DIOCESAN deficits are expected to double from £29 million in 2022 to £62 million this year, a review commissioned by the Archbishops’ Council has calculated. Many dioceses will need funding help from the national Church, it suggests.

Complex financial flows that are a “mystery to many”, and which have contributed to “resentment and confusion”, are also cited in the review, which was published on Thursday with the General Synod papers for next month’s meeting.

The review, Diocesan Finances Review Update (GS Misc. 1384), is signed by Carl Hughes, chairman of the Archbishops’ Council finance committee, and Joanna Woolcock, director of finance transformation, National Church Institutions. Appended to the five-page review is a Powerpoint presentation prepared in March and marked “confidential”.

The review reports that most dioceses are now in a structural deficit position; 30 dioceses report underlying operating deficits in 2022, and 35 expect to report a deficit in 2023 and beyond. It warns that half of dioceses face some short-term liquidity risk, with 23 holding less than three months’ cash reserves, 13 of which do not have any easily available investment assets to liquidate.

The review reiterates the disparity of diocesan wealth — investment levels range from £3.5 million to £168 million — and raises the spectre of diocesan bankruptcy. Eighteen dioceses have no unrestricted listed investment assets; of these, 13 have fewer than 12 weeks expenditure cover in cash reserves “and are therefore more at risk, were an unexpected event to occur”.

It notes that 12 dioceses were able to increase their parish share since 2015 due to ‘giving’ initiatives and Common Fund model changes. Only two, however, were able to increase parish share in real terms. Eight dioceses have decreased their spending on clergy since 2015.

It comes ten years after the Resourcing the Future review introduced a new approach to the allocation of national funding to dioceses, replacing Darlow Funding — said to be “subsidising decline” — with Lowest Income Communities Funding and Strategic Development Funding, for which dioceses had to bid (News, 21 October 2016).

The diocese finances review, carried out between September last year and March this year, observes that the value and number of National Church Institutions grant streams has increased year-on-year, “indicating an increased dependency on the NCIs, with many dioceses still running a deficit. More NCI grant funding streams likely contributes to added funding complexity.” Dioceses told the review about a “lack of clarity” around how grants were awarded.

Between 2014 and 2022, the Archbishops’ Council distributed £198 million in SDF grants (News, 24 May).

The Chote review of SDF concluded that the programme had served as a “lightning rod” for a lack of trust within the Church of England (News, 11 March 2022).

“Financial arrangements in the Church of England are complex and a mystery to many — with an onerous ‘money-go-round’ that takes considerable time and effort to maintain,” the new review says.

“The lack of transparency and clarity about how resources are held, used and shared, can undermine trust and lead to resentment and confusion amongst different parts of the Church family. As the ‘economic landscape’ of the Church becomes increasingly challenging, the time has come for new financial arrangements which enable our parishes and worshipping communities to flourish.”

Ten years since the Renewal and Reform programme was launched, the review paints a stark picture of the state of the Church of England in 2024 (News, 19 December 2014). Church attendance figures are down 19 per cent since the Covid-19 pandemic and are 29 per cent below 2015 (News, 20 May). This is described as a “key driver of weakened financial sustainability”.

In real terms, parish incomes are down 14 per cent on pre-pandemic levels, while the number of regular givers has fallen from 538,000 in 2015 to 480,000 in 2019 and just over 400,000 today. For the first time, in 2022, the average amount given by regular givers fell in real terms (News, 22 March). Parish share is down nine per cent since before the pandemic (closer to 30 per cent in real terms).

At the same time, the number of ordinands entering training has fallen by 40 per cent since 2019, with fewer than 350 ordinands beginning training in 2024, compared with an original aspiration of 650 (News, 11 July 2023).

The previous chair of the Archbishops’ Council Finance Committee, Canon John Spence, spoke of reports of “a lack of confidence among candidates that there will be long-terms posts for them, and among dioceses about their ability to fund those long-term post” (News, 14 July 2023). Against a background of cuts to stipendiary posts across multiple dioceses, the then chair of the Ministry Council, the Bishop of St Edmundsbury & Ipswich, the Rt Revd Martin Seeley, spoke of the need to “overcome this discrepancy between our ambitious aspirations that require stipendiary clergy and our current short-term situation in relation to finance” (News, 11 February 2022).

Financial data has been collected by the accountancy firm BDO, whose presentation is included among the General Synod papers. The review states: “The current financial pressures in the system and the complexity of financial arrangements, can be a constraint to, rather than an enabler of, effective missional planning and action”.

The work was overseen by a steering group, whose members are listed in the paper.

Phase 2 of the review will now begin with an aim to “ease dioceses’ current financial stress in a way which helps to develop the Church’s longer-term missional and financial health”. It will focus on the financial support of dioceses by the national Church and the simplification of the Church’s financial systems, “primarily in respect of financial flows between dioceses and the National Church Institutions”. The aim is to create “costed, coherent proposals for reform of the key financial funding flows, to inform the Triennium Spending Plans process for 2026-28 which will commence in Autumn 2024”.

The review includes a table of “key principles with theological reflections” that should underpin the new funding arrangement, developed in consultation with the Archbishops’ Council and its finance committee, the emerging-church steering group, diocesan board of finance chairs, diocesan secretaries and diocesan finance directors, the Church Commissioners’ board, and the House of Bishops.

A timetable states that emerging proposals will be considered at a joint meeting of the Archbishops’ Council and Church Commissioners in September, and the Inter Diocesan Finance Forum (a meeting of DBF chairs, diocesan secretaries and diocesan finance directors) and House of Bishops residential in October 2024.

Approval of the final model will be shared with General Synod in February 2025, “so that it can provide critical inputs to the triennium spending plans process for 2026-28 which determines the allocation of national funding”.

Among the principles set out is a desire to “prioritise ministry in areas of greatest need, poverty and deprivation, so that our lowest-income parishes and worshipping communities can thrive, recognising that some may never be economically sustainable without ongoing support”.

A theological note states: “For the Church of England to continue to bring this good news to the poor in England today, it must gladly embrace the fact that church life in some parishes will require ongoing financial support.

“The ‘privilege of sharing in this ministry to the saints’ is one to be exercised not with grudging reluctance as if a problem to be overcome, but with ‘abundant joy’ as a grace-gift of God . . . Lower-income parishes, moreover, must not be seen or described as ‘dependent’ or ‘subsidised.’”

In 2022, at the end of the previous triennium, 61 per cent (£19.2 million) of the total amount of Lowest Income Communities Funding was allocated to parishes in which the most deprived 25 per cent of the English population live — a similar number to the previous two years (News, 24 May).