Congratulations! Thanks to the hard work and dedication of the RNLI's supporters the lifeboat service is now on an extremely sound financial footing, and looks set to continue that way. Twenty years ago things were far from rosy, but after a remarkable fight back the RNLI now has the resources available to look to the future with confidence.Essential projects such as new 25-knot lifeboats, long-term plans for improved cover and faster response times and reducing accidents through the Sea Safety campaign are only possible because the RNLI has a strong financial base and the resources to see them through. Mike Floyd explains why we should all be very proud of the RNLI's strong position and adequate reserves.

The RNLI is unique, we all know that, but have you ever stopped to think just how unusual our lifeboat service really is? The Institution is a registered charity, like many in this country which provide a service to those in need and which get their funds from the generosity of the public at large.

Yet it is extremely unusual, and perhaps unique, for a charity to make a commitment to the government, in this case the governments of both the UK and the Republic of Ireland, to provide a service which those governments are obliged to provide under international law.

While some people's gut reaction may be to think 'how shocking' it is in fact a situation which both the RNLI and the vast majority of supporters and sea users find very satisfactory.

As a charity, and with volunteer crews and fundraisers, the Institution can concentrate on providing the best possible lifeboat service. It avoids becoming a political football with its funding subject to whims of politicians, changes of government or cut-backs inspired more by the need to save money than the best interests of those on the receiving end of the service.

The RNLI differs from almost every other charity in other ways too.

Many charities set out to raise as much as they can simply because their main purpose is to distribute that money - or services bought with it. The more they receive the more they can distribute.

This is an excellent aim for, as an example, charities providing aid to the third world. More in, more out - a simple equation.

But the RNLI does not simply set out to raise as much money as it possibly can. Long experience and good planning enables the RNLI to make a good estimate of what it will cost to run an efficient lifeboat service for some years ahead, and plan to raise the money needed to do it.

However one difficulty is that a large percentage of the RNLI's income comes from legacies, and legacy income is notoriously hard to predict. If it should raise more money than planned, all well and good. But to fall short would mean digging into its pockets to find the difference or cancelling some essential spending.

Again in direct contrast to the majority of charities the lifeboat service is a very capital intensive operation, needing more equipment to carry out its task than almost any other.

We have unpaid crews and very small administration overheads, yet to do the job properly and safely we need top-quality machinery - 435 lifeboats for 222 lifeboat stations and a relief fleet to provide cover when the permanent boats are being maintained or repaired.

The cheapest of these lifeboats costs nearly £12,000 and the most expensive £1.7m. Then there are the stations from which they are launched and the exposed slipways or waterproof tractors and trailers needed to get them into the water.

This equipment not only has to be the safest available for the volunteer crews but has to be replaced at intervals with equally reliable new equipment.

No-one builds off-the-shelf boats which are capable of 25 knots in appalling conditions and selfright after a capsize, so most of this equipment has to be specially developed.

All-weather lifeboats have a useful life of around 25 years, so at least another £1.7m (at today's prices) has to be available when the time comes to replace them.

This predictable spending pattern has to be funded from a relatively unpredictable income, but on top of the predictable expense there could be a major unexpected bill at any time. Who can say whether a storm might cause hundreds of thousands of pounds of damage to a slipway, or a lifeboat be so badly damaged during a rescue that she has to be written off? Against that background someone in the RNLI has to put their signature to an order for a lifeboat which might not be delivered for more than a year and which could cost more than one-and-a-half million pounds. Would any prudent person sign up for even a new car twelve months in the future without being certain that they will have the wherewithal to pay for it? Ready for the worst As recently as the mid 1970s the lifeboat service was living almost literally hand to mouth. Inflation was raising costs and undermining income and for some years the RNLI had only a few weeks running costs in hand. Any major unplanned expenditure or a sudden, and entirely possible, further drop in income would have caused major problems.

The RNLI fought back from that position until now it is proud that it could run for just under three years on the money it has put by.

But it can't be complacent. Just one disastrous day of an economic crisis could wipe out months of lifeboat running expenditure, although of course the RNLI's investments are designed to minimise such a risk. The return of high inflation, which almost brought the service to its knees in the '70s, would slash the three-year figure.

The RNLI's '96 accounts show it has about £188m put away. This may sound like a lot of money - but at best it would run the service as it is now for just 32 months. It wouldn't allow any improvements in cover in that time; it wouldn't see the new fast slipway boat project through to completion and it wouldn't allow the RNLI to explore other ways of saving life at sea, such as the highly successful Sea Safety preventative measures.

£188m is a comfortable cushion against an unpredictable world but is a necessary precaution, as a glance at the graph opposite shows just how upand- down the RNLI's finances have been over the years.

Funds are still needed constantly so that the cushion remains intact. To allow voluntary income to fall, to do nothing about a potential decline in legacies or to allow that cushion to be eaten away would be suicidal for an organisation committed to saving lives - not only this year and next but into an unforeseeable future.

So, if any one tells you that they won't contribute because the RNLI is already 'too rich', please put them straight on a few points.

Tell them that it's a charity which runs a government rescue service; that it has a massive capital investment in other peoples' safety and that it has to make large financial commitments for many years ahead.

But, most of all, it is a prudent organisation that wants to be sure that it can carry on saving lives well into the future. And that is something it cannot do by living hand to mouth.

RNLI free reserves expressed as number of years' annual expenditure.