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The measure seeks the renewal for a further seven years of the Church Commissioners’ existing power to spend their capital for pension purposes. This power was conferred by Parliament on the Church Commissioners by the passing of the Church of England (Pensions) Measure in 1997. Parliament also supported the renewal of the power when it passed a similar measure in 2003. The existing power expires at the end of 2011 and the church seeks its further renewal until 2018.

The church proposed in 2003 that future renewals of the power might be achieved under the negative resolution procedure for statutory instruments. The Ecclesiastical Committee was not convinced by that proposal and the church quickly withdrew from the territory. We welcome the fact that Parliament continues to take an interest in the safeguarding of the church’s historic assets and it has not sought to widen the scope of this measure. So the measure before the House today seeks nothing more and nothing less than a straight seven-year renewal of an existing power.

Perhaps I may now sketch in the background. In the mid-1990s, the church began to realise that the commissioners’ asset base could not sustain their

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expenditure commitments. In order to bridge the gap between income and expenditure, they could have cut their expenditure or they could have adopted a different investment strategy which focused on generating short-term income. Neither option was particularly attractive. There had already been deep cuts in their ministry support in the early 1990s and the church was reluctant to see any further cuts. Chasing short-term income, on the other hand, would have come at the expense of long-term returns, ultimately reducing the commissioners’ ministry support. That, too, was unattractive.

But there was a third way. The church and Parliament agreed that allowing the commissioners to spend capital for pension purposes would allow them to meet their pension liabilities and to sustain their other significant non-pension financial support for the church’s ministry. This move has been absolutely crucial to the commissioners’ investment performance. It has enabled them to rebalance their portfolio and has given them the flexibility to make the best long-term investment decisions.

The argument for renewing the power today is exactly the same as the argument for conferring the power in 1997. The commissioners’ actuary suggests that if they are to meet their pension liabilities and achieve their objectives of increasing their various other forms of ministry support, their expenditure commitments will continue to exceed income for some time. So, unless they are to resort to one of the two options which church and Parliament were determined to avoid in the late 1990s—that is, cutting discretionary support or skewing their investment strategy—they will clearly need this power for a further seven years.

We should keep in mind at all times the very far horizon to which a body such as the commissioners must look. The commissioners’ fund is not accruing any fresh pension liabilities and the time will come when their existing pension liabilities will cease and all pensions will be met from the newer funded scheme. Actively planning this transition is simply good financial management. Similarly, investing in assets which promise to produce a good return decades later is a sound strategy, but one which requires patience. This measure will help the commissioners to wait for such opportunities to come through. The legislation does not involve any compulsion to spend capital; we should see it as a vehicle for flexibility. As I said, in recent times the commissioners used that flexibility to invest more heavily in real assets rather than high-income-yielding assets but, equally, if they believe there are good reasons for investing more heavily in bonds and cash, the commissioners can do so.

Between 1 January 1998, when the power came into effect, and the end of 2007, the commissioners spent £405 million of capital but the value of their fund actually increased by £2.2 billion. The outperformance of their investments against the independent benchmark during this period meant £37 million per annum more for the church than average performance would have allowed. I offer that analysis to demonstrate the capital growth at which the commissioners’ investment policy is aimed, not as a cunning way of ignoring the circumstances of 2008.

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The commissioners’ audited 2008 figures are not yet available but it is true to say that, like any other fund at this moment, they have been affected by the market downturn. But this does not alter the argument for this measure.

Nothing in this measure can alter the fact that the value of the Church Commissioners’ fund will go up and down with the markets but, crucially, it enables them to adopt a long-term investment and distribution policy which, in turn, gives them the best chance of maintaining their support for the church even during difficult economic times.

That last point is important: we should not get so preoccupied with investment strategy that we forget the beneficiary. Generating superior returns matters only because it means increased proceeds for the church. So, despite the title of the measure, it is not the payment of clergy pensions that is at stake. Clergy pensions for which the commissioners are responsible—that is, those earned on service before 1997—will always be a first call on their fund. Clergy pensions will be paid regardless of our decision today. The point is that this legislation gives the commissioners the best chance of sustaining their other forms of support for the church in addition to the payment of clergy pensions. That means supporting bishops’ and cathedrals’ ministries, augmenting stipends, funding innovative parish projects which are targeted at the poorest areas of our country—I stand in a diocese which benefits hugely from this support—or exploiting new opportunities such as the creation of a Christian presence in new housing areas or employment areas. It may be a short measure, but it is important to our financial strategy.

Lord Lloyd of Berwick: My Lords, I will say nothing on the second measure, important though I believe it to be. On the first measure, I will add only a few words because the right reverend Prelate has said everything that needs to be said in explaining the measure and why it is expedient.

In the past five years, many measures have come before us from the synod, but three have been of particular importance—the Clergy Discipline Measure in 2003, the Pastoral (Amendment) Measure in 2006 and now this measure in 2008-09. Of the three, this measure is the most important for the future of the Church of England. Therefore it needs our support for the reasons given by the right reverend Prelate.

On each of the occasions we have considered these reports, I have been extremely impressed by the thoroughness with which the synod does its business and with the great care it takes to reach unanimity where it can. Very often it achieves either unanimity or something very near it, and I sometimes think that Parliament might take a lesson from that book.

On this measure there is a feeling, which I share, in favour of retaining the clergy freehold. The Ecclesiastical Committee was well aware of that feeling, took it fully into account and, for the reasons which were given in the report, took the view that nevertheless this measure is the right way ahead for the Church of England. I think I need refer only to paragraph 13 of the report, in which we say it will,

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Finally, I apologise that the time chosen for the consideration of the synod turned out to be very inconvenient to certain Members of the House of Commons. I apologise for that. The timing was chosen after soundings had been taken; we tried to get a time that would suit everyone, but that proved not to be possible. I hope that that will not happen again. I support both Motions.

Lord Wallace of Saltaire: My Lords, in welcoming this measure I shall say a little about the pensions measure. The clergy, like the university profession and, I suspect, like lawyers and judges, tend to live a long time. They have satisfying retirements, they still have interesting things to do and they survive. As a very occasional guide around Westminster Abbey I have had occasion to remark to visitors on the diet of the monks in the 15th century; they had a regime that did not leave a pensions problem, and perhaps part of the answer to the current one is to encourage more gluttony among the senior clergy.

The serious measure—the more serious of the two—is the important one on the freehold. On the Ecclesiastical Committee we had a long and, in many ways, rather nostalgic debate, which reminded me strongly on occasion of the Barchester novels, where abolishing the parson’s freehold was felt to be a step towards the 20th century, clearly a step too far for some people.

I certainly felt that these measures were highly desirable. They improve the conditions under which clergy work, they make them more properly accountable, they give them more active support in difficult circumstances and they make it easier for the Church as a whole to deal considerately and effectively with those few difficult cases where relations break down among office-holders whose job it is to work together, and are thus a useful and helpful step forward. This is not of course a party measure but, as a member of the Ecclesiastical Committee, I welcome these measures.

Lord Judd: My Lords, it is always good to follow the noble Lord, Lord Wallace of Saltaire. As I have already told him today, I often find myself in agreement with what he is saying. All I can say is that if my enthusiasm for his thoughts in this Chamber can be excelled, it is only by my enthusiasm for his singing, which was excellent in last night’s Haydn Mass. I wish more of my noble friends could have been there to hear such a wonderful concert, but such is the business of the state that we must push things like Haydn to one side in order that votes can take place, and all the rest of it. I must plead guilty, with my good colleagues and Whips present, and say that I made the right choice last night; I could not make any other, since my wife was singing in the concert.

The case has been put in exemplary fashion by the right reverend Prelate the Bishop of Chelmsford. Having known him for many years, I am not surprised that he emphasised social justice; that has always been a central preoccupation of his ministry.

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It is a privilege to serve on the Ecclesiastical Committee under the chairmanship of the noble and learned Lord, Lord Lloyd of Berwick, because he chairs it so well. His ability speaks for itself, but he brings such good humour, patience and irresistible firmness to our proceedings that we always reach good conclusions under his guidance. I am sure that this is the right step; it makes a great deal of sense.

In our deliberations in the committee I observed that, of late, while we spend a good deal of our time discussing, as our chair has said in this debate, extremely well prepared considerations coming from committed members of the Synod, more and more we hear the language of running the Church as a business and the business disciplines and professional skills that are required. We need effectiveness in the life of the Church but it is not a business, and I wish that these analogies were not made. Even this debate itself and the scope of it are hard to reconcile with the life of the founders of our Church; I cannot really imagine them sitting around discussing pension arrangements or freeholds. We have moved a long way, and we have to be careful that in our business preoccupations we do not throw out the baby with the bathwater.

With regard to pensions, at a time when there is a great deal of anxiety in our society about principle, about ethics and the absence of such considerations, which has led us into the plight that we now face, if we have an established Church then it has a responsibility to be a leader in the whole concept of ethical and principled investment. It is not just that it matters for members of the Church; it should, by the very nature of an established Church, be an example to the nation as a whole. The commissioners, therefore, have a tremendous task in reconciling good management procedures with a commitment to principle.

On the question of tenure, I hold firmly to the view that while this is clearly the right and sensible step to take, whatever arrangements we have in this and other respects with the Church, we must retain the principle—I hope the right reverend Prelate will forgive my saying this as a mere layman—that the hierarchy is there as a service structure, not as a power structure. They are not directors of a company; they are there to serve the Church, society and the clergy. The arrangements that we have in place should be there to enable them to carry out that service, to which I believe the present Archbishop of Canterbury is deeply committed.

Baroness Wilcox: My Lords, I shall speak for these Benches on these two measures. I am a member of the Ecclesiastical Committee, and as such I have before me the two papers presented to the House so that noble Lords, too, may be aware of what was said in those deliberations. I am always sorry at times such as this that there are not more people here to debate and comment on these issues, because they are so important to the established Church of this country. We are fortunate that the Synod takes such time and trouble to make sure that, by the time these measures appear before us under the able chairmanship of the noble and learned Lord, Lord Lloyd of Berwick, they have discussed and voted on them over a long period. By the time we get them they are well and truly measures.

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We have two measures to discuss today, the terms of service measure and the pensions measure. We had a long and difficult discussion because people wanted to listen to Prime Minister’s Question Time, rather than decide on this. They thought that it was more important; I did not think so. I am very happy that those of us who were there took time to discuss it and that we found out, as we are bidden to do, whether the measure was expedient. That is all that we are bidden to do. We have already heard the right reverend Prelate the Bishop of Chelmsford describe exactly what this first measure is about. The noble and learned Lord, Lord Lloyd of Berwick, has spoken, as have others. Noble Lords do not need me to speak any more, but I will add that we on these Benches find this measure expedient.

I turn to the Church of England pensions measure. I chair three different pension schemes in three very different areas of work. I know how worrying all talk of pensions is at this time, particularly in the Church of England, where we do not exactly pay our clergy an enormous amount of money. The pension is so very important to them. We found the measure to be expedient in our committee. We have heard it described and it has been amended so that there is just to be a seven-year review. There is no point in my saying more, other than that it is a great privilege to serve in Parliament on this particular committee with my friend—as I think I may call him at this time—who is opposite. We take these matters very seriously. It is an enormous privilege to have an established Church of England. I am very proud to be here today, on behalf of these Benches, to say that we find this measure expedient.

The Lord Bishop of Chelmsford: My Lords, I am grateful for all contributions. We on these Benches and in the Church of England are very grateful for the work that is done in the Ecclesiastical Committee and the careful attention that it pays to our measures as they come to Parliament. I agree with the noble and learned Lord, Lord Lloyd, about the significance of the first of these measures. I am reminded that in the 1840s serious legislative reforms of the Church took place, leading to clergy having to reside in their parishes and to other reforms of that sort. The Ecclesiastical Commission’s aim in the Industrial Revolution was to fund new parishes as the population grew. The consequence of those measures was that between 1851 and 1908 the Church of England grew as a proportion of the population that worshipped. These measures are important for the capacity of the Church to fulfil its duty. I sense that the measures that the noble and learned Lord, Lord Lloyd, has mentioned this afternoon are of similar importance for the future life of the Church.

I assure my good friend, the noble Lord, Lord Judd, that I do not consider myself to be in the position of a managing director of a business. If I did, I would fail hopelessly. Micromanaging the clergy and parishes of the Diocese of Chelmsford would be an unwise thing even to countenance. Our task is to enable people to do what they are equipped and skilled to do. These measures, in different ways, will help us to do that slightly better. I ask the House to approve the Motions.

Motion agreed.

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Church of England Pensions (Amendment) Measure


3.23 pm

Moved By The Lord Bishop of Chelmsford

Motion agreed.

Legislative Reform (Insolvency) (Advertising Requirements) Order 2009

Copy of the Order
1st Report from RRC

Motion to Approve

3.24 pm

Moved By Lord Brett

Lord Brett: My Lords, the order will amend the advertising requirements in the Insolvency Act 1986 in relation to voluntary liquidations. This House will already be aware of the real help that we are offering businesses and those struggling to make ends meet during this time of economic difficulty. The order will provide further help to business by reducing some of the costs associated with insolvency.

Before I set out what the order will do, I shall set out a brief history of it. The draft order was laid on 4 December 2008 using the affirmative resolution procedure. It was considered by the House of Lords Delegated Powers and Regulatory Reform Committee, which confirmed that it was content that the order should be allowed to progress as an affirmative instrument. The order was approved in the other place on 24 March.

I move on to the detail. When a company finds itself unable to pay its debts, a liquidator is appointed to find and distribute the company assets. Today’s order will deal specifically with voluntary liquidations. In a voluntary liquidation, a meeting of the company’s creditors must be called under Sections 95 and 98 of the Insolvency Act 1986. Notice of the time and venue of this meeting must be sent directly to all known creditors and advertised in the London Gazette and two local newspapers that are circulated in the area where the company has its principal place of business.

The order removes the obligation to advertise in two local newspapers and means that it will be up to the liquidator, under Section 95, or the company, under Section 98, to decide whether advertising is needed and, if it is, to choose the most appropriate method. It makes no change to the requirements to advertise in the London Gazette and for notices to be sent to all known creditors.

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These amendments to the Act are expected to deliver some £3 million a year in savings to business. Associated changes are being made to the Insolvency Rules 1986. These will come into force on 6 April this year and are expected to deliver further savings to business of some £14 million a year.

Delivery of the advertising changes is the first step in a process to consolidate and modernise our insolvency legislation. That will be achieved by another legislative reform order, which we aim to lay soon, and further rules amendments. We brought this advertising order forward in advance of the wider reforms as we did not want to delay this useful measure. The savings to business expected from the remainder of the project are around £25 million per year.

The savings from this order arise in respect of the £600 per case that will no longer be spent in an estimated 80 per cent of voluntary liquidations. This will increase the pot of money available to the creditors, because there is no reason why the change should result in any increase in the costs of conducting the liquidation, including the fees of the liquidator.

Costs are not the only reason, however, for introducing the order. We also want to make sure that, where creditors’ money is spent, it is spent usefully. That could mean an advertisement in a local paper if the creditors are local. It could equally mean an announcement on a professional website or even a small slot on radio, if they are trying to reach a rural community.

The requirement to use local newspapers goes right back to the beginning of the last century, when those who dealt with a company usually came from the same part of the country, but we do not think that such assumptions still hold good. The chances of local newspapers reaching unknown creditors who are not, as is perfectly possible, based in the same part of the country as the company are very limited. We should not be surprised that the Insolvency Service’s consultation about this proposal found that, in around 98 per cent of cases, no unknown creditors came forward as a result of the advertisements. So, in the vast majority of cases, these advertisements served no useful purpose.

We have considered carefully whether this measure could be open to abuse. It could be argued that companies might wish to conceal their insolvency from their creditors and might be aided if there was no local newspaper advertisement. But adequate measures are already in place to guard against concealment of creditors and those safeguards will not be undermined by the changes that we propose.

The order will make a modest but useful difference to creditors who will have already suffered losses as a result of having dealt with the failed company. It will also give liquidators and companies greater freedom to target their advertising more effectively. During an economic downturn, we should do all we can to help business. It is for these reasons that I commend the order to the House.

3.30 pm

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