Non-league Football

Debate between David Mowat and Mark Garnier

Thursday 4th September 2014 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I add my congratulations to my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) on bringing this important debate to the House. Clearly a great number of hon. Members on both sides are enthusiastic football supporters and know a great deal about the subject. I am not one of them. I have to confess that I am not the most enthusiastic football supporter in the country, and I think that any constituent who sees an MP trying to “ham it up” will see through them straight away, so I do not pretend that I am the world’s leading expert. Instead, I rely on my hon. Friend the Member for North Swindon (Justin Tomlinson), a son of Kidderminster who keeps me in touch with the Kidderminster Harriers, the leading team in my constituency, alongside Bewdley Town football club and Stourport Swifts—I too have three non-league football clubs in my constituency.

In the years I have been involved in Wyre Forest as a parliamentary candidate and as the local MP, I has been my sad duty—albeit one I relish each time it comes about—to work with successive chairmen to raise funds to try to save the Kidderminster Harriers football club. It is, I am afraid, one of the great problems of the smaller, lower league football clubs that most of them, despite enormous support from supporters and fans who give personal contributions, are, broadly speaking, ultimately supported by the patronage of private individuals. Most recently, the Kidderminster Harriers were got on to a sound financial footing through the incredibly hard work done by one such individual, Mark Serrell, and his wife, and through quite substantial personal financial sacrifice.

As we heard from the previous speaker, there is an awful lot of money in the broader football economy—probably enough money to keep the whole thing going, were it not for the huge amount of leakage at the top end, where a great deal of money seeps out of the football economy into the pockets of star players. They are probably worth it, but at the end of the day even an investment banker might blush at £300,000 a week in salary. The sport needs the non-league clubs to bring on the players of the future, and that is why more should be done to support them. At the moment, because of the complex interconnectedness in the football economy, people such as Mark Serrell of the Kidderminster Harriers are, in effect, subsidising Wayne Rooney’s salary.

It is important to recognise the huge contribution that clubs such as the Harriers make to their communities, and I will go through in detail some of the stuff they do. Kidderminster Harriers run a number of community and charitable activities. The club’s community scheme has football courses for children aged between five and 14 during the school holidays—an incredibly important time when they are not being supervised. They are held not just in Kidderminster, but across the entire county and in neighbouring south Shropshire and south Staffordshire. Malvern, Worcester, Bromsgrove, Droitwich, Cleobury Mortimer and Kinver—all benefit from the Kidderminster Harriers.

The football academy, which is run in association with Birmingham Metropolitan college, holds trials for players aged between 16 and 18. Importantly, this enables potential Harriers stars of the future to combine football training with a range of full-time courses at Birmingham Metropolitan college. We all know the importance of having a plan B, especially when one is in sport.

The Harriers have recently been recruiting teenagers to a five-a-side indoor football team that will play against larger league clubs in the midlands. Aggborough stadium occasionally hosts charity fun days. The club’s official charity partner for this season is Prostate Cancer UK. It linked up with the charity at the start of the new campaign in August, with the players posing in special “Men United” shirts during the traditional team picture. The use of Aggborough stadium is also available for other events. It is right that any organisation with assets to sweat should do that as much as possible, but it is encouraging that Kidderminster Harriers lets the community use its stadium. On 27 August, Aggborough hosted an international match between England Under-17s and Czech Republic Under-17s.

We have heard that the “fit and proper” test is incredibly important, and a great deal has been said about that. Two issues are worth looking at. First, there is inadequate distribution of money throughout the entire football economy, and the Football Association needs to deal with that. I call on the Minister to use her substantial powers of persuasion to help it to come to the right decision and conclusion.

[David Mowat (Warrington South) (Con)]

My hon. Friend raises a very important point. The Football Association has a surplus of about £80 million per annum, which basically comes from the England team. That money is given 50% to the grass roots and 50% to the professional game. There is absolutely no reason why it should not all go to the grass roots. Front Benchers on both sides of the House should be applying pressure on that. It would result in an additional £40 million for Hereford, Worksop, Kidderminster and Warrington.

[Mark Garnier]

I entirely agree. It is absolutely right that we should be pushing as much money as we possibly can down to the non-league football clubs.

Secondly, as we have heard, the Government can probably do a little more to help these football clubs directly. I agree with my hon. Friend the Member for Hereford and South Herefordshire that we should not go round handing out VAT breaks to them. However, given the great amount of charitable and community activity going on within some of them, there is a case to be made for having charitable or quasi-charitable status for the element of the club that is giving back to the community. The Government could do a great deal of work in looking to provide such help so that clubs benefit, as other charities do, from a reduction in business rates. Furthermore, there could be help for the businesses outside in the community that support the clubs through donations whereby they get tax breaks on those donations.

This has been a very interesting debate. I am learning a great deal about football, having, as I said, come from a very low base to start with. It is important that we support these clubs. Many football supporters recognise that they are fantastic, enthusiastic centres of the community, but people like me who are not supporters, but work with our communities, also recognise absolutely that the work they do is incredibly cohesive in a town. Even if one hates football, one has to recognise the value of the game in supporting the community.

Private Finance Initiative

Debate between David Mowat and Mark Garnier

Thursday 23rd June 2011 Westminster Hall

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to speak under one’s chairmanship, Mrs Main. [Laughter.] I also add my name to the chorus of congratulations for my near neighbour and hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who has not only secured this debate but worked so hard on the thorny issue of the PFI. His work includes his PFI rebate campaign, which I have enthusiastically signed up to. He has also managed to secure a Treasury Committee investigation into the future of PFI. It is good to see that four members of the Select Committee have come along this afternoon.

The PFI does not directly affect my constituency—there is only a magistrates court there under a PFI contract. However, it indirectly affects my constituents because they are served by the Worcestershire Royal hospital. Famously, Kidderminster hospital was downscaled to help pay for it. When my constituents hear that we have overspent on those contracts to the tune of half a billion pounds, they will be rightly even more furious than they were when the Government wound down Kidderminster hospital.

The PFI is something that we all love to hate. It has come to signify the inability of the public sector to write proper contracts and it is a symbol of trying to hide capital investments on the country’s balance sheet. However, is that a fair summary of what is a reasonably legitimate way of financing part of the supply side of the economy? I have certainly argued in the past that the public sector will always negotiate bad contracts for the simple reason that there is an asymmetry in negotiating skills. I am certainly not here to criticise the knowledge of public sector employees in terms of how to go about writing a contract. However, when it comes to a contract between the public sector and the private sector, we have, on one side of the table, a well-read and well-intentioned civil servant who is doing his best and possibly looking forward to his retirement, while on the other side we have a hardened businessman who is motivated by profit and return on equity and quite probably incentivised by direct equity in his business and a bonus for concessions won. A civil servant will certainly be very well educated in negotiating, but the hardened PFI negotiator from the private sector will have the concept of return on equity, risk evaluation and profitability etched into his DNA. There is no doubt that there is plenty of money to be made out of PFI for the astute negotiator.

Dexter Whitfield, director of the European services strategy unit, in his submission to the recent Treasury Committee investigation, highlighted the profitability of PFI equity sales—that is where a PFI contract is sold and the profit made is in addition to the profit that is gained on an ongoing basis. He pointed out that although there is little readily available information on PFI sales, the ESSU database holds 63 transactions covering 154 PFI projects, and he has looked at how much they have made. Average equity profit has been 50.6% on the 63 transactions. What is interesting is how they fare by sector. Health has been given a profit of 66%, housing 80% and leisure 86%. However, the truly eye-watering winner by miles goes to the defence sector, which has been giving PFI providers a whopping 134% profit on their equity sales. The Treasury Committee inquiry was lucky enough to have a representative from the PFI industry, one of the directors of Balfour Beatty, and he was surprisingly evasive in his reply to my questions, implying that that profit may have included the annual premium returns and therefore was not a fair judgment. But my interpretation is that PFI providers that have sold their investments have already made an annual return on the projects—that is perfectly reasonable, given the way that the projects are structured—but that the sale profit is in addition to that annual return.

What does that mean in terms of the contracts that have been negotiated? It seems that the valuation of risk, which is a key part of a contract, has been miscalculated in favour of the provider and it is that premium, in favour of the provider, that gives the opportunity for the sizeable equity sale profit. Indeed, the fact that there is someone out there to buy the equity stake with their own measure of risk and expectation of return means that there is still more to be made by the subsequent buyer, implying even further mispricing of risk.

That is the point. PFI projects do two things: first, they provide a so-called off-balance sheet way of financing a vital piece of investment; and secondly, they devolve the risk element of any project to the private sector. But the private sector will evaluate that risk and charge for it, and the evidence put forward by Mr Whitfield suggests that the PFI provider is making a great deal of that opportunity.

[David Mowat]

I have been listening very closely this afternoon to the points that have been made about the super-profits, the 180% margins and all the rest of it. I have also tried to hear the names of the companies that are making those profits and the only two that I have heard are Balfour Beatty and Bovis. My understanding is that neither of those organisations has a particularly high return on capital employed. So I am a little bit mystified as to where the money is going and I genuinely would like somebody to help me with that point.

[Mark Garnier]

I thank my hon. Friend for that intervention—what a perfect opportunity for me to do so. These are the profits of equity sales by the companies concerned: 41% for Carillion; 59.1% for John Laing; 53.9% for Interserve; 78% for Lend Lease Corporation, so well done to that company; 42.9% for Costain Group; 20% for Serco Group, which was perhaps not the best investment for someone’s money; 71% for Balfour Beatty; and 59% for Kajima Partnership.

[David Mowat]

What are those numbers?

[Mark Garnier]

Those are the equity sale profits. So those companies are PFI providers who have then sold their contracts, and those figures are the profits they have made. Just to be fair, the figure was 56.3% for Kier Group. Those are pretty sizeable returns.