Football Governance Bill [HL]

Debate between Lord Moynihan and Baroness Evans of Bowes Park

Committee stage
Wednesday 18th December 2024 Lords Chamber

[Lord Moynihan (Con)]

My Lords, I rise to speak to Amendment 173A standing in my name on the Order Paper. Here, we are referring to Clause 32, and it is the Secretary of State who will be taking a power beyond this Bill, not even by positive resolution but by using a much lighter negative resolution procedure, to determine the time period for the approval of new owners and offices. I quote from the Government’s memorandum to the Delegated Powers and Regulatory Reform Committee, which states that

“the contents of the IFR’s suitability tests may likely change, compared to when the Bill is introduced … Once the contents of the IFR’s tests are set in statute, the Government will be better placed to set the time window in regulations”.

This is, after all, an important clause which addresses the scope of powers to attach or vary discretionary licence conditions. I would have thought that the consultation period should be very specific and placed on the face of the Bill. There is a risk here that the regulator may not consult the clubs in the leagues and just hurry the process through, which I am sure is not the intention, but why on earth not put it on the face of the Bill—not only which clubs and leagues are affected—which is not part of the Bill, as we have previously debated?

The very least the Government can do on this occasion is amend this clause, given the scale of these powers, and change the scope of the manifold discretionary licence conditions that the Government, not the regulators, are imposing on football clubs here. They must consult them. It seems eminently sensible that they should consult them, and I would have thought that the Minister would be the first to say that they will consult them. If they will, I cannot understand why we would not put that in the Bill.

My amendment says simply that, before submitting a request under subsection (6), the regulator must consult, first, the clubs; secondly, “each specified competition organiser”; and, thirdly, such other persons as the regulator considers appropriate. The consultation, as it stands, is not specific enough and risks the regulator not consulting the clubs and leagues on this issue. I really do believe that there would be every intention for the regulator to do so, so let us just clarify that in the Bill so that there is no danger that the regulator would avoid that possibility. I hope my amendment gains the approval of the Minister when she comes to wind up.

[Baroness Evans of Bowes Park (Con)]

My Lords, I speak in support of Amendment 173B, tabled by my noble friend Lord Hayward, who I hope feels better soon. It introduces a number of key principles for the governance of capital buffer requirements that the IFR could potentially impose. This amendment fills an important gap in the Bill. I am also supportive of other amendments encouraging the IFR to adopt an outcome-focused approach, allowing the leagues to develop detailed financial rules within the overall statutory framework, as this will help to preserve the competitive balance with the design of common rules for all clubs. I am sure that the Minister will agree that this approach reflects the light-touch model that she has been describing.

As we heard in our debate on Monday, the Bill allows for a more interventionist approach for the IFR with individual clubs, through its discretionary licence conditions. In these cases, it is important that some clear parameters are set out in the Bill to ensure that any capital buffer requirements that may be developed are workable, proportionate and reflective of football’s realities.

Football clubs operate in vastly different financial contexts, even within the same pyramid. At one end, a relatively modest capital buffer of, say, enough to cover six months of operating costs might have saved a club such as Bury, for instance. But, at the other end, the challenges faced by Premier League clubs are of an entirely different scale. For a Premier League club relegated to the Championship, or indeed a club expecting but then failing to qualify for the Champions League, I understand that the financial shock can amount to as much as £90 million to £100 million.

Crucially, the way these clubs manage such risks is fundamentally different from clubs in lower leagues. At this level, as we have heard, clubs do not rely on cash reserves alone. Instead, they utilise a range of financial tools, including player trading, which is a core part of football’s economic model, as well as secured credit facilities—often backed by guaranteed revenues—and parachute payments, which I know we will discuss later and which help with the transition on relegation.

Without explicit reference in the Bill, there is a danger that the IFR might impose overly rigid liquidity requirements that would privilege clubs with access to unlimited working capital—I am thinking, for instance, of those backed by sovereign wealth funds—while unfairly disadvantaging others. This amendment would ensure that capital buffers reflect the real-world financial tools that clubs use to manage risk, including non-cash assets, as I have just described.

The single most important liquid asset for football clubs towards the top of the pyramid is their players. As I am sure my noble friend Lady Brady can tell us, player trading is often one of the first mechanisms that they turn to when managing financial shocks—yet the Bill provides no clarity on how the IFR will treat these assets. Even when player liquidity is recognised, valuation of these assets is critical. Under current UEFA financial fair play rules, players developed through academies are often valued at zero, for instance, based on book value, rather than their actual market worth. The purpose of UEFA’s rules is different, but, if copied by the IFR for the purposes of capital buffers, for instance, this could penalise clubs such as Crystal Palace, Southampton, West Ham or Arsenal, which have brought through many talents into their first teams in recent years.

This amendment therefore seeks to ensure that the IFR adopts sophisticated valuation methodology, including proper independent valuation of players and, in particular, a proper recognition of the value of academy players. Without these safeguards, the IFR risks undervaluing clubs’ most significant assets, forcing them to meet capital buffer requirements that are, in practice, unnecessary.

We have heard many times in this Committee that the competitive balance is the lifeblood of football, but poorly designed capital buffer requirements could easily and accidentally disrupt this balance. We must avoid this outcome, so I hope that even if the Minister is unable to accept the level of specificity in Amendment 173B, she will recognise that this area of the Bill is a source of anxiety for clubs. I hope she will agree that the principles within this amendment are important and that it is the Government’s intention that the IFR pursues a tailored approach, informed by guidance, that will protect the competitive balance and investability of the English game.