Football Governance Bill [HL]

Lord Hayward Excerpts

Committee stage
Wednesday 15th January 2025 Lords Chamber

[Lord Pannick (CB)]

My Lords, my response to the noble Baroness, Lady Taylor, is that the experience in litigation over recent years is that a requirement on parties to acrimonious disputes to mediate does often ensure a consensual settlement of disputes that seemed unable to be resolved—the formal process of mitigation. I declare, as I always do, my interests as counsel to Manchester City in disciplinary proceedings. I am a season ticket holder at Arsenal. I am interested to hear that the noble Lord, Lord Parkinson, is in the Caribbean; I had intended to go to the Emirates Stadium tonight to see Arsenal play Tottenham Hotspur, but I decided, on the basis of their recent form, that it would be far more entertaining to listen to the noble Lord, Lord Birt, and other noble Lords.

I just make two points about the amendments from the noble Lord, Lord Birt. I agree that they deserve close attention and I look forward to hearing from the Minister. The first is on Amendment 297A, on the appointment of a mediator. The noble Lord proposes that the person to be appointed must have held high judicial office. I say to him that, based on my experience, the best mediators are not necessarily those who have been judges. A mediator is not deciding anything; a mediator needs empathy and the ability to build a relationship of trust with the warring parties. I therefore respectfully suggest to the noble Lord that he may want to think about that point.

The second point that I raise with the noble Lord and the Committee is on his Amendment 297F. If I have understood his scheme correctly, there is a mediation stage, then there is an arbitration stage and then the ability for either party who is dissatisfied with the arbitration to take the matter to the Competition Appeal Tribunal. I point out to noble Lords that it is customary, where there is arbitration, that the power to take a matter that has been consensually arbitrated to a court or tribunal is very limited. That is the whole point of arbitration; it is to reduce the possibilities of further lengthy and expensive proceedings. The Arbitration Act, in most circumstances, limits the ability to go to court or to another tribunal thereafter to very specific and limited grounds. Again, the noble Lord may want to give thought to that.

[Lord Hayward (Con)]

My Lords, during the Second Reading debate, I made a contribution in relation to this specific issue and I disagreed with some of my colleagues. I indicated that I had worked for many years as a negotiator on behalf of management, on behalf of some of the largest corporations in this country. I negotiated with trade unions. It is easy to talk about mediation, arbitration and swing arbitration, which is in fact what is proposed in this Bill by the Government, but they all tackle an issue in different ways.

I am impressed by the arguments from the noble Lord, Lord Birt. I said at Second Reading that I was not averse to the proposal, but I wanted to see what the alternatives were. I will listen to the Minister with care, because I think it is important that one addresses the different forms of mediation and arbitration that are available to two sides, whether they are, in my case, management and trade unions, whether they are industrial organisations or whether, in this case, they are particular bodies that have an interest in coming to an agreement.

That is my observation, but I put one specific question to the Minister. According to press reports, the Chancellor is meeting regulators tomorrow to emphasise to them that they should prioritise growth. Given that so much of our debate has been about maintaining the growth of the football industry while tackling issues, I just seek clarification as to whether the shadow regulator has been invited to that meeting with the Chancellor. If so, is he going?

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[Lord Addington (LD)]

My Lords, to follow up on the point from the noble Baroness, Lady Taylor, will the Minister tell us how the Government seek to enable Parliament, and indeed the Government, to look at how this is working when it comes in? There are provisions and, as the noble Baroness, Lady Taylor, sensibly put it, we are looking more at regulators, basically because of a failure of regulation—it has occurred in many fields. When you have a new regulator, you should review it. What is the process of review that the Government have in mind or going on? I hope that it is not a matter of waiting for failure.

[Lord Hayward (Con)]

My Lords, before I come on to the question of compliance costs specifically, I return to an answer the Minister gave me in response to a question I asked at the start of the debate this evening. It was on whether the shadow regulator would be present at the meeting with the Chancellor tomorrow. The response that the Minister gave—I hope I have it correct—was that the shadow regulator would not be present because the invitation was to existing regulators. I note that the Minister is nodding to that, so I presume that I have the phraseology broadly correct, and certainly the message correct. To be honest, I find that staggering. We have been told that the shadow regulator body— I was present at the meeting recently with the shadow regulator and his staff—should be up and running so that the regulator can take over a body that is already in full operation. We were told how many staff had already been recruited. We have been told persistently that this is light regulation.

I refer here to the fan-led review by Tracey Crouch. On page 15, paragraph 15 states that there are five important factors that should be pursued, including, in sub-paragraph (d),

“minimising burdens on clubs or an expensive system”.

Surely a shadow regulator that is going to hand over an up-and-running system and is going to operate a light-touch process of regulation should be invited to a meeting with the Chancellor to discuss precisely that issue. I am at a loss, as I think a number of people in this Chamber are, to understand why the shadow regulator has not been invited to that meeting. I am afraid that it indicates to me the attitude of the Government towards the role of the regulator in this process.

I now turn to the question of compliance costs. I do not intend to cover the issues that the noble Lord, Lord Moynihan, has covered so effectively, but I would like to cover a number of other issues. The noble Lord, Lord Moynihan, made reference to the fact that we were talking about all football clubs. The concentration throughout all our days in Committee has been overwhelmingly to do with the Premier League and the Championship. But when one is talking about the sorts of figures that the noble Lord, Lord Moynihan, was referring to—I have pursued persistently the honest assessment of what the actual cost is for a club, whatever it may be—the Minister has said persistently to me and others that the costs would be proportionate.

It is therefore relevant to remind this Committee what the turnovers of the small clubs are. I am quoting from Deloitte’s figures for the season 2022-23, which I understand are the last figures currently available. The average revenue for a club in League One is £9.8 million. The average figure for clubs in League Two is £5.5 million. Therefore, the categories of hoped-for costs identified in the analysis that the noble Lord, Lord Moynihan, gave earlier fall very heavily on a club.

I will cite a few examples. AFC Wimbledon’s revenue is £7.4 million, Crewe Alexandra’s £4.1 million and Northampton Town’s £5.1 million. I have looked for the figures for Stockport County, but I am sorry: I do not have them. I would give them if I could. If there are to be a series of compliance costs on top of all the other costs faced at the moment—not least national insurance contribution charges and the like—that will make a pretty big hole in the revenue of a club with a turnover of £5 million to £7 million.

The Minister has said that the burden would fall proportionately on the biggest clubs. In an earlier contribution, I said that when I was head of the British Beer & Pub Association I had the responsibility of steering the introduction of substantial changes in licensing legislation, which we did with the full agreement of government. The burdens do not fall proportionately on the biggest companies. They can employ a compliance officer or two but, in a small company or a small football club, you do not have a compliance officer so you have to turn to other people for advice. It therefore takes longer and costs more.

It is like anything in life. If you own a large number of flats as opposed to one home, and you take out insurance and are filling out a form, you know only too well that if you have done it once for one flat, it is just the same the next time. If you are dealing with one property, you do not know because you have never been confronted with the issues before and so you have to turn to other people for advice. The burden is not proportionate. There is a massive imbalance between big clubs with huge turnovers and the smaller clubs living completely hand to mouth.

I have quoted once already from the review. The point I want to raise was triggered by the presentation from the shadow regulator. When he was talking about staff, I believe he said that it had just recruited five people for IT systems. We are told, indicatively, that the regulator is likely to employ some 250 people—that is more than 10% of the total of DCMS’s staff, covering all the range of its departmental remit. Are five people needed for an IT system?

Then I actually looked at the review. There was reference earlier this evening to the question of clubs in terms of a few clubs. In fact, the review says:

“Many clubs are poorly run”.


It goes on to say of the regulator:

“The Review has … concluded that the new financial system should involve real time financial monitoring”.


That is what those IT employees are there to do. They are not there to operate the regulator, because you do not need that many for the day-to-day operations of a business of that size. It is about investigating the processes. When they go to a club and ask it to produce the information, it will say no, because it operates on a completely different system.

When I was first involved with boundary changes, we tried to get figures out of local authorities about the number of voters on an electoral roll. Noble Lords might imagine that the returning officers from different authorities would operate on identical systems. No: they were on four different computer systems. It took several years to get the accurate figures. This is precisely what will happen with the small clubs. They will be operating their own systems, when suddenly along will come the regulator to say that it wants the information, but that it wants it in its own computer system, not the clubs’. Sadly, the likes of Stockport County, Rochdale, or wherever it may happen to be, will be told that they must revise their IT system because they have to give the regulator the answers and the computer says no.

The compliance costs fall very heavily on the smaller organisations. They are not proportionate, and we should be honest about that.

[Lord Jackson of Peterborough (Con)]

I support the amendment that was so ably moved by my noble friend Lord Moynihan and added to by my noble friend Lord Hayward. The amendment is an easy win for the Government, because I cannot understand the rationale for any Administration not seeking to understand the ramifications of their own legislation in terms of the costs of a regulator and other associated costs within six months. Therefore, if the Minister is so minded, she might look more benignly and favourably on this amendment when we come to Report, because it makes sense.

The kernel of this amendment is a fundamental question. It is not a question of whether we trust the Government, because I think, in good faith, that the Minister no doubt truly and sincerely believes that her Administration will preside over a regulator with a light-touch regime. Unfortunately, for those of us who are more cynical, the history of regulators is that they expand. We go back to our old friend that I referenced some weeks ago, Parkinson’s law. It is not named in honour of my absent friend, who is sunning himself in the warmer climes of the West Indies as we labour in the salt mines of the upper House of our bicameral Parliament. No—not Stephen Parkinson, my noble friend Lord Parkinson of Whitley Bay, but Parkinson’s law enunciated in 1955, which is that the number of workers in public administration, bureaucracy and officialdom tends to grow irrespective of the amount of work to be done. That is a very important point.

I commend to noble Lords an excellent report by Policy Exchange, The Rise of the Regulators, which looks at the different philosophical underpinnings and reasons for regulators. It makes the point:

“Once in place, regulations create constituencies that benefit from their continued existence, perhaps because they shield them from competition, or help protect their market position. And those coalitions of interest are better placed and have stronger incentives to act in their own interest than the wider community is to act in theirs and”,


to

“secure an optimal group outcome”.

It notes that, in the 1970s, Professor George Stigler developed the concept that

“regulation is acquired by the industry and is designed and operated primarily for its benefit”.

We know that regulation is costly to British industry. The report says that the Federation of Small Businesses estimates

“the cost of regulation to the SME community in Britain to be £55 billion per year, or £10,080 per business; 88% of its member companies identified some aspect of the regulatory apparatus as a barrier to their operations”.

Furthermore,

“an imbalance of power or an insoluble divergence in interests requires the state to manage the relationship between individuals or groups of individuals by regulating behaviour. But the expanding regulatory bureaucracy is the policy instantiation of a more omnicompetent state—one which plays a larger role in the lives of citizens, and which therefore reduces the scope for freedom and personal initiative”.

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[Baroness Twycross (Lab)]

I thank the noble Lord, Lord Moynihan, for opening the debate on this group and moving the amendment in the name of the noble Lord, Lord Maude of Horsham; and the noble Lord, Lord Markham, for speaking to the amendment in the name of the noble Lord, Lord Parkinson of Whitley Bay, which he signed. I have to say that, at points during the debate, I wished that I was in the Caribbean, but I will endeavour to respond.

The Government recognise the intent behind Amendment 327, in the name of the noble Lord, Lord Maude. I thank the noble Lord, Lord Pannick, for cutting to the chase on what has been a longer debate on two amendments than I anticipated. They raise reasonable concerns that need to be addressed, but we have debated these concerns at some length previously. However, the exchange on what light-touch regulation might mean was useful.

It is vital that the regulator be transparent about the burden that its regulatory activities may have on clubs, so that it can be held accountable. From the start, we have been very clear that we wish to establish a regulator for football that will take a proportionate approach across all its regulatory activities. My noble friend Lady Taylor spoke about proportionate regulation. I thank her for highlighting the research that she shared with me earlier this week. She made many points better than I could.

We do not wish to bring into being a regulator that will impose unnecessary, onerous and burdensome requirements on clubs, and neither did the previous Government. That is in no one’s interest. Noble Lords have spoken of concerns about smaller clubs in particular. I am concerned that this debate may lead to some of those clubs being unduly alarmed. If clubs have raised concerns with noble Lords, please encourage them to contact the department, where we are very happy to discuss in more detail any concerns that they may have.

The noble Lord, Lord Addington, asked how the Government see scrutiny playing out in practice. We already expect that the impact of the regulator on the market, including on regulated clubs and the leagues, will be reviewed in the regulator’s “state of the game” report and its annual report. The Secretary of State and Parliament will be able to scrutinise these reports. This ongoing accountability is more appropriate than a one-time review by the Secretary of State, six months after the Act is passed, not least because, as was highlighted during the debate, six months would be an unfairly short window in which to appraise the impacts of a brand new, novel regulatory regime.

The noble Lord, Lord Moynihan, made a number of points and cited the impact assessment. The costs in the impact assessment have been estimated using evidence gathered through industry engagement and from existing regulators, ONS datasets and other sources of information. The impact assessment has been prepared in the same way as all government assessments, in line with principles in the Green Book. It received a green rating from the Regulatory Policy Committee.

Ultimately, the costs in the impact assessment are indicative. It will be for the regulator to finalise its operating budget, which will be subject to scrutiny from Parliament and government to ensure it represents value for money. The estimated costs have been informed by approaches taken by similar regulators and reflect the complexity of the activities required to oversee a new legislative and regulatory regime.

The noble Lord, Lord Hayward, cited a headcount of 250 staff for the regulator, which is not one that we recognise. Indeed, it is well above the level that we would expect. I will have to pick that up with the noble Lord afterwards to establish how that figure was arrived at.

[Lord Hayward (Con)]

It was the indicative figure given by the previous Secretary of State under our Government.

[Baroness Twycross (Lab)]

That is a helpful clarification. The figure remains one that I do not recognise. I will go away and cross-reference with officials why I have now been told that it is not one that we recognise and is above the level we expect. I know I have committed to come back to noble Lords with a number of costs, and we can clarify that at the same point before Report.

I understand that Amendment 329 in the name of the noble Lord, Lord Parkinson, is a natural consequence of the noble Lord’s Amendment 19 in relation to the specified competitions, and it certainly would have made more sense to debate it then. Nevertheless, as we discussed at length previously, we understand the desire to have upfront clarity in the Bill as to which competitions will initially be in scope of the regulator’s regime.

However, as I explained during our previous debates on this issue, the Government believe the approach taken to defining the scope of the regime in the Bill is the right one. It delivers the effect intended, closing any loopholes that would allow avoidance of the regime, while also allowing for agility to respond to any potential changes in the structure of the football pyramid.

On the merits of Amendment 329, we completely agree that the Secretary of State’s power to define the competitions in scope and to amend this scope in the future should be subject to the affirmative parliamentary procedure. This will ensure that Parliament can scrutinise this important decision properly. That is why the Bill as currently drafted achieves this already in Clause 91(3)(a)(i). However, as we cannot accept the noble Lord’s Amendment 19, which was withdrawn, we cannot accept this consequential Amendment 329 either.

For the reasons I have set out, I hope the noble Lords will not press the amendments.