What the little village church of Grazeley in Berkshire lacks in architectural splendour, it more than makes up for in charm. Built in 14th-century style with stone-dressed flint walls and a steeply pitched slate roof, it stands in a well-kept churchyard nestling among yew trees and hedges a few steps away from the village pond. At one end, a single bell in its diminutive bellcote stands ready to summon the village faithful to prayer.

Today, though, the church – Holy Trinity – stands locked and forlorn, declared redundant two years ago and now being offered for sale by the Church of England to anyone who can find an acceptable use for it. “It’s heart-breaking,” says 87-year-old Vera Lake, who lives on the other side of the village green. “It was really my life, that church. I was baptised there, I was married there, my parents and my husband are buried there ... I looked after it for 50 years as caretaker and did the verger’s work for 20 years. And now it’s closed. I hoped it wouldn’t happen in my lifetime, but it did.”

As Lake acknowledges, the church failed because it no longer had a large enough congregation to sustain it. Services were attended by at most a handful of worshippers, and increasingly elderly ones at that. Parish councillor John Heggadon, who lives in the old vicarage next door to Holy Trinity, says: “I regret very much the closure of the church. Everybody in the community regrets the closure of the church. But the problem is, hardly any of us ever went.”

Standing in a pool of sunshine outside the church gate, the Rev Maurice Stanton-Saringer, team rector for the group of rural parishes that includes Grazeley, has a simple explanation for what happened to the congregants who disappeared. “They’re in there,” he says, nodding towards the graveyard. It’s a problem that afflicts the Church of England across the country: following the great secularisation of the late 20th century, congregations have been pared down to a core group of highly committed but increasingly elderly supporters who are not being replaced as they die off.

The decline in church attendance is hardly news, nor is the closure of churches. But a question less often asked is: how long can the Church of England survive financially? Is it wealthy enough to carry on more or less indefinitely or is it facing mounting pressure as its customer base remorselessly dwindles?

. . .

Christianity has had a good run in Britain over the last 1,500 years. Introduced by the Romans, it was pushed back to the Celtic fringes when the pagan Saxons invaded. In 597, however, Pope Gregory the Great sent St Augustine to convert the Anglo-Saxons, a mission he achieved with spectacular success. Soon the ruling warlords of the various Anglo-Saxon kingdoms were competing with one another to bestow land upon Benedictine monks and by 1066 the Catholic monasteries possessed at least 15 per cent of the now-unified England.

That figure shrank slightly when William the Conqueror seized the country and used the land to reward his knights. But in the 12th century, when the nobility succumbed to an outbreak of religious fervour, the losses were more than made up for by a wave of donations both to existing monasteries and to new ones. By the early 14th century, the abbots and monks of England owned at least 25 per cent of the land and, to the chagrin of their tenant farmers, grew wealthy from the tithes (one-tenth shares of the harvest) they collected and stored in their great tithe barns.

In parallel with the growth of the monasteries, the manorial lords saw it as their duty to build local churches to cater for their tenants. To provide for the priest, these churches were usually endowed with a parsonage and an expanse of revenue-generating farmland known as glebe, from which the first fruits and tenths (first year’s income and one-tenth of annual revenue thereafter) were remitted to the Pope.

Clearly, the medieval church was a large and profitable organisation. This changed in the 1530s when Henry VIII broke with Roman Catholicism and declared himself head of the new Church of England. With the dissolution of the monasteries, all the Catholic Church’s vast monastic estates were confiscated, some going to the Church of England but many more being redistributed by Henry to his supporters. Parish glebe land was unaffected, although Henry diverted the income from the first fruits and tenths from the Pope to his own coffers.

A further land grab took place in 1659 when Oliver Cromwell’s Commonwealth, short of cash to pay the army, seized more of the church’s estates. But over the years, the church made gains, too. It received bequests of land and buildings from wealthy benefactors. And in 1818, amid another outbreak of religious fervour, parliament granted it £1m – as a share of GDP, equivalent to around £4bn today – for a massive church-building programme to serve the growing population, particularly in urban areas. Six years later it granted a further £500,000, equivalent to £2bn today.

The point is, unlike the Catholic Church, which was robbed of its assets, or newer churches that never had any, the Church of England is blessed with a substantial inheritance. Since 1948, its largest estates have been managed by the Church Commissioners. Over the years, they have sold off more than half the land and reinvested the proceeds in stock markets and commercial property; but they still own 112,000 acres, making them one of Britain’s biggest landowners. Most of their estates are farmland around cathedral cities such as Canterbury, York, Durham, Ely and Carlisle, but they also own the Hyde Park Estate on the north side of London’s Bayswater Road, which includes the freehold of the Royal Lancaster Hotel.

Altogether, the Church Commissioners’ land, property and stock market investments were valued at £5.7bn at the last balance sheet date, and last year they contributed £177.8m to the Church of England’s revenues. But these are not the only historical assets. There are also those held by the rest of the church: the cathedrals, the bishops’ palaces, the churches, the parsonages, the church halls, the graveyards and the parish glebe land. Some of these assets produce valuable income, too.

Take the glebe land, once owned by the parishes but now held by the church’s 43 regional bodies, called dioceses. Like the commissioners, the dioceses have sold off much of this land over the years to reinvest in higher-yielding assets. Extraordinarily, nobody knows how much land there was in the first place or how much is left, but we can take some rough guesses. For example, Grazeley’s local diocese, the Diocese of Oxford, has built up an investment fund worth £29m using the proceeds from glebe land sales, yet still holds more than 6,000 acres. If all 43 dioceses in England had only half as much glebe land as this, they would still have 129,000 acres between them - more even than the Church Commissioners.

Take, also, the parsonages, often large, historic buildings in very attractive locations. Hundreds, perhaps thousands, of them have been sold off over the decades after being made redundant by church closures, parish mergers or the rehousing of incumbents in smaller, more practical accommodation. In recent years, many dioceses have been using the profits from these sales to balance their books – a worrying practice since it smacks of running down the church’s capital to help fund current spending.

One group campaigning against the sell-off is the non-profit Save Our Parsonages. Anthony Jennings, the group’s director, says rectories and vicarages are not only an important part of the local community but also generate income through fundraising events such as church fetes. What the Church of England is doing, he claims, is asset-stripping the parishes to cover its own costs. “The parishes are being drained of resources to fund a huge and wasteful bureaucracy that cannot support itself,” he says.

Justified or not, this allegation points to a growing tension in the Church of England between the parishes and the centre. In 1970, the church’s historical assets generated income enough to meet well in excess of half the church’s annual spending needs. Since then, as spending has soared, that figure has fallen to under 25 per cent. Now, for the first time in its history, the church depends for the largest proportion of its revenues not on tithes nor investment returns but on its new paymasters, the parishioners – putting them in a position to start calling more of the shots.

. . .

So, to cut to the chase: how much money does the Church of England make? The figures are elusive since the Church does not file any centralised accounts. Two years ago, however, drawing on data supplied by the cathedrals, dioceses and parishes, it compiled some illustrative figures showing that, in 2004, it had total annual revenues of just over £1bn. For comparison’s sake, that is about the same as easyJet’s revenues that year, though easyJet has grown a lot since.

Of that £1bn, 47 per cent came from voluntary giving in the parishes – predominantly through regular giving by direct debit but also from the collection plate, donations from church visitors and so on. The next biggest category was investment income, mostly from the historical assets, which generated 22 per cent. Trading activities (bookshops, hire of the church hall and so on) and fees for weddings and funerals contributed 14 per cent; grants from other charities and trusts contributed 9 per cent; fundraising contributed 5 per cent; and most of the remaining 3 per cent came from gains on sales of land and buildings.

The figures show the church to be in reasonable financial health, with income exceeding outgoings by a slender margin. But behind them lie some worrying trends. Although returns from the historical assets have grown over the years, that growth has not kept pace with the church’s rapidly rising costs. So a shrinking number of parishioners are having to dig ever deeper into their pockets to fill the widening gap.

One factor driving the rise in costs is the church’s pension problem. The clergy are on final salary pension schemes that have become extremely expensive to provide because of rising longevity. (The parson’s healthy lifestyle doesn’t help.) Once, these schemes were wholly unfunded – all pensions were paid out of the Church Commissioners’ income. But in the 1990s, rapidly rising pension costs made this unsustainable and in 1998 the dioceses had to start making contributions on behalf of the clergy to a new, fully funded pension scheme. All the cost of making these new contributions fell ultimately on the parishioners.

Another financial headache is the rising cost of maintaining the church estate. The Church of England has some 16,200 churches in 13,500 parishes, plus a cathedral for each of the 43 dioceses. Most of these buildings are old and 12,200 of them are listed, of which 4,200 are listed Grade 1. As the buildings age, repairs become more frequent and expensive. On top of that, the church is having to meet the cost of adapting its buildings to conform with new statutory requirements such as the rules on disabled access and ever-proliferating health and safety legislation. More than £125m was spent on repairs to churches and cathedrals in 2004.

The cost of maintaining the estate, points out Andrew Brown, secretary of the Church Commissioners, is the flipside to the argument that the Church of England is unfairly favoured by its inheritance. “You have to look at the other side of the balance sheet,” says Brown. “Just look at the number of beautiful churches for which we have a heritage responsibility on behalf of the nation – 45 per cent of this country’s Grade 1 listed buildings are owned by the Church of England. I don’t think it’s a fair balance between liabilities and assets. I think the liabilities are very heavy.”

Looking on the bright side, the same increase in longevity that has driven up clergy pension costs so rapidly has also kept worshippers alive for longer, slowing the decline in congregations. (Some parishes have also had a boost from immigration, particularly in London, where Christians from Asia and Africa have raised numbers.) And the church does get some help with those repair costs. English Heritage and the Heritage Lottery Fund hand out grants of about £25m for repairs to places of worship of all denominations, of which the Church of England gets the larger part; in 2004, the government started refunding the VAT on all major repairs to churches that are listed; and generous contributions come from charitable trusts such as the Garfield Weston Foundation, which donated more than £7m towards cathedral and church repairs in its last financial year.

It is evident, too, that the parishioners have responded magnificently to the challenge of rising costs. Dr John Preston, the Church of England’s national stewardship and resources officer, says that in the last 25 years they have increased their giving from about 1 per cent of take-home income to an estimated 3.2 per cent, “so their relative generosity has tripled.” The vast majority of church members are now on planned giving schemes, Preston says, contributing an average of £8.62 a week per giver. By comparison, Britons give an average of £4 a week to charity – “and that’s to all charities, whereas our lot are giving £8 a week just to the church,” he says. “You can assume they’re giving at least another £4 a week to other causes. So what we have is very generous givers.”

Perhaps that generosity can be stretched a little further. “One of the things the church teaches and encourages is that church members should be looking to give 5 per cent of their income to or through the church,” Preston says. But even if that level can be achieved, what then? Clearly, a diminishing number of congregants cannot support the rising costs for ever. How long will it be before the crunch comes?

It is hard to predict, because it may be less of a crunch than a crumble. To explain: repair costs are largely borne by local congregations – the ubiquitous church roof appeal – and if the congregation cannot afford them, they are postponed. In other words, financial deficits in the Church of England manifest themselves not as red ink on a profit and loss account but as a growing backlog of repairs to the estate. In 2003, an internal report estimated that the churches alone – excluding cathedrals – had outstanding repair costs of £373m, equivalent to the Church of England’s entire repair and maintenance budget for three years. Since then the church has been lobbying the government to pick up more of the repair bills, preferably 50 per cent, as well as maintaining the favourable VAT regime.

The alternative is to do what any business would do if faced with a declining customer base: cut costs. The Church of England’s infrastructure – a network of tiny parishes covering the entire country – was built to serve a mainly rural economy in which nearly everyone was a Christian, Christians went to church and the church had to be nearby because ordinary folk went on foot. But according to the Church of England’s most recent statistics, for 2006, its usual Sunday attendance is now down to 871,000, meaning large numbers of churches are almost deserted. More than half of them are entered by fewer than 50 adults a week.

How has the church responded to declining footfall? In the 10 years to 2005, according to Christian Research, an independent, not-for-profit body, Church of England attendances fell by 16 per cent but the number of churches fell by just 1 per cent. Rather than closing churches – or, indeed, reducing the number of bishops or cutting support and administrative costs, which rose 5.4 per cent a year in the five years to 2004 – the centre has reduced the number of front-line staff (ministers) by 7 per cent and made them work harder, putting them into small teams looking after larger numbers of churches instead of one each.

The reluctance to close churches is understandable; it could accelerate the fall in attendances. Besides, the proceeds from selling them can be surprisingly meagre: old churches are difficult to convert, especially if they are listed, and often have graveyards that cannot be touched.

Still, the cost of maintaining this vast estate is formidable. “The particular problem, it seems to me, is the upkeep of churches in rural areas with tiny congregations that are unable to fund extensive repairs,” says Professor David Voas, a specialist in religious trends at University of Manchester. “It’s hard to see in the long term how the church can maintain these buildings – they’re either truly ancient or Victorian, and even the Victorian ones are starting to fall apart.”

Predictions are difficult but unless there is a sudden new influx of churchgoers – a possibility that should not be dismissed – Christian Research estimates that, in five years’ time, church closures will start accelerating from their present level of just 30 a year to 200 a year or more as congregations dwindle and the cost of maintaining the estate becomes increasingly unsupportable. By 2030, it says, 6,000 churches could have closed and there could be just 350,000 people attending the 10,000 still open. Even then, the remaining churches would have congregations averaging only 35 people each. So if nothing else happens, by 2040, the Church of England will have been forced to close another 4,000 churches, leaving just 6,000 of them ministering to a total congregation of 180,000.

Will the nation tolerate closures on such a scale? In a modern multifaith community, some will argue, the Church of England, state religion or not, should be left to tough it out as best it can, without any help from the taxpayer. Yet undeniably, the church also doubles as an alternative National Trust, caring for a high proportion of England’s most treasured buildings at the expense of a relatively small congregation. And in rural areas, where the village school, the village pub and the village post office have already gone, the church is often the last structure standing that provides any sense of community.

Voas thinks it likely that, at some point, the church and the government will have to agree to share responsibility for at least some of the most-threatened buildings “because it would be difficult for the church, and perhaps even politically difficult for a government, to allow rural churches to be boarded up or used as carpet warehouses. You can just about get away with it in towns, but not in the country where the Anglican church is often quite literally at the centre of the village.”

Doom-mongering comes easy where the Church of England is concerned. As the Bishop of London once said, “we are always in the biggest crisis since last week.” Even so, the mathematics of decline are clear. Without income from its historical assets, the church would already be financially unviable; with that income, it has been able to survive at its present size without having to face financial reality. Barring a miracle, however, that legacy is unlikely to sustain it in future. Perhaps it is time now to start thinking what shape the future Church of England should be.

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New Questions For The Old Religion

When people think of the scandal surrounding the death of Roberto Calvi, “God’s banker”, found hanging from Blackfriars Bridge in 1982, many see the Roman Catholic Church as not only rich, but financially opaque. The Catholic Church in England and Wales, however, receives no assistance from Rome, nor does it have hidden treasures, having lost its assets during the reign of Henry VIII.

After the Church of England was declared the state religion, Roman Catholics were subjected to increasing penalties, especially after the Gunpowder Plot of 1605. The old religion was kept alive by members of the gentry and nobility, worshipping in private chapels.

Catholics eventually won back religious freedom in 1832 and the Catholic hierarchy of bishops and dioceses was restored by the Pope in 1850. However, the church’s assets were not returned. Instead, the Catholic Church had to be rebuilt by its adherents, who turned out to be an odd alliance between a few English toffs and a vastly larger number of poor Irish Catholics who poured into Britain during the 19th and 20th centuries.

Today, the Catholic Church and the Church of England attract an almost identical number of congregants: the Church of England reported a usual Sunday attendance of 871,000 for 2006 while, according to Christian Research, the Catholic Church in England had a typical attendance of 869,221 at Mass. But their revenues are very different.

Although the Catholic Church has no central accounts, the Financial Times obtained the annual reports of all 22 Catholic dioceses in England and Wales for the year ending either December 2006 or March 2007, added together the numbers and found the church’s annual revenues totalled £279m – about a quarter of the £1bn the Church of England brings in.

The Catholic Church can get by on only a quarter of the Church of England’s income because it is less than a quarter the size. It has well under a quarter as many churches – only 3,200 in England – and most of them are much newer than the Church of England’s so are cheaper to maintain. It also has fewer and less well-paid clergy than the Church of England, many of them without pensions, and much lower administration costs.

As a result, the Catholic Church has no need of an income stream from historical assets and its churchgoers need to contribute far less. The main source of income is the offertory at mass, from which dioceses typically report contributions of around £2.50 per person per week – a fraction of the £8.62 being contributed by Church of England members on planned giving schemes.

In a sense, the Catholic Church presents a model of what a slimmed-down Church of England might look like with far fewer churches to support. But if the Catholic Church looks in better financial health, it is not without problems of its own. Catholic attendances have fallen even faster than the Church of England’s in recent years: between 1980 and 2005, they fell by 49 per cent in England compared with the Church of England’s 36 per cent, according to Christian Research.

An even more pressing problem for the Catholic Church is the shortage of priests. Most are old and it has become very difficult to replace them as they retire: unlike the Church of England, which admits ministers of either sex and allows them to marry, the Catholic Church admits only men and demands celibacy. The shortage of clergy means the Church is having to merge parishes, and many priests are working well after retirement age in an effort to keep services going.

Richard Tomkins is the FT’s chief feature writer

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Blue Sky Thinking From Mcbainey & Acronym

By John Kay

To: The Chief Executive, CE International plc
(formerly the Church of England)

From: McBainey and Acronym, Management Consultants to
Saints and Sinners

Our philosophy: I reap where I sowed not, and gather where I have not strewed:
Matthew 25:26

Staff morale is low and customer ratings of the corporation are poor. Both staff and customers seem reconciled to continued decline, blaming it on the weak state of the overall faith market.

McBainey and Acronym disagree. Outside Europe and bluestate America, faith products are booming. We consider the perception of market decline to be mainly a result of the weak performance of established producers, particularly CE and Vatican International. Although CE’s brand recognition is high, brand identity is weak.

Our focus groups revealed an apparent paradox: although weakening brand values broadens customer appeal in the short run, in the medium to long term only challenging faiths sustain customer loyalty. Vatican’s predecessor, Church Universal, discovered this in the 16th century: the sale of indulgences generated considerable short-term revenue but led to massive haemorrhaging of market share in northern Europe. Your company’s image has always been blurred relative to Vatican’s. The first executive chairman, Henry VIII, failed to establish a clear strategic direction and this legacy has persisted.

The brand image issue is fundamental. Even though Islamicorp’s brand attributes received very negative ratings from our panel – only Ryanair has recorded lower scores – Islamicorp products are gaining market share (as indeed are Ryanair’s). We strongly urge a clear and strong affirmation of brand values – a creed, in marketing jargon.

The strength of brand values may be more important than what they are. We recognise that “the Tory party at prayer” may no longer be an appropriate slogan for CE International. But successful religious brands in today’s market are mostly rightwing and authoritarian. We observe some tension in CE between the expectations and views of staff and of customers.

Although the marketing measures we envisage may slow decline, some reorganisation and rationalisation of production facilities is inevitable. We found most of your company’s premises wholly unsuitable to the needs of a modern business. Many were poorly located, with inadequate parking facilities and crippling maintenance and utility bills. We recommend that you negotiate wholesale disposal to a tourist-focused business such as the National Trust or English Heritage.

Joint ventures with property developers could exploit the obvious synergies between Sunday church attendance and retail therapy. We also recommend that you visit the US to see how successful churches have achieved 24/7 utilisation of their premises. Many of the facilities we visited were in use for only three or four hours a week.

Customer service was deficient in many respects. The one-to-one customer interface – often described as pastoral work – was generally sympathetically handled, but the management of larger groups was old-fashioned and amateur. Few of your representatives made proper use of presentational aids, many outlets lacked broadband access. Some outlets even produced music in-house, usually of lamentable quality.

The average age of staff is high, and while many were strongly committed to the job, others had doubts, and so often did we. Their calibre is, however, high, given the low salaries. We were told that sponsorship from local landowners and businesses used to be common, but has now been more or less eliminated. We recommend these issues should be reopened.

Assessment procedures fall far short of our expectations for a lively 21st-century organisation. We recommend a training programme, including financial management, fund-raising and human relations elements, for all staff expected to reach bishop-grade or above. We also recommend an early retirement scheme for poor performers. Some of the personnel we interviewed acted as if they had already taken early retirement.

We recognise that these changes may be uncomfortable for many within CE International, but believe a restored emphasis on shareholder value is true to the message of your founder in Matthew 25:30: “cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth”. McBainey and Acronym have consultants available with extensive experience of weeping and gnashing.