Football Clubs (Insolvency)

Jesse Norman Excerpts

Tuesday 18th March 2014 Westminster Hall

[Damian Collins]

The hon. Gentleman makes an important point. Undoubtedly, in the past, footballers could often be treated poorly by their clubs and had few of the rights that would normally be expected in the workplace. I am certain that no one would want to go back to such a situation, but I will come to how the financial guarantees work to encourage greater risk taking and irresponsibility with the finances of the game, with a direct consequence and knock-on effect for the insolvency of clubs.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Did my hon. Friend just say that under the football creditors rule, football creditors take precedence over the taxman? If so, can he think of any other industry or sporting activity in this country of which that is also true?

[Damian Collins]

My hon. Friend makes an extremely important point. The taxman lost his preferred creditor status in 2003. An informal arrangement exists between HMRC and football, and I will come to that, but the taxman is not a preferred creditor. The only preferred unsecured creditors are people within the game of football, who must be compensated in full under the rules of the Premier League and Football League. Other creditors get only pence in the pound. For example, when Crystal Palace went into insolvency, football creditors were paid in full, but non-football creditors received 2p in the pound. When Plymouth Argyle went into administration, again, football creditors were paid in full, but non-football creditors received less than 1p in the pound in compensation for the debts that they were owed.

[Damian Collins]

The hon. Lady makes an extremely good point. It does enormous damage to the credibility and reputation of football. That point was made by Niall Quinn, a former player and club chairman of great distinction, when he gave evidence to the Select Committee. How can it be right that in a community where a club has gone through insolvency, a small business that prints match programmes or paints the stadium receives none of the money that it is owed, while watching a player paid tens of thousands of pounds a week drive out of the gates to the ground in a smart car, having received every penny he was owed? It makes no sense at all. It is seen as a massive injustice and, given the huge amounts of money within the game of football, it cannot be justified in any way for football to reserve preferred status for its own creditors.

The Select Committee called in its 2011 report and its follow-up report in 2013 for the football creditors rule to be scrapped. Numerous debates have been raised in the House about both the generalities of football governance and finance, and specific cases relating to clubs such as Coventry and Leeds. Members have raised their concerns about such clubs in particular. Often in those debates, we have been reassured that the Government’s view is that the rule is one whose time has come, that we should move on and that we should not allow it to continue. I secured this debate to ask the Government where they stand on the football creditors rule.

I am grateful that the Minister with responsibility for consumer affairs, the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Cardiff Central (Jenny Willott) is here to answer the debate. Often, when we have had such debates, the Minister responding has not been the Minister responsible for insolvency laws in this country. Today we have the insolvency Minister here to answer the debate.

[Jesse Norman]

I absolutely share my hon. Friend’s view. He is making a powerful case, and it is doubly good to hear it from someone educated in Hereford, a city whose football club is in some difficulty due to the imbalance between the money sloshing around at the top of the game and the meagre pickings at the middle and lower end.

The issue I want to raise with my hon. Friend is the Government’s position. When I asked the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Maidstone and The Weald (Mrs Grant), who is Minister with responsibility for sport, she responded:

“The Financial Fair Play rules now introduced across football which, combined with compliance checks…aim to improve financial management and stability...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.]

I put it to him that, whatever the Government’s position is, it is not “clear”, and that that answer did not particularly clarify it.