Football Clubs (Insolvency)

Debate between Damian Collins and Iain Wright

Tuesday 18th March 2014 Westminster Hall

[Mr Wright]

I must disagree with the hon. Gentleman. In my lifetime, Hartlepool United will become a Manchester United or a Liverpool, and I will live to see us lift the champions league trophy, so the hon. Gentleman is wrong in that respect. He is right, however, about the vital contribution that clubs make to local businesses. Hartlepool borough council recently undertook an assessment of Hartlepool United’s economic impact on local businesses and, astonishingly, the club provides something like £5 million to Hartlepool’s economy.

The figures I have quoted show how inherently uncertain is the business model on which much of football is based. The hon. Member for Folkestone and Hythe said that 46% of clubs have been through a formal insolvency procedure since 1992. No other sector of the economy has had that level of insolvency, which highlights—this was one of the hon. Gentleman’s most articulate points—the possibility of reckless spending. Entry into the premier league—the most exciting and followed league on Earth—could mean as much as £50 million to a club. It is the glittering prize to which all supporters and owners aspire, but it leads to reckless gambles in the transfer market, which could undermine the financial viability and long-term security of a club. Some argue that the football creditors rule prevents clubs from spending money on players whom it cannot afford, but we have heard today that that is far from the case. The football creditors rule means that there is no inherent brake on transfer spending or on—as the hon. Gentleman said—the shared risk of a club not being paid for the transfer of a player, because football creditors are paid in full at the expense of other unsecured creditors.

[Damian Collins]

I agree with the hon. Gentleman’s point. Does he agree that, without the creditors rule, clubs would have to be much more open about their financial status, because that would be a prerequisite of clubs wanting to enter into transactions with them?

[Mr Wright]

That is a fair point. The insolvency rule specifically, as well as the hon. Gentleman’s wider point about governance and transparency, would be better for the game. He also suggested replacing the football creditors rule with some form of sinking fund, and I would be interested to hear whether the Minister is working with the Football League, the Football Association and others to examine such a proposal.

The rule can often act as a drag on a club returning to speedy financial health. I am pleased that the hon. Member for Portsmouth North was here earlier, because Portsmouth football club is now owned by the fans, but still has a significant liability of some £7 million owed to ex-players, which the supporters, because of the football creditors rule, must pay in full. That cannot be a good way of getting the club back to financial health. The need to curb the tendency to overspend makes the financial fair play rules, which cap the salaries of league one and league two clubs against a percentage of their turnover, so important, but are the rules the full answer? What will the Minister do to ensure that they are complied with and enforced?

The essence of today’s debate, which has been articulated by many hon. Members, is this: why should we have the football creditors rule if it means that clubs and players are paid in full ahead of all other creditors when a club enters insolvency? This quote from former Sunderland chairman, Niall Quinn, has been mentioned before, but it is worth repeating, because it sums up the problems of the game. He said:

“The fan in the street meets the guy who printed the programmes who didn’t get paid and he sees the player driving out in the big car who was paid, and I think that’s damaging.”

As mentioned by several hon. Gentlemen, there seems to have been a marked shift in tone and emphasis since the Government response to the original Culture, Media and Sport Committee report in 2011, which stated:

“We have sympathy for those who described the consequences of the rule as ‘morally indefensible’.”

“Morally indefensible” is an extremely strong phrase, and the Government sympathise with the position, from which I can infer that the Government wanted to see an end to the rule and wanted to move, through legislation if necessary, as quickly as possible. After the follow-up investigation by the Select Committee, however, the Government response in April 2013 stated that the Government hope that financial fair play rules will

“negate the need for football to rely on the Football Creditors Rule in cases of club insolvencies. However, we will monitor the effect this self-regulation has on the financial discipline and solvency of clubs, and, if necessary, will re-consider whether legislation is needed to address this issue.”

The tone is markedly different. The hon. Member for Hereford and South Herefordshire (Jesse Norman) also referred to a written parliamentary question from last month, in response to which the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Maidstone and The Weald (Mrs Grant),said:

“The Financial Fair Play rules now introduced across football which, combined with compliance checks that the FA and league administrators carry out on participating clubs, aim to improve financial management and stability across the leagues…Legislation remains an option if the football authorities do not demonstrate that they can reform their own governance of the game…The Government’s position on the football creditors rule is clear.”—[Official Report, 27 February 2014; Vol. 576, c. 495W.]

As we have heard time and again in today’s debate, the position is far from clear. The Government seem to be shying away from the necessary heavy tackle. What are the criteria for legislation to be brought forward? What is the time scale on such legislation? How long do clubs have to demonstrate reform of governance and financial management before the Government act?

There is a wider point here about insolvency policy in general. The Opposition are keen to improve the insolvency regime, so that the public and investors have greater confidence that delinquent directors who are unfit to run a company are pursued efficiently and effectively, which is not the case under this Government. In 2012, just a fifth of reports passed to the Insolvency Service by insolvency professionals resulted in a disqualification court order or an undertaking, compared with 45% 10 years ago. Why has there been such a drop? Why are the Government allowing unfit directors to walk away from their responsibilities? What are the Government going to do about it? Last week, we tabled an amendment to the Deregulation Bill to scrap the need for insolvency practitioners to submit certain forms in hard copy and allow them to do so online, as a means of streamlining the process and ensuring that insolvency policy can be brought up to speed. Will the Minister accept that?

I thank all hon. Members for contributing to today’s debate, which has been incredibly important. We have seen a cross-party approach to this important matter, and I hope that the Minister will provide what hon. Members are calling for: greater clarity and a plan to address the wider point about an insolvency policy that is allowing delinquent directors to get off scot-free both in football and elsewhere.

Nuclear Energy

Debate between Damian Collins and Iain Wright

Tuesday 22nd June 2010 Westminster Hall

[Damian Collins]

The hon. Gentleman makes an important point about the nature of the environmental objections and whether they are well founded. Natural England’s objection is that Dungeness sits on a peninsula of shingle. It is the second largest shingle peninsula in the world; the largest is Cape Canaveral in Florida, so clearly either NASA has found ways of managing the natural environment, or the Americans are working to different rules. We are talking about a living, moving landscape, with nuclear power and other development. There is a need to intervene to prevent coastal erosion of the shingle peninsula, which is moving, and to maintain the defences and protect the existing power station; that means moving shingle from Lydd-on-Sea to the western end of the peninsula. That work has to go on, and people who have lived in Dungeness all their lives are aware that human intervention is natural.

Natural England is right to raise concerns about this important ecological site, which is unique in our country and, in many ways, in Europe. The history of Dungeness is the history of man working in successful partnership with nature. The site is excellent for meeting the energy demand for nuclear power in our country, and it should be considered as a site for a station. Given that the development area for the new power station sits alongside an existing power station, and is on land previously disturbed and developed as part of the building of the first two power stations, we are talking about potentially less than 1% of the entire protected area that covers Dungeness and Romney marsh and the Rye site of special scientific interest. That is a relatively small area of development; development could not be said to bring into question the integrity of the whole site. Only a very small part is affected, so some mitigation may be possible.

The national case and demand for nuclear power is such that we should seriously look at that option. We should not get into a position where any area of development is considered impossible, or where Natural England has, on certain sites, a veto over whether anything happens at all. There are even objections to the movement of shingle from one area of Dungeness to another to maintain the sea defences; there are questions over whether that should be stopped, and whether the building aggregate should be dumped into the sea instead, at great cost to the taxpayer.

[Mr Iain Wright]

I am following the hon. Gentleman’s argument closely. Like him, I have a nuclear power station in my constituency, and there is the possibility of a replacement power station next door. There is also an area for birds, which is of scientific interest, so we have very similar views. I would like nuclear power to be part of a balanced mix of energy for Britain. We need that to happen as quickly as possible, and I think that he agrees with me. On that basis, does he think that the Government’s abolition of the Infrastructure Planning Commission is a good or a bad thing?

[Damian Collins]

The hon. Gentleman makes an important point. The question is, what planning framework should deliver the nuclear new-build programme? Regardless of what takes the place of the IPC, all Members want a structured and coherent plan to take the sites forward. My concerns and argument are about the bit that comes before the IPC—the consultation on the list of nuclear sites. My concern is that that system has fallen down.

I am aware that the Government have inherited a live and open consultation from the previous Government. Ministers are still considering the evidence given by my constituents and many others during the consultation period, as well as the evidence in the report of the Select Committee on Energy and Climate Change. Those things will be taken into account, and I look forward to reading the report. I hope that Ministers will consider some of the points that I have made on the suitability of Dungeness as a key site.