The recession has cost the Church of England £1.3 billion off the value of its investments in shares and property.

Financial results published this week show a fall from £5.67 billion to £4.36 billion between 2007 and 2008 in the value of the historic assets of the Church Commissioners.

Although the Commissioners’ assets have in the past consistently outperformed comparable funds on investment returns, which are used to help towards clergy pensions, stipends and other aspects of the Church’s mission, the returns also showed a negative return last year of nearly 20 per cent.

The slump in asset values means they are now at their lowest value since 2004.

Careful planning and an investment policy known as “smoothing”, where cash is put aside in the “fat” years to provide for the “lean”, means there will be no immediate impact on the work of the established Church.

But the Archbishop of Canterbury, Dr Rowan Williams, is to lead a series of consultations with bishops and other senior clergy around the country later this year to discuss how the Church’s spending priorities should be adjusted to cope in future.

The biggest cost to the Commissioners is clergy pensions, which account for more than £100 million in expenditure. The Commissioners pay 17 per cent towards the Church’s day-to-day running costs in cash distributed mainly to the poorer dioceses through the Archbishops’ Council.

In the last 15 years, after the Commissioners lost millions off their asset values in property speculation, parishioners in the pews have picked up more and more of the running costs of the Church and now give about £700 million a year. The burden became even greater for worshippers after the switch to a contributory pension fund for clergy.

Over the past 10 years, the Commissioners’ total return on their investments averaged 5.7 per cent per year, ahead of the 3.7 per cent return benchmark average. But last year, the return of minus 19.6 per cent was less than the WM All Funds return of minus 17.2 per cent.

However, the total returns of the FTSE100 index and the IPD UK commercial property universe did even worse, at around minus 30 per cent and minus 22 per cent respectively during the year.

The Commissioners said they hoped to maintain the current level of support for dioceses in cash terms into 2011-13. But in line with the normal practice, the position will be reviewed at the end of 2009.

Andrew Brown, the Secretary to the Church Commissioners, said: “In a very difficult financial situation, we believe the Commissioners have achieved creditable returns for our beneficiaries.

“Our policy of holding the majority of our assets in shares and property has benefited the fund’s performance in nine of the last ten years. Relative performance suffered in 2008 as we held very few bonds during the year but weighted the fund towards real assets to match our - mainly salary-related - liabilities. We continue to diversify the nature and type of our investments.”

The Commissioners’ activities in 2008 included providing £41.8 million towards parish-level ministry and mission projects around the country. This compared with £32.9 million in 2007.

The Commissioners manage the Church’s historic assets. They were formed in 1948 when the Queen Anne's Bounty and the Ecclesiastical Commissioners were combined. Queen Anne’s Bounty was a charity founded in 1704 to help poor clergy. The Ecclesiastical Commissioners were given the estates belonging to bishops and cathedrals, so they could fund their ministry as well as the Church’s ministry into new urban areas.

In a letter sent this week to all dioceses, Mr Brown wrote: “We intend to continue our present level of support for dioceses at planned levels through to the end of 2010. We can do this because for several years we have operated ... a smoothing arrangement in terms of distribution by paying out less to dioceses than we might have done in good years in order to keep something in hand to cover leaner years.”