Football Governance Bill [HL]

Debate between Lord Jackson of Peterborough and Lord Hayward

Committee stage
Wednesday 15th January 2025 Lords Chamber

[Lord Hayward (Con)]

My Lords, before I come on to the question of compliance costs specifically, I return to an answer the Minister gave me in response to a question I asked at the start of the debate this evening. It was on whether the shadow regulator would be present at the meeting with the Chancellor tomorrow. The response that the Minister gave—I hope I have it correct—was that the shadow regulator would not be present because the invitation was to existing regulators. I note that the Minister is nodding to that, so I presume that I have the phraseology broadly correct, and certainly the message correct. To be honest, I find that staggering. We have been told that the shadow regulator body— I was present at the meeting recently with the shadow regulator and his staff—should be up and running so that the regulator can take over a body that is already in full operation. We were told how many staff had already been recruited. We have been told persistently that this is light regulation.

I refer here to the fan-led review by Tracey Crouch. On page 15, paragraph 15 states that there are five important factors that should be pursued, including, in sub-paragraph (d),

“minimising burdens on clubs or an expensive system”.

Surely a shadow regulator that is going to hand over an up-and-running system and is going to operate a light-touch process of regulation should be invited to a meeting with the Chancellor to discuss precisely that issue. I am at a loss, as I think a number of people in this Chamber are, to understand why the shadow regulator has not been invited to that meeting. I am afraid that it indicates to me the attitude of the Government towards the role of the regulator in this process.

I now turn to the question of compliance costs. I do not intend to cover the issues that the noble Lord, Lord Moynihan, has covered so effectively, but I would like to cover a number of other issues. The noble Lord, Lord Moynihan, made reference to the fact that we were talking about all football clubs. The concentration throughout all our days in Committee has been overwhelmingly to do with the Premier League and the Championship. But when one is talking about the sorts of figures that the noble Lord, Lord Moynihan, was referring to—I have pursued persistently the honest assessment of what the actual cost is for a club, whatever it may be—the Minister has said persistently to me and others that the costs would be proportionate.

It is therefore relevant to remind this Committee what the turnovers of the small clubs are. I am quoting from Deloitte’s figures for the season 2022-23, which I understand are the last figures currently available. The average revenue for a club in League One is £9.8 million. The average figure for clubs in League Two is £5.5 million. Therefore, the categories of hoped-for costs identified in the analysis that the noble Lord, Lord Moynihan, gave earlier fall very heavily on a club.

I will cite a few examples. AFC Wimbledon’s revenue is £7.4 million, Crewe Alexandra’s £4.1 million and Northampton Town’s £5.1 million. I have looked for the figures for Stockport County, but I am sorry: I do not have them. I would give them if I could. If there are to be a series of compliance costs on top of all the other costs faced at the moment—not least national insurance contribution charges and the like—that will make a pretty big hole in the revenue of a club with a turnover of £5 million to £7 million.

The Minister has said that the burden would fall proportionately on the biggest clubs. In an earlier contribution, I said that when I was head of the British Beer & Pub Association I had the responsibility of steering the introduction of substantial changes in licensing legislation, which we did with the full agreement of government. The burdens do not fall proportionately on the biggest companies. They can employ a compliance officer or two but, in a small company or a small football club, you do not have a compliance officer so you have to turn to other people for advice. It therefore takes longer and costs more.

It is like anything in life. If you own a large number of flats as opposed to one home, and you take out insurance and are filling out a form, you know only too well that if you have done it once for one flat, it is just the same the next time. If you are dealing with one property, you do not know because you have never been confronted with the issues before and so you have to turn to other people for advice. The burden is not proportionate. There is a massive imbalance between big clubs with huge turnovers and the smaller clubs living completely hand to mouth.

I have quoted once already from the review. The point I want to raise was triggered by the presentation from the shadow regulator. When he was talking about staff, I believe he said that it had just recruited five people for IT systems. We are told, indicatively, that the regulator is likely to employ some 250 people—that is more than 10% of the total of DCMS’s staff, covering all the range of its departmental remit. Are five people needed for an IT system?

Then I actually looked at the review. There was reference earlier this evening to the question of clubs in terms of a few clubs. In fact, the review says:

“Many clubs are poorly run”.


It goes on to say of the regulator:

“The Review has … concluded that the new financial system should involve real time financial monitoring”.


That is what those IT employees are there to do. They are not there to operate the regulator, because you do not need that many for the day-to-day operations of a business of that size. It is about investigating the processes. When they go to a club and ask it to produce the information, it will say no, because it operates on a completely different system.

When I was first involved with boundary changes, we tried to get figures out of local authorities about the number of voters on an electoral roll. Noble Lords might imagine that the returning officers from different authorities would operate on identical systems. No: they were on four different computer systems. It took several years to get the accurate figures. This is precisely what will happen with the small clubs. They will be operating their own systems, when suddenly along will come the regulator to say that it wants the information, but that it wants it in its own computer system, not the clubs’. Sadly, the likes of Stockport County, Rochdale, or wherever it may happen to be, will be told that they must revise their IT system because they have to give the regulator the answers and the computer says no.

The compliance costs fall very heavily on the smaller organisations. They are not proportionate, and we should be honest about that.

[Lord Jackson of Peterborough (Con)]

I support the amendment that was so ably moved by my noble friend Lord Moynihan and added to by my noble friend Lord Hayward. The amendment is an easy win for the Government, because I cannot understand the rationale for any Administration not seeking to understand the ramifications of their own legislation in terms of the costs of a regulator and other associated costs within six months. Therefore, if the Minister is so minded, she might look more benignly and favourably on this amendment when we come to Report, because it makes sense.

The kernel of this amendment is a fundamental question. It is not a question of whether we trust the Government, because I think, in good faith, that the Minister no doubt truly and sincerely believes that her Administration will preside over a regulator with a light-touch regime. Unfortunately, for those of us who are more cynical, the history of regulators is that they expand. We go back to our old friend that I referenced some weeks ago, Parkinson’s law. It is not named in honour of my absent friend, who is sunning himself in the warmer climes of the West Indies as we labour in the salt mines of the upper House of our bicameral Parliament. No—not Stephen Parkinson, my noble friend Lord Parkinson of Whitley Bay, but Parkinson’s law enunciated in 1955, which is that the number of workers in public administration, bureaucracy and officialdom tends to grow irrespective of the amount of work to be done. That is a very important point.

I commend to noble Lords an excellent report by Policy Exchange, The Rise of the Regulators, which looks at the different philosophical underpinnings and reasons for regulators. It makes the point:

“Once in place, regulations create constituencies that benefit from their continued existence, perhaps because they shield them from competition, or help protect their market position. And those coalitions of interest are better placed and have stronger incentives to act in their own interest than the wider community is to act in theirs and”,


to

“secure an optimal group outcome”.

It notes that, in the 1970s, Professor George Stigler developed the concept that

“regulation is acquired by the industry and is designed and operated primarily for its benefit”.

We know that regulation is costly to British industry. The report says that the Federation of Small Businesses estimates

“the cost of regulation to the SME community in Britain to be £55 billion per year, or £10,080 per business; 88% of its member companies identified some aspect of the regulatory apparatus as a barrier to their operations”.

Furthermore,

“an imbalance of power or an insoluble divergence in interests requires the state to manage the relationship between individuals or groups of individuals by regulating behaviour. But the expanding regulatory bureaucracy is the policy instantiation of a more omnicompetent state—one which plays a larger role in the lives of citizens, and which therefore reduces the scope for freedom and personal initiative”.

Football Governance Bill [HL]

Debate between Lord Jackson of Peterborough and Lord Hayward

Committee stage
Wednesday 4th December 2024 Lords Chamber

[Lord Hayward (Con)]

Since my noble friend is referring to a letter that was addressed to me, I assure him that in the debate on another amendment I shall return in far greater detail to this letter, not least because the first heading of the letter refers to “Exact cost”. I never asked for exact costs. I preferred to use the word “probably”.

[Lord Jackson of Peterborough (Con)]

Your Lordships and I can rely on my noble friend’s forensic interrogation of the letter and the Bill generally. I know that we will come back to this issue.

I mentioned proportionality and a final example is the framework document, which has a strange description on page 2 of the letter. It says:

“DCMS as the sponsor department will agree a ‘framework document’ with the Regulator”.


It will be up to a parliamentary committee to look at what the point of that framework document is and whether its delivery by the regulator is efficacious. We need to know about the accounting officer. We need to know about the role of the National Audit Office and how it will intervene and work with the department, the regulator itself and any parliamentary committee. The levy, the proportionality and the cost are all areas where Parliament has a very important role to play.

I think we have reached the turning point in trusting regulators to discharge their duties without appropriate and close examination by legislators. That is our job and the job of those elected in the other place. Because the weather has changed for regulators, we no longer implicitly trust them to be full of experts and to do their job effectively. As my right honourable friend the former Prime Minister Rishi Sunak said, “In God we trust, everyone else bring data”. I am not just looking at the right reverend Prelate when I say that. The serious point is that we need to see that the regulator is doing its job. We cannot rely on just undertakings and assurances. We need the proper statutory function of a committee to oversee the work of the regulator. On that basis, I warmly support my noble friend’s excellent amendment.

Football Governance Bill [HL]

Debate between Lord Jackson of Peterborough and Lord Hayward

Committee stage
Wednesday 4th December 2024 Lords Chamber

[Lord Hayward (Con)]

My Lords, I understand the point that both the noble Lord, Lord Addington, and the noble Baroness, Lady Taylor, are making, but I am always hesitant to say that something “must” happen. I speak here as someone who spent many years as a personnel/human resources director, acting as the final stage of appeal in disciplinary matters. As the noble Lord implied, I know that there is a debate in legal fields, because nowadays lawyers generally do not like being bound by something that tells them that they “must” act in a certain way.

It does not seem to be appropriate to insert “must”. The noble Baroness said that there would be a presumption—and I think so too. As the noble Lord said, these are very serious offences, but until one is confronted by a set of circumstances, I hesitate to bind anybody to a certain decision. There may be special circumstances where one is found guilty of only one of the categories and circumstances, so I am not convinced that “must” should be inserted in place of “may”.

[Lord Jackson of Peterborough (Con)]

My Lords, I want partly to echo what my noble friend Lord Hayward said. Given that the individuals concerned will be non-executive directors of a de facto non-departmental public body, they would be covered by the existing code of conduct for non-departmental public bodies, which I think dates from June 2019. It may have been updated by the previous Government; I do not think that the current Government have looked at it. Equally, they are governed by the Nolan principles, with which we are all very familiar—I am as familiar as anyone else, having been a special adviser and currently being a non-executive director of two non-departmental public bodies.

My point is about the restrictive nature of this wording. This is quite an unusual situation, where the individuals responsible for bringing disciplinary issues to the attention of the appropriate authorities in the independent football regulator will have no leeway whatever under this legislation. If it passes the threshold of criminal activity in civil law, legal representatives—the judiciary, magistrates and others—would have no leeway on this. Therefore, you would circumscribe the existing internal procedures.

Those of us who have a role in non-departmental public bodies know that there is a proper process. You would have a verbal warning. I also have a master’s degree in human resource management and have been an HR manager in my time—there are almost as many of us in this place as there are lawyers.