Exposed: The truth behind the taxpayer’s £40m cathedral repair fund

In 2014 the government set up a taxpayer-funded scheme for cathedral repairs. National Secular Society research exposes how the Church of England spent significant amounts of cash it didn’t need without being subject to proper scrutiny. By Chris Sloggett and Ed Moore.

In the 2014 Budget the chancellor George Osborne announced the First World War Centenary Cathedral Repairs Fund, a scheme which used public money to pay for cathedral repairs.

The National Secular Society has previously highlighted concerns about this project. In particular we noted that the Church of England could easily afford to fund its own repairs and that it acted as an opportunity for Anglican archbishops to engage in a power grab.

Now NSS Freedom of Information requests to the Department for Digital, Culture, Media and Sport (DCMS), the National Audit Office(NAO) and the Treasury have pieced together the damning reality behind the scheme.

The government allowed the established church to take taxpayers’ money without making a business case for it. The Archbishops’ Council, a church body, was allowed to oversee the project despite the fact that created a conflict of interests. The church was able to bypass checks which allow the public and parliament to hold the government to account for its spending. And despite all this, the government doubled the amount of money provided under the fund in 2016.

When the C of E asked for money, it seems, the government handed it over without pressing for answers to basic questions as it should have done.

The process was botched from the beginning. In January 2014 the C of E raised the idea of the grant scheme in a confidential memo to the chancellor. The justification seemed to be that the cathedrals had been omitted “through historic accident” from a previous lottery-funded scheme which funded repairs for listed places of worship.

On 5 March the Bishop of London discussed the grant proposal with the chancellor. A restricted Treasury memo to the chief secretary detailing the meeting has made clear that the church was lobbying for funding for cathedral repair grants both immediately and for the long term.

But in a new twist the church now wanted to administer the immediate grant itself, both for its own cathedrals but also surprisingly for Roman Catholic ones as well.

Two days later a note to the chancellor from the chief secretary showed that DCMS was very unhappy with the Church of England running the scheme. It “strongly” preferred that English Heritage administer the grant.

In a further restricted memo to the chancellor and chief secretary on 17 March the Treasury rejected this option to save money and to keep the Church of England happy. English Heritage quoted £500,000 a year to administer the grant properly while the church offered to do it for free. DCMS wouldn’t pay this extra fee. The Treasury did not wish to either — and also did not ask the church to hive it off from the grant itself.

So the Treasury let the Church of England’s Archbishops’ Council administer the grant to save money.

The chancellor announced the scheme in the Budget without fleshing out any of the details as they had not yet been agreed. The government initially pledged £20m (a figure which would double when it awarded a further £20m, shared evenly between the Treasury and DCMS, in 2016). There was no explanation of why only cathedrals would benefit from this publicly-funded act of generosity during a time of austerity. Indeed the decision appeared curious given the fact that English Heritage files from 2009 suggested cathedrals were in a good state.

The Treasury then told DCMS to set the scheme up in a phone call, meaning nothing was written down, as confirmed to the NSS in an FoI response on 13th June 2018.

And no business case was made for the scheme. When the UK government awards grants over £5m, standard procedure is to ensure a ‘Green Book’ business case is presented. But our research has revealed that the church was not required to make such a case for this scheme. The Treasury told us it did not ask for a case because it had delegated the authority to spend this amount of money to DCMS. When we asked DCMS for a copy of the business case, it simply said it did not hold the information we had asked for.

Meanwhile funds were exclusively reserved for Anglican and Roman Catholic cathedrals, despite the fact this raised equality concerns. And as we previously reported, DCMS produced the grant contract despite having no history of providing repair grants to the Church of England.

The scheme’s link to the 100th anniversary of the first world war could perhaps generously be described as tenuous. The original grant request from the church did not mention the war. The justification for the scheme first appeared on 17 March in the internal Treasury memo to the chancellor, just two days before the Budget.

When the government briefly announced that the fund had opened in April, culture secretary Sajid Javid made a vague and brief reference to the war. Roughly speaking, his reasoning was that cathedrals should look nice during the commemorations.

The evidence suggests the government used the war commemorations as a convenient pretext to give the church money. A cynic might say it used the legacy of a generation of dead soldiers to justify a funding package which it knew it could not defend.

The government handed administration to the C of E’s Archbishops’ Council. This decision saved an initial, relatively minor outlay of cash but was also highly inappropriate.

That is not simply the NSS’s view. After we wrote to the NAO to raise concerns, the UK spending watchdog identified ”a number of areas for improvement in the governance, operation and oversight of the fund”. The archbishops’ council lacked expertise and experience in running such a project. And more significantly asking it to do so created a blatant conflict of interests: the church was being entrusted with money from which it would directly benefit.

The taxpayer had a right to expect someone to hold the C of E to account if the money was misspent, and to know that funds which were not necessary were returned to the public purse. Appointing the archbishops’ council undermined any prospect that this scheme would be subject to effective, independent oversight.

In theory the government would address this by requiring the council to issue yearly reports detailing its expenditure, signed off by their external auditor, and accurate quotes in advance of work to be done. But it is now clear the archbishops’ council did none of these things. It routinely breached its legal obligations to keep the government informed about how the public’s money was being spent. An internal DCMS memo of 23 November 2016 makes this clear.

Yet nearly two years later the situation was the same. In an FoI response on 5 July 2018 DCMS said it did not “hold this information” when asked when it expected to receive externally audited reports. The government did not press the church to justify expenditure or to provide independent verification that it was being reported accurately. This leniency and lack of interest allowed the Archbishops’ Council to become creative with grant awards. Rather than awarding grants based on quotes it began awarding grants against estimates of cost.

And while the headline awards were reported to parliament the true payments were kept discreet but occasionally revealed. As an example, a sample report on the completion of repairs to Guildford cathedral provided to DCMS and revealed by our research stated:

The NSS pressed DCMS to explain this cost discrepancy in an FoI request of 4 February 2018. We were told DCMS did not hold the information and decisions would have been made by an expert panel associated with the repairs fund. That multiple differences in project spend existed was acknowledged in an email to the DCMS:

So rather than returning the unneeded funds the Archbishops’ Council simply decided to reallocate the money. It also decided it would continue to reallocate funds in other similar circumstances. The fact the council could do this also reveals that it received money before it needed it. This was another wilful breach of its grant conditions.

When the church was asked to fulfil the terms of its grant contract it told the government to back off. The NSS raised concerns with the fund administration in a letter to the NAO on 25 October 2016 and on 2 December 2016 the NAO acknowledged problems including a failure to provide agreed spending reports:

In the meantime the DCMS had pressed the church on these failings and in response the church appeared to threaten the government:

The government showed no desire to keep demanding the agreed reports. DCMS had little interest in a scheme which had been foisted upon it. And the NAO, which is tasked with reviewing DCMS’s work, did not follow up to ensure it had overseen the church’s claims properly. Meanwhile the church was allowed to make its own case for how well it had done, commissioning its own ‘independent’ report to support how well it had managed the project. Even then it felt the need to interfere in the findings, as the authors noted:

So when DCMS informed parliament of how the money was being spent, it was reliant on unverified figures from the archbishops’ council. DCMS only informed parliament of the initial headline awards, not the actual payments made. The government put inaccurate, unverified figures on the parliamentary record.

This shoddy episode shows what the Church of England’s established status allows it to do. It gained grants without putting together a business case. It was not required to go through the usual checks and balances or be held to reporting requirements. The church was unwilling to be held to account, and the government was unwilling to hold it to account.

In 2014 Sir Tony Baldry MP, then the second church estates commissioner (a position which provides a link between government and the established church), said the chancellor had been “incredibly generous towards the church”. How many other strapped-for-cash bodies or public services would say that of the chancellor? Since then, despite deep cuts in spending elsewhere, many additional millions have flowed from the public purse to the church coffers.

The political power and prestige the Church of England gains from its established status makes this possible. It benefits from the cosy relationship between church and state — and is easily able to abuse its position at the public’s expense.