Co-operatives, Mutuals and Friendly Societies Bill

Lord Mann Excerpts

2nd reading
Friday 24th March 2023 Lords Chamber

[Lord Mann (Non-Afl)]

My Lords, I congratulate the noble Lord, Lord Kennedy, and Sir Mark Hendrick, on their work and their diligence in bringing to a likely success this piece of legislation. I declare a relevant interest as a member of a mutual, the Yorkshire County Cricket Club, and as someone who has provided, in the last year, some significant work and advice, including on regulatory issues, with the Financial Conduct Authority. I am currently assisting the club in looking at the raising of finances from the capital markets or elsewhere to deal with its ongoing financial crisis. According to the press statements by those at senior levels in the club, there is currently a major financial crisis, and indeed a suggestion that the club is in some peril. There is an annual general meeting tonight. Doubtless more details will be provided in relation to that.

This Bill is very timely. It raises interesting questions about how new powers could be used and how the Treasury could give guidance to allow an inventiveness in use. Take the situation with Yorkshire County Cricket Club, a mutual. The public face states “a mutual”. It is my understanding that it is a community benefit society. However, I have been unable to get absolute clarification on that. The fact that one cannot get an easy clarification on that demonstrates a weakness in the current system.

Concepts of asset lock are often seen in terms of financing. Yorkshire County Cricket Club has set up a private charity, the Yorkshire Cricket Foundation. However, assets come in different forms. The financial crisis of this mutual is primarily because it has had an investment with non-mutuals in building assets—in this case, a stand, for which lots of money is owed and for which lots of money had to be borrowed. That agreement is within the mutual and yet outside the mutual because that is not an asset that the mutual controls and therefore can asset lock. Within the stadium, there is a hotel that is rather significant in terms of income generation for test cricket. It is owned by a third party. The interrelationship with the neighbouring rugby club, in relation to car parking and other assets, is complex, but in essence it is a mixed picture.

One could argue that the community benefit requirements under law—not least the 2014 law—would have required Yorkshire County Cricket Club to take a greater interest in the 2012 report by Tom Fletcher of Leeds Met university on racism in Yorkshire cricket and racist attitudes in Yorkshire cricket. If that had been done at the time, on some of the things that Dr Fletcher was able to evidence, future problems that emerged might have been avoided. That would seem to be a definition of community benefit that was not fulfilled under the requirements of the law and by the regulation under the FCA at the time.

What the Bill can do on the ambiguity of what is a mutual will be incredibly helpful to mutual members—I am a mutual member, and it is ambiguous to me at the moment—and there are other sporting clubs where the same would be found, but the key thing, which is potentially revolutionary for sporting clubs, is thinking through where asset locks could go. Asset locks are generally seen in terms of finances and supporting profits and how they are held on to. However, asset locks can include the pitch, for example. Therefore, if the mutual members of Yorkshire County Cricket Club were to choose to identify the pitch as a community asset and lock that in, it would mean that, should the club be in such a perilous state that it goes into liquidation and has the threat of a takeover by third parties who, in order to survive, may not wish to retain mutual status in the future, it would give this opportunity to the mutual members and empower them. For example, in a very different way, not by mutual but by private ownership, the private pitch owners at Chelsea Football Club locked in the pitch at Stamford Bridge, and not even Mr Abramovich could assuage them with financial offers to give up that ownership.

Given the Government’s intention to regulate football and, doubtless, a desire to have good management, ethics and systems across all sport in this country, this opens up a huge opportunity. I have put this to grass-roots, low-level—non-league, to be accurate—football clubs in the past. Ownership structures could be changed so that the core assets including the name, the pitch and perhaps the youth structures could be owned on a mutual basis, but the more complex assets such as the stands, corporate facilities and spectator facilities could be owned by a separate owner and not necessarily be mutualised. That would allow people to invest in some of the profit-making potential of bars and related foods et cetera, while guaranteeing that such ownership could never take away the essence of that sporting club.

I proposed that some years ago to Worksop Town Football Club. The owner at the time did not accept the concept, but the obvious way of managing sport in this country remains for a football club of that level and size, or in whatever sport: locking in the assets to a particular location; locking in the key thing in the asset, which is the pitch; and debarring. They certainly had a case at Worksop Town where one owner debarred local youth and schools from using the facility. Giving members the ability to determine who will use the core sporting facility is a semi-veto power of management, but not one that would put off any coherent private investor—who might want some kind of venture that they have built, such as a private sports club as part of a new spectator stand that he or she and their entity have profited from but, in reality, cross-subsided the creation of a stand for spectators, which then cross-subsidised the sporting body itself and the mutual.

It seems to me that, at many levels of football and cricket and, I dare say, one or two other spectator sports with similar complexities of finance, this anchors in the community benefit. The beauty and criticality of the Bill by the noble Lord, Lord Kennedy, is that it allows this to happen under any form of mutual. It is a game-changer in how, at that level—which is the level of most sport in this country—assets could be seen, and in how the supporter base and community could ensure that they have a lock on those assets.

I urge support for the Bill and urge the Treasury to move rapidly in ensuring effective guidance. This could revolutionise the grass-roots asset base in our sport and may well be of future assistance to troubled entities such as the mutual that Yorkshire County Cricket Club is at the moment.