Examination of Synod Representatives (Questions
MONDAY 22 APRIL
1. Dr Turnbull, could I start, first of all,
by thanking you and your fellow members for coming to address
us this afternoon. Perhaps you could introduce your fellow witnesses.
(The Reverend Dr Turnbull) Thank you,
my Lord Chairman. If I could briefly introduce who is here. On
my left is Howell Harris Hughes, who is the Secretary to the Church
Commissioners. On my immediate right is Mrs April Alexander, who
is a member of the Steering Committee for this Measure. She is
also an Executive Director of OPRA, the Occupational Pensions
Regulatory Authority. Next to her is Mr Stephen Slack, who is
the Head of the Legal Office of the National Church Institutions
and the Chief Legal Adviser to the General Synod. My own role
in this is as Chairman of the Steering Committee that guided the
Measure through the Synod.
2. Would you like to address us first on the
Measure as a whole and what it is seeking to achieve and then
perhaps deal with capital expenditure separately, if that seems
(The Reverend Dr Turnbull) Thank you, my Lord Chairman.
What I would like to do is make a few brief remarks setting the
Measure into context and illustrating its provisions as briefly
and succinctly as I possibly can. First of all, I would like to
set this Measure into its wider context. The Pensions Measure
builds upon the provisions for pensions for the clergy within
the Church of England established under the Pensions Measure 1997.
That Measure established a number of principles. First, that pension
provision for future service after 1 January 1998 would be met
directly by contributions from diocesan boards of finance into
a funded pension scheme for the clergy. Second, that the responsibility
for funding the past service liability for pensions would continue
to fall upon the Church Commissioners. One consequence of this
was the acknowledgement and the agreement between the Church and
Parliament that the Commissioners would need to expend capital
in order to meet these liabilities. That, of course, is one of
the key points of this Measure that is before us and I will want
to return to that in a moment. It is also worth noting in passing
the range of financial challenges that the Church faces. I believe
that the whole Church has responded magnificently well to the
challenges before it, some of which were set in place by that
Pensions Measure in 1997, but it is essential that the Church
as a national institution continues to order its financial responsibilities
in as careful, coherent and strategic a manner as it can. Can
I turn now to two different sets of provisions that we have within
this Measure before us. Let me very briefly deal with the provisions
as they relate to the discretionary powers of the Church of England
Pensions Board. What this Measure does in essence is to bring
clarity and flexibility to various discretionary funds that the
Pensions Board has at its disposal. It does this by bringing together
three existing funds which were established under statute, together
with a further fund, the General Purposes Fund, that was established
by a resolution of the Pensions Board itself. Hence the Board
will have one fund with funds totalling somewhere in the region
of £70 million under one heading from which it can provide
discretionary assistance. The sort of assistance it would provide
would be to deal with particular cases where the income of a retired
cleric is low and needs to be supported and augmented. Secondly,
the Measure makes specific provision for the Board to be able
to offer, at its discretion, assistance with retirement housing
to the spouse of a pensioner when that couple have divorced after
retirement. It is a very specific point but at the moment the
Pensions Board is unable to offer assistance to the spouse of
a cleric when that couple divorce after retirement. I am sure
that the Committee would want to welcome that provision. Finally,
in relation to the Pensions Board there is a technical provision,
the details of which I do not need to go into, dealing with who
pays the cost of pensions when a clerk in holy orders is dispossessed
of office under various pieces of legislation. Let me turn, if
I may, to the power contained in this Measure for the Church Commissioners
to continue to spend capital upon their pension liabilities. This
provision was included in the Pensions Measure 1997 for a period
of seven years. It thus expires on 31 December 2004. This Measure
before the Committee would extend that power for a further seven
years. It is important for me to set out briefly for the Committee
the importance of that provision. Members will be aware that the
Commissioners' expenditure falls into a number of different categories.
Some of these are obligatory provisions and others are discretionary.
The former, the obligatory provisions, include the provision for
past service pensions. The latter, the discretionary support,
includes support for stipends (especially in those parts of the
country and the Church most in need of additional support), support
for the stipends and the working costs of bishops, and some other
miscellaneous grants. The principal issue facing the Church is
how best to manage those funds at its disposal in a coherent and
strategic way so that the responsibility for pensions can be met,
whilst leaving the Commissioners with some degree of certainty
over what future funds will be available for its discretionary
spending. It is planned, Chairman, that the Commissioners will
expend capital over time amounting to round about 45 per cent
of its total assets. That will leave sufficient assets in place
to provide an on-going and continuing support in those areas of
discretionary spending. That process has already begun. In the
year ended 31 December 2000 the Commissioners spent just under
£35 million of capital in support of its pensions liabilities.
If the Commissioners were not able to renew the power to spend
capital there would be two possible consequences. Firstly, the
Commissioners would face the possibility of making significant
reductions in those areas of discretionary spending. I would submit
to you that would be particularly unhelpful to the Church's mission.
Secondly, they might have to restructure their investment portfolio
to give a much higher proportion of gilts in order to fund the
increased income requirement. It seems to me that would be particularly
unhelpful to the long-term profile of the capital fund. Chairman,
I just want to draw attention to two smaller matters on the provisions
that are before us. Firstly, the necessity to spend from capital
will be an on-going requirement, but it is right and proper that
both Synod and Parliament have the opportunity periodically to
review that matter. Hence in order to simplify the procedure and
avoid the need for a full Synodical Measure and the full legislative
procedures of the Synod and of Parliament, it is proposed in this
Measure that future renewals of this power should be made possible
by Order rather than by Measure. I would wish to emphasise that
any such Order could only come into effect after a full debate
on the floor of the General Synod and after it was tabled before
Parliament under the negative resolution procedure. Secondly,
and finally Chairman, I should mention the question of transitional
relief. Under the 1997 Pensions Measure the cost of pensions for
future service was to fall upon diocesan boards of finance. It
was accepted at the time that this was a significant challenge
for DBFs and it is a challenge to which they have responded extremely
well. But it was recognised that it would require some on-going
transitional support from the funds of the Church Commissioners
and that support is currently in place. It was, however, always
intended that such financial provision would be temporary. Hence,
in this Measure before the Committee there is no proposed renewal
of the provisions for the Commissioners to grant transitional
relief from its funds, and so that power will expire on 31 December
2004. The implication, just to be clear about it, is that from
that point onwards the full cost of future service pensions will
be borne by diocesan boards of finance. My Lord Chairman, that
concludes my opening remarks on this Measure. I hope that has
helped the members of the Committee. I together with my colleagues
look forward to discussing these provisions with you and stand
ready to answer any questions that you may have of us.
3. Dr Turnbull, thank you very much. I think
the Committee is very grateful for that exposition of the Measure.
I wonder whether any of your colleagues would like to address
us briefly now, especially on the spending of capital over the
next 60 years. Is that a subject upon one or other of you (and
I suspect it might be Mrs Alexander but I do not know) might like
to address us?
(Mr Harris Hughes) My Lord Chairman, I need add quite
little to what has been said. We seek to renew a power which has
given the Commissioners flexibility. It dictates no particular
policy, it simply allows flexibility. We have since the Measure
came into force been spending capital and last year the figure
was about £40 million. In the process the fund has performed
very well because we have been able to be flexible, and that is
what we continue to protect.
4. Thank you. Anything else from your colleagues?
(The Reverend Dr Turnbull) No I do not think so, my
Chairman: I am sure there will be some questions
for you. Who would like to start us off? Lady Wilcox?
5. I am somewhat comforted, my Lord Chairman,
that Mrs April Alexander is the Chairman of OPRA.
(Mrs Alexander) I am an Executive Director.
6. Because my first worry on the White Paper
in item 9 was this wonderful statement that "we know what
is going to happen over the next 60 years". I would normally
only be comforted in that statement if I had an actuary in the
room. I would like to know if Mrs Alexander can comfort me on
the fact that we are making a statement there based on actuarial
valuation. If I can have the answer to that question first it
might comfort me for the second question.
(Mr Harris Hughes) My Lord Chairman, may I answer
for the Commissioners. We are required to take actuarial advice
in the assessment of liabilities and year-by-year to receive their
reassurance that the spending plans of the Commissioners, both
in respect of pensions and in respect of the discretionary spending,
is sustainable and therefore the figures that are set out are
ones which flow from actuarial advice and calculation.
7. Who are the actuaries?
(Mr Harris Hughes) Messrs Bacer & Woodrow. The
original calculation was Bacer & Woodrow, the annual ones
are Watson Wyatt. Watson's are the appointed actuaries to the
8. That is helpful. I would have felt happier
to have had them here, to tell you the truth, and it would have
made your job easier. The second question I would like to ask
also for comfort is I chair a couple of very big pension schemes
myself. I was a bit nervous about the fact that if we do not let
you do what you want you will not be able to invest in high investment
returns of shares. To my knowledge, our problem with share investments
over the last few years is that we have had to top up from capital
because the share return has been so poor and, in fact, in two
of the boards which I chair we have gone for bonds to get some
regularity in our return. So I was a little bit confused on item
10 of the White Paper that if we do not do this, the threat is
that you will not be able to continue investing in high investment
returns on shares. If I may be rude, given the performance of
the Church Commissioners in the past, I would like to see prudence
here rather than a bit of a romp through the share market.
(Mr Harris Hughes) My Lord Chairman, the advice we
have does not in fact postulate any particular investment policy.
What the actuaries would say to us is that a portfolio which is
biased towards what I would call real assetsshares and
various categories of propertywould on the long-term evidence
of the past produce a better return than the nominal return of
bonds. On the basis of that actuarial advice we have since the
mid-1990s shifted the balance of the fund towards securities where
previously it was with property. But at no time have bonds been
a major element in it. They could be if it were thought that the
returns were particularly attractive on the actuarial estimate.
They have not formed that view, we do not hold it at present,
and to that extent our view is framed by the long-term experience
and by what the actuaries think is a reasonable set of suppositions
for the future.
9. You are asking Parliament to give you powers
which Parliament holds over the historic assets which have partly
been built up from taxpayers and the Monarch but from other sources.
When you set on this course of asking Parliament to expend up
to 45 per cent of your capital to meet past pension pledges, you
presumably had, as you replied to Lady Wilcox, actuaries' advice
and you have got another set of actuaries' advice on the current
position. As you are asking Parliament to give powers away which
it holds on behalf of the nation, could we see the actuaries'
(Mr Harris Hughes) My Lord Chairman, yes of course.
10. Can I say why we probably would like to
see them, which is on the basis that the first set of decisions
the Synod took over current pension contributions has been wrong.
You are now in a period, are you not, of asking for increased
contributions. What worries me about giving up the position that
Parliament has over the historic assets is that if you continue
to get calculations wrong and if those first calculations were
wrong, for example, over how long clergy who have got past pension
rights will survive, you may wish to spend much more of the historic
capital than you have ever actually publicly declared. Given that
we agreed in the first place that you should have this power to
spend capital, why do you want to take the power away from Parliament
which is, after all, another sounding board for you as to if you
have got the policies right?
(Mr Harris Hughes) If Mr Field is particularly concerned
about negative resolution, then my understanding is that that
would clearly be a matter for you. Our only concern, in process
terms anyway, has not been to make the process especially cumbersome
but there is no point of principle on that and certainly no wish
to derogate from the authority of Parliament over the historic
endowment of the Church of England at all.
Mr Field: If we gave away this power and depended
on the negative resolution, do negative resolutions come to the
Lords as well?
Chairman: I think so.
Mrs Dunwoody: They are not voted on, my Lord.
Chairman: They could be prayed against, that is the
difference in the negative and affirmative.
Lord Pilkington of Oxenford: Mr Field is right, we
are taking away power from Parliament in essence.
Chairman: Do you have another point?
Lord Pilkington of Oxenford
11. I wanted to underline what Mr Field said.
Traditionally the Ecclesiastical Commissioners in the 19th Century
took large endowments from the parishes and the dioceses to support
the Church. You can correct me on this. It seems to me that the
Church is taking executive power to itself for things which the
Church Commissioners and Ecclesiastical Commissioners would have
said should be found from within the community of the Church.
The pensions are sacred. I accept the fact that it has always
been the tradition of the Church Commissioners to support parishes
in deprived areas. I have doubts about bishops' expenses and I
have doubts about the Archbishops' Council and I think you would
have to spell out much more clearly because traditionally the
Church Commissioners guarded these rights very carefully. Parliament
was the ultimate guardian of this. That is why Mr Bell is sitting
here. It seems to me that you are carrying out quite a revolution
in this matter. Am I wrong in thinking this?
(The Reverend Dr Turnbull) My Lord Chairman, if I
may comment briefly on that point. I think we need to bear in
mind the range of categories of expenditure which the Commissioners
spend their funds on. One of those categories is, as the Member
said, bishops' expenses. But, Chairman, I think we need to be
clear that the majority of that expenditureand the total
amount is just under £16 million, I think I am correct in
sayingis actually on the provision of support costs and
working costs for bishops, not daily expenses. I think it is important
for us as the Church to say that we do consider it a matter of
quite fundamental importance that the leadership of the Church
is properly resourced and funded. Howell can comment in a minute
on the breakdown but the majority of Commissioners' funds currently
are used for the support of the pensions of clergy. Then some
£22 million is used in support of the parochial ministry
in areas of need and in areas of opportunity up and down the country.
That is the support for the poorer areas of ministry. Then there
is an amount to which I have just referred (£16 million)
which is effectively supporting the national leadership of the
Church of England. It seems to me perfectly reasonable that that
features. We must bear it in mind in relation to the proportion
that it forms of the total.
Lord Pilkington of Oxenford: Fundamentally, the problem
we are facing is your spending of capital. Whether you are spending
it on pensions or bishops' expenses is irrelevant to us. Most
of us in our organisation regard the spending of capital resources
as a most terrifying thing to do. I was a headmaster for 20-odd
years and it was written into my heart not to spend capital. You
could say it is being spent to support the pensions, you could
say it is being spent to support the bishops' expenses and people
like that; it is being spent. Traditionally for the last 150 years
the capital of the Church Commissioners has been sacred. This
is a revolutionary step and all of us who have been concerned
with institutions around this table get worried because we can
all make, and I plead guilty myself, stupid decisions.
12. Really I want to try and understand this
more clearly. We have in front of us a Measure which relates to
part of the activities of the Church Commissioners. It is perfectly
possible to argue that there are on-going responsibilities which
will be exhausted at the end of the period and that therefore
the need for that capital to resource them in the future will
also be exhausted and that therefore it is reasonable to apply
the capital in this way. Surely, that is to take a very narrow
view of the situation? I share the concerns. I do not know of
another organisation which would treat its capital resources in
this way. Indeed, historically I find it very difficult to justify
because this money was not given to the Church of England centrally
at all, much of it was given to the Church of England in the localities.
We can argue about whether the Church should have taken the money
centrally or not, but had it in those days said to those localities,
"Not only are we going to take it centrally, but in fact
we are not even going to keep it, we are going to spend it as
if it were income", the row about taking it centrally would
have been enormous. If you look back to the terms under which
it was taken centrally, there were specific guarantees made by
those who did it to say that it would still be the capital of
the Church of England, although administered centrally. It is
for that reason that I find it extremely difficult to agree to
the proposition that we have here because there is, of course,
a perfectly reasonable alternative and it is the alternative that
everybody else has to carry through, which is to say if the cost
of pensions rises above the money that we have raised in order
to pay for them, we have actually got to raise some more money
or we have got to reduce the other activities that we have. What
I do not like about this is that it seems to me that under the
guise of a Pensions Measure the Church of England is seeking to
use its money in a way which no other organisation would, and
were it to be presented under any other guise a Committee like
this would not begin to agree to it. I think the guise is a very
carefully chosen guise in order to avoid the real issue of the
Church of England which is how to fund its current spending on
its current income, which is what all of us have to do not only
in organisations like Lady Wilcox's pension funds but in our own
private life. If we individually said, "I am going to spend
up to this sort of proportion of my capital on my running costs",
most people would call that, even if they were not very Victorian,
fool hardy. It seems to me that it would probably be rather good
for the Church of England if the Ecclesiastical Committee said
rather carefully that perhaps we ought to think again and that
perhaps you ought to do what everybody else does. Even local authorities,
who are pretty spend-thrift in this particular area, have got
to raise the money in the end from the people who may unwillingly
pay for them. Are we right, honestly, in saying that the treasures
of the past should be spent on the present when the future will
not have it? I find that very difficult to support.
(The Reverend Dr Turnbull) I wonder if I could help
the Committee. Over the next 60 years, yes, indeed, it is planned
as part of the agreement under the 1997 Pensions Measure that
approximately 45 per cent of the Commissioners' assets would be
expended in support of pensions, but at the same time from 1 January
1998 onwards contributions have been flowing in to the Church
of England funded pension scheme, so as the capital reduces in
one place the capital is increasing in another, and it seems to
me that, as Mr Gummer was saying, we need to look at it as a whole.
It is important that we hold that in perspective and in place,
that even though capital is planned to be spent on supporting
pensions from the past, capital is increasing in support of pensions
for the future.
Mr Drew: Could I just ask one very simple question.
Did you take any cognisance whatsoever of clergy poverty in regard
to the pensions situation in regard to this Measure? Does it have
any impact at all on what the clergy are likely to receive, both
existing clergy pensioners, let alone tomorrow's clergy pensioners?
What are the dynamics of this Measure?
Chairman: I did not quite hear.
13. I am asking about clergy poverty with regard
to the pensions situation and I am wondering if this Measure has
any impact at all on today's clergy pensioners let alone tomorrow's.
(The Reverend Dr Turnbull) One of the other hats I
wear is as Chairman of the review group set up under the Archbishops'
Council to review the level and nature of clergy stipends. As
part of that review the investigation of the financial circumstances
of clergy and questions of clergy poverty (to which Mr Drew referred)
came under the auspices of that review. It seems to me that the
Church is seeking to deal with those questions, but I do need
to say that this Measure before us would have no impact at all
upon the level of pension that a cleric would receive. So whereas
I take very seriously the matter of clerical poverty and the need
for the Church to deal adequately with that, this Measure before
us would not have any implications for pension benefits.
14. Mr Gummer raised the issue of are there
any parallels with this running down of capital. I would have
thought the closest analogy was the closed pension scheme. It
has got no new liabilities, it is a pot of money being set aside
for a particular purpose and the closed pension scheme can spend
the pot on the thing it was there for. It seems to me that is
the exact analogy. There is nothing improper about that and I
would be very alarmed if the result of our deliberations were
to undermine today's ministry of the Church, either by cutting
spending in urban priority areas or anywhere else, by raising
contribution rates. Mr Drew referred to clergy poverty. They get
little enough money as it is and then if we were to expect them
to pay more. It seems to me that there is nothing improper in
what we are being asked to do here and we should welcome it. I
perhaps ought to put on the record just for the avoidance of doubt
that my wife is a pre-1998 beneficiary of the scheme, which I
do not think has influenced my comments. Might I just, so as not
to come back again my Lord Chairman, raise the issue of the transitional
arrangements because one of the things that concerns me is that
it was agreed that there would be seven years of transitional
help for the dioceses. Five years have gone by. Is it apparent
that that transitional help was enough because it strikes me that
there are some very poor dioceses out there who may well not yet
have coped with the new pension liabilities they were going to
incur? You implied it was alright. Can you reassure us that it
is universally alright or is there a need for re-opening the question
of transitional assistance?
(The Reverend Dr Turnbull) My Lord Chairman, the reassurance
I can offer is that the transitional support was given by the
Church Commissioners on a selective basis to the dioceses so that
those that were most in need received most. Over that period of
seven years we are confident that all of the dioceses will be
able to have completed that transition period successfully. Some
will have taken the whole seven years but some have completed
their transition to taking their own responsibility for future
pensions more quickly than they otherwise had expected. Clearly,
there are other financial questions that face the dioceses and
that is an on-going discussion within the Church of which the
level of remuneration of the clergy is but one, but in respect
of transitional relief, the seven-year period will be completed
and all dioceses will have taken that responsibility, some more
quickly than others.
15. I have two questions and the first one follows
on very directly from Steve Webb's question. There is a seven-year
period which we are governed by in here because it was a period
set by the Pensions Measure 1997, and so the Church clearly has
to anticipate the end of that period. The questions are, firstly,
at the end of that seven years is there a possibility of review
of the transitional arrangements which have just been alluded
to so that there is scope for adjustment if adjustment is needed
of the big picture? Secondly, is there a reason why we have been
given a seven-year cycle? Is there any precedent for Church legislation
coming back on a renewable by Order basis by negative resolution?
It seems to me that that is quite an important principle. Either
there could be a renewal forever or a renewal with a later possibly
of reconsideration. This gives, as it were, a clock ticking procedure.
Has that got any other precedent in legislation which comes to
(Mr Slack) My Lord Chairman, I am not aware of any
precedent for precisely this sort of arrangement on the basis
of the Church legislation that I have been concerned with so far.
I think that the Synod probably believed that Parliament would
not wish to see any more onerous procedural requirement for future
extensions of the power at the end of each seven-year cycle, which
replicates the existing period, if it were willing to accept the
possibility of further extensions in principle.
Mr Field: Surely it is up to Parliament to decide
how Parliament behaves, not the Synod, is it not? Why do you assume
that it is all going to be terribly onerous for us and you want
to save us time?
Lord Pilkington of Oxenford: Ten o'clock at night
in the House of Lords is not too onerous.
16. Dr Turnbull, if I understood him, says this
is a point on which there should be some flexibility as to whether
it should be done by negative resolution or by starting all over
(The Reverend Dr Turnbull) The matter of how future
Orders are approved or not approved seems to be a matter for us
to agree together. It seems not to be a matter of fundamental
Lord Pilkington of Oxenford: Chairman, could I say
- and I only speak for myselfwith the sort of worries that
have been expressed already about the expenditure of capital and
also wanting to help poorer churches, if we fulfilled our responsibility
as Parliament we would like to see it every seven years because
getting rid of capital is a very worrying thing. If we are going
to earn our money, as you might say, it would not be onerous to
sit here because this is a very important matter for the Church
of England. If you got it wrong and spent the 55 per cent wrongly,
you would be in a terrible mess and we would like to join to help
you. I know you would not be in a mess because you are wise and
this would not occur, but when you start getting rid of capital
it is worrying. Speaking for myself, I would like it not to be
passed on Order but to come back through the whole procedure like
Mr Bottomley: My Lord Chairman, I think we ought
to acknowledge that some of us may be paid to be here but most
people on the Synod are not, so we ought to be grateful for what
they have put in.
Baroness Wilcox: We are not paid to be here, Mr Bottomley.
17. I did say that, I am sorry my voice did
not carry. I do not think we ought to give the impression of attacking
the Synod for wanting to make our lives easier. If we want to
make life difficult for ourselves I think we should be allowed
to do so. It was five years ago that we agreed the power to expend
the capital, so the point of principle was then. Am I also right
in thinking that nothing particular has changed from the Synod's
point of view or the responsibilities of the trustees of the fund
over the last five years?
(The Reverend Dr Turnbull) Mr Bottomley has summarised
that perfectly and I think that was illustrated by when this Measure
was before the General Synod it was approved at final approval
with only one vote cast in the negative. I think for those very
reasons that the principle had been agreed but we were looking
at the periodic review which has been referred to for the continuation
of an existing principle.
18. Can I ask if the Synod has the opportunity
every seven years of looking at it? They do not just go through
(The Reverend Dr Turnbull) I would wish to be clear,
my Lord Chairman, that the Synod will need to vote every seven
years. If this Committee does not find this Measure expedient,
it is likely that there would be preserved to the Synod and to
Parliament the full legislative procedure where there are several
different stages that the Synod has to go through. By putting
it through on an Order it requires a full debate and vote in the
Synod but then it would be referred to Parliament without further
Lord Hardy of Wath
19. My Lord Chairman, I share the anxiety about
the disposal of capital at the present pace. £35 million
in one relatively short period does seem to be a great deal. I
was present in the Committee when we considered it before and
it was a matter of decision to agree in principle but we all assumed
that the very critical situation that preceded that situation
would not be repeated. To some extent it has not been, although
growth of capital may not have been quite as high as many of us
would have wished. To some extent we are taking a gamble on the
actuarial analysis. From the experience of my home parish I am
very cautious about assuming that clergy will die quite so soon
as many other people. We have one vicar who was in post for 64
years. His successor celebrated his golden wedding. Keble Martin
wrote his Concise History of British Flora 50 years
after he retired as our vicar in 1922. We have currently three
former vicars who are alive and well. So let us hope the actuarial
analysis is reasonable!
(The Reverend Dr Turnbull) The Noble Lord fills me
with complete horror about my own longevity if that is what the
future prospect is!