Clergy in the Church of England are being asked to cut their cloth to suit the economic times and to prepare for mergers and staff cuts that could drastically reduce pastoral care and worship.

A report on finances has found that a quarter of all 44 dioceses are running deficits and plundering reserves to pay stipends and pensions. A similar proportion has liquid reserves to last them one month or less.

High staffing levels of clegy and laity are highlighted. The Church of England spends £1 billion a year in salaries and pensions for clergy as well as the upkeep of its buildings, an amount roughly matched by donations from parishes. But rising pension costs mean that every year churchgoers are asked to increase donations. The report, commissioned to help churches to improve “efficiency and effectiveness”, suggests that finances are so finely balanced in some areas that parishoners will have to dig even deeper or face cuts in provision. “Cuts are not inevitable, but are an option that needs to be thought through,” said Paul Gibson, of the accountant Mazars, and the report’s author.

The study of 42 dioceses found that although the Church has assets valued at £3.5 billion, its cashflow is parlous. Between them the dioceses had an income of £388 million in 2008 and spent £384 million. While some are extremely wealthy, 14 dioceses are running deficits.

The report suggests that staffing levels are high among clergy and laity and that dioceses as charities are top heavy with trustees. On average across the dioceses, 40 lay staff support 200 clergy: there is one lay person on the staff for every five clergy.

There are 180 Church of England clergy per million people, with each covering 1.7 parishes. “What changes in working practice could reduce the proportion of lay staff and enable individual clergy to support a higher population? What would be the effect of such changes on parishes, dioceses, staff and clergy?” the report asks. It also suggests reducing the size of trustee boards.

The Church Commissioners, who manage the investments and contribute to dioceses’ running costs, recently disclosed a 15.6 per cent return on investments in 2009 and a rise in asset value to £4.8 billion. Although they have pledged to make no cuts in funding to dioceses, this is only until 2013.

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