Football Governance

Dai Havard Excerpts

Thursday 9th February 2012 Westminster Hall

[Mr Dai Havard (in the Chair)]

For the benefit of people in the Public Gallery and everyone else, I should make it clear that today’s debate is about the Select Committee’s report entitled “Football Governance”, which makes recommendations to the Government, and the Government have responded. Both documents are available for hon. Members. I hope that we have a constructive discussion. I call the Chair of the Culture, Media and Sport Committee to introduce the debate.

[Mr John Whittingdale (Maldon) (Con)]

It is a pleasure to speak under your chairmanship, Mr Havard, and to have the opportunity to discuss the Select Committee’s report on football governance. This was a substantial inquiry by the Committee. It is worth remembering why the Committee decided that this was an important issue that deserved examination. There were two reasons, the first of which was the clear commitment given by both the parties that now form the coalition Government. It was clear that action needed to be taken, particularly to assist and encourage supporters to have greater involvement in the ownership and running of football clubs. That commitment appears plainly in the coalition agreement, although it was perhaps slightly less clear on precisely how it should be delivered. The Committee thought that it might be in a position to help the Government by taking evidence, examining that question and making recommendations.

However, this was not just about supporter involvement, although that is a very important element. It rapidly became apparent to us that there was quite significant concern among hon. Members on both sides of the House about the general state of our national game. A debate in this Chamber was extremely well attended by hon. Members, many of whom spoke up about the difficulties facing their local football clubs. There was widespread concern that something was wrong with the game. Perhaps that was best summed up by my hon. Friend the Minister, who famously described football as the “worst-governed sport” in England. I have to say that in the course of the Committee’s inquiry, we did not find much evidence to contradict what he said. However, we also found much to admire and praise about English football. There is no question but that it arouses huge passions up and down the country.

As I said, this was a substantial inquiry. We received more than 100 submissions of evidence. We held eight oral evidence sessions, to hear from every component part of the game. The Committee went on a number of visits. We went to Manchester City football club to see the huge investment that has taken place under its new owners. They have taken the club from the bottom levels to the top levels of the premier league. We went to Arsenal to see the Emirates stadium and to meet the management there. We held oral evidence sessions at Wembley stadium and Burnley football club. We also went to Germany. Looking at Germany’s model of licensing football clubs was a particularly influential part of our inquiry. It made quite an impact on the Committee.

I will not go through the whole report in detail, because many hon. Members are present and want to contribute and I hope that most of them have already read the report and are familiar with our findings.

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[Mr Whittingdale]

I think that that is a matter more for my hon. Friend the Minister than for me, but I certainly agree that it is something to be encouraged, and that fan liaison officers can play a valuable role. I am sure that my hon. Friend will touch on that.

I thank the Minister for the Government’s extremely positive response to the report. He could not have done more to make it clear that they want its recommendations to be implemented. I think he and I take the same view that it is not desirable for the Government to legislate, but that the matter is so important that if that is what must happen, it will happen. I hope that we will not come to that, and he may be able to say a little more about the state of discussions. He made it clear today that the deadline of 29 February is still in place, and I hope that all those involved in football who may be listening this afternoon will be spurred on to ensure that the sort of reforms that we think are necessary are achieved by that deadline.

[Mr Dai Havard (in the Chair)]

Order. Given the number of hon. Members who wish to speak and the time constraint, Members should estimate to speak for 10 minutes, and plan do so for eight minutes.

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[Mr Foster]

I hope the hon. Gentleman proves to be right and we will hear about the response on that issue that the Minister will receive. He is right to mention his concern for the sustainability of finance in football. As we heard from the Chair of the Committee, although debt has been declining, in the premiership it still stands at £2.6 billion. Some 68% of its income is being spent on players, rather than on other important things.

If we compare the premiership with the rest of European football, we discover that the English premiership has more than 50% of the debt held by all the leading clubs in Europe. Last season, the championship declared its highest ever debt at £133 million, and we know that it is spending about £4 for every £3 that it generates. That is not sustainable. It is vital to welcome UEFA’s proposals, and they will be implemented even though they will not affect all the clubs in this country. That is why the licensing proposals are so critical.

UEFA’s proposals are key. A report by Deloitte published today reflects much of what it said in its 2011 report, and points out that although there have been a lot of false dawns, the UEFA proposals may provide the key to moving forward and to financial sustainability. As it said in its 2011 report, however,

“the more things change, the more they stay the same. While football’s revenue performance has been spectacular, sustainably managing its costs remains football’s primary business challenge.”

That is a key issue that the Select Committee’s report and the UEFA proposals seek to address, which I welcome.

I also very much welcome the proposals from the Select Committee on governance of the game. It is right that the FA be the leading body for football in this country, and it must take charge of many of the deliberations that take place in the 14 different committees. It is ludicrous that so many of them report not to the board, but to the council. The key people making the decisions are therefore at a distance from the considerations of those various committees. The Select Committee was quite right to suggest that the board must be slimmed down. We should all welcome the moves to bring non-executives on to the board, but clearly more must be done to move forward and slim down.

Reform of the FA council itself is equally important. The Chair of the Select Committee has already made it clear how inappropriate the current arrangements are. I was interested in what Malcolm Clarke, the chairman of the Football Supporters’ Federation, said:

“It is impossible in a body of 118 people to have a critical challenge to the board about what it’s doing, partly because the decisions are long since passed and partly because of the sheer format of a body of that size.”

That echoes very much what the Chair of the Select Committee said, and it is crucial.

Rule 34 should be looked at again. The report fails to say very much about that and the remarks of the Chair of the Select Committee were perhaps slightly lacking for not mentioning it. Rule 34 makes it clear that football should be run like a not-for-profit company, with sport and football put before profit, and sadly I do not see that operating in spirit or to the letter.

Finally, licensing is critical. If we wish for a financially sustainable game, the UEFA rules will not cover all the clubs that concern us. The licensing proposal that the Select Committee and others have suggested is the way forward to ensure that similar rules on “fit and proper persons”, sustainability of finance and so on can be enshrined in a way that covers all the clubs in the game. I am particularly drawn, as the hon. Member for Liverpool, Walton (Steve Rotheram) is, to the recommendations of Supporters Direct on club licensing, which deserve to be looked at seriously.

My right hon. Friend the Deputy Prime Minister recently advocated the great benefits of the John Lewis model of running companies and employee share ownership, but with employee share ownership comes employee participation in governance. It seems vital that those who are key funders of the game have a much greater involvement in the governance of the game that they help to fund. There are real benefits to a stakeholder model of corporate governance, which is why Supporters Direct goes through the all the key things in its proposals, but also talks about how supporters can play a key role in the governance of individual clubs as part of the licensing proposal.

I said that I would try to be quick and I hope that I have been. This is an important report, but what will matter most is not what is in it or the Government’s response, but, critically, what the FA does with it. It must now get a grip on the governance and the finances of this crucial part of the culture of this country. So far, it has failed us. Let us hope that this time it will do something about it.

[Mr Dai Havard (in the Chair)]

Ten minutes with an intervention. Exemplary, Mr, Foster.

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[Tom Greatrex]

The hon. Gentleman has anticipated my next point. If a club has somewhere to go and has plans in place, that is fine. There are plenty of examples of clubs that have moved and got new grounds. I am reminded of Manchester City and Bolton. I am concerned about clubs that are left high and dry without a ground. Not being allowed to leave a ground without somewhere else to go would be an important protection. When clubs are separated from their grounds, it causes huge difficulty.

I am conscious of the time. I have not managed to do as well as the right hon. Member for Bath. I will conclude by saying that I think the Committee’s report is superb and it should be congratulated. I also want to compliment the Minister. Whenever I have asked him about these issues, he has always been forthright in his opinions and in his views on football governance. He is absolutely right. I hope that the response that he gets from the football authorities at the end of this month will be good and comprehensive and that it deals with the issues. If not, I hope that he has the courage to go back to the football authorities and say that that is not good. I hope that we get the right system in place for the future of football in this country.

[Mr Dai Havard (in the Chair)]

My only disappointment, Mr Greatrex, is that you did not mention Merthyr Town, which is my club. It is now a community club. It has gone through many of the same things. Welsh clubs who play in the English league have an interest.

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[Paul Farrelly]

I am making brief interventions in lieu of a speech. I am sorry, Mr Chairman.

[Mr Dai Havard (in the Chair)]

You will get pinged if necessary, Mr Farrelly.

[Paul Farrelly]

Does the hon. Lady agree that Portsmouth is the most recent case in point in which a licensing model that applied a rigorous “fit and proper” test would have produced a wholly different outcome? The Football Association could use its licensing power to encourage not only the formation of supporters’ trusts, but their access to administrators, by making it clear that it is most likely to favour bids that involve registered supporter organisations.

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[Mr Dai Havard (in the Chair)]

Order. May I advise the Gentleman? I need to be careful about privilege. I understand what he is saying, but I am listening carefully. Quoting from published material is fine, and I note the word “allegedly”. If he carries on with caution, I am happy, but I am listening carefully.

[Graham Jones]

Thank you for that advice, Mr Havard. I respect your latitude. The letter has been published in several national newspapers and online, just for clarity.

[Mr Dai Havard (in the Chair)]

It must be true, then.

[Graham Jones]

It is more than alleged; I think it is probably true, as nobody has come out and disputed it.

Clearly, there is a significant risk that Blackburn Rovers will regress rapidly while its owners have little understanding of football and the whole management of the first team and club administration rests with an individual as unqualified and inexperienced as Steve Kean. Mrs Desai, the club’s apparent owner and quasi-decision maker, confirmed in the Lancashire Telegraph that Mr Williams did not get on with manager Steve Kean:

“I know that he did not get along with Steve (Kean) and he had struggled to accept Jerome (Anderson)’s role at the club.”

Ian Battersby, a well-known supporter and local businessman, flew out to meet Venky’s in Pune, India. Blackburn Rovers football club is just one of 170 subsidiaries in the Venky’s group. Each has a business head who reports directly to the Venky’s board. In the case of the Rovers, that appears to be Steve Kean. Ian Battersby said:

“The notion of a board executing the owners’ plans on a day-to-day basis is a complete anathema to them and many of our problems flow from that…We have a sporting director who nobody would know if they were sat next to him, and that’s a high-profile job allegedly responsible for player recruitment. We have a deputy chief executive—but no chief executive—whose effectiveness is, in the circumstances in which he operates, negligible.”

I place on record the manager’s statement that he had an irrevocable confrontation with the outgoing manager and that important questions persist about his involvement, as a client of Jerome Anderson, in a coup to oust the former manager, Sam Allardyce, bypassing the board of directors. None of that serves the club well.

Questions remain whether proper due diligence took place and whether Mr Anderson or his associates had a predetermined managerial change in mind and were interested not in the club’s assets and liabilities, but in first-team managerial contracts. The FA must look into it. What we do know is that the current board tasked with the responsibility of managing the club seems powerless to act in the best interests of the club. Serious questions now have to be asked about the owners’ ability to manage an English premier league club; their awareness of Premier League rules; their future intentions for the club; whether foreign business practices bring the club into disrepute; and whether such practices should be prohibited within the framework of the Football Association Premier League’s fit and proper persons test.

Recent financial accounts have resulted in further destabilisation of the club, and newspaper reports have claimed that the club’s bank, Barclays, has initiated steps to protect its liabilities. Recent club accounts detail losses accrued up to June 2011 of £18.6 million; the previous year’s loss was only £1 million. The club’s value while it is in the English premier league is approximately £40 million. According to newspaper reports, Barclays is protecting its liabilities in the club by reducing credit facilities and discouraging asset sales of high-value players. In other words, the bank is determining transfer policy. That practice is not new. John Williams stated a year ago in his letter to the owners of the club:

“Brian Foreman from Barclays Bank is attending the Liverpool game tomorrow and has asked for a catch up meeting with us before the match. He will inevitably ask about our plans for the transfer window and at the present time not only are the Board unaware of these but it has been made clear that we will not have any input into the strategy. This is unacceptable and not in the best interests of the club.”

Why were Blackburn Rovers purchased by Venky’s? Were they purchased to promote football or to promote chicken burgers? Worryingly, during this period, fees paid to agents have risen approximately threefold. The £475,000 transfer of Ruben Rochina carried an additional agent payment of £1.65 million, which was during Jerome Anderson’s admitted involvement. Despite an alleged defensive injury crisis, an out-of-contract 28-year-old, Bruno Ribeiro—described by the manager as the next Denis Irwin—who had no caps and little top-flight Brazilian experience, was given a three-year contract and has yet to make a single appearance in the team or on the bench. Myles Anderson, who is Jerome Anderson’s son, was brought in despite having made only one appearance in the Scottish league. David Goodwillie, who is, to quote the manager, “the next Wayne Rooney,” was brought in from Scotland.

What has been destructive in this spiralling vortex is a smear campaign by the manager, his agent and other clients, which is aimed at ordinary Blackburn Rovers fans who seek only constructive dialogue with the club on the subject. To my knowledge, there have been no arrests or public disorder during the protests, which have always been conducted with the full consent of the police and dialogue with the club. The protests were suspended for seven matches to facilitate positive discussions, but those discussions have not taken place. Three pre-arranged meetings between the manager and organisers have been cancelled by the manager or by the club, the authority over which lies with the manager.

The Premier League is culpable in allowing the current trend of foreign ownership to continue without suitable safeguards; we have heard about Liverpool, Manchester United and Portsmouth. I welcome the comments of the Select Committee Chair that one can drive a coach and horses through the fit and proper persons test. That is clearly the case. This is coming from a completely different angle from Manchester United and Liverpool, and it should open our eyes to how we deal with football governance matters. As Mr Battersby, the Blackburn businessman, states:

“We hear an awful lot about the sham that is ‘fit and proper’…This is a major industry we are talking about here—it’s worth billions globally and there has to be something akin to licensing of owners. How can someone wing their way into the UK, take ownership of a club and within 12 months destroy a community? The warnings of Portsmouth, Notts County and now Blackburn must be heeded.

If the same had happened at Jaguar or similar, there would have been outrage in the House of Commons and yet we sit and watch this happening. In essence, the Premier League are watching one of their member clubs get savaged and haven’t batted an eyelid. It is nonsense.”

Venky’s management of Blackburn Rovers has raised a number of broader questions about the corporate governance of premier league clubs. The FA must look beyond its current ownership rules at arrangements for licensing prospective owners. Those arrangements must include, as Mr Battersby recommends, stricter compliance over financial strength and track record; the quality and strength of the management team; experience of delivery in the sector; the feasibility of the business plan and strategy; and corporate governance. There would need to be provision for the submission of quarterly or half-yearly accounts in addition to the annual ones. The fit and proper persons test in this case has failed. Dialogue with supporters has failed, because the owners have resisted all communication and have neutralised the board’s involvement.

I conclude with another remark from Mr Battersby:

“137 years of football heritage has been decimated inside 12 months. It is like watching a slow motion car crash.”

[Sir Roger Gale in the Chair]