Football Clubs in Administration

Damian Collins Excerpts

Wednesday 6th July 2011 Commons Chamber

[Alison Seabeck]

My hon. Friend makes an interesting point, and I hope that the Minister has heard his plea, because supporters trusts and Supporters Direct have been immensely helpful to a number of clubs.

In Plymouth the staff have been asked to sign away or defer payment of their salary. In the main, we are talking about some very low-paid people who were presented with a form to sign after the club to which they feel great loyalty was threatened with closure. With little opportunity to obtain expert advice on whether signing was the right thing to do, they signed, and most have struggled since, signing further salary deferrals. Some have now had no option but to take redundancy. The hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) and I spent quite a lot of time with the staff looking into their problems; none the less, they are in a difficult position.

The irony is that these are the very people who are keeping the ground in condition to start the next season. The players are protected to some extent by the Professional Footballers Association, and I had a brief word with Gordon Taylor about the position. He shared my concern that there was no protection for all the other staff. It was a struggle to see last season out, with relegation almost guaranteed, despite some amazing and spirited performances by a team that must have been feeling the pressure. Peter Ridsdale stepped in when most of the old board resigned and, in all fairness, worked to get to the bottom of the finances and pay key bills. At the time, he was welcomed. Help also came, as I have said, from the Plymouth Argyle Supporters and Training and Development Trust, which lent the club a not insubstantial amount. Then came the cloak and dagger stuff—the secret discussions between the administrator and various bidders. Plymouth’s local paper, The Herald, struggled to get to the bottom of the question of who they were.

We have all had concerns about what checks have been carried out to ensure that they are fit and proper people to run and sustain a football club. Where are the assurances of the ability of these bidders to meet the financial demands of running a club? Rumours have circulated about what various bidders might have wanted as part of the deal, and concerns have been expressed that they might asset-strip, including developing the current practice ground. Although no one has said that this is true, it does not help to build confidence in those most closely linked to the club, especially the supporters.

What checks are carried out by the Football League on such matters? Very few, I suspect, yet this is a sport of national importance. Where is the transparency that the administrator promised in a BBC interview? Nine days later he was quoted as saying that he did not have to know who was financing the bid. Given the amount of money that circulates at the top of football among clubs which, in some cases, use the lower division clubs as nurseries for up-and-coming stars of the future, I find it astonishing that some contribution could not come from them and/or from the Football League clubs to support the administration and ground staff when such circumstances arise, as a sort of insurance policy.

Others are affected too, especially small businesses linked to football clubs. The Federation of Small Businesses has pointed out that most football clubs operate as small or medium-sized enterprise, employing fewer than 250 people and, like other small businesses, often find it difficult to access credit from the major banks. As a result they often turn to smaller creditors, and similarly contract through many small companies. The impact of such a business going into administration can, therefore, have a knock-on effect on several other local businesses.

I ask the football authorities to look again at the negative impact of the points docking system. Is it really achieving their original aim? Is it punishing the right people? Will the Minister explain why the rules for football clubs placed in administration are different from those for other companies? I believe that Lord Sugar has in the past expressed concern about this.

[Damian Collins (Folkestone and Hythe) (Con)]

I anticipate that the hon. Lady might be about to mention the football creditors rule. Earlier she spoke about the impact on small businesses. Does she agree that the football creditors rule has no place in football today, and that it acts as a disincentive for clubs to deal responsibly with each other and punishes local businesses, while protecting the interests of other football clubs and former players who might be hundreds of miles away?

[Alison Seabeck]

I thank the hon. Gentleman for making that point. He has made it in far more detail than I intended to do. I shall reinforce it later, and I hope that the Minister will listen.

Lord Sugar made plain his view that—I paraphrase—the money thrown at clubs by television companies should be put into a trust, and half of it distributed to the clubs to spend, perhaps on players, but also to do other things. Protecting the staff in times of difficulty would be a worthwhile cause.

There are many questions specific to Plymouth which still need to be answered, despite the fact that we understand that the takeover has gone through today and the papers have been signed. Does the takeover proposal provide sufficient cash for the creditors to be paid in full, as regulation demands? Will the Football League be satisfied enough to hand over the competition share, or will deferred debts, including the remaining unpaid salaries, not be paid or simply stack up, rather like an individual in debt who puts the bills behind the clock in the hope that they will go away? Is the Football League happy that neither party to the deal is likely to be subject to any other outside investigations, which could throw their role at Argyle into confusion?

Although the various parties have signed on the dotted line today, it is still not clear whether this is the end of the story. Will they be able to get on and prepare the club for next season—and, we hope, promotion at the end of it? It will not be easy. Media stories are still circulating about concerns among former bidders that do not appear to be going away. We may never know who the mystery shareholders and directors from the Gibraltar-based company are. The lack of transparency is hugely concerning.

With clubs in the lower leagues spending £4 for every £3 that they generate in revenue, reduced Football League distributions in 2012-13 because of lower broadcasting rights values, and a range of other pressures, clubs elsewhere in the league could face the type of misery that Plymouth is going through, with all sorts of people waiting to pick up the pieces. Some of them care about football and some do not. Some should be allowed to run a football club and some should not be allowed to run a sweet shop. I urge the Minister to take a close look at what is happening in Plymouth and take action to encourage the sport to take better care of its assets—the people who work for and support it.

--- Later in debate ---

[Damian Collins]

I was at the Select Committee when Mr Clarke gave evidence. He also stated that he could not find a moral case for keeping the football creditors rule. Nevertheless, it remains the position of the Football League that it should stay. Does the Minister, like me, find that regrettable?

[John Penrose]

If the football authorities find it unacceptable and regrettable, the Government probably do as well. This is something for football governance to take on first. The Government will seek not to intervene if football puts its own house in order. Mr Clarke has made his position very clear, and that should be a very powerful voice.

The football authorities deserve credit for the rules they have introduced in recent years in the areas of financial regulation and club ownership. There are now an early warning system with HMRC in relation to tax returns, transfer embargoes that help curb club spending, new salary control measures in the lowest two leagues, a new means and abilities test that requires proof of funds from prospective owners, and a strengthened owners and directors test. It is welcome that in May, all 72 Football League clubs voted in principle to adopt UEFA’s new financial fair play rules from 2013, which will require clubs to spend only what they bring in. The Government obviously support those moves. Of course, situations such as that in Plymouth demonstrate how much more may need to be done. They also demonstrate that prevention is better than cure. It is far better to avoid going into a company voluntary agreement or insolvency if possible.

We believe it is for the football authorities to continue to challenge themselves to see whether they should tighten their rules further to ensure that clubs do not fall into administration in the first place, in precisely the way I have just mentioned. Equally, the clubs have to take greater responsibility. Supporters should not have to bail out the club because of bad financial management by owners and directors, as both local MPs said.

The stark reality is that for any company or organisation, not least a football club, emerging successfully from administration is likely to be painful and difficult. The focus must be on doing everything possible to avoid clubs getting into such problems in the first place. The Government’s hope and expectation is that as part of the wider process of the Select Committee inquiry’s recommendations, the football authorities will take steps to deal with such challenges themselves. If they do not, all avenues of course remain open to the Government, and we are prepared to look closely at how best to make those changes.