Church of England (Pensions) Measure (Hansard, 16 January 2003)

§ Second Church Estates Commissioner (Mr. Stuart Bell)
I beg to move, That the Church of England (Pensions) Measure, passed by the General Synod of the Church of England, be presented to her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament. This is the first Church of England Measure to be debated in this Parliament, so I welcome hon. Members on this august occasion.
The Measure makes provision in two main areas. First, it amends the powers of the Church of England pensions board in relation to certain funds that it holds in statutory trusts for the benefit of its pensioners and their dependants. It does so by transferring them to the general purposes fund established by the board in 1975. That fund is then given charitable purposes that embrace all the former purposes of the funds added to it. The result will be to enhance flexibility to make discretionary charitable provision for its pensioners and others and to reduce administrative costs.
The Measure widens the board's powers in relation to the provision of retirement housing for those who have served in the stipendiary ministry. Previously, where a couple housed by the board divorced after retirement, the board could continue to house only its pensioner and not the former spouse. The Measure gives the board power to house a former spouse as well as the pensioner and thus enables it to treat both even-handedly.
The Measure clarifies the position as regards the liability for payment of the cost of accruing pension rights where compensation is paid under the Pastoral Measure 1983 and the Incumbents (Vacation of Benefices) Measures. The changes relating to the Church of England pensions board are dealt with in clauses 1 to 4 of the Measure.
Secondly, in clause 5, the Measure extends for a further seven years, from 1 January 2005, the power granted to the Church Commissioners by the Pensions Measure 1997 to resort to capital to pay their pre-1998 clergy pension liabilities. The 1997 Measure significantly altered the arrangements for the funding of clergy pensions. In particular, it limited the commissioners' pension liabilities to those arising from service before the end of 1997.

§ Mr. David Drew (Stroud)
I hope that the Measures will not be controversial but, given the previous problems experienced by the Church Commissioners, can my hon. Friend tell us what the fall-out might be if there were no improvement in the Church's overall capital position? We are talking about some of the poorer pensioners; it is a myth to pretend that former vicars do not face an extremely difficult situation.

§ Mr. Bell
I am grateful to my hon. Friend for that intervention. The commissioners' investment performance over the past three years has been adversely affected by the poor return from global stock markets, but their property holdings have mitigated the impact, 838 although full figures are not yet available. When they are, I shall ensure that my hon. Friend receives the information.

§ David Taylor (North-West Leicestershire)
I understand that we are talking about assets of about £4.5 billion and that actuarial assumptions envisage that about £2 billion of that will be required over the next 60 years. Can we assume that the actuaries have taken a bleak view of the present stock market position and that things could actually be much better as time goes on?

§ Mr. Bell
The actuaries estimated that, on the basis of present withdrawals from the funds of the commissioners—the capital to which the Measure refers—which amount to about £30 million a year and possibly more than that, it would take 60 years for half our capital to be divested, or used up. Of course, 60 years is a long time for all of us—we may all be dead by then. However, the pensions liability, according to the actuaries, is long standing and we hope that, with flexibility in relation both to our property investments and our stock market investments, the situation to which my hon. Friend alludes will not arise, but I am grateful to him for putting the question.

§ Mr. Frank Field (Birkenhead)
May I ask my hon. Friend about the other side of that actuarial calculation? The first actuarial calculation to be undertaken for the commissioners relates to how much of the total fund will be required, but the second is for the new scheme that is to be established. Is he satisfied that the actuarial calculations for the new scheme are as soundly based as they should be, given that the situation has changed so quickly over the past couple of years? Might the commissioners want to bring forward the actuarial review of the scheme?

§ Mr. Bell
I am grateful to my right hon. Friend for that question. As he is aware, the pension schemes to which we are referring are final salary schemes. The essence of the Pensions Measure 1997 was to divest responsibility of the commissioners for future schemes from that date and to pass it to the dioceses. My right hon. Friend raises an interesting point and I shall be glad to take up the question of whether there should be an actuarial review of the schemes and draw it to the attention of the commissioners.
I shall now return to my speech, with apologies to Hansard if it is not the point where I left off.
The Pensions Measure 1997 limited the commissioners' pension liabilities to those arising from service before the end of 1997 and created a new and separate funded scheme into which dioceses—through funds raised from parishes—could pay clergy pension contributions in respect of service from the beginning of 1998. In support of those arrangements, it gave the commissioners power, but only until the end of 2004, both to give financial assistance to diocesan boards of finance and others in taking on the cost of paying those pension contributions and to spend capital in meeting their own pre-1998 pension liabilities.

§ Mr. John Bercow (Buckingham)
I recognise that this a relatively narrowly drawn Church of England pensions Measure, rather than a Bill that seeks to 839 address contracts of employment. Given the widespread concern on both sides of the House about the relatively minimal and unsatisfactory employment rights of members of the clergy, does the hon. Gentleman feel able to hold out any prospect that the Measure could be amended so that those whose contracts of employment are terminated might be given additional pension provision?

§ Mr. Bell
The hon. Gentleman is right that the Measure is narrowly drawn, and not capable of being amended. However, his point about employment rights has been well taken by the Church, which is providing a full document as part of the consultation procedures demanded by the Department of Trade and Industry that will close in July. I will ensure that the question of pension rights in relation to employment rights is linked in our consultation document.
The Measure will alter the last of the powers to which I referred by extending for a further period of seven years, from 1 January 2005, the commissioners' powers to spend capital to pay their pre-1998 clergy pension liabilities. The reason for seeking that extension is that, because of the need to fund those liabilities, the commissioners' expenditure is likely to exceed their income by at least £30 million per annum, a point that my hon. Friend the Member for North-West Leicestershire (David Taylor) made. Without the continuation of the power to resort to capital to meet those liabilities, the commissioners would need to make substantial cuts in their discretionary expenditure or to realign their investment portfolio to generate higher income. Either course of action would be damaging to the Church's long-term interests. It is also worth recalling that while the commissioners' capital is being reduced, the new funded scheme is being increased in size at roughly the same rate because so far it has few pension payments to make, so that, overall, there is no loss of capital at the national level of the Church.
In summary, the Measure both rationalises the administration of discretionary funds in the hands of the pensions board—

§ David Taylor
My hon. Friend has just announced that the Measure includes provisions that will end the seven-year transitional arrangements, which allowed contributions to diocesan boards of finance and others to help them meet their post-1998 liabilities. The cessation of that will essentially pose extra burdens for dioceses, deaneries and parishes such as mine, which are already groaning under financial pressures. Is he convinced that this is the right time to end that seven-year arrangement? Should it not be extended?

§ Mr. Bell
The seven-year period is being extended by the Measure. It was introduced in this Parliament in 1997, and Parliament thought that it ought to be brought back after five years. It is now being brought back, and it is being extended. The reason for that is to give the commissioners' flexibility in handling their financial affairs for the benefit of those clergy. My hon. Friend's point about the burdens on dioceses was recognised in 1997, and that continues, but I am happy to say that the powers of giving in relation to Church communities have been enhanced. As far as I am aware, those commitments are being met, although we recognise that they are onerous.
840 Extending the commissioners' power to spend capital allows them to manage the resources under their control in the most strategic and effective manner. The Measure is therefore not only important to the pensions board and the Church Commissioners but to those many clergy and their spouses who have faithfully and loyally served the Church over many years. For those reasons, I commend the Measure to the House.

§ Mr. Robert Key (Salisbury)
I warmly welcome the Measure, which I hope will pass speedily through the House. I am grateful to the hon. Member for Middlesbrough (Mr. Bell) for the way in which he presented the issue, which is of great significance to a substantial number of people in my constituency in the diocese of Salisbury. There has been unhappiness in several areas for some time. It is important that the Church realign its resources in this way, streamline its administration, and change the basis of the funding of pensions for the clergy and their spouses.
I broadly welcome clause 3 on housing and residences, as there had been an anomaly. The Church is not immune from the ways of the world today, and, sadly, when spouses divorced after retirement, the Church Commissioners had no power to assist in housing the divorced spouse. That anomaly is put right by this Measure, which is extremely important. I dare say that there will be further amendments in that line.
Finally, the Measure illustrates the importance of the relationship between the Church of England and the state, which I welcome. It illustrates not only that the Church of England is undoubtedly in a privileged position, but that that is not just symbolic but, at a practical level, alive and well and working in the interests of the clergy of the Church of England. Having read the whole of the minutes of the deliberations of the Ecclesiastical Committee, which was quite a task and required several gin and tonics in the middle, I can say that it was worth the read. It illustrated how seriously Members of both Houses take their responsibilities on the Ecclesiastical Committee, and how they bring to bear their wisdom and experience, which has been to advantage in this case. The substantial change made by the Ecclesiastical Committee, which was accepted without difficulty by the Synod, illustrates clearly once again how the relationship between the Church of England and the state is flourishing, and I hope that that will continue for many years.

§ Mr. Steve Webb (Northavon)
I have a feeling that my declaration of interest may last longer than my remarks. As my wife is an Anglican priest of three years' service before the changes were introduced, we have several pennies at stake on this Measure. We hope, however, that that will not bias my comments unduly.
My colleagues and I also welcome the Measure. We note that when the General Synod considered its original version, it was approved by 366 votes to one—

§ Mr. Key
Name him.

§ Mr. Webb
A bishop; I do not know who.
841 Parliament is in the absurd position of considering the matter for the third time. Given that Synod and the Ecclesiastical Committee have already considered it, we should be cautious about seeking to amend anything that has the overwhelming support of the Church. Having said that, Parliament has a historic role in overseeing these processes.
Like other Members who have spoken, we very much welcome clauses 1 to 4, which allow the discretionary funds of the pensions board to be used more flexibly than hitherto, which seems sensible and appropriate. We welcome the fact that divorced spouses of clergy—in post-retirement divorces—will have some possibility of having their housing position protected. Several of my friends are clergy and clergy spouses, and many feel insecure about their housing position, both while in active ministry and after retirement. A provision that recognises that relationships break down and that individuals should not be dependent on a spouse for a roof over their head, possibly at short notice, is entirely to be welcomed. The changes on retirement housing are therefore good.
On the pension arrangements, we become nervous when we hear that pension payments will be made by running down the capital of a pension fund. However, the simplest analogy would be to think of this as a closed pension fund in which no new liabilities accrue and in which existing ones may run on for many decades. It is appropriate that we plan ahead for a measured and orderly financing of responsibilities.
I do not think that the hon. Member for Middlesbrough (Mr. Bell) mentioned this point, but it is worth touching on the fact that the Ecclesiastical Committee prompted one change to the Measure. The Committee felt that, in a further seven years, the House should have a substantive opportunity to review the processes and reconsider whether the run-down of capital was being handled in the right way. It felt that the Measure should not go through on the nod under the negative resolution procedure for statutory instruments. That was probably a constructive suggestion, and I know that the Synod approved it without demur.
Overall, we are comfortable with the proposal. In the unlikely event that the House should seek to divide, I will encourage my colleagues to support the Measure.

§ David Taylor (North-West Leicestershire)
I am a member of the Ecclesiastical Committee, and the hon. Member for Northavon (Mr. Webb) pointed out the overwhelming majority that the Measure enjoyed in the Synod. It was even bigger than the majorities that we encounter in the parliamentary Labour party.
I have one concern to put to my hon. Friend the Member for Middlesbrough (Mr. Bell). The commissioners have a range of discretionary responsibilities for parish ministry support, bishops' working costs, grants to cathedrals and money given to other bodies. When the Ecclesiastical Committee discussed the Measure in April 2002, I made the point that the sums that are currently being used to bridge the gap between funds and pre-1998 liabilities were on a substantial rising curve. Is my hon. Friend confident 842 that there will be little, if any squeeze, on the worthy work that the commissioners do on parish ministry support, bishops' working costs and on the others things that I mentioned?
To clarify my earlier question about the renewal of the seven-year arrangement, I was referring to the seven-year transitional arrangements that allow sums to be paid to the boards of finance in particular dioceses. That arrangement will help them with their liabilities, but it will end, as I understand it, on 31 December 2004. That new burden, which will be unrelieved by any contribution from the Church Commissioners, concerns me in the light of current diocesan financial pressures. I would like reassurance on that point.

§ Mr. Bell
With the leave of the House, I wish to respond to some of the points that have been raised. I am grateful to hon. Members for the manner in which they have raised them and for their constructive approach to the Measure.
My hon. Friend the Member for North-West Leicestershire (David Taylor) asked about the commissioners' power to spend capital. We have the power to spend capital to help dioceses with new pension schemes. As he is aware, that power ends in 2004 and that is to protect the power of the commissioners' fund so that we can help poorer dioceses in other ways. The timetable for phased transitional relief has been agreed with all the dioceses. I shall return to his other points shortly.
I shall deal chronologically with the points made by the hon. Member for Salisbury (Mr. Key). He made the important point that one of the attractive features of the Measure is that it will help divorced spouses who might lose their homes after a separation. That problem is now being rectified, and we have powers to help a spouse or former spouse in that position. He mentioned the Church-state relationship, but I do not wish to widen the debate.

§ Mr. Chris Bryant (Rhondda)
Go on.

§ Mr. Bell
I certainly do not want to do that when my hon. Friend the Member for Rhondda (Mr. Bryant) is in the Chamber. I do not want to encourage him to take part in the debate at this stage. We are dealing with one of the interstices in the Church-state relationship, but that relationship is a matter for another debate. I am always willing to listen to contributions on that subject.
I welcome the contribution of the hon. Member for Northavon (Mr. Webb). If I may paraphrase the words of a famous former Prime Minister, I assure the hon. Gentleman that his wife's pension is safe in our hands. [Interruption.] This might not be the right place to come to buy a second-hand car, but we are certainly looking after his wife's interests and her pension.
The hon. Gentleman agreed with clauses 1 to 4 and welcomed the provision on divorced spouses. He made an interesting point that I did not cover in my opening speech because I did not want to bore the House with the intricacies of the relationship between the Ecclesiastical Committee and the General Synod. However, as the matter has been raised, the House might now be aware that one aspect initially concerned the Ecclesiastical 843 Committee. In addition to the Measure providing an initial extension of seven years up to 2011, it also provided for an indefinite number of further extensions after 2011. The General Synod would have been able to obtain them via a statutory instrument that would have been subject to annulment in Parliament.
As the hon. Member for Salisbury said, and the hon. Member for Northavon emphasised, the importance of the Ecclesiastical Committee's role in the Church-state relationship meant that the Committee thought that it would be inappropriate for the power to be extended by statutory instrument. Instead, it decided that that should be done by means of a Measure that could be brought to the House for a debate like today's. The Measure returned to the General Synod and was amended by omitting the power to obtain further extensions through statutory instruments. The Ecclesiastical Committee was happy that the Church was prepared to amend it in that way, and co-operation between the Committee and the Synod has led to the Measure being debated on the Floor of the House.
My hon. Friend the Member for North-West Leicestershire rightly referred to the additional powers and responsibilities of the commissioners. They have a range of responsibilities upon which they expend their funds. They include parish ministry support, bishops' working costs, grants to cathedrals and money given to other bodies to support their administrative expenditure. As he said, much of that help is discretionary, and we are aware of the additional role. Non-pension responsibilities, however, stand alongside our statutory responsibilities for pensions arising for service from before 1998.
The key issue facing the commissioners is the management of their assets and income in the most effective and strategic way, so that they can make the best possible investment returns at the same time as they carry out their spending in a planned and coherent fashion. To take up my hon. Friend's point, providing discretionary funds to the parishes that are in need has led to us making substantial contributions of at least £20 million a year and they have been worked out with the Archbishops Council.
I trust that I have dealt with the points that have been raised. I again commend the Measure to the House.