Football Governance Bill [HL]

Lord Markham Excerpts

Committee stage
Wednesday 18th December 2024 Lords Chamber

Moved by

[Lord Markham]

251: Clause 53, page 43, line 19, at end insert—
“(c) any interest charged under paragraph (b) may not exceed the rate of inflation, as measured by the Retail Price Index, plus 2 per cent.”Member's explanatory statement
This amendment limits the rate of interest the Regulator may charge on unpaid levies.

[Lord Markham (Con)]

My Lords, I rise to move Amendment 251 in my name and to speak to Amendments 257 and 258 from my noble friend Lord Parkinson.

Amendment 251 seeks to place a limit on the rate of interest the regulator may charge on any unpaid levies. I think all noble Lords have agreed that we want to keep the regulator fees and cost burden on clubs as low as possible, so having a reasonable rate of interest seems helpful. The proposal is that we take the formula the Government currently use for tuition fees, and which is proposed for the tobacco levy, which is the RPI rate plus 2%. I am not absolutely wedded to that figure, but we believe there should be a figure we can all agree on.

Amendment 257 from my noble friend Lord Parkinson would remove the provision whereby the regulator does not have to consult on changing the levy if it considers the change to be minor. We understand the intent behind that provision, but all sorts of discussions could then be got into about what is minor and what is not, so it is probably easier just to establish that it be properly consulted on if there is a change.

Amendment 258 is pretty straightforward. It seeks to establish that if the regulator plans to change the levy rules, it gives six months’ notice before the chargeable period begins. We have said a number of times that we want clubs to improve their financial budgeting and planning, and this would help them to do that. With those simple changes, I beg to move.

[The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)]

I thank the noble Lords, Lord Markham and Lord Parkinson of Whitley Bay, for their amendments concerning the levy. On Amendment 251 from the noble Lord, Lord Markham, setting the rate of interest charged on non-payment of the levy is an operational decision for the regulator, which needs the flexibility to charge interest at a rate that deters non-payment. A rate that is too low could increase the incentive for non-payment and jeopardise the regulator’s ability to carry out its functions. The level of interest charged would be subject to the same consultation requirements as the levy itself. This will ensure a firm but fair level of interest.

Amendment 257, in the name of the noble Lord, Lord Parkinson of Whitley Bay, would require the regulator to consult every regulated club and others such as the Secretary of State and the Treasury on minor changes to the levy rules. These would be immaterial amendments or replacements to levy rules, such as correcting mistakes. Going out to gather the views of all clubs feels like it would be a disproportionate burden on clubs and on the regulator. For material changes, the Bill already requires the regulator to consult as appropriate. No club, especially those in the National League, wants the administrative burden of unnecessary consultation.

Finally, on Amendment 258 in the name of the noble Lord, Lord Markham, requiring the regulator to publish its levy charge six months before the chargeable period would create an operational challenge. The regulator would have to estimate a levy charge having only half a year’s costs to base it on. This could lead to inaccurate levy charges, which could see the regulator underfunded or clubs needlessly burdened. The current requirement of charges being publicised as soon as reasonably practicable strikes the right balance, we feel, between adequate notice for clubs and operational flexibility for the regulator to ensure an accurate and appropriate levy charge.

I therefore hope that the noble Lord will withdraw his amendment.

[Lord Markham (Con)]

I thank the Minister for her reply. As I say, these are not major things, but I must admit, I am a little surprised. The Government rightly see fit to set interest rates on all sorts of other things they deal with, such as student loans, tobacco and vapes, so it seems strange that they do not have a view on what should be an appropriate rate for the regulator to charge. I am not aware of that happening in other parts of the government network.

On the final amendment, this is about the regulator behaving responsibly if it is going to change things. Here, there seems to be a pattern. We had a debate earlier about what happens if the regulator does not approve someone as being fit and proper within the right time period. Again, the Government were saying the regulator might not be able to do it, so that person is automatically deemed not fit and proper. All noble Lords would probably agree that we need the regulator to be a bit more on its game than this. We should be a bit tougher and say that there is no reason why it cannot work out its rules on a change to the levy and give clubs six months’ notice. If the regulator is asking clubs to be financially disciplined, it should be doing the same.

I pose those as things for the Minister to consider but at this point, I will happily withdraw my amendment.

Amendment 251 withdrawn.

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[Lord Bassam of Brighton (Lab)]

My Lords, the noble Baroness makes a compelling point. It is the case that the EFL is dominated by the Championship clubs. The noble Baroness is absolutely right that the EFL has secured a beneficial deal. It is not for me, her or anyone else in this Committee to say what the right sum of money is. I am merely pointing out that the distribution has changed over time. The available money for distribution has grown as the game has become more successful as a product unique to England and Wales, and it is for the IFR to get the distribution right. The point that the noble Baroness makes is that we should not be arguing the case for either the EFL or the Premier League; we should be arguing the case for football, because it is all of football that we want to see benefit, so that the pyramid truly acts as a pyramid and acts well in strengthening the national game.

[Lord Markham (Con)]

My Lords, before I address the amendments in this group, I want to echo the comments made by the noble Lord, Lord Bassam. With 44 amendments in this group, it really is hard to get your head around them all. Although they are given the broad title of “Regulatory powers”, I do not think that is conducive to good debate.

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[Lord Bassam of Brighton (Lab)]

Many of the amendments are consequential. I have highlighted the main points for the benefit of the Committee and that was my objective so that it would get the message.

[Lord Markham (Con)]

I appreciate the noble Lord’s efforts to do that. It was not specific to this group. There have been a number of examples which have been unwieldy, to say the least.

I turn to Amendments 260, 269 and 293 in the name of the noble Baroness, Lady Taylor. They alter the backstop method to enable the regulator to trigger the resolution process. The current drafting permits only the competition organisers to trigger it. That is quite a profound change, if you think about it. To date, we have been saying that the regulator should step in only as a last resort if the competitions cannot reach an agreement among themselves. What we are saying here is that the regulator can step in—I guess, in theory even if the competition organisers have agreed—if it feels for some reason it is not quite happy with the agreement. That seems quite a shift away from the principles we were talking about earlier. Our concern would be that we are suddenly setting up a role for a quite muscular regulator which can interfere maybe not at breakfast, lunch and tea but quite a bit of the time, to say the least.

Amendment 276 in the name of the noble Lord, Lord Bassam, states that the leagues can trigger the resolution process if there has been a change to revenue received by other leagues, as mentioned. Again, I think we could get into situations where a five-year deal has been put in place and a league is suddenly trying to reopen the deal. I am delighted that the Championship has a good Sky deal. Do we think that gives cause to reopen the deal? That would be a concern there. I am always a great believer that a deal is a deal is a deal. You live by that deal for that time and when it comes up again, that is the time to negotiate. Amendment 264 from the noble Baroness, Lady Taylor, and the noble Lord, Lord Bassam, again makes provision for multiple competition organisers to trigger the backstop and mediation process.

In all of these, there is a general concern that instead of the backstop being the backstop, as it is called, it becomes almost the first stop and the first resort. It goes to the concern that noble Lords have mentioned many times that while we start with the principle of a light-touch regulator, very quickly we get into a scenario of a pretty heavy-touch, muscular regulator. That would be our concern.

Amendment 261 provides that competition organisers must obtain the regulator’s consent before entering into a distribution agreement. Again, this adds another level of complexity. If the competitions have agreed between them, why do they need to get the consent of the regulator? It goes far beyond the original intentions of the backstop per the Dame Tracey Crouch report, in which she referred to it as the nuclear option, and how that would be the only case it would come up in. Instead, through these amendments, we would be setting up a lot of situations in which it would be the first resort.

While I understand that the intentions of the noble Lord, Lord Bassam, are noble—as ever—I feel that this is another circumstance of mission creep and unintended consequences, where we would end up with a very muscular regulator. Those are our concerns.

[Lord Addington (LD)]

My Lords, I am not very bothered by having a muscular regulator; I want an efficient one that gets things done and looks after the lower clubs. There is a disagreement between us that has been there all through this Committee.

I regard the series of amendments from the noble Lord, Lord Bassam, as a smorgasbord from which we should select something that is actually going to get us to have a look at what is going on. There are lots of options and I have put my name to one of them. Making sure that we get the regulator right and get money going down to preserve something we regard as good is the primary objective. It is not just to take money off the Premier League; it is to make sure that the structures below survive.

If the Government think these amendments are not the right way to progress, hearing why from the Minister would be sensible. Nobody is quite happy with the backstop power in the regulation structure at the moment. Everybody is a little bit upset about it. People who were happy are now not happy. The Premier League and EFL are having great fun not talking to each other or disagreeing. I have no real objection to a slightly more muscular approach. I do not think it is a light touch that is required; it should be efficient.

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Moved by

[Lord Markham]

263: Clause 56, page 45, line 32, leave out subsection (2) and insert—
“(2) In this Part, revenue received by a specified competition organiser is “relevant revenue” if—(a) it is revenue received as a result of the sale or acquisition of rights to exploit the broadcasting of football matches included in a competition organised by the specified competition organiser, and(b) it is not revenue that the specified competition organiser distributes to a club by virtue of a team operated by the club being relegated from a competition organised by the specified competition organiser.”Member’s explanatory statement
The amendment prohibits parachute payments from being included in the distributions of revenue resolution procedure.

[Lord Markham (Con)]

Amendment 263 is in my name and that of my noble friend Lord Parkinson. Going on from the last debate, it talks about probably one of the most important elements in the whole make-up of the financial payment system: parachute payments. The amendment seeks to remove from the regulator the powers to impact or change those parachute payments.

The reason for that is that parachute payments are a very common feature—I understand that just about all European leagues have parachute payments—and that is for a very simple reason. Any club that gets promoted is automatically in a situation where financially, it has a lot less money than other clubs in the Premier League or whichever higher division it is—parachute payments happen right the way through the pyramid—and they need to invest. They need to do that if they are to have any opportunity, any chance, to compete. If they do not invest, it is pretty likely that they will get relegated again straightaway, and any games that they take part in will be pretty uncompetitive and not very interesting to watch. But how do you get them to invest when they know that there is a decent chance that they will get relegated straightaway and go back to a situation where they have a lot less income?

Of course, as I say, the common mechanism that all the leagues across Europe seek to put in place is the safety net of a parachute payment, so that clubs know that for a period of time—three years—they have that safety net, particularly in years one or two, because in the third year it falls away quite quickly from that.

However, it is not just as a key measure for promoted clubs. Right now, if you are a Wolves fan and you are sitting second from bottom, what do you want them to do? You want them to sack their manager—they have done that; it cost them quite a bit to do that in terms of pay-offs and attracting a new manager—and you want them to invest in the January transfer window to get more players, to give them a chance of staying up for the rest of the season. That is the absolutely normal thing that you would expect them to do.

That is what you want the whole Premier League to be doing: you want the teams to be really fighting to survive and competing in every game. That is what makes the game so interesting to watch. A lot of the fun towards the end of the season, when you know—maybe not this season—that Man City is going to win it again, or whatever, it gets really interesting around the bottom of the league. Why is it interesting? It is because those clubs still invest. So Wolves will no doubt invest in this window and a lot of the bottom clubs, which might be looking over their shoulder, worried about relegation, will invest. They will do that because they have the safety net of the parachute payments.

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[Baroness Twycross (Lab)]

The noble Lord may not be surprised to know that I am not going to commit to doing that. We believe that the model in the Bill is the correct one. I am happy to meet the noble Lord and others to discuss this before Report, However, on the basis of the arguments I have made this evening, I urge the noble Lord, Lord Markham, to withdraw his amendment.

[Lord Markham (Con)]

I thank all noble Lords for their contributions. We can all agree that everyone spoke with passion on this point. We are passionate because we know it really matters.

I am grateful to the Minister for her acknowledgement of the importance of parachute payments. They really are critical. I echo the point made by my noble friend Lady Brady that, since parachute payments were brought into this, my understanding is that there has been only a 30-minute meeting with the clubs, where this was barely brought up. I urge the Minister to consult more with the clubs.

[Baroness Twycross (Lab)]

I asked officials to draw up the words that I said on consultation because, night after night, group after group, it has been said to me that there has been insufficient consultation on the Bill. I went back and asked whether I could stand up and say that there has been sufficient consultation on the Bill. What consultation happened? When has it happened? How has it happened? Who has it been with? I am confident there has been a huge amount of consultation on the Bill and I will continue to state that when I am asked. I will follow up things that people feel have not been followed up, but any club that wanted to have a meeting has had one, and some have said they did not want one. I will sit down and allow the noble Lord to finish, but I am not going to accept that there has not been sufficient consultation.

[Baroness Brady (Con)]

I am sorry to intervene, but I want to say again that on the specific issue of parachute payments there was no consultation with either the Premier League officials or the Premier League clubs that attended that meeting before this went into the Bill. I am not saying that there was not consultation on other areas, but this is a significant change to the Bill that had zero consultation with the Premier League or Premier League officials.

[Lord Markham (Con)]

It may be that it should be a matter of fact and we can find out one way or the other. The question is: how much consultation has happened specifically on the parachute payments? Obviously, they have been a recent introduction. My understanding from my noble friend is that there was just that 30-minute meeting, at which this was barely raised. I would be grateful if the Minister could ask her officials directly.

[Baroness Twycross (Lab)]

I will intervene again, and I thank the noble Lord for giving way. Labour tabled an amendment on this in opposition, so I am surprised that there seems to be so much surprise that the Government have now put this in the legislation. I accept that perhaps it was not noted at the time.

[Baroness Evans of Bowes Park (Con)]

The Minister will also know that Labour tabled a lot of amendments, many of which we are also now pushing, but are told they are not going to be considered. So, yes, but equally perhaps the Minister might like to look through all the amendments tabled by her colleagues in the Labour Party in the other House and see whether she is now prepared to accept them all.

[Lord Markham (Con)]

I hope we can move constructively on this point. I welcome the Minister’s undertaking to give clubs as much time as they request. I appreciate the amount of time the Minister has given all of us in all this. It feels that that may be a point worth taking forward, particularly on parachute payments.

To my mind, the biggest proof on all of this is the fact that 51 of the 92 clubs in the whole pyramid have been in the Premier League at some point. That is way over half. That speaks to how fluid the system is and how much it is working. Over half the clubs have spent some time in the Premier League. To me that speaks volumes. That is the biggest concern I have. We have a system that works; we have competition throughout the pyramid. The real fear from all my noble friends who have spoken on this, and why we speak with such passion, is the fact that we endanger all of that. I will withdraw my amendment.

Amendment 263 withdrawn.

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[Lord Markham (Con)]

This goes to the principle of the redistribution amendments in the group. We have had two debates on this; I hope this will be the hat trick, so to speak, because it is talking about the general principle of whether the regulator should be involved in the redistribution of revenue. This goes to the whole of Part 6—Clauses 56 to 60—and stands in my name and that of my noble friend Lord Parkinson.

As noble Lords have heard me say before, what it comes down to is that no other regulator—and I am still ready to stand corrected—is given powers to take money from one part of the system and give it to another. The FCA cannot take money from Barclays and give it to NatWest; Ofwat cannot take it from Severn Trent to go to Thames; Ofcom cannot move money from ITV to Channel 4. No other regulator can do that. It is unheard of. But that is what we are proposing here.

[Lord Addington (LD)]

That is the point of the Bill.

[Lord Markham (Con)]

No, I do not agree that is the point of the Bill. That is the fundamental difference. I would totally agree that there are certain protections about the European super league, about moving home grounds, as in the case of MK Dons, and about fit and proper owner tests. I would agree they are very good roles for a regulator to play. What I do not agree with is giving a regulator unparallelled power to take money from one part of the sector and give it to another.

What are we trying to do here? Is the English Football League impoverished? Does it have so little money it cannot run itself? We know the answer to that is no. It recently had a very good Sky deal. The Championship is the sixth-richest league in the world. That point has been made before. We are saying that Belgium, the Netherlands and Portugal, which are very good footballing nations, and all the other leagues in the world apart from the top six, all manage to live on less money than the Championship. But we are saying we need to fix that. That is what I do not understand. We are trying to say we will give unparallelled power to try to fix a situation that has had unparallelled success and makes the Championship the sixth-richest league in the world. We cannot argue that is because clubs do not have enough money to be viable in that. If that was the case in the Championship, how do the Portuguese league, the Belgian league, the Netherlands league and all the other leagues cope? This is not an area I believe the regulator should be intervening in. There is no market failure there.

What I have heard noble Lords speak about a lot is fairness or narrowing the gap. Well, I am sorry, but competition and sport are not about fairness, not about trying to narrow the gap or level down. We are not trying to equalise. The whole point of sport is that it is the most competitive thing out there. There is nothing more competitive than a game of sport. That is the whole lesson. It is not about trying to equalise. It is about winning and losing. What football has done is create that very successfully, with great fluidity. As I mentioned in the last debate, over half of clubs at some stage have succeeded in getting into the Premier League. This is something that is working. I do not see any evidence of market failure. So why are we asking the regulator to get involved in all this?

I truly believe we will endanger the whole game and the whole income. Noble Lords have heard me say before: let us maximise the size of the cake before we argue how we distribute it. I fear here that by trying to equalise and level down, all we will do is make the games less interesting, the league less competitive, which will mean fewer people watching, less TV rights money and the result being less money to distribute. That is why I do not believe this is the role of the regulator to take, and this is why I feel strongly that all those clauses that seek to give this unprecedented power should be removed.

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[Lord Markham (Con)]

I thank noble Lords for their contribution to this debate, and again I thank the Minister for her response. I noticed that she went into the detail of the backstop mechanism but I did not hear in that the more fundamental point about why she believes that the regulator needs to be bestowed these unparalleled powers to redistribute income where there are no examples of market failure. In fact, there are the examples of the very healthy Premier League and Championship, which are respectively the first and sixth richest leagues in the world—and all the result, as my noble friends pointed out, of a voluntary agreement and distribution between them all.

However, the whole prospect of the backstop happening is creating the reverse. As I understand it, those negotiations have stopped. Of course, it is entirely rational from the EFL’s point of view to stop them, because why reach an agreement when suddenly you are going to have more negotiating leverage because you have a regulator which will come in? So, again, it is perfectly rational behaviour on the part of the EFL to reach the best agreement it can with the Premier League but then instead of finally agreeing with it, appeal to the regulator in case it can get more because it has already banked what it has got from the Premier League and there is only an upside to doing that. So I am afraid that I believe this whole mechanism will actually create more friction and more disputes, rather than less, and will mean that it is less likely to reach a voluntary agreement. In addition, as I mentioned before, I still have not heard why we feel that the regulator needs these powers in the first place when we have a successful situation in place already.

As a result of that, I believe that these powers will endanger the whole size of the cake that is available for distribution. It will endanger the success and the revenue gained from that, which will result in a loss to everyone. We will definitely return to this on Report but at this stage I beg leave to withdraw.

Clause 56 agreed.