Football Governance Bill

Clive Betts Excerpts

2nd reading
Tuesday 23rd April 2024 Commons Chamber

[Lucy Frazer]

We believe that parachute payments have a role to play, although I know people have concerns about distortion. Under the Bill, if there is any issue relating to the finances of a particular club, particularly by reference to the parachute payments it might have received, the regulator has an ability to look at that within the licensing regime as a whole.

[Mr Clive Betts (Sheffield South East) (Lab)]

I have read the Bill, but I wonder whether the Secretary of State has read it. Under clause 55(2)(b), the regulator is not allowed to deal with

“revenue that the specified competition organiser distributes to a club by virtue of a team operated by the club being relegated from a competition organised by the specified competition organiser.”

In other words, parachute payments are deliberately excluded from the remit of the regulator. Why has that been done when it is one of the most distortive elements of the current arrangements?

[Lucy Frazer]

I have been very intimately involved in this Bill, having put together all the policy recommendations and had discussions with all the parties. I encourage the hon. Member to read all aspects of the Bill, not just the provisions in relation to the backstop, which he quoted. I know many Members feel that parachute payments are very important, so let me try to explain again.

I know that many stakeholders have concerns about the impact of parachute payments on financial stability, sustainability and resilience, and I know that parachute payments can play an important role in softening the financial blow of relegation at all levels of the football pyramid. Given the complexity of the issue, the regulator will need to undertake an holistic, evidence-based assessment of the system of financial distributions as part of its state of the game report, and this will include an assessment of parachute payments.

Parachute payments have been specifically excluded from the backstop mechanism to ensure that the two final proposals from the Premier League and the EFL are easily comparable. The impact of parachute payments on financial sustainability and resilience could be a relevant factor in both the decision to trigger the backstop and the final choice in relation to a proposal. More generally, the regulator can look at the impact of a parachute payment on a particular club when it comes to the licensing regime.

[Mr Betts]

Will the Secretary of State give way?

[Lucy Frazer]

I will press on, as I have now answered five times on parachute payments.

We will achieve our goal through the new licensing regime, under which all clubs in the top five tiers of English men’s football will need a licence to operate as professional football clubs. The regulator will have powers to monitor and enforce requirements on financial regulation, club ownership, fan engagement and club heritage protection, as well as setting a corporate governance code of practice and having the power to prohibit clubs from joining breakaway competitions.

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[Thangam Debbonaire]

My hon. Friend raises a really important point. It is so important that the state of the game report leads the way, and that the regulator is allowed to look at the evidence and have the scope to intervene where that is necessary. I fear that the Secretary of State may inadvertently have confused the issue in her earlier remarks, although I think she began to clarify it. I would be grateful if the Minister could further clarify it in his summing up, as there is some remaining confusion.

[Mr Betts]

I certainly think that if we do not sort this issue out today, we must at least have some time in Committee to try to untangle what clause 55 actually means. I thought the Secretary of State said that the parachute payments were in play in the discussions about distribution of funds within football until it gets to the backstop, when they are taken off the table. It is almost being said that if the Premier League does not reach an agreement with the EFL until the point of the backstop, the Premier League will in effect have a veto over parachute payments being changed. That is what is being said, and I think that position really needs to be changed when we are in Committee.

[Thangam Debbonaire]

I thank my hon. Friend for that intervention. Like other colleagues, he is so knowledgeable about the detail of this Bill. I urge the Government to consider what has been said in a constructive spirit. Everybody present wants to get to the bottom of this confusion. We want to make sure that football and the regulator have the tools they need to grow sustainability—a key word which the Government have themselves used. The confusion about parachute payments is worthy of further attention, because there is so much money involved. They also have the distorting effect that the Government’s White Paper rightly identified.

If we do not look at this issue, we risk distorted competition in the championship by encouraging greater financial risk taking by the clubs that do not receive those payments. We know that that can result in an over-reliance on owner funding, which again is simply not always sustainable. As my hon. Friends have mentioned, clause 55(2) excludes parachute payments from any order by the regulator on revenue distribution. I gently say to the Government that, as there seems to be some contradiction or possible confusion, we would like that cleared up. I would be grateful if the Minister could say more in his summing up about how the money currently used for parachute payments could make more impact and perhaps be shared more widely, whether he has examined that in detail and to what extent he feels the current terms of the Bill are satisfactory.

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[Mr Clive Betts (Sheffield South East) (Lab)]

First of all, we are here today because football has failed to regulate itself over many years. It is our job as parliamentarians to ensure that, in the end, we regulate on the behalf of football fans for now and for the future, and for the communities where our football clubs are based. That is our job. I will just begin by thanking those who have got us to this position: the hon. Member for Chatham and Aylesford (Dame Tracey Crouch), certainly; the Minister for sticking with it and bringing the Bill before the House today; and the EFL, the PFA, the Football Supporters’ Association and Fair Game for their advice. I even had a conversation with the Premier League, but let us say that that conversation did not lead to as much agreement as other conversations I have had with other football organisations.

This is not a Bill to destroy the Premier League, as some have tried to present it, including the Premier League itself. The Premier League has been a massively successful organisation. It has brought unimaginable wealth into football and into this country. The legislation is not here to destroy the Premier League, but to ensure that its great strength, its financial resources, can be used as a basis on which to strengthen the whole of the football pyramid. It is just a pity that the Premier League itself does not see it like that. It does not see its responsibility to the wider football game, but instead so often seems intent on narrowly focusing its attention on supporting the handful of clubs that are within the Premier League.

We just have to look at the other successful brand in English football: the pyramid. There is no other football pyramid like it in the world. The championship has the fifth-highest attendances of any league in Europe. Where else could you go on a Sunday afternoon to a second-tier relegation game and get 7,500 fans not in the home end but in the away end? Sheffield Wednesday did that at Blackburn on Sunday—and won, I hasten to add, giving ourselves hope of salvation. That is the strength there, but the incredible power of the Premier League’s resources is slowly beginning to corrode and erode the basis of the whole football pyramid. That is what we have to stop and what we have to act on.

In very simple figures, 25 clubs—not just the 20 clubs in the premier league, but the other five that are in and out of it on a regular basis—get 92% of the distributed resources within football. The other clubs in the EFL get 8%. That simply is not sustainable, and we have seen that gap grow and grow over the years. It is not just a static problem; it is an increasing problem that undermines the whole of the football pyramid.

Does the Bill, as it stands, deal with that fundamental challenge? The process for a review of football finance is far too bureaucratic. Why not give the regulator the up-front power to come to a decision about the distribution of football’s resources that makes individual clubs sustainable, and competition within and between the leagues sustainable? That is a simple remit. Let them get on with it, rather than going through this process right the way through to a backstop, knowing that the leagues have already had a chance to reach an agreement which they have signally failed to do. The Premier League never made a single offer right through the process from the very beginning.

With the parachute payments excluded from the backstop, the Minister risks destroying his own Bill. If the Bill remains as it stands, we will not achieve a sensible and appropriate redistribution of revenue. I think that has been said right across the House and we simply have to change it. I am happy to table an amendment in Committee. I hope the Minister might think about how the Government might accept such an amendment, because it will be needed to strengthen the Bill.

Is the distribution of resources simply a matter for the EFL and the Premier League, or do the fans, players and grassroots not have a view? Should there not be a wider process, at least a consultation, so that the regulator has the up-front power and also consults those groups in reaching a final conclusion? It is just strange that something that began with a fan-led review does not mention fans in that very important part.

I welcome the general approach of the licensing system. As has been pointed out, we have had too many bad owners and directors in football, and we still have some around.

[James Daly]

I am very interested in what the hon. Gentleman says. There are some very important points regarding redistribution, but there is also a very important point about the competent management of football clubs. The Derby County situation is an example, because the owner had £400 million in cleared funds when the club was bought. What happened to Derby was a result of how badly it was managed after the initial test. That is a real challenge for this Bill.

[Mr Betts]

My understanding is that it will be a test of the licensing system. It is about ensuring sustainability, and not just when an owner comes along and says they want to buy a club. They need to show that they can actually sustain that ownership going forward. That is the difference between the current rules and the rules that are being proposed, which we can test further in Committee.

Can the regulator really regulate sovereign wealth funds that own clubs? I have asked the Minister about that before, and it is something else that we have to look at, because it is a challenge to the system. I welcome the fact that fans will have a veto over their club changing its colours or name, but there is nothing in the Bill that says that fans have to be consulted about a change of grounds. The regulator has to approve it, but there is no right for fans to be consulted. We need to have a look at that.

I come back to my own club, Sheffield Wednesday—I have mentioned them once, and I will mention them again. They welcome the proposals and the EFL’s approach to the review, and they recognise the need for a change in the distribution of resources. I am not sure that the owner will be that enthusiastic about the change to require him to consult the fans properly. Many owners are like that—they want to go through the motions. Are they really going to engage in a meaningful way? That will be a real challenge for the regulator at a number of clubs. I understand why the form of consultation is not specified, but it will still be a challenge going forward and we need to keep an eye on it.

Finally, I come back to the FA cup. The Minister said it is not our job to get involved in football competitions, but the fan-led review was triggered by some clubs wanting to change the competition they play in by going to the European super league. That involved a handful of rich clubs deciding that they could be better off there. We now have a handful of rich clubs deciding that European games are more important than FA cup replays—that is what is happening.

When Arsenal won the FA cup in 1979, they had five replays, four of which were against Sheffield Wednesday in one round. I remember it all these years later, because it was a great achievement. Three of those replays were at the old Filbert Street ground. We remember those things as football fans, and we should not take them away from the game. I say to the Minister that one of the requirements of the regulator is to ensure that the heritage of English football is safeguarded. Will the regulator have the power to do that under the Bill’s rules, and is the FA cup and its replays not part of the heritage?

--- Later in debate ---

[Stuart Andrew]

My hon. Friend raises an interesting point. I have had dozens of meetings with the Premier League, but as far as I can recall, I do not think that it has raised carving out international broadcast revenue in those discussions, which have always revolved around the net media revenues and the aggregate revenue received by both the Premier League and the EFL; she raises a very interesting point.

Some say that the regulator should be able to trigger the backstop right at the outset. Frankly, that would just be a frontstop, and it may hinder a deal being struck by football itself, but the Bill provides that if there is no deal because one has not been offered or one side cannot sign it because it is not a good deal, that side can ask the regulator to trigger the backstop.

Members have mentioned parachute payments, and I am always happy to meet colleagues to discuss and look at that matter further, particularly in Committee. I am also happy to organise a briefing, if that would be helpful, because it is quite a complex issue. Parachute payments play an important role in the sustainability of the system by softening the financial blow of relegation, and removing them could have adverse effects. Look at Bradford City: when they were relegated from the premier league in 2001, there were no parachute payments, and the following season they went into administration.

[Mr Betts]

Will the Minister give way?

[Stuart Andrew]

I literally have two minutes. I have offered a briefing, and we can have this debate afterwards.

We realise that parachute payments can have a distortive impact, particularly in the championship, which is why the regulator has the power to address any structural or systemic issues through its licensing regime. Any distortion created by parachute payments also has the potential to be addressed through distribution to non-parachute payment clubs; that is exactly what the regulator will be able to look at as part of the backstop. Leading experts have advised us to keep the backstop targeted and simple, which we have done, and to design it so that it may never need to be triggered, which we have also done. As such, we do not think it is appropriate to include parachute payments in the backstop, nor we do think it is necessary to do so, as we have ensured that the regulator will be able to address any distortive effects that they cause via the licensing regime.

I am running out of time to answer more questions. This is a landmark Bill for football. It has been carefully designed to celebrate the sport’s success and encourage investment, but it is about providing stability for clubs, sustaining the pyramid and putting fans at the heart. We recognise that there are many successes, but it is important that we tackle the issues. The IFR will be focused on football, focused on financial stability and focused on fans.

I close by playing on the iconic words of 1966. Too many fans have seen their club on the brink, and they think it’s all over. Well, it’s not now.

Question put and agreed to.

Bill accordingly read a Second time.

Football Governance Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)), That the following provisions shall apply to the Football Governance Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 6 June 2024.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Joy Morrissey.)

Question agreed to.

Football Governance Bill (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Football Governance Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred under or by virtue of the Act by the Secretary of State.—(Stuart Andrew.)

Question agreed to.

Football Governance Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Football Governance Bill, it is expedient to authorise:

(1) the charging of a levy by the Independent Football Regulator in connection with the exercise of its functions under the Act; and

(2) the payment of sums into the Consolidated Fund.—(Stuart Andrew.)

Question agreed to.

Football Governance Bill (First sitting)

Clive Betts Excerpts

Committee stage
Tuesday 14th May 2024 Public Bill Committees

[Robin Millar (Aberconwy) (Con)]

I am chair of the all-party parliamentary football club group, and we too receive sponsorship.

[Mr Clive Betts (Sheffield South East) (Lab)]

I am chair of the all-party parliamentary group on football. I do not think it necessary to declare, but at least it is there on the record in case anyone wants to know that.

[The Chair]

We will now hear oral evidence from Kieran Maguire, senior teacher in accountancy at the University of Liverpool, and Dr Christina Philippou, a principal lecturer in accounting, economics and finance at the University of Portsmouth. Before calling the first Member to ask a question, I should like to remind all Members that questions should be limited to matters within the scope of the Bill. We will stick quite strictly to the timings in the programme motion, which the Committee has agreed. For this panel, we therefore have until approximately 10.10 am. I will give warning before this session finishes. Would the witnesses like to introduce themselves and say a few words before fielding questions from the Committee?

Kieran Maguire: Hello, ladies and gentlemen. I am Kieran Maguire from the University of Liverpool. I have specialised in football finance there for the last 11 years. Along with Christina, we have been asked to submit two research papers to the Department for Culture, Media and Sport; first, in respect of the state of finances of the industry during covid, and subsequently coming out of covid. I think we last produced a paper around 12 months ago.

Dr Philippou: I am Christina Philippou from the University of Portsmouth. I do a lot of work around sport finance and sport governance. Prior to academia, I was a forensic accountant.

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[Damian Collins]

Q Briefly, I want to ask about club owners and the business plans of club owners. On your podcast, Kieran, you have recently been talking about Everton in particular. Would you look at a situation like that and say that if this is going to work and make a difference, it is scenarios like that that should be avoided? The checks on new owners’ backgrounds and their proof of finance should be robust enough to stop clubs getting into that kind of mess.

Kieran Maguire: In an ideal world, yes. I do not think that the regulator can convert us into a zero-crisis environment. It is a case of turning down the dial. In the case of Everton, there was no doubt that money was spent in a similar way to what we saw with Roman Abramovich and Chelsea, and with Sheikh Mansour and Manchester City. There was an investment in talent and options in terms of infrastructure as well. The problem is that if you have any business that is living beyond its means, and is reliant on third-party or ownership funding, I think you have to very carefully monitor the ability of that funding to be maintained on a medium to long-term basis. We have seen, sadly in the case of Everton, that that does not appear to have been the case.

Dr Philippou: That is the importance of looking at the sources of funding, which is part of what is in the Bill, in relation to the owners and directors test.

[Mr Betts]

Q Do you think parachute payments, as they currently exist, cause problems or provide solutions?

Kieran Maguire: I think they do both. The intention of parachute payments when they were introduced, which was around 2006, was to address the possibility of clubs going into administration, because of the significant step-downs between the Premier League and the Championship. At the same time, it does mean that you have created a new benchmark in levels of spending that clubs in receipt of parachute payments can achieve, and therefore those clubs in the Championship that want to be competitive are incentivised to overspend, so I think we have a problem. Parachute payments are a clumsy solution to the bigger problem, which is the significant difference between the revenues of not just the Premier League and the Championship, but also between the Championship and League One.

[Mr Betts]

Q Using your own words then, do you think it is right that that clumsy solution should be written into the Bill as a no-go area, which cannot be looked at by the regulator as part of the financial backstop?

Kieran Maguire: If we are going to look for a 92-club solution or, if we are including the National League, an 116-club solution, then the regulator should be able to deal with parachute payments, otherwise you are not dealing with the whole issue. If you have a redistribution model that does not involve parachutes, the Premier League’s position would be advantageous, and I do not think that would be in the best interests.

Dr Philippou: You need to have access over the whole of revenue, and that forms part of the revenues of Championship clubs. It would not make sense, in that sense.

[Mr Betts]

Q We are told that the regulator will still have some powers over parachute payments. Do you understand what they are and how they might work?

Kieran Maguire: One would imagine that you would look at parachute payments from two angles. First, the quantum—the actual sums involved. Secondly, the length of parachute payments. They have been reduced from four years to three years, in recent years. I think there is a third issue, in respect of those clubs that are in receipt of parachute payments and are then promoted back to the Premier League. The parachutes that are not received are kept by the Premier League and distributed between the 20 clubs. That does seem very harsh, given that clubs are losing more money in the Championship to begin with.

[Mr Betts]

Can I just ask about—

[The Chair]

Clive, I will come back to you, but a lot of people want to get in.

[Mr Betts]

This is about the backstop—

[The Chair]

Clive, I want to bring the Minister in.

[Mr Betts]

Fair enough.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

Q We have heard some accusations that the Bill is over-regulation for football. What is your view on that?

Dr Philippou: It is fairly light touch from a compliance background, if you look at the financial implications and what is being asked for. In summary, you are effectively asking for some budgeting, some basic risk assessment, and knowing the roles of your senior management. It is fairly light touch, if you are running the club properly. From my perspective, it does not look particularly over-regulated. Certainly, from a compliance perspective, I would expect that if you are running the club properly, a lot of that information should be there anyway, and should be easily reportable without adding much burden to clubs.

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[Stuart Andrew]

Q Do you worry about the competitiveness of the bottom of the Premier League, particularly after three weak clubs were promoted? That relates to some of the questions that were asked earlier. Do you have any thoughts about a reasonable timeframe for approving a takeover?

Kieran Maguire: In terms of the issues at the bottom of the Premier League, three clubs have just been promoted and have almost been relegated. The three clubs above them—excluding Everton, because if it had not had a points deduction, it would have been on 48 points—have been in the Premier League for two or three seasons, so there is an acclimatisation issue. There is also an issue at the top of the Championship. The clubs that have just been relegated have greater resources than their peer group, and that is going to have a yo-yo effect, which we appear to be locking in on a greater basis. That tends to be more of the case in the Championship and League One, where some clubs are moving. That is driven by the culture of the owners. The system at present encourages overspending. We have not seen that in respect of the three clubs that are being relegated, but we did see it to a greater degree with the clubs that were promoted in 2022.

Dr Philippou: Absolutely, there is that competitiveness issue, which we have seen diminish over time. That has a long-term impact on the commercial side and on broadcasting rights, because the less competitive a league becomes, the less likely people are to watch it and the less likely broadcasters are to put money in, so that can also have an impact.

[Mr Betts]

Q On the regulator’s powers, is it unusual to have a regulator that cannot decide to intervene until you have gone through a process, and will step in and do anything only after the parties have failed to reach agreement?

Kieran Maguire: You would hope that the parties would be able to sort something out between themselves. If we did not have a regulator, we would be in a very similar position to the one we have at present. The Premier League has no incentive to be more beneficial, in terms of the distribution of money. It would have to be dragged to the table by the regulator, so that is why the backstop powers are important. The EFL is a fantastic league in its own right. The chances are that anybody who has supported a club in the Premier League have also supported it in the EFL.

When it comes to the regulator using last resort powers, it is effectively the same as the Bank of England. The Bank of England is the lender of last resort, but there are alternatives. Surely the same should be true in football. It is testament to the intransigence of the Premier League, in particular, which is unwilling to look at the broader football issues in the country.

[Mr Betts]

Q So it is not the case that the regulator should be able to come in earlier?

Dr Philippou: I think a lot of the parts of the Bill that look to fix issues relating to the financial sustainability of clubs and corporate governance should in the long term negate the need for intervention, because stuff will be run in a much better way. The issue at present is that if there is no money forthcoming into the EFL, that creates a huge potential financial problem. That is why the backstop powers are there. It is one for the lawyers to debate, really.

[The Chair]

If there are no further questions from Members, I thank the witnesses for their evidence, and we will move on to the next panel. Thank you very much indeed.

Examination of Witnesses

Richard Masters, Rick Parry and Mark Ives gave evidence.

--- Later in debate ---

[Robin Millar]

Thank you. Mr Ives?

Mark Ives: It is an interesting question. As you say, the differences between the three competitions are striking. If I understood you correctly, the question was about there being failings in all three. If we are talking about financial sustainability, I am at a loss to see where that failing has been from a National League perspective, for the reasons that I outlined before. That is one of the reasons why I support a lighter-touch position from the regulator, but we need to ensure that there is a safety net there for the sport, so that you to step in when that is needed. As I say, from a National League perspective, the record has been quite strong. When the fan-led review first kicked off, there was a misunderstanding as to what the financial regulations in the National League are, and it was not until, I think, the second meeting that we had with the fan-led review, when that was explained, that people understood and realised what steps are being taken by the National League. That is the background as to why we think there is a lighter touch.

[Mr Betts]

Q I want particularly to look at clause 55(2)(b), which you are probably all very familiar with. Could I ask for your view on that provision—the removal from the regulator’s backstop powers of the ability to look at parachute payments? Did you lobby Ministers to include it?

Richard Masters: We do not think that parachutes should be part of the backstop power.

[Mr Betts]

So you lobbied to have that included.

Richard Masters: Well, when asked for our opinion, did we express it? Yes, we did, and I am very happy to repeat it here, Clive. The backstop power is a very novel power, and it should remain so. It should incentivise football-led solutions, which I believe it intends to do. It drives mediation and negotiation. At the very end, if the people at this table cannot come to an agreement, it is able to impose a solution in one specific area, which is solidarity—the funding of the rest of the pyramid, normally from the Premier League down. Any party has the ability to trigger that mechanism once every five years. All of that has been discussed with all of the people at this top table along the way, and it is right that it was, and right that everybody had their opportunity to express their views. Solidarity, parachute payments, is part of the football pyramid and has been for over 30 years. This is not just between the Premier League and the EFL, but intra-EFL and from the EFL into the national league as well, where there is a generous parachute system for clubs coming in and out of the national league and into league two of the EFL.

Solidarity is relatively new. It came around in 2007 when Lord Mawhinney, once of this parish, agreed a small deal with Richard Scudamore, the then chief executive to the Premier League. Over the past many years we have agreed a number of different arrangements. The current arrangement—which is still in existence; there is no cliff-edge—was agreed in 2019. At the moment, the amount of solidarity that comes out of the Premier League to the EFL is around about £130 million a year. This is the part that we think should be adjudicated on if there is to be a backstop power, not parachutes. Why not parachutes? Because they are a competitive balance tool. They obviously have an impact on sustainability as well, as all financial regulations do. Without parachute payments, the Premier League would not be competitive at the bottom end. You will hear from clubs this afternoon that will be able to talk about parachutes from their own perspectives. One is Brighton, which came up without a parachute.

If a club wants to be competitive within the Premier League, which is a brutal meritocracy and that is why people love it, then you have to be financially supported. That is the principal purpose of it. If you want the Premier League to be competitive and to be the economic powerhouse that it is, and to continue to redistribute its success, then we have to have parachute payments and I do not believe they should form part of this regulatory regime.

[Mr Betts]

Q I expect the EFL has a different view?

Rick Parry: Yes. First of all, we think that the way the clause is drafted is intellectually incoherent because it says that parachutes cannot be included in the definition of revenue—they are not revenue, they are distribution. To take Richard’s point that they should be used separately from solidarity, it is interesting that solidarity payments to championship clubs are literally pegged to parachute payments. They are defined as being 11% of a parachute payment, so they are intertwined.

In terms of the practical effect of what the clause says, if we look at the 2021 figures, five parachute clubs received £233 million between them and 19 championship clubs received £79 million in solidarity. So what we are saying is that we can apply the backstop and all its might to the £79 million, but we cannot touch the £233 million. That seems to be the ultimate definition of fiddling while Rome burns. Why you can view one without the other, I do not even begin to understand.

In terms of the effect of parachutes, just in case people are not across it, if we go back to 2010-11—which is not that long ago—they totalled £30 million. They represented 7% of the aggregate turnover of all championship clubs. By 2020-21, they had risen to £233 million and 39% of the aggregate turnover of the championship clubs. They have become the cuckoo in the championship nest. They are enormous. So if you exclude them from the backstop, you might as well not bother with a backstop, frankly.

[Mr Betts]

Q We had a very detailed submission from the EFL, explaining your understanding of the current distribution of media money within the EFL and the Premier League and what the challenges were. I do not think we have had anything similar from the Premier League, have we? You have not given us your understanding of the current position and what you would like to see it changed to, if you want to see any change?

Richard Masters: Sorry, Clive—

[Mr Betts]

The EFL have given us their understanding of the current distribution of funding within the Premier League and the EFL, particularly around media funding, and what sort of changes they would like to see. I do not think we have had a submission from the Premier League identifying what your understanding of the position is and what changes, if any, you would like to see.

Richard Masters: We have our current agreement and it was agreed in 2019.

[Mr Clive Betts (Sheffield South East) (Lab)]

Q So that is it? So you do not want to see any changes?

Richard Masters: It is a perfectly legitimate debate to be had—is the funding of football correct? That should be reviewed on a periodic basis. We have an agreement that stretches out way into the future and either party can terminate it after three years. The current agreement is about to become five years old, so once the state of the game report is done, the regulator will turn its mind to other issues. We are very happy to express our views on the distributions within football; we are not shy of doing that.

[The Chair]

We must move on, Clive.

Football Governance Bill (Second sitting)

Clive Betts Excerpts

Committee stage
Tuesday 14th May 2024 Public Bill Committees

[Chris Green]

Q When we think about good business, with you coming in with those cultures and values from a healthy business environment, and that culture shock when you come into football, this is the divide that the football regulator Bill ought to be bridging.

Sharon Brittan: I completely agree. May I just say that in football, generally it can be a non-trusted environment? I have a football manager who has stayed with me four years and who has turned down three jobs in the Championship that would have given him three times his salary. I have a CEO who has stayed with me three and a half years. I have built a team of trusted people, because we are working in a culture where everybody has bought into the journey to where this football club is going. You can see that after five years, we are a differentiator in what we are doing in Bolton, and if more football clubs worked in that way, I am absolutely positive that it would enhance the economy and life for the 65 million people who live in this country, and beyond. I am on a mission.

[Mr Clive Betts (Sheffield South East) (Lab)]

Q I want to focus on the point you just made. Obviously, Bolton had a terribly difficult time. If this Bill had been passed five or six years ago, would it have stopped Bolton getting into that mess, or is it that the financial distribution would still be needed to change the world in such a way?

Sharon Brittan: It is a very good question. Football has—or has had—a habit of bringing semi-maniac types of people to the table. I think it is driven by ego. In those situations, it comes down to the fit and proper persons test. The previous owner at Bolton spent £180 million. He was a very good man, but a huge amount of that was spent trying to get out of the Championship. If you have someone who is hellbent and comes in just wanting to spend, I do not know if you can actually stop that, per se.

Ian Mather: Can I come in on that point? I think real-time monitoring would have been really helpful with a lot of the problems we have seen with football; Bury was a really good example. You look back over time and you think, “Well, that wasn’t very good. In fact, it was terrible,” but that was years ago. Actually, the ability to look at what is happening in real time is really important.

I know one of the criticisms is that that will be an expensive item for small clubs. As a small club, our turnover is £7 million. Let me put that in perspective for you. We have a Man City supporter in the room; Erling Haaland earns about £7 million in eight weeks. That is equivalent to our turnover. Nothing in this Bill causes me any trouble at all about form filling or submitting accounts. If you want to see our accounts—they might be four weeks out of date, but that is as much as you are going to get—our cash flow forecasts, forecast profits and losses, which are done every month, or our business plan, that is not a problem. I would not buy the argument that this is all cumbersome and difficult, because it just is not. That sort of monitoring would have helped to prevent problems like Bolton, Derby, Bury and a whole lot of other clubs experienced..

[Mr Betts]

Q You have described your situation at Cambridge, with an owner who is philanthropically putting a lot of money into your club. Where does a club go to if that suddenly stops?

Ian Mather: That is a really great question, and one that would keep me awake at night. There would be lots of people who would want to come in and own Cambridge United. We get approaches all the time, and we just bat them off like flies, because none of them is particularly well motivated. When we last looked seriously, in 2018, there were a lot of poor owners. I know that some went on to other places, and I bet those clubs wished they had never seen them. Their interest was in property and profit, not in football.

Sharon Brittan: People go into owning football clubs for the wrong reasons, which we discussed earlier. That is why you have to have people who go into owning these football clubs for the right reasons—people who understand that the responsibility that goes with these clubs is enormous. I invite any of you to come to Bolton Wanderers and see what we have created. The work that goes into it is non-stop, every day. If you cannot deal with stress, you should be nowhere near owning a football club.

[Mr Betts]

It will only increase on Saturday!

[Dame Tracey Crouch (Chatham and Aylesford) (Con)]

Q Sharon, your passion is obvious, and I am sure that if the Clerks could craft an amendment to the Bill to have you cloned, we would all support it. Ian, you sort of answered this question, but I will ask it again: there has been a lot of scaremongering about the impact of the Bill and some of the unintended consequences—the duplication and so on—but is there anything in the Bill that you fear? That question is to both of you.

Ian Mather: The thing that I fear is that it does not work in key places. On the parachute payment clause, protecting that does not work. I know that Rick has made the point, but I would endorse it: we are not against the concept of parachute payments if they are right. I do not believe that they are right, but let’s have a state of the game review and find out whether they are right, or whether they are an impediment to fair competition in the football world as we want it. But do not then hamstring the regulator so that it cannot deal with that problem, if indeed it is a problem.

The problems here are few: they are about who can trigger it, the parachute payments and how often you do a review. Those are the key issues. It comes down to the money. The other bits in the Bill, such as those about protecting heritage, are really good. We were looking at introducing a golden share in Cambridge United to give fans protection against things such as stadium moves and so on, but the Bill probably makes those redundant.

Sharon Brittan: Tracey, what you said about unintended consequences is really interesting. I have looked at the situation closely, and I like to look at both sides of the story, so we get a clear, honest picture from the Premier League side and the EFL side. I do not even understand unintended consequences; I cannot work out what he is referring to, unless I am missing something. I can understand the EFL’s argument, which is very clear and concise. From the Premier League’s point of view, I have so far not been presented with anything or read anything that has made me think, “What they are saying actually makes sense.” They have put together a very weak argument —I do not think there is an argument—and have conducted themselves poorly. I do not think they have presented themselves in the right way. They are arrogant. They think they are an island, on their own, sailing off and forgetting that 14 of the clubs in the Premier League have come from the EFL.

On how the pyramid works together, we loaned two players over the last two seasons. Both of them—James Trafford and Conor Bradley—went back to their respective football clubs, and they are absolutely flying in the Premier League and talking about their time at Bolton Wanderers. I could bring players to the table who will say to you that they have never worked in such a culture. People need to work in the right culture to bring out the best in them. There is enough stress in the world today.

On unintended consequences, I would love to sit down with Richard and for him to explain it to me because I do not understand it. They are just words, and there is no substance or arguments behind the words. I have not yet come across a cohesive argument to which I can say, “Actually, that’s a fair point.” I am not going to talk about the numbers—we all know the numbers. In my opinion, that this goes back to greed, envy, jealousy and thinking about me, myself and I. I cannot comprehend how someone can view this through that lens when we are a football pyramid, and what we do as custodians affects this country and beyond. We should be cherishing what we have here.

--- Later in debate ---

[Damian Collins]

Q If we passed an amendment to the Bill that made parachute payments illegal and they were scrapped, how would that affect your preparations for next season?

Tony Bloom: I think it would be disastrous for the Premier League. The Premier League has done an amazing job to make it far and away the strongest domestic league in the world, and that is where we want it to stay. It is so important for this country. If that was to happen, then outside the biggest five or six clubs, which may think their chance of relegation is tiny, the clubs could not invest the money in players. And then what would you have?

In countries like France, with Paris, and also with Juventus and Munich, there is domination between the top one or two clubs and there is frequently only one winner in the league. The middle and bottom clubs would not be able to invest, and the differential between the top clubs and the middle and bottom clubs would be so big that it would not be so competitive. Then people would not want to watch it; the broadcast money would not be there; and we would veer towards Spain, Italy, Germany and France. I think it would be an absolute disaster. Clubs could not invest because of the worry about relegation. As it is, with the parachute payments, clubs still have to sell players, typically. Often, they get into serious financial problems even with the parachutes.

[Mr Betts]

Q I have a couple of issues to put to both of you. You have said that everything works well. I think most people would be in disbelief at hearing that statement, because we all can see problems in football right the way through. Individual clubs have had them. There are problems right through the leagues in terms of funding and insolvency. Both your clubs nearly got to the point of extinction. Can you not see the need for regulation to stop grounds being sold away from clubs and to stop clubs going into administration repeatedly and facing those problems?

Steve Parish: The reality is that all around Europe and probably the world, football is a billionaire or millionaire-funded industry. That is the reality of it. It does not make money anywhere in the world. We are not unique: this is not a country where uniquely we lose money in football. It is not a business with a profit principle; it is a business with a winning principle. Whatever rules you put in place, people’s desire to win will always trump their desire to make money. So the problem is that if you restrict our league so much that we are taken out of that game, you very quickly could make us very uncompetitive in terms of a European landscape.

[Mr Betts]

Q Is it not true that the Premier League actually has more money than any two other European leagues put together?

Steve Parish: I have put more money into my club in the Premier League than I used to in the Championship. I write bigger cheques in the Premier League than I did in the Championship. It used to cost me a lot less money to run in the Championship.

Tony Bloom: The reality is that across the world in sport—but particularly in football—clubs everywhere lose money every year. People put it in because they want to be competitive, and they want things for their community, and so the problem you have for every single owner in this country is that they want to be competitive, and they want to spend money, but they want to try to be sustainable—and the two are not compatible. Almost every club—and certainly every league—loses a lot of money. The Premier League loses a lot more money than every other league, and that is true on the continent as well. To be competitive, that is what you need to do—spend money. That will never change, whatever happens with the Bill. You will always have that, and you need to accept it, because that is the reality. Without that, or if you try to stop that, the Premier League would not be the best league in the world.

[Mr Betts]

Q Some might argue that the regulator is there to put backstop powers in place in general to try and stop that unsustainability of clubs going bust, when fans then have no team to support.

Tony Bloom: But going—

[Mr Betts]

Q It seems that both of you are arguing from a completely self-interested point of view. You are saying that, “It is terrible in the Premier League because the few at the top are rigging the system to suit themselves with the help of European competition, and we in the rest of the Premier League clubs find this unfair, and the distribution of resources ought to be fairer to us; however, when we look down to the EFL, we say we do not want parachute payments to end because that disadvantages Championship clubs, so we are happy to support that because it supports our friends in the Premier League”. Is all that self-interest?

Steve Parish: That is not what we are saying at all. We are representative of every club like us; what I—quite clearly—said to you is that I believe that if Bolton were in the Premier League, they would believe what I believe, which is that yes, the pyramid should have a sustainable amount of money, or more money so it can better compete—as Tony says, it is very unlikely, in a normal business case, that any of these things will ever look sustainable; there are a lot of people putting a lot of money into football from their own pocket for the enjoyment of the public and their fan base—but there is another problem, and that is the growing wealth of the big clubs, and that has to be identified. What we need to do is make sure that when we pass these distributions down the league, they come from the right place and are fairly apportioned. That is not me being selfish—that is me being sensible.

[Mr Betts]

Q Should the regulator not have the power to do that?

Steve Parish: As I said, if you had a regulator that we all believed would uniquely make all the right decisions for football, of course we would be in favour of it. What you asked me is what my concerns about the Bill are; my concern with the Bill as a starting point is that relevant revenue is only broadcast income, which would be 75% of Bolton’s revenue should they get into the Premier League, and it is about 20% of the top six’s revenue. That straight away is an example of an area of concern.

I just want to come back on parachute payments, because I need to give you some numbers. In the Premier League, if you finish around midtable, you will turn over about £180 million—it is not an unreasonable thing to budget for. The first year in the Championship, with parachute payments, is about £70 million—so you have about an £110 million drop in revenue, which is pretty catastrophic for any business to try and contend with if they get relegated. Many clubs manage to get back in the first year—on average, it is about one a season for the last 10 years—but the average finishing position of a parachute club is eighth. Many clubs, like Stoke or Sunderland, disappear from the Premier League, and that big gap and big drop gets them in a lot of financial difficulties. This is why parachute payments are so important for the sustainability of football.

Tony Bloom: You talk about self-interest: that is not the case at all. I care about every football club in this country. I am not worried about the top six—I have not said anything about the top six. We have regulations in the Premier League, and if something is going to be changed, you need a two thirds majority; if they get two thirds majority, and the top six vote, and get a few more people, that is the way it is. I am not complaining. Football needs to vote, and the Premier League has its constitution; I have no issues with that.

I used to be in the Championship, and we had parachute payments. I was not complaining—we just worked away to try and be the best we could for our football club. I was never in favour of parachute payments when we went and won the Championship; I never voted for that or discussed that. All I was asking when I was in the Championship was for there to be a bit of sustainability so clubs did not lose an average of £10 million a year, which was voted against because clubs wanted to give themselves a chance to get promoted to the Premier League. I am saying exactly the same in both divisions.

[Stuart Andrew]

Q Tony, I was interested in the comments that you made a moment ago. You said that your concern about the regulations and the Bill is that your preference would be for the Premier League, EFL and National League to all work together for a solution for the future of football. Why has that not happened?

Tony Bloom: Because of the talk of a regulator, as I said—

--- Later in debate ---

[Damian Collins]

Q That was perhaps not the best use of words. I meant if information was brought to the regulator, or if it had reasonable grounds to be concerned; its primary job would not be to check on those things, but it could relay that information back to you as the FA, which has investigatory powers of its own. It is more a question of whether, in principle, you think that those sorts of standards should be incorporated into the corporate governance standards that the regulator should set. That would simply be good practice.

David Newton: I guess it depends on what you mean by good standards. If you are talking about things like national minimum wage or employment rights, then absolutely, those things would be expected. In football, we have our own structures, as you say, for dealing with player-related disputes, or players not being paid—the leagues have very strong rules on that—so those things are dealt with in the structure. Sharing of information with the regulator will obviously be something that may come into focus, once it is up and running, because it is important that there is not duplication of requests for information and that those information requests are shared efficiently.

[Mr Betts]

Q It has been mentioned that the remit of the regulator and the legislation is on things that do not matter to the FA, but do to the fans, such as the FA Cup. One of the objectives of the regulator is to safeguard the heritage of English football. Do you not think that the FA Cup is part of that heritage?

David Newton: Absolutely, the FA Cup is an essential part of our football heritage. We reflect that and take the FA Cup extremely seriously. It is a fantastic competition. Everyone cares passionately about it within the FA, me as much as anyone else. Prior to Dame Tracey’s report, we had already established heritage assets in protection of club playing names. Since the report came out, we have also established rules in the FA on club crests and club colours, so we are very aware of heritage responsibilities in that respect.

[Mr Betts]

Q I think most fans would think that FA Cup replays were part of that heritage.

David Newton: We are very aware that FA Cup replays are a hugely emotive subject. The FA Cup as a whole is a hugely emotional subject for football fans. We took a decision based on an extremely congested football calendar with which, as has been referred to previously we are very much in the hands of the world and European governing bodies and the fixture list. We took a decision that, in such a congested calendar, certain difficult decisions had to be made. But in doing so, we also preserved other elements of the FA Cup that we think are equally strong things, such as exclusive weekends for the FA Cup, which sends a strong message. A stand-alone Saturday for the FA Cup final and things like that also play into the whole narrative. We are particularly keen for the David and Goliath aspect of the FA Cup to continue. Many historic FA Cup games have been decided on the day, and that will continue.

On the financial side of things, we are very keen to emphasise that no lower league club will lose out as a result of the loss of replays. We would rather see clubs budget sustainably for revenue in the FA Cup on a consistent basis, rather than for the one-off potential replay chance. We realise we cannot budget entirely for hope, and every football fan—I am no different—loves replays in the sense of the hope, but unfortunately difficult decisions have to be made and that is where we have got to.

[Mr Betts]

Q Are you frustrated at the FA that, somehow, this great competition and its heritage are being undermined by the interests of a handful of clubs who are going to play European games? It is the top few clubs, again, driving what happens for everybody else.

David Newton: I do not think that is necessarily a fair characterisation. The fixture calendar is extremely complex. We sit down two years prior to the season with our colleagues at the Football League and the Premier League and discuss how we are going to best fit in the games we have. We are the only major European footballing nation with three domestic cup competitions: the EFL trophy, the Carabao cup and the FA cup. We have 20 teams in the top league and 24 in each of the other three leagues, and the calendar is extremely congested. It is not just as a result of European ties. Each of those is a fantastically vibrant competition in its own right. Each of those competitions has a heritage and importance, and it is about a balance between all those competitions, as well as the European ones, that allows them to be fitted in.

[Stuart Andrew]

Q We have heard, in these sessions and beforehand, about the scope of the Bill. Some feel it goes too far; some feel it does not go far enough. Can you talk about your perspective of its narrowness in terms of financial regulation, and why that matters in relation to the relationships and statutes that FIFA and UEFA have?

David Newton: It is common knowledge around the room that UEFA and FIFA have statutes of their own, which basically prevent state interference in the running of football and football competitions. We have worked closely with UEFA and FIFA, and with the DCMS staff who have worked so hard on this Bill. They have been taken through where we have got to. Although we have not had a definitive view as such, it is reasonably clear that a tightness of the Bill relating to football governance is not likely to present huge or significant problems, subject to any changes that may occur. However, anything wider would increase the risk of FIFA or UEFA intervention. That is obviously a place we do not want to be, because of the sanctions that may flow, in theory, from that. We continue to work closely with both those bodies and keep them abreast, along with DCMS, of where the Bill has got to, but I think the narrowness of scope is very important.

Football Governance Bill (Third sitting)

Clive Betts Excerpts

Committee stage
Thursday 16th May 2024 Public Bill Committees

[The Chair]

There is time for one more question.

[Mr Clive Betts (Sheffield South East) (Lab)]

Q To follow up on that, are you trying to achieve not a very detailed description in the Bill of what the regulator can and cannot do, but an acceptance that the regulator has an oversight of what football is doing to address the equality, diversity and discrimination issues, and the ability to comment—and step in if necessary—if football fails to address the problem?

Sanjay Bhandari: Our view is that the regulator should have the ability to have oversight in the way that any other regulator does, as a matter of governance, and that what should go in the governance code is what reflects contemporary best practice. In our experience, to drive change it is probably a couple of different things. There is the base standard and mandatory stuff, and we think the key to that is transparency reporting. Again, transparency is disinfectant. What there might then be is good and/or best practice guidelines, reflecting what is going on in other industries and in this industry. It would say, “Here are some examples of good or best practice that the good or the best institutions are doing,” and try to encourage change through that.

[The Chair]

Thank you for coming and for giving your evidence.

Examination of Witnesses

Alistair Jones, Sarah Turner and Tim Payton gave evidence.

Football Governance Bill (Fourth sitting)

Clive Betts Excerpts

Committee stage
Thursday 16th May 2024 Public Bill Committees

[Stuart Andrew]

Clause 2 sets out the key definitions used in the Bill. It also gives the Secretary of State the power through a statutory instrument to specify competitions. Those specified competitions then define the regulated population—the clubs and competition organisers in scope of regulation. Defining the scope in that way is important in future-proofing the Bill. In particular, it will allow the regulator’s regime to adapt to future innovations in the market like those that we saw when the old First Division became the Premier League in 1992, or when the Football League was expanded and rebranded in the years that followed.

I turn to clause 3. Owners of football clubs play a pivotal role in the sport; without their efforts and investment, English football would not be the success that it is today. Owners have an immense responsibility not just to their club, but to fans, local communities and businesses in the surrounding area. While current league rules outline a requirement to declare who controls a club, the fan-led review identified concerns with the application of the role, in particular where clubs are owned or controlled by offshore entities or complex company structures. Fans have also expressed concerns about the opaque nature of who owns their club. Fans deserve to know who has ultimate responsibility for the club they support, and the clause will ensure just that.

Clause 3 signposts to schedule 1, which defines when a person is an owner of a club. The clause also defines a club’s ultimate owner or owners as those who have the highest degree of influence or control over the activities of a club. When a club applies for a provisional operating licence, it has to identify its owners and ultimate owners to the regulator in a personal statement. Clause 51 requires licensed clubs to publish their personal statements.

Defining the ultimate owner of a club and requiring clubs to declare who they are will be a crucial step in improving transparency and accountability in the game, and in ensuring that fans know who owns their club. Schedule 1 defines owners for the purposes of the Bill and equips the regulator to apply this definition in different real-life circumstances.

It is crucial that owners are suitable in order that the sport can be placed on a more sustainable footing. An ownership chain may be long and complex with many links. To ensure that clubs have suitable custodians, the regulator needs to identify the person with actual control at the very end of that chain, rather than the holding companies or the legal structures that are just links along the way. That is why, under the Bill, only individuals or registered societies are defined as club owners.

Registered societies are specific legal structures defined in clause 91. They must be run as co-operatives or for the benefit of the community. When used by fans for collective ownership of professional football clubs, they are typically “one fan, one vote” organisations in which control is split equally between hundreds or thousands of members. As such, they do not concentrate influence or control with just a few individuals.

[Mr Clive Betts (Sheffield South East) (Lab)]

This is a really important clause. There have been so many problems in so many clubs where actions have happened but there is some mystique about who is responsible. The mystique is often deliberate, to hide the real owners and what they are doing.

Although this will be the rule from now on, one issue that I can see arising is about what happens when a league wants to look at who was responsible for the actions of a club in past months and years. Will there be a trail to discover who the owner was in past months and years, so that that sort of action can be taken by the leagues?

[Stuart Andrew]

That would probably be an issue for the leagues. This is about setting up the statutory obligations and the powers that the regulator will need, and will have, to be able to identify the specific owner. The hon. Gentleman is absolutely right: I have heard time and again from fans that trying to identify who the specific person is has been almost impossible. As we are now putting this measure on a statutory footing, the clubs themselves will be obliged to identify who that person is, but I think retrospective work would be something for the leagues to deal with. If the hon. Gentleman will permit me, I will have a further think about the point and come back to him in writing.

I was explaining why ownership chains can end with registered societies without those societies needing to identify the named individuals behind them. The Bill’s definition of an owner is designed to apply to those at the end of ownership chains, no matter how complex the chains are. It draws heavily on precedent from other legal regimes where ownership can be complicated or opaque, including the “persons with significant control” regime in the Companies Act 2006. It is designed to capture those who have significant shares or rights in or other forms of significant influence or control over clubs. The definition also includes owners who meet one of those conditions at arm’s length, such as via a trust or similar body. This robust and comprehensive definition of owners recognises that clubs have different ownership structures. Part 3 of schedule 1 allows the definition to be amended to ensure that it is future-proofed.

Ultimately, the definition enables the regulator to look behind ownership structures to find the person who is actually responsible. That means that owners cannot simply evade regulation by creating ever more complicated ownership structures. Having a clear definition of an owner that reflects those who have influence or control over a club means owners can be identified, tested and held to account as custodians of the club.

I turn to clause 4. The Bill will introduce two key things that are missing in the industry at present: transparency for fans and accountability for decision makers at clubs. Central to both those points is clarity about who the decision makers are. Officers and senior managers must be clearly defined within the new regime so that regulatory requirements and enforcement can bite on the right people and fans know who is running their club. The clause defines an officer and a senior manager of the club for the purposes of the Bill. The definitions have been drafted in recognition of existing legislative precedent, including the Companies Act 2006 and the Financial Services and Markets Act 2023. It also uses the definitions currently used in the football industry.

The purpose of the clause is therefore to appropriately define the people who run or have a significant level of direct influence over the day-to-day running of the club. Other provisions in the Bill will require regulated clubs to publicly set out who their officers are and which persons carry out specified senior management functions. Officers of the club are subject to legislative requirements, including owners and directors tests. Senior managers will be accountable for the aspects of the club’s affairs that they are responsible for. The regulator may take enforcement action against a senior manager if the club commits a relevant infringement that is connected to a senior management function carried out by that individual or individuals.

--- Later in debate ---

[Rachel Hopkins (Luton South) (Lab)]

I would like to build on the comments made by the shadow Minister, particularly on the appointments to the independent regulator and the expert panel. We heard much in the evidence sessions around equality, diversity and inclusion, and I seek assurances from the Minister that there will, in the usual way with public appointments, be a desire for the board to be reflective of society. We have heard, sadly, that we do not see people with a range of diverse characteristics coming through to senior levels in all aspects of football, across the game—there are very few such referees, and so on.

On appointments to the expert panel, I would like a little more clarity from the Minister on the fact that the chief executive officer must exercise the power to secure

“the range of skills, knowledge and experience of the members of the Expert Panel”,

which includes skills, knowledge and experience relating to

“the operation, organisation or governance of clubs or competitions, and financial or other regulation.”

Reflecting on what we already know about the game, could we have some assurance that this provision merely includes that range of skills, and that we could, in fact, have a wider range of skillsets? We want to ensure that we recognise equality, diversity and inclusion in appointments to the expert panel and the board, so that we are not restricted only to people who have experience of the operation, organisation or governance of clubs or financial or other regulation. Other regulators often have a lay person, for example; they may be a senior professional, but they bring a sort of objectivity to the table that others who are very involved in the industry sometimes cannot see. I hope we can have some clarity from the Minister on that.

[Mr Betts]

Can I just raise two issues? The first is about appointments to the board. Does the Minister feel that the issue of conflict of interest is important? Does he feel that he ought to be setting down somewhere what conflicts of interest may amount to, and what may disqualify someone from being a member of the regulator’s board? Secondly—this issue arises in Select Committees from time to time—will the regulator’s chair be subject to a pre-confirmation hearing by the Select Committee?

[Stuart Andrew]

I agree with the hon. Member for Luton South about the independence of the football regulator; we were really careful to ensure that as we drafted the Bill. She is right that we have to take into account the UEFA and FIFA rules. That is why we have made sure throughout that the regulator will be independent, including from political interference. We would not in any way want to see any sanctions on English football because of any pressure that might be given. As with others, we have engaged with both of those bodies. So far, we feel that they recognise that we have gone to great lengths to ensure that that independence is recognised.

On the board being reflective of society, I am a big advocate of making sure that that happens. There are the usual processes of Government appointments; as hon. Members will know, that issue is very much a consideration. Work is constantly being done to encourage a wide range of candidates to apply. I suppose this gives me an opportunity to shout out to the wider society: get involved! We need a very diverse range of candidates to apply for these positions.

We absolutely need to ensure that the measures on conflicts of interest are in there, just as we would with any other public body, and, yes, there will be a requirement for pre-confirmation of the chair through the Select Committee.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Schedule 2

The Independent Football Regulator

--- Later in debate ---

[Stuart Andrew]

The clause sets out the regulator’s objectives, which are its primary aims and also the limits of its statutory remit. As clause 7 sets out, the regulator may only act if the action taken advances

“so far as reasonably practical…one or more of the IFR’s objectives”.

The fan-led review highlighted a myriad problems facing football in this country, and they are all important issues on which action is need. However, in our response to the independent review, and the White Paper that followed, we were clear that not all those problems are for a regulator to fix. The Government have been clear about the areas on which a potential football regulator would need to act. They are areas related only to sustainability, as it is on the issue of sustainability that we believe the market has failed and remains ill-equipped to act. The three objectives in clause 6 codify that intention into legislation, while limiting the opportunity for scope creep to the various broader issues in football.

The first objective on financial soundness looks to deal with the ability of individual clubs to continue to meet their debts and liabilities, even in the face of changing circumstances, new risks and financial shocks. The lower the risk that a club will be unable to meet its debts and liabilities in the future, the more financially sound it is. More financially sound clubs should help to reduce the risk of clubs being run into the ground and lost to their communities.

The second objective is on the wider financial resilience of the English football system. It involves the regulator taking a more macro view of the market to address structural issues and systemic financial risks. There are issues that individually are a small problem, but when aggregated or multiplied pose a significant threat to groups of clubs or the pyramid as a whole. Examples include the distribution of broadcast revenue throughout the football pyramid, or where several clubs are highly dependent on similar sources of income or similar credit markets.

[Mr Betts]

I am interested in what the Minister says about the sustainability of the football pyramid. If a particular measure on the distribution of funding affects other clubs and those in the pyramid that receive that money, that could be construed as posing a risk to the pyramid and might fall within the remit of clause 6(b).

[Stuart Andrew]

We have had this discussion many times, and I look forward to further debate on this as we go through the Bill. The hon. Gentleman will know that we also have provisions in the Bill for the regulator to look at those sorts of issues through the licensing conditions. I look forward to going into that in a bit more detail with him when we get to that part of the Bill, but I am acutely aware of his interest in that specific issue.

The third objective is on safeguarding the heritage of English football. Since the game was first played more than 160 years ago, football clubs have been an integral part of local communities and the lives of their supporters. The identity of each club is unique and often entwined with the identity of its fans and the history of the local community. Clearly, financial collapse is a risk, but so is the potential for clubs to become unrecognisable to their fans and communities.

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[Mr Betts]

I am interested in the Minister’s definition of heritage. So far he has talked about the heritage of English football clubs, not the wider game, and that is quite interesting. Does he accept, for example, that the FA cup is very much part of the heritage of football in this country, and therefore the regulator ought to be able to give some thought to that competition and its future?

[Stuart Andrew]

The hon. Gentleman tempts me to get drawn into an area of further expansion. I understand his point. I have never in my entire life been stopped by so many people to talk to me about football as on the weekend that announcement was made. I of course recognise the importance of the FA cup, but for the regulator to get into areas of match timings, replays and so on may be a bit too far. We will probably look more into that later.

The third objective looks to safeguard the elements I mentioned in the interests of the community and future fans, but not to stand in the way of the natural growth and renewal of a club. I commend the clause to the Committee.

[Stephanie Peacock]

Given the purpose of the Bill, as set out in clause 1, it is important that the regulator’s objectives are shaped carefully and clearly, as they will underpin many of the other measures. Although the fan-led review initially recommended a dual focus on sustainability and competitiveness, when it came to the regulator’s objectives the White Paper streamlined things so that the primary duties were regarding sustainability, with competitiveness becoming a secondary focus. I understand the Government’s reasons for that and have welcomed the subsequent primary duties being in three areas: the financial sustainability of individual clubs, the systematic stability of the football pyramid, and protecting cultural heritage.

I am pleased that the proposal from the White Paper is largely reflected in the Bill. However, I am curious about a few small changes, to which my hon. Friend the Member for Sheffield South East alluded in his intervention. For example, the exact wording in the Bill has “financial soundness” rather than “sustainability”, as was in the White Paper. Will the Minister explain why? It seems strange that the word “sustainability” is not included at all in the objectives. Further to that, the White Paper framed the systemic financial resilience objective in terms of the football pyramid, but the Bill goes only so far as to say “English football”. Will the Minister tell us whether the word “pyramid” has been purposedly omitted? Or does he believe that the definition of “English football” adequately covers things? I have no further issues with the intent of the objectives, but the wording is important if the Bill is to achieve its stated aims.

[Mr Betts]

The Minister’s answer with regard to the FA cup will disappoint many football fans. Football fans look to us to address things that matter to them, and the Minister is right that many fans were outraged at the decision taken with no consultation—not even proper consultation with the EFL and other leagues—to simply abandon FA cup replays.

We could all wax lyrical about the FA cup replay matches we have been to. Those are the ones I remember, and I refer again back to the 1970s, when Sheffield Wednesday, a third-tier club, had four FA cup replays with Arsenal, which was then in the top tier. I remember every one of those games—I went to four of them at least—because they were a unique experience, and that is what many fans feel. They want us to recognise that and to give some assurance that such decisions will not be taken with their interests cast to one side, as though they simply do not matter.

[Robin Millar (Aberconwy) (Con)]

The hon. Gentleman will have heard the questions that I asked in the evidence sessions that reflected that concern. However, I am mindful of Ronald Reagan, who said that the scariest words in the English language are, “I’m from the Government and I’m here to help.” Does the hon. Gentleman accept that there is reason, merit and even value in the Government’s cautious approach?

[Mr Betts]

We should always be cautious when we look at regulation. Without drawing you into the debate, Sir Christopher, I am sure that you would echo that point. Nevertheless, the fact is that there is a bit of conflict in the Government’s argument. Why are we here today with the Bill in terms of regulation? One of the reasons why is that a handful of clubs decided that they wanted to break away into a European super league, so the Bill specifically mentions clubs not being able to simply up roots and go into a different league without permission. The Bill legislates for and gives the regulator powers over new competitions and which clubs may enter into them, but no powers over existing competitions and how they may be changed.

Let me put a scenario to the Minister that involves not just FA cup replays, because I suppose that decision could be reversed; it would not be too difficult to manage if we got to the point where we wanted that to happen. Let us say there is a scenario—it nearly happened a few years ago—in which the Premier League decides to create a Premier League Two, then pulls the drawbridge up and stops relegation from that league. What would happen then? Would the Minister say, “That is terrible. I am getting a lot of letters and emails and people stopping me in the street; I cannot do anything about it and the regulator has no power”? Indeed, would the regulator have a power to intervene at that point, because that would be a major disruption to the whole structure and pyramid of English football? If the regulator will not be there to protect the pyramid, what will it be there for?

[Stuart Andrew]

On the hon. Lady’s points, the term “sustainability” is used in the purposes and not again in its objectives. Our advice from the Office of the Parliamentary Counsel said that “soundness” achieves the same thing, but we are talking about the remit over the entire pyramid. We feel that would overstretch the regulator, which is why we are focusing on the top five leagues.

I understand the points made by the hon. Member for Sheffield South East. On a recent podcast, I repeated the phrase, used by many, that replays are often the David and Goliath of English football. However, in terms of financial sustainability, I cannot imagine a single club relying on the off-chance that it may have a replay at some point as a sustainable business model for its individual club. As I say, that is why the regulator will focus tightly on what the business plans would be.

--- Later in debate ---

[Ian Byrne]

That is a fine point. I am not excluding anybody, because there was outrage across the piece. Setting this regulator up is welcome, but it must have supporters at its heart. The regulatory principles should include supporters, so I hope the Minister takes on board what we have outlined and adds that one word, which would make a huge difference. It would reinstate trust in the whole process if supporters were listened to.

[Mr Betts]

I was thinking of moving my amendment from the Chair and then I could have directed the Minister to agree with it. [Laughter.] This proposal would feel very strange, as Ben Wright from the PFA said this morning, without the two groups of people who are absolutely key to football. We can manage without owners and directors, but we cannot manage without fans and players, and they are not mentioned in this part of the Bill. Will the Minister give us some comfort at least about how that particular point will be addressed?

[Stuart Andrew]

I recognise the intent behind the amendments, which is to add further groups to the list of persons the regulator should co-operate and proactively and constructively engage with. However, we do not think that is necessary, and we believe it would alter the intention and effect of the regulatory principle in question. We have always said that the regulator should take a participative approach to regulation, which means to co-operate constructively with the regulated industry where possible.

The principle’s original intention was to guide the regulator to take that approach, which might not otherwise have been implicit, since the natural instinct for regulators may be not to co-operate with the persons they are regulating. By contrast, for other groups such as fans and members of local communities, it is implicit that the regulator should engage with them where appropriate, not least because the sustainability objective of the regulator is in the very interests of fans. Indeed, fans and local communities are the key consumer group that the regulator is established to protect. They feature in the very purpose of the Bill in clause 1.

My concern is that to list every possible stakeholder that the regulator should engage with during the course of regulation would be a slippery slope that could impact on the effectiveness and, crucially, the speed of the regime. That is not the intention of this principle, nor is it necessary detail for the face of the Bill.

I absolutely recognise that players and fans have a huge role to play in football. It will be for the regulator to engage with those stakeholders during the appropriate process. That is why, absolutely, where collaboration is working well, we would expect the regulator to continue that. Having a comprehensive list might mean that we miss out a group that we would like the regulator to consult. It might also mean that the regulator then feels obliged to consult that entire list on everything, whether appropriate or not, clogging the regulator up, if we are not careful.

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[Stuart Andrew]

I absolutely understand the hon. Gentleman’s point. It is why, on page 93, the Bill specifically says that the “relevant matters” include

“matters relating to…operational and match-day issues”.

I encourage the clubs to speak to the fans about these very issues.

The Bill is very focused on sustainability in order to protect the long-term future of clubs, in the interests of the fans and the local communities. That means that the regulator will not intervene directly on issues outside this scope—including match scheduling and ticket prices. Issues of that kind are for football to address. It is well within the gift of the leagues and the authorities to intervene if clubs are not getting it right.

The purpose of the state of the game report is to allow the regulator to better understand the finances and economics of the industry and its individual clubs. As industry experts said on Tuesday, the state of the game report will allow the regulator to look forward as well as in the rear-view mirror. In turn, that allows it to deliver on ensuring the sustainability of clubs. To specifically require the regulator to consider ticket pricing and match scheduling as part of the report would detract from that purpose.

[Mr Betts]

The Minister is saying that this is a job for the leagues and the clubs. One problem with the legislation—it relates to the point made a few minutes ago by my hon. Friend the Member for Liverpool, West Derby—is that clubs consult their own supporters. The real argument in the Premier League a few years ago was about the price of tickets for away supporters. How do clubs consult on that? Why should not the regulator, in looking at the sustainability of the game, consider the impact on the future of the game of pricing out away supporters?

[Stuart Andrew]

Again, the clubs will have that engagement and raise those points with their own individual club—the away clubs can raise the issues within their club. This is actually putting it into legislation. It gives them that opportunity, which does not currently exist.

The Government do not believe that amendments 6 and 18 are necessary, as we expect that

“operational and match-day issues”

will already capture ticket pricing, and kick-off times are ultimately a sporting decision. It is not for the regulator to intervene on the sporting calendar, but I do recognise the issues that it causes for fans. It has been raised in Culture, Media and Sport questions with me on a number of occasions, and I have raised it with the authorities. They have promised to come back to me although, in fairness to them, these decisions are sometimes out of their control too. It is quite a challenging area.

The Government would welcome any club that chose to go beyond the relevant matters and consulted fans on kick-off times and everything else. However, as I have just mentioned, it is not always an issue that clubs have enough control over to adequately consult fans and respond to opinions. Therefore, to mandate them to do so could be problematic.

For those reasons, I am not able to accept the amendments and I hope the hon. Member for Barnsley East’s will therefore withdraw them.

Football Governance Bill (Fifth sitting)

Clive Betts Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[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.

[Stuart Andrew]

indicated assent.

[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.

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[Stephanie Peacock]

I thank my hon. Friend for those comments; I am sure that the Minister was listening. I will come to the issue of playing games abroad in future Committee sittings, but I hope that the deterrent of the regulator’s enforcement, as well as the fact that the prohibition will apply whether or not a club is licensed, will be enough to dissuade clubs from making such plans anyway. A club that is willing to participate in a prohibited competition is a club that is willing to risk losing its licence, which would release it from the fan consultation requirements anyway.

The amendment is right to highlight that fans are not currently given a say in the Bill on changes to where their home matches are played. We will come to that point later, when we look at further amendments that give fans a say on stadiums.

[Mr Betts]

On the point about playing games abroad, which we will come back to later, it is interesting that although clubs will have to consult their fans, if the competition organiser decides to move games abroad and requires the clubs to do so as part of the competition requirements, there is no requirement for the competition organiser to consult fans. That seems to be a hole in the provisions that we will have to address at some point.

[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.

--- Later in debate ---

Requiring clubs to have consulted fans on home matches being played elsewhere, prior to notifying the regulator, would mean that the consultation would need to occur before there is a reasonable prospect of the club entering into arrangements. That is unnecessary and may mean that clubs are overly delayed in notifying the regulator. The amendment would also require a club to consult its fans before it proposes to play matches in any specified competition, and that would mean that every licensed club would be required to consult its fans on playing its first match of a league season, which is unnecessary and disproportionate. Competition organisers are already required to consult the regulator on relevant material changes to competition rules, as established in clause 54.

[Mr Betts]

Is the Minister saying that, if a competition organiser such as the Premier League, UEFA or FIFA suddenly required clubs to play their games away from home in another country, it would be covered by the regulator’s powers at present to stop that?

[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.]

--- Later in debate ---

The threshold requirement then empowers the regulator to go further on fan engagement if needed. It allows the regulator to impose discretionary licence conditions on clubs relating to fan consultation in order to meet the fan engagement threshold requirement. The annual declaration condition requires a club to submit an annual declaration to the regulator that sets out all the notifications that the club has made or should have made to the regulator in the preceding 12 months. Broadly speaking, the notifications relate to changes in circumstances affecting the club that the regulator needs to know about in order to regulate effectively. That includes any non-compliance relating to the club. That will create a formal touchpoint each year in lieu of any licence renewal. The emphasis is put on clubs to declare all relevant changes of circumstances and compliance against which they can be held accountable.

[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.

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[Dame Tracey Crouch]

I rise to speak briefly about this particular part of the Bill, because although the fan-led review—and indeed the Bill, the explanatory notes and the evidence that we have heard from fans—have of course referred to some poor owners in the Football League over many years, it is really important that we also recognise that there are a large number of very good owners in football. I do not think that they necessarily get the credit they deserve, because we so often focus on those who have not done the game any favours.

Personally, I often think that, despite my love of football, I would not dream of wanting to be an owner, because at the end of the day someone can be a fantastic owner who cares passionately about the long-term financial stability of their club, but if they do not actually buy that left back during the summer transfer window and ultimately the club does not do as well as fans expect it to—I speak as a lifelong Spurs fan—expectations and reality are very different.

Being a club owner can really be very stressful. I do not think that running a football club, wherever that club is in the football pyramid, is a particularly easy thing to do. I also think that most people purchase a football club with the right intention for the club, its fans and the local community, but we have seen some poor examples of ownership in the past and that has really driven the Bill. I just wanted to place on the record my sincere thanks to all those custodians of football clubs who have not driven away their fans, who engage with others regularly, who do their very best to support the local community and who very much have the best intentions of their football club at heart.

[Mr Betts]

The hon. Lady is absolutely right—there are many good owners of clubs in football. I refer immediately to Milan Mandarić, who came into Sheffield Wednesday when we were virtually bust, put the club on a sound financial footing, wrote the debts off, took the club forward and got it promoted, with Paul Aldridge as chief executive. They worked together. Mandarić then sold the club on, because he believed that he could not take it any further at that time.

There are other owners who do not necessarily have bad intentions—I think the Bill exists to stop those who have bad intentions—but just make mistakes. This Bill will not make every club successful and it will not make every owner make the right decisions, and we should always remember that. The Bill is to stop people from deliberately doing things that undermine the future of their club.

[Dame Tracey Crouch]

The hon. Gentleman makes a really important point. During the fan-led review, Mel Morris gave evidence to us. His is an example that illustrates the point that the hon. Gentleman just made. As a panel, we asked Mel Morris whether, if the Bill and the regulator had existed with real-time financial monitoring, he thought the same mistakes would have been made. He said that fundamentally he thought that if these interventions had been in place, Derby would never have got itself into the situation that it did.

[Mr Betts]

That is a really helpful point. The Bill is about stopping people from doing the wrong things for the wrong reasons, as opposed to stopping people from making mistakes because they are trying to do the right thing but get things wrong. We will never be able to stop that completely.

[Damian Collins]

I echo what my hon. Friend the Member for Chatham and Aylesford said. Part of the problem with the lack of oversight of spending, particularly in the Championship, is that club owners who go in with the best of intentions find themselves competing against other clubs that are spending over 100% of their annual revenue on salaries. They therefore make mistakes in trying to compete with someone else who is already trading in breach of the league’s rules.

[Mr Betts]

Absolutely. Trying to keep clubs in line with the league’s rules, so that others do not over-compete to match them, is vital. We will come on to parachute payments later, including how they can drive these processes.

We cannot go back and undo all the problems of the past. My concern about new clause 3 is about owners who, for whatever reason, have decided to separate the ownership of the club from that of the ground. I know that in future that will require proper consultation and approval from the regulator, but this is being done in some clubs. My own club, Sheffield Wednesday, is one. Derby County has done it, and I think Aston Villa and Charlton have as well—it has happened at quite a few clubs, for various reasons. For Sheffield Wednesday and Derby, it was a way to try to get round the financial restrictions on clubs. Wednesday just made a mess of theirs and got the timing wrong, so they got a points deduction anyway.

New clause 3 is an attempt to say that although we cannot go back and reverse that decision—we cannot force the owners to sell back the grounds to the same organisation that owns the club—we can say that if the club is to be sustainable, the owner has to demonstrate that the ground will be available. A club cannot play without a ground; if it does not have a ground, it is not sustainable. I hope that the Minister will take that point seriously. If he cannot accept the new clause, because there is some—

[The Chair]

Order. We are discussing clause 26.

[Mr Betts]

Sorry. When we come to the new clause, I will say that I have already said what I will say.

[Anna Firth]

I am very pleased that we have got to this important part of the Bill, which deals with owners and directors tests. I am conscious that we may be about to come on to the provisions that I am about to support. I would be grateful if I could say my piece now, and then not come back to it. Perhaps you could guide me, Mr Sharma.

--- Later in debate ---

[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.

Football Governance Bill (Sixth sitting)

Clive Betts Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[Mr Clive Betts (Sheffield South East) (Lab)]

I am speaking in the right place this time. I was pre-emptive in my comments before the break, but that has given the Minister an opportunity to go away and look at the wording that he will come forward with to improve new clause 3.

I take the Minister’s point about the complicated circumstances for many clubs with respect to who owns the ground and what form they own it in, and that is understood. I hope that we can find a way of ensuring that, whatever the complications, the owner cannot simply put the club and the ground into different organisations—different legal constructs—but that in all cases there can be an assurance that the club will have use of the ground going forward, because otherwise the club cannot be sustainable by anyone’s definition.

I thank the Minister for agreeing to go away to look at the issue. I accept that new clause 3 is probably imperfect, and I very much look forward to a perfect clause coming back from him in due course.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship this afternoon, Ms Nokes.

I thank hon. Members for their contributions. The hon. Member for Sheffield South East thinks I can work that quickly, just in the time we had during the break, but I have committed to write to him. Work is going on among colleagues in the Department for Levelling Up, Housing and Communities, for example, but I will write to him with further details.

On the specific question of the hon. Member for Barnsley East about local information, she made an important point. Fans and other sources are able to provide information to the regulator about the suitability of their owners or officers should they wish to do so. It will of course be up to the regulator to determine the relevance and significance of any information provided to it, but the mechanism exists.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28 to 31 ordered to stand part of the Bill.

Clause 32

Determinations under sections 28 and 29: time limits

--- Later in debate ---

[Stuart Andrew]

I thank the hon. Lady for her comments.

As I said, if the regulator deems that a current owner is unsuitable, it would first direct them to leave the club in the specified timeframe. During that period, the regulator will have available several powers to safeguard the club from further harm. However, as the hon. Lady rightly said, there is a risk that an unsuitable owner does not comply with the directions. For instance, they may refuse to leave the club or may continue to use their position as owner to damage the club. In those situations, the regulator will have the powers to directly remove the unsuitable owner from the club.

The hon. Lady makes a point about cases in which there is a failed incumbent owner but no new prospective buyer for the club. By conducting strong statutory tests on prospective owners, the regulator will ensure that clubs are run by suitable custodians and that unsuitable owners can be stopped at the point of entry. That will help to reduce the risk of unsuitable owners entering the industry.

The wider regulatory system of financial regulation and improved governance will further put clubs on a more sustainable footing, which should ensure that clubs are attractive as investments for prospective buyers. If an owner wishes to sell, or is required to sell by the regulator, the club should therefore be a much more attractive asset.

[Mr Betts]

The Minister is almost assuming that the regulatory regime is going to make a perfect world, and that there are not going to be failures. The question being asked is: what happens when there are? When there is an owner who is required to sell, what happens to the club in those circumstances?

[Stuart Andrew]

The hon. Gentleman is right. I am not saying that this is going to be the panacea for all football clubs; they are businesses, and businesses go under at times. When the regulator is ensuring that the club has to be sold, its powers will minimise the risk of a bad owner further damaging the club, which adds to the pressure of finding a good new owner to take over. By having those powers, we are not drumming that club into the ground, as we have seen in other instances; it remains a positive and attractive prospect for investment. I hope that answers the hon. Gentleman’s question.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clauses 39 to 44 ordered to stand part of the Bill.

Clause 45

Duty not to operate a team in relation to a prohibited competition

[Mr Betts]

I beg to move amendment 21, in clause 45, page 37, line 11, leave out from “fans” to “about” in line 12 and insert

“players and staff of regulated clubs in England and Wales”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 22, in clause 45, page 37, line 12, after “competition” insert

“and the full impacts of such a decision”.

Amendment 13, in clause 45, page 37, line 15, at end insert—

“(aa) professional football players,”.

This amendment expands the list of those whom the IFR must consult.

Clause stand part.

[Mr Betts]

Amendment 21 is quite simple, and I am sure that the Minister can accept it without much consideration. It simply applies where a team is prevented from going into a prohibited competition, which I think is absolutely right. The outrage of the European Super League in some ways triggered recognition of the issue and the need to regulate football more appropriately. There are consequences for people who make their living from football, whether they are players or staff members of clubs.

Ben Wright from the PFA very appropriately spelt out the fact that the Bill quite rightly, in many cases, highlights the need to consult and involve fans, but players are not mentioned anywhere. As Ben Wright said, there are only two groups of people who really matter in football:

“those who play it and those who watch it.”––[Official Report, Football Governance Public Bill Committee, 16 May 2024; c. 88, Q145.]

Without those two groups, football would not exist. I hope the Minister thinks about the amendment and comes to the conclusion that he could accept it without undermining the Bill in any way. I hope he might give careful consideration to that.

I am also happy to support amendment 13, which was tabled by my hon. Friend the Member for Barnsley East. It is very much along the same lines as my amendment, and the Minister might rather choose her wording if he cannot support the wording that I have put forward. I hope the Minister will reflect carefully on the amendments.

On amendment 22, having

“the full impacts of such a decision”

taken into account seems a fairly obvious thing. The Minister will no doubt tell us that that is the intention of the Bill and that there is no need to add in the extra words, but I am sure he will agree that the extra words are not in any way in conflict with what the Bill is trying to achieve.

[Stephanie Peacock]

I am pleased that we are making good progress in moving on to discuss part 5 of the Bill and the free-standing duties on clubs, which apply to clubs separately to the licence conditions. They are set out by the Bill directly and, in many cases, apply to a club regardless of whether it is licensed.

Clause 45 sets out the duty not to operate within a prohibited competition. I will briefly set out some context before discussing amendments 21, 22 and 13. The clause is clearly designed to prevent a repeat of the European Super League, which rightly prompted immense backlash from fans, clubs and governance structures throughout the English football pyramid when it was first announced over three years ago.

There were many reasons why the project sparked such outrage, and it is important to name a few directly. First, the European Super League was designed, at least to some extent, to be a closed competition. For many of the richest clubs, qualification would have been an automatic right, rather than being meritocratic. It would have taken an axe to one of the most important features of football’s success: the idea that any one team can dream big and become a winner. With qualification based on merit taken out of the equation, the entire structure, purpose and sustainability of football’s existing competitions would have been undermined.

Secondly, the European Super League was launched—

--- Later in debate ---

[Stuart Andrew]

Amendments 21 and 13 would require the regulator to determine and have regard to the views of club staff and players, placing them on equal footing with the club’s fans for the purposes of clause 45. I do not believe that the inclusion of players and club staff is necessary here. The Bill is designed to protect and promote the sustainability of clubs so that they continue to serve the interests of their fans in local communities, who have been around far longer than any owners and will be around long after those owners have moved on. That is why clause 45 requires the regulator to determine and consider the views of fans.

A decision to prohibit a competition may also impact a wide range of other stakeholders, which is why the clause already requires the regulator to

“consult such other persons as”

it

“considers appropriate.”

That allows for consultation with a broad range of potential stakeholders. If the regulator considers players and staff of regulated clubs to be an appropriate group, it must consult them. It is right that the regulator has the discretion to make the judgment.

Amendment 22 seeks to draw out that when the regulator is determining the views of fans about a competition being prohibited, it must include their views on the full impact of the competition being prohibited. Specifying that in the Bill is unnecessary as it is already implicit that fans would consider the potential impacts as part of reaching a view on a competition’s prohibition. For the reasons I have set out, I hope the amendment will be withdrawn.

[Mr Betts]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 13, in clause 45, page 37, line 15, at end insert—

“(aa) professional football players,”.—(Stephanie Peacock.)

This amendment expands the list of those whom the IFR must consult.

Question put, That the amendment be made.

--- Later in debate ---

[Mr Betts]

Why does the Bill give powers to the regulator to stop clubs entering into new competitions but no powers to stop fundamental changes to existing competitions, which fans might find just as unsuitable?

[Stuart Andrew]

I understand the point that the hon. Gentleman makes. We have had this conversation several times on the replays, and I understand that point. As I have said before, not drawing on the merits of the decisions that have been made, I understand some of the challenges that those organisations have in terms of a very crowded field and in terms of competitions.

--- Later in debate ---

[Stephanie Peacock]

Football stadiums have immense value. First, they have value to fans, who have precious memories going back generations of standing in the same spot watching their club through the lowest lows and highest highs. In many ways, a stadium is one of the strongest ties a club has to the local community. A club’s staff, players and owners might change, but the pitch remains.

Secondly, grounds also have a financial and fundamental value. They are often among the club’s most valuable assets. In well-run clubs, that is positive, but where a club is already financially unstable, home grounds can become vulnerable to sale in a way that seriously undermines the club in the long term. In some cases, they are sold in a desperate attempt to make a return on losses, and in others they are sold by those purposefully wishing to strip a club of its assets before leaving it behind to collapse. Indeed, there are numerous examples of clubs in financial trouble selling their stadiums to give owners some collateral on their investments or to circumvent profit and sustainability rules. Troubled Sheffield Wednesday sold Hillsborough to its owner for a profit of more than £38 million, covering its pre-tax losses of £35 million. Both Reading and Derby sold their grounds in a similar fashion. But a stadium can be sold only once, and without a stadium in their possession, clubs risk not being able to play at all.

We are familiar with the story of Wimbledon FC, whose home was forcibly moved to Milton Keynes in 2003, resulting in the club being renamed. Finances aside, that decision was devastating for local fans, who felt their club had been stolen from them and their community, as we heard in the evidence session. Given that the regulator is a body specifically established to both ensure the financial sustainability and protect the heritage of English football, it is right that it should have a responsibility to ensure that stadium sales do not undermine a club’s future.

There are of course many circumstances in which a club’s selling its stadium and relocating is a sign of progress and positive investment. Tottenham fans, for example, are now enjoying the benefits of a brand-new state-of-the-art ground, while the club is widely considered one of the best in the country. That kind of investment should in no way be discouraged, let alone blocked. The regulator must therefore be equipped to tell the difference between two very different kinds of proposed transactions—those that propel a club forward and those that seriously undermine a club’s long-term financial sustainability or heritage.

With the expertise the regulator will have, I understand why the Government have decided that it is best placed to grant approval on stadium sales and moves. However, I also acknowledge the concern that the FSA and many fans have about their lack of voice in the decision-making processes in both clause 46 and clause 48.

Amendments 3 and 29, tabled by my hon. Friends the Members for Liverpool, West Derby and for Sheffield South East, give us the opportunity to discuss the role that fans might play in understanding what a stadium change might mean in terms of the fans, heritage and local community. It is of course the fans who will suffer if their team no longer has anywhere to play, and it is fans who best understand the precious heritage and memory that grounds carry for them and their community.

Clause 48 seems to be based on an understanding of that point to some extent, given that the regulator is explicitly tasked with paying attention to whether a relocation of home games would cause “significant harm” to the heritage. However, as Fair Game points out, it would be curious if the regulator were able to understand the implications for heritage without consulting fans. Will the Minister explain how that might work? On what basis will the regulator make a judgment if it is not through understanding the impact on fans?

Combined with the lack of consultation rights in clause 46, the result is that fans are currently given absolutely no voice on matters to do with stadiums, even though they are the ones who will travel there, buy tickets and offer their support. I understand that the regulator is best placed to make a final decision, but it is unclear to me why fans cannot form one of the inputs that the regulator might consider.

The Government’s White Paper said that the regulator should

“have a remit to consider the implications for club heritage of any proposal, the views of fans and the club’s historical connection to its locality.”

Will the Minister share with us what has happened between the publication of the White Paper and the Bill to cause the Government to divorce the idea of heritage from fans? It must be clear why fans have not been given any say in this process. I hope the Minister will elaborate on that point today.

Finally, I want to examine whether the Bill will be able to prevent some home matches being played abroad if that damages heritage. This is not a purely theoretical proposition. Just a few weeks ago, Tim Howard wrote for a national newspaper about why Premier League games being played in the USA was “inevitable”. FIFA has also reportedly begun the process of allowing league matches to be played overseas. When Tim Payton of the Arsenal Supporters’ Trust gave evidence to the Committee, he warned that the movement of games abroad could be the next catastrophe the size of the Super League.

Clause 48 has the potential to provide assurances that this kind of action could only be taken by clubs with the approval of the regulator, should it be seen to damage heritage. However, the wording does seem to be geared more towards permanent relocation rather than the issue of clubs wishing to play single games, or a small subset, away from home.

Will the Minister confirm whether approval only needs to be sought by clubs wishing to play all of their home games elsewhere or whether it also applies to clubs wanting to play a handful of games elsewhere? In particular, will the regulator be able to have a say on league games being played abroad, and if so, would fans be given a say in the process? Given the salience of this issue with fans, it is important that we are clear on how the clause would apply.

[Mr Betts]

I rise to speak to amendment 29, which I tabled. We will move on to a debate on clause 49 shortly, to which it relates. It is interesting that fans will get a specific consultation, involvement and approval about changing the crests, shirt colours and names, as those are decisions that can be reversed quite easily. We know about the problems at Cardiff with shirt colours and at Hull with the name, but even if those mistakes are made by the owners, they can be changed the following year. A club cannot go back to playing on its old ground if it has been sold and is no longer an asset of the club. In some ways, the issue of where a club plays and its ground is more important for the heritage of the club, and it needs to take account of the interests and wishes of fans.

In clause 48, we have a regulator that will have to look at the significant harm done to the heritage of the club by moving ground. How does the regulator decide what is significant harm to the heritage of the club in isolation? The fans are the ones who understand that. They are the custodians of the club; they are the ones who go every week, whose families have gone to the club for years and whose children will go in the future for years. They are the ones who have a real stake in the heritage of the club, yet there is nothing in the wording that says they must be consulted.

All amendment 29 states is that in looking at the issue of significant harm to the heritage of the club, we should actually ask the fans what they think about it, so that they do not consider that the arrangements will constitute significant harm. I do not know how on earth the regulator will come to a view that is not a view derived from consulting the fans, so I hope that the Minister will give way on this amendment. At the heart of what we are doing here is ensuring that fans are listened to about the issues that are so important to them, and there is nothing more important for fans of a club than where their club plays, so I hope the Minister thinks that this amendment is in the spirit of the Bill and could be accepted.

[Stuart Andrew]

The Bill requires regulated clubs and clubs that have been regulated in the past five years, which I shall simply refer to as clubs, to notify the regulator where there is a reasonable prospect of either the club selling or otherwise disposing of its home ground or using it as security for a loan or other liability. The proposed transaction can proceed only if the regulator grants approval. Clause 46, which the amendment seeks to change, deals with only the narrow issue of a home ground disposal or the use of the home ground as security. Those matters do not necessarily threaten the heritage of the club in the same way as forcing a relocation. Where currently regulated clubs propose to relocate in parallel, which may impact on the clubs’ heritage, that is subject to a separate approval from the regulator under clause 48.

Clause 48 sets out that the regulator can grant approval to a relocation only if it does not undermine the financial sustainability of the club and does not cause significant harm to its heritage. Given that clubs will be required to consult with fans on matters relating to home ground, we expect that the regulator would consider that in reaching its decision on whether to approve a relocation.

[Mr Betts]

The Minister is therefore saying that a club makes a proposal, consults with the fans and comes to a view, then the regulator must accept the view that the club has come to. Why does the regulator not have a responsibility to ensure that the fans are comfortable with any proposal in the way that amendment 29 suggests? Why is it simply left to a club, which may have a vested interest, to consult with fans and report at second hand to the regulator?

[Stuart Andrew]

The regulator will be able to see whether that consultation was done properly, and the mechanisms that we are setting up for fan engagement are much strengthened from what they may be at the moment. That gives confidence that what the clubs consult on will be done through a mechanism that is much stronger than some of the examples mentioned earlier by the hon. Member for Barnsley East. By doing that, because it is about the club’s heritage—it is its home ground, and the club is going to move—the club must demonstrate that it has properly consulted with the fans in the way described by the Bill.

[Mr Betts]

Where does it say precisely that the club must consult on that? It must consult about shirt colours, names and crests, so where does it specifically say that about the ground?

[Stuart Andrew]

The heritage of the club will include its home ground. Of course that is part of the description of heritage, so it will come under that aspect. Just selling the club to get a loan, for example, will not move the stadium, but if it is going to relocate, that is a change to the club’s heritage, so that will come under the heritage aspect of the Bill.

[Mr Betts]

Which bit of the clause covers that? Can we have the word, please?

[Stuart Andrew]

As I said a moment ago, clause 48 sets out that a relocation can be granted approval only if it does not undermine the financial stability of the club or cause significant harm to its heritage. It will come under that.

[Mr Betts]

That is the IFR’s responsibility, but nowhere in the Bill does it say that fans have to be consulted. Neither the IFR nor the club has to consult on the matter, does it?

--- Later in debate ---

[The Chair]

Mr Betts, do you wish to move amendment 29?

[Mr Betts]

I will reflect on what the Minister said. I will perhaps do so at a future date, but I will not move it at this stage.

Clause 48 ordered to stand part of the Bill.

Clause 49

Duty not to change crest, home shirt colours or name without approval

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

A club’s name, home shirt colours and crest are intrinsic parts of its heritage, and therefore the decision to materially change any of them requires considered thought and consultation. The clause requires a club to establish that a majority of domestic supporters approve any material changes to its badge or predominant home shirt colours. In practice, we expect that to take place through a formal survey of fan opinion, as happened last season when Bristol Rovers supporters opposed the final proposal put to them, resulting in the club halting the redesign of its crest.

The clause also requires clubs to get Football Association approval prior to changing the name their team plays under. The view of supporters is a significant factor in the FA’s final decision, but it may also need to balance wider considerations, such as the effects on other clubs in the pyramid, and the relationship between the club’s current name, the proposed name and the locality with which it is traditionally associated.

--- Later in debate ---

[Stephanie Peacock]

During our discussion of clause 16, I spoke about the importance of clubs publishing personnel statements. By identifying exactly who holds key positions, including owners and officers, the regulator will be absolutely clear who must be held accountable for the proper fulfilment of licence conditions at each football club. With that in mind, I am pleased to support clause 51.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52

Duty to pay a levy

[Mr Betts]

I beg to move amendment 30, in clause 52, page 42, line 28, at end insert—

“(9A) The starting point for calculation of the levy payment under subsection (9) applicable to a particular club shall be a percentage of its annual revenue.”

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Clause 53 stand part.

[Mr Betts]

This is a fairly simple clarifying amendment. As we have heard, smaller clubs feel that regulation must be proportionate and that there should be more requirements on very wealthy clubs, because they have the staff and resources to deal with that. Smaller clubs may find the whole issue of regulation very challenging, so amendment 30 simply says that the levy they will have to pay should be a percentage of annual revenue; in other words, a proportionate basis for the levy should be written into the Bill. The Minister may say that that will happen anyway—that that it is what the regulator will do—but the issue is a concern for smaller clubs, and the amendment 30 is an attempt to highlight and deal with it.

[Stephanie Peacock]

When the fan-led review first proposed the creation of an independent regulator for football, it suggested that the most logical way to pay for it would be through a levy on those who would benefit from it: the clubs. I agree with that conclusion, and I am pleased that the Bill confirms that the regulator will be able to require licensed clubs to pay an annual levy.

However, even though clause 52 is relatively detailed, there is surprisingly little on how the levy will be split between the clubs themselves. That is something that amendment 30, tabled by my hon. Friend the Member for Sheffield South East, has sought to rectify. If the regulator is given wide discretion to determine the extent of the levy, clubs further down the pyramid might be concerned that their payments will not be proportionate to their wealth and size. Of course, clause 52 states that the regulator should have regard to the financial resources of each club and the competition it operates in. That is promising, but it is worth clarifying today what that is expected to mean in practice. Will decisions be based on broadcast incomes, as per the fan-led review, or just on average total revenue, as per the White Paper?

There is broad agreement that the richest clubs should subsidise regulation for others. The majority of costs should, in this case, fall on Premier League clubs. The Government identified that these clubs could pay about 80% of the cost, with the six richest clubs taking on 50% of the total cost. The regulator will ultimately dictate the shape of the levy, but it should be under a clear direction to ensure that the levy is progressive and proportionate. It hardly makes sense for a regulator focused on financial sustainability to shackle struggling clubs to paying large fees. It is important that clubs do not fear the introduction of the new regime and view it as an opportunity, rather than being scared into thinking it will be a hindrance.

Clause 53 requires the regulator to consult before making the levy rules. That will include taking input on a draft version of the rules from the Secretary of State, the Treasury, regulated clubs and other appropriate persons. That welcome measure will hopefully shape the levy rules in a progressive way. It is also right that the regulator must publish information about the costs involved in calculating the levy charge before it starts charging in any given year. That transparency will be important, particularly for the clubs, which will want to understand exactly what they are paying for and why.

Overall, I welcome the levy and the method of payment, and I look forward to clarification on how the Minister expects the levy will be set.

--- Later in debate ---

[Stuart Andrew]

The reality is that, to help it understand the specifics of club finances, the regulator will have at its disposal information that we do not have at the moment. If we set the levy by percentage, we may unintentionally cause a problem for some clubs and cause an unintended consequence. The regulator will be best placed to make sure that the levy is proportionate, which is why we want the regulator to determine it. My hon. Friend is right, in the sense that some clubs will pay more for a player than most clubs earn in a year, but we will make sure that the levy is proportionate. I understand the points the hon. Member for Sheffield South East made, and I have heard what some of the smaller clubs have been saying, but I am confident we will be able to achieve that aim.

Clause 52 will allow the regulator to charge a levy to licensed clubs that covers the regulator’s running costs, following the precedent of other regulators, such as the FCA and Ofcom. The cost of the regime will be paid for by licensed football clubs. By making football clubs more sustainable in the long term, the regulator will be providing a service to the industry. As the industry would benefit from regulation, it is logical that it, rather than taxpayers, should cover the cost.

The legislation puts robust checks and balances on the regulator, which will be limited to raising funds to meet its annual regulatory running costs. That includes the costs of ongoing regulatory activity, additional money for new activities, and costs associated with recouping set-up costs. In line with the principles of transparency and accountability, the regulator will be subject to “Managing Public Money” guidance, and its forecast running costs will be subject to review by the Department for Culture, Media and Sport and the Treasury.

The clause also gives the regulator discretion regarding the method for calculating the levy and in setting the levy payment level for individual clubs. To ensure that the regulator takes into account clubs’ differing financial circumstances, and to prevent charges from being unaffordable for clubs, clause 52 requires the regulator to take into account a club’s financial resources and the league it plays in. Clause 53 imposes a statutory duty on the regulator to consult regulated clubs and the Government on its levy rules.

The levy is an operational matter that should be determined independently by the regulator, and it would not be appropriate for the Government to make the assessment. As I say, running costs will be checked by both the DCMS and the Treasury.

[Mr Betts]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Stuart Andrew]

I can confirm that I am confident.

Question put and agreed to.

Amendment 23 accordingly agreed to.

Clause 54, as amended, ordered to stand part of the Bill.

Clause 55

PART 6: OVERVIEW AND INTERPRETATION

[Mr Betts]

I beg to move amendment 27, in clause 55, page 45, line 1, leave out paragraph (b).

This amendment allows the regulator to consider the effect of “parachute” payments when assessing the distribution of revenue between competition organisers.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 31, in clause 55, page 45, line 3, at end insert—

“unless the IFR specifies otherwise in rules.

(2A) The IFR can only make such rules if it can be satisfied that their inclusion furthers its objectives under section 6 by protecting and promoting—

(a) the financial soundness of regulated clubs, and

(b) the financial resilience of English football.

(2B) The IFR should also have regard when making any rules under section 7 to act in such a way that avoids any—

(a) effects on sporting competitiveness of any regulated club against another regulated club,

(b) adverse effects on the competitiveness of regulated clubs against other clubs, and

(c) adverse effects on financial investment in English football.”

Clause 55 stand part.

--- Later in debate ---

[Mr Betts]

Could I ask for a bit of advice, Ms Nokes? I have a selection list that says that new clause 4, which I also tabled, should be debated with amendment 27, but another selection list says that it should be debated under clause 56. There seems to be some discrepancy. It would be helpful if you could provide an explanation.

[The Chair]

The suggestion is that you are looking at a previous selection list. New clause 4 will be debated with clause 56.

[Mr Betts]

Thank you for that clarification—I am sorry for mixing myself up.

Let us get down to the issue of parachute payments, which almost everyone spoke about on Second Reading, and which the Minister seems to believe should be treated as a given in their current form, with no change. I think he has the support of the Premier League—or some clubs in the Premier League, because it is by no means certain that the Premier League speaks with one voice on these issues. But it clearly is a very important issue.

I am calling for the removal of clause 55(2)(b), which stops the regulator, as the backstop, being able to consider removing or changing parachute payments in their current form. Under the regulator’s remit, they have to be treated as a given.

[Dame Tracey Crouch]

Is the hon. Gentleman talking specifically about parachute payments from the Premier League into the Championship, or is he talking about the smoothing process of the parachute payments to clubs that are relegated from leagues in general, indeed most probably from the EFL into the National League?

[Mr Betts]

I am talking about parachute payments that currently exist, which is what the Bill refers to—I do not think it refers to parachute payments that might exist in the future in some other arrangement.

[Dame Tracey Crouch]

It is important to place on the record that National League clubs get 100% and then 50% of an EFL deal for League Two upon relegation, and a Championship club once relegated gets one eighth of the Championship deal for one season, and a League One relegation gets one ninth. This is not the same solidarity payment. It is important to remember that, when clubs are relegated to the league below, there is some sort of parachute payment in order to smooth out the process of losing the revenue received from being in that upper league.

[Mr Betts]

The point I was going to go on to make was that I am not suggesting that parachute payments should never be allowed under any income redistribution. That is not the case. My amendment does not say, “No parachute payments”. It says that parachute payments can be considered as part of the overall distribution of finances within the game.

The Bill as drafted states that parachute payments are exempt from consideration at the backstop stage—full stop, end of story. Everything else, including media income, can be considered, but not parachute payments. That seems strange, given that the Minister has repeatedly said that the independence of the regulator needs to be preserved and recognised, and yet on this key issue its hands are being specifically and absolutely tied. That just does not chime as an appropriate situation for the Government to get themselves into compared with everything else that they have said about the Bill. The regulator needs to be independent and have discretion, but on this issue it is not allowed to have the freedom to look at the situation, particularly with regard to the state of the game report. If the regulator believes that it is necessary to revisit the issue of parachute payments in order for income in football to be distributed properly and appropriately, and for it to be sustainable not just for individual clubs but for the whole of the football pyramid, this proposal is a significant mistake.

We must recognise that 80% of what the Premier League gives to the EFL is in parachute payments to a handful of clubs. When the Premier League talks about its generosity to the game, it is talking about generosity to a handful of clubs that have just been in the Premier League. That is not a real position. When we look at the distribution of the media money overall, we find that 92% goes to 25 clubs—namely, the Premier League clubs and five others that have been in and out of the Premier League in the recent past. That is not sustainable, and if a reasonable and fair distribution of money should be agreed in the future, the regulator must have the power to take that into account.

I have also said to the Minister that we ought to look at not just the importance of parachute payments to the clubs that receive them. I do not think that anyone I have met who has talked about this issue has said, “You cannot have parachute payments.” They say that it must be looked at in terms of the totality of the game and the distribution of money. I would understand, very quickly, that a club going up into the Premier League faces an enormous difference between the wage bill it had before being promoted and the wage bill it will need once promoted, and it must have some reassurance on what happens if it gets relegated. That is an understandable situation, but we must also take into account the impact on the finances of clubs in the same division as the relegated clubs and their ability to compete.

It has been said over and over again that Championship clubs are getting completely overstretched, because the holy grail of promotion to the Premier League means that clubs try to extend their budgets beyond what is reasonable. Owners put in large sums of their own money, often beyond what is reasonable and sustainable, in order to compete with clubs with parachute payments, and the difference is enormous. Parachute payment clubs will come down with budgets three times the size of those of many other clubs in that league, so in order to compete clubs often do fairly stupid things to try to ensure that promotion becomes a possibility.

My amendment says that the regulator ought to take account of those issues. It is not reasonable to say to the regulator, “The only thing that matters is parachute payments to protect clubs that get relegated and you should have no regard to the impact on the clubs already in that league.” I hope that the Minister will consider this seriously. It is obviously a concern across the House, as was reflected on Second Reading.

I know that my hon. Friend the Member for Barnsley East on the Front Bench has a slightly different way of addressing the issue, but the wording in her amendment 31 relates to what I have just said. Yes, parachute payments and the impact on the clubs that receive them must be taken into account, but the impact on other clubs that must compete with them must also be taken into account. The position under the Bill as drafted is that that cannot happen, because it is fixed as it is and cannot be changed by the regulator.

The Minister will probably say that the leagues themselves could come to an agreement and change it. What happens if they do not do that? There has not been much evidence of the leagues being able to reach an agreement for a long period of time now—that is why we are here debating this Bill. In the end, it is down to the backstop. That backstop, the regulator, needs to have the flexibility to address these very important measures.

[Ian Byrne]

Does the format of how parachute payments are directly paid not imperil the Independent Football Regulator’s key objectives, which are to protect and promote the financial soundness of regulated clubs and financial resilience? The imbalance in parachute payments is driving clubs into making decisions that they would not usually take.

[Mr Betts]

Absolutely. I just made the point about the enormous difference in budgets that Championship clubs now experience because of that. Of course, when we look at this season of the Championship, three out of the top four clubs have received parachute payments. Yes, other clubs, such as Ipswich, have done remarkably well without them, but clubs are always trying to compete with those clubs receiving the payments. Last year, two of the three clubs that came up had parachute payments, and it is now almost becoming a cycle of clubs getting parachute payments, going back up, then sometimes being relegated, and then getting another lot of parachute payments. That really is not a sustainable position for the clubs receiving those, for the clubs that are trying to compete with them, for the competitiveness of the game, or for the sustainability of the pyramid as a whole. I hope that the Minister will reconsider this because it is an issue that really needs addressing.

[Stephanie Peacock]

I am pleased to be able to discuss part 6 of the Bill, which provides a backstop power in the event that certain thresholds are met and football is unable to resolve the issue of financial distribution. Before I begin to explore this clause, it is important to set out that, in an ideal situation, these powers would never be used. As the hon. Member for Chatham and Aylesford set out during the evidence sessions, based on her experience with the fan-led review, a football-led solution to the issue of distribution has always been and remains the preference. I hope that can be kept in mind when discussing this part. Indeed, I welcome the powers but my hope is that their enforcement will not actually be necessary.

Clause 55 broadly sets out the process under this part but most importantly defines what might count as “relevant revenue”, which is money to which the backstop will apply. Relevant revenue is broadly defined as revenue received as a result of broadcasting rights, with the Minister given the flexibility to change that if broadcasting is no longer the predominant source of income. There are a couple of things to clarify. First, it would be good if the Minister could confirm whether such broadcast revenue is meant to cover domestic competitions only. Secondly, it would be appreciated if the Minister could clarify whether broadcasting revenue will still be considered relevant if the funding model changes so that it is paid directly to clubs, rather than through competition organisers. Broadly, though, I think this scope is generally accepted as being the right one.

Issues have, however, been identified with clause 55(2)(b), which is the part of the Bill that excludes parachute payments from the definition of relevant revenue. My hon. Friend the Member for Sheffield South East tabled amendment 27, and I will speak primarily to amendment 31 in my name. First, I would like to set some background to the issue, as it stems from the fact that there is an ever-growing gap between the Premier League and the EFL. Indeed, 30 years ago, EFL revenues were 75% of those of the Premier League; today they are just 6%. In real figures, that means that 30 years ago the gap was £11 million, and today it is £3 billion.

The Premier League’s approach to mitigating that gap is the so-called parachute payments to clubs relegated from the Premier League for up to three seasons. Those payments help to ensure competitiveness in the Premier League by providing clubs with the confidence to invest on promotion in the knowledge that they will be supported if they are relegated. For example, parachute payments might give the club the confidence to sign players on multi-year contracts, and that is incredibly important to consider. The Premier League’s competitiveness and the fact that any team, no matter their size or experience, can compete on any given day is what makes it the most beloved and exciting league in the world.

However, while they help to boost competitiveness in the Premier League, parachute payments—by the White Paper’s own admission—can distort competition in the Championship. In each of the last six seasons, two of the three clubs promoted from the Championship to the Premier League have been in receipt of parachute payments. The knock-on effect of that is that owners of clubs not in receipt of parachute payments are compelled to put ever greater levels of funding into their clubs to try to remain competitive. That overreliance on increasing owner funding has deeply exposed clubs when the funding does not materialise, as we have seen for Wigan, Bolton and Bury.

Further, the size of parachute payments has increased in recent years. Between 2010 and 2020, they have risen from £30 million to £233 million. That is an eightfold increase in a period in which player wages have only doubled. That means that, of the total distributable revenue of the English and Welsh professional game, the top 25 clubs—those in the Premier League—and the five in receipt of parachute payments in the EFL received 92% last season. That is £3 billion for 25 clubs, and £245 million for the other 67 professional clubs. Given the scale of parachute payments, therefore, it is notable that the Bill has definitively excluded them from the definition of relevant revenue. That is why I have tabled amendment 31.

4.30 pm

I want to be absolutely clear that the amendment is not about abolishing parachute payments; I believe that they provide clubs with the confidence that they need to invest, and they are a crucial tool in ensuring the competitiveness of the best league in the world. The amendment would simply give the regulator discretion to decide that, if certain criteria are met, parachute payments need not be excluded from the revenue to be distributed under the backstop provision.

Certainly, there is no reason to single out parachute payments. Whether people are in favour of significant parachute payments or not, they agree that they have an impact on club finances. As such, they will have a significant impact on the regulator’s objectives of protecting and promoting the financial soundness of clubs and the resilience of English football. Given that that relates to the regulator’s core role, the regulator should have the ultimate say on whether parachute payments are considered as part of the backstop provision.

Further, solidarity payments are explicitly linked to parachute payments. Solidarity payments are worked out as a percentage of the value of a year-three parachute payment. Championship clubs receive 30%, League One clubs receive 4.5%, and League Two clubs receive 3% of the value. The regulator, therefore, might find it difficult to look at one without looking at the other.

I emphasise again that the amendment does not predetermine whether the regulator includes or excludes parachute payments. If the regulator has a case, based on its objective evidence base, that excluding parachute payments from relevant revenue is more likely to make clubs financially sound and promote the financial resilience of English football, they will remain excluded. The amendment simply recognises that it should be the regulator that makes the decision, independent from any vested interests.

When making that decision, the regulator will have to pay explicit regard to the fulfilment of its core objectives and its secondary purposes: financial sustainability, financial resilience, competitiveness and investment. Taken together, those are the principles that should decide whether parachute payments are included—not the leagues and not politicians. Only then will we ensure that the regulator can fulfil the purpose of the Bill.

[Damian Collins]

I will make a few points on parachute payments. It is fair to say that they are not part of the redistribution mechanism between the Premier League and the Football League. They can be set as an amount alongside the redistribution that takes place, but, of course, they are not fixed. They are a contractual arrangement that the Premier League enters into with clubs that are in the league or when they get promoted.

For reasons that hon. Members have rightly set out, if the income of a Premier League club drops by at least half after being relegated, even with parachute payments, that will be a severe challenge to its sustainability. It is anyway and it certainly would be if those payments did not exist. Of course, if a club is promoted straight back up, as Leicester City has been this year, the year-two and year-three parachute payments are not kept by the Football League—the money never goes to the Football League—but goes back to the Premier League. Therefore, in many ways, the payments have nothing to do with the Football League; they are made by the Premier League to its member clubs in the event that they go down.

The question is then whether the existence of parachute payments has such a market-distorting effect that the regulator would have to intervene. It is difficult to see why the regulator would need to intervene on the basis of the impact on the clubs that have been relegated; they clearly need that support. From all the evidence that we heard as a Committee—I have not heard anyone this afternoon say anything to the contrary—there needs to be some compensating mechanism for clubs that go down, otherwise the risks are too great.

It is not always about clubs that have gone up and come straight back down again; it is often about quite large clubs—it was Leicester and Southampton last year. Everton could easily have gone down last season and the impact of such a relegation would have been catastrophic. The regulator would therefore have to take a view as to whether the existence of those payments has a distorting effect on the Championship.

Given the remit of the regulator, I urge hon. Members tabling amendments to be careful what they wish for. The regulator may well take the view that its job is not to have an impact on the nature of competition in the Championship, or to make it easier for more clubs to get promoted. Its interest is to promote financial sustainability, so it could easily take the view that parachute payments should stay because they are necessary for the clubs that are relegated.

Alongside that, there must be effective financial controls on Championship clubs. The question of whether a Championship club feels the need to compete against parachute payments is not necessarily one for the regulator. The regulator’s role is to ensure the financial sustainability of the league, so it might say that it can do that through the checks that it can put in place now, and therefore ensure that the situation created before does not happen again.

One could ask whether it is fair for the Championship to be run such that Championship clubs must compete against Premier League clubs, and cannot cook the books or rely on director’s loans because the regulator will stop them. Of course, in some ways the Championship is not competing with the Premier League. It is a league of clubs seeking to get promoted to the Premier League, but it is also looking to develop its own talent. It can buy talent from the lower leagues and from Europe, as it effectively does already. The TV revenue for the Championship, as it stands today, is already greater than for the top division in the Netherlands, Portugal, Belgium or Denmark, all of which are highly-competitive football nations whose pedigree in major international tournaments has been somewhat better than the home nations over the last few decades.

[Mr Betts]

Is it not one of the great strengths of the English pyramid that there is, or should be, the ability for clubs to move around? If there are massive differences in the financial capabilities of the clubs that come down from the Premier League with a view to going back up again very quickly and the other Championship clubs, that effectively removes the element of competition and removes the prospect of promotion from so many clubs that it changes the fundamental nature of the pyramid. Surely that goes against one of the objectives that the Bill is trying to achieve.

[Damian Collins]

I agree with the hon. Gentleman. The strength of the pyramid is one of the most important parts of the English game. It is probably the reason why the Premier League is such a commercial success—there is real promotion, relegation and competitive matches between the leagues. Parachute payments have come in out of necessity because of the requirement for clubs to jump up into a competition in which players are paid so much more and then to come out of it again. The regulator, as we are setting it up, would view the sustainability of the clubs in the Championship as important.

It is difficult to say that Championship clubs in England cannot recruit talent from other major European leagues and cannot develop their own talent. My concern is that, if all we do is push more money into the Championship, we will see a very large inflation of Championship player salaries. There will not necessarily be an improvement in the quality of players in the Championship but those players will be paid a lot more. There would also be even greater calls for bigger solidarity payments between the Championship and League One.

As the hon. Gentleman knows, League One club owners already complain that unless a big club happens to have been relegated into League One—a league that it is not normally in—getting promoted and sustaining a place in the Championship is becoming increasingly difficult because the Championship has largely become a division of former Premier League clubs. There are one or two exceptions—such as Preston North End, which have never played in the Premier League—but they are increasingly rare.

If the amendment were made and parachute payments were to be considered by the regulator, that might lead the regulator to demand much greater payments from the Premier League to the Championship. The logical argument that the Football League is advancing is that it wants more money for the Championship, not that parachute payments should go.

A question that was raised in the evidence session would also come into play: would it be fair for the medium and smaller clubs in the Premier League if the only method of distribution was UK broadcasting revenue, which the Premier League clubs receive equally? As we heard in the evidence session, that would place a much greater financial burden on clubs such as Brighton, Crystal Palace, Nottingham Forest and Everton than it would on Manchester United, Manchester City, Liverpool and Arsenal, for whom that money is a smaller part of their total revenue. Unless European money, other prize money and commercial gate money could suddenly be considered along with parachute payments, we are picking winners. We are saying, “We are going to favour the Championship side at the expense of the teams that play in the lower half of the Premier League.”

This is a highly complex matter with lots of moving parts. As we have heard throughout the debate on the Bill, the different parts of the football pyramid have different demands and income streams, and would make different cases. It is therefore right that parachute payments are kept out of the Bill, because they are a matter for the Premier League and the clubs that are relegated. Of course, the regulator will still be free to take wider consideration of the sustainability of the whole pyramid, which is purely about redistribution and where the money is drawn from. My concern is that—to use the phrase that we have used throughout the Committee’s consideration of the Bill—the unintended consequence of the amendment would be to create different winners and losers. The regulator has the power to look at all those things in the round.

[Mr Betts]

Is the hon. Gentleman saying that the Premier League’s objective in having parachute payments protected in this way is to ensure they that continue, while the issue of the pyramid and more competition lower down is met by even more money from the Premier League to the EFL, irrespective of parachute payments? It seems to me that that is not its position; it actually wants to hang on to as much money as it can for Premier League clubs and to protect parachute payments too. I accept what the hon. Gentleman says about the multitude of issues surrounding competition between clubs in different leagues, but the fact that we cannot solve everything with this amendment does not mean that we should not address one of the problems.

[Damian Collins]

One of the reasons why the Bill is important is that the biggest problem in the pyramid at the moment is the financial sustainability of Championship clubs. There are different pressures and the greatest financial risks are taken there; some of the biggest failures have been at that level. That is why it is important.

Parachute payments exist only because the Premier League wants a more competitive, more attractive league. It does not want a closed league where the same three clubs are going up and down all the time, and the clubs that come up are just cannon fodder for the teams that play in it regularly. It is incumbent on the regulator to take a view on the sustainability of the pyramid, but the Premier League would not wish for that outcome.

We can choose which seasons we want to pick, but I do not think it is proven that parachute payments are having that effect already. There is plenty of evidence of badly run clubs—Sunderland is a good example from not long ago—that have been relegated from the Championship while still in receipt of parachute payment money. A lot of clubs come down with players who are not worth what they are being paid, and are stuck with a Championship squad on Premier League money. That is a problem that many clubs face.

Many problems are about the poor decisions made by managers and owners in the Championship, and a lack of financial oversight. The regulator needs to fix that financial oversight first, alongside considering redistribution in the round. It is easier to do that if we do not confuse that with parachute payments, which as the hon. Gentleman says are a much bigger quantum than the amount of redistribution anyway. We need to get the financial oversight right and look at redistribution in that context. I am concerned that simply asking the regulator to recommend a transfer through the backstop of money from the Premier League to the EFL corporately without the right financial oversight will pour petrol on the fire and drive wage inflation in the Championship.

--- Later in debate ---

[Stuart Andrew]

I must say that I almost want to stand up, say what other Members have said and sit down again. I agree with everybody else: I wish we were not at this stage and that there had been a deal between the parties concerned, because it is in the interests of football for them to come up with a deal. I hope that the mechanisms we are talking about will enable us to encourage that deal to happen sooner rather than later.

On amendments 27 and 31, although the parachute payments can have the distorting effects outlined, they play a pivotal role in protecting clubs at risk of relegation from going bankrupt, as others have said, and certainly give certainty to clubs competing for promotion. As I mentioned on Second Reading, in the past, relegation from the Premier League often meant financial ruin, as teams such as Bradford City failed to adjust to the huge drops in revenue. Given the important role that parachute payments play in helping to ensure the financial sustainability of relegated clubs, removing them entirely could have significant adverse effects on the game, and we do not want to create an opportunity through the Bill’s distribution mechanisms to get rid of parachute payments by the back door. Including parachute payments in the Bill’s scope, as amendment 27 proposes, could do just that. It could mean the regulator accepting a final proposal from one of the leagues that removes those payments, and if the mechanism allowed for that, it could create significant financial uncertainty for clubs that could not confidently invest in promotion. My hon. Friend the Member for Chatham and Aylesford also mentioned the commercial agreements that are in place.

An exciting, competitive and sustainable pyramid is at the heart of what makes English football the asset that it is, and we should not put that at risk. We have excluded parachute payments from the backstop, because it needs to be targeted and simple to work effectively. Including parachute payments in the backstop means that the regulator could be presented with two entirely incomparable final proposals, which could render decision making almost impossible, but it is important to remember that the backstop may never be triggered, and is only ever intended as a last resort. We expect the leagues to reach a football-led solution themselves and will continue to press them to do so.

I recognise there are also concerns about the potentially distortive effects of parachute payments, and that is why the broader regulatory framework is designed to address it. If the regulator finds that parachute payments are causing a structural or systemic issue, it could attach discretionary licence conditions to parachute payment clubs to address that. We are creating a financial regulator, and it is entirely right that we solve issues like this through financial regulation wherever possible.

[Mr Betts]

It would help if the Minister was clear on what he was suggesting the regulator should do to deal with the massive gap between the clubs with parachute payments and those in the Championship without. Is he suggesting that the regulator should come in and tell clubs with parachute payments, “You have got them, but you cannot actually spend them, or not all of them, because that is distorting competition”? It seems a very odd way to try to deal with the problem.

[Stuart Andrew]

The whole point is that the regulator can look at financial controls and make discretionary licence conditions if it wants to try to minimise that impact. However, if the backstop ever gets triggered, if two very different bids are put in, the regulator is put in an incredibly difficult position; in contrast, if those backstop payments are there, the two sides will be able to adjust their bid to address it in another way, such as by improving the solidarity payments to other clubs as a proposal to reduce that cliff edge. That is the point we are trying to make. As I say, I cannot accept the amendment that the hon. Member tabled and I hope he will withdraw it.

[Mr Betts]

Could the Minister explain what he has just said? I still do not understand how it is going to work. On the regulator’s powers to deal with the problem created by parachute payments, which he accepts could be created, what exactly are those powers? How does he expect the regulator to use them?

[Stuart Andrew]

As I mentioned, it can introduce a discretionary licence condition. There will be a range of options that the regulator may consider, but it will have discretionary licence conditions that it could put on clubs in receipt of those payments that will manage the amount of money they are spending while helping to keep clubs financially solvent and sustainable. That is the point I am trying to make.

By way of background to clause 55, the Premier League earns significant revenues from selling its TV rights. It then determines how much of its broadcast revenue is distributed within its own league, and how much is distributed to the rest of the game, including the EFL and the National League. These backstop powers have been designed to incentivise reasonableness, encourage industry solutions and tackle any bargaining imbalance between the leagues. The clause sets out an overview of those backstop powers and defines some terms that are important for setting their scope.

One key term defined in the clause is relevant revenue. It expressly includes broadcast revenue, which is the predominant source of revenue for the relevant leagues and of any redistribution. The clause allows the Secretary of State to specify other kinds of revenue to be included as relevant, which will future-proof the policy—for instance, if broadcast revenue is no longer the main source of income for the leagues. There are safeguards on the use of this power, as the Secretary of State must consult the regulator, the FA and the relevant leagues, and can use the power only when there has been a material change in circumstances.

The exclusion of parachute payments in the clause is to ensure that the two final proposals can be easily compared. That is based on detailed analysis and advice on similar mechanisms. However, as mentioned, the regulator will still be able to consider parachute payments through the licensing regime.

The clause also sets out several other definitions, including the idea of a “qualifying football season”. The effect of this definition, together with the operative clauses in this part, is that the backstop can be triggered only in relation to the current season and the five subsequent seasons. That ensures that the backstop powers are used only in a reasonable timeframe and not for the remote future. I commend the clause to the Committee.

[Mr Betts]

I am not convinced by the Minister’s arguments, I must say. I think that we will be giving further consideration to this, as I hope the Minister will, and that we will come back to this issue on another occasion. I just hope that, by the time we come back, the Minister might be able to better explain the powers of the regulator to smooth out the issues where there are problems for Championship clubs trying to compete with those clubs with parachute payments. I was not convinced about that point from his arguments, but we will consider that further at another stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 31, in clause 55, page 45, line 3, at end insert—

“unless the IFR specifies otherwise in rules.

(2A) The IFR can only make such rules if it can be satisfied that their inclusion furthers its objectives under section 6 by protecting and promoting—

(a) the financial soundness of regulated clubs, and

(b) the financial resilience of English football.

(2B) The IFR should also have regard when making any rules under section 7 to act in such a way that avoids any—

(a) effects on sporting competitiveness of any regulated club against another regulated club,

(b) adverse effects on the competitiveness of regulated clubs against other clubs, and

(c) adverse effects on financial investment in English football.”—(Stephanie Peacock.)

Question put, That the amendment be made.