Addressing the deficit to achieve a balanced budget

The diocese of Lincoln is currently running an annual cash deficit of around £3 million, which has been steadily increasing for some years, and is not sustainable. To achieve a balanced budget in the coming years and resource the diocese in a sustainable way, five working groups have been established to each look at a different area of income and expenditure and propose ways to improve the missional and financial health of the diocese: growing the church and reducing the deficit. 

Given the size of the gap between income and expenditure, these ideas will have to be bold and transformational across all areas. The groups will meet several times ahead of a final report being presented to the Bishop’s Council on July 1st.

Lincoln is not the only diocese experiencing financial difficulties and most other dioceses around the country are also struggling to balance their books. This is for a variety of reasons, including increased overall expenditure, low levels of reserves and the amount received in parish share not keeping pace with these increases.

As a brief snapshot of the financial position in the diocese, of the £9 million expected income for 2020, 50 per cent is expected to come from parish share.  This is the money given by individual churches to contribute towards the stipend, pension, housing and training of their vicar as it is not wholly covered by the endowment fund that the Diocesan Board of Finance manages.

However, the current amount being received in parish share from churches falls substantially short of those costs (£7.9 million), by £4 million per annum.

Clergy costs represent the largest cost to the diocese and account for 50% of the expenditure budget.

For several years, bridging the gap between the parish share income and the clergy stipend costs has been met by disposing of our assets. Although this does result in an immediate injection of funds, we lose a proportion of the interest (income) on the greater amount of the asset, thus putting further pressure on our finances.

Whilst the diocese has some historic assets, by 2021 we will have reached the safe limit of what we can sell off to pay the deficit without causing damage to those assets.

The other main costs to the diocese are mission and ministry and parish support at £2 million (17% of total expenditure) and those relating to legal, professional and governance at £1.3 million (11% of total expenditure). The majority of these costs are salaries of staff at Edward King House (EKH). Reducing the amount of staff at EKH would change what we are able to offer parishes but it will be necessary to look at the number of posts which we have in Edward King House.

The five groups working on proposals to balance the budget are listed below and each has a number of terms of reference (TOR) and suggested outcomes. Examples of the TOR are given alongside the name of the working party:

Growth – this will look at increasing the number of worshippers; investigating ways in which growth is being achieved here and elsewhere around the country

Assets – maximising the diocesan asset portfolio, including looking at different proportions and elements within it

Central Diocesan Costs – looking at costs and service delivery levels; reviewing other models of central service delivery

Deployment – this will look at a number of models of deployment, including lay ministers and readers, as well as ordained clergy

Parish Share – looking at the giving culture of parishes in the diocese as Lincolnshire has the lowest amount of giving in the country; other parish share schemes from around the country will also be looked at.

We will be providing a series of brief updates from the groups over the coming months.

This story was posted on Monday 17th February.