Football Governance Bill [HL]

Baroness Taylor of Bolton Excerpts

Committee stage
Wednesday 15th January 2025 Lords Chamber

[Lord Moynihan (Con)]

Before the Minister responds, I thank the noble Lord, Lord Birt, who sat through many hours of Committee and held his council until this moment, when he has made some very forceful and powerful points geared specifically towards having a co-operative, thoughtful and collaborative response to mediation. The legislation at present is not like that; it is divisive and nuclear, to use two of the words that the noble Lord used. This is one area where there can be agreement across the Committee, and I hope that there will be agreement from the Minister that we can return on Report to look at this, so that we can be more in line with other regulatory mechanisms for mediation. None is as divisive and polarised as the one in the Bill, and I very much hope that the support will be universal for the noble Lord, Lord Birt. I am grateful to him for the thought that he has given to this.

[Baroness Taylor of Bolton (Lab)]

Will the noble Lord acknowledge that you can have mediation only if both sides are willing to participate? What we have seen from the Premier League in recent years is that it is not willing to do that.

[Lord Moynihan (Con)]

I disagree with the noble Baroness on that. Through the history of the backstop powers and the parachute payments, this has been subject to consistent and constructive negotiations. Some negotiations are tougher than others; there is no doubt that in recent months and the last couple of years there have been examples of both sides failing to reach an agreement. I do not believe that putting this regulatory pressure into a binary system is going to resolve that. Yes, negotiations are tough and are frequently going to lead to detailed iterations before a satisfactory position is reached—but the last round of negotiations in particular was very close to reaching an agreement. I do not believe that the imposition of regulatory pressure is going to resolve that beneficially for the future of the Premier League, or indeed the EFL, at all.

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[Baroness Taylor of Bolton (Lab)]

While the noble Lord is talking about parachute payments and the yo-yo, he used the figure of 14%. If you take out parachute payments, is the figure not an awful lot lower and actually near 4%?

[Lord Markham (Con)]

I am sure that we can get the absolute reference from the statto—the noble Lord, Lord Birt, will probably calculate it and tell us by the end of the debate. I think the figure is about 9%, but we can check that.

The point I was trying to make is that Tony Bloom, the chair of Brighton, and Paul Barber, its CEO, whom I have spoken to during this process, would say that parachute payments were a very important part of their business planning in giving them the confidence to invest, which allowed Brighton to stay up and thrive in the Premier League. There is a very good argument for them being there.

As much as I would like the regulator not to get involved in redistribution payments, I accept that it is likely that those powers will be granted. If we really narrow it down, the debate on this group and the previous one is all about the negotiation mechanism. That is where I appreciate so much the work that the noble Lord, Lord Birt, has done on this, because it is not a political point. I do not think anyone in the outside world would get into the intricacies of and care more broadly about the negotiation mechanisms that we are talking about, but what we are talking about is, as the Minister said, a theory behind binary choices and what will happen in terms of gaming. It is an untried theory that has not been done anywhere else, and it has been put forward. I thought the Minister said that it had not been done by the commission.

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[Baroness Brady (Con)]

My Lords, I shall speak also to Amendment 312. These amendments would ensure that any distribution order affecting parachute payments is introduced with a three-year, rather than one-year, transition period, and that an order would come into effect only from the start of a new football season.

Before I give the Committee my experience of why that is so important, having spent 32 years running Premier League and EFL clubs, I want to make the point that I think there is a total misunderstanding in the Committee about parachute payments. Parachute payments are not about helping clubs get promoted into the Premier League; they are about helping Championship clubs that are promoted into the Premier League to have the ability to invest to give them a chance to stay in the Premier League. You cannot invest to stay and be competitive in the Premier League if you do not know that there is some sort of safety net to help you in the event of relegation. My Amendments 311 and 312 are, in my view, essential to safeguarding the stability and sustainability of English football, particularly for those clubs that face the challenges of relegation.

As I have said before in the House, parachute payments are not a luxury or a reward for failure. They are an essential tool that encourages the competitiveness, investability and financial sustainability of English football. Without them, relegation would create a financial free-for-all and a cliff edge that could devastate clubs, their communities and the broader ecosystem. Without them, newly promoted clubs cannot invest in their squads to ensure that they have any chance of remaining in the Premier League.

[Baroness Taylor of Bolton (Lab)]

Will the noble Baroness acknowledge that they distort competition in the Championship?

[Baroness Brady (Con)]

I do not say that they do or do not. I am saying that, if they were not there, you would have to invent them. If a club is promoted from the Championship to the Premier League and cannot invest in its team to stay in that league, it is automatically almost certain to be relegated. If an established club, such as those mentioned earlier, is relegated, without the parachute payment it will be in financial trouble. Some 50% of all administrations come as a result of relegation; that is why parachute payments are fundamentally important. They are designed to manage the financial shock of relegation, where clubs could lose significant revenues, almost overnight, while their costs remain fixed.

For a recently promoted Premier League club, squad costs alone average £115 million a year, with most player contracts running for three to five years. Relegation means that clubs face an average shortfall of £165 million over three years, even with parachute payments included in that equation. It is important to recognise, therefore, that they do not help clubs avoid a painful transition but soften the blow to a degree. Without them, the financial impact would escalate from being very painful to being catastrophic.

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[Lord Moynihan (Con)]

My Lords, I am very pleased that the noble Lord, Lord Pannick, has just returned. He will be in an exceptionally good mood as his club has just gone 2-1 up with about a minute to spare before half-time. That will put him in a good mood to support my amendment.

Amendment 327 was tabled in the name of the noble Lord, Lord Maude, who is abroad on business and apologises for not being with us this evening. It is a straightforward, simple amendment, which I hope will have support from the noble Baroness, Lady Taylor. She and I have both been concerned about the potential financial impact of the Bill, particularly on clubs in the EFL. Pursuant to her earlier intervention, I am here not on the EFL side or the Premier League side but genuinely to look at the legislation and make sure that good legislation comes out of our deliberations.

One of the areas of particular concern is the cost. This is new; it is the first time it has happened not just in this country but anywhere in Europe for a sport. It is novel, and that word is used quite extensively in the Government’s impact assessment. It is important, therefore, to have an opportunity in Parliament to consider the costs of setting up the regulator and the initial costs of regulation. That is why Amendment 327 proposes:

“Within six months of the day on which this Act is passed, the Secretary of State must lay before Parliament a review of the financial impact on regulated clubs of complying with the provisions in this Act”.


That will give us an opportunity to consider whether it is massively inflated in comparison with the expectations set out in the impact assessment or if there are cost savings. I think the noble Baroness is about to intervene, so I am happy to give way.

[Baroness Taylor of Bolton (Lab)]

I am about to intervene. The noble Lord is somewhat optimistic in thinking that everything can be revealed within six months. I will make a broader point, which we are not specifically discussing tonight. The role of Parliament in holding regulators to account is where many of these considerations could usefully come in.

[Lord Moynihan (Con)]

The noble Baroness makes an important point but, in the context of this, I think her first point was even more relevant. Perhaps at a later stage, more than six months would be appropriate; maybe a year would be appropriate. Either way, it is appropriate that Parliament has a look at the costs of implementation, not least because there will be views among parliamentarians about where that burden should fall, and whether it should fall on some of the EFL clubs that might find it difficult to afford those costs of following this legislation. It is interesting that the French regulator who covers professional football confirmed yesterday that he has five staff to do the job that we are looking to cover with this substantial regulation. He also has 18 volunteers from the leagues, including the French FA, who make up their boards and committees to do the work that we have been considering so far in Committee.

The reason for moving this amendment is the concern about the uncertainty of the additional costs to be imposed on all 116 clubs as a result of the financial regulations set out in this Bill. I am not going to go into the details of questioning each and every figure, because that would be inappropriate, but I think it is worth looking at areas of the impact assessment that lead me to worry about the potential increase in costs that this could result in, not least because there is no estimate of litigation costs involved with the regulator, and we have heard that there is quite a lot of potential litigation that could be flowing as a result of the role of the regulator.

Initially, these litigation costs in the Bill will be funded through fines and interest as a first recourse, and that is set out Clause 96; but the further costs to cover litigation would come via the levy—in other words, come via the clubs themselves, and not be a burden on the taxpayer. That could lead to perverse incentives when it comes to the advocacy-first proportionate enforcement model. The legal costs should not be underestimated when you bear in mind that in the last financial year the Premier League had some £40 million-worth of legal costs alone. We should add to that the potential for legal costs associated with what we have been discussing this evening. I hope they do not come to fruition, but it is perfectly possible that they might, with parachute payments and the backstop.

In the context of trying to establish a cost base for clubs and the government regulator, it is really important that we look in detail at the impact assessment. It addresses costs in three buckets: familiarisation costs of £400,000 to £1.2 million, covering the one-off costs to business occurring in the first year of the appraisal period; compliance costs, which potentially go up to £35.8 million over the 10-year appraisal, which are the ongoing costs to business following the first year of the appraisal period; and then the operational costs, which are significantly higher. While these operational costs will initially be funded by the Exchequer before an industry levy is introduced, the costs will subsequently be clawed back from all clubs.

The role of the regulator and the work required by clubs is based on the belief that professional football in this country is in crisis and requires government intervention to sort it out. The legislation addresses what it has set out to be perverse incentives and misaligned owner motivations which have resulted in excessive risk taking in pursuit of sporting success and promotion. Those are quotes and they are meat to any lawyer immediately before this Bill is even on the statute book. Ultimately, the Government argue that this has resulted in market failure, despite the Premier League being the most successful football league in the world and the Championship the sixth-richest in Europe. However, the Government have ignored that and believe, as is clearly set out in the impact assessment, that government intervention is necessary to correct market failure.

There are complete sections on the problems that the Government believe have led to this market failure. Briefly, in 1.2.1 on page 9, the Government believe there is a perverse incentive for clubs to overreach financially. I anticipate that will be challenged. Paragraph 1.2.2 states that inequitable distribution across the English football pyramid has exacerbated poor financial and operational management. Paragraph 1.2.3 states that unsustainable financial management exists, in the view of the Government. Paragraph 1.2.4 covers poor operational management where financial mismanagement has been exacerbated by poor-quality operational management and decision-making at clubs. That is quite a statement to address towards professional football clubs in this country.

Paragraph 1.2.5 states that clubs will need to spend more to

“take into account the interests of fans/communities”,

which currently they do not sufficiently consider. But the impact assessment does not set out how much this is, or make costs, or rectify any of the other broken aspects of professional football that I have outlined this evening. It argues that the existing regulations have “proved ineffective” and it states that the

“free market will not rectify the football industry’s problems”.

In paragraphs 1.3.2 and 1.3.5, it says that

“market failure has large spillover impacts on society”,

which it does not cost.

In paragraph 1.7.5, the FA is blamed, with the Government concluding that,

“given the inaction of the leagues and the FA, the preferred option is to establish a new statutory independent regulator rather than industry self regulation or a light touch intervention”.

That is somewhat at odds with what the Minister was saying, because she argued quite strongly that light-touch regulation was what was sought—but in the impact assessment it is made clear that the Government favours having an independent regulator rather than

“industry self regulation or a light touch intervention”.

If it is not to be light-touch intervention and it is to be heavy intervention, that will incur significant costs, and it is not clear at all what those costs will be.

This is important, because the Government are rejecting in this document light-touch intervention on the French model for comprehensive state-controlled regulation, which will cost all clubs substantial internal costs and legal costs, potentially with the cost of lawyers and outside advisers for sure, to comply with the tasks outlined in the Bill, since all clubs will need to be licensed and meet in detail all the requirements in this lengthy and comprehensive legislation. To believe that this can be done for £40 million a year under preferred option 4 over the coming 10 years is, to be quite honest, fanciful. It ignores the legal costs and the club operating and compliance costs for all 116 clubs, and it ignores potential litigation costs. It beggars belief to believe that the total central estimate for familiarisation to the clubs and leagues associated with option 4 is £800,000, or £7,000 a club on average. The compliance costs outlined in paragraph 211 are estimated at £100,000 per annum for Premier League clubs and £60,000 for all remaining clubs. I do not see for the life of me how that is possible.

However, at least the Government have added the rider that familiarisation compliance costs “may be underestimated” and that

“this is a novel and high profile area”.

It certainly is that. So, the Government suggest,

“clubs may pay more attention and buy in high-end specialist advice”.

But high-end specialist advice does not come for £7,000 a club per annum.

However, all this is predicated on the most important paragraph, paragraph 289, towards the conclusion of the impact assessment, which states:

“The Regulator will be legally prohibited from intervening in football (e.g. spend on players) or commercial (e.g. ticket price) activities, thus limiting the potential risk of deterring investment”.


We have spent dozens of hours looking into the fact that there will be detailed and intrusive activities by the regulator—understandably, to fulfil the legal requirements of this Bill. Far from not being interventionist in football, the regulator will in fact be legally required to intervene in the running of all aspects of the financing of football, including external factors such as season ticket prices and other ticket prices, in its overview of the finances of all clubs. There is nothing on the finances of the clubs in this legislation that is exempt from the consideration of the regulator, if he or she should wish to look at that in the context of fulfilling their functions under the legislation.

What it should say, as I say, is that the regulator is legally required to intervene in the running of all aspects of football—and, if that is the case, there is a whole different scenario for the costs involved for all clubs. I am not talking about just Premier League clubs or EFL clubs—I am talking about all clubs. That is why I would hope that there would be an opportunity to review the costs at six months—or it could be year—because this is the first time this has ever occurred in sport in this country. It is indeed the first time that it has ever occurred in football in the European Union, or indeed in any international body that I know of.

The statement that I have just made underpins the whole cost structure and sits uncomfortably with paragraph 298 of the impact assessment, which provides for the regulator to enter business premises in conjunction with an investigation or an actual or suspected breach of a club’s licence conditions in any form with its powers of search and seizure and the power to require specified persons to attend an interview. Given the likely cost of this intrusive legislation, I believe it is important to write into the Bill a review of the financial impact on regulated clubs of complying with its provisions, so that football fans can regularly review the true costs of government-led regulation. I beg to move.

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[Lord Birt (CB)]

It is a matter of creating the right institutions. In the golden days of ITV and Channel 4, it was the IBA—a relatively small but highly effective organisation. The noble Lord does not want a long speech from me about what it achieved as an organisation, but it was extraordinary. Obviously, the BBC has had 100 years as the most successful broadcaster in the whole world. The light-touch governance through BBC governors was powerful and impactful and it worked.

I am not suggesting that you just import those models, but we need something that is not stifling and bureaucratic, in a dynamic environment where people can get round the table and sort out these issues.

[Baroness Taylor of Bolton (Lab)]

My Lords, I just want to pick up on some of the points made. It is right that we need a proportionate system and we have to be careful in what we do. But we cannot afford to be complacent about the state of British football today. Yes, the Premier League is doing very well at the moment, but we have to acknowledge the difficulties of many other clubs and the serious need for some change in the way in which many football clubs are run.

A report published on Monday this week from Professor Nick Lord and lecturer Peter Duncan in the department of criminology at the University of Manchester shows some of the dangers that Premier League clubs could face if we do not get the right financial structure, and how certain clubs could be, because of the complexity of their ownership, vulnerable to their funds being used for illicit purposes. I mention that because we do need regulation and we cannot be complacent and pretend that all is well even in the Premier League.

[Lord Markham (Con)]

I rise to speak to Amendment 329 in my name and that of my noble friend Lord Parkinson. I will speak very briefly, because Amendment 327, on costs, was spoken to extensively.

I think we all accept the need for a regulator. The points about broadcasting made by the noble Lord, Lord Birt, were points I am very familiar with as a former director of ITV and were very well made. On proportionality, we have talked a lot about Premier League clubs, but I would argue that when you have National League clubs who have two, three or four members of staff and an impact assessment that says they will need one member of staff for compliance on this, that tells me that we have the balance wrong. We are saying that a third of their staff need to be in compliance.

I would like to answer the point made by the noble Lord, Lord Bassam, who said that clubs should already have all this information because they are doing an audit. An audit is backward-looking over the year that has happened. What the regulator is asking clubs to do here is to write a three-year business plan, which is forward-looking.

[Lord Markham (Con)]

I can bore on this issue, as a former FTSE chief financial officer. An audit is backward-looking, and you have to have a going concern statement, which is the forward 12 months. It is nothing like the business plan requirements that the regulator is asking clubs to provide for three years going forward. There is no doubt that that will require clubs to employ consultants, accountants—you name it—so it will be a significant burden on them, and this is exactly the point we should be considering. When you think about it, if you are talking about one member of staff per national—

[Baroness Taylor of Bolton (Lab)]

The noble Lord is almost suggesting that clubs of whatever size should not have a business plan. One of the things we want to encourage and develop is sustainability. There has been complacency among many clubs at different levels, such that they have not made proper forward-looking plans. I do not think it is a burden on them to do so at the appropriate level and proportionately, as we were saying earlier, but it would help the sustainability of all football clubs if they were to look forward in that way.

[Lord Markham (Con)]

Speaking as a fully signed-up member of the anorak club, I completely understand the point about business plans, which I have always done in businesses I am involved in. I am talking about the reality of football clubs. There is no way I am going to argue that having a business plan is not sensible, but at the same time, suddenly putting business plan requirements on a club with a turnover of a couple of million and two or three members of staff is an expensive exercise. That is the context in which I am making this point, and it is why I think Amendment 327 is sensible. It would make sure that everything is set out, so that we go into this with our eyes fully open to the burdens and what we are expecting clubs to do.

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The reason why the Government accepted the amendment was principally to ensure the passage of the Bill and to avoid the House making more stringent sunsetting provisions. The Minister may wish to bear in mind that accepting these clauses or committing to some amendment to provide for post-legislative review may make the task of getting the measure on to the statute book a little easier.

[Baroness Taylor of Bolton (Lab)]

My Lords, I am afraid that, although the hour is late, I cannot resist saying a few words about the suggestion that we should have a sunset clause. I am somewhat surprised that the noble Lord, Lord Goodman, has presented what is a very bureaucratic way of going about getting some accountability here, and I fear that the sunset clause would be an incentive for non-co-operation. The noble Lord, Lord Markham, said earlier that he thought that some people might wait until the regulator was in place before they did certain things. If we had the sunset clause, it would be an incentive for those who did not want this kind of regulation to drag their feet and not co-operate. So that is not a good way forward.

I was also interested in some of the comments on the commencement amendments, which would also bring about a delay. I note that the suggestion is that after, I think, three years and nine months we should have this kind of review that was being suggested. I noted the noble Baroness, Lady Brady, saying earlier that there should be a transition period of three years, so we would be judging it on nine months if all the opposition amendments on this were carried, and that is not really satisfactory.

The simple fact is that football needs the Bill, fans need the Bill and we need to get on with it as quickly as possible. We need to give the regulator the powers that he or she needs to carry out the work that needs doing. We talk about football being a pyramid, and it is. The Premier League needs the whole of that pyramid. I could quote certain players who have been on loan at Bolton Wanderers and who now are doing very well at Liverpool, such as Conor Bradley—I am sorry that my noble friend from Everton is looking at me askance. The English national team needs football to be healthy at all levels. If we do not have proper involvement and proper facilities at all levels it will suffer as well. We have talked about the FA not taking its responsibilities seriously in terms of football governance, but there is a dimension here about the English national football team. We have to make some headway and get some things moving as quickly as we can.

The noble Lord, Lord Goodman, also mentioned accountability. What the noble Lord, Lord Norton, said about post-legislative scrutiny was also interesting. I chaired the modernisation committee in the other House in 1997. One of its recommendations was that there should be more post-legislative scrutiny. Both pre-legislative and post-legislative scrutiny give power to Parliament to get things right and to monitor exactly what it is doing. I am all in favour of that, but it does not need to be in the Bill.

What we do need is a proper drumbeat of accountability of all regulators to Parliament. The noble Lord, Lord Goodman, mentioned the report that the committee I chaired published, Who Watches the Watchdogs? One of the things we said in that report is that it would be to the advantage of everyone—industries, regulators, Government Ministers and consumers—if there was a proper drumbeat of regulation. A third of all regulators have never been called before Parliament. Another third has been called only when there is a crisis. That is not proper accountability. We need Parliament to take its responsibilities seriously and ensure that all regulators, including new ones, are held accountable by Parliament. That is a valid point, but we do not need new amendments. We need new action on the part of Parliament.

We need this Bill; the Premier League needs this Bill. I mentioned the research from the University of Manchester. Ironically, in the long term, this Bill might help to protect all clubs, including those in the Premier League. I hope we can make progress. It should be Parliament that holds regulators to account, not extra dimensions such as have been suggested.

[Lord Hannett of Everton (Lab)]

My Lords, I will refer to the comment by the noble Lord, Lord Norton, about not everybody being interested in football. As a long-suffering Evertonian, sometimes that is not a bad place to be, especially having seen Everton’s results tonight —but there you go; there is another day. I say to the noble Baroness, Lady Brady, regarding David Moyes, who has now returned to his spiritual home, that I hope some of his success at West Ham will rub off on Everton.

I have listened on a number of occasions to this debate and to some of the contributions and the experience that has been expressed. However, I am with my noble friend Lady Taylor—this is a time to move on and to enact the Bill, because this is what football fans want. As a football fan—a season ticket holder at Everton—I was delighted that support for the Bill was in the manifestos of all the main parties. From some of the contributions, you could sometimes be confused that that was the case. As football fans say, this is an important Bill. Noble Lords have on occasions appeared to forget how we arrived at this position. The fan-led review was based not on hot air but on the genuine concerns of football fans. The fans and the future sustainability of our beloved national game must always be at the heart of the House of Lords.

Noble Lords’ amendments—there have been too many to comment on individually, so this is a general observation—would in effect ensure, even before the independent football regulator gets off the ground, that those who oppose it would be seen to be working to ensure its demise. We know there are people who hold strong views about regulation, but there are occasions for regulation and this is one of them.

It could be said that this is another way, on top of the attempts through other means, to kill the Bill—to kill the regulator by the back door. That is not what fans want. I speak to fans from many different clubs who have been waiting for the Bill to pass.

In conclusion, I thank the Ministers for the way they have had handled this debate over many weeks, not only with stamina but with attention to detail. That is extremely uplifting.