Archbishop of Canterbury Justin Welby is a Corbynista. He can afford to be – he and our national Church are entirely financed by one of the most successful investment funds in the world. Thank God for that!
See you at the TUC…
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On 12 September His Grace the Archbishop of Canterbury addressed the Trades Union Congress on the occasion of its 150thanniversary conference in Manchester[i]. The Archbishop gave an erudite sermon with extensive scriptural references; but in it he chose to stray into current fiscal and social policy in a way that aligned the policy prescriptions of our established Church with those of Mr Jeremiah Corbyn’s Labour Party.
Justin Welby, let us recall, is probably the first head of the world-wide Anglican Communion who has had hands-on experience of big business. Before he was ordained, he worked for the French oil major Elf Aquitaine (now part of Total SA (EPA:FP)) in Paris and was Treasurer of Enterprise Oil (later bought out by Royal Dutch Shell (LON:RDSB)). Unlike most Church of England clergy, he can read a balance sheet and understands how bond yields are calculated. Some of his writings explore the relationship between finance and religion, including a tract entitled Can Companies Sin? As an active member of Britain’s House of Lords he sits on the panel of the 2012 Parliamentary Commission on Banking Standards.
Blessed are the tax-collectors…
Even before the TUC address-cum-sermon, Archbishop Justin was on the offensive. As a member of a self-appointed commission for economic justice under the auspices of something called the Institute of Public Policy Research (IPPR), he demanded a series of “radical” measures to improve the plight of the least well-off.
These measures were: (1) a cap on house prices. This will be enforced by making banks lend less to buyers in areas where house prices are rising. (2) A £200 billion National Investment Bank. If banks won’t lend to businesses, then obviously government should! Apparently, this could be financed by good old quantitative easing (QE) – pure McDonnellomics! (3) To revive union membership to 1970s levels. Wages are low because there is insufficient collective bargaining. (4) To bring in BBC-style reporting of gender pay differentials. And while we’re about it, let’s stir up the BME communities further by making “ethnic pay differentials” more transparent! (5) To remove voting rights at AGMs for “speculators”. (6) Let’s smash the tech giants! Regulate them into the ground and tax them dry! Block all further acquisitions! (Presumably, the IPPR envisages the conquest of the State of California to achieve this.) (7) Give more bank holidays for the down-trodden! (This is a naked steal from Jeremiah’s 2017 general election manifesto.)
Essentially, the report concludes that government should increase taxes on personal wealth and that corporations should pay both higher taxes and wages. This intervention comes at a moment when the Labour Party – which is in the business of liquidating Blairites – offers a Hugo Chavez-style socialist solution for the UK.
Let’s just acquaint ourselves with the economic reality in the UK right now. Employment, at 32.4 million, is at an all-time high – and, conversely, unemployment, at just four percent (which most of us, Christian or not, regard as a great evil) is at the lowest level for 43 years, with 833,000 job vacancies unfilled. Earnings are growing at last. Income equality has actually fallen and the wealthiest ten percent pay a bigger proportion of total income tax than under Labour. Despite that, the Archbishop – and much of the clergy, personified by the Reverend Giles Fraser who spends most of his life preaching socialism on BBC Radio 4 – is on a righteous crusade for the Prophet Jeremiah…
Yet the Church, like all of us, keeps going not just on God’s grace but on pounds and pence…
The fund that makes the Church rock
The investment fund that holds the Church together is the Church Commissioners, based in Dean’s Yard in the shadow of Westminster Abbey. It currently has about £8.3 billion under management, invested in real estate (mostly in the UK – they own the Metro Centre shopping mall, Gateshead – but also overseas), stocks, corporate and government bonds and private equity. For the year ended 31 December 2016 it reported a return on assets of an incredible 17.1 percent – becoming the world’s number one fund performer, according to the Financial Times[ii]. It’s nice to know that God is on your side!
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In its current form, the fund dates only from 1948. Before that, the investment assets of the Church of England were held across a range of quaint, ancient entities such as Queen Anne’s Bounty, a fund dating from 1704 for the relief of poor clergy, and of the Ecclesiastical Commissioners formed in 1836.
The board of the fund (33 Commissioners, of which the Archbishops of Canterbury and York, plus numerous other members of the great and good – including the Prime Minister) has delegated the investment process to an investment committee headed by the virtually unknown Tom Joy. The investment committee, in turn, allocates blocks of assets to private fund managers according to tight investment parameters, including a strict adherence to an ethical investment policy.
The fund’s investment strategy has been contrarian. It often rejects “expert” opinion (I love it) and it favours active management above passive (i.e. dreary tracker funds). It is supposed to follow an investment strategy that is compatible with Christian values – though this has not prevented controversy (see below).
The fund is tasked to pay the salaries and pensions of all C of E clergy plus some cathedral costs. The cost of maintaining parish churches – often medieval buildings with complex structural problems – normally falls to the parishes themselves. Hence the weekly collection plates (though virtually all parish churches now invite congregants to contribute by monthly direct debit as well). Fortunately, parochial churches have recourse to the Heritage Memorial Fund (National Lottery), where they are in open competition with other good causes.
Wonga, Amazon and the “ethical investment” dilemma
In 2012 the Church Commissioners sold its holdings in News International because of the phone hacking scandal. In the same year it boosted its exposure to hedge funds and private equity. This had unintended consequences.
In 2014 Archbishop Justin denounced the payday loan merchant, Wonga as “morally wrong”. In fact, the Church hierarchy was late to the table in the condemnation of aggressive lending practices – and still has said very little about the evils of online gambling. Later that year the Financial Times disclosed that the Church Commissioners indirectly had exposure in Wonga on account of its holding in Accel Partners a California-based venture capital outfit which was a major backer. The Archbishop described this revelation as “embarrassing”. Shortly thereafter, he announced that the holding in Accel had been liquidated.
Later, the Archbishop expressed a wish that Wonga would go out of business. That wish came true just before the TUC Conference. Frank Field MP even proposed that the Church should buy Wonga’s £400 million loan book from Grant Thornton, the administrator – something the Church Commissioners considered, but rejected, presumably for commercial reasons.
At the TUC Archbishop Justin took aim at Amazon (NASDAQ:AMZN), now the world’s largest company by market capitalisation, owned and controlled by the world’s richest man. (It is also the largest seller of Bibles in the world, by the way.) He accused the online retailer of “leeching off taxpayers”. In August, Amazon revealed that it paid £4.5 million in UK corporation tax last year on UK profits of £72 million[iii]. (Note that this is corporation tax only and excludes a huge amount of VAT paid.)
When vast companies like Amazon, and other online traders, the new industries, can get away with paying almost nothing in tax, there is something wrong with the tax system.
Almost nothing? The Archbishop is right that there is a problem here but it is not as straightforward as he thinks. As I have said before, if this matter were so simple it would already have been solved.
The problem arises because Amazon, Apple and the rest, most of whose revenues are generated in cyberspace, can choose to book those sales in jurisdictions that have the most favourable tax regimes – generally Luxembourg in the case of Amazon and Ireland in the case of Apple. Then they can also reduce profits by booking costs in jurisdictions with the highest tax rates. They can game the system for capital expenditures in similar fashion.
It is not surprising that they set out to pay as little tax as possible – they are in the business of maximising shareholder value. (If they did not, then the management would be changed.) But let’s be clear, what they are doing, even if you think it is ethically questionable, is totally legal and within the rules. If Amazon had done anything illegal then it would have been fined and some of its people would be in prison – which is not the case.
The question is then – how can we tax globalist corporations generating revenues in cyberspace more effectively and justly? This has actually been on the agenda for about five years now. Mr Osborne raised it at the G-20 summit when he was still Chancellor. He and others (Mr Hammond is on board) proposed a tax on global sales. But – here is the prisoners’ dilemma – for it to work properly allcountries would have to implement it together with identical rules. Thus far, such international cooperation has eluded us. The Archbishop should lobby the G-20, not the TUC.
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I would also point out to the Archbishop that, ultimately, carving up Amazon’s tax liability is a zero-sum game. If Amazon pays more corporation tax in the UK it will probably pay less tax in Luxembourg. That would be good news for the UK Treasury – but is that really morally preferable?
A more pressing problem for the Archbishop was the subsequent revelation that Amazon is one of the Church Commissioners’ top 20 equity holdings – worth an estimated £20 million. The Church then released a statement to the effect that it was better to remain “in the room” – meaning that, as a shareholder, the Church might be able to exert some beneficial influence over Amazon’s behaviour. This opened the Church to the accusation of hypocrisy.
In terms of orders of magnitude, the Church controls a percentage of Amazon’s stock which is totally insignificant in voting terms. You have to go to ten decimal places of a percent until the number even shows up on an Excel spreadsheet – so its influence is, frankly, zilch (unless you believe in the power of prayer). I don’t think it’s hypocritical to invest in a company in the hope that it mends its ways. In this case, however, the investment logic is curious. The Church is effectively saying – We, a totally insignificant shareholder, will do our best to ensure that your after-tax return on equity declines!
The Archbishop also said that Amazon pays such low wages that staff need to claim state benefits. (He failed to mention that Amazon operates a generous share bonus scheme for employees.)
Amazon is certainly not unique in that respect. I have written in this column before about what I call the Costa Problem – which applies to almost all coffee and fast food chains in London, which are overwhelmingly staffed by migrant workers earning the minimum wage. These people, who rightly pay little or no income tax, receive Working Tax Credit as well as in many cases Housing Benefit paid ultimately by the British taxpayer – so the state is subsidising those businesses. In this way, generous welfare systems encourage employers to pay lower wages.
George Osborne was planning to address this by hiking the Living Wage while at the same time reducing Working Tax Credit. His effort to reduce WTC was scuppered by the House of Lords (the Bishops voted entirely predictably). And then the Good Ship Cameron hit the Brexit iceberg…
I have consistently argued that the Living Wage should be much higher than it is – at around £13 per hour currently – but (the Archbishop would not like this) migrant workers should not receive any state benefits until they have contributed to state coffers for a minimum period (say, five to seven years). Employers would then be incentivised to train up indigenous workers whom they would be more motivated to retain.
The Church itself certainly doesn’t volunteer to pay more taxes than it has to (as the Archbishop of York has suggested we should). The Church Commissioners, which has charitable status (unlike your pension fund), pays no tax on dividends and is exempt from capital gains tax. Churches (quite rightly, in my view) are exempt from business rates and can claim back VAT incurred on repairs. Nor does the Church have to pay VAT on services supplied such as weddings (sorry – no gays!) and funerals.
The state of labour
The Archbishop told the TUC: The gig economy, zero-hours contracts, is nothing new – it is simply the reincarnation of an ancient evil. My interpretation of this is that he is comparing the gig economy to slavery. I think that is a false comparison.
I am not going to defend zero-hours contracts – though the gig economy can be very fulfilling. Many people like the way in which they can structure work around childcare and so on. People willingly sign-up to work in this way; slaves don’t. The fact is that it is not just prevalent amongst the tech giants – e.g. Uber drivers. The entire adult education sector in the UK, operated by local councils, engages teachers overwhelmingly on such a basis. If a course is cancelled due to insufficient numbers, teachers do not get paid. I have even heard it said that cathedral book shops are staffed on zero-hours contracts.
There must be unions in the gig economy. There must be unions in industries being automated, unions wherever workers are vulnerable. There must be a new unionisation, or, President, there will only be a new victimisation.
Some of us remember the 1970s when the union bullies were in control – and we do not regret that time. Arthur Scargill did not behave like a Christian during the miners’ strike (1984-85) – when people got killed. Even today, there are abundant examples of where intransigence on the part of trade unions has caused entirely unnecessary disruption to the public with no advantage to workers. (Southern Trains?) But Mr McDonnell wants to turn back the clock to the 1970s, according to his pronouncements in Liverpool this week.
Surely, in a world where the labour market is regulated, where there is a Living Wage and where employers must provide pensions and adhere to high health and safety standards, unions are much less necessary than they were in the 19th century. Then, unions arose as a result of the exploitation of workers in factories – things are very different now.
Food banking crisis
Today, I dream that governments, now and in the future, put church-run food banks out of business.
You will not meet a C of E vicar these days without getting into a conversation about food banks – the C of E is a big mover and shaker in this realm. Much to its credit, in my view. They will tell you that most of their “clients” are not the unemployed or the homeless but people who are in work but just can’t manage – despite the welfare state. Supposedly, the migration to Universal Credit has exacerbated hardship. (Though the welfare bill has not gone down – so where did the money go?)
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I salute the people who make food banks happen, though I would point out that the problem is not simply one of insufficient state welfare. The tsunami of social problems that is upon us – drug-addiction, obsessive gambling, loneliness, bingeing, declining mental health, broken homes, domestic violence, self-harming, kids locked in their rooms alone staring at little screens, obesity, the decline in public manners – all this has a role too and cannot be entirely blamed on the state. Nor will these social problems ever be entirely fixed by the state.
You would have thought that Christians would know that. Christian theology is founded on the notion that we humans have free will – in modern parlance, we have choices. People who go to food banks have often made bad choices. Food banks are becoming common even in rich countries with generous welfare states like Norway.
But the Archbishop and fellow Corbynistas think that the cure is always tax-and-spend. He has even suggested that inheritance tax should be increased massively (upper-class guilt, again?) and that grammar schools (which foster social mobility) should be scrapped – as if that will put the food banks out of business.
If you raise personal taxes, charitable donations will fall. Americans enjoy lower taxes than the Brits but are far more generous philanthropists. If you deny inheritance, you undermine the law of property – about which the Old Testament has much to say. Moreover, you take spending power out of the economy. If you raise corporate taxes, investment falls. Either way, the economy stalls.
On the EU
In August, the Archbishop attracted widespread ridicule by claiming that “The EU is the greatest dream realised for human beings since the fall of the Western Roman Empire.” The moment I heard him say that I concluded that His Grace had completely lost the plot.
Firstly, the statement, as a historical conjecture, is laughable. (I wish that dear old Professor David Starkey could contribute on this – as no doubt he will.) Secondly, it is evident that 17.4 million British citizens (many of them – possibly most of them – Anglicans) don’t agree with him.
According to a recent survey[iv], 66 percent of practicing Anglicans voted Leave against the national total of 52 percent. Before the referendum, both Archbishops stated their intention to vote Remain, Justin proclaiming that Leave represented “our worst instincts”. Only one C of E bishop voted Leave – Mark Rylands, Bishop of Shrewsbury.
Anglicans are also at odds with their clerical leadership on welfare spending and immigration, according to the report. That is not surprising since Anglicans – unlike the globalist metropolitan elite with their doctrine of the necessity of diversity – “take a positive view of English culture and ethnicity, and regard the EU as a threat to heritage, values and parliamentary sovereignty”.
Archbishop Justin has had nothing to say, be it noted, on the democratic deficit in EU institutions and the endemic corruption within it (as in the books not balancing for the last 50 years). Frankly, like much of the Corbynite left, he doesn’t seem very patriotic at all. Next up, at the behest of Baroness Shami Chakrabarti, he’ll probably want to remove all those splendid regimental banners and Union flags carried in battle which bedeck our splendid cathedrals.
Church militant
On the other hand, the Church of England is much more than just its clergy – whatever their political outlook may be. The clergy do not own the Church.
More important is a vibrant army of chirpy flower-arrangers, cake-makers, church-cleaners, bell-ringers, sherry-dispensers, grave-tenders, brass-rubbers, candle-lighters, tea-pourers, fund-raisers, choir-singers, organists and angelic bean-counters (someone has to count the collection). Vicars may run food banks and visit the dying – but it is overwhelmingly lay Anglicans who do an estimated 23 million hours of voluntary work each month across the UK.
These are the people who make the Church of England work. And most of them will never vote for the Prophet Jeremiah.
Church triumphant?
You can impose equality through socialism – but there will be restricted freedom and prosperity. And, if historical experience is anything to go by, religion will be extirpated…Or, you can release the animism of capitalism and enjoy freedom and prosperity – with, admittedly, greater material inequality. (Which seems natural to me: since human beings have very diverse skills. Priests are not money-makers – but we still need them.) With prosperity you can buy good healthcare – and welfare for the least advantaged.
If you are an Archbishop, it must be tempting to imagine that every half-baked idea you have about economic or social policy is divinely inspired. Let’s not be too hard on him.
May God bless the good ship Church of England, and all who sail in her communion – but especially the money-makers who keep her afloat.
[i]Text and video available at: https://www.archbishopofcanterbury.org/speaking-and-writing/speeches/archbishop-canterburys-speech-tuc
[ii]See: https://www.ft.com/content/d87f60ec-3cbc-11e7-821a-6027b8a20f23
[iv]Religion, State and Society by Greg Smith & Linda Woodhead, University of Lancaster.