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Football Governance House of Commons Culture, Media and Sport Committee Football Governance Seventh Report of Session 2010–12 Volume I: Report, together with formal minutes Volume II: Oral and written evidence Additional written evidence is contained in Volume III, available on the Committee website at www.parliament.uk/cmscom Ordered by the House of Commons to be printed 19 July 2011 HC 792-I Published on 29 July 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Culture, Media and Sport Committee The Culture, Media and Sport Committee is appointed by the House of Commons to examine the expenditure, administration and policy of the Department for Culture, Media and Sport and its associated public bodies. Current membership Mr John Whittingdale MP (Conservative, Maldon) (Chair) Dr Thérèse Coffey MP (Conservative, Suffolk Coastal) Damian Collins MP (Conservative, Folkestone and Hythe) Philip Davies MP (Conservative, Shipley) Paul Farrelly MP (Labour, Newcastle-under-Lyme) Cathy Jamieson MP (Labour/Co-op, Kilmarnock and Loudoun) Alan Keen MP (Labour, Feltham and Heston) Louise Mensch MP (Conservative, Corby) Mr Adrian Sanders MP (Liberal Democrat, Torbay) Jim Sheridan MP (Labour, Paisley and Renfrewshire North) Mr Tom Watson MP (Labour, West Bromwich East) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/cmscom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some of the written evidence are available in a printed volume. Additional written evidence is published on the internet only. Committee staff The current staff of the Committee are Emily Commander (Clerk), Andrew Griffiths (Second Clerk), Elizabeth Bradshaw (Inquiry Manager), Jackie Recardo (Senior Committee Assistant), Keely Bishop/Alison Pratt (Committee Assistants), Steven Price, (Committee Support Assistant) and Jessica Bridges-Palmer (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Culture, Media and Sport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6188; the Committee’s email address is [email protected] Football Governance 1 Contents Report Page Summary 3 1 Introduction 5 2 Context 7 The old model 7 The need for change 7 The new model 9 Strengths of the new model 10 Weaknesses of the new model 12 3 The FA 15 The role of the FA 15 Concerns about the FA 15 The FA Board 19 Reform of the FA Board 21 Reform of the FA Council 24 Other Committee reforms 26 4 Football financial management 28 Debt in the game 28 What is causing the debt problem? 31 Wages 34 Players and agents 35 Competition 38 Problems down the pyramid 40 The Football Creditors Rule 41 Broadcasting rights 45 Internal regulation 47 Parachute payments 50 The impact of UEFA 52 The German model 55 A licensing model for England 58 Administering the domestic licensing model 59 5 Club ownership 63 Changes to the ownership model 63 Foreign ownership 64 Leveraged buy outs 66 Club ownership 67 6 Supporter involvement 74 The case for radical change 74 The case for incremental change 74 2 Football Governance Problems with supporter ownership 77 Mitigating circumstances 78 A way forward for supporter ownership 79 The role of the football authorities 83 Supporters Direct 84 7 The future development of the game 88 Strategic planning: youth development 88 Strategic development - coaching 92 Finance 93 8 The Way forward 96 Conclusions and recommendations 99 Formal Minutes 106 Witnesses 107 List of printed written evidence 108 List of additional written evidence 109 List of Reports from the Committee during the current Parliament 112 Football Governance 3 Summary The Committee began its inquiry into domestic football governance in December 2010 to establish the seriousness of the problems facing our national game, and to examine possible options to address them that, crucially, did not impinge on English football’s strengths. The Premier League has been an undoubted success in terms of the quality of football and the experience for the spectator, and with regard to generating financial benefit for its member clubs. The Football League has also experienced something of a renaissance since the 1980s. However, the successes of the new domestic football model have been accompanied by financial instability and increasing levels of debt, which remains a serious problem throughout the football pyramid. We have examined how financial incentives and pressures, particularly revenue gaps within the Premier League and between the Premier League and the Championship, have served to exacerbate financial challenges. The Football Association (FA) is the national governing body of English football. It is the most appropriate agency to take the lead in addressing the weaknesses of English football, but it needs urgent reform to carry out its responsibilities effectively and meet the future challenges of the game. We recommend an FA Board of ten, consisting of: the Chairman; the General Secretary; two further FA executive staff; two non-executives; two professional game representatives; and two national game representatives. The reconstructed FA Board should reconsider whether the 50:50 divide of surplus revenues should be scrapped to allow it to take strategic decisions regarding the distribution of FA funds. The FA should review the composition of the FA Council to improve inclusivity and reduce average length of tenure. The reformed Council should absorb the shareholder role. All FA Committees should report to the Board not the Council. We urge the FA to consider whether the National Game Board and Professional Game Board promote strategic decision-making. The Football Creditors Rule epitomises the extent to which financial priorities are being distorted. The moral case against it—that it harms the communities that football is supposed to serve—is persuasive on its own. There is also a compelling systemic argument against it, namely that it positively encourages financial risk-taking, by offering a safety net to those who seek to benefit from such practices. It should be abolished. If the football authorities do not take the initiative themselves, and Her Majesty’s Revenue and Customs loses its legal challenge to the Football Creditors Rule, we recommend that the Government consider introducing legislation to abolish it. We recommend the introduction of a formal licensing model imposed rigorously and consistently throughout professional English football to underpin the self-regulation measures already introduced by the Premier League and the Football League, and the financial fair play regulations being introduced by the Union of European Football Associations for its European competitions. The licensing model adopted should both review performance and look to promote sustainable forward-looking business plans. We recommend that the Football Association takes on a strong scrutiny and oversight role in the licensing process and makes the final decision on contentious licence applications. 4 Football Governance We recommend that robust ownership rules, including a strong fit and proper persons test, consistently applied throughout the professional game with the FA having an oversight role, should be a key component of the licensing model. The presumption should be against proposals to sell the ground unless it is in the interests of the club. There should be complete transparency around ownership and the terms of loans provided by directors to the club. There is no more blatant an example of lack of transparency than the recent ownership history of Leeds United, and we urge the FA to demonstrate its new resolve by conducting a thorough investigation and, if necessary, to seek the assistance of Her Majesty’s Revenue and Customs. Supporters trusts face significant legal and bureaucratic hurdles when raising funding. We recommend that the Government amend the Financial Services and Markets Act 2000 to recognise the special nature of supporters trusts. We further recommend that the Government consider passing legislation to protect minority supporter stakes that would otherwise be the subject of a compulsory purchase order. The FA should look at means of giving properly constituted supporters trusts, or consortia which include supporters trusts, an opportunity to make a successful matching bid for a club that has gone into administration. There are a number of examples of effective club consultation with supporters. We welcome these approaches to consultation with supporters in a more structured format, and urge other clubs to follow suit. The reluctance of the FA, Premier League and Football League to devise a formula for the long-term future of Supporters Direct constitutes a failure of imagination and of governance. We urge them to work quickly towards a funding solution, and the Government to use its influence with the football authorities to work to this end. We are concerned by evidence of the lack of a co-ordinated approach to English youth development, and urge the FA to provide strategic direction and leadership. We recommend that the FA review expenditure at the grass roots, to help form a view as to whether English football should be spending more on this important component of the game, with a particular emphasis on coaching education. Almost all our recommendations for the reform of football governance can be achieved through agreement between the football authorities and without legislation. We therefore urge the football authorities to consider our Report carefully, and to respond positively with an agreed strategy and timetable for change.
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