Football Governance Bill [HL]

Baroness Brady Excerpts

Report stage
Monday 17th March 2025 Lords Chamber

[Lord Addington (LD)]

My Lords, it might be convenient to give our opinion on this matter, which is very straightforward. Parachute payments are a system that is in place for today and not set in stone. This is an ongoing process, and the situation will change with the Bill. There is the suggestion that parachute payments are a great drop down and land with a heavy thump. Hopefully, we will raise the ground up a bit or have some cushioning in place. Having one system built in for ever goes against the purpose of the Bill.

[Baroness Brady (Con)]

My Lords, I refer the House to my interests, as declared in the register. I support my noble friend’s amendments, which would remove parachute payments from the backstop.

I hope it will assist the House if I explain why I am so concerned about the inclusion of parachute payments within the definition of relevant revenue. It is not because I believe that the parachute system is perfect—I really do not. It is not because I believe that the precise level or design of parachutes should be fixed forever or protected from scrutiny—I do not. Nor is it because Premier League clubs are insensitive to the aspirations of clubs throughout the pyramid—we are not. We all share the same common goal: a thriving, dynamic, sustainable football ecosystem from top to bottom. It is because the backstop mechanism as it has been designed is so fundamentally unsuited to addressing the issues of parachutes.

The previous Government’s backstop was badly flawed, enabling a binary choice between two proposals, one of which must be selected in its entirety. That was highly unusual and posed significant risks. However, that mechanism could have just about been tolerable because, by isolating solidarity or voluntary payments as the sole issue for resolution, the backstop at least delivered a binary choice between two numbers. That is a judgment the regulator could reasonably make. I remind noble Lords that the levels of solidarity are explicitly linked to parachute payments in the existing distribution agreement between the Premier League and the EFL. One can be used to smooth the potential rough edges of the other, which is what the previous Bill correctly recognised.

However, the expansion of the Bill’s scope to include parachute payments transforms the backstop entirely. It is no longer about determining quantum, but now forces a judgment on the wholesale redesign of football’s financial architecture. It has become a choice, not between two numbers but two fundamentally different systems and it is substantially more legally and financially risky as a result.

The crucial thing to appreciate is the connection between the now systemic nature of the backstop and the position of the EFL. The EFL’s chair has called parachute payments

“an evil that needs to be eradicated”

—not reformed or adjusted, but eradicated. When we combine that system, a binary process, with the open agenda of one of the two parties, we create an absolutely intolerable risk. The backstop offers no capacity for careful calibration or fine tuning, which I would be wholly supportive of.

There is no part of this Bill that allows the regulator to make a reasoned, balanced judgment. It creates a binary, “winner takes all” approach, with no room for nuance but plenty of room for poison pills and final damage. It enables a proposal from the EFL that would level down the bottom half of the Premier League, rather than genuinely elevate the entire football pyramid. Surely, we want a mechanism that delivers both a strong Premier League and a strong EFL, rather than a zero-sum game.

The Government have made their political choice on the backstop, but I believe that they did so without the full understanding of its implications for the delicate ecosystem that sustains football at all levels. If we are to avoid serious, legal and economic consequences for football over the next few years, the Government would be well advised to now address the serious problem they have created. If they are not prepared to revisit the decision on parachutes, my amendments on how the IFR should make its final decision offer a constructive path forward that would benefit the entire pyramid. The proposal from the noble Lord, Lord Birt, offers an alternative. There can be no doubt that change is needed.

We all want the same thing—financial sustainability throughout English football—but the starting point must surely be a shared recognition that we cannot achieve this by dismantling the very mechanisms that have made English football, from the Premier League to the National League and beyond, the world’s most successful ecosystem.

[Baroness Taylor of Bolton (Lab)]

My Lords, I start by reminding the House that the Bill will not abolish parachute payments or change the architecture in the way that has just been suggested. When the noble Lord, Lord Markham, talked about the need to have confidence, so that clubs can invest in new players and have confidence in the strong club structure and financial position, he mentioned only the Premier League. He did not refer at all to the rest of the football pyramid. The Bill needs to make sure that we have sustainability, not just of those clubs in the Premier League, but of the whole English football pyramid. It is important to bear that in mind because, while parachute payments may have a place—as most people have acknowledged, certainly at the moment—there is no doubt that the level of parachute payments is such that it distorts competition in the Championship. I asked the noble Baroness, Lady Brady, when we were in Committee, whether she would acknowledge that, and she declined to comment.

If we look at the actual figures involved, there is no doubt that the current arrangements distort competition. At the moment, clubs that are relegated receive, in year one, £48.9 million. Other clubs receive £5.3 million. The redistribution that is often talked about from the Premier League to the EFL does not help all the clubs in the EFL equally. It distorts competition, which is something we should bear in mind when we are talking about parachute payments. Although they may help a few, they do not help the sustainability of the whole pyramid, as they could—and should—if we had a fairer system of distribution.

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[Lord Bassam of Brighton (Lab)]

My Lords, I will add just a couple of comments to those from my noble friend Lady Taylor. The issue for me is the distortion of competition. In each of the last seven seasons, two of the three clubs promoted from the Championship have been in receipt of parachute payments. This year it could easily be three: Burnley, Sheffield United and Leeds.

Its meaning in the longer term is that the Premier League becomes a closed shop. Clearly, parachute payments are having an impact, because this process has been going on for a long time and it has got worse. I am not saying we should get rid of parachute payments —far from it—and neither does the legislation. Nobody on our Benches wants to see that. But, clearly, the “state of the game” report will have things to say about the impact of parachute payments.

Any sort of fair and reasonable assessment of where parachute payments have been made in the last decade and more would suggest that competition is being badly distorted. The noble Lord, Lord Goddard, is right: they are affecting the shape of our game, and that means that the Brightons and Bournemouths of this world will find it harder to break through the glass ceiling that is there at the moment. For that reason, we should continue to include parachute payments within the remit of the independent football regulator.

[Baroness Brady (Con)]

My Lords, let me make one final point to the noble Lord, Lord Bassam—

[Noble Lords]

The noble Baroness cannot speak again on Report.

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[Baroness Evans of Bowes Park (Con)]

My Lords, I support the amendment from the noble Lord, Lord Birt. As I said in Committee, I believe that the binding arbitration model that his amendments set out is unquestionably better than the proposed backstop mechanism in the Bill currently. In particular, Amendment 72 fills a glaring hole in the current process: that is a transparent and clear set of criteria against which the expert panel in this process will make its decision.

It is clear that the noble Lord and his colleagues have thought very deeply about their proposals and have tabled a comprehensive package of amendments. Indeed, their contributions have shown a breadth of experience and expertise that they have brought in developing them. Therefore, I very much hope that, even at this late stage, the Minister will accept these amendments, and her colleagues in the other place can use the passage of the Bill to finesse and improve them if the Government are concerned, for instance, about certain elements of drafting. I commend these amendments to the Minister and hope she will look on them favourably.

[Baroness Brady (Con)]

My Lords, I offer support for the broad approach of the noble Lords led by the noble Lord, Lord Birt, who have tabled the amendments in this group. I do not agree with every element of the proposed new process, but I appreciate that this idea, to replace the current mechanism with a structured commercial arbitration process, would be a substantial improvement on the current flawed and high-risk process —a process designed largely by the previous Government and not a mechanism recommended by the fan-led review. I believe these amendments would deliver a better process for the EFL as well as for the Premier League—better for all of football—because they would make the backstop process more transparent, more predictable and therefore lower risk.

In Committee, the noble Lord, Lord Birt, made an incisive and compelling case for change, as did the noble Lord, Lord Burns. He has done so again today, demonstrating the virtues of balance, nuance and good sense—all qualities that are excluded from the operation of the existing backstop process. The current backstop mechanism is fundamentally flawed. For example, the 28-day mediation process amounts to little more than mandating a conversation between parties, and of course then the parties have to go back and discuss those conversations with their clubs, which takes a lot longer than 28 days. It also creates no structure to identify areas of compromise, nor does it establish proper incentives for genuine negotiation. It does not even require both parties actually to make a proposal, so neither party’s position is flushed out. In practical terms, it means we might as well jut skip directly to the final decision.

The current process will leave the expert panel examining two highly divergent proposals, which will come out of the blue, with no arguments properly aired ahead of that decision. By contrast, the amendment before us introduces significant advantages. First, the three-person panel, with two representatives selected by both the Premier League and the EFL alongside an independent chair, mirrors successful approaches used throughout football arbitration. Crucially, the same panel would make the final decision, having heard all the arguments throughout. Secondly, an extended 90-day arbitration period would allow for proper engagement rather than the perfunctory approach currently proposed. Thirdly, and crucially in my view, the requirement for structured offers to be put forward, scrutinised and then defined, introduces a dynamic entirely absent from the current model.

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[Lord Markham (Con)]

My Lords, I must admit that this group of amendments feels a bit “after the Lord Mayor’s Show”. I rise to move Amendment 60 in my name and that of my noble friend Lord Parkinson of Whitley Bay. This amendment reintroduces the ability of a competition organiser to contract out of the backstop. This was in the previous version of the Bill, introduced by the last Government. It permitted the leagues the opportunity to come to a mutual agreement to opt out of the backstop mechanism for a longer period of time. To me, this seems entirely sensible, because of course the whole point of a backstop agreement is for it to be a backstop. Clearly, if the leagues have already reached an agreement—and clearly both want to opt out of it all—by definition you do not need a backstop, because an agreement has been reached. So my question is: why should the leagues not be allowed to do that?

Our Amendments 60 and 61 would also remove the short-termism introduced in this version of the Bill, allowing for a flexibly and mutually agreed opt-out mechanism that would be longer term—beyond the five years, if need be—to create the stability required for long-term partnerships. Again, it is commonly known that clubs, leagues and commercial organisations can often decide and come to better deals over a longer- term period, because often the people paying the money are prepared to pay more to get the certainty that a longer period of time gives. So allowing a period such as 10 years instead of five can often lead to mutually beneficial outcomes.

Again, I do not know why we would want to be prescriptive in all this and not allow competition organisers—in this case the Premier League and the EFL—to have the flexibility to come mutually to those agreements. Clearly, they will do so only if they think it is in the interests of both parties, so I do not know why we would wish to deny them the opportunity to reach such a long-term partnership agreement. To me, that is what we should all be about: trying to encourage co-operation between the leagues, instead of being prescriptive, setting out things they cannot do and saying, “No, we’re not going to let you reach an agreement between yourselves”. For those reasons, we propose our amendments, which hopefully are very sensible. I will listen with interest to the Minister’s response.

[Baroness Brady (Con)]

My Lords, I rise to speak to a number of amendments in my name in this group, but first I lend my support to the amendment tabled by my noble friend Lord Parkinson, which would allow the parties to contract for longer than a five-year period. I remain surprised that the Government believe that two consenting parties should be actively disincentivised from ever contracting for the long term by the automatic availability of a dispute mechanism. This cannot be about fairness, transparency or sustainability; it is about turning the backstop into a ratchet, ensuring that no long-term agreement between the Premier League and the EFL, no matter how mutually beneficial, can ever provide genuine stability or be truly relied on.

The EFL, in its briefing for today, says that it would oppose these amendments because they would

“incentivise a larger league to try to coerce a smaller league into a longer agreement that suits its strategic objective over those of the other league, using its financial muscle”.

In one sense, that is right. Basic commercial logic means that the Premier League would be prepared to pay more, to be more ambitious, to do things like selling the EFL’s international rights, which it has asked us to do, and to offer a fixed percentage of pooled revenues, which is the EFL’s big idea, if it enabled long-term certainty. The same basic logic suggests that shorter-term deals will therefore be less ambitious, result in less of a partnership, deliver less regulatory certainty, offer less in subsidy and therefore be less beneficial to both sides. Let us be in no doubt as to the EFL’s positioning. The Government’s support for its agenda is delivering for the EFL clubs in communities and constituencies across the country.

My Amendment 73 introduces what I would call a new “funder assurance principle” into the backstop process. Unless there were compelling reasons not to, this principle would require the regulator to select the Premier League’s proposal if—and only if—that proposal fully meets the IFR’s objectives. This is not about giving the Premier League what it wants; in this scenario, the league would be giving away billions of pounds of revenue in a forced redistribution process. No one could describe that as a win for the Premier League. This principle creates powerful incentives for the league to continue to step up to the plate, but it does so while offering some security and certainty, reducing the intolerable risk of a disruptive, damaging and extreme proposal being selected. That is what is so difficult—legally, financially and political—about the crude and binary backstop process.

My Amendment 74, which could be seen as an alternative position, would place property rights at the heart of the decision criteria. It would simply require the regulator to recognise, and have particular regard to, the fact that mandating the distribution of revenue constitutes an interference with property rights. This is not a controversial principle; it is the cornerstone of our legal system. It is, in fact, language taken directly from the Secretary of State’s ECHR memorandum to the Bill.

I hope that, given how extraordinary this backstop process is, the Minister will not object to putting the most ordinary of safeguards as a statement of existing law into the Bill. It is surely important for the IFR to be reminded of the public law principles that it must have in mind when taking property from one party and transferring it to another.