Bishops' palaces may have to be sub-let

The Archbishop of Canterbury's £10m palace could be turned into a self-financing conference centre under cost-cutting measures proposed yesterday.

Restrictions on first-class travel and proposals to rent flats in 15th-century towers are other reforms suggested in the review of the homes of the archbishops of Canterbury and York. The package was drawn up by a committee chaired by Professor Anthony Mellows, who assessed the living arrangements of bishops last year and warned that the image of them living in palaces was damaging the church.

In his new report, Resourcing Archbishops, he said the Archbishop of Canterbury's accommodation in Lambeth Palace and the Old Palace in Canterbury, and the Archbishop of York's home in Bishopthorpe Palace, were not damaging to the image of the Church.

But a financial crisis has forced the Church to ask parishioners to donate more to pay for priests' pensions, and Professor Mellows said it was difficult to justify expenditure on the palaces against that.

Lambeth Palace and Bishopthorpe Palace had areas that were "grossly" underused and the report called for reforms to cover most of the costs of running Bishopthorpe, and all costs at Lambeth Palace.

Lambeth Palace costs £500,000 a year to run on average, although it was higher last year at £594,000, including £242,000 on staff costs. It has been the home of the head of the Church of England since St Anselm in the 11th century, and has been in continuous use for 900 years. The main palace building contains three state rooms, two chapels, the Great Hall, four flats, and studies for the Archbishop and the Bishop of Lambeth. Outside there are two towers, eight cottages – one for the head gardener – and 6.3 acres of gardens.

The archbishop and his wife live in a flat added to Lambeth Palace in the 19th century, which the report said lacked privacy and fell far short of modern standards, although Dr Carey had been "modest" in their aspirations and found the accommodation satisfactory.

Professor Mellows considered the option of selling the palace because of the Church of England's "difficult financial circumstances" but found that it would be cheaper to keep the building and use it to generate income.

His report proposes turning part of the palace into a conference centre or "commercial hospitality" suite while allowing the archbishop and others to continue living there and using the state rooms for up to 40 per cent of the year.

The report estimates that the venture could pay for the running costs of the palace within five years, although the proposal would inevitably change its "ethos".

Flats in Lollards Tower within Lambeth Palace are let rent-free at present, but another proposal was to rent them at market rates.

The report also proposed a reform of long-haul travel arrangements for archbishops and their staff, who usually flew first class.

Professor Mellows recommended that all official air travel should be at the cheapest rate that would suit the traveller's needs. For archbishops and their wives, that would still normally be first class, but their staff should travel economy class.

The Archbishop of Canterbury, Dr George Carey, and the Archbishop of York, Dr David Hope, said in a joint statement that they would give the report careful attention. "We shall naturally wish to consult others and to invite views on the many recommendations the report contains.

"For now we would simply like to acknowledge the many supportive things the report has to say about our own work and about the staff who so loyally and ably serve us and our ministries," they said.