Football Governance Bill [HL]

Lord Bassam of Brighton Excerpts

Committee stage
Wednesday 15th January 2025 Lords Chamber

[Lord Moynihan (Con)]

I disagree with the noble Baroness on that. Through the history of the backstop powers and the parachute payments, this has been subject to consistent and constructive negotiations. Some negotiations are tougher than others; there is no doubt that in recent months and the last couple of years there have been examples of both sides failing to reach an agreement. I do not believe that putting this regulatory pressure into a binary system is going to resolve that. Yes, negotiations are tough and are frequently going to lead to detailed iterations before a satisfactory position is reached—but the last round of negotiations in particular was very close to reaching an agreement. I do not believe that the imposition of regulatory pressure is going to resolve that beneficially for the future of the Premier League, or indeed the EFL, at all.

[Lord Bassam of Brighton (Lab)]

My Lords, before the noble Lord completely finishes his point and before we get to the Minister, from whom I think we all want to hear on this, does he accept that there has not been any progress in negotiations for 18 months? That is a very long time. The Premier League has to come somewhere close to where the EFL is if there is to be some sort of progress, and there has been no progress in that time—so I am not sure that the noble Lord is right.

[Lord Moynihan (Con)]

I am equally keen to sit down so that we can hear the Minister respond. I was party to the letter from the EFL and to the reply from the noble Baroness, who set out clearly the steps taken during these negotiations, and it is simply not true to say that over the past 12 months no progress has been made. I hope that the noble Lord will agree that the proposal made by the noble Lord, Lord Birt, is a far more efficient, professional and collaborative way in which to make progress, and I very much hope that the Minister will echo that in her response.

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[Lord Bassam of Brighton (Lab)]

My Lords, I will speak to Amendments 308, 309 and 318. Before I say something critical about the comments made by the noble Baroness, Lady Brady, I would love to congratulate her on securing the services of Graham Potter—a good example of how Brighton & Hove’s generosity of spirit has extended down the Premier League. I hope that West Ham can build on our measure of bringing on talent.

The heart of our amendments in this group is Amendment 309, which seeks to qualify the way the regulator performs in this regard. Essentially, it would ensure that the financial gaps between the divisions in the pyramid are closed. It seeks to ensure that there is adequate compensation for player development and academies, and to provide for the welfare of players. It seeks to incentivise clubs to be well run and provide training for volunteers. The fifth element of the amendment is that the independent football regulator should address issues identified by the relevant “state of the game” report.

We do not set out a formula in our amendments but we say that the financial gap between the leagues needs to be addressed. Of course, in doing so, the football regulator will have to have regard to its “state of the game” report. The noble Baroness, Lady Brady, has made much play on several occasions of the generosity of the Premier League. There is no doubt that the Premier League is generous, but when one looks more closely at the figures and statistics, there is a limit to that generosity. Currently, the distribution of money coming from the Premier League is that some 92% of the revenue that it generates goes back to the 20 Premier League clubs, plus the five that are beneficiaries of parachute payments. Therefore, 92% goes to 25 clubs. That seems somewhat excessive. It means that just 8% of the distributable revenues from the English game, which amount to some £3 billion, goes to the other 67 professional clubs, which receive just £245 million. That gap has grown over the years. That is why we think it is right that the independent football regulator should give that gap some careful scrutiny.

The then Conservative Government commented in their White Paper that the parachute payment system

“can distort competition in the Championship and encourage greater financial risk taking by clubs that are not in receipt of them”.

That was a big and bold statement. It is worth reflecting on some of the research that has been done on the impact of parachute payments. Back in 2017, Dr Rob Wilson from Sheffield Hallam University, looking at that period between 2006-07 and 2016-17, concluded that clubs receiving parachute payment were

“twice as likely to be promoted to the English Premier League”

and “considerably less likely” to be relegated. That is a considerable distortion of the way in way in which the leagues operate. For that reason too, we think that the financial gap issue should be looked at more closely.

Obviously, it is right that there are solidarity payments, but the majority of those payments are concentrated simply in the parachute payment system. I therefore hope that the first “state of the game” report gives some close attention to that. It is worth observing too that, before the formation of the Premier League, domestic broadcasting money was allocated according to an agreed formula, with 75% being paid to the top-flight clubs and 25% to the other three divisions. I do not say that that is the right formula or that the 92% figure I referred to earlier is the wrong formula, but it is clearly an issue that need to be addressed.

In the last seven seasons, those clubs that have had parachute payments have managed to get back into the Premier League. In each of those seasons, two of the three promoted clubs received parachute payments. Looking at the Championship this year, the top three clubs are still in receipt of parachute payments. There is definitely a serious case to be examined.

We have heard a lot about the strength of the Premier League, and there is no doubt that it is the finest league in the world. I thought the statistics from the noble Lord, Lord Birt, were fascinating. They underline the confidence in our Premier League that exists in the football world. We want the distribution mechanism, as it works through, to be fairer and more equitable, and address some of the issues within the game. That is why we brought forward our amendments.

I conclude by making this observation: it is clear that the big divide in the consideration of this Bill is over the parachute payments. It is clear that noble Lords on the Opposition Benches are very much opposed to including them within the remit of the IFR. On our side, we think it only right that they should be brought into scope, and that was one of the major changes made between the previous Government’s Bill and our Government’s Bill. That is right, because it tries to ensure that there is some greater equity in the legislation. The noble Lord, Lord Pannick, put his finger on the issues, as did my noble friend Lord Watson.

I hope the Minister will give some consideration to the criteria point that we have raised in Amendment 309, if not in the Bill then certainly ensuring that it is carefully taken into consideration when the IFR is finally set up.

[Lord Birt (CB)]

To respond briefly to what the noble Lord just said, in my remarks I said that I think there is a case for looking at the weighting between solidarity payments and sustainability payments. That is exactly what I think the kind of measures that we discussed earlier would bring some clinical analysis to and come up with a considered answer.

Forgive me if I point out something else to the noble Lord. I am a lover of stats, and I have just looked up a stat, which is what proportion of Brighton’s revenues come from the Premier League. In the last year for which figures are published—so this will not be from this year—73% of the revenues of the noble Lord’s club came from the Premier League. He has to face the issue that if there were a material change in that, it would have an impact on the club and the Premier League and its appeal. This is about getting the right balance in all these things.

[Lord Bassam of Brighton (Lab)]

I agree that it is about getting the right balance—there is no disagreement between me and the noble Lord—and obviously I acknowledge the size of the support that Brighton & Hove Albion get. One should also put on record that our fans—I am a great fan, a season ticket holder and a 1901 Club member, for that matter—are incredibly grateful to Tony Bloom for the investment that he has put in. I do not entirely buy the argument that it is because of parachute payments. Back when Brighton were pressing for promotion in 2016-17, that was not foremost in anyone’s thinking, and I doubt whether it was foremost in Tony Bloom’s. But obviously we have to look at where the resource is spent, and that is why it is for the IFR to make that determination and to treat this issue with great care when it comes to a conclusion, based on the “state of the game” report.

[Lord Goddard of Stockport (LD)]

My Lords, for the first hour of the debate today, I honestly thought I was in a different Committee. The thoughtful amendments from the noble Lord, Lord Birt, and the reasoning behind them were more favourably reflected on by the Minister than almost any other amendment I have heard over seven nights. The helpful intervention from the noble Lord, Lord Pannick, about some technical issues, and his offer—probably to be accepted—of redrafting for a further thing, emphasise that we are drawing to a place where I think we can begin to make progress. Even the noble Lord, Lord Markham, was concise in his comments on those amendments in the spirit of trying to move the evening on, while still making the political points that he needed to make.

I was going to comment on the speech by the noble Baroness, Lady Brady, but the points have been made by the noble Lord, Lord Bassam, far better than I could: the Premier League does not have all the right answers, and it is about the pyramid and the lower clubs. This afternoon I met disability groups, women’s groups and other people concerned about the economics of football, and their real concern is whether they will ever see the benefits of whatever happens with this regulator, so that it does not just stay between the Premier League and the Championship. It is fine to say that the Championship is now one of the six best leagues in the world—that is to be supported—but below that are League One, League Two and the National League teams. We need to keep all those thoughts in our minds as we move forward.

Personally, I have absolutely no problem with the Premier League. It is a fantastic thing and I pay my money to watch it if I can—I wish I could have switched the fixtures around from last night to tonight, so that I would not have had to endure City throwing away a two-goal lead at Brentford. I could have missed that, listening to the enjoyment in here, but that is just the way the fixtures are thrown up, unfortunately.

What I am trying to say, clumsily, is that the regulator needs to be given responsibility. We can influence that responsibility by way of amendments in this and the other place, but it is very important that the Minister understands where those amendments are coming from, and for what reasons. I do not think that anybody in this Chamber does not believe that football deserves the very best governance and the very best people running it to keep its status as our national game. It is our national game, from Liverpool at the top right down to Southend and clubs at the bottom. Our group on these Benches just wants to ensure that we keep that focus, because you can lose it in the argument of the to and fro of the money, the percentages and how it is not fair. The fairness is not the point. The point is the 92 football clubs, which should be at the forefront of all our minds.

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[Lord Markham (Con)]

That is precisely the point of this debate. I think everyone agrees that the Premier League should be paying money over, no one more than the Premier League itself. The whole question is whether it needs a regulator to enforce a set number. As my noble friend Lady Brady said, the Premier League is more generous than other leagues. As my figures showed, the Premier League pays over 14%, which is almost three times the level that UEFA pays over in its version of solidarity payments. The real point of the debate is whether we really need a regulator to determine it.

We have had a good debate on parachute payments. The noble Lord, Lord Bassam, made a particular point about Brighton and how it did not need them. It is a little known fact that that a job I never got, although I was through to the final round, was being CEO of Brighton many moons ago, when it was a Championship team and was pressing for the Premier League. I recall very well a conversation with Tony Bloom when he was interviewing me for that job. I still think he is a brilliant chair, and I cannot argue against Paul Barber, the CEO; given how good he is, I cannot deny that he chose the right candidate.

[Lord Bassam of Brighton (Lab)]

The noble Lord is obviously used to being a runner-up in these competitions.

[Lord Markham (Con)]

That hurts. Tony Bloom made clear to me that Brighton’s whole business plan depended on what he called “the yo-yo”. West Brom had just done it at the time: you get promoted and make some investment in new players. You then expect to go down and have the benefit of parachute payments to build more players up again, so you slowly get to the level, through the yo-yo, where you can be sustained.

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[Baroness Brady (Con)]

I do not say that they do or do not. I am saying that, if they were not there, you would have to invent them. If a club is promoted from the Championship to the Premier League and cannot invest in its team to stay in that league, it is automatically almost certain to be relegated. If an established club, such as those mentioned earlier, is relegated, without the parachute payment it will be in financial trouble. Some 50% of all administrations come as a result of relegation; that is why parachute payments are fundamentally important. They are designed to manage the financial shock of relegation, where clubs could lose significant revenues, almost overnight, while their costs remain fixed.

For a recently promoted Premier League club, squad costs alone average £115 million a year, with most player contracts running for three to five years. Relegation means that clubs face an average shortfall of £165 million over three years, even with parachute payments included in that equation. It is important to recognise, therefore, that they do not help clubs avoid a painful transition but soften the blow to a degree. Without them, the financial impact would escalate from being very painful to being catastrophic.

[Lord Bassam of Brighton (Lab)]

I remind the noble Baroness that parachute payments have not always been at the level they currently are. In 2010-11 parachute payments were something like £30 million; by 2020-21 they had escalated to £233 million, which is an eightfold increase. This was during a period in which player wages only doubled. The noble Baroness’s point about the need to ensure that there is no cliff edge around financial commitments to players is not entirely valid. Why did the parachute payments need to grow so rapidly and by so much during that period?

I do not argue against the principle of parachute payments; I recognise their importance and the need to soften the blow that is a product of relegation. But the noble Baroness must accept that they have a distorting impact on promotion bids by Championship clubs. Over the last seven seasons, 14 of the 21 clubs promoted were in receipt of parachute payments, where previously that was not the case.

[Baroness Brady (Con)]

As the noble Lord pointed out, wages have increased. Newly promoted Premier League clubs have an average wage bill of £115 million and transfer fees have gone through the roof. That is why the costs are fixed. If a club is relegated, it cannot terminate its players’ contracts; they are honoured, as clubs are obliged to pay those contracts. The parachute payment helps soften that blow. Parachute payments put restructuring responsibly at the forefront of clubs’ minds. Relegated clubs have to sell players, but they also have to buy players, reduce their wage bill and recalibrate costs to adapt to life in the Championship. What these payments really do is help clubs avoid wholesale disinvestment, panicked fire sales or, worse, administration.

Parachute payments work. They do not distort competition; they enable it. That is why versions of parachutes are used all over Europe and throughout the EFL system. Clubs such as Brentford, Brighton, Nottingham Forest and Crystal Palace have all demonstrated that well-run, innovative clubs can rise through the Championship without parachutes and build competitive, successful teams in the Premier League. Parachute payments are a stabiliser for relegated clubs, not a barrier to promotion.

Without these payments, the competitive balance, investability and appeal of both the Premier League and the Championship would be put at risk. Investors in the Championship recognise that parachute payments provide the essential scaffolding for strategic investment. These payments enable clubs to build towards promotion with confidence, knowing that there is a safety net. Parachute payments create the conditions for clubs to invest in players, infrastructure and long-term strategic plans, with the assurance that one challenging season in the Premier League will not unravel their progress and render all that investment worthless.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, there stands a contribution that does not know how tedious, time-consuming and expensive it is to write reports. Now we are putting on the same people, whom we have just said are going to be drowning in bureaucracy, another report for which they have to compile all the information and write. That was my view.

Although that is a simple point, it should be in the Bill because it is an underestimated threat of the Bill. I have no doubt that the Minister and the Government do not intend—

[Lord Bassam of Brighton (Lab)]

I made this point at an earlier part of our considerations. Put simply, all these clubs are limited companies and are regulated effectively through an audit process, so all of the financial information that will be required will be accumulated as a process and a product of their annual audit. I do not see that as excessive.

[Baroness Fox of Buckley (Non-Afl)]

I will carry on and make my point and we will see whether we can agree. I am concerned about it being excessive, but if it is not, this proposed new clause will prove the noble Lord right and me wrong, and that would be fine.

I wanted to start with the way that fans have really gone along with the Bill because they see it as something that will save smaller clubs and keep them from going under. Everybody knows about Bury and other clubs such as Chester City, Hereford United and Halifax Town. One of the most compelling things about the need for the regulator and the Bill is this notion that we will be able to save unsustainable, smaller clubs from going under. That is what gives it its moral force. People can rail against the big bad Premier League in some ways, and I understand that the Premier League, with its fans in the Chamber, is all we have talked about. I am glad that in this amendment we have started to talk about those smaller, poorer clubs, because I am worried that they will suffer as a consequence of the Bill. The noble Lord, Lord Hayward, explained that very well, and I just want to just tease that out a little more.

It is not just about operational costs in terms of compliance in a direct financial way. It is also the amount of energy and time that is going to be taken to comply by these very poorly staffed clubs, which have, say, two full-time members of staff plus volunteers. We know that time is money. I remind your Lordships of the speeches that we heard earlier on in Committee. The noble Lord, Lord Moynihan, made an excellent one about what it takes to write a corporate governance plan. I try to illustrate what it means to comply with equality, diversity and inclusion policies—forget any ideological disagreement on that. It costs time and money. By the way, to fulfil the EDI plans, you have to send all your staff on training. For example, the Civil Service at the moment spends 1 million days of Civil Service time on its civil servants going on EDI training. That is an indirect cost. The paperwork needed to keep this regulator happy—by the way, under the terrifying threat that you could lose your licence if there is non-compliance—really needs to be taken into consideration. It is not just money; it saps creativity and life out of the club, which in a way is a slightly different cost.

Recently, David Riley, who has moved from his role as legal director at the Competition and Markets Authority to become head of legal at the IFR, posted the following, rather boastfully, on LinkedIn:

“The first job is to recruit a team of lawyers to work within the shadow regulator as the legislation progresses. These lawyers will play a central role in shaping the IFR legal function, and working with others to help the IFR prepare to deliver on its statutory objectives”.


I read that out to a group of football fans, who said, “Oh my God, that sounds terrifying! Imagine if you’re running a small football club”. If you are a smaller, cash-strapped club hearing this, it is immediately about lawyers policing your work. You have no in-house experience to cope, so you think you had better bring in experts, consultants and third-party bodies. Again, that can lead to eye-watering costs, let alone your independence being undermined. I am concerned about that.

I will quickly take a step back, because sometimes we can get trapped in the specifics of football and all the passions and emotions associated with the game. I remind the Committee that one reason why so many of us are worried about this Bill is because of examples of other regulators created by legislation leading to damaging unintended consequences.

In terms of proportionality, a few weeks ago the tech journalist and academic John Naughton wrote an article in the Guardian bemoaning the terrible toll that the Online Safety Act and its heavy-handed regulator Ofcom were having on smaller, community-driven online forums, even though the Act’s stated aim was to target big tech and harms. I never really agreed with the censorious assault on big tech anyway but, as I argued with the noble Lord, Lord Parkinson, when he was on the other side and taking the Bill through the House—just to show that I am not sectarian—there is always a danger that compliance costs associated with any regulator, in that instance with the Online Safety Act, will make it untenable for smaller platforms to bear the brunt of the law. As John Naughton explains, that is what is happening as we speak, leading to the potential closure of forums with benign purposes—his examples were those discussing cycling and cancer care.

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[Lord Markham (Con)]

I rise to speak to Amendment 329 in my name and that of my noble friend Lord Parkinson. I will speak very briefly, because Amendment 327, on costs, was spoken to extensively.

I think we all accept the need for a regulator. The points about broadcasting made by the noble Lord, Lord Birt, were points I am very familiar with as a former director of ITV and were very well made. On proportionality, we have talked a lot about Premier League clubs, but I would argue that when you have National League clubs who have two, three or four members of staff and an impact assessment that says they will need one member of staff for compliance on this, that tells me that we have the balance wrong. We are saying that a third of their staff need to be in compliance.

I would like to answer the point made by the noble Lord, Lord Bassam, who said that clubs should already have all this information because they are doing an audit. An audit is backward-looking over the year that has happened. What the regulator is asking clubs to do here is to write a three-year business plan, which is forward-looking.

[Lord Bassam of Brighton (Lab)]

The regulator is also encouraging clubs to put things right and offer remedies in their reports that have to be fair and proportionate.

[Lord Markham (Con)]

I can bore on this issue, as a former FTSE chief financial officer. An audit is backward-looking, and you have to have a going concern statement, which is the forward 12 months. It is nothing like the business plan requirements that the regulator is asking clubs to provide for three years going forward. There is no doubt that that will require clubs to employ consultants, accountants—you name it—so it will be a significant burden on them, and this is exactly the point we should be considering. When you think about it, if you are talking about one member of staff per national—