Football Governance Bill (Fifth sitting)

Debate between Stuart Andrew and Tracey Crouch

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[Stuart Andrew]

I welcome the positive comments from the hon. Member for Barnsley East. She is right that we are trying to have a fair and supportive approach here and that clubs should be supported.

I want to reassure the hon. Member for Sheffield South East that we have tried to design the Bill so that it recognises that the level of activity at the top of the Premiership, for example, will be vastly different, and that, as we heard in the evidence sessions, many of the club officers in the National League will be volunteers and we would not want to overburden them.

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

The Minister will have heard the concerns in the evidence sessions about duplication. Will he be kind enough to remind the Committee that it will be for the leagues, not the statutory regulator, to decide whether there is any duplication?

[Stuart Andrew]

My hon. Friend makes an important point. This will be the statutory regulator, and this will be where the reporting will need to happen. If the leagues add anything, it is for them to make that decision. As this process progresses, I hope they will see that there is no need for the extra layer of reporting and that the regulator’s powers will be sufficient to secure the future of English football.

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[Stuart Andrew]

I expect that clubs would have to work closely with the leagues as well.

On the issue of EDI, I hope that it is clear this is an area that I personally feel very passionate about. We have made sure that the Bill and the regulator are tightly focused on the finances of clubs, the sustainability of the pyramid and fan engagement. We recognise the importance of equality, particularly, as the hon. Member for Barnsley East mentioned, in light of unacceptable abuses. I regularly engage with the Football Association and the leagues to put pressure on them and to work with them to do more to make improvements in this area. We also work with organisations such as Sport England and UK Sport, because it is not just football where this is an issue.

[Dame Tracey Crouch]

On the sports governance code, which I may have had a hand in helping to design and shape many years ago, is the Minister saying that when looking at the issue of corporate governance, he will draw on the experience of the sports governance code, which has specific EDI aspect it, or is it more about looking at the UK corporate governance code, which has elements of that but is certainly not as strong as the sports governance code?

[Stuart Andrew]

My hon. Friend makes a really important point, which I was just about to come on to. I am glad that she did so—it was a perfect introduction. She is absolutely right. The regulator can consider all of those, and I would expect that it would do so. It can draw on established principles such as, as she rightly points out, the code for sports governance and the UK corporate governance code. It can also draw on the Wates principles on corporate governance for large private companies, and it can also draw on the regulator’s own state-of-the-game reports. There is a whole host of information which I hope will address those issues.

I can confirm to the hon. Lady for Luton South that the phrase, “likely to be affected”, includes fans, so I expect that they will be consulted.

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[Stuart Andrew]

Clearly we have got to the bit that everyone is itching to speak to. Ensuring that new owners and officers of clubs have passed the regulator’s owners and directors tests is a key tenet of the new regime, and is designed to prevent unsuitable custodians from running or owning clubs. The regulator therefore needs to know who a club’s prospective new owners and officers are before they buy or join the club, so that they can be tested for suitability.

Clause 27 will place duties on a person to notify the regulator where there is a reasonable prospect of that person’s becoming a new owner or officer of a regulated club. The clause will ensure that the regulator receives advance notice of an application from a prospective new owner or officer, and will help the regulator to prepare to act quickly when it receives the application. The clause will place the same duty on regulated clubs themselves, as another means of ensuring that the regulator will be notified.

The regulator needs to know a person’s role at the club so that it can prepare to assess whether they are suitable to be an owner or an officer of that club. That is why, where the notification relates to an officer, it must state their proposed job title or job description, as well as any senior management functions that they will carry out. Enforcement measures such as censure statements or financial penalties are also available to the regulator if it determines that this requirement has not been complied with without a reasonable excuse. This will deter those who do not wish to comply with the regime.

Clause 28 will prohibit a person from becoming a new owner of a club unless the regulator has determined beforehand that they are suitable to own that club. It requires prospective new owners to provide an application containing information about how they propose to run the club, the estimated costs, how those costs will be funded and where that funding comes from. This will better ensure that prospective new owners are clear from the outset about their plans for the club and how they will deliver the resources to fund those plans.

Once a complete application has been provided, the regulator can pass the individual owner only if they meet the individual ownership fitness criteria, as defined in clause 26; they have the requisite honesty and integrity and are financially sound; they have sufficient financial resources; and the regulator does not have grounds to suspect that the individual has any source of wealth that is connected to serious criminal conduct, which is defined in the Bill by reference to part 1 of schedule 1 to the Serious Crime Act 2007, which includes crimes such as drug trafficking and fraud. This will mitigate illicit finance in the game.

Registered societies are one vehicle by which fans can collectively own clubs. They must be run in accordance with specific legal requirements regulated by the Financial Conduct Authority. Registered society owners are not assessed against the fitness criteria or the source of wealth test, but they still need to complete an application, including providing a plan for running and funding the club.

[Dame Tracey Crouch]

The Minister is setting out clearly the purpose of these clauses of the Bill. It is clear that the regulator has been designed to be as agile and as future-proof as possible. If a crime that we have not yet imagined is added to the Serious Crime Act, how will the regulator assess a potential owner who has committed that crime?

[Stuart Andrew]

My understanding is that if the 2007 Act is updated with a new crime, it will still be relevant to the Bill. However, I want to be absolutely sure, so I will write to my hon. Friend, and if I am wrong I will correct my homework.

By requiring new owners to undergo the regulator’s test, clause 28 will better mitigate harm to clubs by stopping unsuitable custodians.

Football Governance Bill (Sixth sitting)

Debate between Stuart Andrew and Tracey Crouch

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[Stuart Andrew]

Absolutely.

My hon. Friend the Member for Southend West and the hon. Member for Luton South made important points. As a public body, the regulator must act fairly when it makes decisions. As set out in the White Paper, it will make an evidence-based objective judgment to assess whether an owner or a director is a suitable custodian of a club, and it will apply its tests consistently and fairly to every person.

The fitness element of the test will assess an individual’s honesty, integrity and financial soundness, as well as, for directors, competence. That draws on the fit and proper person test applied by other regulators, including the Financial Conduct Authority, His Majesty’s Revenue and Customs and the Solicitors Regulation Authority. The regulator will set out in its rules and guidance further detail on how it will conduct its tests.

The factors I have outlined are specified because they have a real bearing on whether an owner or officer could have a significant detrimental impact on a club’s financial sustainability. Listing specific matters provides greater clarity to the industry about what will be tested. It also constrains the regulator. The matters listed in the clause are the only things that it will take into account when considering honesty, integrity, financial soundness or competence. To ensure that the fitness test remains effective in the future, the clause gives the regulator the power to use its rules to add further matters that it will need to take into account when considering someone’s honesty, integrity or financial soundness. Before using that power, the regulator must consult the leagues.

[Dame Tracey Crouch]

I have listened carefully to the Minister, as I always do, and I will withdraw the amendment. However, as I understand it, similar provisions do not apply to any other regulator, and other regulators are faced with very similar decisions on a day-to-day basis. We do not take unilateral moral decisions, as the Minister pointed out, but I am happy to discuss the matter further with him. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38

Disqualification orders

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

[The Chair]

With this it will be convenient to discuss clauses 39 to 44 stand part.

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[Dame Tracey Crouch]

I completely agree with my hon. Friend. I always refer back to that point in the fan-led review, and we mulled over that issue at length. The truth is that we did not come to a conclusion ourselves, because it is so complex. We have made it clear in the chapter on financial distribution that we hope that there will be reform to the system, but this was back in 2021, for goodness’ sake. I want to bang everybody’s heads together and send them to bed without any tea, because we are dealing with the failure of the leagues to reach a solution, and I hope that the message they get from today’s sitting and the evidence sessions that we had last week is to go away and come up with another solution. The Bill sets out the process if there is no deal on that, and ultimately if there is no amendment to the Bill, let that be an inspiration to people to come together and find a solution.

[Stuart Andrew]

I must say that I almost want to stand up, say what other Members have said and sit down again. I agree with everybody else: I wish we were not at this stage and that there had been a deal between the parties concerned, because it is in the interests of football for them to come up with a deal. I hope that the mechanisms we are talking about will enable us to encourage that deal to happen sooner rather than later.

On amendments 27 and 31, although the parachute payments can have the distorting effects outlined, they play a pivotal role in protecting clubs at risk of relegation from going bankrupt, as others have said, and certainly give certainty to clubs competing for promotion. As I mentioned on Second Reading, in the past, relegation from the Premier League often meant financial ruin, as teams such as Bradford City failed to adjust to the huge drops in revenue. Given the important role that parachute payments play in helping to ensure the financial sustainability of relegated clubs, removing them entirely could have significant adverse effects on the game, and we do not want to create an opportunity through the Bill’s distribution mechanisms to get rid of parachute payments by the back door. Including parachute payments in the Bill’s scope, as amendment 27 proposes, could do just that. It could mean the regulator accepting a final proposal from one of the leagues that removes those payments, and if the mechanism allowed for that, it could create significant financial uncertainty for clubs that could not confidently invest in promotion. My hon. Friend the Member for Chatham and Aylesford also mentioned the commercial agreements that are in place.

An exciting, competitive and sustainable pyramid is at the heart of what makes English football the asset that it is, and we should not put that at risk. We have excluded parachute payments from the backstop, because it needs to be targeted and simple to work effectively. Including parachute payments in the backstop means that the regulator could be presented with two entirely incomparable final proposals, which could render decision making almost impossible, but it is important to remember that the backstop may never be triggered, and is only ever intended as a last resort. We expect the leagues to reach a football-led solution themselves and will continue to press them to do so.

I recognise there are also concerns about the potentially distortive effects of parachute payments, and that is why the broader regulatory framework is designed to address it. If the regulator finds that parachute payments are causing a structural or systemic issue, it could attach discretionary licence conditions to parachute payment clubs to address that. We are creating a financial regulator, and it is entirely right that we solve issues like this through financial regulation wherever possible.

Football Governance Bill

Debate between Stuart Andrew and Tracey Crouch

2nd reading
Tuesday 23rd April 2024 Commons Chamber

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

I thank all Members for their thoughtful and wide-ranging contributions, and I am grateful for learning about the first black professional footballer, Arthur Wharton, from my hon. Friend the Member for Darlington (Peter Gibson). I am pleased to hear the broad support for what the Government are proposing, and I am grateful for it. I am also grateful for the continued engagement with colleagues as we have prepared for the Bill.

My right hon. and learned Friend the Secretary of State rightly pointed out the successes of English football, and the contribution it makes to our economy and the pride of our nation, but it is important to remember why we are here today. My very first meeting when I was appointed as Minister was with fans’ groups. I heard at first hand their experiences of when it all goes horribly wrong—even to the point of having to boycott their own club for five years, in one instance. The fans felt unheard. We know that clubs are more than just football clubs. When they go into administration and are run down, the fans are obviously in despair, but that also has a significant impact on the wider community because they are more than football clubs; they are community assets.

That is why we committed to the fan-led review. Like everyone else, I want to put on record my thanks to my hon. Friend the Member for Chatham and Aylesford (Dame Tracey Crouch) and to the people who helped her, including Kevin Miles from the Football Supporters’ Association. The review was the foundation for the White Paper, and now we have the Bill today. I thank all those who engaged with us for all they have done: the FA, the Premier League, the EFL, the National League, the FSA and the Select Committee. I also want to put my particular thanks on the record to the officials in the Department. I cannot tell the House how many hours they have put in; they have been first rate and I thank them a great deal.

I want to focus, in the short time I have left, on some of the points that were raised. Many issues were raised and I will try to get through as many of them as I can, but I am happy to engage with colleagues afterwards if need be. When constructing the Bill, we have been careful to ensure that it is carefully drafted, considered and proportionate, and that it provides an advocacy-first approach; and that there is focus on the clubs where it is needed, and we make sure it is proportionate to their place in the pyramid.

A number of Members raised the owners and directors test. Too many clubs have been brought to the brink with unsuitable owners taking over, stripping them of assets and refusing to adequately fund them. That is why we are bringing in strong statutory tests to help prevent unsuitable owners at the point of entry, before they can do harm to clubs. Prospective individuals will be prohibited from becoming club owners unless the regulator has determined beforehand that they are suitable. They must pass a fitness test, which means: they have the requisite honesty and integrity; are financially sound; have passed the source of wealth test to ensure that their wealth is not connected to illicit finance; and have a plan and the resources to run the club.

Even once an owner is in place at a club, the regulator will still be able to make sure that they continue to be suitable. If it has grounds for concern about their suitability, it can test them on their fitness and their source of wealth. If it finds them unsuitable, they will have to sell the club. To prevent further harm being done to the club during the sale process, the regulator will have the powers to limit the owner’s involvement in the club, and if the unsuitable owner ultimately refuses to sell the club, the regulator will have the powers to step in and force a sale as a last resort. Strengthened tests and robust powers to remove unsuitable owners will mean that fans have the suitable owners that they deserve.

Hon. Members asked about what would happen if a club’s owners were forced to divest. Let me be clear: we hope that such a circumstance will be incredibly rare. The regulator’s objective is to promote clubs’ financial sustainability, and it will introduce tests on governance and financial oversight, which will greatly reduce the likelihood of financial distress and make football more resilient in the long term. For example, we will ensure that the regulator is able to look at a liquidity buffer, which could provide the club with time to seek a new owner, and the regulator will have the power to test an incumbent owner where it has grounds for concern about their suitability.

Almost every Member mentioned the backstop, and I repeat that we want football to come up with a deal itself; it is the best option, and this delay serves no one. We need to remember that we are talking about a commercial arrangement—businesses giving businesses money—which is why we believe it is best that football does it, but we recognise that there is no deal at the moment. That is precisely why we have put provisions in the Bill for a backstop—something to fall back on—so that they can consider the relevant revenues.

[Dame Tracey Crouch]

Does my right hon. Friend agree with my interpretation of clause 55, which is that international broadcast income is included in the relevant revenue for redistribution? That is currently not the case for solidarity payments. If it is the case, has this issue come up in his discussions with the Premier League?

[Stuart Andrew]

My hon. Friend raises an interesting point. I have had dozens of meetings with the Premier League, but as far as I can recall, I do not think that it has raised carving out international broadcast revenue in those discussions, which have always revolved around the net media revenues and the aggregate revenue received by both the Premier League and the EFL; she raises a very interesting point.

Some say that the regulator should be able to trigger the backstop right at the outset. Frankly, that would just be a frontstop, and it may hinder a deal being struck by football itself, but the Bill provides that if there is no deal because one has not been offered or one side cannot sign it because it is not a good deal, that side can ask the regulator to trigger the backstop.

Members have mentioned parachute payments, and I am always happy to meet colleagues to discuss and look at that matter further, particularly in Committee. I am also happy to organise a briefing, if that would be helpful, because it is quite a complex issue. Parachute payments play an important role in the sustainability of the system by softening the financial blow of relegation, and removing them could have adverse effects. Look at Bradford City: when they were relegated from the premier league in 2001, there were no parachute payments, and the following season they went into administration.

Oral Answers to Questions

Debate between Stuart Andrew and Tracey Crouch

Thursday 16th November 2023 Commons Chamber

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

The inclusion of five additional sports in the Los Angeles Olympics programme could provide extra medal prospects for Team GB, especially as our women are current European flag champions, the England, Scotland and Wales women’s lacrosse teams are in the top 10, and we have two men and one woman in the top 10 for squash. However, to ensure success, funding for the 2028 Olympics needs to be secured before Paris next year, so what discussions is the Minister having with the new lottery provider and the Treasury to ensure that UK sport is adequately funded for those sports and others for LA28?

[Stuart Andrew]

I was interested to discover this morning that my hon. Friend has a horse named after her, called Commander Crouch—if anyone wants a good investment, there you go.

The UK sports investment process for Los Angeles is under way. I welcome the fact that there are these new sports, including flag football; I know that my hon. Friend is a big fan of American football. UK Sport will consider the funding for all those new sports, and I will soon have a meeting with its representatives to get an update.

Football Governance White Paper

Debate between Stuart Andrew and Tracey Crouch

Thursday 23rd February 2023 Commons Chamber

[Mr Deputy Speaker (Sir Roger Gale)]

I call the chair of the fan-led review of football governance.

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

I join those on the Front Bench in paying tribute to John Motson. He was not just a commentator of great football matches; he was a commentator inside the head of millions of kids playing football in their back garden. He commentated many times on my Ricky Villa-esque swerves around flowerpot midfielders, and my Gazza-style chips over defenders, before my Clive Allen-style cup-winning glory goals against the back wall. His voice was unique, his expertise second to none, his sheepskin was iconic, and he will be much missed.

I thank the Minister for the White Paper. It has, I know, been a painstaking experience for him, but we are here due to his perseverance, and that of his officials. The White Paper honours and reflects the vast majority of recommendations in the fan-led review, which I and the panel, and the thousands of fans who contributed, appreciate. I genuinely believe that the White Paper does nothing to threaten the competitiveness, wealth or attractiveness of the premier league, but it will protect English football from vulnerabilities that in the past have had devastating consequences. I appreciate that we will now go away and look at the detail of the White Paper. I also appreciate, Mr Deputy Speaker, that I have to ask a question in response to the statement, so is the Minister able to set out his vision for the timeframe for the next steps of the White Paper?

[Stuart Andrew]

May I again put on record my thanks for all the considerable work done by my hon. Friend in this area? She is right to highlight the fans, and they have been at the forefront of my mind in all the meetings I have held to discuss the White Paper. I agree that there is no threat to competition within the White Paper. If anything, it will bring about a great deal of confidence, and I hope we will see even more investment—dare I say from the right people? On the time frame, we will be doing a short, targeted consultation following the publication of the White Paper. My vision is to get on with this as quickly as possible, and I know that the Secretary of State shares that as far as—Members will expect me to say this—parliamentary time allows. In the meantime we are also considering the establishment of a shadow regulator to do much of the preparatory work, so that once it is enacted, the regulator can get on with the work straightaway.