that changes that might arise from the proposed Turnbull organisational reforms should be the subject of a parliamentary Bill rather than a Measure. The key phrase in the recommendation is "further changes", to distinguish these from the pensions Measure that the report majored on. At present, such changes have not been officially, specifically and finally formulated, and must lie in the realm of the hypothetical. The scale and scope of what may in the end be proposed will properly determine the shape of a Bill versus Measure debate, but we are simply not there yet.
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