Football Governance Bill [HL]

Lord Grantchester Excerpts

2nd reading
Wednesday 13th November 2024 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, there can be no dispute that the formation of the Premier League in 1992 has been transformative of football and has led to English top-flight football being the most dominant across European leagues. It has attracted worldwide audiences, the best players from all continents, international investment into clubs and unparallelled cash flows from broadcasting rights. Despite the success, and despite all the good outcomes—redistributions and investments in grass-roots development—serious problems have arisen, with widespread agreement and approval for corrective action. The spark for this came from the ill-advised breakaway proposals from six Premier League clubs in 2021 to form a new 12-team European Super League. Arriving at this point has been accelerated by some rogue, self-interested club owners ignoring the heritage and community aspects of football clubs; fans have rightly insisted that protections from abuse be enshrined in legislative regulations. I pay tribute to them.

I support the Bill. I am pleased with the enhancements the new Labour Government have brought to the previous Bill of the Conservative Administration. All political parties agree on the need for reform to counter inadequate corporate governance resultant from inadequate and ineffective regulation, such that the structure and dynamics of the market create incentives for financial unsustainability.

This new Bill strengthens effective engagement with fans and their representatives; it brings income redistributions from broadcasting rights within scope; it makes the regulator fully independent of industry and government’s foreign and trade policies; and it will create a new football club corporate governance code to improve equality, diversity and inclusion, and decision-making at clubs. I thank Katie Nixon from the Premier League, Rick Parry from the Championship and EFL, Sophie Levin from the Football Association, Kevin Miles from the Football Supporters’ Association and the Bill team for all their engagements on the Bill.

I declare my interest from a lifetime of experience in football and, most pertinently, from having been a director of Everton Football Club and, presently, chairman of Everton’s football memorabilia collection charity. I hasten to add that these remarks are wholly my own and not made on behalf of or representative of anybody else.

The football industry must agree to make this legislation and regulation work effectively and successfully. It is important for the whole game and to the lives of so many. I do not share the widespread general disapproval of the Premier League or of the exaggerated risks its briefings draw attention to. In many respects, the legislation may not go far enough, but it must be made to work, and we need to consider where it may lead and how it may develop and adapt to circumstances.

The immediate issue the regulator will face is in regard to the backstop Clause 57 and the divergent proposals on parachute payments and redistributions between the Premier League and the Championship. I understand the distortion of competition this brings to the Championship. However, I contend that the internal distribution between clubs in the Premier League also requires consideration and is pertinent to this. Should the Premier League distribute income more equally between the top and the foot of the table, those regulated clubs would have improved cash flows and potentially be better able to sustain the change. They can already limit exposure through their player contracts. Redistributions could be better made to Championship clubs; the sheer volume of broadcasting rights receipts counters the argument that the effects of the multiples of distribution between clubs at the top and bottom of the Premier League are less, in percentage terms, than elsewhere across other UEFA leagues.

Volumes are also pertinent. Indeed, the sheer dominance in cash terms from broadcasting rights to the Premier League leads top European clubs to consider that the Premier League is setting itself up to be the super league. In contention to this, there are fears of an emerging super league being created from the expansion of the Champions League and other UEFA competitions attracting more Premier League clubs into their participation. Protections against the super league in Clause 45 need to recognise these concerns. The cancellation of replays from round 1 of the FA Cup competition, and thereby the Premier League increasing its dominance by taking over the Football Association’s income streams, has been the result.

There are many concerns over competition law that are relevant not only within the football pyramid but internationally between England and both UEFA and FIFA. Both have issued statements of concern. It is a complex area. I highlight the conflict of interest that arises to the Premier League in relation to its being both a regulator and a marketeer of broadcasting rights.

I turn to how competitive the Premier League is. It can be argued that merit payments and their size will create elites, especially where redistributions of broadcast rights are augmented from playing in European leagues and from worldwide rights. The probabilities of any Premier League club beating another reduce from disparities between all those distributions. Is the league actually competitive? It could be argued that competitive pressures to achieve a merit position drive incentives to unsustainable behaviour. Relegation is the ultimate cliff edge. Clause 1(1) states that the purpose of this legislation

“is to protect and promote … sustainability”.

All aspects of income distributions and their effect need to be borne in mind, and the regulator must pay due regard to them.

The present problems also include financial fair play and the Premier League’s litigation against its members. Investments into clubs, their stadiums and facilities have not been adequately appreciated in the Premier League’s PSR. Surely investment should not be discouraged and penalised. In contrast, it appears to some clubs that accounting norms and standards are challenges to be circumvented or reinterpreted. For example, one of these is the length of time over which players’ contracts can be amortised.

As an aside, the Women’s Super League has adopted a better approach by having a total salary limit—a model familiar to US owners. I assure noble Lords that Everton abides by one, even though other clubs may not. The amount that can be spent on players’ wages is limited to 40% of turnover. However, the parent men’s team can invest further sums into the club’s women’s team and thereby lessen that impact, as it can spend 40% of its investment on player wages. Further discussions are ongoing in both sections, men’s and women’s. I am also pleased that the Secretary of State has powers in the Bill to extend the legislation to apply to the women’s game, which it is correct to leave to develop itself at the moment.

I commend the provisions about fans’ engagement in the Bill. I interpret them as enabling rather than prescriptive, and they should be sufficient to be effective.

Once the legislation completes its passage through both Houses into law, the very next important step is for the regulator to set up the “state of the game” report outlined in Clause 10. Its terms of reference need careful drafting, the call for evidence needs to be wide-ranging and inclusive, and the consultations need to be extensive. The reduction of time to 18 months from three years for this to be concluded is also an improvement to the Bill. The “state of the game” report is fundamental for the independent regulator to understand a full economic and financial analysis and all the implications of the market structures of the game, to have a broad remit with wide-ranging information-gathering powers, and to enable effective consultation.

The Bill is broadly balanced in its approach, and the House can consider whether amendments may be needed to make the Bill more explicit regarding the regulator’s reach. I close with a remark from Carlos Hurtado, a sports lawyer at Baker McKenzie:

“If you have strong governance and financial controls, you’re creating the perfect environment for the sport to develop, investors to come in and create more value for the business. When you do that you’re going to have more competitive football”.

[Baroness Blake of Leeds (Lab)]

My Lords, I remind noble Lords of the advisory speaking time. We have a lot of Members who wish to speak and we want to finish at a reasonable time.