Football Governance Bill [HL]

Lord Londesborough Excerpts

2nd reading
Wednesday 13th November 2024 Lords Chamber

[Lord Londesborough (CB)]

My Lords, my background is not in football beyond being a lifelong Hammers fan—the club which your Lordships might remember won England the World Cup back in 1966, with captain Bobby Moore, hat-trick hero Geoff Hurst and midfield dynamo Martin Peters, all products of the famous West Ham academy. It is a pleasure to follow the vice-chairman of my club, the Irons, the noble Baroness, Lady Brady, and, of course, the former chairman of the FA, bedecked in his splendid blazer, the noble Lord, Lord Triesman.

I am a supporter of the Bill but with several caveats. I feel, in the broadest interests of the game, that the time for regulation has come, although we must be very careful. Football’s financial sustainability is my number one concern. That is a perspective I hold first as a fan, but it is tempered by my experience as a CEO and entrepreneur and now as an investor sitting on the board of start-ups. Wearing those hats, I have not been a great fan of regulation. I am also privileged to sit on the Economic Affairs Committee, where the subject of financial sustainability, which runs through the Bill, looms large in all our inquiries, whether it is scrutiny of the Bank of England, our public finances or our £3 trillion national debt.

I declare a personal interest in that my son’s father-in-law is chairman of the upwardly mobile Worthing Football Club, currently challenging for promotion into our fifth tier, the Vanarama National League. Also, for 20 years I lived in Wimbledon and witnessed the appalling destruction of my local club, which went from winning the FA Cup to being forced to relocate to remote Milton Keynes. We must never permit that to happen again.

Some key questions hang over the Bill and the game of football itself which, let us be honest, are divisive. How do we balance promoting the Premier League as the world’s greatest league—which it is—while protecting our domestic competitions? Should we treat football as part of our social fabric and football clubs as community assets even if they are privately owned and run as limited companies? How do you balance competition with fairness? Football is inherently unfair. Do we continue to allow market forces to turn English football into a global product, resulting in fewer English players, fewer English coaches and fewer English club owners?

These are fraught and difficult questions. I have looked long and hard at a broad range of research and data. I have also talked to chairmen, board directors and supporters. The result is that I am firmly of the view that self-regulation will not deliver financial sustainability. Football’s finances are hair-raising, from the Premier League to the Championship through to Leagues One and Two and the National League.

I will start with the Premier League, which, as we know, is by some margin the richest league in the world in terms of revenues. Yet 16 of the 20 clubs generated pre-tax losses in the 2022-23 season, each club losing on average £60 million. Total debt across the Premier League has risen to £3.6 billion. It is probably over £4 billion now, with Man United and Spurs each clocking up almost £700 million. Even well-run Brighton carries £390 million of debt. West Ham, to its credit, is one of the least indebted clubs. Looking at the clubs’ trading history over the last 20 years, only three clubs look financially sustainable: Brentford, Bournemouth and Brighton. The financial reporting of Chelsea and Man City is opaque, to put it politely. They depend on the deep pockets of their owners, without which their balance sheets would implode.

In the EFL Championship, finances are even more precarious. Over 80% of the 24 clubs have negative equity. Not one of the clubs generated an operating profit outside player trading last season. Wage costs alone exceed revenues for many of the clubs, so the clubs are propped up by owner funding as they scramble for promotion to the Premier League and its parachute payments or fight to avoid financially disastrous relegation to League One. Look at what has happened to Birmingham, Bolton, Charlton, Derby and Wigan. Five of the Championship clubs, those in receipt of parachute payments, have average revenues of £66 million per annum, while the other 19 averaged £22 million. Cash flow is volatile and unpredictable, with cliff edges all around.

In League One and League Two, the majority of clubs generate losses, with increased dependency on owner funding, and not all owners are scrupulous. I learned yesterday that one club in League Two is paying 45% annual interest on its debt to the owner—financially sustainable this is not. When TV revenue falls, as one day it assuredly will, clubs could fall like dominoes.

Turning to the Bill briefly, I support introducing financial regulation to improve the financial resilience of clubs across the all-important football pyramid. In my view, to do that effectively the regulator must have a role in ensuring proportionate financial distributions between the leagues, as covered in Part 6 of the Bill, especially the level of parachute payments—I support these, but I feel the degree distorts competition. Our football ecosystem depends on this pyramid. The ongoing failure of the Premier League and EFL to reach agreement on financial distribution underlines the need for a regulator. Of course, there is devil in the detail. I will listen closely to what others have to say on what powers the regulator will have regarding mediation and last-resort resolution and how that is structured.

Time is short, so let me finish on the well-intended measures to give fans a greater say, ranging from consultation to representation at board level. As a fan I applaud this, but as a former CEO and chairman I have some concerns. We must be careful that the Bill does not overreach itself or, indeed, overregulate or overcomplicate the running of our cherished football clubs.

Football Governance Bill [HL]

Lord Londesborough Excerpts

Committee stage
Wednesday 27th November 2024 Lords Chamber

[Baroness Brady (Con)]

I thank the noble Lord; he made his point very well. The Bill does not say “financial sustainability”. Sustainability is not defined. If you put sustainability above overall success, growth and the competitive nature of the game, you might have a safer league, but you will have one that no one wants to watch. You might, notionally, have a more sustainable ecosystem, but it will also be smaller, more boring and poorer. If sustainability is the number one aim of the regulator, can the Minister explain to us what she and the Government consider to be the definition of the “sustainability” of English football? Can she also explain why sustainability does not include supporting the sustainability of the success and growth of the Premier League?

[Lord Londesborough (CB)]

My Lords, I intervene briefly as an impartial Cross-Bencher. In the interest of productivity, I am aware that we are still on the amendment to:

“Clause 1, page 1, line 4”—


although many of us are still discussing line 1. I will suggest a compromise. The word “sustainability” on its own is too undefined; I suggest that it should be “financial sustainability and success”—thereby combining Amendments 1, 2 and 3.

However, I do not agree with Amendment 4. On growth, I would go back to the banking sector. I know that football is a very different industry, but banking and the financial services in the noughties had the most phenomenal growth rates and we are still all picking up the tab as taxpayers. That was not financially sustainable. So my suggestion is that the words should be “financial sustainable” and “success”—those two together.

[Lord Ranger of Northwood (Con)]

My Lords, I will speak briefly in support of Amendments 1, 2, 3 and 4, because words matter. We have been debating the words “sustainable” and “sustainability”, but I will mention the word “unpredictable”—as was my team this weekend in trouncing Manchester City 4-0 away; a completely unpredictable result by all accounts. That is exactly what the Bill is trying to work against—if somewhat inadvertently.

Having spoken to many organisations in the professional game, I get a sense that the Bill is trying to establish a vision for the game that it does not need to. That vision needs to be left in the hands of this successful industry. That is why there is a general feeling that, when we are focusing on whether it is sustainable or on how much we are listening to fans, we are stepping in to an arena that we do not actually want to control and should leave to the people who have been so successful so far.

Many views have been expressed—including, with respect, those of the noble Lord, Lord Mann—on football’s past, but we should be cautious of looking back through rose-tinted spectacles at the history of our game. Yes, it is celebrated by fans, but the future is about innovation, as the noble Lord, Lord Birt, said. Whatever we say, the game will evolve—because of pressures from fans and commercial pressures. The European Super League did not succeed, but have we seen what UEFA has done with the Champions League? It has evolved again, with more games and more clubs. I am not sure that I completely understand the process it works in at the moment, but it has created a whole new league. Again, as the noble Lord, Lord Mann, said, maybe the Church is losing some of its customers, but these leagues and clubs are gaining customers, eyeballs and commercial contracts that are only getting bigger. So something is succeeding and it will continue to succeed and drive the evolution of our game.

I say in conclusion that, as we go through the Bill and look at the regulator, can we say that the regulator does not drive the vision of football—leave that to the successful industry—but steps in if there is going to be significant failure? That is what a good regulator should do.

Football Governance Bill [HL]

Lord Londesborough Excerpts

Committee stage
Wednesday 4th December 2024 Lords Chamber

[Lord Birt (CB)]

There is a potential conflict on both sides. There are many different roles in media but obviously, it is a single role that might be filled here. I would feel very uncomfortable if someone were sitting in both camps, were I to be in the decision-making capacity ever again in a broadcast organisation.

[Lord Londesborough (CB)]

My Lords, I shall address Amendment 40 in the names of the noble Lords, Lord Parkinson and Lord Markham.

Before I do, I have remained silent for the last few days, taking in what has been said. I have a problem with Amendment 40, which I will come on to in a moment, but I want to reflect on the role of the regulator and the CEO. We are now on day three in Committee. It is important that both sides—I am trying, as a Cross-Bencher, to act as an honest broker—work productively and do not lose sight of what the majority of us want, which is to establish a new regulator with a clearly defined remit that does not stray into areas of overregulation or overreach.

That is not to say that issues such as environmental sustainability, CSR, women’s football or player welfare are not important; they are, but if we do not focus tightly on the core responsibilities of the regulator, I fear we are going to end up with a very complicated Bill that lacks pragmatism and leaves the regulator, whose salary I will come on to in a moment, in a pretty unworkable and unpopular role, at increasing expense to the football clubs in terms of the licence fees. I am thinking here particularly of the clubs in tiers 3, 4 and 5.

I would like to bring back a bit of financial perspective to this debate. Remember, financial sustainability is really what brought us here. Yes, there is fans’ engagement, but we have rather lost sight of that. The Premier League is the richest and most-watched league in the world, a fantastic creator of jobs and a multibillion-pound generator of exports. However, we have warning lights flashing on our dashboard that we ignore at our peril.

Total debt across the Premier League is fast approaching £4 billion—not the £2 billion that one of your Lordships mentioned on Monday—and that figure comes from the University of Liverpool. Losses across the Premier League are running at close to £1 billion per annum, per season. As we have heard, typically, 16 to 17 of its clubs generate losses, while in the Championship 80% of clubs have negative equity, and not one of those clubs generates an operating profit outside of player trading.

Having said that, I appreciate that we need to strike a balance and not interfere unnecessarily. I have listened carefully, this week and last week, to the noble Baroness, Lady Brady, among others, when she spoke about the danger of overreach and the need to be careful that we do not kill off the ambition, aspiration and calculated risk-taking of clubs—in other words, that we do not kill off the excitement and jeopardy of the game, which of course involves financial risk. That is a really important point.

Taking that into consideration, we need to be disciplined and define the parameters of the IFR with an eye on realism, pragmatism and effectiveness. The Bill runs to 120 pages, with 99 pages of Explanatory Notes. We have 340 amendments, which, thankfully, are reducing—and I think we are still on page 4. That is not a great advert for productivity.

Anyway, that is enough background from me. I return to Amendment 40. We are going to need a CEO of the highest calibre for the regulator, and that CEO is going to have to show great leadership skills and profound and relevant domain experience. Capping his or her salary at £172,000 per annum will simply make the recruitment of a high-calibre CEO that much more difficult. I appreciate that we need to control costs, but that is not the area in which to do it.