Football Governance Bill (First sitting)

Damian Collins Excerpts

Committee stage
Tuesday 14th May 2024 Public Bill Committees

[Ian Byrne (Liverpool, West Derby) (Lab)]

I sit on the management committee of the Spirit of Shankly football union for Liverpool football club.

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

I am a trustee of The Sports Trust in Folkestone, which has previously received funding from the Football Foundation.

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[The Chair]

Stephanie, if you have any other questions, I will bring you in a bit later. There are a lot of Members who have indicated that they want to ask questions.

[Damian Collins]

Q I have a question on the redistribution of money, which is one of the Football League’s principal concerns about the current model. From what you have said, is there not a danger that, despite redistributing more money into the Championship, those clubs will not necessarily get any better? They will probably just end up paying the players they have more than they do at the moment. Redistribution without some sort of control will just fuel inflation.

Kieran Maguire: When we had the introduction of solidarity payments from the Premier League to the EFL, which started to become index-linked to the growth in the Premier League broadcasting, exactly what you suggested tended to be the case. Any redistribution plan has to go hand in hand with a more nuanced and affirmative cost-control measure. Otherwise, you are simply transferring money from the wages of a footballer in the Premier League to the wages of a player in the Championship. I do not see how that benefits the game on a holistic basis.

Dr Christina Philippou: As we have seen, the cost-control issues are still there. The point is to try to fix that concern, rather than just to give more money to be spent poorly, which is not going to fix the problem. Fixing corporate governance and the cost controls will have a much better effect.

[Damian Collins]

Q Do you agree that one of the reasons why we need the regulator is that we need a body with statutory powers to investigate clubs and use real transparency of powers to see what is going on? A lot of clubs that have failed have been reckless, and often they have been trading outside the rules of the leagues they are playing in anyway, but they have just been able to hide that fact until it is too late.

Kieran Maguire: Historically, the authorities, given the mandate that they currently have from the clubs themselves, have tended to be looking in the rear-view mirror. Therefore, they are playing catch-up. One of the advantages of having an independent regulator would be the ability to do real-time investigations and also potentially either to offer advice or, in extreme circumstances, to look at some form of regime change that allows the appointment of trustees and advisers to assist clubs in precarious financial positions.

Dr Christina Philippou: That is the whole point of something like an advocacy-first approach: you can work with the clubs before you get to the problem. Before you get to administration or those serious financial problems that we are seeing, if there is real-time monitoring, if you see the problems ahead of time, and if we have some proper budgeting and corporate governance in football clubs, that should mitigate the problem to a large degree.

[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.

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[Stuart Andrew]

Q The regulator will have a duty to work with the leagues when they are exercising their regulatory functions and have regard to the existing rules within your leagues. How do you see that working in practice, and how are you reforming your own structures to ensure that regulation works effectively? You talked about unintended consequences, Richard—can I just push you to give the Committee a specific example of what those might be?

Richard Masters: It is unclear—a lot of this depends not on the technical drafting of the Bill, but the personality of the regulator, who we are yet to meet. Now the appointments have been made, it depends upon how the regulator and its powers are going to be utilised. For example, if the regulator wishes to put financial controls on virtually all the 116 clubs that it wants to license, I believe that will stop investment into football squads and football in general, and will slow down the growth of English football. That is the principal unintended consequence I would be concerned about.

Mark Ives: On unintended consequences, there are a couple of things, particularly when you consider the size of the National League clubs and how they are staffed. The Bill is written in a way that sets out what it intends; it does not give how it is going to achieve those aims. As far as the clubs are concerned, there is massive uncertainty.

As we see it, one of the unintended consequences is the drain on the resources of those clubs because of the duplication of work and the over-bureaucracy that there may be. For example, we already have a licensing system. Our system includes our football finance regulations, which have been activated since 2013. It is worth noting that we are talking about improving the sustainability of our clubs—but the National League, which is the only division that I can talk about, has not had a club going into administration since 2013, since it brought in its financial regulations. That is not a bad record. Our concern is the duplication of that licensing scheme. As the Minister rightly says, there is a referral back to the league regulations. We had hoped that that would go further and put the onus on the league, on the competition, to be the first to react. If that does not work, then the regulator steps in—rather than create a lot of duplication of work for our clubs, as we see it.

The other issue is costs. The Bill is intended to ensure financial sustainability. Yet the concern of this is that, as with all regulators, the people who pick up that bill are those who are being regulated. I am not sure that the clubs fully understand that. When you are at the bottom level of what is being regulated, the fear is the quantum of those costs. If you have a challenge that goes to judicial review from one of the National League clubs, I suspect that the financial cost on that is not going to be too great. However, if one of the top clubs in the Premier League challenges the regulator, the costs on that are going to be really significant. Those costs get passed on to those being regulated, and they could run into millions of pounds, when the cost of those are being borne by clubs at the National League level. In our view the Bill is not strong enough in clarifying what proportionality means. We have been given assurances: we have had some good meetings with the Department for Culture, Media and Sport, with the Minister and the Secretary of State, where assurances are that it will be proportionate. However, we do not understand what “proportionate” is. So, one of the unintended consequences is the financial and human resource burden on our clubs.

Rick Parry: It is incumbent on us to work with the regulator to make sure that this works for the good of the game. We see big pluses in terms of the regulator bringing independence, transparency and consistency across leagues, which is a bit of a disaster area at the moment. We view it positively: everything we have found so far in terms of engagement with DCMS and in terms of the shadow body that is the regulator is that all these concerns can be addressed. It is going to be a tougher environment, but football needs a tougher environment. We have had 30 years to get this right and we have failed.

Richard Masters: Just to answer your question about what plans the bodies are making to adjust to the regulatory world, we will all have to adjust to the new environment that is coming. I am very happy to do so. Like Rick, we are already meeting with the shadow regulatory team on a regular basis and have had good conversations about how it might work in practice. In reality, I think the performance of the regulator can be managed. We will meet that obligation head on and ensure that they get all the information they need, and we will respond at all times.

The issue that we are most concerned about is what impact that might have on the wider system—beyond the very positive objectives of the regulator to give fans a stronger voice—to improve the sustainability of the pyramid and individual clubs, and to avoid some of the issues we have had in the past. We agree with all that, but it is important to make sure it does not impact on the very good success story that we have at the moment.

Mark Ives: Can I echo that and clarify some points about where we stand on the regulator? From day one, and from when Tracey started the fan-led review, we met the review and we were asked whether we wanted to be part of the regulator. We said yes we did, on the understanding that it would not be too onerous for our clubs, and we would keep a mind on the costs. So we are mindful of that. We embraced the regulator. Our position was always that if there is a regulator, we thought it should be the FA, but for well-documented reasons, we know why that cannot happen. So we move on and embrace the regulator as it is.

Our challenges are not about having a regulator; they are about understanding and clarifying how the regulator will work. We embrace it and we will work with it. We have had some very productive meetings with DCMS and discussions all the way through. All we are trying to do is make sure that it is not too onerous and too costly for our clubs, because we have to protect the interests of those clubs, and they need clarity.

[Damian Collins]

Q Richard Masters, at the beginning you raised some concerns about the checks on new owners. You said you wanted a process that was governed by objectivity and certainty—I think those were the words you used. A lot of people would look at the live example of Everton and 777 Partners and say that that does not look like a situation that is being governed by objectivity and certainty, and that it is the kind of case where the regulator may well have taken a different view from the Premier League and may well have rejected the takeover. Given your concerns about the regulator in this regard, and given that, after eight months, 777 has still not met the criteria that the Premier League has set, I would be interested to know why the Premier League has not rejected it.

Richard Masters: Let me be clear about what the Premier League’s role in this is. As regulator, it is to perform the test. It is not to decide who the current owner wants to sell this club to. That is his decision. At the moment, he wants to continue to have discussions with 777 about it. The Premier League has made very clear the conditions that have to be met by 777 if it wishes to become the owner of Everton. At the moment, obviously, because the takeover has not been confirmed, I will leave it to the Committee to make its own conclusions about where we are with that.

Rick and Mark have talked about some of the benefits of the regulatory ownership test, in the sense that they will get access to more information that we can have, because we are not a statutory body. So we can only get the information that we are provided with and we have strong investigatory powers.

The other thing that Mark talked about was speed. I accept that takeovers that carry on for a very long time are not good for fan certainty. That is why we have a very big team of people who do nothing else in this. All I would say is that over time, particularly in the Premier League, takeovers are becoming increasingly complex. It is not a small undertaking on the part of the regulator to take this burden on. That is why we want to remain involved with it as well. This is very complicated, and we need to make sure that all those decisions are correct, even if that means taking a little more time to make sure that a decision is correct.

[Damian Collins]

Q It would seem that there is a real role for the regulator here, because the regulator could make this a lot simpler by saying, “You demonstrate the proof of funds and where you’re raising those funds from, and until you can do that, the answer is going to be no. You can come to us when you’re ready.”

Richard Masters: It may be that they could come to conclusions quicker. I would imagine that that is possibly correct in that circumstance, but obviously, I cannot imagine what the situation would be like if we had a regulator in the current example that you raise. Obviously, I know a bit more about the background to it all. I cannot say too much about it, but I do think there are some benefits to the regulator working in tandem with leagues on this particular topic. That is true.

[Damian Collins]

Q How would you respond if you were overruled? What would be the effect if the regulator took a different view from you?

Richard Masters: Maybe a bit like “The X Factor”, you need two green ticks to get in. That is it, and in terms of the Premier League operating its own test, in the unlikely event that the regulator said yes and we said no, that person could not take over that club, and vice versa.

[Matt Rodda]

Q This question is for Rick Parry. Where a potential owner has a track record of being associated with clubs overseas that have got into difficulties, do you believe the Bill has enough powers to prevent that in future?

Rick Parry: I think so. I do not think there is any reason to be doubtful at this moment, and within football we have been refining the tests that we apply over time. A decade ago, I think the tests were probably inadequate and overly simplistic. We have definitely refined them. We take a closer look at people’s track records, and I am not fearful that the regulator will be unable to do the same.

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[Ian Byrne]

Q I am happy to get that on the record. I welcome what you said about the ticket prices potentially being included in one of the clauses. I do not think we mentioned kick-off times, which can be changed at the drop of a hat, meaning that hotel bookings have to be cancelled and travel expenses cannot be returned. That is a hugely important element in lots of anger from football supporters. How do we ensure that this is included in the regulatory oversight?

Kevin Miles: Again, what I do not want to do is put a whole shopping list of items into the Bill, because I think that is problematic. We would support some clear direction in the guidance notes about what should be required from clubs. You have identified another important issue. It is a complicated issue, and it is not likely to be solved on a club-by-club basis. However, the idea that we could face a situation where a club declines to discuss with its fan advisory board as part of its fan engagement process an issue as important and impactful as supporters being able to turn up to the games and support their team—which is so important to so many people—seems to me to be absurd. It is common sense that those issues should be part of the discussion, and it is sad to think that there are clubs that do not approach it with common sense and want to discuss it. I think it should be required.

[Damian Collins]

Q Clubs have to produce a corporate governance report annually as part of their licensing agreement. Do you think there is scope there for the clubs to be required by the regulator to set out in that report what their policies for fan engagement are, and then the regulator would have the right to audit them on that?

Kevin Miles: Yes. One of the ideas that we are quite keen on is that, as part of the corporate governance code, there could be a requirement of clubs to have independent directors. In many other aspects of corporate governance codes, there is a particular responsibility on independent directors. Independent non-executive directors do have consideration for the views of other stakeholders in the work of a company. The idea that an INED in a football club could be required by a governance code to have particular responsibility for making sure that fans’ views are taken into consideration would be a very useful addition.

[Damian Collins]

Q I have one other question. One of the biggest concerns for fans is when a club leaves its ground. That can be an extreme case, as in years ago with MK Dons and Wimbledon, which is probably something that could not happen again now. We have seen cases where you have a dispute between the ground owner—a third-party private company—and the club. We saw that problem with Coventry City a few years ago. That was a clear example of where the club says, “We can’t afford to pay the rent that the landlord wants to charge us. We think it’s extortionate”, and they have no option other than to move on. Under the Bill as drafted, if the club made a compelling case to say that sustainability required moving away from the ground, the regulator would sanction it even if the fans were against. Do we need a better mechanism in place to try to resolve these issues and get a fair settlement on rents for clubs to play in grounds, with a view to avoiding their having to move and enabling them to carry on and play where they are?

Kevin Miles: Yes, I think that that is one of the few gaps in the Bill. On the heritage items around playing name, shirt colours, club badge and that sort of thing, there are clear FA rules, and it was clear that the fan voice on those issues will be very important. The FA’s heritage rules do not cover grounds. They have found that difficult to tackle from the point of view of their rules. But the idea that the fan view on some of these issues should not be taken into consideration is an omission. We appreciate that there are other issues involved in staging a relocation. There are big economic issues et cetera. We are not necessarily saying that fans should have a veto over a business decision, but certainly they should have a level of consultation and input into that process.

As an aside, I think we should clearly define the UK-based supporters. It is entirely possible that with some of the clubs these days, given their international fanbase, you could find a huge majority of the football club’s supporter base in Shanghai quite ambivalent about whether the stadium moves 40 miles down the road. There would be a very different feeling among the people who have an extra 40 miles to travel to their home game. So I think it should be the UK supporter base that is consulted in those cases. That consultation should be enshrined.

[The Chair]

We move from the fans’ views to the person who started all this with the fan-led review—Tracey.