Football Governance Bill [HL]

Lord Watson of Invergowrie Excerpts

Committee stage
Wednesday 15th January 2025 Lords Chamber

[Lord Markham (Con)]

My Lords, I rise to oppose the proposition that Clauses 61 to 64 should stand part of the Bill and I am grateful for the support of the noble Lord, Lord Birt. I will also speak to my Amendment 310, which is also in the name of my noble friend Lord Parkinson, who unfortunately cannot be with us today. I appreciate that there is quite a bit of overlap here with the debate we have just had, so I will try to keep this concise.

For me, the main thing about all of this is, what are we trying to solve here? We all agree that we have a very successful league—the most successful in the world. I love the statistic that 40% of the best players play in it. I would say that even more of the best managers are there when you look at it.

I looked up the solidarity payments and compared the 14% that the Premier League pays with the UEFA figure—in terms of the solidarity payments it pays to clubs not in the European competition but in the leagues —which is 5%. So we have a situation whereby the Premier League is paying almost three times the amount, creating a very successful situation. Of course, a lot of the reason for that is because it realises there is a great degree of fluidity, as per the statistic that the noble Lord, Lord Birt, mentioned earlier and which I have mentioned previously. The fluidity means that over 50% of the 92 clubs at some stage have been in the Premier League, and by definition have fallen out again. So, it is in all of their interests to make sure that the whole structure of football is successful. The fact that the Premier League pays 14% in solidarity payments, far more than UEFA and other leagues, shows all of that.

The statement has been made that we need to step in here as a regulator because there has not been agreement for years. As soon as it was known that a regulator was going to come on to the pitch, so to speak, it is not surprising that you do not get an agreement at that point. If I was the English football league in that, it would be entirely logical to think, “Hang on a moment, if a regulator comes in with powers in this space, that is going to give me more leverage” So, clearly, under that circumstance, it is rational for me to hang on because I am likely to get a better deal under that situation. I cannot get a worse deal than the one the Premier League has already suggested, so why not hang on for the regulator to come into the picture? So, to my mind, it is not surprising that we have not had an agreement as a result. It is actually because of the offer of the regulator that this has not happened.

So my main question about all of this is, what are we trying to solve here? It is not clear to me that there is a problem. In fact, I would suggest the opposite. I do not believe that this is the time to give unprecedented powers to a regulator which no other regulator in the country has, as I mentioned before. The regulator’s only criteria are to promote the financial soundness, financial resilience and heritage of English football. There is nothing else: nothing to do with its success, its audience appeal or the rights money it gets in, just those very narrow objectives. To fulfil those, it is always going to look to the mechanism which redistributes the most amount of money, because those are the narrow criteria it has been given. So I believe that that really gives us a danger of setting in motion a set of unintended consequences.

Given that I accept that there is a small chance those points will not be agreed by the Minister, I will move on to the other amendments we have added. My Amendment 310 states that, when making a determination under Clause 62, to which a final proposal to accept is made, the expert panel must have due regard for Section 7(2), which establishes the negative outcomes that the regulator must take all efforts to avoid. I must say that in all of this I actually prefer the amendments made by the noble Lord, Lord Birt, to any of these following ones that we put down. I am mentioning them in terms of completeness, but my first choice is that the regulator does not have the powers to redistribute at all. If it does, my second choice is that it adopts an approach similar to the one set out by the noble Lord, Lord Birt, which is a very well thought through process. I will speak to all of my amendments with that context in mind.

As I said, Amendment 310 tries to make sure that the expert panel takes into account the unintended consequences set out in Section 7(2), making sure that the expert panel has a duty to consider the impact on the leagues and on the competitiveness of English football, which is what makes it exciting and the best in the world.

I also support Amendment 304 in the name of my noble friend Lady Brady, which deals with precisely the issues that have been identified: the binary nature of the final proposals process. My noble friend’s amendment is simple and very reasonable. It permits the committee of the expert panel to include elements of both final proposals when making a distribution order. This will prevent the regulator simply choosing one proposal and ignoring the other, thereby achieving a real compromise while at the same time ensuring that the regulator is not imposing its will on the competition organisers. Amendment 304 seeks to strike a balance and better meets the aims set out in the Minister’s letter of incentivising compromise. I urge the Government to support these amendments.

[Lord Watson of Invergowrie (Lab)]

My Lords, I had not intended to speak to this group of amendments, but the noble Lord, Lord Markham, has prompted me to do so. He said just now that he does not think the Bill or a regulator are necessary because his aim is— I am quoting him; I hope he thinks I am doing so accurately—“to make sure that the whole structure of football is”, and remains, “successful”.

[Lord Markham (Con)]

Noble Lords will remember that, in earlier debates, I said that there are many good things that the regulator should be set up to do, so I agree with that. The MK Dons is a very good example. The “fit and proper persons” test and the breakaway league are both very positive reasons to have it. An earlier proposal was that every club should have two non-executive independent directors, which, from memory —I cannot quite remember—had widespread support. All those sorts of things are good; it is the financial redistribution of the moneys that I believe is a step too far.

[Lord Watson of Invergowrie (Lab)]

I thank the noble Lord for that, but I do not thank him for mentioning MK Dons, which, as a supporter of AFC Wimbledon, strikes a bit of a raw nerve with me. But I understand the point he was making.

I come back to the noble Lord’s argument about making sure that the whole structure is “successful”—yes, I want that. As a supporter of a club in League Two, I want to make sure that more of the money available in the game filters downwards. I do not even want it to be contained within the Championship; I believe that the Championship has a disproportionate amount of the revenues that come from the Premier League.

I do not believe in parachute payments. All the money, including the parachute payments, should be spread throughout the three divisions below the Premier League—I have argued that before in your Lordships’ Committee in earlier debates. We are told that clubs are disincentivised to get promoted to the Premier League if they cannot have some guarantee. But, from memory, I can think of some clubs who are in the Premier League for the first time and have established themselves after several years—Brentford and Brighton are obvious examples—without having parachute payments to get there. Bournemouth have been in for some time; although they dropped out for a season, they came back again. For this season, somebody mentioned Nottingham Forest, who are second place; they have been in the Premier League for 25 years or so. Ipswich have made it after a similar gap.

I do not think that the parachute payments are anywhere near as essential as has been suggested. However, the money used for parachute payments, if it is spread more equitably, particularly down to League One and League Two to a greater degree, would enable the structure of English football to be successful in the way that the noble Lord, Lord Markham, suggested.

[Lord Markham (Con)]

The noble Lord, Lord Watson, referred to Brighton and Brentford. I have spoken to the chair of Brentford and the CEO of Brighton. Both say that without the parachute payments—that safety net—they would never have invested in the players when they got promoted. If they were relegated without the parachute payments, they would have faced real financial difficulty. So it was the safety net of the parachute payments that gave them the confidence to invest in players, which then allowed them to have a strong enough team to stay up. I think that they would argue—in fact, they have argued this; it was in the letter that I circulated from the Brentford chairman—that the parachute payments were fundamental to their success in the Premier League.

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[Lord Jackson of Peterborough (Con)]

My Lords, I did not intend to speak on this group of amendments but, as with all the best Committees, you are sometimes prompted to contribute by the ebb and flow of the debate.

Just to respond very briefly to the noble Lords, Lord Pannick and Lord Bassam, of course we all want to see the best possible legislation. This is a scrutiny and oversight House, and we want to make sure the Bill is improved as it goes between the two Houses of Parliament. But we also do not want to respond merely to anecdote, whether it is the financial difficulties of a small number of clubs or the issue of the super league evolving as it did in 2021. I have gone on record as saying that the Bill is suboptimal—and that is polite. I would have said the same under a Conservative Government, and it bears repetition tonight. It was terrible then, and it is even more terrible under this Government.

I want to try to explain to noble Lords why, specifically on the issue of whether Clauses 61 to 64 should stand part, some of us have a philosophical issue. At the moment, I believe that although it can be quite robust and in many ways brutal, there is a self-correcting mechanism for the way football clubs are operated. There is a predisposition not to take inordinate risk in the future of small community clubs supported by the local communities in towns and cities across the country.

What slightly worries me is the concept of moral hazard, as we have discussed before, which is obviously quite an arcane economic concept. Incidentally, with respect to the noble Lord, Lord Pannick, I do not see that it is necessarily axiomatic that the Premier League has some moral duty, as businesses and as private entities with shareholders, to necessarily be a pseudo-charitable outfit and to provide for those in other leagues. The noble Lord might want to elucidate why he feels that is the case. Whether we believe it is a good or practicable idea is another issue.

[Lord Watson of Invergowrie (Lab)]

Is the noble Lord familiar with the concept of solidarity?

[Lord Jackson of Peterborough (Con)]

Yes indeed, comrade.

I suppose the significant point I am making is that not enough credence has been given to the efforts, which were very well enunciated by my noble friend Lady Brady, of the Premier League through very difficult times, economic downturns and, of course, Covid. At the moment we have that self-correcting economic mechanism to prevent smaller clubs making calamitous economic decisions that may end up with them closing, going into administration, et cetera—although of course, as we have seen from the figures, a relatively small number of clubs have been in that position.

Conversely, we are being asked to formalise in primary legislation a situation where we are putting in the hands of the IFR, along with very significant enabling powers, including Henry VIII powers, the right to redistribute wealth. It may be a simplistic argument but, as my noble friend Lord Markham said, it would be an unprecedented situation for a regulator to redistribute capital between entities. In other words, there will be no internal mechanism or sanction to prevent inordinate amounts of risk being taken. It would be a market distortion and there would be no disincentive for those clubs to make those decisions, as there is now.

That is the philosophical underpinning of why we support these clauses not standing part of the Bill. It does not mean that we do not care about community football clubs. We are being asked to vote not on a perfect piece primary legislation but on the Bill with 100 clauses that is in front of us today. For that reason, I support my noble friend’s contention that Clause 61 and others should not stand part of the Bill.

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[Lord Moynihan of Chelsea (Con)]

The noble Lord, Lord Watson, reminded us of solidarity. Does my noble friend agree that there is a great difference between legislative—which is to say coerced—solidarity, which some would call theft under the law, versus the voluntary and friendly solidarity that is already being shown by the Premier League? Does he agree that there is a fundamental difference between the two and that it is a subversion of the word to call it solidarity?

[Lord Watson of Invergowrie (Lab)]

The noble Lord is now making a distinction between solidarity and paternalism.

[Lord Markham (Con)]

That is precisely the point of this debate. I think everyone agrees that the Premier League should be paying money over, no one more than the Premier League itself. The whole question is whether it needs a regulator to enforce a set number. As my noble friend Lady Brady said, the Premier League is more generous than other leagues. As my figures showed, the Premier League pays over 14%, which is almost three times the level that UEFA pays over in its version of solidarity payments. The real point of the debate is whether we really need a regulator to determine it.

We have had a good debate on parachute payments. The noble Lord, Lord Bassam, made a particular point about Brighton and how it did not need them. It is a little known fact that that a job I never got, although I was through to the final round, was being CEO of Brighton many moons ago, when it was a Championship team and was pressing for the Premier League. I recall very well a conversation with Tony Bloom when he was interviewing me for that job. I still think he is a brilliant chair, and I cannot argue against Paul Barber, the CEO; given how good he is, I cannot deny that he chose the right candidate.

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[Lord Pannick (CB)]

I support the noble Lord, Lord Markham, on this. I find it quite extraordinary that the governing body of European football has written a letter to the Government relating to this legislation and yet we are not able as a Committee to see it and form a view. It is not my understanding that UEFA has specifically asked that the letter remain confidential. Indeed, it would be a very surprising attitude for the governing body of European football to take. We have discussed this on a previous Committee day, but I did not think we received a very satisfactory response. Could the Minister tell us whether UEFA has asked for its letter to remain confidential and, if not, why we cannot see it?

[Lord Watson of Invergowrie (Lab)]

My Lords, with all due respect to the noble Lords, Lord Pannick and Lord Markham, is it not rather disingenuous to suggest that UEFA might have some concerns with this legislation but is not willing to make them public? UEFA is not known for being shy and slow in coming forward when it is concerned about any aspect of football in any of its member countries, so I think we can be fairly certain that, if it had serious concerns—or indeed, any concerns—it would have made them public and we would know about them.

[Lord Addington (LD)]

My Lords, I find myself agreeing with both the noble Lords, Lord Watson and Lord Pannick. It would be good if we could know what has been said and, if there is no big objection, we could move on. It was suggested that we had to comply with UEFA’s rulings in our own law. That is patently absurd. But, if there is no problem, let us know about it. We have not been told that English clubs will be banned if this goes ahead, so presumably it is not that big a deal. Surely, finding out about it now would be sensible.

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[Lord Markham (Con)]

My Lords, I hope that this will be very simple and quick. All we are trying to do here is prevent the possibility of mid-season disruptions brought about by the implementation of the licensing regime. Clause 99 states that Part 3 will come into force on a day that the Secretary of State may by regulations appoint. The licensing regime therefore could be implemented at any date; there is no specification of when this should come into force. We want to ensure that, when the licensing regime is implemented, there should be as little disruption as possible.

The intention of this amendment, therefore, is to ensure that the Secretary of State cannot apply the licensing regime in the middle of a season. My concern is that the licensing requirements in Part 3 could be quite extensive. The information that clubs will have to provide to the regulator to obtain their licence is not only vast but, at this stage, quite unknown. Of course, the regulator will start to work on publishing its rules and requirements for the licensing regime, although we do not know when because the Bill does not include a timeline for the regulator to do so. However, I would hazard a guess that clubs will have to compile a large volume of information and documentation.

We know the requirements that are in the Bill at this stage. Clubs will have to submit a financial plan, a corporate governance statement, an annual declaration, and a personnel statement. They will have to ensure that they have the appropriate financial and non-financial resources, and meet the fan engagement threshold. If a club cannot comply with these requirements and therefore cannot obtain a licence—I am thinking of the smallest clubs in the National League, with just a few employees—then that club would have to cease operating teams in specific competitions.

If the regulations to implement the licences came in the middle of a season then a club could find itself in the position of having to drop out of the league half way through. The disruption that this could cause would obviously be enormous—not to mention the financial ramifications of such an event. By stating that the Secretary of State may implement operating licences only at the end of a football season, the potential for the disruption I have outlined would be significantly reduced. This safeguard is therefore required to ensure that the licensing regime, when it comes into force, causes less disruption than could otherwise be the case.

[Lord Watson of Invergowrie (Lab)]

The noble Lord may be surprised and not too pleased to hear that I support this amendment. It makes sense not to have in-season changes. This message needs to be got through to some Premier League clubs, including West Ham—I invite the noble Baroness, Lady Brady, to reply. Some clubs change their ticketing arrangements in the middle of a season, shutting out some fans—particularly children and seniors—from getting cut-priced tickets. This is apparently in pursuit of greater income. Manchester United are the main culprits. I understand that a group of fans from various clubs has come together to protest at these changes. It is wrong for this to happen in season, which is why it would be sensible for the Bill to incorporate an amendment similar to the one that the noble Lord, Lord Markham, has just moved.

[Lord Addington (LD)]

My Lords, I basically agree. There is a break at the end of the season. Most organised team sports change their rules and regulations in that break if they are going to do so. It might not need to be in the Bill, but it might be a Pepper v Hart type case; I say that timorously in view of the company I am keeping. If the Government can give us some indication that they will make major changes in the off-season, when players are exhausted and structural changes can be made—that is basically what it is for—then I would be happy because it is quite a sensible principle.

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[Baroness Brady (Con)]

My Lords, before I speak to the amendments in this group, I want to address the accusation from the noble Lord, Lord Watson, that West Ham United has put its season ticket prices up mid-season. That is categorically untrue. We have the cheapest adult season ticket in the league, at £345. Since we moved into the London stadium, we have sold 35,000 season tickets for £99 to juniors. We have two “kids for a quid” games every year in the Premier League at the club. We are more than doing our bit.

[Lord Watson of Invergowrie (Lab)]

If I have got that wrong, I unequivocally apologise to the noble Baroness. I was reading an article about football supporters, including of West Ham, who were protesting about changes to season tickets. Maybe it is not within this season but next season, but there were fairly significant changes being put forward, and the argument was that children were not being given cheaper prices, which will stop them becoming regular fans at football matches. If what I said was wrong, I apologise.

[Baroness Brady (Con)]

I accept the noble Lord’s apology.

The hour is late, but as we debate this idea of a sunset clause, we should pause and reflect on what is truly at stake. We are all here during extra time because all of us—bar one, I think—love football. It is a cultural touchstone, an economic powerhouse and a source of immense national pride. At its best, football connects communities, inspires individuals and projects the best of Britain to the world.

The Premier League is only one part of English football. I operated in the EFL system for many years and know that it is hugely important to our pyramid, as is the National League. But the Premier League is special for our country: with its global reach, this fizzing, vibrant competition has an extraordinary ability to draw interest, investment and innovation into the game. It not only powers the football pyramid but supports £8 billion in gross value added to the economy, contributes over £4 billion annually to the Exchequer and supports more than 90,000 jobs. The Premier League’s influence extends far beyond the pitch, creating an affinity for the UK and showcasing our ability to create a product that the world wants to watch.

We all know the background and the well-made case for some sort of regulatory intervention, but with this particular Bill we are now at a crossroads. I am passionate about this and live it every day, so I can see the risks very clearly. But I also know that this is a well-intentioned piece of legislation with aims that we can all support. The reason we have been so forensic and questioning during Committee is that it genuinely has the potential to inadvertently damage the structures that have made English football the envy of the world. We are not imagining these deficiencies in the Bill, or the risks that could play out. This is why I am interested in the idea of assessing whether this legislation and the IFR have achieved their goals or inadvertently harmed the game we all love.

The Government have rightly made economic growth their overriding priority. In a time of global economic turbulence and domestic fiscal and productivity challenges, it is vital that we protect and nurture the UK’s most successful industries. Football is clearly one of these: a global export that not only generates revenue but enhances Britain’s soft power and investor appetite for the UK on the world stage. It is against this backdrop that I must express surprise at the puzzling reluctance so far of the Government to listen to the concerns we have been expressing.

At a time when the Prime Minister has asked all regulators to focus on growth—and has also apparently asked Ministers to cancel all anti-growth measures—here we are, about to create a regulator that has no growth duties or objectives. We even read in the newspapers that the Chancellor has told regulators this week that they need to go further and faster in stripping back unnecessary rules and creating an environment where companies can take risks.

But this new regulator will be principally charged with risk reduction and, effectively, a new form of taxation on specifically one part of football, the Premier League. This is a mandate that seems inherently restrictive, redistributive and therefore anti-growth. The signal this will send to global investors could be troubling. If we overreach in regulating one of the UK’s greatest success stories, what might that say about our ability to protect and nurture other industries?

Poorly executed regulation would not just chill investment in football; it would ripple out into broader perceptions of the UK as a place to do business. A sunset clause is an interesting idea. It is clearly important that we do not undermine the regulator from the get-go. We all want this to work. But it is important that an appropriate review and accountability mechanism is found, so that a future Government can assess whether this Bill is delivering the sustainability it promises or whether it is in fact creating regulatory uncertainty and systematic risk, and damaging investment—in which case, we would want to see urgent remedial action.

As I have said this evening, the Premier League and its clubs are not opposed to change. What we do ask, though, is for change to be thoughtful, measured and informed by the realities of what makes football so successful. This Bill has the potential to do some good, but it also carries significant risks that, I say to the Minister, deserve to be engaged with seriously and constructively.

Today, the Premier League is competing not only with domestic leagues but international competitions, other global events and new forms of entertainment in what is a rapidly changing media industry. The UK has created something so special in the Premier League. We should not stifle our ability to adapt in order to deal with these new threats. We should not be complacent when it would be so easy to be knocked off course. We should not gamble that the Premier League is now an unstoppable juggernaut, immune to even the unintended consequences of its own Government’s actions. Empires rise, but they also fall.

It has been said that the Premier League has become the goose that is laying English football’s golden egg. I would encourage all noble Lords to think about it that way, rather than as a cow to be milked or a magic money tree to be shaken. Above all, we should look after it. We should nurture it. Dare I say that perhaps we should even think about how we can help it, not hurt it? We should work together to ensures that it continues to be so successful. To do so, it is obvious that we need some sensible changes to this Bill, and I sincerely hope we can achieve them together as we move towards Report.