Football Governance Bill (Fifth sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 21st May 2024
(7 months ago)
Public Bill CommitteesFootball Governance Bill 2023-24 View all Football Governance Bill 2023-24 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 21 May 2024 - (21 May 2024)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Chair
With this it will be convenient to discuss the following:
Clauses 16 to 19 stand part.
New clause 8—Support to clubs—
“(1) The IFR shall provide reasonable and proportionate assistance to—
(a) regulated clubs seeking to obtain a provisional club licence;
(b) regulated clubs with a provisional operating licence seeking an full operating licence; and
(c) unregulated clubs which are reasonably likely to become regulated clubs in the next football season.
(2) The IFR shall provide reasonable and proportionate assistance to regulated clubs in their efforts to continue to comply with the conditions of a provisional or full operating licence.
(3) In fulfilling its duty under subsections (1) and (2), the IFR shall have regard to the factors listed in section 52(9).”
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)
It is a pleasure to serve under your chairmanship, Mr Sharma. Starting with clause 15, one of the regulator’s main responsibilities will be to operate a licensing system for football clubs through which the majority of its regulation will be delivered. The licensing regime will cover all football clubs that have a team playing in any competition specified by the Secretary of State in regulations. It is proposed that it will cover the top five leagues of the English football pyramid, but that is subject to the Secretary of State’s discretion and parliamentary approval. I will use “specified competitions” as shorthand to denote those competitions covered by the regime. That means that football clubs will require a licensed, lawfully operated team in any of the specified competitions. A licensing system to enact regulation is not a new idea, with sectors such as communications, finance and healthcare all operating such a system.
The clause sets out the requirement for clubs to have a provisional or full operating licence, and the regulator’s power to grant those licences, subject to clubs passing the relevant tests, which are established in the following clauses. The licence will enable the regulator to regulate clubs through licence conditions set out later in the Bill. This will enable proportionate regulation tailored to clubs rather than a one-size-fits-all approach. An operating licence will specify which club the licence relates to, the team that the club is operating and any conditions attached to the licence.
I will move on to clause 16. The introduction of a football regulator into a previously unregulated sector will be a substantial change to the industry, but a necessary one to safeguard the future of English football. In order to provide for a graduate transition to being a fully licensed club, a club will initially apply to the regulator for a provisional operating licence. We see that as the natural first step to attaining a full operating licence. That will give clubs time to adapt to the regulatory system and make the necessary changes without being unfairly penalised for not being able to raise standards overnight.
The application for a provisional licence requires basic information on the club’s owner or owners, officers and senior management as well as a strategic business plan detailing things such as the estimated costs of the club and how they are expected to be funded. The regulator should look to make that process as simple and straightforward as possible, assisting clubs with their applications where necessary. It will be aware of the possible constraints on smaller clubs lower down the football pyramid. We envisage that the majority of clubs will meet the test for a provisional operating licence through the submission of basic information and documentation, and showing a readiness and willingness to work with the regulator to meet the mandatory licence conditions and free-standing duties.
Clause 17 outlines the granting of a provisional operating licence that will allow the club to operate for a time-limited period. That may be up to three years initially, although it could be shorter or extended depending on the circumstances. The provisional period will allow the regulator time to assess the current standing of the club and determine what steps it will need to take to obtain a full operating licence as well as giving the club time to take the necessary steps. The provisional licence will ensure that all clubs under the remit of the regulator meet basic fundamental requirements, in the mandatory conditions, that will help to safeguard the club’s sustainability and heritage.
There are three aspects of the test to grant a provisional operating licence. First, the club must operate a relevant team in a specified competition, which effectively means that the club must be in scope of the regulator. Secondly, the club will comply with the mandatory licensing conditions attached to the licence by the regulator. Full details of the mandatory licence conditions are in schedule 5 to the Bill, but they encompass a financial plan condition, a corporate governance statement, a fan consultation condition and an annual declaration condition. Thirdly, the club will comply with the duties on clubs as set out in part 5 of the Bill. If the regulator is not satisfied that the club passes all elements of the test, the clause gives a club the opportunity to engage with the regulator to rectify the issues identified. That collaborative approach will aim to ensure that clubs are given every opportunity to meet the requirements and gain a provisional operating licence.
Clause 18 states that in order to pass the test for a full licence, the regulator must be satisfied that a club is meeting the threshold requirements as set out in schedule 4 and that the club is complying and will continue to comply with the mandatory licensing conditions and free-standing duties on clubs set out in part 5. The regulator must also not have determined that any person who is an owner or officer of a club is unsuitable for the position they hold.
Clause 18 also details the power of the regulator to extend the provisional operating licence for a club. That will be done only if the regulator believes that the club does not meet the bar for a full licence at present, but will if given more time. As set out later in the Bill, the regulator will be able to sanction a club if it has to extend its provisional licence. Once a club has a full licence, it will not have to be periodically reviewed. Instead, the regulator would continue to monitor and supervise the club, and there will be an annual touchpoint in the form of the annual declaration, where the club will notify the regulator of any changes within the club over the past year that are relevant to the regulator. That is intended to minimise burdens while still ensuring that the club continues to adhere to the necessary requirements, including requirements that ensure that fans’ best interests are at the heart of the club’s decision-making process.
Clause 19 details the revocation of a club’s provisional operating licence for failing to progress to a full licence, as well as when the licence ceases to have an effect. For a provisional operating licence to be revoked, the regulator must satisfy itself of three things: first, that the test for a full operating licence is not met; secondly, that the club in question has persistently and without reasonable excuse failed to take reasonable steps to meet the test; and finally, that there is no reasonable prospect of the club meeting the test within a reasonable period, even if given more time. The regulator should be engaging with the club throughout that period, and we expect that through constructive dialogue, a solution that avoids that drastic step can be found in all but the most serious cases. The regulator must notify the club of its decision and provide its reasoning. To reduce as much as possible the regulator’s impact on ongoing sporting competitions, a revocation must not be before the end of the current season.
A licence will cease to have effect only if the club ceases to operate a relevant team. The most likely cause of cessation of an operating licence is that a club has been relegated from a specified competition and is therefore no longer in the scope of the regulator.
I understand the intention behind new clause 8, which would require the regulator to provide clubs with “reasonable and proportionate assistance” as they engage and comply with the licensing system. However, I can reassure the hon. Member for Sheffield South East that the Bill already achieves that in principle. It is already implicit that any good regulator should provide support and assistance to the regulated population as necessary, to aid their understanding and support compliance. But for the avoidance of any doubt, we have also explicitly codified that participative approach into the Bill through the regulatory principles. The regulatory principle in clause 8(b) encourages the regulator to
“so far as reasonably practicable, co-operate, and proactively and constructively engage, with…clubs”.
The regulatory principle in clause 8(c) encourages the regulator to be proportionate. Those two principles would encourage the regulator to provide clubs with assistance in engaging with the licensing system.
It is in everyone’s interest to maximise clubs’ compliance with the system and minimise burdens on them as much as possible. Indeed, ensuring a smooth transition and minimising burdens on clubs has been at the heart of our design of the licensing system. That is precisely why there is a two-step structure of provisional licences followed by full licences, with clubs given time and support to progress from one to the next.
Stephanie Peacock (Barnsley East) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I am pleased to have reached the part of the Bill where we can discuss the content of the operating licences that will make up the regulator’s regime. As the Minister has said, clauses 15 to 19 set out the process for applying and granting both provisional and full operating licences. I would like to welcome a few things about these clauses.
First, I welcome the ability for clubs to gain a provisional licence first, with the conditions in this licence providing the building blocks for the full-time licence. This process recognises the importance of the transition period, allowing clubs to take the necessary time to understand the new requirements and get themselves in order to meet them if needed.
I also welcome that clause 16 clarifies that any club can apply for a provisional licence, allowing those expecting promotion to the National League to be proactive. Further, I am pleased that the process will require a personnel statement to be provided. That will be crucial in ensuring that the regulator is able to hold the right people accountable for the proper fulfilment of the licence at any given club.
The clauses allow for an advocacy first approach, where the regulator will provide an encouraging and flexible pathway for clubs to gain their licences. Coupled with the enforcement power in clause 19 to ensure that the regulator has the teeth it needs in the event of non-compliance, the process in this part of the Bill seems to offer a fair and supportive approach to getting clubs up to speed with the full requirements.
My hon. Friend the Member for Sheffield South East is right to highlight in new clause 8 that clubs should be supported in their transition to becoming fully regulated. That is especially important for those clubs in the National League and the lower tiers of the English Football League. In his evidence to this Committee, Steve Thompson, the managing director of Dagenham & Redbridge told us he was
“really worried that the extra reporting…will be more than a lot of them can manage without taking on extra staff.”––[Official Report, Football Governance Public Bill Committee, 14 May 2024; c. 39, Q61.]
He also highlighted that most clubs at National League level operate on one or two full-time staff, with some working on volunteers alone.
I think the Bill has done a good job of ensuring regulation will be proportionate. Further, I believe reporting requirements have been minimised wherever possible and should in any case be balanced out by the benefits of good financial planning and governance. However, given the concerns of clubs, I understand why some may feel it is better to make it explicit that the regulator will support clubs that are or will be licensed.
I hope the Minister can use this as an opportunity to highlight some of the ways in which the Bill as it stands will adopt an advocacy first approach and offer clubs the assistance they need to keep up with the regime. I do not believe it is anyone’s intention for the regulator to have to use its enforcement powers on well-intentioned clubs that are genuinely struggling to comply.
Mr Clive Betts (Sheffield South East) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I thank the Minister for his positive comments on new clause 8, which are very much in line with what it is trying to achieve. I think the Minister said that the new clause is unnecessary because the essence and intention of it is already contained in other clauses, and the regulator would be expected to operate in providing assistance to clubs in line with the way described in new clause 8. I think I have got that right.
Mr Betts
The Minister is nodding on that point. On that basis, I will not push the new clause, because the Minister’s explanation, and the evidence we have heard, reassures me that clubs that are coming up from the National League and want that assistance will be helped in precisely the way the new clause would require of the regulator.
Stuart Andrew
I welcome the positive comments from the hon. Member for Barnsley East. She is right that we are trying to have a fair and supportive approach here and that clubs should be supported.
I want to reassure the hon. Member for Sheffield South East that we have tried to design the Bill so that it recognises that the level of activity at the top of the Premiership, for example, will be vastly different, and that, as we heard in the evidence sessions, many of the club officers in the National League will be volunteers and we would not want to overburden them.
Dame Tracey Crouch (Chatham and Aylesford) (Con)
The Minister will have heard the concerns in the evidence sessions about duplication. Will he be kind enough to remind the Committee that it will be for the leagues, not the statutory regulator, to decide whether there is any duplication?
Stuart Andrew
My hon. Friend makes an important point. This will be the statutory regulator, and this will be where the reporting will need to happen. If the leagues add anything, it is for them to make that decision. As this process progresses, I hope they will see that there is no need for the extra layer of reporting and that the regulator’s powers will be sufficient to secure the future of English football.
Anna Firth (Southend West) (Con)
On behalf of a National League club, Southend United, I welcome the light-touch approach set out in clause 8(c). I welcome the Minister’s comments that where the National League is already regulating itself well, there will be a proportionate, light-touch approach to any additional regulation.
Stuart Andrew
At the end of the day, we want to ensure a standard approach to regulation to ensure that we secure clubs in the future. As I say, I hope that as the regulator starts getting up and running, the leagues will see that there is no need for duplication and will make decisions accordingly. Ultimately, however, it is up to them to make that decision.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16 to 18 ordered to stand part of the Bill.
Schedule 4
Threshold requirements
Ian Byrne (Liverpool, West Derby) (Lab)
I beg to move amendment 4, in schedule 4, page 93, line 3, leave out from “has” to end of line 6 and insert—
“(a) adequate means by which to consult its fans about relevant matters, and
(b) structures and processes for effective engagement with its fans and takes the views of its fans into account in making decisions about the relevant matters.”
Stephanie Peacock
I thank my hon. Friend for that comment, which I will talk about later. I am sure that the Minister also heard it and will respond if he feels able to. For now, I ask the Minister to set out his thinking on why fans are not consulted on the heritage implications of moving a home ground. Overall, I welcome schedule 4 but would welcome a strengthening of the fan engagement provisions.
Stuart Andrew
Schedule 4 introduces the threshold requirements that clubs will have to meet to be granted a full operating licence. These are the three main areas of the regulator’s club licensing regime, which build on the freestanding duties and the mandatory conditions. Meeting the threshold requirements will mean that the regulator is satisfied that the club can currently and will be able to continue to operate sustainably in its financial, non-financial and fan engagement areas.
Although the threshold requirements are principles set in legislation, what each club must do to meet those requirements will not be the same. For example, what constitutes appropriate financial resources for a Premier League club will be very different from a League One club. A club might already meet the threshold requirements—for example, through naturally good operations or by complying with competition rules—in which case, the regulator will not need to intervene directly. If a club does not, the regulator can apply discretionary licence conditions to bring it up to the required threshold. That structure will allow for a proportionate system with requirements tailored to individual clubs, rather than the approach taken by the industry to date of blanket rules catering to the lowest denominator but applying to all.
The threshold requirement for financial resources means that clubs need an appropriate level of financial resources to support their long-term financial sustainability, accounting for their circumstances and risks. For example, that might include which competition the club competes in, its financial relationship with its owners, and the wider economic context in which it operates.
In particular, the regulator should take into account the club’s financial plan and its contingency plans for dealing with financial shocks. For non-financial resources, a similar requirement and process applies. “Non-financial resources” refers to things such as internal controls, systems and policies, as well as the information and people that the club has at its disposal. Although not financial in nature, those are important resources for any well-run club, so they need to be adequate. When assessing whether the resources are appropriate, the regulator might consider the skills and experience of the senior management and its corporate governance arrangements.
The threshold requirement for fan engagement requires that clubs adequately consult and consider the views of fans when making decisions relating to certain specified matters. As we heard from the FSA on Tuesday, this is the first time that there has ever been a requirement for fan engagement to this extent. The relevant matters are listed in the Bill and cover key off-pitch decisions, which the fan-led review highlighted as important to fans across the specified leagues. The threshold requirement is designed to work in tandem with the fan consultation mandatory licence condition. Through that condition, all clubs must regularly consult a representative group of supporters to discuss the relevant matters listed in the Bill, and that must be in place by the time a club receives a provisional licence.
Appropriate fan engagement will look different at every club and will partly be based on the size and complexity of the club’s fanbase. The threshold requirement has been designed to allow the regulator to recognise the inherent variation between clubs while ensuring that standards are raised where necessary.
Ian Byrne
Is the Minister confident that independence will be hardwired into engagement? Regarding the fan advisory boards, there are several examples of Premier League clubs flooding them with club employees. For engagement to work, it has to be completely independent so that we can hold the powers that be to account.
Stuart Andrew
The hon. Gentleman is absolutely right and I give that reassurance. If fans feel that the body that is currently being consulted is not truly representative, the independent regulator can have a look and, if necessary, apply discretionary licence conditions.
Fans, as everybody has said, are the foundation of any club. Putting in place a supporter engagement threshold requirement recognises that they must be consulted on key issues that affect their club. The requirement for clubs to have adequate means to consult their fans and to take fans’ views into account allows the regulator to consider the outcomes of fan engagement and whether the appropriate processes are in place at clubs and are being utilised.
Importantly, the regulator will be able to take enforcement action, such as censure statements, where it deems it appropriate following non-compliance with the licence conditions relating to the fan engagement threshold requirement. That is just one of the factors that results in a robust fan engagement requirement on clubs.
Amendments 4 and 16, however, seek to add something that is already captured in the legislation, with the difference in legal effect of “adequate” and “effective” being negligible. There does not seem to be a way in which a club’s fan consultation could be determined to be adequate without the structures and processes for effective engagement in place. Although the Government understand the intent to make sure that the fan engagement provisions in the Bill are strong, I can provide reassurance that that is the case already and I therefore hope that the hon. Member for Liverpool, West Derby will be able to withdraw his amendment.
Turning to amendment 8, I have been clear that the Government agree with the need for many clubs to engage with their fans on more issues. We expect that the issues of joining a new competition or not playing matches at their home ground would already be captured by the “relevant matters” of
“(a) the club’s strategic direction and objectives;
(b) the club’s business priorities;
(c) operational and match-day issues;”
and matters relating to “the club’s home ground”. It is therefore already implicit in the “relevant matters”, so to add this amendment would be duplicative.
Stuart Andrew
The leagues will have to report to the regulator if they are making changes to any of the competition rules—that is a requirement within the legislation. If changes to competition rules were to impact any of the “relevant matters” in the Bill regarding fan consultation, the club will be required to consult the fans on the related club decisions. However, where changes to competition rules do not have such an impact, it does not seem appropriate to mandate that consultation. Therefore, I hope that the amendment will not be moved.
Mr Betts
Is the Minister saying that if there is a requirement by FIFA, UEFA, the Premier League or any other league for clubs to play their home matches away in another country, the clubs would have to consult the fans about that issue and the regulator would take account of that consultation, even if it was a requirement on the club by the competition organiser? Could the regulator overrule the requirement of the competition organiser in line with the fan consultation that a club would have to engage in?
Stuart Andrew
I think I understand the hon. Gentleman’s question, but my understanding is that that will be looked at on case-by-case basis. I want to ensure that I have exactly the right line for him and I would not want to give any misinformation, so I will write to him, if he will allow it.
On amendment 5, the hon. Member for Liverpool, West Derby is correct that fan engagement in football clubs is an integral part of football and capturing that in the Bill is essential. Regarding the specific amendment, I assure him that the fan engagement threshold requirement and the wider licensing regime already captures what the amendment is describing. As the Bill is drafted, before a club receives a full operating licence, the regulator—which is independent—will assess if the club has adequate means to consult fans and to take their views into account on a range of issues in the Bill. The test for a full licence, which is set out in clause 18, is such that a full licence cannot be granted unless the club meets the threshold requirements, including those on fan engagement.
Once a licence is granted, the regulator will continue to monitor the club’s adherence to all the threshold requirements, including on fan engagement. For the avoidance of any doubt, the regulator’s general duties in clause 7(4) explicitly require that. If the regulator identifies that a club is no longer meeting the fan engagement threshold requirement, the regulator can take relevant action to bring the club back to meeting that threshold requirement. Given that those elements are already a feature of the licensing regime, I hope the hon. Member will not move his amendment.
On amendment 17, the FSA has been extensively consulted from the fan-led review until now. I am incredibly grateful to Kevin Miles and all those at the FSA for their support—the amount of help and support that they have given to this process has been extraordinary. The Government expect that the regulator will continue that engagement with the FSA, and it is often likely to be a relevant stakeholder on fan engagement. It is therefore not appropriate for the legislation to bind the regulator unnecessarily, but I hope that that makes it clear that we expect the FSA to be consulted where relevant.
As currently drafted, the Bill is future-proofed so that the regulator may always consult the most appropriate stakeholders in relation to and at the time of a particular decision. The regulator will be best placed to establish what adequate fan consultation looks like in practical detail, given its position of oversight and understanding of each club’s fan base. Adequate fan engagement is not a one-size-fits-all, as the hon. Member for Barnsley East mentioned, and limiting it to a strict definition would water down the intention for clubs to be able to take a bespoke approach. The legislation has deliberate, in-built flexibility so that fan engagement expectations can be tailored to a club’s size, fan base and individual circumstances.
On the topic of guidance on fan consultation, it will be for the regulator to determine the most effective course of action in relation to producing and publishing any formal guidance, the contents of guidance and the timing of publication. As we heard on Tuesday, this is a key area for the FSA, and the Government expect that the regulator will work at pace on any required formal guidance, working throughout with appropriate stakeholders, including the FSA. Setting a legislative requirement for that may risk rushing the regulator’s work in the space without sufficient time for necessary consultation with those stakeholders, or force the premature publication of guidance to the detriment of its quality. I therefore hope that the hon. Member for Barnsley East will withdraw her Bill—sorry, her amendment. [Laughter.]
The Chair
With this it will be convenient to discuss the following:
Amendment 19, in schedule 5, page 95, line 36, at end insert—
“8A Where a club’s fans have established legally registered Supporters Trusts, clubs must have regard to whether these bodies should become the appropriate representation in its fan consultation process under paragraph (8).” Amendment 7, in schedule 5, page 95, line 40, at end insert—
“(3) Persons selected as representing the views of the club’s fans should be appointed through a process that is democratic and independent of club control.
(4) Where the club’s fans have established a legally registered Supporters Trust, that body should have appropriate representation in the club’s consultation processes.” Schedule 5.
Stuart Andrew
Clause 20 requires the regulator to attach the four mandatory licence conditions to the provisional and full operating licences of all licensed clubs. These are basic and fundamental requirements of the whole regime, so apply to all licensed clubs, regardless of their individual circumstances. The mandatory conditions vary in what they attempt to achieve, and are set out in schedule 5, which I will discuss after amendments 19 and 7.
In our view the amendments risk undermining the key intention to implement a proportional and flexible system for fan engagement. Mandating specific forms of fan representation may lead to clubs being required to implement an entirely new way of engaging with their fans, even where existing frameworks are working well. Should it be deemed necessary, the regulator already has the power, established in schedule 5, to specify the means by which clubs are required to consult those representing the views of fans, which may include how a representative group of fans should be constituted. The regulator may specifically choose to require a club to implement a mechanism for the independent selection of fan representatives. On that basis, I hope that Opposition Members will not press the amendments.
The conditions set out in schedule 5 are related to core areas of financial management, corporate governance, fan engagement and reporting, and will form the foundations for the overall improved standards and sustainability of a club. Long-term financial sustainability is at the heart of the Bill, and is vital to make clubs more resilient to financial difficulties. The financial plan condition allows the regulator to understand the risk profile of the club and its plans for mitigating risks if necessary. To do this, the regulator needs detailed financial information about clubs. This allows it to establish the risk profile of a club and then, if necessary, to make a considered, proportionate intervention to reduce the risk of that club getting into financial difficulty.
As well as allowing the regulator to assess the risk profile of a club, a detailed financial plan will help clubs to establish their funding requirements over a period of time. Clubs need to have sufficient funds, or access to such funds, to support their intended level of spending. Clubs will need to model their financial plan against different scenarios and over different periods. They will also need appropriate contingency plans that they can enact if their finances worsen, in order to get them back to a sustainable state. This is to ensure that clubs can be ambitious and, equally, to prevent the failure to achieve those ambitions from putting the club’s long-term financial sustainability at risk.
Mr Betts
On corporate governance, I do not want to name names, but this relates to a club not too far from me. Is the Minister saying that in the future it will not be appropriate to regulate the corporate governance of a club if it merely has an owner who is the chairman, and no board of directors to run the club?
Stuart Andrew
The hon. Gentleman makes a really important point, which is why one of the mandatory conditions is good corporate governance. Some clubs do that extremely well, and he gives an example of one that may not be doing so well. For it to get a licence, the regulator would expect a minimum level of corporate governance.
Stephanie Peacock
Clause 20 and schedule 5 provide us with the building blocks of a licensing regime. The Minister set out the mandatory licence conditions that all clubs must comply with in order to obtain a provisional or full licence. That will ensure that base-level requirements are fulfilled on key areas such as finances, corporate governance and fan engagement. I will speak briefly to each area in turn, and then address the amendments.
The first condition relates to financial plans. I will not spend too much time on it as we have already discussed financial resources. However, I believe that the requirement to submit a financial plan would be fundamental for clubs wanting to exercise best practice.
The second requirement is on corporate governance. As we just discussed, good corporate governance can help to deliver better business outcomes, improve the efficiency of decision making and demonstrate to stakeholders that a club is well managed, to the benefit of both fans and investors. Furthermore, as the Government’s White Paper says, poor governance can exacerbate financial issues, allowing reckless decisions to be made without challenge or scrutiny. Many clubs already engage in good corporate governance, and for those that are not, the introduction of requirements should genuinely help to move them towards best practice.
However, I have some questions about the content of the corporate governance code of practice, which will be published by the regulator and reported against by clubs. In particular, Fair Game and Kick It Out have questioned whether issues such as equality, diversity and inclusion will be included in the code. Indeed, the Government chose not to pick up the recommendation of the fan-led review to mandate EDI action plans through the licence regime, pointing instead towards enhanced industry assessments in that area.
I understand the need to ensure that existing structures that are working well are not disrupted, and to give the regulator a well-defined scope. Given the explicit focus that the regulator will have on good governance, however, it seems slightly odd to divorce the concept from the issue of EDI. The fan-led review said:
“Aside from a clear moral case, improving diversity is also a key aspect of driving better business decisions by football clubs. Diverse companies perform better”.
A football that welcomes everyone, then, is a football in which clubs have the best possible chance of success. But change is needed at almost every level for that to happen.
Kick It Out’s reporting statistics from last season show that it received a record 1,007 reports of discriminatory behaviour across the professional game, including a 400% increase in reports of sexism and misogyny. Meanwhile, in 2019, the law firm Farrer & Co found that across all professional football clubs only 7% of board directors were female. Just one club met the 30% target set for other industries, and only 7% have a woman in a leadership position on the board. Work must be done to address the problem across the board. I am keen to hear from the Minister about how whether issues such as EDI will form part of the governance code will ultimately be decided, and whether he has a view on whether they should.
I have spoken about fan consultation in detail during our discussions on schedule 4, so I will save repeating how important it is. However, I would like to raise some further concerns. Namely, I am disappointed that the Bill makes no provisions regarding supporters’ trusts, as noted by my amendment 19 and amendment 7 tabled by my hon. Friend the Member for Liverpool, West Derby.
At the time of the fan-led review, 73 clubs had a community benefit society in the form of a supporters’ trust. Community benefit societies are incorporated co-operatives that conduct business for the benefit of their community. They must follow certain rules, including operating on a democratic basis and ensuring that any profits gained by a trust can only be reinvested into the club or returned to the community. Those minimum standards mean that CBSs in the form of supporters’ trusts operate with a broad level of consistency and reliability. Many of them have a long legacy of connecting with the local area, liaising with their club and organising on behalf of fans. Many trusts should therefore be viewed as an asset to the community that clubs can learn from and engage with positively. We saw that at first hand in our evidence sessions, with the insight that Action for Albion, Supporters’ Trust At Reading and Arsenal Supporters’ Trust brought us in respect of their clubs and the view of their communities.
I understand why the Bill has sought to ensure that fan engagement measures are not a one-size-fits-all. However, where trusts are established, I believe that clubs should consider them when forming their consultation processes. Amendment 19 would ensure that where a club’s fans have established a legally registered supporters’ trust, that body is considered for representation in the club’s fan consultation process. Clubs would not be bound by any hard-and-fast rules, but would be encouraged to consider the benefits of engaging relevant existing trusts.
That brings me to the broader issue of how fans will be selected for consultation. Amendment 7 suggests that fans are given a democratic mandate if they are to be consulted by the club regularly. That way they would have the backing of fellow fans, helping to avoid scenarios in which the fans are seen as a mouthpiece for the club directed at fans, rather than the other way round. I am keen to hear how the Minister thinks we can ensure that fans are both selected and treated fairly. Will there be standards or guidance on that specific issue?
Finally, I am pleased to touch on the annual declaration condition. Given that there is no requirement for licences to be renewed, it is right that there is a touchpoint for clubs with the regulator to ensure that everything is in order, but I have one brief question. The schedule outlines that the annual declaration must contain a summary of any “material change” at the club over the year. That phrase is used 11 times throughout the Bill, but its definition is not clearly set out. Will the Minister provide a working definition today, or write to me with one?
Overall, I am broadly happy with the contents of the clause and schedule, albeit with a few questions that I would like answering on governance code and on supporter involvement.
Stuart Andrew
I thank hon. Members for their contributions. I agree with the hon. Member for Barnsley East that the guidance on corporate governance should be really helpful to clubs that are perhaps struggling with that, and puts it on a statutory footing. As my hon. Friend the Member for Folkestone and Hythe quite rightly points out, many of these clubs, by obligation of the leagues they are in, already have to provide a corporate governance code. However, as we go further down the pyramid, there are varying degrees of quality for that corporate governance code. That is why having a statutory requirement will, we hope, improve those standards. We recognise that some of those codes work well, but my hon. Friend is right: this will enable the regulator to hold those clubs to account for the way in which they are implementing those corporate governance codes.
Damian Collins
My right hon. Friend makes a good point. The requirements will differ at different levels of the pyramid. It would be wrong for us to require a club in League Two to meet the same corporate governance standards as a Premier League club. However, the provision could be worded to say that the corporate governance statements must set out how the clubs meet all the requirements they are expected to meet by the competition organisers for the competition in which they play.
Stuart Andrew
I expect that clubs would have to work closely with the leagues as well.
On the issue of EDI, I hope that it is clear this is an area that I personally feel very passionate about. We have made sure that the Bill and the regulator are tightly focused on the finances of clubs, the sustainability of the pyramid and fan engagement. We recognise the importance of equality, particularly, as the hon. Member for Barnsley East mentioned, in light of unacceptable abuses. I regularly engage with the Football Association and the leagues to put pressure on them and to work with them to do more to make improvements in this area. We also work with organisations such as Sport England and UK Sport, because it is not just football where this is an issue.
Dame Tracey Crouch
On the sports governance code, which I may have had a hand in helping to design and shape many years ago, is the Minister saying that when looking at the issue of corporate governance, he will draw on the experience of the sports governance code, which has specific EDI aspect it, or is it more about looking at the UK corporate governance code, which has elements of that but is certainly not as strong as the sports governance code?
Stuart Andrew
My hon. Friend makes a really important point, which I was just about to come on to. I am glad that she did so—it was a perfect introduction. She is absolutely right. The regulator can consider all of those, and I would expect that it would do so. It can draw on established principles such as, as she rightly points out, the code for sports governance and the UK corporate governance code. It can also draw on the Wates principles on corporate governance for large private companies, and it can also draw on the regulator’s own state-of-the-game reports. There is a whole host of information which I hope will address those issues.
I can confirm to the hon. Lady for Luton South that the phrase, “likely to be affected”, includes fans, so I expect that they will be consulted.
Damian Collins
My right hon. Friend’s response is helpful. If the Government are not willing to amend the Bill, and do not feel the need to do so, would he consider writing to the Committee, setting out the guidance which he would give to the regulator when preparing the codes of practice on what the corporate governance code should include?
Stuart Andrew
Yes, I would be more than happy to do that.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clause 21
Discretionary licence conditions
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 22 to 24 stand part.
Schedule 6.
Clause 25 stand part.
Stuart Andrew
I will begin with clause 21. Where needed, discretionary licence conditions will be used by the regulator to bring a club up to the required level of compliance with the threshold requirements. That means that the regulator is satisfied that the club can currently, and will continue to be able to, operate sustainably in financial, non-financial and fan engagement areas, as per the regulator’s objectives. Those conditions will be in addition to the standardised mandatory licence conditions and, when applied, will be tailored to the club’s specific circumstances and identified financial risks. If a club already meets the threshold requirements set by the regulator, the regulator will not need to attach any discretionary licence conditions. That means that it can be light touch where appropriate, and need not directly intervene if the desired outcomes are already being met. Discretionary licence conditions could also be used to protect and promote the financial resilience of the football system. The conditions would be used to resolve risks that might not threaten any one club significantly, but their potential aggregated, correlated or multiplied effects may pose a significant risk to large parts of the football system, or the pyramid as a whole.
Clause 22 sets out the scope of the regulator’s powers to attach or vary a discretionary licence condition. Under the financial resources threshold requirement, discretionary conditions may only relate to one of four areas including debt management, liquidity requirements, and overall cost reduction, or they might restrict a club’s ability to receive illicit finance. The fourth area is integral and enables the regulator to restrict the club’s ability to access funding that it has reasonable grounds to suspect is connected to serious criminal conduct. It will empower the regulator to limit illicit finance, which is inherently unsustainable for a club.
Under the non-financial resources threshold requirement, conditions may only relate to one of three areas: internal financial controls, risk management, and financial reporting. As outlined in the previous clause, the regulator can also attach discretionary licence conditions to advance its systemic financial resilience objective. That objective is specifically to address systemic risks, or structural issues, by applying conditions to multiple clubs or even to all licensed clubs. Clause 22 limits the scope of discretionary licence conditions to only conditions that relate to debt management, liquidity requirements, and overall cost reduction.
To future-proof the regulated regime, the Secretary of State will have the power to amend the areas to which discretionary licence conditions may relate. However, that can be done only if the regulator makes a request in writing to the Secretary of State, having first held a consultation, explaining why an amendment is needed by reference to the purpose of the Act. That will limit the risk of unwanted, politically motivated scope-creep in the future.
Clause 23 sets out the procedure for attaching or varying financial discretionary licence conditions on clubs. The procedure outlined in the clause ensures that clubs and competition organisers are notified and given the appropriate opportunity to engage in advance when the regulator considers a discretionary licence condition is needed. Where appropriate, the regulator will seek to allow the relevant club and league to address identified issues and risks so that it does not have to intervene formally. That may produce a better regulatory response and outcome. The football industry may be best placed to address specific issues within the overall context of a league’s regulatory framework.
Ian Byrne
I thank the Minister for what he has said so far. I want to touch on a point for the clubs and, certainly, for supporters, having spoken to those of both Everton and Nottingham Forest, regarding profit and sustainability rules and the tariff that was served on them. At the moment, there seems to be zero confidence in the Premier League’s ability to govern that system and there are many calls—in fact, I got about 14 last night—from supporters right across the board who are asking why the independent financial regulator is not taking control of the whole profit and sustainability issue, any breaches and then levying the punishment to clubs in a manner that people think would be fair and transparent and, as I say, a process that they have a belief in. At the moment, they undoubtedly do not have that and that is a real worry.
It would be remiss of me not to touch on Manchester City winning the league yesterday and congratulate the club on that. However, there are 115 charges hanging over the club’s head and there is lots of disquiet around the whole process. It would have been welcome if the Minister had considered whether that should sit with the independent financial regulator to restore faith in the whole process, which, unfortunately, is not there.
Stuart Andrew
I understand what the hon. Gentleman says, but there is a balance about football having its rules and independence. We have to honour that in terms of relationships with UEFA and FIFA. However, we are ensuring that there is a regulatory regime that I hope will start to improve confidence among fans, as the hon. Gentleman describes. When it comes to the specific area under focus, if the regulator feels that the league’s proposition does not meet the objectives it needs to fulfil its duties, it can decide that it will still impose its own. The regulator will have to be satisfied that what the league is proposing will meet its required objectives.
Before any action is taken by the regulator, there will be a period where both the relevant leagues and clubs can make any representations and in which the relevant league, as a competition organiser, can also give a commitment to take action in lieu of the condition being attached or varied, as proposed by the regulator. Where the regulator is looking to attach financial discretionary licence conditions to a club, it must go through the relevant procedure to do so, as outlined in clause 23.
Clause 24 sets out further details on one key aspect of the procedure: a final, formal opportunity for competition organisers to offer a self-regulatory solution to a problem identified by the regulator so that the regulator does not have to step in. That is known as the competition organiser making a commitment in lieu of a financial discretionary licence condition. The clause is another important aspect of the regulator’s approach, which emphasises engagement and working with the industry to minimise formal intervention where possible. The regulator will still have powers to step in if the issue is not resolved, but it provides the chance for a competition organiser to present a football industry-led solution to an identified risk.
The regulator can accept a commitment if it concludes that that commitment should achieve the same results as the proposed discretionary licence condition and it does not conflict with the regulator’s objectives. If the commitment proposed by the league will not achieve the regulator’s desired outcome, the regulator can reject it—to repeat the point to the hon. Member for Liverpool, West Derby—and retains the power to intervene directly by imposing the discretionary licence condition.
Stuart Andrew
This is in relation to the mandatory conditions that all clubs have to meet under the regulatory regime. If the regulator identifies that a club is not meeting one of the mandatory conditions set out in the Bill on the financial side, it can apply its own discretionary conditions. If the league proposes a solution to the problem and the regulator believes that it will work, it can then allow the league to apply that. However, if the regulator feels that the proposal put forward by the league would not get that club up to the standards required, it can then impose its own rule. I hope that makes sense.
Schedule 6 outlines the procedure for when the regulator is minded to accept a commitment given by a competition organiser, and covers requests to vary an existing commitment. The schedule therefore expands on clause 24. As I say, if it does not accept the commitment, the regulator can impose the original conditions. The intention is that commitments could provide a less burdensome solution for all parties that still addresses the risk. However, for that to be the case, it is important that there is a clear procedure for the interaction between clubs, the relevant competition organisers and the regulator. Schedule 6 sets out that procedure in further detail. The notification processes and timings set out in the schedule allow clubs the opportunity to make representations before the regulator accepts a commitment or requested variation of an existing commitment from a competition organiser, and before the regulator releases a competition organiser from a commitment.
Finally, clause 25 sets out the procedure for the regulator to attach or vary non-financial discretionary licence conditions. Such conditions, set under the non-financial resources and fan engagement threshold requirements, will not be subject to the commitments procedure involving relevant leagues as outlined in the previous clauses. Instead, the procedure is that the regulator must notify only the club and give the club a period of no less than 14 days to make representations. As per previous clauses, this is an important safeguard to allow the club to make its case. However, the clause allows the regulator to take more immediate action in situations that are more urgent and serious. If the regulator believes that giving the club notice and allowing a period for representations will jeopardise or risk jeopardising one of its objectives, it can apply the discretionary licence condition immediately, without prior notice.
Stephanie Peacock
I will start by briefly addressing the broad provisions around discretionary licence conditions in clauses 21, 22 and 23 together, before moving on to a discussion on commitments in lieu of licence conditions, covering clauses 24 and 25 and schedule 6.
Looking first at the discretionary licence conditions, clause 21 allows the regulator to attach licence conditions that are specific to a particular club. This allows the regulator a mechanism to put the principles of proportionality and consistency into practice: every club will be required to meet the threshold conditions for a full licence, providing us with consistency, but where a club falls short, the regulator’s response can be bespoke, allowing for proportionality.
Clause 22 provides strict limits as to what the discretionary licence conditions can cover, ensuring that they are focused on the areas in which they are most needed. Finally, clause 23 requires the Independent Football Regulator to notify a club, as well as the relevant competition organiser, about a proposed financial discretionary licence condition before attaching it to a licence. This is a sensible provision, which allows for a club and the regulator to remain in conversation unless there is an immediate risk that further delay would threaten the club’s financial sustainability.
I will move on to the idea of commitments in lieu of discretionary licence conditions. This requirement, which was not initially proposed as part of the fan-led review or the Government’s White Paper, says that the regulator must invite the relevant competition organiser to give a commitment to make a rule of its own instead of the proposed condition’s being attached to the particular club’s licence. I understand that the reasoning behind that provision is to ensure that competition impacts can be reduced, allowing a competition organiser to try to ensure that one club alone does not have to face a rule that other clubs do not. Further to that, it exists to offer competition organisers an opportunity to improve consistency across clubs in following good practice. However, despite that, a number of concerns about these clauses have been raised with me, so I hope that the Minister can provide some further context in answer to some of the following questions.
First, it would be good to have confirmation that this provision cannot be exploited to delay the regulator from imposing licence conditions. Consultation will be incredibly important as part of the regulator’s functions, but the regulator must have the teeth to make an executive decision where needed. In that vein, it would be good if the Minister could provide some insight on what these commitments might mean for rule primacy.
I understand that the regulator will have the final say on whether a commitment in lieu is accepted, and that the discretionary licence condition must be dropped while a commitment is in force, but it still remains the case that any accepted commitment will mean that both the regulator and competition organiser will have oversight and scope in the same area. That could see clubs paying twice for two sets of overlapping rules. Who has ultimate power in these cases?
Another area where clarification is needed is on the topic of commercial sensitivities. Although the Premier League is in many ways representative of clubs, it is also a competitor to clubs when it comes to gaining big sponsorship deals. Can the Minister confirm that the regulator will be alert to the ways in which discretionary licence conditions are discussed with competition organisers, so that sensitive information is not disclosed? Indeed, in cases involving such commercially sensitive information, it seems slightly odd to think that the competition organiser, which will not have the full picture, would be better placed to create a rule than the regulator itself, which will be privy to more of the financial details.
Finally, it is welcome that the relevant club will be consulted about a commitment in lieu beforehand, as per schedule 6, but, for the other clubs competing in a relevant competition, who will also be impacted by the commitment, there is no right to consultation. That might seem strange to clubs that have done what is required of them to meet the threshold requirements; they face being subject to further regulation due to the specific circumstances of another club’s finances, without a fair say in the matter. I should be grateful to the Minister, therefore, if he would set out how the Bill will ensure that clubs are not ignored in the engagement process when the commitment in lieu being proposed will directly apply to them.
Stuart Andrew
The hon. Lady makes important points. The idea is that as we have a regulator on a statutory footing, which will improve standards, hopefully that will bring football along with those improved standards. However, she is right to highlight the point about sensitive information. The regulator will be on a statutory footing and will be able to look at that information.
That is why it is important for the regulator to allow the leagues and clubs to make representations. The leagues may be able to say, “We can offer a commitment in lieu that will address this and look at the detail of that,” but the regulator, having information from the club that may be sensitive and private, can work out that, “Actually, that commitment in lieu will not meet the objectives,” and therefore impose its own discretionary licence condition.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clauses 22 to 24 ordered to stand part of the Bill.
Schedule 6 agreed to.
Clause 25 ordered to stand part of the Bill.
Clause 26
Part 4: overview and interpretation
Question proposed, That the clause stand part of the Bill.
Stuart Andrew
The Government’s White Paper laid out several failings of the existing owners and directors tests conducted by the football authorities. The tests are conducted on a self-declaration basis, and have allowed owners with long histories of business bankruptcies and owners later imprisoned for crimes including money laundering. To address such shortcomings, the Bill includes strong statutory owners and directors tests, a vital part of the new Independent Football Regulator’s regime.
Part 4 gives the regulator the power to test the suitability of prospective new owners and officers of regulated clubs. In certain circumstances, it also gives powers to test incumbent owners and officers. The clause provides an overview of part 4, and signposts the rest of the clauses in this part.
One element of the regulator’s tests is the fitness criteria for individual owners or officers. They will ensure that custodians have the necessary characteristics to run or own an important community asset. Subsections (7) and (8) of the clause specify the fitness criteria: having the requisite honesty and integrity; being financially sound; and, for officers only, having the requisite competence for their role at the club. Alongside other elements of the test, ensuring that owners and directors are suitably fit for their roles will better protect each club against unsuitable custodians, ensuring the sustainability of English football over the long term.
Stephanie Peacock
I am pleased to have reached the part of the Bill where we can discuss the owners and directors tests. Football clubs are historical institutions with deep community ties; thus we must be careful to ensure that owners are people who view themselves as caretakers of an asset that has existed long before them, and we hope will continue to exist for years afterwards. As such, it is right that owners and directors are subject to fitness tests to ensure that the custodians of beloved football clubs meet certain standards.
At the moment, the tests are operated by different authorities depending on the league a club plays in. The Premier League, the EFL, and the FA on behalf of the National League all administer owner tests and have powers to disqualify unsuitable individuals. While those tests have been in place, many successful owners have been appointed, making selfless and sustainable investments in their clubs, which have brought about rewards on the pitch. However, not all owners have the same outlook, fortune, capacity or capability. Despite ownership tests, too many clubs and fans still have to deal with malicious, absent or incompetent ownership.
Stuart Andrew
Everyone is obviously getting so excited that they are getting ahead of themselves. To be fair, I understand why. It is important to acknowledge what my hon. Friend the Member for Chatham and Aylesford said about the many people who put themselves forward to support their local football club to build and become competitive. They are hugely important to the local communities in which they are based. We should acknowledge that there are many who do that well and with the best of intentions—even those who make mistakes, as the hon. Member for Sheffield South East said. Their intention is right.
We are focusing on ensuring that owners and directors tests get to the heart of the detail that we need. The test will be much stronger with the regulator, which will have access to information from statutory organisations such as the National Crime Agency, as the hon. Member for Barnsley East mentioned. She asked about the Premier League continuing with its own owners and directors test. It can continue with it if it wishes. I note that the EFL has made a different decision, because it recognises that the tests that the regulator will provide will get much more detail and information than the leagues may be able to. Because the tests will be statutory, they will take primacy.
Stephanie Peacock
I appreciate that clarity. I also appreciated the intervention from the hon. Member for Folkestone and Hythe. Richard Masters’s comments to the Committee about two green lights are welcome, but it is important that the Bill is clear on this point and that we are clear about it in Committee, so the Minister’s comments are welcome.
Stuart Andrew
I thank the hon. Lady. I commend the clause to the Committee.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27
Duties to notify IFR of prospective new owner or officer
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 28 to 31 stand part.
New clause 3—Owner’s commitment to future use of a club’s football ground—
“(1) A person may not become or continue to be an owner of a regulated club unless they provide to the IFR a commitment to maintain long-term use of the football club’s grounds as a mandatory licensing condition.
(2) The IFR must codify the commitment.
(3) The IFR may only determine a person to be or remain a suitable owner of a club if the person has made a commitment under subsection (1).”
This new clause introduces a new licensing condition requiring an owner to provide a commitment to the future ongoing use of a football ground by a club.
Stuart Andrew
Clearly we have got to the bit that everyone is itching to speak to. Ensuring that new owners and officers of clubs have passed the regulator’s owners and directors tests is a key tenet of the new regime, and is designed to prevent unsuitable custodians from running or owning clubs. The regulator therefore needs to know who a club’s prospective new owners and officers are before they buy or join the club, so that they can be tested for suitability.
Clause 27 will place duties on a person to notify the regulator where there is a reasonable prospect of that person’s becoming a new owner or officer of a regulated club. The clause will ensure that the regulator receives advance notice of an application from a prospective new owner or officer, and will help the regulator to prepare to act quickly when it receives the application. The clause will place the same duty on regulated clubs themselves, as another means of ensuring that the regulator will be notified.
The regulator needs to know a person’s role at the club so that it can prepare to assess whether they are suitable to be an owner or an officer of that club. That is why, where the notification relates to an officer, it must state their proposed job title or job description, as well as any senior management functions that they will carry out. Enforcement measures such as censure statements or financial penalties are also available to the regulator if it determines that this requirement has not been complied with without a reasonable excuse. This will deter those who do not wish to comply with the regime.
Clause 28 will prohibit a person from becoming a new owner of a club unless the regulator has determined beforehand that they are suitable to own that club. It requires prospective new owners to provide an application containing information about how they propose to run the club, the estimated costs, how those costs will be funded and where that funding comes from. This will better ensure that prospective new owners are clear from the outset about their plans for the club and how they will deliver the resources to fund those plans.
Once a complete application has been provided, the regulator can pass the individual owner only if they meet the individual ownership fitness criteria, as defined in clause 26; they have the requisite honesty and integrity and are financially sound; they have sufficient financial resources; and the regulator does not have grounds to suspect that the individual has any source of wealth that is connected to serious criminal conduct, which is defined in the Bill by reference to part 1 of schedule 1 to the Serious Crime Act 2007, which includes crimes such as drug trafficking and fraud. This will mitigate illicit finance in the game.
Registered societies are one vehicle by which fans can collectively own clubs. They must be run in accordance with specific legal requirements regulated by the Financial Conduct Authority. Registered society owners are not assessed against the fitness criteria or the source of wealth test, but they still need to complete an application, including providing a plan for running and funding the club.
Dame Tracey Crouch
The Minister is setting out clearly the purpose of these clauses of the Bill. It is clear that the regulator has been designed to be as agile and as future-proof as possible. If a crime that we have not yet imagined is added to the Serious Crime Act, how will the regulator assess a potential owner who has committed that crime?
Stuart Andrew
My understanding is that if the 2007 Act is updated with a new crime, it will still be relevant to the Bill. However, I want to be absolutely sure, so I will write to my hon. Friend, and if I am wrong I will correct my homework.
By requiring new owners to undergo the regulator’s test, clause 28 will better mitigate harm to clubs by stopping unsuitable custodians.
Stuart Andrew
Well, the Bill identifies an individual as the owner, not a state, but we will come on to some of those points. I have heard some of these representations as we have been preparing the Bill. It would not be right for the regulator to be getting into foreign policy—I do not think any party would want a regulator of any sort to be setting the nation’s foreign policy—but I get that it is an area of interest, and we will come on to it later in our proceedings.
Football clubs hold unique importance to their fans and local communities, who are the ones who lose out when clubs are exploited or mismanaged by unsuitable officers. Clause 29 will prohibit individuals from becoming a new officer of a regulated club unless the regulator has determined beforehand that they are suitable to be an officer.
Once the prospective officer has provided a complete application to the regulator, it will assess them to ensure that they meet the individual officer fitness criteria, as defined in clause 26. They must possess the requisite honesty and integrity and the requisite competence and must be financially sound. If the regulator is satisfied that the individual meets these requirements, it must find them suitable to be an officer of the club; otherwise, it must find them unsuitable. When the regulator is making this determination, it will take into account the matters listed in clause 37. By requiring new officers to undergo the regulator’s tests, the clause will better mitigate harm to clubs by stopping unsuitable individuals from becoming officers.
The Bill requires prospective new owners and officers to pass the regulator’s owners and directors test before they join or buy a club. However, it is possible that someone might take up a position at a club without first having undergone those tests. This may be a blatant and deliberate breach of the requirement to undergo tests before joining the club. A prospective owner may act in bad faith, hoping that once they are in, the regulator will be more hesitant to fail them, but in some circumstances a person may fall into the definition inadvertently or have some other relatively innocent reason for the breach. This may occur, for example, if a person inherits significant equity in a football club or if a person disputes in good faith whether or not their actions bring them within the Bill’s definition of an owner.
Clause 30 will therefore provide the regulator with the powers that it needs to respond decisively but flexibly when a person has become a new owner or officer of a club without the regulator having first determined whether that person is suitable. When the regulator becomes aware that this has happened, it must either notify the new owner or officer that they are being treated as unsuitable automatically or require them to provide an application, treating them as though they were a prospective applicant. When deciding which option to take, we expect the regulator to assess the circumstances of each case carefully and consider whether the new owner or officer has an innocent explanation or whether they have deliberately breached the regime.
The regime cannot be allowed to be abused. The regulator must have the discretion and the teeth that it needs to address harm to the sector. Clause 30 is an important step towards achieving that aim.
When the regulator is minded to fail a new or prospective owner or officer, clause 31 will require the regulator to give that person and the relevant club an opportunity to make representations before the regulator makes its final decision. Affected persons can also require an internal review of the regulator’s decision and then can appeal the outcome of that review to the Competition Appeal Tribunal. The purpose of clause 31 is to allow a new owner or officer, or the relevant club, an opportunity to argue their case before the regulator finds them unsuitable, which will ensure that the regulator has all relevant information available to it, allowing it to make better decisions and ensuring the regime is more effective.
The Government recognise the intent behind new clause 3, which is to ensure that football continues to be played in a club’s home ground. The Bill takes account of a variety of ownership structures relating to home grounds that exist across the football pyramid. The new clause would capture only one type of ownership structure. Owners may not necessarily directly own the rights to the club’s ground; in fact, only about 40% of clubs own their stadium outright. The new clause would require owners to make a commitment about something over which they do not necessarily have complete control or influence.
Let me be clear: the intent of the new clause will already largely be achieved by the Bill as drafted. The Bill places duties on the club itself regarding selling the club’s home ground or relocating from it; clauses 46 and 48 will require clubs to obtain approval from the regulator before a home ground is sold or relocated. If that requirement is breached, the regulator can exercise its enforcement powers.
Mr Betts
The Minister refers to what the Bill will do in regard to future sale, but the new clause does not deal with future sale; it deals with something that has already happened. The Minister says that it does not cover all eventualities, which may be true, but surely there are eventualities that need to be covered. If the Minister does not think that the new clause goes far enough, is he prepared to table another new clause that goes further to ensure a sustainable future for a club with a ground to play on?
Stuart Andrew
The hon. Gentleman makes an interesting point. I will not commit to introducing a new clause, but I will commit to going away and having another look at the points that he has raised, if that will satisfy him.
The Bill also allows for senior managers to be held accountable if they are responsible for the club breaching the requirements. That means that enforcement action could be taken against an owner of a club who was also a senior manager of the club and responsible for the club failing to comply with clauses 46 and 48.
Matt Rodda
Further to the point made by my hon. Friend the Member for Sheffield South East, in some cases there may also be an issue with training grounds being separated from the main organisation of the club. The current owner of Reading was trying to sell the training ground separately from the ground itself and from the club. Can the Minister write to me on that matter? It does not currently appear to be covered by the Bill, and I would be very grateful if he could reassure local fans.
Stuart Andrew
I am happy to commit to writing to the hon. Gentleman. He is right that it is really the perimeter of the stadium, the car park and so on. I will happily give him further details.
When the regulator is testing the fitness of prospective new or incumbent owners of clubs, it must have regard to any action of a regulatory or disciplinary nature that is being or has been taken in relation to the individual. The regulator already has the power to consider that as part of an owner’s suitability termination. For those reasons, I cannot accept new clause 3, and I hope that the hon. Member for Sheffield South East will not press it.
Stephanie Peacock
This group of clauses begins to set out how the new tests for prospective owners and directors will work in practice. I broadly welcome the clauses and will begin—I am conscious of time—to speak to each of them in turn, addressing new clause 3 last.
Clause 27 will require prospective owners and officers, as well as the club, to notify the regulator. This is an important first step that will allow the regulator to start the work of conducting the test itself.
Clause 28 will ensure that a person cannot become an owner unless the regulator has decided that they are suitable. This decision is called a positive determination and will be given to a candidate based on their ability to meet three main standards.
First, the candidate must pass the ownership fitness criteria, which are based on the idea that an owner must have the requisite honesty and integrity and be financially sound. I understand that those criteria have been based on the work of the Financial Conduct Authority; I hope that there will be an opportunity to share learnings and best practice across regulatory organisations as the regulator finds its feet.
Secondly, a candidate must show that they have sufficient financial resources, judged on the basis of an application that must include proposals on running the club. As with the regulator’s enforcement of financial sustainability more broadly, it is important that this process does not deter investment or require clubs to break even. Rather, I trust that the test will seek to ensure that good practice and long-term planning are embedded in owners’ plans from the very beginning.
Finally, there must be no grounds to suspect that the candidate’s wealth is connected to serious criminal conduct. That will prompt a welcome due diligence search on an owner’s wealth sources with the backing of institutions such as the National Crime Agency. Taken together, those standards will provide a comprehensive analysis of a potential owner.
For applications made by registered societies, the regulator will have a slightly different process, making a determination on the basis of sufficient financial resources alone. I am pleased that this recognised route to fan ownership will be treated with a tailored, yet proper, process.
Clause 29 covers officers. As I have mentioned, it is right that officers face a slightly different set of crafted criteria—