Football Governance Bill (Sixth sitting)

Stephanie Peacock Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[The Chair]

I remind the Committee that with this we are considering:

Clauses 28 to 31 stand part.

New clause 3—Owner’s commitment to future use of a club’s football ground—

“(1) A person may not become or continue to be an owner of a regulated club unless they provide to the IFR a commitment to maintain long-term use of the football club’s grounds as a mandatory licensing condition.

(2) The IFR must codify the commitment.

(3) The IFR may only determine a person to be or remain a suitable owner of a club if the person has made a commitment under subsection (1).”

This new clause introduces a new licensing condition requiring an owner to provide a commitment to the future ongoing use of a football ground by a club.

[Stephanie Peacock (Barnsley East) (Lab)]

It is a pleasure to see you in the Chair this afternoon, Ms Nokes.

I will continue where I left off, looking at clause 29. I have a question for the Minister on behalf of the Football Supporters’ Association, which pointed out that fans are often privy to local information about owners and officers that might be relevant to a determination of the regulator. Does the Minister believe that the mechanisms in the clause are adequate for the regulator to take relevant input from fans and local communities when making determinations?

Clause 30 provides for cases in which a person becomes an owner or officer without the regulator having made a determination on their suitability. It is important that no loopholes allow owners to skip out of the new tests. Clause 31 gives clubs, and prospective owners and officers, the welcome opportunity to make representations to the regulator should it be minded to determine that someone is not suitable or has not passed the relevant test.

Finally, I am thankful to my hon. Friend the Member for Sheffield South East for highlighting, through new clause 3, just how important it is that clubs have a guarantee about the future use of their ground. The Minister agreed to write to him about that, and I look forward to seeing the response.

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[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship this afternoon, Ms Nokes.

I thank hon. Members for their contributions. The hon. Member for Sheffield South East thinks I can work that quickly, just in the time we had during the break, but I have committed to write to him. Work is going on among colleagues in the Department for Levelling Up, Housing and Communities, for example, but I will write to him with further details.

On the specific question of the hon. Member for Barnsley East about local information, she made an important point. Fans and other sources are able to provide information to the regulator about the suitability of their owners or officers should they wish to do so. It will of course be up to the regulator to determine the relevance and significance of any information provided to it, but the mechanism exists.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28 to 31 ordered to stand part of the Bill.

Clause 32

Determinations under sections 28 and 29: time limits

[Stephanie Peacock]

I beg to move amendment 12, in clause 32, page 24, line 2, at end insert—

“(2A) A determination period as specified in subsection (2) should have an end date which is as soon as is reasonably practicable.”

This amendment would ask the Secretary of State to propose a timely end date to a determination period.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Stephanie Peacock]

I welcome the principle of the clause. I will discuss that first, before moving to the amendment.

That decisions on ownership should be taken within a reasonable timeframe is right. Allowing the Secretary of State to set maximum time limits, alongside allowing for extensions where a case is particularly complex, seems a sensible way to go about ensuring that decisions are made in good time. Indeed, although I hope that I have set out my belief that the owners and directors test should be comprehensive, the purchase of any club is likely to be time sensitive. Circumstances are subject to changing quickly on both ends of a deal, and in many cases the right takeover deal can be the difference between a club surviving and not.

Oldham Athletic was in trouble after a period of severe turbulence that saw assets sold, staff unpaid and its main stand unable to be used for certain games due to a lease dispute. After a successful takeover, its new owner, local man Rothwell, cleared Oldham’s debts. Birmingham City and Wigan Athletic also appear to have reversed their fortunes thanks to new ownership. Birmingham City is now one step closer to a new stadium as St Andrew’s falls into disrepair, a long-term project that owners have promised will not be affected by relegation this season. In Wigan’s case, local businessman Mike Danson has appeared to stabilise the club after a period of losses on and off the pitch. Those examples show just how crucial the timing of ownership change can be for clubs in financial distress.

I welcome what the clause is trying to achieve, but I wonder whether it could go one step further. It is of note that the time limits in the clause are not accompanied by a general duty on the regulator to make determinations as soon as is reasonably practicable. That is why I tabled amendment 12. As the English Football League has argued, it is crucial that owners are able to sell their clubs when needed, particularly in instances of financial distress. Protracted takeovers can impact a club’s finances further, and they are hardly an advert for potential investors in clubs.

Given the fear some have expressed about the unintended consequences of the Bill on investment, it is important that the clause is watertight in ensuring that the time limits are truly seen as a maximum, rather than as a target. That is of particular concern given that the clause says that if the regulator does not make a determination within the time limit, it is automatically to be treated as having determined that the prospective owner or officer has failed the test. Again, I understand why that measure is in place—it is dangerous to allow a takeover where a person cannot be approved by the criteria set by the regulator—but we must ensure that the provision is protected against misuse. A regulator working in good faith would surely not time-out a test just to ensure an owner or officer is prevented from being granted a positive determination.

Protections should be built in to the legislation to ensure that it cannot be exploited. Not only is it built into the principles of the regulator to work efficiently, but it is within its general duties to avoid any adverse effects on financial investment in English football. I hope that the Minister will carefully consider amendment 12, which would ensure that determinations are made as expeditiously as possible, and recognise it as in keeping with the underpinnings of the regulator.

[Stuart Andrew]

The Government recognise the intent behind amendment 12, which is to ensure that the determination period is set at the right level so that the regulator makes a timely decision. Clause 32, which I will turn to shortly, provides that the determination period will be set in secondary legislation by the Secretary of State, who will have to consult such persons as she thinks appropriate when setting the period.

The purpose of the determination period is to provide more certainty to the industry about how long the determination of a new owner or officer will take, to incentivise new owners and officers to promptly provide the information the regulator needs to assess whether they are suitable, and to keep the process efficient. It is important to get the length of the determination period right. If it is too long, it could result in a slow and bureaucratic process, as the hon. Member for Barnsley East said, which could have a negative impact on investment. However, if decisions had to be taken too quickly, there would be a risk of them being less rigorous, and investors might worry about being failed because the clock runs out before the regulator can gather all the relevant information to make a decision.

The Government do not believe that amendment 12 is necessary because the Secretary of State will already consider those trade-offs, as well as other matters, including existing deadlines for comparable tests in other industries and the views of appropriate stakeholders. For example, we expect that the regulator will likely be consulted when the determination period is being set in regulations. For the reasons I have set out, I am not able to support the hon. Lady’s amendment, and I hope she will withdraw it.

With regard to clause 32, football is a fast-paced industry, where clubs operate within constraints such as league seasons and transfer windows. Timely decision making about the suitability of new owners and officers is important for clubs’ financial sustainability. Without deadlines, we have seen league determinations drag on, with a decision unable to be reached.

The regulator will need to conduct thorough scrutiny of new owners and directors, but it will also need to make decisions in an appropriate timeframe to ensure that clubs are not unnecessarily impacted in this fast-paced industry. That is why it will be subject to a statutory deadline when it tests the suitability of prospective owners and officers. The determination period will start when a person provides a complete application to be a new owner or officer of a regulated club. By the end of the period, the regulator must find the applicant suitable or unsuitable.

As well as providing certainty to the industry, the deadline will incentivise new owners and officers to provide the information the regulator needs to assess suitability. If the regulator cannot decide before the initial deadline is met, it can extend the determination period. That will provide it with the necessary flexibility to gather more information to make a well-informed, but still timely, decision.

As I set out, the determination period, including the maximum amount of extra time, will be set by the Secretary of State in secondary legislation. That will ensure that the regulator is bound by it but that there is still flexibility for the deadline to be amended in future. If the regulator cannot make a decision about a prospective new owner or officer before the period expires, the person will automatically be determined to be unsuitable. That means that only owners and officers that the regulator is confident are suitable will be allowed to get involved with clubs.

[Stephanie Peacock]

The amendment was simply intended to ensure that decisions on owners and directors are made with time sensitivity in mind. I appreciate the Minister’s comments and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Clause 33

Duties to notify IFR of change in circumstances relating to incumbent owner or officer

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

It is important for clubs’ sustainability that their incumbent owners and officers continue to be suitable. That is why the Bill gives the regulator the power to test incumbents if it has grounds for concern about their suitability, to mitigate the risk of harm from individuals already in the system. To do so it needs to be aware of any material change in the circumstances of incumbent owners and officers that is relevant to their suitability.

The clause therefore places a duty on incumbent owners and officers, as well as regulated clubs, to notify the regulator when they consider there has been, or may have been, a material change in circumstances that is relevant to whether the individual is suitable to be an owner or officer of the club. For example, if an officer became subject to criminal or relevant civil proceedings that the regulator was not previously aware of, that would constitute a material change in circumstances.

The notification must include certain matters listed in subsection (3), including an explanation of the material change in circumstances and why it is relevant to whether the owner or officer in question is suitable. If that information gives the regulator grounds for concern about the incumbent’s suitability, it can test them using the powers in clauses 34 and 35. If they are determined to be unsuitable, the regulator has a strong suite of powers to remove them. By ensuring that the regulator is aware of relevant material changes, we will better enable it to ensure that incumbent owners and officers continue to be suitable.

[Stephanie Peacock]

The clause mirrors the notification requirements for prospective owners and officers, requiring incumbent owners and officers to go through the same process of notifying the regulator in the event of a material change that might affect their suitability. This is an important provision that will ensure that owners and directors cannot circumvent the standards set out in the tests after their appointment. I certainly think it is the intention that the tests should act as the beginning of an ongoing compliance with the standards by owners and clubs, rather than the end.

If an owner or officer becomes subject to criminal proceedings, or new information comes to light about a criminal source of their wealth, it is only right that their suitability should be reviewed by the regulator. For example, the owner and chairman of Fleetwood Town FC was recently found guilty of defrauding creditors, false representation and being concerned with the retention of criminal property. The multimillion-pound fraud operation, which duped firms into expensive energy contracts, earned him jail time amounting to 13 years. Of course, in that case, Mr Pilley resigned following his conviction.

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[Stuart Andrew]

Clause 34 provides the regulator with the necessary powers to test incumbent owners who are already in place at clubs. It limits the regulator to testing where there is concern about an owner’s suitability. That will allow the regulator to tackle any risks to clubs from unsuitable owners already in the industry, while recognising that there are suitable owners already in the system who do not need to be tested. If the regulator has information that gives it concern about the fitness of incumbent owners, those owners can be assessed to ensure that they have the requisite honesty and integrity and are financially sound to own a club.

If the regulator has information that gives it grounds for suspicion, incumbent owners can also be tested on their source of wealth to establish whether it is connected to serious criminal conduct, including crimes such as drug trafficking and fraud. The regulator will not remove incumbent owners because of mere suspicion about their source of wealth; rather, an incumbent owner must be treated as unsuitable if the regulator is more sure than not that the source of wealth is connected to serious criminal conduct. The clause will ensure that the regulator has the appropriate powers to test incumbent owners where a risk of harm arises. Clauses 39 to 44 provide the regulator with the powers needed to remove unsuitable owners, allowing the regulator to address such risks. That will help ensure the sustainability of clubs over the long term, benefiting football now and into the future.

Clause 35 provides the regulator with the necessary powers to test incumbent officers who are already in place at clubs. It limits the regulator to testing where there is concern about their suitability. That will allow the regulator to tackle any risks to clubs from unsuitable officers already in the industry, while recognising that there are suitable officers already in the system who do not need to be tested. Again, if the regulator has information that gives concern about their fitness, incumbent officers can be tested to ensure that they have the requisite honesty, integrity and competence and are financially sound enough to continue in their role. The clause will ensure that the regulator has the appropriate powers to test those incumbent officers, and clauses 39 to 42 provide the regulator with the powers needed to remove them if necessary. That will help ensure the sustainability of clubs over the long term.

Finally, on clause 36, the regulator’s ability to test or re-test incumbent owners and officers will prevent unsuitable custodians from harming clubs over the long term, not just at the point of entry. The Government are aware that a finding that an incumbent owner or officer is unsuitable brings about significant consequences for that person and may cause concern for the club or fans. That is why, when the regulator is minded to fail an incumbent owner or officer, clause 36 requires it to give them and the relevant club an opportunity to make representations before making its final decision. That will allow an owner or officer an appropriate opportunity to argue their case before the regulator finds them unsuitable, ensuring that the regulator has all relevant information available to it and allowing it to make better decisions and ensure that the regime is more effective.

I commend the clauses to the Committee.

[Stephanie Peacock]

I have no major issues with the clauses, so in the interests of not repeating what the Minister outlined, I will simply welcome them.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Clauses 35 and 36 ordered to stand part of the Bill.

Clause 37

Matters relevant to determinations

[Dame Tracey Crouch (Chatham and Aylesford) (Con)]

I beg to move amendment 1, in clause 37, page 27, line 30, leave out “must” and insert “may”.

[Dame Tracey Crouch]

This important clause will give comfort to many fans about the agility of the regulator. Of particular note overall is the reference to bankruptcy, which I know many fans will take a great deal of comfort from. My hon. Friend the Member for Southend West will speak on that part of the clause if she catches your eye, Ms Nokes.

I advised in my speech on Second Reading that I would table this amendment, if only to impress the importance of independence within the regulator. There has been much commentary on the independence of the independent regulator, and much of it has focused on the fact that it is a political appointment. To allay some of those concerns, I should say that there are more than 600 agencies in Government, of which the largest number sit within the responsibility of the Department for Culture, Media and Sport. That is why the Minister always looks so exhausted: because of the number of stakeholders he must deal with. I have been there.

Some of the concern and criticism has focused on clause 37(2), which states that the regulator must

“have regard to the foreign and trade policy objectives”

of the Government. Throughout the passage of the Bill, there has often been confusion about what certain things within it mean, and the wording of clause 37 has set hares running. The Sunday Times this weekend had an interview with the Premier League’s Richard Masters, in which the journalist—not Richard—made reference to the clause, saying that it

“raised questions as to whether it could be forced to give state-backed clubs such as Manchester City and Newcastle United soft treatment”.

The piece refers to whether the regulator would have any say on the outstanding charges and, if it were to have a say, whether, due to foreign policy, there would be a softer stance on that.

Although we on the Committee understand that the clause relates to ownership, the wider world has somehow got it into its head that it also relates to the administration of the league rules, which is beyond the remit of the regulator. However, the clause would relate to the purchase of the club and, as the Minister will know from his own never-ending media round, also often relates to the public investment fund takeover of Newcastle. As the Minister has outlined, the ownership tests are set out in the legislation and apply to all potential owners and directors, regardless of where they are from, as long as they are not from a country where sanctions are in place.

However, my concern about clause 37(2) is that it adds an element of uncertainty into the test because of the fluidity of our foreign trade policy. For example—I use this with complete poetic licence—Donald Trump decides to add to his golf course portfolio and wishes to buy Arsenal. Concerns about his integrity are well documented, and yet our foreign and trade policy determines that we consider the USA to be one of our key allies and an absolute must for investment and trade in the future. Therefore, do we automatically give the keys to the Emirates to the former, and possibly next, President? Can the Minister confirm that the foreign policy test is just one part of the test, and would not overrule others where there is evidence that other matters might disqualify a prospective owner?

I am also concerned that the clause is not applied fairly across industries. Ofcom does not need to take into account foreign or trade policy when adjudicating on a takeover of a newspaper, but the football regulator does for the takeover of a club. I am not saying that subsection (2) should be removed altogether, although I am not sure I understand the value it brings. Many will be acutely aware that most of our Premier League clubs, and an increasing number of clubs elsewhere in the pyramid, are foreign-owned or owned by British people living in other countries, so it is essential that we have complete transparency in the process, including on at what point subsection (2) is relevant.

However, I fundamentally believe that if we are to truly value the independence of the regulator’s day-to-day decisions from the Government, the subsection ought to be reworded from “must…have regard” to “may…have regard”. In this morning’s sitting, in response to a question from the hon. Member for Liverpool, West Derby, the Minister said that we do not want the regulator to be involved in foreign policy. But putting subsection (2) into clause 37 does exactly that. A minor tweak to the wording satisfies everyone, but most of all retains the spirit of independence and removes some of the confusion about who is deciding who owns our football clubs. I am very interested in what the Minister has to say in reply.

[Stephanie Peacock]

Clause 37 has three main parts. It requires the regulator to have regard to determinations from competition organisers, requires the regulator to have regard to foreign policy and trade objectives, and provides the criteria for judging honesty, integrity and financial soundness. I will speak to each of those parts in turn and address amendment 1 with the second part.

On the regulator having regard to determinations from competition organisers, I have already raised the issue of conflicting outcomes and was reassured by the Minister’s explanation, so I will move on to the issue of the influence of Government policy objectives on the regulator.

The clause states that the regulator must have regard to the Government’s “foreign and trade policy objectives” when making determinations on ownership. That has caused concern across the board, including across football governance structures, which usually have a harder time finding consensus, and with fans. That almost unanimous voice tells us something important: everyone wants to see a regulator that is free from undue political interference. I agree. The Government should not be in a position where they can apply pressure to the regulator to make decisions on ownership just because they might be politically favourable. Club ownership must not be a tool used to reward those with which the Government have a positive relationship or penalise those with which they have a negative relationship. That is particularly so given that the Bill empowers the regulator to make decisions on incumbent owners and officers.

However, I understand that there may be circumstances in which national security and foreign policy objectives may be pertinent to the regulator’s decision making. The regulator should, and will want to, have an understanding of all relevant information when making a determination. That is part of the reason why the regulator was chosen as the location of the tests, due to its ability to access relevant information that would not otherwise be available. I therefore do not believe that the intention of the clause was to compromise the independence of the regulator, but to empower it where security or foreign policy objectives are concerned.

Whatever the intention may be, we must ensure that the clause is not open to abuse. I am therefore pleased to offer my support to amendment 1, tabled by the hon. Member for Chatham and Aylesford, which suggests that we change “must regard” to “may regard”. That amendment might help to provide some reassurance on the purpose of the clause and the independence of the regulator.

Some further clarification on how the measure will work in practice would also be helpful. In particular, there must be more guidance on how the regulator will be made aware of “foreign and trade policy objectives”. That is particularly important because transparency is a crucial tool for providing accountability, but may be difficult given that some information will naturally be confidential in line with national security considerations. Can the Minister provide any information on what good practice will look like in terms of striking the balance between accountability and security?

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Separately, the regulator may make rules that require the unsuitable owner to pay costs associated with an ownership removal order. That could include costs incurred by a trustee appointed by an order. This power will help to ensure that costs are borne by the unsuitable owner. I commend the clauses to the Committee.

[Stephanie Peacock]

It is incredibly important that if the regulator is going to take on responsibility for conducting the owners and directors tests, it is also given the teeth to enforce the outcome of those tests. I am pleased to have reached the part of the Bill where we can discuss those powers.

I will speak to each clause in the group in turn, starting with clause 38, on disqualification orders. In some circumstances, a test may reveal that not only is the person in question unsuitable to be an owner or officer of a particular club, but their record is such that they should not be considered for such a role again. I agree with the principle of the clause, which is to ensure that tests are not unnecessarily duplicated and to protect multiple clubs from the same issue.

On clause 39, if the regulator has determined an owner of a club is not suitable, it is right that it is bound to give a direction requiring that person to take reasonable steps to cease being an owner. That binds the regulator to the outcome of its test, rather than giving it discretion over whether a negative determination results in the departure of an incumbent owner. I have a few questions about what that would mean in practice. I am curious to hear the Minister’s take on what taking “all reasonable steps” to cease ownership might involve. It surely implies that a person needs to sell their shares, but what if they are unable to find a buyer? Would they be required to give the club away if there was no willing purchaser? Furthermore, if there is a buyer but they offer a price below market value, or a value that would result in big losses for an owner, would the person still be forced to sell?

The answers to those questions, and a clear direction on the application of the clause, is important for two distinct reasons. First, it matters because this process may have a knock-on effect on people’s willingness to invest in football clubs. Secondly, it matters for the sustainability of the club and its fans. It is important that the club is in the right hands for the right price, or this entire part of the Bill on owners will be undermined. I hope the Minister can today, or in due course, provide some further information on how clause 39 will work in practice.

Clause 40 largely mirrors the removal directions for owners, but applies them to officers. How the clause will work in practice is less complex, as the removal of officers is less likely to hinge on the finances of an outside party. I am also satisfied that the alternative officer arrangements in clause 42, to appoint an interim officer, might mitigate any problems with an officer’s removal.

Clause 41 provides an important protection against unsuitable officers or owners carrying out activities that might negatively impact the club in the long term. When it comes to actions that have an impact on a club’s future, it is right that anyone who has been identified as a potential harm to a club can be limited in those areas if needed.

Finally, I welcome clause 43, which gives the regulator the ultimate power to ensure that a person ceases to be an owner when they have failed to comply with orders given under powers in this part. That power is complimented by the safeguards and notice provisions in clause 44.

[Stuart Andrew]

I thank the hon. Lady for her comments.

As I said, if the regulator deems that a current owner is unsuitable, it would first direct them to leave the club in the specified timeframe. During that period, the regulator will have available several powers to safeguard the club from further harm. However, as the hon. Lady rightly said, there is a risk that an unsuitable owner does not comply with the directions. For instance, they may refuse to leave the club or may continue to use their position as owner to damage the club. In those situations, the regulator will have the powers to directly remove the unsuitable owner from the club.

The hon. Lady makes a point about cases in which there is a failed incumbent owner but no new prospective buyer for the club. By conducting strong statutory tests on prospective owners, the regulator will ensure that clubs are run by suitable custodians and that unsuitable owners can be stopped at the point of entry. That will help to reduce the risk of unsuitable owners entering the industry.

The wider regulatory system of financial regulation and improved governance will further put clubs on a more sustainable footing, which should ensure that clubs are attractive as investments for prospective buyers. If an owner wishes to sell, or is required to sell by the regulator, the club should therefore be a much more attractive asset.

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[Mr Betts]

Amendment 21 is quite simple, and I am sure that the Minister can accept it without much consideration. It simply applies where a team is prevented from going into a prohibited competition, which I think is absolutely right. The outrage of the European Super League in some ways triggered recognition of the issue and the need to regulate football more appropriately. There are consequences for people who make their living from football, whether they are players or staff members of clubs.

Ben Wright from the PFA very appropriately spelt out the fact that the Bill quite rightly, in many cases, highlights the need to consult and involve fans, but players are not mentioned anywhere. As Ben Wright said, there are only two groups of people who really matter in football:

“those who play it and those who watch it.”––[Official Report, Football Governance Public Bill Committee, 16 May 2024; c. 88, Q145.]

Without those two groups, football would not exist. I hope the Minister thinks about the amendment and comes to the conclusion that he could accept it without undermining the Bill in any way. I hope he might give careful consideration to that.

I am also happy to support amendment 13, which was tabled by my hon. Friend the Member for Barnsley East. It is very much along the same lines as my amendment, and the Minister might rather choose her wording if he cannot support the wording that I have put forward. I hope the Minister will reflect carefully on the amendments.

On amendment 22, having

“the full impacts of such a decision”

taken into account seems a fairly obvious thing. The Minister will no doubt tell us that that is the intention of the Bill and that there is no need to add in the extra words, but I am sure he will agree that the extra words are not in any way in conflict with what the Bill is trying to achieve.

[Stephanie Peacock]

I am pleased that we are making good progress in moving on to discuss part 5 of the Bill and the free-standing duties on clubs, which apply to clubs separately to the licence conditions. They are set out by the Bill directly and, in many cases, apply to a club regardless of whether it is licensed.

Clause 45 sets out the duty not to operate within a prohibited competition. I will briefly set out some context before discussing amendments 21, 22 and 13. The clause is clearly designed to prevent a repeat of the European Super League, which rightly prompted immense backlash from fans, clubs and governance structures throughout the English football pyramid when it was first announced over three years ago.

There were many reasons why the project sparked such outrage, and it is important to name a few directly. First, the European Super League was designed, at least to some extent, to be a closed competition. For many of the richest clubs, qualification would have been an automatic right, rather than being meritocratic. It would have taken an axe to one of the most important features of football’s success: the idea that any one team can dream big and become a winner. With qualification based on merit taken out of the equation, the entire structure, purpose and sustainability of football’s existing competitions would have been undermined.

Secondly, the European Super League was launched—

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[Stephanie Peacock]

I appreciate your comments, Ms Nokes. I can skip forward to the amendments. I have some separate thoughts on clause 45. I do think that the background is quite important to the amendments, but am happy to move on directly to address them.

Amendments 13 and 21 are on player consultation. It seems like a missed opportunity that the views of players are not to be taken into account by the regulator. That is why I tabled amendment 13, which would expand consultation requirements to include them. Similarly, amendment 21, tabled by my hon. Friend the Member for Sheffield South East, would require the regulator to seek the views of players and staff, so I will address both amendments together.

Players in both the clubs that tried to break away and the clubs that were left behind had an instrumental role in demonstrating against the ESL. For example, just 48 hours after the announcement, a group of high-profile Liverpool players issued a collective statement against the Super League. That clearly stated:

“We don’t like it and we don’t want it to happen.”

Meanwhile, Leeds players, while warming up for a game, wore shirts featuring slogans such as “Football is for the fans” and “Earn it.” Players in other clubs followed suit. It is clear from that that players feel passionately about the competitiveness and fairness of the competitions that they operate in, and have a view to share on these issues.

[Dame Tracey Crouch]

The shadow Minister is making a really interesting speech, but is she not actually making a speech against the amendment, because the players did that without there being a statutory requirement for them to do it?

[Stephanie Peacock]

That is a fair point, but I do not think we should have to rely on players having the bravery to make public statements. We are saying—this is a debate that we rehearsed earlier in Committee—that there should be an obligation on the regulator to consult them, and I will come on to make that argument.

Many players care about the fans and communities that they play for, and it is players who are likely to come under fire if they take part in competitions that fans oppose. At best, they will act as a vehicle for fans hoping to hold their clubs to account. At worst, when competing in closed competitions, players may become the face of the demise of the long tradition of the English football pyramid, without having had any say in the matter. At a time when there has been a particularly concerning rise in abuse of football players—albeit from a shameful minority of fans—that becomes even more concerning.

[Robin Millar (Aberconwy) (Con)]

We rehearsed this somewhat when the representative of the PFA came before us to give evidence. I made the point to him then that we had been told that it was an inability to control costs that was damaging football, but—this was the point I made—actually it is the inability to control wages that is damaging football. That is firmly within the control of players, so I am a little less sympathetic to the argument that the hon. Member is making.

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[Stephanie Peacock]

I am not sure it is the case that the players control their own wages. When we look at this Bill, as other hon. Members have said—

[Robin Millar]

They can simply say no.

[Stephanie Peacock]

Yes, that is true, and it is true for all of us and anyone who takes a wage, but I think it is a rather unfair expectation to put upon players. I am not sure that I accept the hon. Member’s argument, but obviously, if he has strong views on this issue, he can make a speech when I have concluded.

As my hon. Friend the Member for Sheffield South East set out, there are two main components in football, and they are the players and the fans. I think it is incredibly curious that this Bill does not mention players at any point. That is why I am making the case for these amendments.

I will draw my remarks to a close in a moment. I would just like to share a few other examples with the Committee. To give a troubling example, we will all remember that, following the penalty shoot-out at the Euro 2020 final, a wave of racist social media abuse was aimed at certain players. Ensuring a duty of care to protect players from abuse deserves its own conversation, but I think it is relevant to raise. It is not right that players are not given any say in relation to prohibited competitions, but could be told that they must compete in one—only to face the wrath of fans afterwards. Football is for the fans, of course, but it cannot exist without the players. I therefore encourage the Minister and members of the Committee to consider the benefit of player input on the regulator’s decision making in that area. Given that fans and the FA will already be consulted for their views, it would only require a simple change to the legislation. I hope that we can all get behind amendment 13 to strengthen the clause as much as possible.

Amendment 22, tabled by my hon. Friend the Member for Sheffield South East, would strengthen the duty of the regulator to understand the view of fans, so that the full impacts of any particular competition are considered. As the European Super League attempt showed, the consequences of a closed competition, where qualification is not based on merit, are plenty. It is therefore important that the full range of impacts is considered. Is the Minister satisfied that the current wording will ensure that, or is amendment 22 needed to require the regulator to take everything into account when gathering the views of relevant stakeholders?

[Stuart Andrew]

Amendments 21 and 13 would require the regulator to determine and have regard to the views of club staff and players, placing them on equal footing with the club’s fans for the purposes of clause 45. I do not believe that the inclusion of players and club staff is necessary here. The Bill is designed to protect and promote the sustainability of clubs so that they continue to serve the interests of their fans in local communities, who have been around far longer than any owners and will be around long after those owners have moved on. That is why clause 45 requires the regulator to determine and consider the views of fans.

A decision to prohibit a competition may also impact a wide range of other stakeholders, which is why the clause already requires the regulator to

“consult such other persons as”

it

“considers appropriate.”

That allows for consultation with a broad range of potential stakeholders. If the regulator considers players and staff of regulated clubs to be an appropriate group, it must consult them. It is right that the regulator has the discretion to make the judgment.

Amendment 22 seeks to draw out that when the regulator is determining the views of fans about a competition being prohibited, it must include their views on the full impact of the competition being prohibited. Specifying that in the Bill is unnecessary as it is already implicit that fans would consider the potential impacts as part of reaching a view on a competition’s prohibition. For the reasons I have set out, I hope the amendment will be withdrawn.

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[Stuart Andrew]

As the hon. Gentleman knows, the purpose of the Bill has been tightly focused to feature those particular issues. We have a fine balance to ensure that we do not upset or get into challenges with UEFA and FIFA, and it is for football to make some of the decisions that it has made, but I would expect that, as the provisions in the mandatory conditions say, clubs will consult their fans on decisions on match days.

The extension to clubs regulated in the past 10 years will stop them circumventing the rules by withdrawing from existing competitions in order to join a new breakaway competition. The regulator is expected to prohibit competitions on the basis of the predetermined, proportionate and transparent framework based on the prescribed factors set out in legislation. That will provide up-front clarity to the industry and means that new competitions will not just be prohibited outright. That is important to ensure that the regulator does not unduly stand in the way of innovation in the market—for example, like when the old First Division became the Premier League in 1992.

The clause requires the regulator, when deciding whether to prohibit a competition, to consider several factors, including whether the competition is merit based, operates on the basis of fair and open competition, jeopardises the sustainability of English football’s existing competitions or the clubs in those competitions or harms the heritage of English football. Of course, football belongs to its fans, so the regulator will also determine and consider the views of fans in England and Wales before prohibiting a competition. As the national governing body for football, the FA will be consulted before the regulator prohibits any competition, and the regulator will also consult anyone else it considers appropriate. I commend the clause to the Committee.

[Stephanie Peacock]

Apart from my amendments, which I had hoped would strengthen clause 45, I am pleased to offer my support more generally for the clause. I will not repeat my remarks from previous debate, but given the fallout from the so-called Super League attempt, the Bill is absolutely right to make provisions around prohibited competitions.

However, I have three remaining questions on wording that I hope the Minister can clarify. The clause provides that a club will not be able to join a prohibited competition so long as it has been regulated in the last 10 years. However, that does not apply retrospectively, so if a club has never been regulated—as is the case now, before the Bill passes—the rules cannot be enforced. That has sparked concern that clubs might form a breakaway league before the Bill passes and the regulator will be left unable to enforce its own rules. Will the Minister confirm whether the regulator will have any power to act in such a situation?

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[Ian Byrne]

It is a pleasure to serve under your chairship, Ms Nokes.

Clause 46 is welcome, but I have real concern because, although we are again talking about supporter engagement, there is no mention of a requirement or even a power for the independent football regulator to consult any other parties about the disposal of the ground—often a community asset. If the Minister is not prepared to accept the amendment, which would allow supporters, local stakeholders and competition organisers to be engaged before any such disposal takes place, will he explain why? What powers does he believe are available to the independent football regulator to ensure that supporters, local stakeholders and competition organisers have a voice in any decision made about ground disposal?

[Stephanie Peacock]

Football stadiums have immense value. First, they have value to fans, who have precious memories going back generations of standing in the same spot watching their club through the lowest lows and highest highs. In many ways, a stadium is one of the strongest ties a club has to the local community. A club’s staff, players and owners might change, but the pitch remains.

Secondly, grounds also have a financial and fundamental value. They are often among the club’s most valuable assets. In well-run clubs, that is positive, but where a club is already financially unstable, home grounds can become vulnerable to sale in a way that seriously undermines the club in the long term. In some cases, they are sold in a desperate attempt to make a return on losses, and in others they are sold by those purposefully wishing to strip a club of its assets before leaving it behind to collapse. Indeed, there are numerous examples of clubs in financial trouble selling their stadiums to give owners some collateral on their investments or to circumvent profit and sustainability rules. Troubled Sheffield Wednesday sold Hillsborough to its owner for a profit of more than £38 million, covering its pre-tax losses of £35 million. Both Reading and Derby sold their grounds in a similar fashion. But a stadium can be sold only once, and without a stadium in their possession, clubs risk not being able to play at all.

We are familiar with the story of Wimbledon FC, whose home was forcibly moved to Milton Keynes in 2003, resulting in the club being renamed. Finances aside, that decision was devastating for local fans, who felt their club had been stolen from them and their community, as we heard in the evidence session. Given that the regulator is a body specifically established to both ensure the financial sustainability and protect the heritage of English football, it is right that it should have a responsibility to ensure that stadium sales do not undermine a club’s future.

There are of course many circumstances in which a club’s selling its stadium and relocating is a sign of progress and positive investment. Tottenham fans, for example, are now enjoying the benefits of a brand-new state-of-the-art ground, while the club is widely considered one of the best in the country. That kind of investment should in no way be discouraged, let alone blocked. The regulator must therefore be equipped to tell the difference between two very different kinds of proposed transactions—those that propel a club forward and those that seriously undermine a club’s long-term financial sustainability or heritage.

With the expertise the regulator will have, I understand why the Government have decided that it is best placed to grant approval on stadium sales and moves. However, I also acknowledge the concern that the FSA and many fans have about their lack of voice in the decision-making processes in both clause 46 and clause 48.

Amendments 3 and 29, tabled by my hon. Friends the Members for Liverpool, West Derby and for Sheffield South East, give us the opportunity to discuss the role that fans might play in understanding what a stadium change might mean in terms of the fans, heritage and local community. It is of course the fans who will suffer if their team no longer has anywhere to play, and it is fans who best understand the precious heritage and memory that grounds carry for them and their community.

Clause 48 seems to be based on an understanding of that point to some extent, given that the regulator is explicitly tasked with paying attention to whether a relocation of home games would cause “significant harm” to the heritage. However, as Fair Game points out, it would be curious if the regulator were able to understand the implications for heritage without consulting fans. Will the Minister explain how that might work? On what basis will the regulator make a judgment if it is not through understanding the impact on fans?

Combined with the lack of consultation rights in clause 46, the result is that fans are currently given absolutely no voice on matters to do with stadiums, even though they are the ones who will travel there, buy tickets and offer their support. I understand that the regulator is best placed to make a final decision, but it is unclear to me why fans cannot form one of the inputs that the regulator might consider.

The Government’s White Paper said that the regulator should

“have a remit to consider the implications for club heritage of any proposal, the views of fans and the club’s historical connection to its locality.”

Will the Minister share with us what has happened between the publication of the White Paper and the Bill to cause the Government to divorce the idea of heritage from fans? It must be clear why fans have not been given any say in this process. I hope the Minister will elaborate on that point today.

Finally, I want to examine whether the Bill will be able to prevent some home matches being played abroad if that damages heritage. This is not a purely theoretical proposition. Just a few weeks ago, Tim Howard wrote for a national newspaper about why Premier League games being played in the USA was “inevitable”. FIFA has also reportedly begun the process of allowing league matches to be played overseas. When Tim Payton of the Arsenal Supporters’ Trust gave evidence to the Committee, he warned that the movement of games abroad could be the next catastrophe the size of the Super League.

Clause 48 has the potential to provide assurances that this kind of action could only be taken by clubs with the approval of the regulator, should it be seen to damage heritage. However, the wording does seem to be geared more towards permanent relocation rather than the issue of clubs wishing to play single games, or a small subset, away from home.

Will the Minister confirm whether approval only needs to be sought by clubs wishing to play all of their home games elsewhere or whether it also applies to clubs wanting to play a handful of games elsewhere? In particular, will the regulator be able to have a say on league games being played abroad, and if so, would fans be given a say in the process? Given the salience of this issue with fans, it is important that we are clear on how the clause would apply.

[Mr Betts]

I rise to speak to amendment 29, which I tabled. We will move on to a debate on clause 49 shortly, to which it relates. It is interesting that fans will get a specific consultation, involvement and approval about changing the crests, shirt colours and names, as those are decisions that can be reversed quite easily. We know about the problems at Cardiff with shirt colours and at Hull with the name, but even if those mistakes are made by the owners, they can be changed the following year. A club cannot go back to playing on its old ground if it has been sold and is no longer an asset of the club. In some ways, the issue of where a club plays and its ground is more important for the heritage of the club, and it needs to take account of the interests and wishes of fans.

In clause 48, we have a regulator that will have to look at the significant harm done to the heritage of the club by moving ground. How does the regulator decide what is significant harm to the heritage of the club in isolation? The fans are the ones who understand that. They are the custodians of the club; they are the ones who go every week, whose families have gone to the club for years and whose children will go in the future for years. They are the ones who have a real stake in the heritage of the club, yet there is nothing in the wording that says they must be consulted.

All amendment 29 states is that in looking at the issue of significant harm to the heritage of the club, we should actually ask the fans what they think about it, so that they do not consider that the arrangements will constitute significant harm. I do not know how on earth the regulator will come to a view that is not a view derived from consulting the fans, so I hope that the Minister will give way on this amendment. At the heart of what we are doing here is ensuring that fans are listened to about the issues that are so important to them, and there is nothing more important for fans of a club than where their club plays, so I hope the Minister thinks that this amendment is in the spirit of the Bill and could be accepted.

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[Stuart Andrew]

The regulatory framework is not a zero-failure regime. Therefore, it is possible that football clubs may enter administration despite the best efforts of the regulator. We would of course, hope that this is rare. There already exists a legal framework for companies—and that includes football clubs—to enter into administration, which is detailed in the Insolvency Act 1986, and in many cases this existing framework has enabled clubs to go into administration and re-emerge as solvent clubs. It should be noted that those clubs often re-emerge in a lower league as a result of the sporting sanctions placed on them by the competition organisers.

Given that the existing administration regime seems to work well in relation to appointments initiated by creditors, it is not necessary for the regulator to cut across that process. However, there are occasions where the administration of a club is not initiated by creditors but by the club itself. A club can appoint administrators directly, and so does not require a court to sanction the appointment in advance. In those circumstances, there have been occasions in which some stakeholders have had cause to question the relationship between the insolvency practitioner appointed as administrator and the football club.

That is why, in those specific circumstances, the appointment of an administrator requires the regulator’s approval to ensure that the process is transparent and to avoid conflicts of interest. Such approval should give all stakeholders, particularly fans, more confidence in the system and more confidence that the outcome is the best available, in the circumstances, for the individual club.

The requirement to seek approval from the regulator for the appointment of an administrator applies to clubs that have a licence, and those that should have a licence but for whatever reason do not, as well as clubs that were formerly regulated within the previous five years. That is included to ensure that clubs are not deliberately run so that they are no longer in the leagues that the regulator has oversight of, to then take advantage of being an unregulated entity to appoint an administrator without approval of the regulator.

I commend the clause to the Committee.

[Stephanie Peacock]

The clause sets out that regulated clubs and clubs that have been regulated at any point in the last 10 years must seek approval from the regulator before appointing an administrator. I understand that this measure is needed to offer protection against rushed insolvencies that end up having adverse effects. It is also needed so that club owners are not able to appoint firms or people they have connections to as administrators in an attempt to manipulate the administration. Although we hope that, with the regulator’s guidance, fewer clubs will face administration, it is important that, if the worst happens, proper administrators, without conflicting interests, are appointed to oversee the process. I therefore support the clause.

Question put and agreed to.

Clause 47 accordingly ordered to stand part of the Bill.

[The Chair]

Mr Betts, do you wish to move amendment 29?

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[Stuart Andrew]

That is a very good question, and I feel my officials thinking, “Not another letter!” If the hon. Gentleman does not mind, we will write to him. I apologise to my officials, who have enough on their plate, but I want to make sure I am not saying something that is not correct.

The existing FA rule has been used to prevent name changes that have been proposed in the past against the wishes of fans, as happened at Hull City, for example. Codifying that as a legal duty will mean that there are additional powers to ensure that clubs do not make changes without proper approvals and to respond to instances of non-compliance. I commend the clause to the Committee.

[Stephanie Peacock]

Heritage assets are incredibly important to a football club and its fans. They carry the history of where the club is based, what its identity is and the journey fans have been on through the years, in victory and loss. It is therefore pleasing that, in the light of the fan-led review, the FA has updated its rules on changes to club heritage assets. Those rules, supported by the clause, will hopefully ensure that a majority of fans are in favour of a change.

It is not just fans who will benefit from owners not being able to make unilateral changes to heritage items. There have been cases of clubs changing badges and crests without consultation, only to find that fans dislike them and will not buy replica kits or merchandise. Avoiding such situations is beneficial for people on all sides.

I know that some fan groups and Fair Game are disappointed that fans will not have a direct say over changes to a club’s name, because that is done via the FA. However, the FA told us in evidence that it consults fans as part of the name change process, so it would be good if the Minister can confirm whether he thinks that that is adequate.

The clause offers the bare minimum of fan engagement. Clubs can and must build on it through the consultation requirements in other clauses, forging ongoing listening exercises with their supporters on relevant matters. In many ways, therefore, this measure should be seen as a backstop, ensuring that a club cannot be stripped of its identity against the wishes of fans. In that context, I am pleased to welcome it.

[Stuart Andrew]

I absolutely have confidence that the FA rules will apply.

Question put and agreed to.

Clause 49 accordingly ordered to stand part of the Bill.

Clause 50

Duty to notify of changes in circumstances relevant to the IFR’s functions

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

In order to regulate clubs effectively, the regulator will need the complete picture of each club. Complete transparency and timely updates will allow the regulator to stay abreast of any relevant changes. That is why clause 50 imposes a duty on all regulated clubs to notify the regulator of any material changes in circumstances relevant to the regulator’s functions as soon as reasonably practicable. For example, the club’s finances might have materially changed, or the club might no longer comply with the licence condition. The self-reporting will facilitate the regulator’s ongoing real-time monitoring of clubs.

[Stephanie Peacock]

Clause 50 ensures that a club notifies the regulator if there is a relevant material change in circumstances affecting the club and, again, we must be clear what “material change” means. However, it is absolutely right that if a shift in a club’s nature, behaviour or external context might impact compliance with its duties under the regulator, the regulator should know about that as soon as possible. I have no issues to raise with clause 50.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Duty to publish a personnel statement

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The owners and officers who control and run football clubs are vital for clubs’ sustainability. The regulator therefore needs to know who is running a club behind the scenes, so that it can implement the regime. The Bill requires licensed clubs to prepare a personnel statement and submit it to the regulator for approval. A personnel statement must outline each of the club’s owners and the club’s ultimate owner; officers and the job description of each officer; and senior management and their roles at the club.

Once the statement has been submitted, the regulator will review it and decide whether to approve or modify it. Any modification must be made in consultation with the club to ensure that the statement is accurate. Once the statement is approved by the regulator, clubs must publish it online, increasing transparency and accountability in football. Subsequent statements must be submitted to the regulator if an old statement becomes out of date, such as after the departure or hiring of an officer.

[Stephanie Peacock]

During our discussion of clause 16, I spoke about the importance of clubs publishing personnel statements. By identifying exactly who holds key positions, including owners and officers, the regulator will be absolutely clear who must be held accountable for the proper fulfilment of licence conditions at each football club. With that in mind, I am pleased to support clause 51.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52

Duty to pay a levy

[Mr Betts]

I beg to move amendment 30, in clause 52, page 42, line 28, at end insert—

“(9A) The starting point for calculation of the levy payment under subsection (9) applicable to a particular club shall be a percentage of its annual revenue.”

[Mr Betts]

This is a fairly simple clarifying amendment. As we have heard, smaller clubs feel that regulation must be proportionate and that there should be more requirements on very wealthy clubs, because they have the staff and resources to deal with that. Smaller clubs may find the whole issue of regulation very challenging, so amendment 30 simply says that the levy they will have to pay should be a percentage of annual revenue; in other words, a proportionate basis for the levy should be written into the Bill. The Minister may say that that will happen anyway—that that it is what the regulator will do—but the issue is a concern for smaller clubs, and the amendment 30 is an attempt to highlight and deal with it.

[Stephanie Peacock]

When the fan-led review first proposed the creation of an independent regulator for football, it suggested that the most logical way to pay for it would be through a levy on those who would benefit from it: the clubs. I agree with that conclusion, and I am pleased that the Bill confirms that the regulator will be able to require licensed clubs to pay an annual levy.

However, even though clause 52 is relatively detailed, there is surprisingly little on how the levy will be split between the clubs themselves. That is something that amendment 30, tabled by my hon. Friend the Member for Sheffield South East, has sought to rectify. If the regulator is given wide discretion to determine the extent of the levy, clubs further down the pyramid might be concerned that their payments will not be proportionate to their wealth and size. Of course, clause 52 states that the regulator should have regard to the financial resources of each club and the competition it operates in. That is promising, but it is worth clarifying today what that is expected to mean in practice. Will decisions be based on broadcast incomes, as per the fan-led review, or just on average total revenue, as per the White Paper?

There is broad agreement that the richest clubs should subsidise regulation for others. The majority of costs should, in this case, fall on Premier League clubs. The Government identified that these clubs could pay about 80% of the cost, with the six richest clubs taking on 50% of the total cost. The regulator will ultimately dictate the shape of the levy, but it should be under a clear direction to ensure that the levy is progressive and proportionate. It hardly makes sense for a regulator focused on financial sustainability to shackle struggling clubs to paying large fees. It is important that clubs do not fear the introduction of the new regime and view it as an opportunity, rather than being scared into thinking it will be a hindrance.

Clause 53 requires the regulator to consult before making the levy rules. That will include taking input on a draft version of the rules from the Secretary of State, the Treasury, regulated clubs and other appropriate persons. That welcome measure will hopefully shape the levy rules in a progressive way. It is also right that the regulator must publish information about the costs involved in calculating the levy charge before it starts charging in any given year. That transparency will be important, particularly for the clubs, which will want to understand exactly what they are paying for and why.

Overall, I welcome the levy and the method of payment, and I look forward to clarification on how the Minister expects the levy will be set.

[Stuart Andrew]

The Government understand that the intent behind the amendment is to create certainty about how the regulator’s levy charges will be distributed between clubs. The clause gives the regulator the necessary discretion to determine how the levy is calculated and the individual charges to be paid by clubs. The Government do not have the information or datasets required to determine the appropriate way to calculate levy payments, but those will be available to the regulator. Therefore, the regulator, rather than Government, will be best placed to determine how to distribute levy charges across clubs. Importantly, that reinforces the regulator’s operational independence.

I strongly support the objective that levy charges should be affordable to clubs, which is why there is already provision that should ensure that. However, requiring the regulator to be guided by a percentage of a club’s annual revenue in its levy calculations could undermine its ability to ensure that the charges are proportionate and affordable. In addition to revenue, the regulator should have the discretion to take into account clubs’ other financial resources when determining levy payments, which may be a more appropriate indicator of what a club’s charges should be. That could include resources such as owners’ funds, but also the offset of club expenditure.

Clause 52 already provides assurance that the regulator must take into account clubs’ differing financial circumstances. That includes clubs’ financial resources and the leagues that club teams play in, as that ultimately has a direct link to revenue. For the reasons I have set out, I am not able to accept the amendment from the hon. Member for Sheffield South East, so I hope he will withdraw it.

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[Stuart Andrew]

Amendment 23 will correct a cross-reference in the Bill, to ensure that clause 54(1)(b) correctly refers to section 24.

Clause 54 outlines the circumstances in which a relevant league must notify the regulator whether, for example, it believes or suspects that a club has breached one of the league’s own rules that is relevant to the regulator’s regime. The clause also requires that a relevant league consult the regulator when it is considering changing its own competition rules where a rule is relevant to the regulator’s regime. Just as the regulator is required to consult the industry in certain circumstances, these duties on relevant leagues will ensure appropriate notification and consultation in the other direction, too. If a relevant league has certain pertinent information, given its knowledge and understanding of the football industry, it must tell the regulator. Equally, if the relevant league is intending to take certain action that might impact on the regulator’s regime, it must engage with the regulator. That will allow for co-operative regulation whereby information is pooled and action can be co-ordinated. That should help both the regulator and the relevant leagues to deliver their respective regulations more effectively, and ultimately minimise the overall burden on clubs.

[Stephanie Peacock]

Clause 54, with the correction made by amendment 23, is one of the only measures in the Bill that directly places duties on competition organisers. As I have made clear throughout these Committee proceedings, I believe it is extremely important that the regulator has a constructive relationship with existing football governance structures where possible, and that they work together to ensure a coherent regulatory regime. This clause will ensure that by placing a clear duty on competition organisers to keep the regulator updated on the enforcement of its own rules, as well as on areas where they might have information that overlaps with the regulator’s remit.

It is good to see, for example, that competition organisers will report to the regulator on any risk to financial resilience, as well as on any breach of specified competition rules and any subsequent sanctions they are placing on clubs. Competitions will also have to consult the regulator before adding to their own rules; this, again, is a positive step which will hopefully prevent any such rules from undermining the regulator.

However, I do think there needs to be further consideration for how the respective regimes will work when rules and regulation overlap. Ultimately, although the regulator will be consulted on new rules, competition organisers have the final say. The Government’s White Paper says:

“Where rules of industry bodies stray into the Regulator’s remit, the Regulator would have oversight to ensure that regulations are coherent and effective.”

I would like to ask the Minister, therefore, whether he thinks that the regulator has all the powers it needs to make sure that the landscape is coherent and effective when there is crossover. This is important for all of those who enforce rules in football, as well as for clubs.

[Stuart Andrew]

I can confirm that I am confident.

Question put and agreed to.

Amendment 23 accordingly agreed to.

Clause 54, as amended, ordered to stand part of the Bill.

Clause 55

PART 6: OVERVIEW AND INTERPRETATION

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[Mr Betts]

Absolutely. I just made the point about the enormous difference in budgets that Championship clubs now experience because of that. Of course, when we look at this season of the Championship, three out of the top four clubs have received parachute payments. Yes, other clubs, such as Ipswich, have done remarkably well without them, but clubs are always trying to compete with those clubs receiving the payments. Last year, two of the three clubs that came up had parachute payments, and it is now almost becoming a cycle of clubs getting parachute payments, going back up, then sometimes being relegated, and then getting another lot of parachute payments. That really is not a sustainable position for the clubs receiving those, for the clubs that are trying to compete with them, for the competitiveness of the game, or for the sustainability of the pyramid as a whole. I hope that the Minister will reconsider this because it is an issue that really needs addressing.

[Stephanie Peacock]

I am pleased to be able to discuss part 6 of the Bill, which provides a backstop power in the event that certain thresholds are met and football is unable to resolve the issue of financial distribution. Before I begin to explore this clause, it is important to set out that, in an ideal situation, these powers would never be used. As the hon. Member for Chatham and Aylesford set out during the evidence sessions, based on her experience with the fan-led review, a football-led solution to the issue of distribution has always been and remains the preference. I hope that can be kept in mind when discussing this part. Indeed, I welcome the powers but my hope is that their enforcement will not actually be necessary.

Clause 55 broadly sets out the process under this part but most importantly defines what might count as “relevant revenue”, which is money to which the backstop will apply. Relevant revenue is broadly defined as revenue received as a result of broadcasting rights, with the Minister given the flexibility to change that if broadcasting is no longer the predominant source of income. There are a couple of things to clarify. First, it would be good if the Minister could confirm whether such broadcast revenue is meant to cover domestic competitions only. Secondly, it would be appreciated if the Minister could clarify whether broadcasting revenue will still be considered relevant if the funding model changes so that it is paid directly to clubs, rather than through competition organisers. Broadly, though, I think this scope is generally accepted as being the right one.

Issues have, however, been identified with clause 55(2)(b), which is the part of the Bill that excludes parachute payments from the definition of relevant revenue. My hon. Friend the Member for Sheffield South East tabled amendment 27, and I will speak primarily to amendment 31 in my name. First, I would like to set some background to the issue, as it stems from the fact that there is an ever-growing gap between the Premier League and the EFL. Indeed, 30 years ago, EFL revenues were 75% of those of the Premier League; today they are just 6%. In real figures, that means that 30 years ago the gap was £11 million, and today it is £3 billion.

The Premier League’s approach to mitigating that gap is the so-called parachute payments to clubs relegated from the Premier League for up to three seasons. Those payments help to ensure competitiveness in the Premier League by providing clubs with the confidence to invest on promotion in the knowledge that they will be supported if they are relegated. For example, parachute payments might give the club the confidence to sign players on multi-year contracts, and that is incredibly important to consider. The Premier League’s competitiveness and the fact that any team, no matter their size or experience, can compete on any given day is what makes it the most beloved and exciting league in the world.

However, while they help to boost competitiveness in the Premier League, parachute payments—by the White Paper’s own admission—can distort competition in the Championship. In each of the last six seasons, two of the three clubs promoted from the Championship to the Premier League have been in receipt of parachute payments. The knock-on effect of that is that owners of clubs not in receipt of parachute payments are compelled to put ever greater levels of funding into their clubs to try to remain competitive. That overreliance on increasing owner funding has deeply exposed clubs when the funding does not materialise, as we have seen for Wigan, Bolton and Bury.

Further, the size of parachute payments has increased in recent years. Between 2010 and 2020, they have risen from £30 million to £233 million. That is an eightfold increase in a period in which player wages have only doubled. That means that, of the total distributable revenue of the English and Welsh professional game, the top 25 clubs—those in the Premier League—and the five in receipt of parachute payments in the EFL received 92% last season. That is £3 billion for 25 clubs, and £245 million for the other 67 professional clubs. Given the scale of parachute payments, therefore, it is notable that the Bill has definitively excluded them from the definition of relevant revenue. That is why I have tabled amendment 31.

4.30 pm

I want to be absolutely clear that the amendment is not about abolishing parachute payments; I believe that they provide clubs with the confidence that they need to invest, and they are a crucial tool in ensuring the competitiveness of the best league in the world. The amendment would simply give the regulator discretion to decide that, if certain criteria are met, parachute payments need not be excluded from the revenue to be distributed under the backstop provision.

Certainly, there is no reason to single out parachute payments. Whether people are in favour of significant parachute payments or not, they agree that they have an impact on club finances. As such, they will have a significant impact on the regulator’s objectives of protecting and promoting the financial soundness of clubs and the resilience of English football. Given that that relates to the regulator’s core role, the regulator should have the ultimate say on whether parachute payments are considered as part of the backstop provision.

Further, solidarity payments are explicitly linked to parachute payments. Solidarity payments are worked out as a percentage of the value of a year-three parachute payment. Championship clubs receive 30%, League One clubs receive 4.5%, and League Two clubs receive 3% of the value. The regulator, therefore, might find it difficult to look at one without looking at the other.

I emphasise again that the amendment does not predetermine whether the regulator includes or excludes parachute payments. If the regulator has a case, based on its objective evidence base, that excluding parachute payments from relevant revenue is more likely to make clubs financially sound and promote the financial resilience of English football, they will remain excluded. The amendment simply recognises that it should be the regulator that makes the decision, independent from any vested interests.

When making that decision, the regulator will have to pay explicit regard to the fulfilment of its core objectives and its secondary purposes: financial sustainability, financial resilience, competitiveness and investment. Taken together, those are the principles that should decide whether parachute payments are included—not the leagues and not politicians. Only then will we ensure that the regulator can fulfil the purpose of the Bill.

[Damian Collins]

I will make a few points on parachute payments. It is fair to say that they are not part of the redistribution mechanism between the Premier League and the Football League. They can be set as an amount alongside the redistribution that takes place, but, of course, they are not fixed. They are a contractual arrangement that the Premier League enters into with clubs that are in the league or when they get promoted.

For reasons that hon. Members have rightly set out, if the income of a Premier League club drops by at least half after being relegated, even with parachute payments, that will be a severe challenge to its sustainability. It is anyway and it certainly would be if those payments did not exist. Of course, if a club is promoted straight back up, as Leicester City has been this year, the year-two and year-three parachute payments are not kept by the Football League—the money never goes to the Football League—but goes back to the Premier League. Therefore, in many ways, the payments have nothing to do with the Football League; they are made by the Premier League to its member clubs in the event that they go down.

The question is then whether the existence of parachute payments has such a market-distorting effect that the regulator would have to intervene. It is difficult to see why the regulator would need to intervene on the basis of the impact on the clubs that have been relegated; they clearly need that support. From all the evidence that we heard as a Committee—I have not heard anyone this afternoon say anything to the contrary—there needs to be some compensating mechanism for clubs that go down, otherwise the risks are too great.

It is not always about clubs that have gone up and come straight back down again; it is often about quite large clubs—it was Leicester and Southampton last year. Everton could easily have gone down last season and the impact of such a relegation would have been catastrophic. The regulator would therefore have to take a view as to whether the existence of those payments has a distorting effect on the Championship.

Given the remit of the regulator, I urge hon. Members tabling amendments to be careful what they wish for. The regulator may well take the view that its job is not to have an impact on the nature of competition in the Championship, or to make it easier for more clubs to get promoted. Its interest is to promote financial sustainability, so it could easily take the view that parachute payments should stay because they are necessary for the clubs that are relegated.

Alongside that, there must be effective financial controls on Championship clubs. The question of whether a Championship club feels the need to compete against parachute payments is not necessarily one for the regulator. The regulator’s role is to ensure the financial sustainability of the league, so it might say that it can do that through the checks that it can put in place now, and therefore ensure that the situation created before does not happen again.

One could ask whether it is fair for the Championship to be run such that Championship clubs must compete against Premier League clubs, and cannot cook the books or rely on director’s loans because the regulator will stop them. Of course, in some ways the Championship is not competing with the Premier League. It is a league of clubs seeking to get promoted to the Premier League, but it is also looking to develop its own talent. It can buy talent from the lower leagues and from Europe, as it effectively does already. The TV revenue for the Championship, as it stands today, is already greater than for the top division in the Netherlands, Portugal, Belgium or Denmark, all of which are highly-competitive football nations whose pedigree in major international tournaments has been somewhat better than the home nations over the last few decades.

--- Later in debate ---

[Damian Collins]

One of the reasons why the Bill is important is that the biggest problem in the pyramid at the moment is the financial sustainability of Championship clubs. There are different pressures and the greatest financial risks are taken there; some of the biggest failures have been at that level. That is why it is important.

Parachute payments exist only because the Premier League wants a more competitive, more attractive league. It does not want a closed league where the same three clubs are going up and down all the time, and the clubs that come up are just cannon fodder for the teams that play in it regularly. It is incumbent on the regulator to take a view on the sustainability of the pyramid, but the Premier League would not wish for that outcome.

We can choose which seasons we want to pick, but I do not think it is proven that parachute payments are having that effect already. There is plenty of evidence of badly run clubs—Sunderland is a good example from not long ago—that have been relegated from the Championship while still in receipt of parachute payment money. A lot of clubs come down with players who are not worth what they are being paid, and are stuck with a Championship squad on Premier League money. That is a problem that many clubs face.

Many problems are about the poor decisions made by managers and owners in the Championship, and a lack of financial oversight. The regulator needs to fix that financial oversight first, alongside considering redistribution in the round. It is easier to do that if we do not confuse that with parachute payments, which as the hon. Gentleman says are a much bigger quantum than the amount of redistribution anyway. We need to get the financial oversight right and look at redistribution in that context. I am concerned that simply asking the regulator to recommend a transfer through the backstop of money from the Premier League to the EFL corporately without the right financial oversight will pour petrol on the fire and drive wage inflation in the Championship.

[Stephanie Peacock]

The hon. Gentleman is making a really comprehensive argument for parachute payments. I want to be clear that my amendment is not proposing to get rid of parachute payments; it simply says that they should not be ruled out. I appreciate that he is saying that we should get this right before we move on, but we are here now setting the regulation. Obviously, if they are excluded, they are excluded.

[Damian Collins]

I will draw my remarks to a conclusion. I appreciate that—the hon. Member for Sheffield South East makes a similar argument—it is not an argument for the abolition of parachute payments. My concern is that if we take that step, we would have to bring into scope all football money, not just the money that the Premier League pays in redistribution to clubs in the lower leagues and through parachute payments. That would be a much wider step and would require further consideration. If such recommendations are to be made in future, that should be done after the regulator is established and we have the state of the game report.