Football Governance Bill [HL]

Lord Jackson of Peterborough Excerpts

Committee stage
Monday 2nd December 2024 Lords Chamber

Moved by

[Lord Jackson of Peterborough]

16: Clause 1, page 2, line 4, at end insert—
“(3A) Notwithstanding the purpose of this Act, the IFR must have due regard to the potential economic harms of overregulating English football.(3B) As part of fulfilling its duty under subsection (3A) the IFR must assess the effects of its activities on the financial position of regulated clubs and submit a report to the Secretary of State within six months in the first instance and annually thereafter which must be laid before Parliament within 28 days of their receipt of the report.”

[Lord Jackson of Peterborough (Con)]

My Lords, this amendment, on the potential harms of overregulation, goes to the heart of this whole Bill. What we are discussing in this Committee is not just the role of a new regulatory body but the future of English football in its totality. The Bill introduces a complete overhaul of the entire system of English football. It creates an entirely new organ of state apparatus, which will no doubt introduce copious amounts of onerous rules and regulations that clubs and leagues will be forced to comply with—in addition to the already stringent rules that the leagues impose on clubs themselves.

The Premier League has a handbook on its rules and governance procedures that is 768 pages long. Contained within this vast document are reams of rules, regulations and duties relating to matters such as club finances, tests for the prospective owners and directors of clubs, the disclosure of relevant interests by club officers, requirements for directors’ reports, and so on. Under rule E.22, the league has the power to impose financial penalties, and under E.37 it can deduct points from clubs which violate those rules. All the things that the Bill seeks to address are already covered by the Premier League.

It is not just the Premier League that does this. The EFL already has an established financial regulation department, aptly called the club financial reporting unit, which monitors and ensures financial regulations that EFL clubs must abide by. The EFL can and does hand out penalties to clubs that fail to meet its standards. For example, in May 2023 Wigan Athletic FC was deducted four points, beginning the 2023-24 season on minus eight. That was because the club failed to comply with the EFL’s requirements that the club deposit 125% of its forecast monthly wage bill into a designated club account. In fact, in that season there were 15 disciplinary and enforcement proceedings against clubs by the EFL for breaching its rules. That existing self-regulation has clearly been effective. Despite some high-profile cases of failure, the vast majority of the time the current regulations do serve their purpose.

Since 2012, when the financial rules were strengthened, only six Football League clubs have gone into administration and only seven football clubs have been completely liquidated since 1945—these are remarkable numbers. Compare that to the finance industry, whose insolvency figures dwarf that of football. In the 12 months to September 2024, there were approximately 500 insolvencies in the financial services sector alone, according to the Insolvency Service’s official statistics. We talk about breakaway leagues, and yet we must not forget that the European super league was stopped in its tracks by the fury of the fans and the power of the current league regulators of football. Is that not a clear example of the self-regulation of the sport working very effectively?

It is not clear at all that self-regulation has failed. I put it to your Lordships’ House that English football is one of the great success stories of private regulation. The leagues already impose their own rules, which hold clubs to account for their actions. They have robust mechanisms for punishing those clubs that do not act appropriately, and the evidence of the success rate of football clubs proves that that has indeed worked. So I ask the Minister: why strangle the flourishing industry that is professional football?

I also point out that that seems to be the view of the Prime Minister. As my noble friend Lady Evans of Bowes Park noted at Second Reading, the Prime Minister himself said at the recent investment summit that

“the key test for me on regulation is … growth. Is this going to make our economy more dynamic? Is this going to inhibit or unlock investment?”

He went on to say that

“where it is needlessly holding back the investment we need … we will get rid of it … we will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does”.

There we have it. The Prime Minister himself understands that regulation and overregulation are fraught with economic danger. If he realises the risks of regulation inhibiting investment in that arena, does he also recognise the risks of regulation and overregulation within football?

It seems we are suffering from, as Harold Demsetz termed it, the Nirvana fallacy. This is where people look at private solutions and seek to discover discrepancies between the ideal and the real. If discrepancies are found, they deduce that the real is inefficient. Their usual yet unfortunate response is that the only possible solution must surely be more regulation, more rules and more state diktats. But when we are considering whether this new regulator will actually improve outcomes for football, we cannot merely have reference to the supposed limitations of self-regulation. We must look at what this independent football regulator will become.

For that, it is particularly instructive to examine the recent report on the Financial Conduct Authority by the All-Party Group on Investment Fraud and Fairer Financial Services. That report has found that the body that regulates the entire financial sector in this country is

“an opaque and unaccountable organisation”

that is

“incompetent at best and dishonest at worst.”

The noble Lord, Lord Sikka, who is not in his place, stated that the FCA was “complacent, conflicted and captured”.

Among the litany of failures that the report identified is one that is typical of regulators of all stripes: the culture of the organisation. The APPG found that the entire professional culture of the regulator was defective, and that

“errors and inaction are too common”.

The APPG has lined up a vast array of whistleblowers, who have shed light on the problems that the FCA faces. That report is backed up by the Institute of Economic Affairs, which points out that the FCA has been able to decide its own burden of proof and then levy fines running into billions of pounds, and all without proper accountability.

I will not reiterate the entire report for the Committee, but I was not surprised at all when I read it. The behaviours and the failures as described by the APPG are all too common when it comes to state-run bodies that seek to enforce their rules on to other private entities. They are too often encouraged to go further than necessary—mission creep—and then do not act when they are supposed to.

Why would this regulator be any different? Why would the independent football regulator break the mould and challenge these hitherto proven truths? I see no reason why the IFR would improve football in this country in any way. Previous state-run regulators have clearly failed, and I have no doubt that this regulator would potentially do the same. I therefore feel it is an absolute bare minimum to require the independent football regulator to have due regard to these risks of overregulation, as enunciated in my amendment. That should not be a contentious point.

I hope that the Minister can give me cast-iron assurances that the regulator will be ever watchful of the damage that it could very well inflict on football clubs and leagues. I ask her to guarantee absolutely that the IFR would be a light-touch regulator and not delve into the minutiae of each club’s finances and everyday operations. I want her to reassure the House that not one penny of a club’s income will be wantonly redistributed to another club, which would be tantamount to asking one private business to give its own earned assets to another private business. As I described last week in Committee, that would be a moral hazard. This is a matter of profound principle that I simply cannot disregard.

For the avoidance of doubt, I say again that this is a poorly drafted Bill. It was poorly drafted under the previous Administration, and it is worse now—but at least we have the opportunity to address its worst deficiencies and improve it in Committee. I hope that the Government and this Committee understand the dangers of the path that we are heading down, and that all possible efforts should be taken to shift us away from the constant move towards more regulation and to protect our nation’s proudest cultural export from the ever-encroaching arms and dead hand of the state.

[Lord Moynihan (Con)]

My Lords, I will speak for the first time today to support my noble friend’s amendment, because it is important to set this Bill in context.

I, for one, am not in favour of the financial regulation in the Bill. I have a degree of support for many of the amendments that came out of the Tracey Crouch review, and the propositions on fan-led change are reasonable for the Premier League to consider. What worries me is that we are introducing—the only country in the western world to do so—the imposition of regulatory control over one of our major sports. Even countries such as Russia and China, which have sports laws, recognise the overall authority of the International Olympic Committee, FIFA and UEFA. They do so in recognition that they would not be able to host or to participate in their sporting events if they did not accept that overall authority.

On the first day in Committee, it was clear that the Government were not prepared to countenance putting the important rider in the legislation that we would do nothing that would threaten the role and playing of our clubs in European competitions and the World Cup—and, if we include women’s football, in the Olympic Games too, but that is a matter for a latter amendment. I am concerned about the imposition of regulatory control, being the only country that does this, because, as was rightly pointed out by my noble friend, this does not in any way generate growth. On the contrary, it proposes a whole series of measures that will restrict the competitiveness of the clubs in the Premier League, which, in turn, will mean that the waterfall of financial support that comes through to all professional football in this country is lessened, not increased.

I speak from the position of somebody who has had the privilege of being involved in sport for 30 or 40 years. When I was interested in becoming a Member of Parliament, I wanted to go to Moscow as an athlete for the Olympic Games. Had we legislated that the athletes could not go, I would not have been permitted to go. As it was, I led a campaign for the athletes to go against the boycott that my then Prime Minister, Margaret Thatcher, strongly supported. I felt that, under the autonomy and independence of sport and the vital principle that sportsmen and sportswomen should not be political pawns, it was right for the competitors, who wanted to go, to compete in Moscow, however much they may have opposed the Soviet invasion of Afghanistan, as indeed I did. I recognised that to use sportsmen and sportswomen as the only way to demonstrate opposition to the invasion of Afghanistan by the Soviet Union was wrong, when people could buy tickets for Aeroflot in Piccadilly and go to watch the Bolshoi in Leningrad, and while trade and diplomatic relations continued.

--- Later in debate ---

[Baroness Twycross (Lab)]

I am happy to meet the noble Lord to discuss it further.

[Lord Jackson of Peterborough (Con)]

I thank the Minister for her answer and I thank my noble friends and others for an excellent debate on my amendment. I hesitate to single anyone out, but the contributions of my noble friends Lord Maude, Lord Moynihan and Lady Brady showed their great expertise in different aspects of football, sport and regulation over the years. I make particular reference to the granular and forensic demolition of the impact assessment by my noble friend Lord Hayward, and the issue of the impact on small clubs that was alluded to by my noble friend Lord Goodman of Wycombe.

To come back to the noble Lord, Lord Birt, I see this amendment as complementary to good governance, because it is a pretty light-touch amendment. It is really a permissive oversight power—we will come back to it, of course, on Report—with timely regulatory audit and a sense check. The Minister may need to think about whether accepting this amendment, perhaps on Report, would detract from the substance of the Bill.

Football is full of amazing stories. I want to finish with a story about my own local team, which goes to the heart of the debate on this amendment, which is the nature of entrepreneurial endeavour in football—risk and reward. Darragh MacAnthony, a property entrepreneur, bought Posh, Peterborough United, at the age of 30, the youngest owner in the league, in 2006. In August 2007, he put a note in the programme at a football match which said, “I will deliver back-to-back promotions from League Two to the Championship by 2009”. He did it, with the help of my friend Barry Fry, who, of course, noble Lords know. The point is that I have to ask, looking at the Bill and at all its onerous implications in terms of regulatory impact, would Darragh MacAnthony have put his business on the line to buy Posh, to keep Peterborough United afloat and make it flourish as it has done for the last 18 years, had the Bill been in place? I very much doubt that he would.

[The Deputy Chairman of Committees (Baroness Morris of Bolton) (Con)]

Does the noble Lord wish to withdraw his amendment?

[Lord Jackson of Peterborough (Con)]

Thank you; I appreciate being kept on my toes by the noble Baroness, Lady Morris. With that in mind, and notwithstanding anything I have said, we will ventilate these issues on Report. On that basis, I beg leave to withdraw the amendment.

Amendment 16 withdrawn.