'Chaotic' investments cost Church pounds 800m: Congregations asked to make up for decade of mismanagement

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The Independent Online
MEMBERS of the Church of England were told yesterday that they would have to rescue its finances after disastrous speculation in the commercial property market was revealed to have cost the church pounds 800m in assets since 1989.

Church closures, job cuts among the 11,200 clergy and a reduction in pension benefits were inevitable without a fresh injection of funds, according to two reports published by the Church Commissioners.

A nine-month review of finances found that a decade of speculation in retail and business parks had left the church living clearly beyond its means. Deficits of more than pounds 50m a year are having to be made up by raiding capital reserves.

The commissioners, who administer the church's pounds 2.2bn in assets, said that present levels of support to the clergy could not be maintained because of the crisis.

The Bishop of Chelmsford, the Rt Rev John Waine, who chaired a report team of church leaders and financial advisers appointed by the Archbishop of Canterbury, Dr George Carey, denied the church was 'sliding off the edge' but confirmed the need for a rise in the average weekly donation of pounds 3.

Earlier appeals for generosity have fallen on deaf ears, but the church hopes that this situation will prompt larger donations, particularly in richer congregations.

His report, and another by the accountants Coopers & Lybrand, categorised chaotic fund management which allowed excessive exposure to a few large property developments, such as the MetroCentre in Gateshead and the Marlowes Centre in Hemel Hempstead.

Dr Carey said the church was 'not in the business of recriminations', and called for calm reflection. 'We have a unique opportunity to look realistically at how best to build up the financial future of our church.'

Sir Michael Colman, chairman of the household goods group Reckitt & Colman, who was appointed First Church Estates Commissioner earlier this year, said that if the church was one of his factories, there would be job losses and redundancies. He said: 'We have to get into the growth business. If we allow the church to shrink we shall have to ask questions about what some of the ministers will do.' Of the annual 'shortfall' of pounds 50m, he said that even after remedial measures there would be a pounds 33m deficit over the next four years.

Both reports show that speculative developments in Britain and the US were financed through borrowings of pounds 382m. The property element of the total investment expanded to more than 60 per cent - in breach of a policy restricting it to 50 per cent.

Coopers & Lybrand said that cost- control procedures were ineffective, risk assessment was inadequate and professional advice was ignored.

The accountants added that the loss of pounds 800m in assets would have been serious enough, but during the 1980s the commissioners had also expanded expenditure. Significant improvements in clergy benefits were granted in the form of increased stipends - up by 44 per cent above inflation - and in entitlements to the church's 10,500 pensioners, 82 per cent above the Retail Price Index.

Two commissioners who were at the forefront of the decision-making during the 1980s had retired and a third executive had left, their report noted.

Coopers & Lybrand said that, to steady the church's finances, generous benefits should be trimmed; speculative property investment should be avoided; no borrowing should occur, and professional advice must be taken from fund managers and other experts. A separate pension fund is likely to be established to secure future responsibilities.

Suggestions for cost savings cover the possibility of contributory pensions for clergy, a break between increases in salaries and an automatic link to pension increases, and capping the commissioners' pension-support payments.

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