House of Commons Culture, Media and Sport Committee

Football Governance

Seventh Report of Session 2010–12

Volume III Additional written evidence

Ordered by the House of Commons to be published 8 February, 8 March, 27 April and 14 June 2011

Published on 29 July 2011 by authority of the House of Commons : The Stationery Office Limited

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) 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 or all written evidence are available in a printed volume.

Additional written evidence may be 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]

List of additional written evidence

(published in Volume III on the Committee’s website www.parliament.uk/cmscom)

1 Mrs Linsey Wraith Ev w1 2 Carlos Diaz-Sanchez Ev w1 3 Steve Lawrence Ev w2 4 Peter Hodge Ev w8 5 Jay Cochrane, The International Football Development Academy (iFDA) Ev w12 6 Saints Trust Consumer Cooperative Action Committee Ev w13 7 Runcorn Linnets Football Club Ev w14 8 Gary Pettit Ev w17 9 Rob Bradley and Roy Noble, Lincoln City Supporters Trust Ev w20 10 Commission on the Future of Women’s Sport Ev w21 11 City Supporters Trust Ev w21 12 Andy Green Ev w23 13 Cambridge Fans United (CFU) Ev w26 14 James Wheeler Ev w29 15 Paul Norris Ev w32 16 Manchester United Supporter Trust (MUST) Ev w36 17 Football Foundation Ev w38 18 Liverpool Supporters’ Union – Spirit of Shankly Ev w39 19 Steve Beck, York City Supporters Trust Ev w42 20 Keith Blagbrough Ev w43 21 Clarets Trust Ev w47 22 Merthyr Town FC Ev w49 23 Arsenal Supporters’ Trust and Arsenal Fanshare Ev w52 24 Wimbledon Football Club Supporters Society Limited on behalf of AFC Wimbledon Ev w56 25 Professor Richard Giulianotti Ev w59 26 Bristol City Supporters Trust Ev w63 27 Bees United, the Brentford FC Supporters Trust Ev w66 28 Independent Manchester United Supporters’ Association (IMUSA) Ev w70 29 Newcastle United Supporters Trust Ev w72 30 Fulham Supporters’ Trust Ev w74 31 Board of Reading Football Supporters’ Society Limited T/A “STAR” (Supporters’ Trust at Reading) Ev w77 32 Blake Welton, Editor, First e11even Ev w79 33 Southend United Supporters’ Club Trust t/as The Shrimpers Trust Ev w85 34 David Hodges Ev w89 35 Bradford City Supporters’ Trust (BCST) Ev w91 36 Phil Gregory Ev w94 37 Supporters Trust Ev w101 38 Blue and Gold Trust (King’s Lynn FC Supporters Trust) Ev w105 39 Foxes Trust (Leicester City Supporters Society Limited) Ev w107

40 AFC United Ev w108 41 Daniel York and Ben Westmancott on behalf of the board of Fisher FC Ev w112 42 Adam Franks FCA CFA Ev w115 43 Schwery Consulting Ev w119 44 FC United of Manchester Ev w122 45 Wimbledon Independent Supporters Association (WISA) Ev w124 46 Olswang Ev w127 47 National Association of Disabled Supporters (NADS) Ev w132 48 Paul Baggaley, Chairman, Newark Town FC Ev w136 49 Football Club Ev w137 50 Stephen Temple Ev w141 51 Centre for the Study of Law, Society and Popular Culture, University of Westminster Ev w144 52 Scarborough Athletic Football Club Ev w147 53 of the Football Supporters’ Federation Ev w149 54 Professional Players Federation Ev w153 55 Darlington Supporters Trust Ev w154 56 Jonathan Keen Ev w157 57 Dr John Beech, Head of Sport & Tourism, Applied Research Centre for Sustainable Regeneration, Coventry University Ev w161 58 Lawn Tennis Association (LTA) Ev w165 59 John Bentley Ev w169 60 Rick Duniec Ev w170 61 Pompey Supporters’ Trust Ev w172 62 Football Licensing Authority Ev w176 63 City Supporters Trust Ev w178 64 Co-operatives UK Ev w180 65 Vince Cullen Ev w183 66 Cambridge City Supporters Trust Ev w186 67 Hendon Football Club Supporters Trust Ev w188 68 Mark Usher Ev w190 69 Hamburger SV Supporters' Club Ev w198 70 Christian Müller Ev w201 71 Substance Ev w204 72 The Isthmian Football League, known as the Ryman Football League Ev w208 73 Inclusion and Diversity Caucus Ev w214 74 Bates Wells and Braithwaite London LLP Ev w216 75 Chris Vasper, ex Chair, TEAM Mansfield Supporters Trust Ev w217

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Written evidence

Written evidence submitted by Mrs Linsey Wraith I doubt very much whether my input will be of any relevance, however I feel so strongly about this subject, I feel compelled to submit my opinion. As the mother of four sons, our household centres around the subject of English football, albeit in the main Newcastle Utd. In this week when I have been asked to explain the actions of both Fifa, and the owner’s actions of Newcastle Utd, ie an apparent owner’s whim, in terms of fair play and morality, I am left speechless. When even the Government seems hell bent against sport in schools, what explanation am I to give my sons? The whole English game, without Fifa, has lost its way—it is no longer a “national” game but a preserve of the rich, and wholly unsuitable owners. Who will stand up any longer for real sport, and real and proper owners? Opinions of real fans, and real voters, are irrelevant against the profit pound it appears yet again. December 2010

Written evidence submitted by Carlos Diaz-Sanchez To whom it may concern, I currently volunteer in the community by running a local junior Under 14’s football team. I am very passionate about grassroots football and the development of our footballers, who will become the next generation of home-grown players. Having played junior football for a number of years, and entering in to coaching soon after, I have a great level of experience in this field and believe that I have a number of suggestions that would be beneficial to the way we conduct the development of footballers in this country. Firstly, I believe that the government should set up committees of volunteers, like myself, to address the failing standards of development for our young footballers. I am currently in my second year of A level studies and it is this youthful approach that parents and clubs are desperate for when searching for coaches. The FA is working hard in this area, but unfortunately all too often it is a case of centralised directives that are difficult to put in to practice and often characterised by bureaucracy. This government was elected, partly, on the basis of devolution of power to communities; it is people who actually work in grassroots football, who brave the cold on winter mornings and who collect subs money, that recognise the fundamental changes that need to be made and I believe the government and the FA should make better use of this advice. Furthermore, the provision of facilities is crucial to raising the standards of our development. My father is Spanish, and on my regular visits to Spain, I visit their facilities in both awe and envy; the quality of the training pitches that the aspiring footballer use are phenomenal. A great emphasis has been placed on providing conditions to encourage the technical development of the young footballers, rather than focusing on the winning mentality. The facilities they provide is linked to the style of coaching; as previously mentioned, technical ability is the primary focus of their development, and the governing body has ensured that the conditions are perfect for the young players to thrive. Despite a great charitable effort in terms of financial grants, the UK still has a long way to go before the facilities they provide are in line with those on the continent. My key concern is the standard of school football. When my father’s generation were growing up, school football was the most important element of their football development. It is an unfortunate, but truthful, fact that school football has been marginalised in recent years, partly as a result of central directives to ensure that everybody is given opportunities to play, regardless of their ability. I believe school football is something that needs to be saved; it is under threat of becoming obsolete. I know from coaching Sunday League football that my players, at the age of 14, which should be the height of their school football, are disillusioned and disinterested. I know from recent experience, having played for both my school and my local club, the latter at a particularly high level, that the standard in school football was, frankly, disgraceful. I believe there needs to be a radical overhaul of school football; too much responsibility lies with P.E teachers, overburdened with a range of extra-curricular sports in addition to their professional duties. In truth, many of these teachers are not capable of delivering the standard of coaching that school football requires and deserves. My solution to the problem would be to adopt a similar system as in the United States schools with regards to their football and . This would involve schools employing professional coaches to work on a full time basis to be responsible for the management of the football sides. I recognise that in the current economic climate, that this is perhaps not practical. However, it should be a long term goal for the government to pursue; it would raise standards throughout the country and generate great social benefits. The coaches would act as mentors to some of the most disillusioned pupils, who see football as their only opportunity in life. The 2018 bid team adopted this theme, and I believed it to be the most convincing of all the factors of the bid; football is a tool to promote social cohesion and provide opportunities for those who would otherwise become involved in a poor lifestyle. Football is our national game; by adopting a measure as mentioned above, the standards of development would increase dramatically, as shown in the United States. Finally, we must encourage more people to enter in to coaching. It is a thoroughly rewarding experience but too many people believe that the bureaucracy and administration outweigh the benefits and simply do not get involved. Furthermore, the cost of the FA courses is extortionate, and efforts need to be made to reduce the cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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price. These factors have led to the most disgraceful of all statistics: only 2,769 English coaches hold Uefa’s B, A and Pro badges in comparison to 23,995 in Spain, 29,420 in Italy, 34,970 in Germany and 17,588 in France. This had led to a comparative of ratio between young footballers to UEFA qualified coaches of only 17:1 in Spain to a startling, and frankly embarrassing 812: 1 in England. It is essential that we tackle this embarrassing statistic by providing more courses for prospective coaches and ensure that they receive teaching of the highest standard. As part of the unsuccessful, but excellent 2018 bid, the FA promised to ensure that football development would be encouraged throughout the world. Despite FIFA’s rejection of our charitable intentions, this government, in partnership with the FA, the (whose financial capability is essential) and volunteers such as myself, should make it a priority to ensure that we significantly improve the standard of our development programme. The details and issues above are just a small selection of my ideas and suggestions for the problems I believe that English grassroots football faces. I believe the government should utilise volunteers, like myself, as part of task forces and committees to address these problems. England invented football. England gave football to the world. Let us once again provide an example to the world, by revolutionising football development and reaping the rewards for generations to come. I look forward to receiving your response to the issues raised. December 2010

Written evidence submitted by Steve Lawrence Key points: — European Union Competence in respect of Sport (The Treaty of Lisbon). — Specificity of Football particularly in respect of the spectrum from amateur to professional. — Emphasis on the youngest participants. — Dysfunction of the trinity of The FA, The FA Premier League and The Football League. — The imperative for government intervention. — The contribution that football can make to social cohesion and the potential for a model “Big Society” initiative. — Alternative means of governance particularly for the grassroots game. — A coordinated pyramid for competition based on geographical criteria. — The English Amateur Football Association. — The potential for £1 billion of revenue to a revitalised strata of community members clubs. — The Netherlands as an example of good practice.

1.0 Introduction 1.1 The Treaty of Lisbon confers new competence on the European Union in respect of sport and it is the stated intention of the European Union to develop policy in the realm of sport; Article 165 of the TFEU states that: “The Union shall contribute to the promotion of European sporting issues, while taking account of the specific nature of sport, its structures based on voluntary activity and its social and educational function.” It goes on to say that: “Union action shall be aimed at—developing the European dimension in sport, by promoting fairness and openness in sporting competitions and cooperation between bodies responsible for sports, and by protecting the physical and moral integrity of sportsmen and sportswomen, especially the youngest sportsmen and sportswomen.” This new competence of the European Union is relevant to the Inquiry into Football Governance in the and the Culture, Media and Sport Committee should give appropriate consideration to it. In this regard“The Lisbon Treaty and EU Sports Policy” published by the Directorate General for Internal Policies should form a core reference document. The emphasis on sport as voluntary activity, and its social and educational function ought properly to define the characteristics of any UK Policy which emerges from the Inquiry. In addition the references to fairness and openness and moral integrity especially in relation to the youngest must inform initiatives. 1.2 In particular the Committee should address the issue of the “specificity” of football. It is particularly important to recognise that the development of the professional game has created a component of the sport cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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which has fundamentally different characteristics to the amateur or “grassroots” game. Additionally football needs to be recognised as having very distinct characteristics and requirements as a game for participation quite distinct from its nature as a game for spectators. It is also important to recognise the differences between football for youth and football for adults. 1.3 The Committee should have due regard to the antitrust rulings of the European Union in respect of media rights, ticket sales arrangements, sport goods, regulatory and organisational aspects, anti-doping rules and state aid. 1.4 Sport in general and football in particular has the potential to contribute very significantly to social cohesion, reduction in anti-social behaviour, physical and mental health of the general population, attendance levels in employment, education and volunteer activity. It is important to account for these aspects in financial terms when calculating the costs of implementing a strategy for football. It should be noted that other European countries calculate a very significant net return on investment in football particularly at the “grassroots” and level. 1.5 The complexity of football governance in England contributes significantly to the present dysfunction. The relationship between , The FA Premier League and The Football League constitutes a noxious cocktail.

2.0 Government Intervention 2.1 Government intervention in football is absolutely essential, football governance is moribund and dysfunctional and in certain areas football is administrated for the advantage of the few at great cost to the many. An immense community of players, parents, coaches, spectators and volunteers is calling for leadership and radical change. 2.2 Government intervention should be by legislation requiring the metamorphosis of The FA, The FA Premier League and The Football League and/or legislation bringing into being a new English Grassroots or Amateur Football Association with special competence in respect of children. 2.3 Government intervention should extend to revising legislation in respect of amateur and clubs determining structures of ownership and of membership. 2.4 Government intervention should also include legislation requiring local authorities and other undertakings to gift or otherwise make available land, buildings and resources appropriate for member’s football clubs in order to further the interests of social cohesion and the common good. 2.5 The model for football might be appropriate for sport generally and a significant piece of legislation “The Sport Act” might be considered. 2.6 The creation of a New Institute for Sport and Social Cohesion modelled on the Netherlands Instituut voor Sport & Bewegen should be considered. The Institute would be charged with informing sport policy with particular emphasis on social cohesion and as an example of how “Big Society” ideas can be implemented on the ground.

3.0 Specificity of Sport in General and Football in Particular 3.1 It is important that football clubs be treated differently from other commercial organisations. Sport in general and football in particular are unusual activities encompassing a wide spectrum from amateur to professional, young to old, encompassing leisure and cultural characteristics from participation to spectating. The EU guidance on sport recognises this fact referring to the “specificity” of sport. It is crucially important the any UK government proposals on football take account of the potential for future EU intervention. Indeed the present Inquiry is well timed with the potential to place the UK in harmony with the radical changes which are likely. 3.2 It should be remembered that every football club, large or small will have a community aspect to it. Large professional clubs will have a “football in the community” component and small clubs will be not-for- profit undertakings, perhaps member’s sports clubs, whose function is wholly community orientated. 3.3 At the smaller scale a member’s club constitution with not for profit principles designed to encourage volunteer activity and allowing sponsorship and municipal participation is essential. The example of the standard Dutch amateur football club is a healthy model. 3.4 At the largest scale a commercial corporate model is necessary but designed to encompass a substantial fan-based membership. The German constitutes a good example of what can work in practice.

4.0 The Governing Bodies of Football in England have become Dysfunctional 4.1 The FA has a Council of 114 members of which 53 represent County Associations (to whom The FA distributes £15 million annually), 24 are Vice-Presidents, 10 are Divisional representatives, seven represent The Football League (to which The FA distributes £11 million annually), eight represent The Premier League with 12 other individual representatives including HRH Prince William. (The FA website) cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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4.2 There is only one representative for players, one representative for referees, one representative for football fans, there are no representatives for football coaches, and there are no representatives for the parents of 1.5 million youth players. 4.3 Football involves players, coaches, referees, the parents of youth players and spectators. These stakeholders, some seven million people according to The FA, are represented on The FA by three people out of a Council of 114. The FA is utterly un-representative of football. 4.4 In 2000 Lord Pendry promised in the first annual report of The Football Foundation that The FA would contribute £20 million per annum to grassroots football. In 2010 The FA is contributing only £12 million (by agreement with Sport England)—a reduction in real terms of significantly more than half over ten years. (Sport England FOI release) 4.5 The FA strategy for English football over the last 15 years has been: 4.5.1 to cede governance of high level youth football to the FA Premier League in the form of the Football Academies and Centres of Excellence. (FA Charter for Quality 1997) This has resulted, according to current FAPL figures, in a position where the FAPL development programme produces some 50 foreign players within the U16–U18 cohort with an attrition rate of less than two players for every one graduating whereas 270 indigenous players graduate into the U16–U18 category with an attrition rate of nine players for every one graduating. These figures suggest a focus on the development of foreign players. (FA Premier League website) 4.5.2 to re-construct Wembley , the most iconic arena in the history of world football, at a cost approaching £1 billion with no significant net benefit in terms of televising of matches and with a smaller and sub-standard pitch. Income from broadcasting at £133 million constitutes 42% of FA group turnover. (FA Limited Report and Financial Statements 2009) The interest burden from construction loans is subject to an interest rate swap and for 2009 was £26 million. (FA Limited Report and Financial Statements 2009) Of the 20 top nations in world football only one has a dedicated national stadium for football. 4.5.3 to construct a centralised elite performance centre at St Georges Park, Burton at a cost of £100 million which will be more than three hours travel time from 80% of the population of England rendering it almost useless for its primary purpose as a coach and player development centre. Its resulting function is therefore likely to be as a residential facility for the FA Premier League. 4.5.4 the publishing of a coaching manual in 2010 for sale at £39.99. 4.5.5 the establishment of a cohort of UEFA (category A, B and Pro) coaches numbering some 2,769. This compares with Spain 23,995, Italy 29,420, Germany 34,970 and France 17,568 (UK Coaching Network). 4.6 The FA plays no role in organising a coordinated pyramid of competition for youth players, it organises The FA Cup the FA Vase and England representative matches. 4.7 The net effect of FA actions over this period of time has been to diminish financial stability from a position of some £70 million of cumulative surplus in 2006 to a marginal position in 2010 and the potential for a deficit in 2011 of perhaps some £40 million. (FA Limited Report and Financial Statements 2001–09) cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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THE FA RETAINED PROFIT/LOSS 2001–09—£‘000’S

50,000

40,000

30,000

20,000

10,000

0 2001 2002 2003 2004 2005 2006 2007 2008 2009

-10,000 earnings before interest & taxation retained profit/loss -20,000

-30,000

4.8 The FA has acquired very serious conflicts of interest. On the one hand it is the body which speaks for the grassroots game, yet it also has serious concerns as a facilities management organisation in respect of Wembley and St Georges Park and finally it owes allegiance to The FA Premier League due to its stake in the collective bargaining arrangements. It is therefore very difficult for The FA to make adequate financial contributions to the grassroots when it has interest payments to make on its loans furthermore it is difficult for The FA to stand up to The FA Premier League and demand that The FA Premier League honours its commitments in respect of grassroots funding. 4.9 The FA Premier League is an extremely successful collective bargaining organisation which operates as a cartel in negotiating broadcast rights for the top 20 clubs in the English football pyramid. Its cartel activities are sanctioned by the European Union on the basis that significant benefits flow to other areas of football in ways which would otherwise not happen and that it abides by certain agreements in respect of selling rights to more than one party. The agreement with the European Union expires in 2013. 4.10 In 2000 Lord Pendry promised in the first annual report of The Football Foundation that The Premier League would contribute 5% of broadcast income to grassroots football. In 2010 with gross broadcast revenue according to Deloittes of £2.7 billion The FA Premier League is contributing £12 million. 4.11 The Football League (founded in 1888) is a self governing body which administrates the league competition system for 72 clubs in the Championship, League One and League Two (being the 2nd–4th tiers of English football) and also the . This quote from the Football League’s own website states: “AUTHENTICITY: We are the world’s original league and retain honest, open and exciting competitions that are about developing home-grown talent”. For 104 years until 1992 The Football League also administrated the top tier—these days called The Premiership (before 1992 called the First Division). The Football League enjoyed significant income from the football league structure until 1992 when behind the Football League’s back The FA made a deal with the top 22 clubs to form the FA Premier League and thus acquired a degree of control of the revenue from broadcast rights. The Football League has suffered a diminution in revenue since 1992 and is presently a junior partner in the football hierarchy. 4.12 The Football Foundation is an independent not-for-profit undertaking, founded in 2000, whose function is to coordinate and distribute to the Grassroots Game funding from The FA, The FA Premier League and Government. From 2001 to 2009 The FA Premier League contributed £111.44 million to The Football Foundation, The FA contributed £111.44 million, Sport England £51.76 million and other Government funds £60 million. (Football Foundation Financial Statements 2001–09) To put these sums in context the total annual revenue to amateur grassroots football in Holland is currently £1 billion Euros. (The Mulier Institute) 4.13 From 2001 to 2009 The Football Foundation distributed £216.95 million to Football Associations, £7.28 million to Schools, £12.3 million to Councils, £4.4 million to Leicester City Council, £900,000 to The BBC, £187,000 to The Girl Guides, £300,000 to Barnsley Rugby Club, £150,000 to The Foundation, cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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£890,000 to Nike, £10.59 million to FA Premier League Clubs, £1.25 million to The Football League and £500,000 to Comic Relief. (Football Foundation Financial Statements 2001–09) 4.14 From 2001 to 2009 The Football Foundation distributed £1.03 million to Grassroots Football Clubs. 4.15 The structure of English football has essentially become one of patronage with advertisers patronising broadcasters, broadcasters patronising The FA Premier League, The FA Premier League patronising The FA and The FA and the Premier League patronising the Football Foundation. The filter system which has been created allows only a trickle of revenue to arrive at the grassroots. It is essentially a top down funding system and it is inherently fragile.

5.0 Alternative Models for Governance 5.1 There are two ways forward in restructuring football governance: 5.2 The first is to encompass the status quo leaving The FA and The FA Premier League to administrate the top tier of the professional game, with continuing financial responsibility for Wembley, along with The Football League continuing to administrate the lower tiers of professional football but; to transfer jurisdiction of grassroots, amateur and youth football to a new “English Amateur Football Association” possibly by re-constituting The Football Foundation. The new association would accept and encourage membership of amateur, grassroots and youth football clubs, including school teams. The new association would be responsible for coordinating a nationwide pyramid of competition across age groups with four principal and eight tertiary regional administrative and development centres. The new association would encourage membership of individual clubs. The model for this new association would be the KNVB in Holland which has 1.2 million members, some 7% of the population (Mulier Institute); in proportion England would expect to build a membership to a target of some five million over time. 5.2.1 The revenue contribution to football in The Netherlands from memberships is some 370 million Euros with another 430 million Euros provided by municipalities. This strategy has placed The Netherlands in the position presently of having 10 billion Euros of capital infrastructure for football. The Dutch funding system for football operates from the bottom up and it is inherently robust. 5.2.2 A membership model such as this for England would create underpinning revenue circa £1,000 million per annum. Bearing in mind that for a flourishing member’s club sector to exist long term access to land and buildings is a basic requirement. 5.3 The alternative is to amalgamate the activities of The FA, The Premier League and The Football League into a pair of re-formed bodies. 5.3.1 Firstly, a not-for-profit member’s organisation, funded by memberships drawn from all football clubs and with responsibility for governance, administration and development of the game. 5.3.2 Secondly an arms length commercial corporation with competence to negotiate and contract in respect of the various rights. 5.3.3 The model for this re-organisation is the arrangement agreed between Formula One and the European Union. (See European Commission on Competition, Notice published pursuant to Article 19(3) of Council Regulation No 17 concerning Cases COMP/35.163) 5.3.4 The not-for-profit organisation would essentially be the continuation in a different form of The FA. Responsibility for Wembley would be diverted to a new and independent facilities management company and The FA would be reorganised to absorb The Football League and take on responsibility for coordinating a coherent unified pyramid of competition from the top tier of professional football to the lowest tier of U8 youth football. The FA would then involve itself only in the governance and administration of the game as per the proposal for an “English Amateur Football Association”. The reconstituted FA would have representation from its member clubs with representation from amongst professional and amateur players, coaches, referees, youth player parents and fans and of course government 5.3.5 The County Association structure would be sustained as the structure for referee development and administration. 5.3.6 The administration of media rights would fall within the competence of a newly constituted corporation encompassing the former FA Premier League whose responsibilities would encompass the entirety of the unified pyramid of competition. Shareholding in the new/revised undertaking would be controlled by statute with a significant government stake holding. The corporation would be profit making with obligations to contribute to the revised FA Governing Body. 5.5 The re-structuring of football governance carries with it the very real difficulty of structuring models of stewardship which allow for a spectrum including individual ownership, enthusiast representation to member ownership and municipal stake holding. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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5.6 A solution to this will involve legislation to define a shortlist of ownership models with model Articles of Incorporation which allow a spectrum of possibilities which have corresponding balances of obligation and benefit. 5.7 A sanctioning committee within a newly constituted “English Amateur Football Association” or the reconstituted FA would have responsibility for administrating a “fit and proper person” database in respect of the various forms of constitution and would adjudicate where necessary. DCMS might properly have representation on this committee.

6.0 Learning from other Models 6.1 It is important that the Committee considers governance models from other countries. 6.2 The structure in The Netherlands seems to be inherently robust and extremely successful. it represents an ideal model for comparison. The Netherlands has a population of 16.5 million which is 25% that of England, the population density of Holland is 388.93 inhabitants per sq. km and for England the figure is nearly identical at 384.13. 6.3 The Netherlands exports large numbers of players, coaches and managers. The export of players and coaches creates a virtuous circle where the international experience gained by the KNVB is recycled and used to inform policy and development. Essentially it means that Dutch football is at the leading edge of world football. Holland is typically in the top three of FIFA rankings. 6.4 Holland does not have its own national stadium, it places international matches in various stadia around the country but tends to use the Arena which is owned by The City of Amsterdam and which is leased long term to AFC Ajax. There is therefore no financial burden on the KNVB in respect of stadium commitments. 6.5 The KNVB (Royal Dutch Football Association) is the single body governing all aspects of Dutch football. 6.6 In 2002 under the guidance of Louis van Gaal the KNVB instituted a “master plan” which integrated professional and amateur football in a single competitive infrastructure. A strategy of coach education was implemented administrated out of the headquarters in Zeist. The KNVB has a staff of 420 who administrate football for a population of 16.5 million with 400,000 youth players and a total of 2,700 clubs of which 36 are professional clubs. 6.7 Each of the 2,700 amateur clubs is rated by the KNVB according to its facilities, the quality of its coaching and its contribution to wider social needs. 6.8 Spectators at amateur clubs do not as a rule pay to watch individual matches instead they are members who pay membership fees for the use of club premises. The KNVB has approximately 1.2 million members. 6.9 Holland’s 2,700 clubs play in a single pyramid of competition organised across six geographical regions. The top two professional leagues are organised on a national basis. The amateur leagues are organised with the top four Saturday leagues and the top four Sunday leagues organised nationally. The remaining leagues are organised regionally in four, five or six tiers.

7.0 The New English Model 7.1 The strategic implementation of a new model in England could be achieved through the creation of an English Grassroots Football Association divided into four main regions North, , South East and South West. 7.2 Each region would be further divided in a binary structure facilitating competition within and between regions. 7.3 A national pyramid of competition for youth and adult football could be administrated from four regional centres which would coordinate player registration, league structure, web based results and league tables, coach education and player development with tertiary centres located to ensure minimum travel times for participants. The existing ad hoc framework of leagues would be absorbed into the new national pyramid.

7.4 The existing Academy and Centre of Excellence structure would be absorbed into the highest tiers of the new national pyramid of competition creating the opportunity for cross fertilisation of ideas and techniques and the healthy flow of expertise from the highest tiers into the national framework.

7.5 Inter regional competition at all age levels would provide a meritocratic structure for talent identification and development and the broad base of the pyramid would encompass the notion of participation for all. December 2010 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Ev w8 Culture, Media and Sport Committee: Evidence

Written evidence submitted by Peter Hodge Summary — This submission is in a personal capacity as a football supporter. — There have been positive developments in the game over the last 20 years, eg eradication of hooliganism, new stadia. — However, because the free market philosophy adopted by the Premier League has resulted in unacceptable differences in wealth between clubs to the point where the game is no longer competitive, I agree with the proposition that the current governance arrangements of the game are not fit for purpose. — There is a system of financial rewards that are based entirely on success—gate money retained by the home team, television money, prize money in both domestic and European competitions. Thus the rich become richer and as a result ever stronger on the field of play—and vice versa. — There have been a number of negative consequences—the need for parachute payments, talented young players gravitating to the major clubs, extremely high player wages, fielding of weakened teams, and foreign ownership with, in some cases, more or less unlimited wealth. — The outcome has been that, since the establishment of the Premier League, only a very small number of teams has been able to win trophies and very few promoted teams have been able to establish themselves in the Premier League. In eighteen seasons: — Only four teams have won the Premier League. — Only 11 teams have won a major domestic trophy. — Only seven teams have survived for more than five seasons in the Premier League following promotion. — In order to restore competitiveness to English football, the current free market philosophy needs to be changed to a more egalitarian one. A much better balance needs to be struck between the key interrelated variables that determine the quality of the team on the pitch and thus its success or otherwise. — Two possible routes by which to effect such a change are: — For the “smaller” clubs—up to 35 in number—to break away from the Premier League. — For governing bodies adopt an egalitarian philosophy and make the necessary practical changes that go with it.

1. Introduction 1.1 I submit this in a personal capacity as a football supporter. I am 58 years old and have been a supporter of Sheffield United for nearly 50 years. 1.2 To begin on a positive note. In the last 20 years serious hooliganism has been all but eradicated, crumbling stadia have been rebuilt, clubs now have well organised academies with state-of-the-art facilities, and there is excellent television coverage of the game to an extent undreamed of in my youth. Football has been restored to its rightful position as our number one national game. 1.3 Yet despite all of this, I am currently extremely disillusioned with the state of English football. The reason for this is that the unregulated, free market, commercially-driven philosophy adopted by the Premier League has resulted in unacceptable differences in wealth between clubs to the point where the game is no longer competitive. Money has replaced competition as the driving force of the game. 1.4 Thus, I agree with the proposition that the current governance arrangements of the game are not fit for purpose. 1.5 From conversations and message boards, I believe my views and concerns are shared by many others.

2. The Problem 2.1 The unregulated, free-market, commercially philosophy of the Premier League has led to the adoption of a system of financial rewards that are based entirely on success. Thus, unless there is a major injection of cash from a rich benefactor, the successful clubs inevitably become richer and thus in consequence are nearly always more successful on the field of play—and vice versa. 2.2 Specifically: 2.2.1 Gate money Allowing the home team to keep all the gate money has on season given greater income to the better supported clubs. Every season there are extremely big differences between those with the highest and those with the lowest average attendances. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Culture, Media and Sport Committee: Evidence Ev w9

To illustrate, in 2009–10: Highest Average In Top Two Lowest Average In Top Two Divisions Divisions Manchester United 74,864 Peterborough United 8,913 Arsenal 59,927 Blackpool 8,611 Manchester City 45,512 Scunthorpe United 6,383 2.2.2 Television and prize money There are huge differentials in the rewards for teams placed highest and lowest in the Premier League; and massively smaller rewards for Championship teams compared with the Premier League. “To those that hath shall be given” inevitably leads to the strong becoming ever stronger. 2.2.3 European Cup The re-structured European Cup, set up to knock out financially less attractive teams, has given massive financial rewards to teams that reach the knockout stage.

3. The Consequences 3.1 There have been a number of specific consequences of this unequal distribution of wealth, some of which have in themselves reinforced the inequality of competition: 3.1.1 Parachute payments The need for parachute payments for teams relegated from Premier League to Championship. The recent increase to four years will potentially distort competition in the Championship. 3.1.2 Youth development The “hoovering up” of talented young English players by the stronger clubs resembles modern fishing methods. If the net does not catch them initially, then the line with a financial bait will. In days gone by, fans of the local club could at least enjoy two or three years of such players in their first team. Now they are lured away by lucrative offers after one season or, in some cases, before they have even left the Academy. Kyle Naughton, , and Jacob Mellis are recent examples at Sheffield United; there are many others across the country. And the big English clubs scour not just England but the globe. 3.1.3 Player wages Players earning extreme and unacceptable amounts of money. Whilst I acknowledge that they are talented individuals with scarce skills in relation to demand and that the economics of “showbusiness” are different from those that apply elsewhere, nevertheless the amounts are such as to sever any connection with the vast majority of fans. 3.1.4 Weakened teams Distortion of competition occurs when teams play weakened sides. For example, when Sheffield United were relegated from the Premier League in 2007, both Liverpool and Manchester United played understrength sides in key games against other sides in the bottom six late in the season in order to “rest” players for European games. 3.1.5 Cup competitions The League Cup has become farcical. The top sides play reserve and even youth teams. If they manage to get through to the later stages, the first team suddenly reappears on the pitch. Yet despite this just nine teams have won the League Cup in the last eighteen years (five only from outside the “Big Four”.) The FA Cup is not much better. Just six teams have won the FA Cup in the last 18 years (two only from outside the “Big Four”). And should a club from outside the “Big Four” manage to win one of these competitions unexpectedly, is it not something of a pyrrhic victory if early rounds have been skewed by teams playing weakened sides? 3.1.6 Club governance The best way to seek success appears to become to “spend, spend, spend”. Prudently run clubs such as Sheffield United and West Bromwich Albion struggle whilst United and Portsmouth are either bailed out or go into administration to clear their debts. They then carry on much as before. 3.1.7 Club ownership There is an increasing trend towards foreign ownership of clubs. If a club is to have any real meaning and identity, it needs as a minimum to be majority owned by local supporters, albeit there may need to be wealthy individuals on the board. Otherwise, why have the club? Blackburn Rovers are a case in point. The club has Indian owners and a significant number of mercenary first team players from abroad. Other than that it plays in Blackburn, what is the local link? 3.1.8 Money to burn Given the financial attraction and high status of English football, I predicted that it was only a matter of time before an individual with “bottomless pockets” took over a club and rendered the Premier cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Ev w10 Culture, Media and Sport Committee: Evidence

League as a sporting competition all but pointless. This happened at Chelsea with , turning the club at one fell swoop from the verge of bankruptcy to title winners. Much the same has now happened at Manchester City. Without a billionaire backer, there is now little or no chance of winning the Premier League. And without a major backer little chance of remaining there, even if promotion is achieved.

4. The Outcomes

4.1 Results on the field of play are the acid test of the proposition that the free market philosophy has resulted in the game at the top level no longer being competitive. These show that, since the establishment of the Premier League, only a very small number of teams has been able to win trophies and very few promoted teams have been able to establish themselves in the Premier League.

4.2 Results on the field of play are defined as: — Winners of the three major trophies—Premier League, FA Cup, League Cup since the establishment of the Premier League. — Survival of clubs promoted from the Championship to the Premier League.

4.3 Trophy Winners

In the 18 seasons since the Premier League was founded in 1992–93 to 2009–10, a total of only four teams has won the Premier League. A total of only 11 teams have won one of the three major trophies.

Table 1

WINNERS OF MAJOR DOMESTIC TROPHIES 1993–2010 INCLUSIVE (18 SEASONS) Premier FA League All League Cup Cup Competitions Total number of teams winning trophies 4 6 9 11** As a % of 20 Premier League teams 20 30 45 55 As a % of 44 top two divisions teams 9 14 20 25

“Big Four”* Total trophy wins 1993–2010 inclusive 17 16 10 43 As a % of available trophies 94 89 50 80

* Defined as Arsenal, Chelsea, Liverpool, Manchester United

** “Big Four” plus: Aston Villa, Blackburn Rovers, Leicester City, Tottenham Hotspur (Two wins each) Everton, Middlesbrough, Portsmouth (One win each)

4.4 Cup Finals

Between 1993 and 2010, “Big Four” teams have played non-“Big Four” teams in cup finals a total of 19 times. The non-“Big Four” team has won on only three occasions.

Table 2

“BIG FOUR” RECORD AGAINST NON-“BIG FOUR” TEAMS IN CUP FINALS 1993–2010 INCLUSIVE (18 SEASONS) FA Cup League Cup Total “Big Four” Win 9 7 16 Non-“Big Four” Win 1 2 3

4.5 Survival in the Premier League

Between 1993 and 2009, promoted teams have generally not survived for very many seasons in the Premier League before being relegated. Of the 50 teams promoted during this period, 25 (48%) were relegated after only one season. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Table 3

PROMOTION TO RELEGATION—SURVIVAL OF TEAMS PROMOTED TO THE PREMIER LEAGUE 1993–2009 INCLUSIVE Number of Seasons in Premier League From Number of Teams Number of Teams Promotion to Relegation Relegated not Yet Relegated 1 24 2 2 5 1 3 2 1 4 2 0 5 0 2 6–10 inclusive 5 4 11 and over 2* 0

* Newcastle Utd.—16; Middlesbrough—11

5. The Solution

5.1 In order to restore competitiveness to English football, the current free market philosophy needs to be changed to a more egalitarian one. A much better balance needs to be struck between the key interrelated variables that determine the quality of the team on the pitch and thus its success or otherwise, namely: — Distribution of resources. — Direction from the board. — Quality of manager and his team. — Support—fans getting behind their team. — Use of resources. — Quality of youth development. — Transfers of players in and out.

5.2 There are a number of ways in which the necessary changes might be effected: — Government intervention: This appears to me to be very unlikely under a Government of any political persuasion. — Clubs vote for the changes: The “big” clubs would certainly not vote for it and, if they could do so, would block any moves in this direction. —“Smaller” clubs breakaway: The “smaller” clubs—anything up to 35 in number—could break away from the Premier League and leave it with a small rump of teams with no . This could be effective but would be a brave and collective decision. — Governing bodies adopt an egalitarian philosophy and make the necessary practical changes that go with it: This would be possible; philosophies can change.

6. Conclusion

In conclusion: — My proposition is that the unregulated, free market, commercially-driven philosophy adopted by the Premier League has resulted in unacceptable differences in wealth between clubs to the point where the game is no longer competitive. — In order to restore competitiveness, the philosophy needs to change to a more egalitarian one in which resources are much more evenly distributed. — A much better balance needs to be struck between the key interrelated variables that determine the quality of the team on the pitch and thus its success or otherwise. — In practical terms, this should be undertaken by the game’s governing bodies. — A breakaway from the Premier League by a majority of teams might be another route. January 2010 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Ev w12 Culture, Media and Sport Committee: Evidence

Written evidence submitted by Jay Cochrane, The International Football Development Academy (iFDA)

I wish to contribute to the current inquiry on the governing of professional football. Having worked as a coach for the past seven years my colleagues I feel I have a realistic view of the state of the English game and I believe that a majority of the problems are rooted in youth development. The development and production of less English players at the top level, means clubs are having to buy players and import talent from abroad. This is well documented in The PFA’s meltdown report, an important document which, in my opinion, should be considered in this inquiry.

European clubs such as Real will never struggle to purchase players due to royal backing. This can serve as a catalyst for clubs paying bigger wages and spending more money on players. This is well highlighted in the recent Wayne Rooney saga, where according to newspaper reports Rooney is now the highest paid player in Premier League history. Manchester United are notorious for not paying the highest wages, but yet were almost held to ransom by their star player. Now a club who are reknown for excellence while not paying high wages are having to dig deep and spend over £200,000 a week on one player. So is European football to blame? If you look at any of the major transfer fees through the years, most of the bench marks have been set by Real Madrid (Anelka, Figo, Zidane, Kaka, Ronaldo—Brazil, C Ronaldo—Portugal). After these prices, each club wanting to stay at the front of the pack experienced an increase in player fees. For example Manchester United spent £30 million on and £28.1 on Juan Seba Veron, once the Zidane and Figo transfers were completed. These players were used as a measuring resource by clubs to value their players for transfer fees. Prior to this their most expensive transfer fee was £19 million on Van Nistlerooy, who was a striker. This may seem insignificant but strikers are notably the most expensive transfers where goalkeepers and defenders are less costly. However, Ferdinand fetched £30 million and is a defender. This was a bizarre series of transfers where a defender was fetching more than a striker, it was a sign of the turmoil to come.

It is well documented that good youth programmes can help reduce debt, win trophies and improve the game for peoples enjoyment. Ultimately leading to a better government of football. After all, lest not forget it is a game. All these transfer saga’s can be somewhat avoided if a strong youth setup is implemented. Again, coming back to Manchester United, the famous youth team of ’92 produced players such as , , Nicky Butt, Gary and Phil Neville and the mighty who played in the same team during the world famous treble season. This pushed British football from a 1/4 finalists place to serious European contenders. Barcelona’s current team boasts nine graduates from La Masia (Barcelona’s academy training system) an unprecedented amount in modern football. The majority of the Spanish World Cup winning squad were also graduates from La Masia (player breakdown available). Watford FC are currently 6th in the English Championship (and looking good for promotion), from near relegation last season and seven of their current squad are youth team graduates. All these clubs, during times of youth team graduate success enjoy a period of financial stability after receiving their rich crop of home grown players.

It is a popular opinion that youth success gives stability to any club. After all a club can have as many strategies as it wants but without a crop of talented players to win trophies/play good football no success will be enjoyed.

Increasingly frustrated with the drop out figures and stats displayed by The PFA’s meltdown report a new concept known as The Scholarship Programme has been conceived and promises to light the way for drop outs from the game. It promises a realistic way back in and also a cutting edge education for a fallback career. The Scholarship Programme is ran out of , in England. It is available for 16–21 year olds and will provide them with an opportunity to live and play football in England full time for a full season.

September ’11 sees the doors open for 18 fortunate footballers to come and play fulltime football here in England. Full time training at an elite facility next to professional English teams, a ground breaking education supported by (Chelsea FC and England) and (ex Arsenal and England, now TV personality), luxury accommodation in a Cheshire mansion, personal conditioning programmes and much much more will be provided to the lucky 18. “The Scholarship Programme” is the most unique and pioneering scholarship in World football. We know this through researching private models, the FA Premier League Academy model, the Draft system and a whole host of other scholarship packages out there. More information can be provided on this pioneering new football and academic education. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Culture, Media and Sport Committee: Evidence Ev w13

Written evidence submitted by the Saints Trust Consumer Cooperative Action Committee 1. All professional league football clubs should have their own Consumer Cooperative trusts representing the consumer rights of supporters and progressing the potential economic and social role football can play in the community. 2. The FA, Premier League and Football League should develop and implement a standard swipe card payment and identity card system similar to that of the successful Oyster Card System used by Transport For London. 3. The swipe card system used as a means for trusts to prevent fellow travellers from using football as a means to cause social disorder and progress political agendas—and to negotiate discount fares with train operating companies—reserve whole carriages on scheduled services and contract hire special trains.

Background Everyone knows how to manage football clubs except the professionals who own and manage them … a similar attitude adopted by consumers in the industry I work as a professional in—the rail and hovercraft transportation sector. The rail industry has a formal structure within which these attitudes can be channelled—the common interests of passengers in their role as consumers represented on the board rooms of train operating companies and the Department for Transport—and the government through its community rail development legislation—the means for consumers to own and manage their own local rail networks. The football industry does not. What the Saints Trust was all about during the three years I was secretary (August 2007 to August 2010)— was representing the rights of supporters as consumers of the club’s services—it was a period when Southampton Football Club was experiencing critical financial and board room instability with factions on the clubs board of directors playing a game of musical chairs in their quest for control of the company—this situation led to the club going into administration In a spirit of cooperation not conflict with the different board room decision makers which surfaced during this period—and the auditors who were appointed to take the club out of administration—including the progression of a “Plan B” to seek funding from the private and or public sectors to purchase the club should no credible buyer surface in the administration process. The same policy of representing consumer rights and cooperation was adopted when the club achieved financial and management stability after it was a acquired by a new owner—placing the trust in a position to undertake football in the community initiatives necessary to meet its constitutional objectives—a decision being made to create new football related jobs career and business opportunities in the St. Mary’s district of Southampton—the area immediately surrounding Southampton Football Club being designated an economic redevelopment area by the European Union receiving access to redevelopment funding through a local government agency. The Saint Trust Consumer Group Action Committee being formed to take football supporters rights and its football in the community programme forward.

Submission The Football Association in partnership with the Premier Division, The Football League and Supporters Direct (the umbrella organisation of the national movement of football trusts) should develop and implement a National Swipe Card Identity Scheme—with a standard electronic pre payment and self validation system— based upon London Transports successfully Oyster Card system. The system mean’t that regular travellers could take advantage of low bulk price advance bulk purchase of travel units—which they could use if and when they travel—the system replacing the former season ticket system whose condition of issue required consumers to travel on a day to day sequential travel basis in order to obtain discounts—with the consumer bearing the loss if through sickness holidays or other commitments they were unable to travel—a system which effectively excluded access from significant sectors of London public transport’s core market base of regular travellers—whose journey patterns were not on a day to day sequential basis. As well as extending consumer rights in terms of access to bulk advance purchase discount rates—and expanding access to the rates to all sectors of London’s core market base—it provided the back office management information control and communication systems for the introduction of low cost airline style capacity revenue control and market forecasting systems—and the means for the electronic payment of revenue direct to independent participating operators at the time of use. The introduction of a similar standard swipe card digital pricing and documentation system for all professional league football clubs as well as providing a win—win situation for supporters and owners of clubs would also provide the logistics for Supporters Direct to introduce a scheme designed to prevent fellow travellers using football as a means to cause social disorder or progress political agendas—and for them to negotiate special match day discount fares with train operating companies—reserve coaches on scheduled services—and contract hire special trains. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Ev w14 Culture, Media and Sport Committee: Evidence

The swipe card identity card providing the means for supporters to have automatic free membership of their designated club football trust under the umbrella of Supporters Direct—with a proportion of the clubs revenue from the card used to finance the administrative cost for trusts to regulate their members behaviour with the provision of their own stewards on rail transport access. Trust membership automatically means that members must conform to European Human Rights Legislation—both travelling to an from grounds and at the grounds themselves—which is contained in the Constitution and Model Rules issued by Supporters Direct—this provides trust with the means to sanction of withdrawal of members swipe card facility—who as “fellow travellers” use football to engage in unsocial behaviour or political motivated activities. Or engage in excessive behaviour in regard to rival club supporters—over and above that of the natural old English “Chaucerian” banter chants song and body language which has been the historic tradition built into professional league football supporters culture ever since its formation in the nineteenth century. January 2011

Written evidence submitted by Runcorn Linnets Football Club Introduction — This submission is on behalf of Runcorn Linnets Football Club. — Our submission refers mainly to Question 4 (Supporters’ Trust Model) plus Question 3 (Debt) and Question 5 (Government Intervention). In the spring of 2006, the supporters of North West Non-League club Runcorn FC held a public meeting to discuss the future of the club. At this meeting it was decided that if the club was to survive, the fans would have to form a new club from the ashes of the old one. This has become an all too familiar story in the world of football. Our submission to the committee would like to relate the background to our story and thereby attempt to cast some light on the governance of football and why we feel it must change. Our story is not unique but shows how fans have an important role to play in governance as the only constant at any club.

Summary — A brief history of our club. — The formation of a limited company. — The local club in the community. — The onset of financial problems. — The move out of the town, spiralling costs and falling attendances. — The old club ceases to trade. — Formation of the Trust. — Decision to re-form. — Planning the return home. — Working with the local council. — The pros and cons of the shareholding model.

1. A brief history of our club Runcorn FC was founded in 1918 at the end of the Great War. The town and ground had previously played host to a successful rugby team. The club was closely allied to the social arm of the local tannery and was seen as a community facility to allow locals to play football at a reasonable non-league level, in our case the Cheshire League. The club enjoyed varied degrees of success throughout the 1920s and 1930s, culminating in an appearance in the Third Round Proper of the FA Cup in 1939 against the then holders Preston NE. The war years in the early 1940s interrupted normal football life but post-war the club resumed its life in the Cheshire League. We were a typical north of England non-league team that attracted good crowds in those pre- televised football days and before the huge marketing of football by the large league clubs

2. The formation of a limited company In 1953, the club took the decision to become a Limited Company, in line with many other clubs of the day. This, of course, resulted in shareholders buying into the club. At this level of football, the shares represented little more than a donation to the club as there was never any real prospect of a return on them. Many fans and local businessmen purchased varying numbers of shares to help the club. From this point onwards, the club was run by a Board of Directors. The number of shares was significant, as they gave the holder more voting power and the board tended to comprise of groups of local and often influential businessmen. The Chairman tended to be the local greengrocer or confectioner. It was assumed and expected that board members cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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would “dip into their own pockets” to help ensure the bills were paid. As a limited company, regular annual accounts would be produced showing mostly that the club lived from hand to mouth.

3. The local club in the community By the 1960s, post war Britain was undergoing immense social change and football was part of that change. The local football club in the community was now under increased pressure as people’s wealth increased and the range of social activities and venues started to increase accordingly. At non-league level this was an era of substantial change in the structure of the game. Up to this point, the league structure had been generally regionalised but by the late 1960s, Runcorn FC had joined the newly formed , which covered much of the North of England and took us away from our mainly local North West roots. This in turn meant higher costs and the desire to attract better quality players from a wider area. The Limited Company model was even by this stage becoming questionable. Clubs at this level were becoming increasingly reliant on local businesses to provide financial support and many had local benefactors who dug deep into their pockets. The model was flawed. Clubs started to live and spend beyond their means. Travel became easier but increasingly expensive and the advent of televised football and access for more and more fans to the league game was impacting on the game at this level. Supporter involvement at our club was limited to the “Supporters Club” whose sole purpose was to raise funds to help the club, which they did very successfully. There was no influence in terms of a seat on the board although occasionally a nominal seat was offered to placate the supporters. However, the amounts required to run a club at this higher level were becoming beyond the means of these hard working fans. They raised hundreds when thousands were needed. Gate receipts were no longer sufficient to meet the needs of the club as they travelled wider, paid higher expenses to players who were travelling from farther afield and generally had higher running costs. The burden increasingly fell to local businesses and benefactors to produce the finance. The model was always doomed to eventual failure. That said, the club continued to function and enjoyed success in this higher league throughout the 1970s and by the end of the decade, non-league football went national and we became part of that change, when we joined the Alliance Premier League (now the Conference) and indeed won the at our first attempt. Wembley appearances followed in the 1980s and 1990s but even by this stage, the trend was showing signs of going downwards. The travelling costs alone to southern outposts like Weymouth and Dover were draining finances. Players demanded ever more to play at this level. A north / south divide started to occur as the poorer northern clubs could not compete with their wealthier southern rivals. The championship success at the start of the 1980s was to prove to be the last at that level and despite three Wembley appearances in FA Trophy finals, the club was on the downward slope

4. The onset of financial problems One local businessman had followed another as Chairman. The power in the club lay with those who held the shares. The fans were seen almost as a necessary evil at times. The change from a local regional set up to the eventual national non-league set up had stretched the club to the limit financially and attendances had gradually decreased as competition from other sports, other social activities and league football increased. Various disasters hit the club to compound this. A wall collapsed at an FA Cup tie involving Hull City fans. The main stand was burnt down and high winds blew down another covered area. The club was forced to play out of town for a period for the first time since its formation, Valiant efforts were made to rebuild the ground and eventually the club was able to return home but the costs had taken their toll. The true picture of the debts was slowly starting to emerge. By the end of the 1990s the then Chairman and remnants of the board took the decision to move the club out of the town to play across the River Mersey in Widnes, a Rugby stronghold, where a new Community Stadium had been built.

5. The move out of the town, spiralling costs and falling attendances The fans were outraged by the decision. A fans’ group was formed to fight the decision but it had no teeth and the Chairman was not for turning. He held the shares and the power. Many fans took the decision to abandon the team and not to follow it out of the town. By this stage the club had been relegated for the first time in its history and further relegations followed. The move to the community stadium proved to be disastrous as spiralling rental payments and falling attendances compounded the problem. Despite repeated requests from fans, the club failed to produce adequate accounts to allow the true nature of the financial situation to be assessed. When the club could no longer afford to pay its way at the Community Stadium, a further move ensued to play at Prescot, even further out of the town. The club hit an all-time low and by the end of season 2005–06 it had become apparent the the situation could not be sustained. No true picture of the debts could be ascertained and estimates ranged from £150,000 to £500,000. Even to this day no-one is aware of the true scale of those debts. A last ditch attempt by the Chairman at that stage to involve fans by asking them to find £60,000 for the following season failed. The fans wanted to know the true financial picture and this was not forthcoming. To have tried to take on a club with apparently immense debt would have been both foolish and reckless in the eyes of the fans.

6. The old club ceases to trade The season 2005–06 was to be the last one for Runcorn Football Club (renamed Runcorn FC Halton when it moved to Widnes). The fans were aghast. They had already formed a small Supporters’ Trust in an attempt cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

Ev w16 Culture, Media and Sport Committee: Evidence

to win some influence in the old club but this had proved futile. However, the formation of the Trust was to prove decisive in what happened next.

7. Formation of the Trust When the Trust was formed it had not been the intention of the small group of fans to do anything other than try to win influence within the club and to this end had purchased 400 shares as a starting point. However, when the old club ceased to play, the Trust was the ideal vehicle to move forward towards the formation of a new club, but this time not as a limited company but as a co-operative, as an Industrial and Provident Society, whereby Trust members would have one vote and the Trust Board would be an elected body. The fans would in our case run the club! We were indebted to the help we received from Supporters Direct in all this and indeed for the ongoing support and advice we have received from them since our formation. We are not alone in saying that without such help and ongoing support and encouragement we would have found the whole process much more demanding. This organisation has been crucial in moving the whole football agenda forward. Their advice in the setting up of the Trust was vital and there is a crucial ongoing role for them to play in ensuring the development continues.

8. Decision to re-form The decision to re-form the club was taken by a group of fans at a public meeting on 28 April 2006. An interim committee oversaw negotiations over the next three months which saw us find a league to play in (The North West Counties League Division 2) at Step 6 of the pyramid, set up a ground share agreement at Witton Albion FC (there was no facility within the town at the right level), appoint a manager and find a team! All this was achieved and a good pot of money was donated by committed fans to help the club establish itself. Within the next few months, Board elections were held and the first elected board was put in place. Amazingly the team achieved promotion in the first season and the attendances proved to be the best in our league by some margin.

9. Planning the return home The new board had promised the fans and Trust members that they would do all within their power to return the club back to Runcorn within a reasonable time-frame. Running a football club was a steep learning curve and at the same time we were holding negotiations with various funding bodies including the Football Foundation and Halton Borough Council to ascertain the level of funding we could achieve. Our own fundraising efforts hit a target of £30,000 over a period of 18 months. With great support from our local council and two local MPs, we eventually achieved our funding goals and our new ground was built during the early part of 2010, and we played our first game back in the town on 17 July 2010, some nine years after the old club had left the town. The ownership model that we presented to the council was undoubtedly a crucial element in obtaining their financial support for the project. The grant of £100,000 together with a similar grant from the Football Stadium Improvement Fund allowed us to build our stadium.The model clearly reflected shared agendas with the local council in terms of community targets and no risk of private gain.

10. Working with the local council As fans, we had watched dismayed as our club had reeled from crisis to crisis. We wanted to learn the lessons from this. We produced a development plan for our local council to ensure that our vision was for a community club at the heart of the local sporting community which would encourage local youngsters to aspire to play football to a good level and provide good facilities for the town. The development of the stadium was the first phase in this and the second phase involves the development of a multi sport all-weather pitch. The formation of a good open working relationship with our council was crucial to our success. We wanted them to see our vision and how it fit into their key targets, likewise with the local County FA. The first part of our plan, to return the club home, has been achieved. Other key elements, such as establishing reserve and youth teams have also come to fruition. Our aim to involve the local community is progressing and we have taken a junior club under our umbrella providing 10 junior teams. We will continue to work with the council to develop our plans further.

11. The pros and cons of the shareholding model The Limited Company model for the old club simply did not work for us as a club at this level and with our supporter base. There was no real sense of ownership. Allegiance to a football club is invariably passed down through the generations, but clubs cannot depend on a blind allegiance any more. For us, the fan-based Trust model provided a perfect vehicle. It provides an opportunity for annual elections to the board; is a one vote per member model, so is not dependent on the acquisition of large numbers of shares; the constitution is reasoned and will not allow the club to spend beyond its means; fans have ownership of the club. We have to build our own revenue streams and this in turn compels the club to grow at a sustainable rate. We are a small club in the wider picture but the lessons we have learnt must apply across the football community. We are not unique in seeing our club fold and neither are we unique in re-forming our club but football cannot live with ever increasing debt. Clubs who spend beyond their means are cheating the fans and cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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other clubs who live within their means. We need to create a fair playing field. Aspiration needs to be kept alive at all levels of the game. There is a case for treating community clubs differently. As an IPS we have no tax concessions, even though we are a non-profit distributing organisation. We are not treated as a charitable organisation. Changes here could help clubs to ensure financial stability which is a must for the future of our game. This is an opportunity to change the game for the better. The surge in Football Trusts and fan involvement must not be lost. Football needs to return to its roots and needs to be returned to its fans. January 2011

Written evidence submitted by Gary Pettit Introduction My name is Gary Pettit. I am a licensed insolvency practitioner and have recently been administrator of two non-league football clubs and have advised others over the past eight years. During my career I have been on Council at the Association of Business Recovery Professionals, course director at the Smaller Practices Group seminar and a regular speaker at various insolvency conferences.

Matters for Consideration The principle headings for this report are: — Should football clubs be treated any differently to other commercial organisations? — Are the rules governing football fit for purpose? — Is there too much debt in the game? — Is Government intervention justified and, if so, what forum? — Are there lessons to be learned from other sports?

1.0 Should football clubs be treated any differently? 1.0 Football clubs serve the community; they provide thousands of people with a pastime, a break from what is generally a stressful working and social environment. The following of a club can be astonishing. An example is one gentleman I conversed with who had not missed a single game in 20 years (home or away). He did not support any glamorous club like Manchester United or Liverpool but (non-league) Halesowen Town FC. 1.1 However, the professional clubs in the UK are limited liability companies, registered at Companies House and required to follow statutory duties like all companies registered under statute. While they do serve the community, what is different for clubs from those that contract to repair and maintain roads, drainage systems, medical or educational supplies? 1.2 Until recently I was in office as administrator of Northwich Victoria Football Club. I am also handling the affairs of a health and welfare business where the sick and needy are cared for. Are we saying football clubs should receive a preferential treatment over that business? 1.3 While football clubs are perceived to be important to the British public there should only be a reasonable degree of flexibility. All too often winding up petitions are adjourned, causing frustration, an additional burden on the courts and increased costs.

2.0 Are the rules governing football fit for purpose? 2.1 It has become abundantly clear from handling two football club insolvencies recently the Football Association (“FA”) treat all clubs with the same rules, irrespective of position in the professional game and behave in a manner whereby the Companies Act is of little relevance. 2.2 The FA does not act in a manner of a governing body, but rather an administrative centre ensuring its members abide by the FA rules. It appears to be nothing more than a bureaucratic tick box exercise. 2.3 Example of both (above) points is: — Same rules. Halesowen Town Football Club is a non-league club. In order to save the club I needed to trade the business under administration and this was only made possible by third party funds. In a conversation with the FA finance regulatory division I was asked why I was not reducing costs and considering the sale of any players. This is not a club with multi-million pound sponsorship deals or £1 million, plus, value players yet the FA were of the view I must trade it exactly like a league outfit such as Leicester, Southampton or Portsmouth. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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— Again with Halesowen the FA were concerned with the accuracy of the last set of accounts filed. While there was a mutual agreement they accounts were probably inaccurate the FA frustrated the administration (and withheld membership transfer) by wanting answers to their concerns, notwithstanding: — The directors controlling the club at the time the accounts were filed were removed from the board the year prior to administration; and — These accounts had no relevance to the club going forward with purchasers who were approved by creditors at a properly convened meeting. 2.4 A further example of the approach adopted by the FA surrounds the administration of Northwich Victoria Football Club (“NVFC”). NVFC went into administration on 15 May 2009 owing in the region of £400,000 to HM Revenue & Customs. Notwithstanding the administration The FA allowed NVFC to enter into the 2009–10 FA Cup competition where they excelled, beating league club Charlton before succumbing to Lincoln City. These fixtures attracted media attention and both were broadcast on ITV. 2.5 Prize money and funds paid for television rights amounted to £190,100 but the FA refused to release the funds due to reasons including the following: (a) The FA were not happy the club was being run in accordance with their rules, ignoring the statutory duties of an administrator and steps he must take to safeguard the company. (b) The “Football creditors” had not been paid, notwithstanding a term within the proposed sale agreement included the requirement to pay all football creditors as required by the FA rules. (c) It should be noted the exit from administration was a sale of the business and assets via a company voluntary arrangement (approved December 2009) but the sale could not complete until FA membership transfer was sanctioned. HM Revenue & Customs approved the voluntary arrangement. (d) At first, the FA refused to entertain my suggestion that they pay the amounts due to Charlton and Lincoln from the funds held, insisting I pay them from the administration, failing to accept NVFC are a non-league club on very limited funds. They eventually paid the £22,000 but subsequently alleged I had refused to pay the sums owing so they were forced to pay! (e) The FA has continued to refuse payment of the funds owing claiming payment is discretionary. Even with the knowledge their continued refusal placed NVFC at risk of being placed into liquidation to the detriment of all concerned. (f) Eventually, after the threat of legal proceedings the FA has, in December 2010, agreed to pay the net proceeds over, albeit there are still certain (manageable) conditions. 2.6 The 12 months it has taken to get the FA to concede the funds are payable nearly saw the closure of NVFC, added approximately £20,000 to the costs (to the detriment of creditors) and has placed the new owner under significant personal financial strain.

3.0 Is there too much debt in the game? 3.1 The simple answer to this heading is “Yes”. You only need to consider some of the clubs that have become subject to administration or are facing (or have faced) winding up petitions include: — AFC Bournemouth — Chester City — Halesowen Town — Luton Town — Leicester City — Merthyr Tydfil — Leeds United — Northwich Victoria — Portsmouth — Southampton — Crystal Palace — Cardiff City — Sheffield Wednesday 3.2 It goes without saying each one of the above (and some 140, plus other clubs) have issues with taxation arrears. It is well documented Portsmouth owed some £32 million (although the quantum was in dispute and the accepted amount was some £20 million). 3.3 The common denominator of most clubs in financial difficulty is significant debt owing to a benefactor and HM Revenue & Customs. One of the offences under the Company Directors Disqualification Act 1986 is retention of Crown monies, whereby a policy has been adopted where the Crown are treated as an unauthorised overdraft facility. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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3.4 Contributors to the financial issues professional clubs face include: — Transfer fees (including costs associated with a transfer) are out of control on an international basis. — Unsustainable player wages. — A drive towards corporate hospitality, removing the game from the (majority) supporter by making it too expensive to attend games. — Lack of financial governance by the FA.

4.0 Is Government intervention justified and, if so, what forum? 4.1 FIFA do not recognise the intervention of a government with its football association. That was demonstrated with their action against Nigeria after the shooting incident at the last world cup. Accordingly, the FA cannot act upon Government intervention without serious consequences imposed by FIFA as a result. 4.2 Irrespective of the comment in 4.1 (above) the financial state of football in this Country requires intervention, whether directly or indirectly. 4.3 At the moment the FA hold a position of punishing members who are in financial difficulty and insisting on the FA rules being followed, even though those rules are outdated, fail to be flexible in terms of the size of club being dealt with and do not provide for insolvency events or recognise the office held by administrators or liquidators. 4.4 If the FA are to be the trade (or governing) body of football then they need to conduct themselves accordingly. Some of the key areas they need to impose proper rules upon include: (a) Flexibility of rules for Premiership, league and non-league clubs. You simply cannot impose the same rules across the board. (b) Question accounts filed rather than simply “Tick the rules compliance box”. (c) Be more critical on wage levels. They need a computation (or guide) where if a club propose to pay a player at a given rate of pay the club must deposit a bond representing the PAYE/NIC for the player with the FA to be held to the order of HM Revenue & Customs. Alternatively, officers of the club provide a personal guarantee for the likely tax liability. 4.5 The football creditor rule is anti-competitive and must be amended, if not removed. Its original intention was to protect players’ wages but the FA have extended this rule to cover football clubs and all other football- related bodies. With NVFC football creditors amounted to £24,000 (paid in full) whereas other creditors, including HM Revenue & Customs, can anticipate approximately 35 pence in the pound in five years. Similarly, in Portsmouth the football creditors are in the region of £30 million (to be paid in full) with other creditors receiving approximately 16 pence in the pound. 4.6 Should the FA refuse to exercise some form of bond or guarantee then HM Revenue & Customs should have the power to invoke a security bond. If the football industry wants some form of flexibility in the approach by the court then there must be a cost. Allowing HM Revenue & Customs the power to demand a bond will, indirectly, control wage levels and provide some form of protection for the Crown. Under the terms of the voluntary arrangement for NVFC I put forward that the new owners shall deposit with me a bond equivalent to three months’ PAYE/NIC liability, which I hold in an interest-bearing trust account. Should the club fail, for any reason, this bond fund shall be paid to HM Revenue & Customs, thus reducing their exposure. 4.7 Section 190 Companies Act 2006 provides that a connected party transaction is one where the transaction is £2,000 or 5% of the company asset base. I fail to see why the FA cannot impose similar parameters (adjusted to a reasonable/appropriate level of course) for football clubs.

5.0 Are there lessons to be learned from other sports? 5.1 The obvious lesson the FA could take is that from England with the wage cap. The FA (and its members) will almost certainly object to such a move. However, it needs some form of control such as this in order to start imposing better financial controls. 5.2 The arguments put forward by footballing bodies would include the likes of such a restriction will make English football non-competitive. However, English rugby can demonstrate that is a fallacy. 5.3 Players’ wages must be controlled and imposing a wage cap for premiership and another for league clubs would be the obvious start. Apart from stopping agents demanding ransom hikes in wages (Wayne Rooney being the most stark, recent example).

Conclusion 6.1 In my opinion the FA have a huge responsibility and need to be more than a mere tick-boxing police department. They are quick to impose fines and penalties where members encroach on the rules but, do not have rules to cope with none-ordinary activities such as insolvency. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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6.2 The FA must revise their rules to accommodate insolvency events and to reflect the level of football club involved. To this end, I would suggest the rules should reflect premiership, league and non-league. Actual (playing) football laws are designed to accommodate differing levels of football so why not the FA in general.

6.3 More scrutiny is required by the FA on proposed large-scale salaries. The FA could construct rules of a similar parameter to that of the Companies Act where taxation bonds must be deposited or personal guarantees given if the transaction exceeds these parameters.

6.4 HM Revenue & Customs must be allowed to impose needs for security before any salary terms are concluded.

6.5 The FA monopoly needs addressing. If it is considered they are unreasonably preventing methods approved by creditors to save the club then there must be some form of recourse.

Clearly, the restrictions imposed by the committee mean it is not possible to go into greater detail, which I more than willing to discuss if necessary. January 2011

Written evidence submitted by Rob Bradley and Roy Noble, Lincoln City Supporters Trust

At Lincoln City the ownership of the club changed in 2000 from that of a single owner, to a broader “community” model. The supporters trust gained over 25% of the shareholding with the rest owned by local business people and a lot of smaller shareholders. The new board of directors has comprised around eight individuals including a representative from Lincolnshire Co-operative and two elected fans representatives from the supporters trust.

In the last 10 years or so the club has cleared a large amount of debt, and made profits when the team reached the play-off final in Cardiff twice. Since then the team has struggled and small losses have been made, but the policy of running the club on a responsible and sustainable financial footing remains.

Over the last few years, it has been interesting to view the economic climate at clubs in the UK, especially bearing in mind the experiences we have had here locally. The excesses of some chairmen and boards still continues and it is not easy competing against some clubs who have gambled their future existence in the pursuit of instant football success.

We believe football clubs should be treated differently than other limited companies or businesses. A football club is a community asset and a focal point for the area in which it is located. It is not a business in the usual sense and should not be a means for irresponsible owners to pander to their ego before they depart often leaving behind the debris they have created. Often the name of a football club is the only way that particular town reaches the eyes and ears of people far away. And all supporters trusts (and trust supporters) would say in an instant that the game should be better regulated to prevent the near demise of their clubs or the build up of debt that can never be repaid.

The election of a fan onto a board of directors opens a club up to its fans, within the discipline of not breaking any obvious confidentiality. The introduction of supporters into the running of a club creates a team ethic behind the scenes and not just on the pitch. And our experience has proved, or has witnessed when looking at other clubs with trust involvement, that fans are often of a calibre that can run clubs responsibly and successfully.

Our view is also that the FA is not strong enough or dynamic enough. It does not control the national game with enough strength. It has allowed clubs in this country to have debts that exceed the debt at all other Eurpean leagues added together. It has only one fans’ representative when millions of men, women, and children love the sport.

We believe government should step in and make the changes that to some people are obviously needed. It should control what clubs do within reasonable bounds and it should make the football bodies strong enough to stand up to the larger clubs and the moneyed owners.

Football is a great sport and it is still the peoples game. But it needs a radical overhaul and the clubs themselves are in too deep to do it. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Written evidence submitted by the Commission on the Future of Women’s Sport 1. Our response concentrates on one particular aspect of your review, whether the FA is fit for purpose. 2. As you know, the Commission on the Future of Women’s Sport (full membership listed below) has published two reports into the need for governance reform in sport. Trophy Women? and Trophy Women? 2010 both demonstrate that many sports, including football, are suffering by not having a diverse leadership. The FA in particular, has no women on their Board and very few in senior executive positions. 3. We recognise that your current investigation is primarily concerned with professional football clubs, but we believe that the lack of diversity (specifically the lack of women) at the top of the FA is damaging its ability to take the sport forward, and damaging its ability to properly regulate the professional clubs. 4. It is incredibly difficult to fathom out who controls the FA. It remains a myriad of Boards and Committees all representing different (and often competing) interests which ensure that proposals for reform and progress are quashed at every opportunity. For instance, last year the 1,120 FA Shareholders managed to overturn the will of the FA Executive and the FA Council and block the removal of an antiquated ban on mixed football up to the age of 14. (http://www.thefa.com/TheFA/RulesandRegulations/NewsAndFeatures/2010/MixedFootball) 5. When even seemingly uncontroversial and well backed proposals such as this are blocked, it is easy to understand why the FA struggles to control the many powerful interests within the professional game. 6. The Commission believes that to ensure that the FA is fit for purpose; it needs to radically modernise its own governance structure. Many of the representative committees need to be abolished and the main Board needs streamlining with a strong injection of independent Members from outside the sport. These new Board Members should be appointed following an open recruitment process against defined role descriptions. We believe that if these new Members included women, then the FA would benefit from more informed decision making and higher quality decisions. 7. You will be aware that we are not the first body to call for these reforms, but we urge the Culture, Media and Sport Select Committee to do all it can to ensure that the FA adopt them. January 2011

Written evidence submitted by Cardiff City Supporters Trust 1. Introduction 1.1 Established in 2008, Cardiff City Supporters Society Limited (the Trust) is a democratic, not-for-profit group of supporters, committed to giving fans a voice in the decision-making process of the club, and to strengthening the links between Cardiff City and the community it serves.

2. Concerns 2.1 The Trust shares the concerns of many supporters across the United Kingdom at the way football clubs are owned and managed by wealthy individuals simply as businesses without any concern for, or involvement by, the wider social and footballing community. We have seen clubs chasing the golden goose that is football’s Premiership, making short term investment decisions which have long term consequences. 2.2 Investing in football on a purely business basis, without concern for a club’s sustainability is contrary to the interest of the club itself and indeed the interest of the fans who will still be attending matches long after the investor has moved on to other business ventures.

3. Cardiff City 3.1 Chasing that dream of Premiership football Cardiff City has over recent years, swayed from one financial crisis to another. Players were enticed with unrealistically high signing on fees and wages without the club having the long term means of paying for them. 3.2 Under the ownership of Lebanese businessman Sam Hammam, the club was run at a significant operating loss. This resulted in the club loaning more than £21.7 million from Citibank between 2000 and 2004. Citibank called in those debts in late-2004, so the club then borrowed £24 million from a mysterious Swiss-based Panamanian-registered company called the Langston Corporation. The advance was given in the form of unsecured loan notes. 3.3 This particular loan was unsecured because there were no material assets at the club other than the playing squad. (A pepper corn rent was being paid to the council for the use of , the club’s ground at that time). 3.4 The club was incurring heavy losses and has only showed a net profit in one year during the last 10 and then only because promising players or those with a proven track record were sold. There could be no more borrowing. Consequently, costs had to be cut but the club’s hands were tied with a high wage bill and long term contracts for players in place. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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3.5 Ninian Park could not be redeveloped so a new build was conceived—this would be more attractive to those who had not previously attended football matches, would increase the capacity and raise the price supporters paid to attend the all seater stadium. Retail outlets were in large part to pay for the new stadium. However, delays in the project meant it finally opened during a recession.

3.6 Even after the new stadium opened cash flow became a problem. Season tickets were offered for sale earlier and earlier. Some contractors at the stadium went unpaid. This season’s season tickets were offered to supporters well before Christmas 2009. Fans were told that the money raised would go towards strengthening the playing squad.

3.7 The supporters were keen to play their part in helping the club financially, but the first they heard of the financial difficulties was when the local paper announced that the club had been served by HMRC with a petition to wind the business up for non payment of taxes. As it transpired, the season ticket money, given in good faith to purchase new players, was used to pay outstanding bills. The new players never materialised. It was against this history of mismanagement that the Trust was set up.

3.8 By early 2010 the Trust became concerned that the club had not held an AGM for three years. Such a meeting would have allowed small investors, which by then included the Trust itself, to ask searching questions as to the financial viability and the management of the club.

3.9 The Trust pushed for an EGM to discuss the ongoing crisis. It wrote to every investor in the club and asked them to proxy their votes to the Trust in order to call a meeting. In the face of such discontent the club did finally call an EGM. Some unpalatable truths were disclosed at that meeting, in part as a result of the actions of small investors and the Supporters Trust itself.

4. Recommendations

4.1 In the light of the experience of the Cardiff City Supporters Trust we offer the committee the following recommendations with regards to the future management and regulation of football in the United Kingdom. 4.1.1 The government should establish a UK Football Commission (the Commission) which would oversee the financial and corporate governance arrangements of professional football clubs. The Commission would include representatives from the FA, football trust or Supporters Direct and a players’ representative. 4.1.2 The Commission would conduct the “fit and proper person” test for chairmen of football clubs over and above all other aspects of due diligence undertaken when a club changes ownership. This test would become a statutory obligation and be conducted in conjunction with the Football League and the Football Association, with the Commission having the final say on the suitability of all such persons to run a football club. 4.1.3 The existing fit and proper person test would be strengthened. New measures could include the person’s previous record not simply in business but also in football, their personal history and past and their present financial standing. 4.1.4 A club’s players wage bills should be capped as a percentage of the total turnover of the club and monitored by quarterly returns to the Commission. This would ensure there is no breach of the cap and that the figures could not be somehow masked over longer accounting periods. 4.1.5 Supporters trust should have formal representation on the boards of professional football clubs, even if this is simply in an “observer” capacity. Fans issues should become a permanent agenda item at all clubs’ board meetings. 4.1.6 New share offers in football clubs should ensure preferential status for properly constituted supporters trusts so that they have the first right to buy any new share issue. This would continue until the supporters trust has achieved a %age of the total shareholding of the club. (We suggest this should be set at 25% of the overall shareholding.) 4.1.7 As happens in France and the NFL, football clubs should be liable to independent audits every year so that the Commission is aware of the financial state of professional football clubs. 4.1.8 In order to encourage supporter participation and ownership, tax relief should be offered on investments by supporters’ trusts in their clubs. 4.1.9 Before there is a takeover of a professional football club, an “intentions test” should be required by the Commission which lists and assesses potential investors’ plans to develop the club as a community enterprise as well as what role they intend fans to play in the governance of the club. This should then be made a condition of agreeing any take over. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Written evidence submitted by Andy Green Submission to the DCMS Select Committee Enquiry into the Governance of Professional Football — The nature of sport and financial inequality means that football clubs have volatile and unpredictable income. — The volatility of earnings makes clubs very vulnerable to damage from excess borrowing (whether to fund the acquisition of the club, to fund unsustainable spending on players or to pay for poorly thought out stadium investment). — Other sports (such as the NFL in the United States) and other football leagues (such as the Bundesliga) show how easy it is to regulate borrowing in a sport. — Football in England has no limits on the amount of debt that can be placed on clubs and little indirect financial regulation that mitigates the impact of excessive borrowing. This is wrong. Current Premier League financial regulation is inadequate and needs strengthening. — Controlling excess debt in football is intimately connected to the issue of ownership. Greater supporter ownership would help prevent many of the current issues seen in the game. — The Committee should recommend tighter financial regulation of football through the banning of LBOs and either limits on debt or regulations similar to the Bundesliga or UEFA’s Financial Fair Play rules.

1. Introduction 1.1 I am writing this submission in a personal capacity. I am an investment analyst in London with 16 years experience of company analysis. Since January 2010 I have written a blog (www.andersred.blogspot.com) about football finance with a focus on Manchester United and the ownership of the Glazers. My blog is one of the leading sources of information and analysis of football finance and has received over 200,000 visits in its first year. 1.2 I conducted the initial research on the Manchester United bond issue that was carried by (http://bit.ly/5OF2N8), Daily Telegraph (http://bit.ly/gGmaTP) and FT (http://bit.ly/728KJ4). I also conducted the investigative work on the Glazers’ US property business that was featured on the BBC Panorama programme “Man United—Into the Red” in June 2010. I have written for the Guardian and various websites and have appeared on TV and radio programmes to discuss football finance.

2. Why debt is particularly dangerous for football clubs 2.1 Football is an industry and its clubs are limited companies, but the structure of the industry is such that it operates very differently from others. Whilst in other industries, the majority of (or even all) firms can prosper together, in football there are always winners and losers. Only one club can be the winner of each of the professional leagues each year. There can be no more than two winners of the major domestic cup competitions and in the Premier League, only four clubs can qualify for the Champions League and two to three for the Europa League. When clubs are successful, success (winning a title or promotion or European qualification) cannot be taken for granted (as Liverpool FC’s fall from a member of the “big 4” shows). Whilst this sharp divergence between success and failure has always existed in the professional game, the highly skewed financial rewards seen in the last 20 years have made the financial impact of “failure” far more actute. 2.2 An English club qualifying for the Champions League can expect to receive c.€29 million (c. £25 million) in TV income even if they are eliminated at the group stages. In addition, the club will be guaranteed three home fixtures which will bring in significant matchday income (for example c. £5 million for Liverpool or c. £10 million for Manchester United). CL participants can expect to achieve better commercial and sponsorship deals and this too will add to income. The flipside to this bonanza of extra income is that failure to qualify for the Champions League can seriously impact a club’s business model by depriving it of a major part of its “expected” revenues. 2.3 The same high risk/high reward profile is present for those clubs in risk of relegation from the Premier League. Although “parachute payments” reduce some of the downside, the skewed nature of domestic TV deals (the Football League receives £264 million over three years for domestic rights vs. the most recent Premier League three year deal worth £3.2 billion) means that relegation to the Championship can cause catastrophic financial problems. 2.4 It is in the nature of football that the largest cost, player wages, is largely fixed in the short-term. Players are typically employed on four to five year contracts and this makes reacting to adverse financial events difficult for clubs. Furthermore (and thankfully of course) football is highly unpredictable. Teams can and often do see huge slumps in form after periods of considerable success (obvious examples being Leeds United between 2001 and 2007 or Liverpool FC’s current travails). Such volatility makes business planning in the normal sense very hard and increases the likelihood that revenues and hence profits will be highly volatile. 2.5 The volatility of sporting performance, the semi fixed nature of much of a football club’s cost base and the skewed media income distribution within the professional game means that debt and leverage can have a cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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very significant negative impact on clubs. Debt involves fixed interest and capital payments which as is well known increases risk for a business. Although financial theory states that debt is “cheaper” than equity it also riskier and the level of debt that is sensible for a business depends to a great extent on the stability and predictability of a business’ income, profits and cash flow. Football with its highly volatile and unpredictable finances is inherently unsuited to high levels of leverage. Indebted clubs that unexpectedly underperform on the pitch can very quickly encounter very significant financial problems, with the forced sale of players, in some cases the sale of historic grounds, relegation and administration. Clubs that get into financial difficulties due to debt often have to file for administration and HMRC and other “non-football” creditors often suffer significant losses. The list of such problem clubs in recent years is well known and well documented and includes Portsmouth, Leeds United, Sheffield Wednesday, Liverpool, Cardiff City, Plymouth Argyle etc, etc. Debt is a factor present in the majority of these cases.

3. Borrowing to fund player acquisitions and wages; “living the dream” and Leveraged Buyouts damage clubs and supporters. Borrowing for investment in assets is less risky but can still cause major problems 3.1 Although the risk that excessive borrowing presents to football clubs is always the same, it is important to identify the most dangerous types of leverage; borrowing to fund sporting ambitions through player purchases and paying unsustainable wages (often called “living the dream”, a quote from former Leeds United Chairman Peter Risdale) and borrowing to fund the acquisition of a club itself. Borrowing for long-term investment such as new stadia (which by definition creates an asset) is less risky but can still have serious adverse effects on clubs (see the experience of Bristol City’s delayed ground development for example). 3.2 Borrowing to fund sporting ambition is the most common form. Club owners are generally over optimistic about their management abilities and vision for a club. As Christian Müller, CFO of the Bundesliga told the European Commission: “...we learn by experience all over the world [that] most Club executives tend to operate riskily, tend to overestimate their chances in the Championship. This may result in disproportionate spending relative to the income some clubs generate.... club executives have somehow to be protected from themselves.” All academic evidence is that there is a very strong correlation between squad wages and points won (see http://on.wsj.com/cAWKoz), something which is obvious to owners. There is a natural tendency to borrow in the pursuit of success, although the zero sum game nature of sport means that not all teams can be successful. The skewed media incentives described above also conspire to encourage owners to borrow just to keep their team where it is. With relegation from the Premier League into the Championship so dangerous, the tendency is to borrow in an attempt to retain Premier League status (see the recent problems of Hull City). 3.3 Leverages buyouts (“LBOs”) are far less common than excessive borrowing in the pursuit of success on the pitch. It is commonly thought that only Manchester United and Liverpool have been bought in LBOs, but debt financing has been a material part of other purchases and subsequent problems of other football clubs including Portsmouth and Hull City as well as smaller clubs like Chesterfield. There is also suspicion that other “equity financed” takeovers have actually been funded with debt (Notts County and Derby being recent examples). 3.4 LBOs are in some ways even more problematic for football clubs than borrowing in the hope of success on the pitch. In the former case, owners are taking a gamble which may or may not pay off. Investment in the playing squad may lead to promotion and further success although the risks are high. With LBOs, clubs are saddled with debt solely to allow a particular party to take over the club. The club gains little or no benefit, no players are purchased, no facilities are built or improved. 3.5 In other “normal” industries, LBOs can often be defended as mechanisms to bring efficiency and financial discipline to target companies. Academic evidence is ambiguous and the financial crisis has caused a number of companies bought in LBOs during the boom to fail financially or run into significant problems (ie Readers Digest, EMI). When football clubs are bought using significant debt, the need to service interest costs has typically led to ticket price rises (c. 50% at Manchester United in the first five years following the Glazer takeover) and reduced investment (the need to service acquisition debt meant the deferral of Liverpool FC’s plans for a new stadium for example). The “efficiency” sought by LBO buyers tends therefore to be against the interests of supporters and other stakeholders. LBOs actually exploit the loyalty of fans to their clubs (economists would describe the demand for tickets as relatively price inelastic). Supporters end up, literally, paying for the privilege of having new owners. Monies that could improve football clubs or make tickets affordable are diverted to servicing debt. Since 2005, Manchester United has wasted around £300 million on bank fees, derivative losses and interest. To quote former Liverpool Chief Executive Christian Purslow during the last days of Hicks and Gillett’s ownership: “Can we afford to meet [our loans, interest costs and bank charges]? Just about... Do I wish that every penny spent on interest was available to spend on players? Passionately....We are highly profitable. The issue is that too much of that profit is being used to service loans put into place when the club was bought.” 3.6 As with debt taken on in an attempt to improve the team, unexpected failure (such as not qualifying for the Champions League) can cause significant financial problems for clubs loaded with LBO debt. Liverpool’s near default on its debt is fresh in the mind, and the club enters 2011 further away from a new stadium and a competitive team than it was when acquired by Hicks and Gillett in 2007. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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4. Other sports have successfully regulated debt 4.1 There are essentially two ways to regulate levels of debt in sport, direct controls (seen in the NFL for example) and indirect controls (such as UEFA’s Financial Fair Play regulations or the Bundesliga’s liquidity forecasts). The latter method does not prescribe debt levels (although positive balance sheet equity is a key part of the Bundesliga’s licensing system), but looks at the consequences of debt interest on profitability. 4.2 The NFL rulebook (formerly “The Constitution and Bylaws of the ”) provides the most obvious example of direct debt controls. Since 1988, the rules have prescribed a fixed “debt limitation” to which all franchises must adhere. The original 1988 ceiling was set at $35 million and it has been reviewed annually since. The current ceiling is set at $150 million and crucially within this sum, owners can only secure $25 million of their own liabilities on franchise assets. 4.3 In addition to the debt limitation, LBOs are specifically barred with the rules stating: “…in connection with any acquisitions of a member club or any controlling interest therein, the principal and/or controlling owner shall be required to invest equity (cash on hand or funds borrowed against other current or determinable futures assets of such owner) in a minimum amount to be determined by the Finance Committee, and no acquisition transaction that the Finance Committee finds to be excessively leveraged shall be recommended by the Finance Committee for membership approval.” 4.4 A single debt limit works in the NFL because of the near equality of franchise income and costs. Clearly in football where clubs vary enormously in their economic scale such a single monetary cap would be inappropriate. This does not mean that direct controls could not be introduced by one or more of the leagues, rather that such limits would have to be set as in relation to size (a net debt to EBITDA limit being perhaps the most obvious solution). The limitations on leveraged purchases of franchises could of course be applied on a near identical basis to football clubs. 4.5 The Bundesliga’s licensing tests show a different route to regulate club finances and prevent the taking on of unsustainable and dangerous leverage. Each Bundesliga club has to submit detailed financial forecasts showing its liquidity resources and future liabilities. The league’s licensing officers have the right to adjust the club’s forecasts if they believe them to be inprudent. If the club (on the adjusted forecast) does not have positive liquidity over the forthcoming season, the league can force “conditions” on the club to ensure there is a prudent buffer. No Bundesliga club has ever gone bankrupt (or entered into the equivalent of English administration) during a season. 4.6 UEFA’s Financial Fair Play rules, published last summer, borrow from the highly successful Bundesliga process. The Premier League initially resisted the proposals and has lobbied hard (and successfully) for an extended transitionary period for their implementation. Financial Fair Play is only relevant for the seven or so English clubs seeking a UEFA licence each season, and therefore does little to help the other 85 professional teams.

5. English football does not have any significant element of financial regulation and what is there is inadequate 5.1 Sadly for English football, and despite dozens of clubs running into financial problems through mismanagement often associated with irresponsible borrowing, neither the Football Association nor the Premier or Football Leagues have attempted to limit borrowing by member clubs using either debt limits or indirect controls. 5.2 None of the rules of the Premier League, Football Association or Football League contain any stipulations concerning how much football clubs can borrow or any rules on how debt can be placed onto a club by its owners. The rulebooks also contain only very limited analysis by the leagues or FA of clubs’ financial prospects. 5.3 Changes to the Premier Leagues rules effective from the 2010–11 season (rules 78 to 92) now require clubs to provide “Future Financial Information” to the Premier League in addition to accounts for the most recent period. This “Future Financial Information” includes financial projections for each club for the next year. Whilst this is a step in the right direction, enforcement action by the Premier League will only be triggered if: Rule 89.1: the club fails to deliver annual accounts to the league by 1 March; or Rule 89.2: the club fails to deliver interim accounts to the league by 1 March (which set of accounts are required depends on the club’s year end); or Rule 89.3 the club fails to deliver “Future Financial Information” by 31 March; or Rule 89.4 the club fails to deliver additional information requested by the Premier League relating to the auditor’s qualifications of its accounts; or Rule 89.5 the club has failed prove its doesn’t owe HRMC or other clubs money it should have paid; or Rule 89.6 the accounts supplied are qualified or part qualified by the auditors; or Rule 89.7 the Premier League Board, having looked at the information supplied by the club doesn’t believe the club will be able in the next season to: Rule 81.7.1 to pay its “football creditors” or employees; or cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Rule 81.7.2 be able to play its 38 league matches the following season; or Rule 81.7.3 be able to fulfil its league obligations to broadcasters. 5.4 The new rules rely too heavily on auditors qualifications or part qualifications of accounts as the “early warning” mechanism to determine whether clubs are likely to run into financial trouble. In the most recent case of major failure in the Premier League, Portsmouth FC, the auditors Grant Thornton did not qualify the accounts in the year prior to the club’s collapse. The rules contain none of the questioning of financial projections seen in the Bundesliga. If in place last season, the rules would not have done anything to prevent Portsmouth’s subsequent problems. 5.5 There are no rules forcing clubs to maintain positive equity positions, no rules on dividend payments (an ongoing threat to Manchester United) and no rules on using clubs as security for owners own liabilities. There is effectively no presumption of what is a “good” or “bad” financial model for the 92 professional clubs despite the fact that they are key social and community assets.

6. Issues of financial management are connected to issues of ownership 6.1 Although better regulation would go a long way to protect clubs and supporters from financial mismanagement and excessive debt, longer-term and more stable ownership is also needed. 6.2 In the last 20 years English football has had a shift in ownership. Traditionally owned by local business people, many clubs have been bought and sold by a new breed of entrepreneurs from both the UK and overseas. In many cases owners have been proved to be short-termist, seeking swift improvements in team performance through debt funded investment, often mortgaging grounds and/or future ticket revenue in pursuit of success. The self professed “neutrality” of the football authorities on issues of ownership means that there is effectively no regulation of who owns football (“fit and proper” tests have proved highly ineffective). 6.3 A system of ownership that included supporters (probably through official trusts) would be more likely to provide long-term ownership and hence longer term planning horizons and greater financial stability. Supporters’ trusts would act as a break on reckless short-term borrowing and would be more likely to safeguard historic grounds for their communities. 6.4 In Germany the well known “50+1%” ownership rules which apply to most clubs have given football a highly stable ownership base compared to English football. In France the involvement of local authorities provide a similar stability and connection with the local community. In England, owners with no knowledge of a club and its traditions can takeover, execute an aggressive and risky business plan and put up club assets as security for debt. 6.5 Significant supporter ownership cannot guarantee good governance (as the recent experience of Notts County has shown), but in conjunction with tighter regulation it can move English football into a new era of long-term financial planning and more stable financial performance.

7. Conclusions 7.1 Financial mismanagement usually involving excessive borrowing has been a major problem for English football for over twenty years. Dozens of clubs have been forced into Administration, historic football grounds have been separated from their clubs, HMRC and small creditors have lost considerable sums. Leveraged buyouts at Liverpool and Manchester United have slowed investment and priced supporters out of the game. This has been allowed to happen because of overly lax regulation by the football authorities. 7.2 Regulating debt either directly or indirectly is not difficult and there are precedents and blueprints from other sports and other countries. 7.3 The Committee should strongly recommend that English football ban LBOs and introduces tougher financial regulation across the professional game. The Committee should also recommend that the football authorities actively encourage supporter ownership (with practical measures to help fans take stakes in their clubs) to encourage longer term financial planning in clubs. January 2011

Written evidence submitted by Cambridge Fans United August 2010 saw the 10th anniversary of the supporters trust. It was held during a period of relative stability at the club. In the 10 years since we have been in existence CFU have seen many changes at the club and been involved in many crisis moments. These are always beyond our control; however, they impact greatly on the supporters and even more so, on the individuals on the trust board through their private and working lives. Many of the situations could have been avoided if the supporters trust had been listened to and their advice acted on. We have been seen too often as the emergency service, having to react to situations beyond our control. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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CUFC, has been and currently is a privately owned club and over the past 10 years the Supporters Trust, CFU has seen and had to react, to the following: — The sale of the club’s Abbey Stadium to fund player wages, HMRC bills and a second loan. This was after CFU had raised £100k 12 months previously to help towards the payment of an earlier loan. — The Club going into administration within six months of the ground sale. — A failed attempt to re-purchase the ground in 2009 having been given less than a month’s notice. — Boardroom upheaval and changes of personnel on a regular basis. We have seen 10 different Chairmen in 10 years. — Having to cover the inability to pay player wages and invoices on several occasions. — Unrealistic budgets set for the club of its statue. This allows the owners to buy extra shares to cover losses and increase their share percentage. — The lowering of our share percentage and value in the club through share devaluation. We worked hard to buy shares and become involved responsibly getting to the point of owning nearly 20%. At that stage the shares where devalued from 50 pence to 5p and we were effectively moved aside. The only option for the Trust at the time was to refuse and allow the club to enter administration for a second time. Since then we have not been able to keep up with other investors. We have also been refused shares being transferred to us from existing shareholders. In the past 10 years we have also: — Invested over £350k in the club through shares and additional monies through donation, gifts and sponsorship. — Been allowed a Fans Director. However, he can often be sidelined during the decision making process. He is a lone voice as a minority shareholder and minority board member, which make meaningful influence difficult. Without embedded rights for supporter directors to uphold and maintain agreement on what can be shared externally a supporter director is not enough. It certainly does not bring the benefits, including business that community ownership will release. — Invested hundreds of unpaid hours working either at the club or on fund raising activities. — Organised community events. — Helped managed the club through administration. It is now less than four months since our 10th anniversary and we see ourselves reacting to another crisis and the Club has been put up for sale. The sale is against a backdrop of pending debts and the non payment of invoices. The leading director no longer has the funds to bank roll the Club. We would like to be a part of that process and move the club into community ownership; however money will talk and decide if the true custodians or another individual or group will do so. We are concerned that the current major shareholder will possibly leave the debt that was budgeted for, behind. How is that fair on the supporters? How can supporters respond to that? If the Trust approaches financial institutions they are judged against the previous business and their performance. There has to be change in the ownership of clubs. The current model and the structure of football is flawed. It is based too often on short term plans and personal opinion. The average supporter has no say or real opinion in what happens at their club. It encourages debt and irresponsibility. Football clubs have been ruined by asset strippers and by individuals in it for their own gain. It is supporters who will have to live with the consequences because of an emotional attachment. Until there is real change in the way clubs are run and owned, then football will lurch from disaster to disaster. Supporters will continue to have no real say and then blackmailed to react to situations that are beyond their control and could, and should, have been avoided. Football clubs are not like other businesses. Supporters and communities should own clubs not individuals. Future decisions should be based on what is good for the club and not a six month push for glory. Supporters want to watch and support, not to be in the courtrooms and holding buckets week after week. They want to talk about goals and not about due diligence, burn rates and recovery plans. The only way that can happen is for them to be allowed the opportunity to run their own clubs and have the knowledge that there are rules and sustainable financial plans in place to allow that to happen. Most directors and owners of football clubs do not have either the will or the inclination to change and allow supporters into the boardroom. The Football Association has the power to change things but chooses to bury its’ head. Why should either of them change—they go together, hand in hand. The only real chance supporters have for change is via legislation or government intervention. Currently football is like the band playing on the Titanic, the game is sinking, everyone knows it, but we carry on playing regardless. The time for action and real action needs to be taken now. Tomorrow or the next day is not good enough. Football clubs are about to fail, the industry is about to fail. The people running the game are to blame, but cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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seem unable, or lack the will and the imagination, to change course now after 20 years of failure and greed. The average fan is deeply sceptical and distrustful of them to make the necessary changes required to move the game forward. A revolution is required now for our national game to be saved. Children need to be encouraged back; families need to be involved again. We believe there is an alternative, but we need help to make that happen. The way forward is to move towards community football clubs. These have two main elements. Firstly, it is a sporting club and should always maintain the ambition and drive for success that any other club has. Its purpose is to improve and rise through the leagues in the same way as other teams. It should, however, do so in a responsible way and not put the overall club at risk of financial failure in the future. Supporters want to see success, but not at the risk of long term failure of the business and club. Also, as a sporting club it should be spreading its net into other sports both locally and nationally to raise profile and national acclaim in sporting achievement. Secondly, football and football clubs have a unique place in society. They have the ability and also the facilities to help change lives and communities. It may be a child or a teenager needing help. It may be an adult who is requiring a fresh start. Everyone, whether interested in football or not, can be involved within the social elements. Everyone, whatever their background, ability and culture should have access to the facilities. Programmes for example dealing with health, education, well being, social responsibility, a football club can make a difference and benefit the wider population and community. There is currently a Learning Centre existing at the club and other facilities that can be used by the wider community for both social and economic reasons. I am aware of several clubs looking at the prospect of moving towards community or supporter owned clubs in the country at present. It allows the opportunity a club to thrive, removes the dependency on any one individual while allowing individuals to invest in either the sporting or community element of the project. They deserve the chance to try. However, additional help is required: — Possibly, by allowing tax relief for fans to invest in their clubs via supporters trust that change and offer real community activities. Football clubs could become third sector providers in the community providing real services to their local area. However, Learning Centres are currently being closed. — Trust owned clubs could receive a larger piece of the Television money to encourage change to happen. — We also need in addition to financial support the ability to receive assistance and guidance to an agency that specialises in the management and the organisation of running trust clubs. In the 10 years I have been involved with the trust I have received advice on numerous occasions. Advice and help which as an organisation we could not afford or resource. I think it proves much about the FA, Premier League and Football League that no one wants to provide financial assistance to the one organisation that could help change football for the better. Supporters Direct should be financed by the industry at source. Why is it not? Could legislation to create a “Football Levy” be introduced as currently it would appear the people who are running football do not want supporters involved or the current model changed. — We need tighter financial controls such as those proposed by the UEFA Financial Fair Play plans to stop the boom and bust, instability and difficulties for sustainable clubs to compete. I hear about plans for the Big Society and how individuals need to become involved more. Football can be a vehicle for its success. The Prime Minister was happy to lend his support to the (albeit failed) bid for the World Cup to the UK, acknowledging the importance of the game to our country. The arts and the classics are important in developing the mind. Sport and football are important in the development of the body. We are at the edge of the cliff. Someone will and can make the decision if football jumps or moves back. It will probably have to be the government alone that can decide. Will it stand back and allow the fall to happen? Will it stand back and allow the individuals and organisations to keep the status quo? There are now some clubs in the UK who have become supporter owned, community clubs setting examples of how this can be done successfully and believe that this model should be encouraged for the future, in the best interest of our beloved clubs, our communities and could be integral to the move towards The Big Society. I believe this model deserves a chance—big businessmen have failed the game. Football clubs should belong to the community and be managed by people who really care. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Written evidence submitted by James Wheeler

1. Introduction

1.1 My personal knowledge and experience in completing this submission is through my support for Derby County FC and my involvement with RamsTrust (the Supporters Trust for DCFC)—as a member, Board member and ultimately Chair of the organisation. I am no longer on the RamsTrust Board, but continue to be an active member.

2. Overview

2.1 Just to give some background, I have been brought up as a Football Fan—and specifically a Derby County supporter. I was first taken to a game by my father when I was six years old and have barely missed a home match in the succeeding 35 years—also regularly attending away matches. I now bring both my young sons and we still attend with my parents and various friends. Supporting Derby County is a way of life for many fans and forms an intrinsic part of our lives. I do not claim Derby County is any different to any other team (although clearly we are superior), but to show how important football is to millions of people like us in the UK and worldwide.

2.2 As a result, I believe football clubs need to be treated differently to other organisations and—due to their community importance—should be protected legally. Football clubs are of great significance, not just locally (although they are often the defining characteristic of many towns) but nationally and internationally. Many towns and cities in England are known throughout the world because of their team—and this has financial and cultural benefits to the town, the region and the country as a whole. English football is the envy of the world and its success or failure reflects strongly on the entire nation.

2.3 The football club is the centre of the community—it is a community asset, and club directors merely overseeing its activities on behalf of that community. It is therefore imperative that the directors keep supporters fully informed regarding what is going on at the club.

2.4 To see clubs “fail” (or more often be badly run or financially crippled for personal gain) is not only devastating for the local community and supporters, but also reflects very badly on the governing body and the government who allow this to happen. Football clubs deserve additional protection to prevent this.

2.5 Football clubs historically grew from their local communities—they were genuinely “clubs” for local people to play, support and attend. Initially, many of these early clubs were run by committees for the good of the club and the community. Some clubs did have businessman who supported their local teams (financially as well as physically), but this was always by putting money into the clubs to help them (and undoubtedly gain local prominence and approval as a result). Football League rules were in place to prevent directors running clubs for personal or private profit. This meant clauses preventing directors from paying themselves a salary, safeguards on the grounds where the clubs play and measures to prevent directors paying themselves any significant amounts in dividends from their shareholding. In essence the League was ensuring that Football was NOT a business, it was a sport and should be treated in a totally different way.

2.6 In many ways a “businessman” is the LEAST appropriate person to run a football club. By their very nature, treating a club as a business involves attempting to make a profit—hopefully for the club, but often for personal gain. For football clubs to succeed the last thing they should seek to do is to make a profit that isn’t retained within the Club. Clearly the books need to balance, but any surplus should be invested in improving the club—be it the team, the ground or the facilities.

2.7 Many of the rules are now avoided by introducing “holding companies” to own the clubs, which can pay directors and can pay dividends. This has brought extra “investment” into the game, but also began to attract elements who were purely involved to make a profit for themselves—usually at the expense of the club and ultimately the supporters. This has also allowed some clubs to separate ownership of the ground from ownership of the club—whilst still under the same overall company. This has led to many clubs losing their own grounds after questionable financial restructuring, much of it brought on by poor stewardship of the club in the first place. In effect, directors have been able to have a punt on making a club a success and the rewards that go with it, but if success isn’t forthcoming the club's main asset (the stadium) is taken as payment. Owners can then move on and the club is left with a crippling problem in the long term.

2.8 There are numerous other ways people have found to take money OUT of football. Often money taken out will be hidden—in agents’ fees, “kickbacks” on financial deals (such as commission on loan payments), expenses, cars etc. To a large extent football supporters—and clubs—are easy targets. Whatever happens at their club, a hardcore of supporters will carry on spending money every week on match tickets, club shirts, merchandise, programmes etc. Even fans that recognise they are being fleeced are still very reluctant to sacrifice watching their team. This does leave a real dilemma—the only action supporters can take which can have any impact on the directors is to stop watching the team they love. This really is a case of “cutting off your nose to spite your face”—but is an action many fans have been forced to take. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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2.9 The Football League—partly following pressure from supporters groups—has started to push for greater transparency and regulation within the game. They now publish the figures for payments to agents on a six- monthly basis. There is an important first step, but there should be much greater transparency of where supporters’ money goes. 2.10 The creation of the FA Premier League as a breakaway from the Football League was the ultimate result of allowing money to rule the game. This was done purely in order for the bigger clubs (and their Boards of Directors) to make and keep more of the money football was attracting rather than sharing it with the smaller clubs. The “Premier League” was created by the greed of a small group of individuals, and the weakness of the football authorities to prevent it. Whereas there used to be a fair split of revenues coming into the game, the vast majority of the money is now retained in the hands of the few—creating an ever widening financial gap and a reduction in competition. 2.11 There is now a massive dichotomy in the game in this country which is weakening the sport for future generations. At the “top” of the game a relatively small group of individuals (chairmen, directors, managers, players and agents) at a small number of clubs are making massive amounts of money (ultimately from the fans) whilst many smaller clubs are struggling for their financial lives. Many non-league clubs have folded altogether and local communities have seen their infrastructure decline through lack of investment. Many small clubs have failed due to debts of less than a week’s wages for a Premiership footballer. This cannot be good for the game in the long-term.

3. Specific Responses In response to the individual points suggested in the submission request 3.1 Football clubs cannot be treated in the same way as other commercial organisations—they should not be allowed to be commercial organisations in the first place. A football club is not the same as a local shop or factory, towns and cities are judged worldwide on the success of their football team. Children grow up aspiring to be and inspired by the players on their team. Indeed there is increasing evidence of the community benefits of using the local football club to promote community groups (education, health, young offenders) having much greater success by being associated with the club. This again shows that football clubs should not be allowed to “fail” without a higher degree of protection—as this can lead to massive damage to the community affected. 3.2 The Football Association (FA) has become beholden to vested interest groups who are often involved purely for personal benefit. The Premier League is now seemingly the most powerful body in football in this country—and its members are all “businessmen” seeking to make personal profit. Indeed a number of the individuals involved have actually seen their own businesses fail, but have retained their wealth and influence purely as a result of making money from their clubs—at the expense of the fans. There is never any chance of the Premier League bringing in legislation to protect clubs from directors—as this would be in effect “Turkeys voting for Christmas”. Similarly the “top” clubs will never vote for fairer distribution of funds within the game—for obvious reasons. It is therefore essential that the government acts to protect the clubs and the fans. 3.3 Debt levels within the game are clearly too high and threaten many—if not the majority—of professional football clubs in the UK. However, I believe this is a symptom of the problems within the game rather than a cause. Legislation should be brought in to prevent clubs from generating such massive debts (or from having the debt hoist upon them by unscrupulous owners). I believe this needs to be done by preventing clubs from being run in this way rather than specifically addressing the debt. There are many examples of clubs being penalised for debts caused by previous directors—so the previous director is unaffected, but the club and supporters receive further punishment on top of having been “ripped-off” already. Unfortunately (as per my earlier point—turkeys voting for Christmas), too much power rests with the member Clubs, so the prospect of regulation such as HMRC debt monitoring being extended to all clubs is unlikely, because they would need to vote it in themselves. This situation reinforces the need for Government intervention. 3.4 The Supporters Trust model is to encourage ownership of clubs by the supporters. In a utopian world this is clearly the ideal, and should be encouraged. However, merely “encouraging” ownership by Supporters Trusts is not going to work for all clubs. Whilst the majority of supporters clearly do have the long-term interests of their clubs at heart, some are fickle and will seek short-term success and enjoyment without considering the longer term. There are many examples of clubs where the directors (even true fans) have “chased the dream”—gambling short-term investment (or borrowing) in the hope of long-term success—but actually achieving the opposite. The pressure on the directors of a club to invest, to sign a star player or to reduce prices is often immense from ordinary supporters. With better communication, either through a supporter director or supporter ownership, this pressure changes because people have a better understanding of the circumstances and consequences of overspending. Often with a “sugar daddy” owner the relationship between fans and club deteriorates because there is an expectancy that they will continue to fund the club as they have done in the past. To have a situation where some clubs are “supporter-run” whilst others still have a “sugar- daddy” approach will mean the supporter-run clubs will struggle and will be put under undue pressure from their fans. One solution is to create a more level playing field; take out “financial doping” with better regulation and incentivising community owned clubs. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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3.5 Justification for Government intervention—this has already been addressed above. Football by itself is powerless to protect the clubs because of the power and influence of certain individuals at the “top” of the game. UEFA under is attempting to bring in legislation to protect the game and the clubs but is still struggling to gain authority over the big clubs (both in this country and abroad). An extension of UEFA’s licensing across the leagues seems like a logical solution for the Government to explore. FIFA seems now to be similarly succumbing to the influence of money on the game. It is consequently essential that the government steps in to protect the game and the clubs in this country. There will be criticism—largely from supporters who will see their own clubs adversely affected by such legislation without seeing the “bigger picture”. However, there will be more criticism should the government fail to act—particularly after commissioning this review— and more clubs fold. The game would continue to deteriorate as a competitive sport in this country. 3.6 The “Fit and Proper Persons Test” is a valiant attempt to prevent unscrupulous directors from getting involved with clubs—but has had limited effect. There will always be “loopholes” which they will seek to exploit. I therefore believe a different approach is required. There would be less of a requirement for a Fit and Proper Persons Test if there was legislation to prevent individuals from making personal profit out of football clubs.

4. Relevant Experience at Derby County FC 4.1 Many of my views that reform is required are from direct experience at DCFC. We were the victims of a lack of a regulation over ownership of football clubs at great expense to the club. 4.2 On 20 October 2003 Derby County was put into “Administrative Receivership” due to debts following relegation from the Premier League, and then taken over by a consortium of “businessmen” for the sum of £3. The consortium consisted of the Chairman, Mr John Sleightholme, a barrister and Assistant Coroner for North Yorkshire; the Chief Executive, Mr Jeremy Keith, from Oxford, a self-proclaimed business doctor, who was previously involved with Leeds United—just before the time where Leeds finances began to go into crisis— and previously Portsmouth—from which he resigned a day before the Inland Revenue issued notice of a winding up petition in December 1998; Mr Steve Harding, a self-styled marketing entrepreneur and communications expert from Wimbledon; and also linked to them was “Director of Football”, Mr Murdo Mackay, a former football agent, previous business partner of Mr Sleightholme who was formerly sequestrated for outstanding debts in Scotland; and the previous chairman’s Financial Director, Mr Andrew Mackenzie. 4.3 The club was purchased via a company called Sharmine Ltd, whose shareholders were listed as—Cosmo Corp, Belize City, Belize; Williston Consultancy, Road Town, Tortola, British Virgin Islands; and Precision Finance Ltd, Belize City, Belize. Sharmine’s postal address was given as Beresford Lowe and Co LLP, Craven Street, London—the contact address for a solicitor called David Lowe, based partly in Monaco. Messrs Sleightholme & Keith have always claimed these companies were owned by them. 4.4 The consortium took the club on with a “business plan” and paid off £15 million of the debt to the Co- op Bank, by way of mortgaging the stadium, Pride Park, to the ABC Corporation, of which little more was known than its PO Box in Panama. This was the same ABC Corporation which has lent money to QPR, and, according to sources, is backed by a family trust registered in Switzerland linked to Michael Hunt, the former managing director of Nissan UK, who was sentenced to eight years in 1993 for his role in the largest tax fraud ever perpetrated in the UK, siphoning £149.2 million from the company and depriving the Inland Revenue of £92.3 million in tax and interest. 4.5 Many supporters were immediately concerned having seen what has happened at other clubs—where directors have committed to massive loans which can never be paid off, clubs have lost their grounds, clubs have gone into administration—whilst directors have picked up a tidy salary, Company cars, bonuses etc. 4.6 Jeremy Keith has claimed he got involved because he “had always wanted to prove to himself that he could run a football club using a particular business model”. The directors said that they never had any intention of putting any money into the club—they believed the way forward was for the club to be run as an efficient business which does not require a “sugar daddy”. 4.7 The debt grew by an estimated £10 million over the first two years of their tenure—despite high profile sales of some of Derby’s best players. Ultimately, as the club approached bankruptcy or administration and was almost relegated from the Championship, pressure from supporters and local investors lead to the Co-Op Bank ousting the consortium and replacing them with local owners who were prepared to repay large proportions of the debt. 4.8 Police investigations then took over and Jeremy Keith, Murdo Mackay, Andrew Mackenzie and David Lowe were eventually convicted and jailed for financial fraud and money laundering in connection with the takeover of Derby County FC. 4.9 The club and the supporters were made to suffer severely over a prolonged period because of the inadequacies of regulation by the football authorities and the government. Indeed, if it were not for supporter pressure—particularly from RamsTrust members—the situation could have continued for longer and the club may have been forced to fold completely. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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4.10 It was clear from the outset that the individuals involved had come to Derby County solely to make money for themselves. There was no previous connection with the club or any indication that they were here for the good of the community. It would have been relatively simple for any regulator to identify whether these individuals had the best interests of the football club at heart.

5. Conclusions 5.1 The government needs to act as the Football Authorities are powerless to act themselves. 5.2 Without action, we will continue to see the decline of many clubs in this country, and—ultimately—the competitiveness of the league and the most popular sport in the country. It could be argued that the league is already less competitive than at any time in history with the gulf between the biggest clubs and the rest widening all the time. 5.3 Regulation needs to be introduced to ensure the supporters are consulted and involved in all major decisions regarding their team. No individual should be allowed to take over a community asset and sell its ground, strip its assets or even move the club to another town without the full approval of the supporters who have dedicated much of their lives and finances to their team. 5.4 Similarly, regulation needs to be introduced to ensure supporters and players are fully represented on the governing bodies of the sport. Football is too important to this country to allow financial self-interest to dominate governance of the game. January 2011

Written evidence submitted by Paul Norris 1. Short Biography 1.1 I am a football supporter with at heart the best interests of the game in this country at all levels. I work in semi-professional football on a voluntary basis and I’ve been involved in semi-professional football as a player, coach (FA qualified), club secretary and general administrator for the past 10 years. I am currently involved with Eton Manor Football Club of the Essex Senior League, however, this submission is made in a personal capacity.

2. Introduction 2.1 Football Governance in this country has become confused at the very highest level since the creation of the Premier League in 1992. This lack of clarity and direction at the top of our national game has directly resulted in a number of worrying developments that, should they be allowed to continue unchecked, risk the very fabric of the sport in this country. These are: — The increasing trend of irresponsible ownership of a number of our top professional clubs. — The continued decline of our national teams (not only of England, but also of Scotland, and Northern Ireland). — The destruction of non-league football. 2.2 It is my submission that the only way to resolve these issues is for clear and appropriate delineation top of the game. The current Football Association, Premier League and Football League structure is not working in the best interests of the game.

3. Issues around the Ownership of Professional Clubs 3.1 Football at the highest level is now a multi-billion pound international business. Owning a football club, particularly one in a league with the commercial power and worldwide appeal of our Premier League has never been more attractive, and wealthy investors from right around the world have bought, or attempted buy into English football clubs. 3.2 It is important that we do not make generalisations about the pros and cons of foreign ownership. Whilst many fans would prefer their club to be run by the traditional “local boy done good” type of owner (an example might be Steve Gibson at Middlesbrough) or through fan ownership models, the reality is that the finances demanded in order to compete at the top of the Premier League mean that this is now rarely possible. 3.3 However, it is just as possible to have bad English owners of football clubs as it is bad foreign owners. Whilst Portsmouth’s financial collapse over the past couple of years can largely be held up as an example of bad foreign ownership, the collapse of Leeds United’s finances in the first half of the last decade was under what you might call a “traditional English regime”. Nationality and personal background of an individual are not relevant factors in relation to whether they are “fit” to run a football club. 3.4 The “Fit and proper persons Test” which was introduced by the Premier League in 2004, in part as a reaction to the events at Leeds United, and since extended to cover the Football League and the Football cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Conference, considers the following as disqualifying factors for people wanting to become a director of a football club. — They have power or influence over another Football League club. — They hold a significant interest in another Football League club. — They become prohibited by law from being a company director. — They are filing for bankruptcy. — They have been director of a club while it has suffered two or more unconnected events of insolvency. — They have been a director of two or more clubs of which, while they have been director, has suffered an event of insolvency. 3.5 In May 2010, , the Chief Executive of the Premier League admitted that the fit and proper persons test was “limited”. I agree with that view. The disqualifying criteria as they exist are acceptable in as far as they go, but they do not go far enough. For example, the existing criteria could be tightened so that any person who has been involved as a director in two periods of insolvency with companies of any kind (ie not just football clubs) would be disqualified from becoming a football club director. 3.6 In addition, the current criteria focus only on the individual concerned and not on the way in which they are buying or intending to run the football club. I do not profess to be an economics expert, but it seems to me that it can not be right that people can purchase a football club, by using the value of that club to secure loans, against its assets, that are required for the purchase. I accept that this would probably be making a special case in relation to football. I do not know for certain, but I presume that in no other industry is a potential buyer prevented from using this specific method in order to purchase a company. However, I believe that in few other industries do the companies involved evoke such depth of feeling in the communities that they represent, and whilst I am sure that there are difficulties with such an approach on which the Department for Business, Innovation and Skills would wish to make representations, from a pure football point of view I believe that this would be a positive step. 3.7 Furthermore, I should stress that I do not believe that football should look to prevent potential owners from purchasing clubs with borrowed money across the piece. If the money is borrowed against their own assets and not those of the club that they are seeking to purchase, then there is a greater amount of protection afforded to the football club should the owner fall into financial difficulty, and I believe that to restrict ownership in such a way would make owning a football club purely a pastime of the super rich, and reduce as opposed to improve opportunities for supporter based ownership models to flourish.

Recommendations — That the “fit and proper persons test” be controlled and administered by the Football Association. — That the disqualifying criteria is amended as below to say: — They have been a director of “any company” while it has suffered two or more unconnected events of insolvency. — They have been a director of two or more “companies of any type” of which, while they have been director, has suffered an event of insolvency. — That the disqualifying criteria is extended to include any person who is seeking to undertake any form of leveraged buy out that attempts to use the assets of a football club as collateral to secure loans against the club.

4. The Decline of National Teams 4.1 In the 20 years prior to the formation of the Premier League England had appeared at 3 of 5 World Cups. Scotland had appeared in 5 of 5. Wales had appeared in 0 from 5, but Northern Ireland 2 of 5. From the four home nations that makes a total of 10 qualifications from 20 opportunities. Since the formation of the Premier League England have appeared at 4 from 5 World Cups, Scotland at 1 of 5, and neither Wales nor Northern Ireland at even 1. So the qualification rate of the home nations has dropped from 10/20 (50%) to 5/ 20 (25%). 4.2 I accept all of the other arguments that exist as reasons for this decline. Children have so many alternatives for entertainment now than going outside and kicking a football around, the Internet, the Playstation, Satellite TV, Social Networking, Mobile Phones etc. But there is something wrong somewhere with the way in which we, as a United Kingdom are attempting to develop young footballers. There has also been a marked move away from the importance of National teams and a switching of emphasis to the strength of the clubs. 4.3 This inquiry is interested in looking at the way in which football is governed, as opposed to youth development and other related issues (which would require a submission all of their own), so I will restrict my discussion to the second point that I raise in the paragraph above. The move of power away from the National teams and towards the clubs. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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4.4 In my view the Football Associations of England, Scotland, Wales and Northern Ireland should be a lot stronger with the clubs. There should be an effort to reach collective agreement, maybe as a group of FAs, with the clubs competing in the English and Scottish Leagues around the release of players for international duty. This could be in the form of contracts that state where a player is called for international duty a club must release him for that purpose. Any club found to be in breach of the agreement would be liable to a sanction, for example, a fine of £100,000 for an English Premier League club, reducing in size as you move down the league structure. 4.5 This would send a strong message about the importance of the National teams, which, after all, are the ones that can often have the effect of lifting the mood of a country, and creating an economic boost, especially around the time of a major international tournament. 4.6 In addition, it is my belief that the Football Associations of England, Scotland, Northern Ireland and Wales, should proactively petition FIFA to review the International footballing calendar. Suggestions have been made that three “International Periods” of three weeks duration could be built into the calendar. One to run from the last week of September to the end of the second week in October. A second to run from through the first three weeks of March and the last one to run from the last week of May to the end of the second week in June (obviously in years of a summer International Tournament this period would be extended to last the duration of the tournament. All internationals could then be played in those three periods. This would improve the standard of international football as it would give managers prolonged periods to work on team cohesion and it would improve club football as it would allow managers to better plan for international breaks. I realise that such a proposal represents a significant change to the current position. However, we have a footballing calendar designed for the “old” footballing world, not for the modern international and commercial game that we have.

Recommendations — That the home National Associations seek to secure a collective agreement with professional clubs in England Scotland with regards to the release of players for international duty. This agreement to include penalties for any club found to be in breach. — That the home National Associations petition FIFA and UEFA as appropriate, in relation to a review of the International Footballing Calendar.

5. The Destruction of the Non-League Game 5.1 As any keen horticulturist will confirm, if you kill the roots the flower will eventually die. Make no mistake, non-league football in this country is being killed. Killed by the crippling cost of running a club, killed by the declining attendances, killed by the lack of support afforded to it by the professional game and killed by the amount and the scheduling of televised football. 5.2 I understand that the focus of this inquiry is intended to be the professional game. However, I implore you to consider how the professional game can better support the grassroots. Too often non-league is forgotten about. It is completely maladministered by the Football Association, there is no direction, no plan for support. Last summer Grays Athletic, for financial reasons had to withdraw from the Football Conference. It took the FA until three weeks before the season began to decide in which league Grays would play. This caused a huge amount of delay in a number of leagues finalising their constitutions, and consequently left any number of clubs completely unsure as to which league they would be competing in. It delayed the draws for the early rounds of FA Competitions for a number of weeks. All particularly sickening for those involved in non-league when they can see FA Executives sitting in the posh seats at the World Cup in South Africa at the same time. 5.3 And Grays Athletic are not the only non-league club in recent years to have hit financial hardship. Many long standing football clubs, with terrific amounts of history and pedigree have gone to the wall in the past 10 years. Many have reformed, some have not. Darwen FC (founder members of the Football League ), Runcorn FC, Fleetwood FC, Kings Lynn FC, Tiptree FC, Berkhamsted FC, Enfield FC, to name just a few. That list includes some clubs that were once big names in semi professional football, but who have either disappeared or had to be reborn. 5.4 I will deal with the lack of leadership and direction in non-league in the next section of my submission. So I turn first to the crippling costs of running a non-league football club. The simplest cost to eliminate is the cost of league registration fees and cup competition registration fees. I personally believe that it is a disgrace that non-league football clubs are expected to pay to enter the FA Cup. The Cup is about giving the underdog a chance. In my view no non-league team from the Conference all the way down, entering the FA Cup, the FA Trophy or the FA Vase should be charged a competition entry fee. These fees could easily be recouped by charging the Premier League sides extra to enter the FA Cup. I would reckon that if you charged every Premier League club an extra £5,000 per year to enter the FA Cup you could easily remove entry fees for non-league clubs, and probably have money left to spare. 5.5 Secondly, televised football has always hurt non-league attendances in mid-weeks. However, since the introduction of the Saturday evening televised game (5.15 / 5.30 kick off) attendances have noticeably slumped. People would prefer to sit in and watch a live game on the TV than get out and support their local grassroots cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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club. It may be the case that even if these games were no longer televised that those supporters would not return to watching non-league games, but I believe that it should be considered as an option.

Recommendations — That FA competition entry fees should be removed for all non-league teams. This to be financed by charging all Premier League clubs £5,000 per year extra for entry to the FA Cup. — That the televising of games at 5.30pm on Saturday evenings is prevented, in an attempt to boost non-league attendances.

6. Overall Governance Structure 6.1 In addition to some of the specific problems and possible solutions that I have discussed elsewhere in this submission, I believe that there is an overarching structural problem in the governance of English football that has existed since the Premier League breakaway. In my view allowing the Premier League and the Football League to exist separately of the FA as corporate bodies is largely responsible for the lack of cohesive management and governance on the national game. I submit that power should be centralised in the Football Association (which needs an entirely separate review of its functions—again not for this submission or this inquiry). The Premier League even dropped the reference to the FA in its name in 2007 further highlighting that they almost see themselves as equal to the FA in terms of importance as a governing body. 6.2 However, I believe that if the FA was in control of all decision making, game development, and had the ultimate decision making deciding power in relation to commercial negotiations above a trio of game bodies, which each would have a managing director who reported directly to an elected FA Chief Executive then there would be a clearer delineation of roles and responsibilities. In my view the trio of game bodies should operate as below: — The Elite Game Board, which would have responsibility for the management of the Premier League and the England National team. — The League and Competitions Board, which would have responsibility for the management of the Football League divisions, the FA Cup, the Football League Cup and the Football League Trophy. — The Grassroots Game Board, which would have responsibility for non-league football, the organisation and structure thereof, as well as the non-league specific FA competitions (FA Vase and Trophy) and for the FA’s youth development programmes and the new National Football centre. 6.3 Each of these boards would have the right to take all decisions relating to the day to day running of their areas of responsibility. However, in relation to suggestions to change competition rules and in the negotiation of commercial contracts the individual boards would only be able to make recommendations and the final decision would be for the Football Association Chief Executive and the Football Association Executive Board to take a final decision. 6.4 I understand that this restructuring is a radical suggestion, which is unlikely to be taken forward. However, I feel that failure to accept that the Premier League breakaway has caused confusion and a lack of direction at the top of our National game will lead only to the accentuating of the problems in the three specific areas that I have already outlined.

7. Conclusion 7.1 I conclude by re-iterating that the individual recommendations that I have made in response to the very real problems that I have identified in sections 3, 4 and 5 of my submission would go some way to addressing some of the immediate governance problems that English football faces. However, it is my submission to the inquiry that in order to achieve the very real and necessary changes to the way English football is governed, consideration should be given to the kind of more radical change that I proposed in section 6. 7.2 I would be happy to be invited to appear in front of the Select Committee to allow them the opportunity to further explore the written evidence provided in this submission. I attach an Annex with a full composite list of my recommendations.

Annex A LIST OF RECOMMENDATIONS — That the “fit and proper persons test” be controlled and administered by the Football Association. — That the disqualifying criteria is amended as below to say: — They have been a director of “any company” while it has suffered two or more unconnected events of insolvency. — They have been a director of two or more “companies of any type” of which, while they have been director, has suffered an event of insolvency. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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— That the disqualifying criteria is extended to include any person who is seeking to undertake any form of leveraged buy out that attempts to use the assets of a football club as collateral to secure loans against the club. — That the home National Associations seek to secure a collective agreement with professional clubs in England Scotland with regards to the release of players for international duty. This agreement to include penalties for any club found to be in breach. — That the home National Associations petition FIFA and UEFA as appropriate, in relation to a review of the International Footballing Calendar. — That FA competition entry fees should be removed for all non-league teams. This to be financed by charging all Premier League clubs £5,000 per year extra for entry to the FA Cup. — That the televising of games at 5.30pm on Saturday evenings is prevented, in an attempt to boost non-league attendances. — That the FA structure is altered to include three separate Game boards and provide a clear delineation of responsibility. January 2011

Written evidence submitted by the Manchester United Supporter Trust (MUST) 1. Introduction This inquiry is extremely welcome, as we believe both Parliament and Government should be acting to ensure football governance and regulation is reformed. We know that politicians from all sides of the House do not wish to interfere in the running of the game, but the Government should be establishing the correct framework so that football can then run itself more efficiently, professionally and in the interests of both clubs and supporters. Football authorities have been given multiple opportunities to reform but have failed to do so. MUST has been at the forefront of the debate on Football Governance (and the related issues surrounding ownership of clubs) and had meetings with representatives of all parties prior to the last election with a view to influencing manifesto content. MUST directly represents thousands of UK citizens as well as the interests of millions of Manchester United supporters. However we recognise we are just one supporters’ trust amongst many at clubs across the country but we believe the issues confronting us are representative of those for a huge number of supporters at all levels as well as specific issues affecting the bigger Premier League clubs. We understand there is no single one size fits all solution for clubs and their fans so, in addition to considering the issues affecting football as a whole it is also important to consider the different challenges faced by groups of clubs of different sizes and ownership structures. Further information on MUST, our membership and our history can be found at the end of this document following an outline of our concerns and our suggestions for changes to governance in English football.

2. Current Ownership of Manchester United The Glazer family purchased Manchester United in May 2005 and removed the club’s public listing. The purchase, which also forced supporters to sell their shares in the club, was financed largely through acquisition debt. Before 2005 the club had no debts and was on a sound financial footing, with the then (and current) Chief Executive, David Gill, (along with the entire board) opposing the attempted purchase of the club—stating “Debt is the road to ruin”. Sir added that any approach to buy the club was “unnecessary and unwelcome”. At present, the most commercially successful football club in the world is still struggling to finance the debts that served no purpose other than to help fund the Glazers’ acquisition of the club. The club’s commercial, matchday and media revenues have all risen since the takeover, mainly due to the success of the team and the success of the Premier League’s collective deals for all its member clubs, yet the amount of money required to finance the debt exceeds the club’s operating profits. Supporters are paying dramatically increased ticket prices (which the Glazers gave assurances to the then Department of Trade and Industry would not happen). They see the club generating higher revenues than ever before, yet do not see any significant investment in the team and certainly not at the levels of pre-2005. There is a major distinction here between other high profile clubs who have run up debts in order to compete on the field (eg Leeds United and Portsmouth) and the case of United where the creation of debt has not been for football reasons at all. Adding to supporters’ frustrations over the debt is the secrecy and lack of communication by the Glazer family. They have failed to meet with or communicate with any supporter group, and relations with the fans are at an all time low. No open conversation has ever been held about the club’s finances, which is alarming to supporters especially when the Bond prospectus published in January 2010 revealed so much worrying information on the levels of the debt. It was this that provoked the now famous green and gold protests, when supporters chose to wear the original colours of the club. Conversation has been limited to one scripted cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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interview on the club’s own television channel, MUTV, shortly after the takeover, and we find this unacceptable for a cultural institution with the importance and reach of Manchester United.

We find it remarkable that the governance of the game allows supporters to be treated with such contempt, and can think of no other business that treats its “customers” in such a dismissive and complacent manner. Unlike in other industries, businesses or brands, football supporters have a loyalty to the team they support and they cannot just choose to buy the same product elsewhere. This loyalty should not continue to be exploited as it is at present.

3. Addressing the Governance of the Game

We believe that: (a) The Government should encourage the growth of shareholdings by registered supporters’ trusts by offering tax incentives to promote investment. Such incentives, as have been successfully offered previously to the film industry for example, would be universally popular with both supporters and the football authorities. It would also help the Government to fulfil the Coalition Agreement’s pledge to “encourage the reform of football governance rules to support the cooperative ownership of football clubs by supporters”. (b) There is widespread agreement that the Football Association needs reform to make it fit for purpose. It should be empowered to regulate the game effectively with a board which is completely independent from the organisations it seeks to regulate. The board should also have notable supporter representation from all levels of the game ideally with the introduction of real democracy. (c) The Football Association should continue to have a commercial arm that seeks to maximise revenues from sponsorship and media deals, but this should be a separate function to its regulatory responsibilities. Currently there is a clear conflict of interest. For example if the FA wished to impose rules on debt or capping ticket prices this creates a major dilemma when the financial status of the project has created their own debt and a pressure to drive ticket prices higher and explore all commercial avenues to raise revenues. The Association should be acting as a strong regulator in the game. The regulatory function should be genuinely independent with secure and guaranteed funding that would not make it reliant on keeping the “big clubs” in favour. Nor should it allow the Premier League to have control/ veto of appointments. The new regulatory arm would also need powers to impose sanctions and to have a strong say in the rulebooks of the English leagues. (d) A new strengthened club licensing system, in line with UEFA’s existing criteria, would allow the Football Association to enforce regulation of debt and ownership. A timetable to convert existing debt to equity is needed and, and in future, football debt should be replaced by issuing new equity (with supporters encouraged to participate) as the mechanism for raising capital. If it isn’t possible to raise capital through uptake of new equity there must be a good reason and so this forms a natural brake on embarking on high risk activities. The Premier League has been a fantastic success and we welcome the changes that have improved the standard of football on offer and allowed English clubs to take on the best in the world. However, while we accept and understand the benefits of the Premier League’s commercialism and the investment it has brought, we also feel it should be regulated properly for its own long term good. A lack of regulation and restriction around ownership is especially concerning, and we note that it is not in the long term interests of the Premier League to allow models which remove money from the game rather than encourage investment in it. The Premier League’s current structure, in which it must represent its twenty member clubs even if they are short-term investors with no interest in the long-term state of the game, does not currently allow them to address this issue. This impacts on a whole host of wider issues such as the England national side. (e) The Football Association and/ or Premier League should be required to ensure that all club owners contribute to taxation in the United Kingdom. At present, the Glazer family are taking advantage of the fact that interest is tax deductible for companies when calculating corporation tax. By loading so much debt onto United, they manage to generate an interest bill that offsets all the club’s profits and hence pay little or no corporation tax. The club’s accounts show a tax charge from 2006 to 2010 of £82.0 million (ex-deferred tax) or £89.5 million (inc-deferred tax) but the parent company (Red Football) only actually paid £3.4 million. While this isn’t a football specific issue—it’s common to all leveraged buyouts—the football authorities could not permit it within the game. Alternatively, a wider law could ensure that no company should receive tax relief should it not be permanently registered in the UK and subject to the maximum transparency and disclosure requirements.

4. About MUST

MUST is an Industrial & Provident Society—a democratic and not-for-profit mutual society which is registered with and overseen by the Financial Services Authority. We were formerly known as Shareholders United, but reconstituted as MUST after the Glazer family’s purchase of Manchester United in 2005 when all supporters who had not already done so were forced to sell their shares in the club. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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We are a voluntary organisation representing over 160,000 Manchester United supporters and our aim is to ensure that supporters of Manchester United have a meaningful stake in the ownership of the club. Our board and committee are elected, and we also have a number of high profile patrons from the worlds of sport and entertainment, as well as five members of the Houses of Parliament. We want to make clear from the outset that we do not wish to run the club—we believe it should be professionally managed by qualified individuals who are best suited to doing so—but we do believe the priorities of the club should mirror ours, namely a stable financial future and a continuing improvement in the standard of football on offer. Supporter ownership does not prevent us from wanting the club to generate strong profits—we want to see high revenues at Manchester United—but our concern is about where this money goes at present. It should be used for the good of the football club and its supporters, not to pay off acquisition debt loaded onto a profitable football club by owners who patently did not have resources of their own to acquire the club in the first place. January 2011

Written evidence submitted by the Football Foundation 1. The Football Foundation is funded by the Premier League, the Football Association and the Government. It is a unique partnership between English football and the UK Government, which invests £36 million into grassroots football and multisport projects every year. The Football Foundation is a good example of how TV rights money matched by investment from government and an NGB, is a successful model of funding grassroots sport. 2. Whilst not directly impacted by decisions made around the governance of the game, the Football Foundation is not immune from the influence of such decisions. The support provided by the Premier League and the FA, who are able to invest the proceeds of their commercial activities into grassroots sport, is vital. Any decisions affecting these commercial activities could result in a reduced investment into the Foundation. 3. Any reduction in the Football Foundation’s annual budget would not only restrict investment in new projects but would also stunt the achievements of existing projects as continued support ensures these projects’ success. 4. The Government are in a strong position to influence people’s behaviour, especially around health and fitness. It would be beneficial for the Government to work with the sporting bodies, such as the Football Foundation and its funding partners, to encourage people to participate in sport. The sporting bodies are ideal partners to help government achieve greater scale and quality as their participation policies are likely to be aligned to policies of the sporting bodies themselves. 5. Launched in July 2000, the Foundation celebrated its 10th anniversary this year and has so far supported around 7,656 community sports projects worth £933 million. £407 million of this has been direct funding from the three funding partners, which has been used to leverage a further £526 million from local and other sources. This has a provided a 7:1 return on investment for each of the three funding partners. 6. The role of the Foundation is to provide funding to improve community grassroots sports facilities, especially in areas of greatest need. Last year alone the Foundation invested 61% of its funds into the 20% most deprived communities in the country. 7. The Foundation has also funded a significant number of social intervention projects, using participation in sport to address issues such as obesity, mental health, smoking cessation and cancer awareness; as well as funding social inclusion projects, which tackle high reoffending rates, gang culture and knife crime. Projects are also funded which provide opportunities for young people to get back into education, volunteering or employment. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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8. Our comprehensive monitoring and evaluation system evidences participation increases year on year. Last year the overall increase across the sites was 18.7%. The tables below show the current levels of weekly participation at Foundation funded projects across the country in the three main schemes: Facilities Community Grow the Game Total football players 656,841 Total players 75,162 Total new players 21,121 Male football players 567,331 Total coaches 4,268 Male new players 14,538 Female football players 89,510 Total referees 33 Female new players 6,599 Total multi-sport players 267,509 Total accredited 4,268 Total new teams 1,419 courses Male multi-sport players 153,025 Football exit routes 2,844 Male new teams 868 Female multi-sport 114,434 Employment exit 705 Female new teams 426 players routes Total players 924,351 New coaches 1,302 Mixed new teams 125 Male players 720,356 Volunteer coaches 2,016 New coaches 1,555 qualified Female players 203,944 Paid coaches 2,054 Total volunteer coaches 16,069 Other volunteers 1,490 Male volunteers coaches 14,429 Female volunteer coaches 1,739 BAME (Black & 16.1% Minority Ethnic)

January 2011

Written evidence submitted by Liverpool Supporters’ Union—Spirit of Shankly 1. Spirit of Shankly This submission is made by Liverpool Supporters’ Union—Spirit of Shankly. The Union is a fully constituted Industrial & Provident Society that was founded in 2008 as a response to the crisis that was engulfing Liverpool Football Club following the leveraged buy-out takeover by Tom Hicks and George Gillett. The Union exists to represent the best interests of supporters of Liverpool Football Club, to hold whoever owns the football club to account and, ultimately, to secure supporter ownership of the club.

2. Summary — Football clubs should be treated differently; they are primarily sporting clubs rather than commercial entities. — Football governance rules and the bodies responsible for their implementation are not fit for purpose. There ought to be one governing body, as far as possible free from commercial conflict of interest and with meaningful supporter representation. — There is too much unsustainable debt in the game. The leveraged buy-out model of club acquisition should be outlawed. — The Supporters’ Trust model provides an opportunity for meaningful supporter involvement. There are potential concerns; however our experience indicates that they can be mitigated. — Government intervention is justified. In the first instance this should take the form of legislation to enable Supporters’ Trusts to purchase shares in clubs, or material stakes in clubs, that are being sold. — The governance of the game in Germany provides many lessons for the game in the top flight in this country.

3. Should football clubs in the UK be treated differently from other commercial organisations? 3.1 Football clubs were never intended to be commercial organisations. The limited company model was adopted as a means of protecting the people who set up and operated football clubs on behalf of their local communities. 3.2 While there is a need to be commercially sustainable, football clubs are primarily sporting organisations. The ties that bind people to particular football clubs are quite unlike those that bind people to other commercial organisations, for example it has been said that nobody asks for their ashes to be scattered at their local Tesco. Accordingly, supporters are a wholly different breed to customers of commercial entities and ought not to be subject to the same commercial pressures that a consumer with a range of alternate options faces. Football clubs are an intrinsic part of a supporter’s identity and lifestyle, the over commercialisation of the game has led to the wholesale exploitation of this situation. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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3.3 Unlike other commercial organisations, the success of a football club is determined by the outcome of what is still fundamentally a game. It is crucial that, regardless of the outcome of games, football clubs survive in order to enable fixtures to continue and winning football clubs still have somebody to play against. Traditionally, this meant that the game’s income was shared on a more equitable basis than the current overly commercial model allows.

4. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 4.1 There is a serious conflict of interest in the governance of the Premier League in that it is the owners of the clubs in that League who oversee its governance. It is the experience of this Union that this has led to a clearly unfit for purpose “fit and proper persons test” being applied. In our view this test, which appears to amount to nothing more than a lightweight CRB check, has led to wholly inappropriate ownership of a number of top flight football clubs. 4.2 In the case of Liverpool Football Club, and others, new owners purchased the club on the basis of assurances that they could not be held to. Perhaps the most insidious approach adopted by such owners is the so-called “leveraged buy-out”. In Liverpool’s case, Tom Hicks and George Gillett gave both the previous owners and the supporters’ assurances that they would not subject the club to a leveraged buy-out. As events proved, this was an outrageous lie and the club was burdened with unsustainable levels of debt to pay for the privilege of Hicks and Gillett’s period of ownership. 4.3 It is our belief that the game’s governance ought to include a fit and proper persons test for owners that also incorporates binding commitments not to burden clubs with debts to pay for the club’s purchase. We also contend that this ought to be overseen by an independent and appropriately qualified body rather than by an organisation comprising fellow club owners. 4.4 The FA is recognised by FIFA and UEFA as the governing body of the game in England. If the position was confused by the existence of an independent Football League, it was compounded many times over by the formation of the Premier League—complete with FA “branding”. It is our contention that there should be a single governing body for the game in this country and that supporters should be properly represented upon the board of that governing body, preferably through supporters’ trusts with stakeholdings in their clubs represented nationally by Supporters Direct.

5. Is there too much debt in the professional game? 5.1 It is perhaps more pertinent to look at the type of debt in the game rather than the absolute amount of debt. For example, Liverpool Football Club borrowing £300 million in order to develop a stadium solution that would generate revenues sufficient to both service the debt and provide the club with a surplus for reinvestment is a completely different matter to Liverpool Football Club borrowing £300 million simply to reimburse the owners the costs they incurred in purchasing the club. It is our view that leveraged buy-out debt should have no part in the game. 5.2 In addition, debt incurred in order to purchase players and pay off player wages that require a given level of on field success to avoid causing serious damage to the club in question should not have any part in the game. This practice amounts to nothing more than a club borrowing money in order to gamble on success which, if it does not materialise, places the club in jeopardy. Often future revenues have been mortgaged in the hope that on field success will enable those revenues to be supplemented by income generated through Premier League or Champions League participation. 5.3 While the leveraged buy-out has gained notoriety through high profile cases at Liverpool and Manchester United, it is the latter form of debt that appears to have caused most damage at other clubs.

6. What are the pros and cons of the Supporter Trust share-holding model? 6.1 As a supporters’ union we see many benefits in the Supporters’ Trust shareholding model. Having met with both sets of Liverpool’s past and present American owners, we have become familiar with the phrase “skin in the game”. As such, we recognise that in order for supporters’ interests to be properly represented within our clubs we must invest our cash and secure a seat at the board table as of right and not through the patronage associated with the “fan on the board” concept. 6.2 It is this idea of “skin in the game” that represents the major barrier to the implementation of the Supporters’ Trust model at the higher levels of the game. For example, if we assume that Liverpool Football Club was sold at a value of around £300 million then a 10% share would cost around £30 million. To purchase this 10% stake we would require 60,000 supporters to purchase a £500 stake in the Supporters’ Trust shareholding. Even at £500, rather than the £5,000 originally proposed, our members would face problems raising the money. Consequently, the Union has developed a partnership with Partners Credit Union to offer an SOS account to supporters, enabling them to save towards purchasing a stake in their club and expenses such as season tickets and European travel as well as having access to low cost lending facilities. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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6.3 In developing our own supporters’ shareholding proposal a key concern that was highlighted to us was that of accountability and governance. For this reason we chose to adopt the Supporters’ Direct approach and constituted as an Industrial & Provident Society with annual elections overseen by the Electoral Reform Society.

6.4 In practical terms we were very keen to avoid a position where supporters would become embroiled in decisions regarding playing matters. As a union we have steadfastly adhered to a position of not expressing an opinion on playing matters. Our view is that the resources of the club ought to be dedicated towards supporting the football manager in his job and that the Board of the club can then judge the manager on his results. Our vision of a supporter owned Liverpool Football Club would involve an Executive Board being appointed to take charge of the everyday running of the club and an Ownership Board overseeing all aspects of governance and operations undertaken by the Executive Board.

7. Is Government intervention justified and, if so, what form should it take?

7.1 The position that football clubs hold in community life and the unique way in which they are supported mean that its incalculable contribution to social cohesion and its role in building social capital ought not to be left in the hands of solely commercial organisations that often have their headquarters based on another continent. The current model negates the positives that football clubs bring to communities by leaving them at the mercy of equity financiers scouring the globe for their next cash cow. It is no exaggeration to say that while Liverpool Football Club was pre-occupied with PIKs and refinancing the club’s neighbours have been left to endure severe abandonment and dereliction, induced in no small way by the uncertainty surrounding the club and its intentions for future development.

7.2 We believe that, given its place in the life of so many communities, football has a big role to play in the ongoing realisation of the “Big Society” vision. In its response to the financial crisis, the Government has proposed the mutualisation of public services such as the Post Office network and suggested the creation of social enterprises in order to ensure local needs are met. This Union proposes similar as a resolution to the crisis of governance facing football.

7.3 As a starting point, we propose that the Government legislates to introduce a “transfer window” policy whereby clubs that are in the process of changing ownership or ownership stake in excess of 20% are legally bound to offer a properly constituted Supporters’ Trust the opportunity to purchase a shareholding in the club. We would suggest that the minimum stake offered should be set at 10%. In order for this to be a viable option legislation would be required to prevent the onward sale of any or all of a Supporters’ Trust shareholding and the shareholding would need to be protected in perpetuity, regardless of any future changes in club ownership.

7.4 Building upon this initial measure, it would be our aim to see Supporters’ Trusts being given a “right to buy” backed up by legislation. This would enshrine the right of supporters to buy their clubs at a fair value, which may ultimately be determined by arbitration.

8. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?

8.1 A number of the world’s most iconic football clubs are supporter owned, including Real Madrid, Barcelona and Bayern Munich.

8.2 Our investigations into appropriate governance models have led us to believe that there are many lessons to be learned from the German model, where the “50% plus1” principle, ensuring that supporters have a minimum of 50% ownership and 51% of voting rights in their respective clubs, is enshrined in law. While clubs must remain 50% supporter owned, this doesn’t preclude private investment. German clubs also operate within an enhanced version of the proposed UEFA Financial Fair Play regulations, which prevent clubs using debt in order to enhance their ability to compete on the pitch. The outcome of the German model is one where supporters pay as little as half of what we currently pay to occupy Liverpool’s cheapest seats, clubs are bound to operate within their means, taking a long term view of their sustainability, and the Bundesliga is emerging as the most competitive of Europe’s top flight league competitions.

8.3 We would urge a formal Government study into the way the game is governed in Germany and the lessons that may be leaned and applied in this country. January 2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Written evidence submitted by Steve Beck, York City Supporters Trust In this document I will cover the following questions: 1. Should football clubs in the UK be treated differently from other commercial organisations? 2. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 3. Is there too much debt in the professional game? 4. What are the pros and cons of the Supporter Trust share-holding model? 5. Is Government intervention justified and, if so, what form should it take? 6. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? Response: 1. I have always held the belief that football should be treated the same as any other commercial industry, most of footballs’ problems stem from the fact that the majority of clubs are not run by Boards and Chairmen as they would their own companies. We also have the absurd situation with regard to employment law which seems to be applied to employees of UK companies, but not football clubs; in that contracts can be signed by players and managers/coaches then just ripped up by Clubs and then players and managers can request a transfer or to have their contracts settled. I clearly remember being told on my first day as York City chairman by the then Chief Executive that there was no business like the football business, I did not believe him. I do now. I am sure there are many former company owners who wish their debts to HMRC and other creditors could have been dealt with in the same way as some football club, they may still be in business. Unless football is treated in a similar way to other commercial industries the situations as we see time and time again at Clubs will continue and the smaller non-league go to the wall for relatively small amounts, but the larger (more high profile clubs survive) 2. I firmly believe that the governance rules and the ruling bodies are not fit for purpose, we have a structure whereby the F.A Board have ultimate control of the game, they also set up the Premier League and following the Government Task Force report in 1999 that made many recommendations, so many still remain unimplemented. Whilst I was a football league chairman in 2003 the fit & proper person test was introduced—it was and still is in my opinion toothless. I had personal experience of dealing with an owner, who went on to try and obtain ownership of at least three other league clubs over a period of years and would have passed the fit & proper persons test after almost bankrupting my club. The whole structure of football governance from top to bottom needs to be reviewed. I would prefer this to be from the bottom up, the game has never had so much money but this does not filter down to the small local lower league clubs where with improvements in coaching skills (possibly by using coaches from Premiership and Football League clubs) could improve the development of our younger player, making them a more viable prospect for clubs higher up the pyramid which would ultimately feed through to the national team which the F.A holds so dear. 3. Absolutely; there is too much debt in football. We only have to look at any media source, be it TV, Press or Internet almost on a daily basis to read about another club in crisis, winding up petitions being served upon Clubs, players not being paid. This situation has got worse since I experienced it in 2002–03 when York City went into administration and was rescued by the supporters. The position of the clubs involved in are now higher up the football pyramid, the desperate situation that played out at Portsmouth only went to show this. There are too many club chasing the “pot of gold at the end of the rainbow” Leeds United fell foul of this in recent years—going from Champions League semi-finalists to League One status in a few seasons. Clubs incur costs in terms of players and managers contracts which are not sustainable; it only takes a owner to take his money out of club for the “pack of cards” to collapse. I believe that there is only one debt free club in the four English leagues and referring back to Q1. no other industry could operate in this way. Referring back to Q2. as I said there is more money in football than there has ever been but where is it going? I remember clearly on the day York City was informed as we had been relegated from the Football League we were to lose our Youth Funding of £118,000 per annum, the now England team captain had signed a contract extension for a reported £125,000 per WEEK. At York the parents of our Youth players raise funds and along with generous sponsorship keeps the Youth scheme going in difficult times. 4. The main pro of the Supporters Trust share-holding model is that of a feeling of helping to support the club in many ways, it might be to have a voice within the club to share the ideas, suggestions and yes the complaints from fans to be heard by the Club. On the reverse whilst Trusts may be able to obtain a share-holding in their clubs, this does not always guarantee that the Club Boards will firstly recognise how the Supporter can help the Club and a misgiving in most cases that confidential matters may be divulged makes things difficult between the two bodies. This can only be allayed by dialogue cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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between the Boards of the Club and Supporters’ Trust. It cannot and will never be the same at any two clubs. But the Clubs have to wake up (and some slowly are) to the fact that the fan base can offer so much more than just cash at the turnstiles. 5. I feel that Government intervention may be justified, this is our national game and I believe as I said earlier in my submission, there have been so many reports and recommendations ignored in the main by the governing bodies it is time for these bodies to be called to account and be informed that they are to implement changes for the good of the game. 6. As I do not know enough of the governance models of football in other countries or from other sports I am unable to give a detailed answer to this point, however I would mention that other countries seem to able to produce young players that end up at Academies and Youth schemes from Premiership down, but we seem to be able to produce so few, I remember seeing a BBC report presented by following last years World Cup highlighting how the coaching of young players in Europe was helping their national teams, the players being mentioned were the likes of Van Persie, Fabregas and Torres, all now plying their trade in the Premier League, but of course unable to play for England. In summation I would like to mention in slightly more detail how York City Supporters Trust was formed, what its goals were and what it has achieved over the years. I along with a group of like minded supporters formed the Trust back in 2002, when the then Board were looking to circumvent a F.A rule to asset strip the club (namely to sell the ground we played on to property developers) The club was then sold for £1 to a businessman who promised much, but delivered nothing and only succeeded in taking the club into administration. Through the hard work and support of York City supporters UK and world wide along with the support from many other football fans we were able to acquire the club from the administrators in March 2003 with a majority 85% share-holding, unfortunately due to the financial state we inherited we had to reduce our playing budget to cover outstanding debts, this resulted in my proud club losing it’s Football League status after 75 years. This of course to any club this is devastating and many more have suffered this fate and worse since. In 2004 the Supporters Trust had to in order to secure the long term funding of the club found it necessary to sell the majority share-holding to the minority shareholder (who is however a life member of the Trust) This did cause some concerns within the Supporters Trust Board and amongst members. But as we pointed out at the time one of the aims was to help keep professional football in York (now the only professional club in North Yorkshire, England’s largest county) we had little option. It was the need for on-going funding year on year that we simply could not sustain. I am proud of the part that York City Supporters Trust is playing in the history of our club, I firmly believe without it our club would no longer be around. But due to the lack of proper financial control at all levels of the game, having clubs living beyond their means in order to be one of the few successful clubs or trying to avoid relegation and its resultant financial impact it makes the chasing that “pot of gold” all the more worrying. January 2011

Written evidence submitted by Keith Blagbrough 1.1 About Me My name is Keith Blagbrough.

1.2 Background I am retired from employment after a series of employment with firms such as Glaxo, Tarmac, Reckitt and Colman and finally the BBC. My background is in IT and finance. I have played, enjoyed and supported football for virtually all my life and my club is Wycombe Wanderers. I was a founder member of both the Official Supporters Association and also the Supporters Trust. For nearly four years I was also on the Board of Directors of the Football Club, elected as a Supporters Director.

1.3 Why I am Submitting This Document I have for many years observed football, as a passionate supporter and also for a period as a supporter elected Director of a Football Club and once again as a supporter. I have seen the game evolve and change over the years from football and supporter oriented, to one dominated by business and used to further unrelated self interests. I have noted steadily increasing costs of attending matches, and the domination of a select few clubs who by their control of finance protect their own position to the exclusion of others. Many clubs particularly in the pyramid are struggling to survive. Many have gone. Others have been saved by their supporters for example Brentford, Notts County and Exeter. I have seen supporters and particularly families priced out of attendance due to these influences. We are creating a generation of young people whose only exposure is to watch the same teams on television and who rarely attend a match. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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I have seen the number of quality players available for the England Coach to select for the national side decreasing, and this is reflected in the performance and recent results. This trend is not healthy for the game, and no one listens to the real supporter. Some clubs have a Director elected by the supporters on their Board of Directors. If these directors are listened to and effective that is fine, but too often they are there to pay lip service to the principle and decisions are taken elsewhere, and merely rubber stamped at Board meetings. I have attempted to outline below areas where I think things could be improved. Many of these views will not be popular and may need legislation, but unless things change soon, the game will be taken away from supporters and will be another game that many used to enjoy but only the few can.

2. Summary of Concerns and Recommendations The committee have outlined the areas for consideration and I have followed this structure in my submission.

2.1 Football Clubs They should of course be required to conform with the provisions of the Companies Act but in addition should be required to: (a) Ensure that there is Supporters Representation with a minimum of at least one Full Board Director . This should be on the lines of that recommended by the organisation known as Supporters Direct, elected by supporters, and not nominated by the Football Club. (b) The ruling that a proportion of developed players should be home produced should be rewritten to ensure that the definition of home produced means that they are eligible for selection for England. This should also be extended to a fixed proportion of any club squad. (I note that this would need legislation to overcome EEC regulation). (c) Live within their means. Debt must be sustainable and not allowed to accumulate especially with the so called soft loans. Soft loans must be controlled with stringent guarantees covering when and in what circumstances they can be called in. If allowed to sit, after a defined period, they should be written off, or it would make sense for the majority of these soft loans to be converted into shares, as this would demonstrate a long term commitment and would not destabilise the clubs balance sheet. (d) Conform to ownership regulations, and appoint only Directors who conform to the fit and proper definition.

2.2 Football Authorities (See Paragraph 3.0 below) Although in theory the Football Association is nominally responsible for all Football in England, in practice the Premier League and the Football League run autonomously with objectives that are inward looking and serving only the interests of their members. The three Footballing Authorities: The Football Association, Football League and the Premier League should be reconstituted as a single authority who would be responsible for: (a) The objectives of the current Football Association, but take direct responsibility for the operation of the Premier and Football League. (b) The current hierarchy of the Association is cumbersome and the FA Council should be scrapped. The New Authority should be run with a modernized structure which does not allow the current richest clubs to perpetuate their dominance but is representative of the wider needs of football. In particular it should have supporters representation at the highest level, and enable the needs of minorities to be heard. (c) The negotiation of financial contracts for TV money and its distribution in a more equitable manner. To include the revision of match scheduling because the current scheduling of TV games militates against supporters traveling to matches, with kick off times at lunch time and shortly after 5.00 pm on Saturday being a particular disincentive to attend. (d) Be able to audit all club affairs to ensure compliance with regulations such as the debt exposure, owners and Directors passing the right and proper persons test, the mix of the squad conforming to home produced players, and such other regulation as is determined by the authority. They should be able to impose penalties. Financial would be counter productive, points deduction more effective with the ultimate sanction of suspension or even expulsion being considered. (e) The fit and proper definition should be revised to exclude individuals who have a conflict of interest with control of more than one club of any code sharing the same facility. It should also be updated to change the rule that disqualification takes place when a Director has been involved with two insolvencies, to disqualification after only one. This would preclude the threat of making a club insolvent and then acquiring it from the administrator as a 100% owner. If one reconstituted body is not possible, at the very least there should be one independent body (paragraph (d) above) which deals with all financial regulation and governance issues. This would address many of the cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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points discussed above. It would have to exist independently from, and without the vested interests of the Premier, Football League and Football Association Boards of Directors who are responsible for decision making in their own areas.

3. Current Structure The current way the game is structured has evolved rather than having been designed and placed with specific objectives being defined. The result of this is that self interest and self preservation has created a condition where overall power and control has been placed in the hands of a few clubs who monopolise the income coming into the game, to the detriment of the game as a whole. I have repeated at some length the current structures, to illustrate deficiencies and anomalies

3.1 The Football Association The FA, the governing body of football in England, is responsible for developing and regulating the game at all levels from international football to the grassroots. It is committed to making football accessible, enjoyable and safe for everyone, regardless of race, religion, gender, sexuality, background or ability. Its objectives are: — Promoting the development of the game amongst all ages, backgrounds and abilities in terms of participation and quality. This also involves promoting the availability of the sport to the greatest possible number of people. — Regulating the game on and off the field of play through the “Laws of the Game” and the “Rules of The Association”. — Sanctioning, either directly or indirectly, all matches, leagues and competitions played in England. — Overseeing the administration of the disciplinary system. — Organizing a number of senior men’s, youth and women’s national competitions (including most notably The FA ) and the participation of England national representative teams in international matches. — It is also responsible for governing the game, in areas such as disciplinary, compliance, refereeing, agents, financial matters and doping control. Its organisation which has developed over many years is run by a Board: Chairman, Two Vice chairmen, (One of whom is Premier League representative, the other from the National Game), three National Game representatives, three Premier League representatives, two Football League representatives. At this level there is no supporters representation. Below this is the FA Council which has a structure: Chairman, two Vice Chairmen, two Senior Vice Presidents, six Vice Presidents, 54 Representatives of various county associations (including Cambridge and Oxford Universities, the three armed services, Independent Schools and one representative from Womens football), seven Premier League, eight Football League, two Conference, one each from , Northern Pemier League,Southern League, Professional Footballers Association, League Managers Association, Referees, Race Equality, Disabled Supporters, and finally one representative of supporters. There are also 10 Divisional representatives. This is an organisation which has just grown over the years and is overdue for a radical overhaul.

3.2 Football League The Football League is the world’s original league football competition and is the template for leagues the world over. With 72 member clubs, it is also the largest single body of professional clubs in European football and is responsible for administering and regulating the Football League, Carling Cup and Johnstones Paint Trophy as well as reserve and youth football. Through the work of The Football League Trust, all parts of the community are encouraged to enjoy league football through community inclusion programmes. The League is also responsible for generating the commercial revenue that sustains and fuels football’s growth and encouraging the next generation of football supporters to watch their local Football League club. It is run by an elected Board consisting of Chairman, Independent Non executive member, and six elected football club representatives, consisting of three from the championship, two from Division 1, and one from Division 2. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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In spite of an objective to encourage the next generation of supporters, it is noted that there is no representation from supporters, or other groups such as disability, liaison with other leagues or womens football. This is an inward looking league which is structured to favour the Championship who take the majority of TV generated monies.

3.3 Premier League This League is run by and on behalf of its 20 members at any one time who each have one share. They are responsible for taking decisions based on the objectives below. The Football Association is also a special shareholder. They have the right of veto in certain crucial areas, such as the appointment of Chairman and Chief Executive and promotion and relegation, but have no say on other areas of Premier League work. The day-to-day business and statutory company responsibilities are handled by the Board of Directors, which comprises of Chairman and Chief Executive, and the full-time members of staff at the Premier League. Objectives are: — Manage, continually improve and be regarded as the world’s best league football competition—on and off the field. — Increase interest in our competitions, promote accessibility to live games and ensure that media exposure is used to optimum effect. — Generate increased commercial value, using the resulting revenues to further enhance our competitions and strengthen the long-term future of the Premier League and its clubs. — Use our power and influence responsibly to improve the game in this country and abroad through partnership with the FA, UEFA and other bodies. — Create a quality of competition that provides a platform from which our member clubs can achieve unparalleled success in European or World competitions. — Use our resources to develop playing talent that will provide for international success with the England team at all levels—with the status of World Champions being the realistic goal. Membership of this League is inward looking and is confined only to those clubs within the League. Its objectives are to further its own interests, and when it comes to a conflict of interest for example with releasing players for the England team, their own interest will take priority. The ideal of having the England team as World Champions is more observed in the breach rather than compliance, indeed in developing talent for the International Squad few young promising players qualified for England are selected for the first Teams, with either established overseas talent being purchased, or promising young players from abroad who are not qualified for England now being recruited to develop in this country in preference to home grown talent. This is designed to get round the potential ruling that any proportion of named players in squads have to be “home grown”, in its self a sensible approach to bolster the future of the National Team. It is noted that there is no supporter representation and no representation from other areas such as disability or womens football. They take the lions share of monies from Television and skew the Transfer market by paying exorbitant transfer fees, and wages. Money also is drained out of the game into the pockets of agents. This situation is exacerbated by the clubs benefiting from “soft loans”. This is practice which should be curtailed, because it leads to one or two clubs dominating and distorting the whole system, and also gives specific individuals who may not have the best interests of the club at heart but who have other priorities. They can then hold power over the club, and can utilise the clubs assets to further those other interests. This is not confined to the premier league and is a trend being noticed in the lower leagues,

4. Supporters “Owners, Directors, Players and managers come and go but supporters are there for life” Unfortunately they are also very much taken for granted. The current attitude by some management is that they only become supporters when they are through the turnstiles, up to that point they are treated as customers. (a) The cost of admission keeps many supporters and particularly those with families away, and this is an age group needed to retain for the future. (b) Merchandising policy is costly and for example the changing of shirt design frequently places a financial strain on supporters and parents. (c) They are under represented at all levels in the game. Some clubs have had supporters representation on their Boards, and found their contribution assists them, other have been saved from extinction by their Supporters Trust. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Taking the football authorities as a whole we find that: Members Supporters involved Football Association. Board 11 0 Council 101 1 Premier League 22 0 Football League 8 0 Totals 142 1

Out of the Football Authorities governing bodies with 142 decision makers only 1 is allocated to supporters. (d) Kick off times and days are changed to suit the requirements of Television companies without any thought of the traveling and timing impacts o supporters, particularly evening scheduling. January 2011

Written evidence submitted by the Clarets Trust Should Football Clubs be treated differently from other commercial organisations? 1. An easy answer to this would be no but it is perhaps not that simple. The success (or otherwise) of a Football Club has a much wider importance than just to the Club itself. Most Football Clubs are very much involved in the wider community and many run very important and successful community programmes. Certainly to a town like Burnley for instance the Borough is also known nationally—and indeed internationally—because of the Football Club. The era in the late 50s and 60s brought international fame to the not only the Club but the Town. At the opposite end publicity was worldwide when in 1987 the Club faced losing its place in the league if it lost the last game against Orient. I recall that Gerald Kaufman at that time was in China and on the day of the game he was asked if Burnley had won and survived. Our recent year in the Premiership was a tremendous boon to the whole town and indeed got a mention on Eastenders. When I was Council Leader and a Shop Steward at a local factory periods when the Club did well the town had a feel good factor. The bonus system at Philips hit the ceiling as productivity improved in a year Burnley won promotion. The point I make is the wider importance of a football club to its fans and the area in general cannot be ignored. 2. Another factor that makes normal commercial rules difficult is that the assets of a football club are not easy to assess. The value of a footballer can soon disappear if they lose form and arising from the Bosman transfer rules are on a declining basis as the player’s contract period is eaten. The value of the ground is also a difficult one. In London or Manchester there may well be a high land value but for a club like Burnley where general land values are low a stadium only has a value as a stadium of a successful club. We very much underlined this in Burnley in the difficult days. If planning permission for other development had been possible then the asset value may have been higher but this may not always be possible. 3. Many football clubs if in other commercial fields would not be allowed to operate. Wage bills and expenditure far exceeding match and other income. Crazy transfer fees paid for players. Even in the Premiership few Clubs operate on a genuinely viable commercial basis. As one who opposed the Premiership breakaway it has concentrated too much money in that Division rather than a League of 92 Clubs with a trickle down of money far more than is the case now. In meetings at that time it appeared that an element of the breakaway was the Football Association trying to score one over the Football League. That said the baby then became bigger than Football Association as a result of the money involved. 4. Before the breakaway in 1992 the television deal was distributed 50% to the top division, 25% to the second division and 12.5% each to the bottom two divisions. This ensured a more level playing field via a fair distribution of such revenue. Now the Premier League takes nearly all of their own deal and the leave the other divisions to negotiate their own deals. 5. The ITV Digital Deal with the Football League was one that was bound to fail—I was involved in a number of meetings at that time which showed the weakness of the deal. It proved a disaster for many of the lower league clubs who had planned budgets etc, on funding from a deal that was bound to fail. 6. Reverting to the question whilst wider issues of importance of Clubs must be taken into account it is important to ensure that clubs income and expenditure accounts, balance sheets etc, are more realistic thus avoiding the need for so many Clubs to go into administration. Whilst the penalty of points deductions now makes Clubs think more before taking such a course of action too many Clubs a run in a way that makes such action a possibility. It is also wrong, in my view, that so called football debts have to be given priority under League rules. Many other local suppliers and traders have paid a heavy price when clubs have gone into administration. 7. Burnley FC resisted the option of going into administration but it was particularly galling on one occasion to lose a player effectively as Burnley tightly controlled wages and expenditure to another club that had chosen cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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(before the points deduction days) to go into administration. This should be addressed by a licensing system to stop clubs spending more than they earn and having realistic budgets.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 8. The answer must be that there are still a lot of flaws in the governing bodies and a failure at times for consistency. Even on such things as ensuring persistent standing at a match; ensuring that where seated tickets are issued that is where they should sit are not enforced uniformly. The latter makes it difficult to enforce action if a fan is guilty of unacceptable behaviour etc, In the Premier even in some of the long standing members of the Premier grounds are really not up to standard—some having areas of restricted viewing etc, Liverpool and Everton for example of grounds where Clubs need to invest a lot more in their grounds. 9. Every year we see examples of appalling actions by some Club Boards in relation to their fans and supporters which show that the governance rules at the top of football are still failing to ensuring the appointment of fit and proper persons to be Directors of Football Clubs remembering they are not the playthings of wealthy directors but that they effectively have control and stewardship of important community assets. 10. The ruling bodies in football have a responsibility to ensure that all the rules and regulations are enforced uniformly to all Clubs. Many fans feel that the powerful and wealthy clubs sometimes get more favourable treatment.

Is there too much debt in the professional game? 11. Yes. Some of the debts are now quite crazy. The ownership of some clubs is no longer clear. The level of foreign ownership is becoming nonsense. The pouring in of millions by some billionaire owners has totally distorted the football world. Unrealistic transfer fees. Unrealistic wage levels have become nonsense. It really is not good for football as a whole to see most of the top trophies won all the time now by a handful of powerful and wealthy clubs who in the main still have effectively massive debt and do not in any way survive on what their football income really is.

What are the pros and cons of the Supporter Trust share-holding model? 12. At the moment there is massive variation in Trust shareholding involvement in Football clubs. At Burnley the Trust own 110 shares in the Club which in relation to the Directors is in reality on a token shareholding. That said the Trust has been building up a working relationship with the Club and we will continue to build on that. 13. Those Trusts that have a control or major stake in a Club seem to have acquired that at a time when a Club has been in major crisis. I would like to see fans via Trusts acquire a reasonable stake in a Club with, in the end, fans having some representation on the Board via the Trust (I would stress I am speaking in general terms in this respect). It is essential, however, not to just have tokenism but some legislation is needed to ensure a fair and reasonable input from the fans/community. When Burnley had problems some five or six years ago some would have liked the Trust (fans) to be able to take the Club over but that was not a realistic option. Some would have liked the Trust (fans) to acquire the ground. At that time the Club did try to use the ground as security for finance but that was not easy and in the end the ground was secured for a cash injection into the Club by a new company formed by two of the Directors. The terms are complex and give the Club a long term lease but with varying options over the years of acquiring the ground back. That company has been sold onwards but the conditions still apply which should safeguard the future of the Club in relation to the Ground but also gave the Club money at a time when it was urgently needed. The Club is on record as saying if promotion were to be re-secured to the Premier the option to take back the ground would be exercised. 14. The point I am making is would a fan based Trust in ownership of a Club have a better ability to secure long term finance to run a Club. Whilst, in theory, I would like to see us moving to being involved in Club ownership but it is essential that Trusts secure the skills and expertise necessary from the wider community to ensure they have the ability needed to run a Club. The higher a Club is in the League ie Championship— Premiership with really big budgets and money involved even with professional management employed it is clearly a major task. 15. Therefore on balance I do believe in fans through a Trust having a stake in their Club and believe the relationship involvement should be increased and perhaps put on a statutory basis to ensure that fans views are genuinely taken into account.

Is Government intervention justified and, if so, what form should it take? 16. Yes. It should give fans (Trusts) a genuine and secured role in the running of Clubs. This input is essential even where fans (Trusts) do not have a controlling stake or ownership of a Club. It should ensure the legislators in the game uniformly enforce the regulations on. 17. Fair and proper persons for Club Directors. 18. Open accounting on a sound financial basis. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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19. Open policy on who has ownership of a Club being known. 20. Uniform enforcement of policy re seating/versus standing at grounds—and enforcement of use of seats as per ticket allocated, At Everton I could not see far side of ground as I had to stand due to consistent standing in front and restricted view due to upper tier blocked line of vision. At other grounds having tried to go to seat allocated have been told use any seat what nonsense when at Burnley we try to allocate away tickets where requested to disabled etc, and others having an access problem. 21. It is essential that legislation should ensure that the scandals and abuses that have taken place over recent years are no longer possible.

Are there lessons to be learned from abroad form football governance models across the UK and abroad, and from governance models in other sports? 22. I will leave the last question as I am not an expert on other sports but I think football is unique in the UK as it is by far the largest spectator sport and clearly is the sport with the biggest money issues. Many people in football would argue that the big money has in many ways spoilt the game as it used to be—it is a pity to see the greatest cup competition now regarded by so many Clubs as a second tier competition. In Europe there are clear examples of where a fan input is enshrined by law into the Clubs and I hope the Committee will study these examples and how they work. January 2011

Written evidence subimitted by Merthyr Town FC SUBMISSION SENT BY MERTHYR TOWN FC, ELECTED INTO THE WESTERN FOOTBALL LEAGUE ON 8 JUNE 2010 Summary of Submission 1. Merthyr Town—brief history. 2. Arrival of owner 1999. 3. Owner’s local business interests. 4. Growth of club debt. 5. Decline of club’s finances. 6. Growing involvement of Trust. 7. Trust offer to take club over. 8. Club placed in administration. 9. Club liquidated. 10. Club reformed by Trust. 11. Club becomes a Community Mutual Sports Club. 12. The threat to clubs’ existence from large debts. 13. Suggested deterrent to growth of unsustainable debts. 14. Support for the Supporters Trust share holding model. 15. Support needed for Supporters Trusts by new Governance rules. 16. Likely impact on players wages. Formed in 1909, Merthyr Town F.C participated in the (primarily English) Southern League, alongside a number of other Welsh clubs, including Cardiff City, Newport City and Swansea Town. At the outset of World War One, the club were in the Southern League First Division, which meant that when the Football League expanded to form a Third Division in 1920, Merthyr were invited to compete. Despite a promising start, the club fell into decline and eventually ceased to exist in 1934, having been voted out of the Football League four years previously. In 1945, football returned to the town in the form of Merthyr Tydfil FC, who began in the Welsh League but soon returned to the Southern League, winning five titles between 1948–54. However, the club were consistently denied entry to the Football League, something that appears scarcely conceivable to a modern football audience. Arguably the club’s finest hour came in the 1987: having won the for the third time, they qualified for the European Cup Winners’ Cup, where they were drawn against Atalanta, who had played in the previous season. The first leg at Merthyr resulted in a famous 2–1 victory for the home side, and although the second leg saw them eliminated on aggregate after a 2–0 loss, it was a a momentous event for the club. They were finally admitted to the Football Conference in 1989, after winning the Southern League for a record sixth time. However, by 1995 they were back in the Southern League once more.(1) The arrival of Wyn Holloway as Chairman in 1999 can, in hindsight, be seen as the beginning of the end for Merthyr Tydfil. Holloway, a businessman with no ties to the local community, was initially fairly quiet as an owner, however a culture of overspending and shoddy financial planning at boardroom level soon emerged. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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As the club continued to compete in the Southern League, Holloway oversaw a period of inflated wages which, combined with a distinct lack of understanding in terms of attracting revenue, precipitated an initially unobtrusive but nevertheless discernable accumulation of debt.(2) Around the same time that Holloway became involved with Merthyr, the Coalfields Regeneration Trust (CRT) was established. Merthyr as a town is of course inextricably linked with the rise, golden age, and eventual decline of the mining industry. The CRT describes itself as “an independent regeneration organisation”, aiming to “make coalfields sustainable, prosperous, viable and cohesive without support.” The Trust awards grants to companies and organisations who wish to redevelop sites left redundant by the mining industry. During the 2000’s, one such company emerged with grand plans to regenerate Merthyr. Merthyr Village Ltd. (MVL), owned by Mr Holloway, devised a multmillion pound scheme that would have radically altered the appearance and economy of the local community. Around 2,000 new homes, as well as a business park, leisure facilities, and a shopping complex were envisaged for a 550-acre site in the Rhydycar area. MVL declared that the project would potentially create up to 2,000 jobs, as well as long-term economic regeneration.(3) In stark contrast to the talk of regeneration and redevelopment that permeated the offices of MVL, Merthyr Tydfil F.C were quietly sinking into a financial quagmire. As of 2006, the club’s debt was estimated to be upwards of £500,000, yet Holloway (who had by now already turned to the Martyrs to the Cause Supporters’ Trust for financial relief) showed little willingness to address the situation. Soon after this, the MVL project ground to halt as the Welsh General Assembly rejected the proposals, with the crux of the issue apparently worries over the level of costs required to make the coalfields suitable for housing, as well as an uncertainty about how the town’s numerous sites of historical interest would be affected. Local Assembly Member Huw Lewis stated that the absence of town centre regeneration in the plans also played a role.(4) With his club facing mounting debts, Holloway’s behaviour became increasingly erratic. Martyrs’ Trust Chairman was banned from Penydarren Park in 2007—this despite the fact that the Trust had been providing financial assistance to the club for some time! 2008 bought a winding-up order from HMRC over an outstanding tax debt of £20,000. Having realised that there was no future for the club under Holloway, the Trust submitted an offer to assume full control of the company, despite the unknown levels of debt— accounts had not been submitted to Companies House since 2006. In return for this (and assuming responsibility for those of the club’s debts, not personally guaranteed by Mr Holloway), the Trust asked that Holloway and his board resign and transfer at minimum a controlling stake into the hands of the Trust. Despite the seemingly reasonable nature of the offer, Holloway and his board rejected it out of hand, with the demand for a controlling stake apparently the sticking point. The sense amongst the Trust membership was that Holloway wished to remain in control whilst the supporters continued to subsidise the club, for no return. In a press release, the Trust expressed our grievances and aims: “It is time to end the culture of living hand to mouth, of only just getting by. The fans and community of Merthyr deserve better. When we look to the likes of AFC Telford United, we know it is possible.”(5) The Trust sought the assistance of Supporters Direct, and as the club continued to slide towards administration as the 2008–09 season got underway, began to pave the way for future containing a more positive community-based club. Unlike the Holloway administration, the Trust set about implementing fundraising initiatives, maintaining links with the local community, and providing members with regular updates on their activities. We also continued to contribute £300 per week towards the club wage bill. Despite this, 2009 brought little in the way of good news. Amidst a backdrop of debt, unpaid wages and the removal of utility services from the club, the Trust released a statement reminding the Holloway administration of the 2008 offer, and reiterated our intention to transform the club into a co-operative, supporter-owned organisation. Another HMRC winding-up order arrived on 6 May, although an adjournment was secured by the Trust. However, having continuously refused to enter into negotiations, Holloway threw a spanner into the works on later in May, with his declaration that he had received an offer to buy the club. The Chairman stated that: “The person I’ve had the offer from is looking at the fact that, if he wanted to get a team in the league, it would cost him a lot of money. The gentleman wants to get into the English pyramid system. To start from the beginning and go through what we have would take time and cost. This deal would be a short cut to where we are. You would start with a ground share then after two or three years take it elsewhere.”(6) The final sentence of that declaration in particular was an irrefutable indication of Holloway’s true intentions regarding Merthyr Tydfil F.C (if there were any lingering doubts amongst supporters). Whilst the most obvious solution at this juncture would have been to form a new club independent of Holloway’s corrosive influence, the issue was complicated by the fact that the Football Association of Wales (FAW) had previously shown a strong reluctance to allow Wales-based clubs to compete in the English pyramid system. Any new club would clearly have been unable to assume the additional costs that potential legal action would have created. It appeared that the best option for the Trust was to continue the fight against the “franchising” of our club.(7) This battle was handed a significant boost on 12 June 2009 when the club was finally placed in administration, the High Court having accepted the application of the Trust. General Secretary John Strand described the appointment of MB Insolvency as “absolutely necessary”, and the Trust set about rebuilding what was left of their club. However, it soon emerged that the Wyn Holloway era had left Merthyr Tydfil F.C essentially insolvent. It is here that the contrary state of UK Company Law in regards to football clubs can clearly be seen. Under FAW rules, the club were unable to sell their few remaining assets, as to do so would cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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be deemed as trading whilst insolvent. Yet at no time had the FA, FAW, or British legal system been able to prevent the club from sliding into the state that required such drastic action. The Trust found ourselves unable to do what was necessary to save the club.(8) Meanwhile, the Administrator was unable to satisfy the FA of the continuation of football at Penydarren Park for the 2010–11, and the club were excluded from the Southern League, despite finishing eight points above the relegation zone in 17th. In retrospect, the very fact that the club managed to finish the season without going under was a major achievement in itself, having cut costs to the bare minimum. However, the inevitable end of Merthyr Tydfil F.C came through liquidation during the close season, with the continuing legacy of the Wyn Holloway era exacting a final toll. Whilst the club were forced to depart from Penydarren Park, a ground share with Taffs Well F.C was secured, and the presence of Roman archeological remains underneath the stadium ensured that the land would not be sold for redevelopment. Merthyr Tydfil County Borough Council, who own the freehold to the ground consistently intimated to the Trust that they would not sell the freehold to the ground, which made the sale of the remaining lease, held by the administrator, not viable.(9) At this point, the Trust were left with a dilemma: under the rules of the game, starting a new club from scratch would likely have meant a drop down to the lowest organised levels, something that would have naturally had major implications for the club going forward. However, with the assistance of Supporters Direct and the FAW, the Trust were able to ensure that the newly-named Merthyr Town F.C were elected to the Western League for the 2010–11 season. Despite this positive outcome, the whole episode was indicative of a general failing on the part of the various governing institutions. By not granting the club re-admission into the English pyramid, the FAW would have set themselves a precedent that could prove to be a ticking time-bomb: what if a giant of Welsh football (such as Cardiff City) were to go out of business? Would they, and their fanbase, be required to enter the lowest rung of the Welsh ladder? In the event, common sense prevailed, and a place in the Western League was secured. Credit must go to the FAW for acquiescing, but the absence of supporter representation at the very level of the game where they are most needed (particularly now that insolvency triggers an automatic demotion to Step 7 of the pyramid) remains a worrying state of affairs.(10) Merthyr Town F.C amended its constitution on 17 July 2010, registering themselves as a Community Mutual Sports Club. This represents a positive step forward for both the supporters and the wider community, despite the club’s continued exile from Penydarren Park. Shortly after the beginning of the current season the County Borough Council granted the club a new lease, but the application to return there immediately was rejected by the Western League and that decision was upheld by an FA panel on 10 January of this year. The club has continued to deepen its links to the Merthyr community, and is run on an accountable and democratic basis.(11) The conclusion that we draw from this sequence of events is that the greatest threat to the development of a healthy economic environment at football clubs is the growth of unsustainable debts. It is clear that this problem puts the very existence of many clubs at risk. The clubs most susceptible to such threats are those owned by one or two individuals, who often put money into clubs when they first arrive, but treat those cash injections as loans. This was the case at our club, where the owner lent money to the club and personally guaranteed other loans, none of which were ever repaid by the company. This resulted in the company, and therefore the club, being liquidated.(12) The current FA rules penalise clubs that go into administration or are liquidated, by deducting points or demoting teams. This is intended as a deterrent to clubs living beyond their means, but is in fact often closing the stable door after the horse has bolted. Once a club has been liquidated, debts often go unpaid and supporters may lose their clubs. A more effective deterrent would be rules which penalise clubs who incur debts which exceed an agreed percentage of turnover. We would suggest a points deduction for clubs who exceed a limit at the end of each season. This would have the effect of reducing the likelihood of capital injections being treated as loans, and would deter clubs from building debts for short term success. An exception could be sustainable debt for the purposes of improving facilities.(13) We strongly recommend the Supporters Trust share holding model as a sustainable reasonable way of organising football clubs. It has the advantage of encouraging only people who are interested in developing clubs for the benefit of players and supporters, and discourage the involvement of those who have ulterior private business objectives, as was the case at our club. In practice, clubs like ours are largely administered by volunteers, regardless of who owns them. In our case those volunteers, after financially supporting the club in recent years, now own the club.(14) The development of the Supporters Trust model could be better supported if the current Governance Rules were relaxed. At the moment clubs which are liquidated and reformed by Supporters Trusts are treated in the same way as clubs mismanaged by individuals, who might even be involved in the reformed or new club. It would help the development of supporter run clubs, if they suffered a less severe punishment after liquidation.(15) The outcome of the sort of changes recommended here would contribute to a slow down in the unsustainable inflation of players’ wages, which is occurring even in non league football, often at the expense of many creditors who are never paid.(16) January 2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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Written evidence submitted by the Arsenal Supporters’ Trust and Arsenal Fanshare Introduction to the Arsenal Supporters’ Trust (AST) The Arsenal Supporters’ Trust (AST) is an Industrial and Provident Society founded in 2003 with financial and administrative support from Supporters’ Direct. Its main objectives are to: — Promote the interests of supporters who own shares in Arsenal Football Club. — Facilitate wider supporter involvement in the club. — Facilitate and promote mutual supporter ownership of Arsenal, thereby giving supporters greater representation and influence in how the club is run. Many of our members are already personal shareholders in Arsenal Holdings Plc (Arsenal’s holding company) and every member of the Trust shares in ownership of Arsenal Football Club through shares the Trust owns. The AST estimates that its members directly account for between 2 and 3% of the equity in Arsenal and we are recognised by the club as the main representative body for small shareholders. In total about 10% of Arsenal’s equity is held by “supporter shareholders”. The AST works with its members, Arsenal executives, the club’s Board, major shareholders and other Arsenal supporter groups to help maintain Arsenal as a world class sporting institution. The AST’s primary role is to provide opportunities for supporters to scrutinise and question how Arsenal is run. This is achieved through activities such as: the production of independent financial analysis of the report and accounts of Arsenal FC; representing supporters views to the club’s Board and executives, including attendance at the club’s AGM where supporters have an opportunity to ask questions; an annual end of season review meeting with the Chief Executive; and undertaking a detailed survey of supporters’ views on issues such as the ownership structure of the club, the club’s corporate governance and its footballing and commercial strategies, which was presented to all Board members. The AST aims to act as a constructive challenger to the club. Among the issues we have raised, and subsequently seen positive development on, are our recommendations to make Stan Kroenke a Board member and calls for the club to make significant additional investment into its commercial and marketing infrastructure, which Chief Executive Ivan Gazidis is now implementing. Arsenal’s parent company, Arsenal Holdings plc, is a public limited company on the AIM market. Only 62,219 shares in Arsenal have been issued and they currently trade at a price of approximately £10,500, which sets the club’s market capitalisation at approximately £650 million. The high price of each share is a considerable barrier to supporter ownership and the AST has long sought to introduce a scheme that would assist supporters in buying shares in Arsenal. Last August this objective was achieved through the launch of Arsenal Fanshare.

How Arsenal Fanshare Works Arsenal Fanshare is operated by the Arsenal Fanshare Society Board, an Industrial and Provident Society (IPS). The scheme itself is run by Equiniti, who administer investment plans for large companies and are specialists in shareholder plans. Equiniti Financial Services Ltd is authorised and regulated by the Financial Services Authority (FSA) (reference 468631). Arsenal Fanshare is an independent organisation separate from Arsenal FC. However, Arsenal Fanshare is endorsed by both Arsenal FC and the AST. The AST welcomes the support that the Arsenal Board and Chief Executive have given to the scheme. In addition, the club’s other major shareholders, Lady Nina Bracewell-Smith and Red and White Holdings (Alisher Usmanov) have also given their backing to Arsenal Fanshare. The Arsenal Fanshare Society buys shares in Arsenal Holdings PLC and nominally divides each one into 100 Arsenal Fanshares. As the value of one share in Arsenal Holdings Plc is currently around £10,500, the value of one Arsenal Fanshare is currently around £105. The value of Fanshares varies according to the real time market price of a share. Arsenal supporters join the Arsenal Fanshare Society by paying a one-off membership fee of £20 and deciding a set monthly contribution they would like to invest each month in Arsenal Fanshares. The lowest monthly contribution is £10 and the highest is £1,000. Each participating supporter has a Fanshare account where their monthly contributions are saved until there are sufficient funds to cover the cost of a Fanshare, at which time the Fanshare is allocated to them. Any money left over is put toward the cost of the next Fanshare. The specific benefits that members of the Arsenal Fanshare scheme receive are: — A direct ownership stake in Arsenal. — Fanshare membership certificate. — Opportunity to attend the Arsenal AGM. — Quarterly shareholder email update from Arsenal Chief Executive Ivan Gazidis. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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— A vote on key club resolutions. — Access to the AST’s scrutiny of the club’s finances and opportunities to express their views directly to the club’s Directors and Executives. Once a member has acquired 100 Fanshares, equivalent to one full share, their membership status within the scheme is amended to give them a guaranteed place at the club AGM and the full voting rights for one share. Arsenal Fanshare has been a great success. It currently has more than 1,600 members, a larger number than those who own ordinary shares in Arsenal Holdings PLC. Arsenal Fanshare has already invested more than £350,000 into buying shares and 100 Fanshare members were granted priority access to the club’s October 2010 AGM. The Arsenal Fanshare scheme has been widely praised across the football community as an important initiative for increasing supporter involvement, with endorsements from UEFA, Supporters’ Direct, the Premier League, the Minister for Sport and leading football commentators. The “Fanshare” brand name and scheme rules were designed and created by the Arsenal Fanshare Society Board. These could be made available to other supporters’ trusts and clubs who would like to replicate the model. However, due to the regulatory burden of offering share ownership, Arsenal Fanshare has been very expensive to establish and maintain. In the submission below we set out how this can be addressed and also cover how both the Football Authorities and the Government can do more to assist with the introduction of schemes that reflect the Fanshare objectives to increase supporter involvement in football clubs.

Custodianship and Supporter Involvement in how Clubs are Run At Arsenal, the concept of custodianship and plurality of ownership is central to the club’s character. The AST sees custodianship as the responsibility of all Arsenal stakeholders to look after the club’s values and keep them safe for future generations. The AST recently surveyed its membership on their preferred ownership structure at Arsenal. 90% of AST members rate maintaining the club’s custodianship and protecting the long-term future to be an important priority for Arsenal’s Board. There is little support for the club being taken private, with 84% preferring Arsenal’s plural ownership model that includes supporter representation. There is also huge support for the club’s philosophy to be financially self-sustaining, with 89% of AST members supporting the club’s self-sustainability model even if it means struggling to complete with clubs that have a “sugar daddy”. Arsenal has benefited greatly over many decades from maintaining stability in its ownership structure, and from having supporters who own shares and are actively involved in this structure. Plurality of ownership has served Arsenal well and is the best way to ensure the necessary checks and balances are in place to protect the club’s long-term future. Throughout its history, Arsenal has always looked to the future and has been at the forefront of important developments in football. Innovations have ranged from the introduction of floodlit football and the renaming of Gillespie Road tube station to “Arsenal”, through to the building of a landmark new stadium and transformation of the game in England with the pioneering appointment of the first successful overseas manager in Arsène Wenger. Arsenal Fanshare continues this innovation and sends a positive message to the wider football community about the importance of involving supporters in the game’s future at an ownership level. Arsenal Fanshare meets the demand from Arsenal supporters that the club should remain in plural ownership and gives them a small but relevant—and growing—voice in the how the club is run.

Good Governance is how a Club Behaves, not just how it is Owned The AST would like to reiterate to the Select Committee that good governance isn’t solely defined by how a club is owned—just as important is how it acts. Some observers point to Barcelona and Real Madrid as good models for mutual ownership. The AST challenges this notion and does not believe that the Spanish clubs represent good practice in ownership or governance, and that many of their corporate actions should be subject to far greater scrutiny and challenge. Barcelona, for example, operates under considerable levels of debt, propagates an individualistic model regarding the sale of television rights that sees it retain a vast proportion of the revenues (unlike the collective and redistributive structure in the Premier League and making a mockery of financial fair play rules), and its executives and directors frequently and consistently break football’s rulebook and engage in the inappropriate ‘tapping up’ of players under contract to other clubs. We urge the Committee to note the failings that occur in this ownership model and to judge governance by how a club operates rather than just by its constitution. We would also ask the Committee to ask UEFA as part cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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of its inquiry what it is doing to address issues like this as any introduction of financial fair play requires consistency across Europe and for all of football’s rules to be applied to all clubs.

The Role of the Football Authorities and Government in Promoting Supporter Involvement in Football Clubs

The AST is fortunate that at present Arsenal’s ownership structure enables its supporters to hold equity directly in the club. Further, the club’s Board and senior executives are keen to develop a working relationship with these shareholders and support the AST’s attempts to further increase supporter ownership.

This may not always be the case, and of course it is not an option open to supporters at many other clubs that have private ownership structures. The AST has therefore given careful thought to the questions that the Committee is posing on supporter ownership and have built our recommendations around the two core values we take from the Fanshare model. They are values that can be applied at every club regards of the specific ownership structure: — Increasing opportunities for supporters to be directly involved in the ownership structure of their club. — Providing greater transparency on how the club is run so that supporters can scrutinise developments, with ongoing opportunities to hold those running the club to account.

The following part of our submission sets out our recommendations on how supporters’ involvement in both ownership structures and having a greater understanding and improved representation can be enhanced through actions taken by Government and/or the Football Authorities.

1. Opportunities for Supporters to be directly involved in owning a stake in their club

The AST believes that the direct involvement of supporters in clubs’ ownership creates positive benefits not only for fans but also for clubs themselves. For clubs, it establishes an additional opportunity to raise capital through issuing equity to supporters. It also allows clubs to give supporters a real sense of belonging and involvement, which is likely to strengthen the bond between supporters and their club leading to greater commercial and sporting success.

Yet whilst the AST supports greater supporter involvement in ownership, we do not believe it’s right to achieve this through direct government intervention or interference in independent financial investment decisions. Such action could lead to the de-facto nationalisation of football and breaks the convention that Government does not intervene in the direct running of sport. In Arsenal’s case it could even lead to action that penalises the interests of existing supporter shareholders.

However, we do advocate far greater effort being put into introducing policy measures to increase the opportunities open to Supporters’ Trusts to secure an ownership stake. The three main policy areas we have identified are: (a) Action to remove regulatory and fiscal burdens currently placed upon supporters’ trusts being involved in ownership schemes. This specifically involves: looking at how current financial legislation works to the detriment of supporters’ trusts by imposing unnecessary costs and regulation (see FMSA example below); and creating a level playing field in the fiscal environment by either ending the scenario whereby private investors can secure tax breaks on their investment or creating additional incentives for trusts. This might include giving tax breaks for supporters’ trusts’ ownership schemes, such as exemption from stamp duty and allowing VAT paid on season tickets to be reclaimed for contributions to share save schemes. We recommend that the DCMS establishes a working group that includes the Cabinet Office and Treasury, that has as its remit to review all the regulatory and fiscal structures that apply to fan investment schemes like Fanshare and recommend additional measures that can be taken to assist them to grow. (b) Trusts are voluntary bodies often relying on the goodwill of the professional members. Setting up schemes such as Fanshare incurs significant costs and therefore we recommend increased, and direct, financial assistance to be made available to trusts to support the costs of meeting the regulatory requirements of developing models such as Fanshare and running representative bodies that have to comply with financial legislation. Such funding could be provided by both the Government and Football Authorities. (c) More promotional activity and support from both Government and the Football Authorities of the benefits of supporters’ trusts to football supporters and the role they can play, including as vehicles for clubs to raise capital. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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2. Supporter involvement in how a club is run; access to core financial and operational material and opportunities to engage with clubs’ owners Whatever the ownership structure of a club, we believe that its governance will be enhanced if supporters have a greater understanding of decisions being made and the opportunity to meet executives and have an input into the key day-to-day and strategic decision-making. The Government itself recognises these values through its commitment to publishing financial information about how Government works and the stated desire to give stakeholders a greater say in how services are run. The simple objectives of improving information flows and introducing formal structures in which supporters can be represented does not require any new legislation or Government intervention, but can be introduced as self-regulatory measures within the rule books of the Football Authorities. We recommend that the Premier League introduces a rule that places a duty on their member clubs to engage with official supporters’ trusts. This engagement would specifically cover: 1. Providing a financial and reporting format similar to that required under the Companies Act -report and accounts for each six months (interim) and full year—supplemented with information already collected under UEFA licensing scheme and other tests that clubs are required to meet under Premier League rules. 2. Twice yearly meetings between representatives of the supporters’ trusts and directors and/or executives of the club, at which discussion can take place on the performance of the club and the views of the wider membership can be directly reported. The second proposal would of course require an agreement for identifying official supporters’ trusts and ensuring that they reach minimum standards in the representation of their membership. The requirement to register as an Industrial and Provident Society should partly address this but we would also envisage a role for Supporters Direct to nominate the official trust at each club and act a quasi-regulator of their operations. This would include providing training and advice to trusts on the business issues faced by clubs and the high standards required in their own organisation and operation, such as minuted meetings, elected officials and audited accounts.

Case Study: Amending the Financial Services and Markets Act (FSMA) to Recognise the Role of the Supporters’ Trusts The establishment of Arsenal Fanshare has been a huge and expensive effort for a small team of volunteers to complete. This work has been greatly complicated by the inflexible nature of Financial Services Authority regulations. The following sets out how financial services legislation, particularly the FSMA, is not flexible enough and in fact acts as a barrier to enabling supporters’ trusts to make a broad appeal to fans to put equity into the club or supporters’ trusts. It also shows how an amendment to the legislation could help. The FSMA prohibits the offer of shares or investments without the trust itself complying with regulatory requirements that create significant financial and administrative burdens for voluntary organisations such as the AST. The FSMA also prohibits the issue of any investment advertisement to a general consumer/supporter (eg an offer of shares in a company or to make an investment) unless that investment advertisement is authorised by an FSA authorised organisation or individual. Additionally, supporter ownership models are likely to be classed as Unregulated Collective Investment schemes preventing the offer of shares to persons other than high net worth individuals, sophisticated investors and exempt institutions. There are a number of exceptions to this legislation but none quite fits the specific supporters’ trust models. As a result, the AST had to establish a second IPS—the Arsenal Fanshare Society Limited—to do nothing but run Fanshare, and not by way of a business to fit with the legislation. We have to act very carefully to make sure it does not make any profit nor have any trading income so we can establish it is not a business and thus not an unregulated collective investment scheme. This is a tortuous issue that impeded our efforts for many years and means that we have had to put in place duplicate structures for AGMs, Boards, accounts and even legal advice, with all the effort and expense that entails. There are other subsidiary issues by which we could also fall foul of FSA rules. Because of these complications we have engaged a management company, Equiniti, to administer the scheme on our behalf at considerable expense. This issue could be addressed by Parliament introducing a statutory instrument widening the exemptions in the FSMA to include Industrial and Provident Societies or community interest companies raising money for sports clubs. This would of course need more detailed safeguards such as a sensible limit on the annual investment an individual can make. In the case of Arsenal Fanshare it is £12,000 a year. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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There are clearly technical issues which would need to be resolved here, and that is why we have recommended that DCMS established a working group to cover these subjects. Given our experience in developing Fanshare, the AST would be happy to provide further input on this issue and to join any working group the DCMS might establish to review the way forward. 26 January 2011

Written evidence submitted by Wimbledon Football Club Supporters Society Limited on behalf of AFC Wimbledon Executive Summary This submission is made by Wimbledon Football Club Supporters Society Limited, the owner of AFC Wimbledon, a football club which plays in the Football Conference. It focuses principally on the financial issues facing supporter-owned clubs like ours: — We believe that the role of government in football governance should be to encourage existing bodies to cooperate. Only if this fails should intervention be considered. — Football finances are imbalanced, with clubs running themselves into major financial difficulties in the pursuit of success. — There is no reward for financial virtue—clubs like ours which are run prudently on a sustainable basis cannot compete with clubs where owner-directors pump in short term loans which are spent on players’ wages. — We believe that this issue should be addressed by stronger financial regulation. Such regulation should be based on principles applied consistently throughout the football pyramid. — Our specific recommendations include: — A requirement that clubs should be sustainable. — A governance framework that applies a licensing system to enforce regulations relating to sustainability. — Revoking the “football creditor” rules which encourage poor business behaviour at the expense of others, especially the community and tax payers. — The governance body should have the authority to deny a takeover which is based on leveraged debt. — We believe that supporter-owned clubs are a force for good in football. They should be encouraged, at least in their early, formative years, by financial and tax incentives — AFC Wimbledon was created as a response to a serious failure in football governance—we strongly recommend that no further franchising should be allowed in UK football.

Introduction 1. This submission is made on behalf of Wimbledon Football Club Supporters Society Limited (known as The Dons Trust—“the Trust” in this document) which is an Industrial and Provident Society which owns AFC Wimbledon Limited. 2. AFC Wimbledon was born following a serious failure in football governance. Despite advice to the contrary by governing bodies, the club was established by fans and in just over eight years has become the highest placed fans-owned club outside the Football League—and the one which has risen furthest in the football pyramid since it started. We feel we have a unique perspective to bring to the Select Committee inquiry. 3. Our comments and recommendations are structured around the six questions published by the Committee, with one additional topic at the end of our document.

Should football clubs in the UK be treated differently from other commercial organisations? 4. Football appears to be unlike any other business: (a) in many cases, clubs are run with little or no intent to make a profit, but they are regulated by legislation which is aimed at profit-making organisations; (b) the experience that football clubs offer is very different from most other businesses and entertainments—for a large part of the fan base, a poor experience on one day may be a cause for grumbling and discontent, but it doesn’t affect the likelihood of them returning. This extreme loyalty is uncommon in the commercial world; a consequence is that it can lead to a certain laziness amongst clubs about the need to consider supporters because demand is inelastic; and (c) the motives for running clubs are many and varied and include: serving the community; a means of fans retaining control of their local club; self aggrandisement for rich people; and to take money from the club, in some cases to the detriment of the club itself and the community. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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5. Football clubs are already treated differently from other organisations, notably they can create preferential “football” creditors in the case of insolvency, even ahead of HMR&C. A significant number of clubs have gone into administration or liquidation, paid their football creditors in full, but paid little or nothing to creditors generally and local businesses in particular. This is inequitable and it has had a direct and detrimental effect on the communities in which the clubs are based. 6. Football needs a more formal regulatory environment which reflects the social and community roots of the clubs, while demanding responsible and accountable management. Specifically: (a) A governance framework should be established to require clubs to run themselves in a sustainable way—the UEFA “Financial Fair Play” initiative is a good step in this direction. (b) A licensing system for clubs at a certain level, say the Premier League, Football League, and Football Conference, should be introduced to require compliance with sustainability regulations. (c) A suitable regulatory body should be empowered to enforce the requirements. (d) The “football creditor” rules should be revoked. A change would require clubs to be more circumspect in their dealings with each other, as they should be with any other business.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 7. Our experience of governing bodies has been with the leagues in which we have competed over the last eight years, the two County FAs to which we are affiliated, and limited exposure to the FA itself. Our submission therefore largely reflects the view from lower down the football pyramid. 8. AFC Wimbledon aspires to return the name of Wimbledon to the top levels of English football. In the eight years of our existence we have been promoted four times and we are currently in contention for promotion to the Football League. In that time we have developed a total of 22 teams of men, women, boys and girls, as well as and a range of other community activities. We have done all of these things while running the club on a sound, prudent and responsible commercial basis. 9. We are immensely proud of what we have achieved but our progress is increasingly hindered because there is no reward in football for financial virtue. We cannot, and will not, compete with clubs where substantial losses are funded by rich shareholders in the pursuit of success on the pitch As a result, the classic ambition of the little club, to rise through the ranks and reach the top—so brilliantly achieved by Wimbledon FC—looks well-nigh impossible. 10. We believe that this imbalance should be addressed by stronger financial regulation, based on consistent principles throughout the football pyramid. We recognise that a “one size fits all” solution cannot work given the differing resources available to monitor each competition’s regulations. To achieve this, there would need to be more consistent regulation within football since there are substantial differences in the approaches taken by the Premier League, the Football League and the Football Conference. 11. To explain our concerns in more detail, it is widely recognised that at all levels of football, clubs run themselves into desperate financial positions. For example, drawing on publicly available information, in 2009 the Football Conference Premier division (in which we play) had: (a) Nineteen of the twenty four clubs with net current liabilities, ie apparently not able to meet their short term debts. (b) Eleven clubs with negative net worth. 12. In practice, many of these clubs are “safe” because their debts are to directors; but the underlying commitment of the directors is indicated by the fact that their loans are usually classified as short term, repayable on demand. Despite the loans being due on demand, some clubs will have entered into player contracts that extend for two or more years, with limited prospects of the clubs generating sufficient profits to cover such commitments. 13. The Football Conference has put procedures in place to apply sanctions to clubs which fail to pay their taxes promptly. This initiative has had increasing success, and the Conference has recently expanded its monitoring to promote sustainability within clubs. Nonetheless, several clubs appear to be on the brink—it is hard to be certain because most clubs taking advantage of the reduced disclosure requirements offered under the Companies Acts. 14. Any club is susceptible to over-reaching itself financially, but we believe that clubs which are unsustainable save for directors’ loans are much more likely to crash than those which are fans’ owned. This is because the absence of a director subsidy forces clubs to operate based on their trading income and effectively demands that the board actively governs to ensure that finances are managed properly. 15. As for the adequacy of the governing bodies, our experience is that they are staffed by professional and motivated people who have been consistently supportive. Our concern is the lack of effectiveness in demanding sustainable clubs and the inconsistencies that are unavoidable when there are regulatory bodies with apparently conflicting objectives. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:50] Job: 011147 Unit: PG01

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16. Our exposure to the top levels of football governance is too limited for us to offer detailed recommendations for reform, but we strongly believe that government should use its authority to demand greater cooperation and consistency from these bodies. Otherwise the recommendations in paragraph 6 apply equally to this section of our submission

Is there too much debt in the professional game? 17. Debt in itself is not a bad thing but in football it is all too often “the wrong kind of debt”. 18. We have already commented on short term debt, usually as directors’ loans, which are used to pay wages and operating expenses. This is an unsustainable way of running a football club. Debt to fund capital investment is one thing; debt to fund higher wages in the hope that it will breed success is gambling. And it is gambling with the livelihoods of players, other clubs, and businesses in its local community. 19. In a governance environment where a club has to be sustainable such lending would not be allowed, which is why we believe that regulation should move in this direction. 20. Leveraged debt, ie where a club is bought by borrowed funds and then the borrowings are loaded upon the club may well be legal but it cannot be in the best interests of the club and its fans. We would expect a regulatory body to have the right to deny such a takeover, and be protected from a legal challenge when doing so. We are not experts in this area but we understand that the NFL takes a dim view of one of its competitor clubs being loaded with debt, and thus more of the sport’s incomes flowing out of it to creditors.

What are the pros and cons of the Supporter Trust share-holding model? 21. Clearly we have extensive experience of the Trust-owned model. 22. The major pros of this approach are: (a) The club is controlled by one of the key communities it serves, namely its fans. (b) It cannot be run into the ground by a sugar daddy; the club cannot be sold or mortgaged without the agreement of the fans; where the club has land of its own, any asset strippers cannot benefit. (c) Fans have a closer involvement in how the club is run, especially with key decisions and thus greater buy in and ownership. (d) Fans’ oversight is much more likely to prevent financial over-commitment in a drive for success. In effect, the absence of a sugar-daddy forces a club to be businesslike and medium-term. While sustainable management is not an exclusive feature of community-owned clubs, that ownership model has much to commend itself in terms of sustainability. (e) There are greater benefits to the community due to the stronger links with the club. 23. In our opinion, there is only one major con, which is the difficulty of competing with clubs where rich owners can make substantial sums of money available for players’ wages. Our own club has faced this at every level from when we started until today. For example, despite having the highest trading income we were outbid for talent by clubs using directors’ subsidies, leading to the extraordinary result in our first season where we gained 111 points from 46 games—and came third in the league. As we move higher up the leagues the amounts being injected into clubs become much larger, but the problem is the same—we cannot prudently match them. 24. We are in our ninth year and despite these problems we have demonstrated that a fans-owned club can be successful while also being self-funded and operated in a pragmatic, sustainable way. To date we have overcome the problems of the clubs where massive sums of money are injected (as loans) in an unsustainable way—we have left most of these unsustainable clubs behind but as we rise through the leagues the amounts that are injected increase and our task becomes ever harder. To give an example of the scale of the problem, the published accounts of one club in our league in 2009 show an operating loss almost as great as our (and its) entire turnover. 25. For fans-owned clubs to compete we need a level playing field and that means clubs being required to be sustainable. So long as the majority of clubs is owned in the traditional way such a change is unlikely to come from within. Appropriate regulation appears to be the only solution. 26. For fans-owned clubs to be able to get started and thrive through the early years, we believe that financial and tax incentives should be made available to them. For example, grants should be directed towards the development of such clubs, provided that they meet other criteria, including totally transparent financial reporting, audited accounts and a demonstrated involvement in and benefit to the community. 27. Similarly, fans-owned clubs with a turnover less than a designated amount should be exempted from VAT. Since much of their income is subject to VAT and they have limited input tax to recover (the major expenditure being players’ wages) there would be a substantial benefit to such clubs but, given the small number involved and a limit on turnover, the cost to the Treasury would be very limited. Similar financial reporting and community involvement would be required for clubs to qualify for the tax exemption. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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28. These recommendations will not be welcomed by clubs under direct ownership of wealthy individuals but they can so easily distort the economics of non league football, where most supporter-owned clubs play, that something needs to be done to counter the imbalance. Relatively small sums can have a big effect—to put it into perspective, our annual player budget is less than three weeks’ wages for a top Premier League player.

Is Government intervention justified and, if so, what form should it take? 29. Football is the national game. It involves a significant proportion of the population and can fire the imagination of the nation. It has a substantial capacity for good in the community. But the leagues are currently dominated by owners who have limited, if any, credibility as representatives of their communities. They will not vote for change, yet their model has led to regular financial failures, losses to the communities they nominally serve, and a lack of recognition of the wishes of the fans. 30. We believe that the government should not seek to impose its own solutions, but it should demand that existing bodies cooperate. The problem for the FA appears to be that it is deadlocked and can see no clear way forward. The government should corral the various parties, cajole and if necessary bully them into working together—only if this fails should it intervene directly in the name of public good.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 31. Many sports other than football retain teams that are run as true members’ clubs; with 100% ownership retained by the paid up membership who elect a committee to run matters on their behalf. In Britain such clubs compete sustainably at a high level in Rugby Union, and Cricket. Very few English football clubs have retained this structure at anywhere above local non-league level, but some examples exist overseas— Barcelona FC being by far the most famous. This model of ownership does ensure that key decisions remain with the fans (ie members) rather than with a single majority shareholder as found at most English clubs. 32. One country that has imposed a strict licensing model for football clubs is Germany. The German League (the DFL), on behalf of the German FA (the DFB), operates the licensing of all professional clubs within the top four levels of the league pyramid (over 100 clubs). Their licensing system for professional clubs is aimed at maintaining competitive integrity and “clears” each club before the start of each season—failure to be licensed results in demotion or temporary expulsion. 33. Special focus is traditionally placed on liquidity controls, ie a financial assessment of a club’s ability to operate throughout the season. This rigorous system is largely responsible for the fact that over 45 years into the competition’s history no Bundesliga club has filed for administration/bankruptcy during a season. 34. Another facet of German football is that virtually all professional clubs have an ownership model where 51% of the voting shares rest with the fans—a status protected by law. Typically the clubs are run by a principal owner (who usually controls the remainder of the shares), but the ownership model ensures that key strategic decisions can be rejected by the fans if not in their interest. This ownership model, coupled with the prudent licensing approach, gives great stability and good competition within the German .

Other Issues 35. AFC Wimbledon was born as the result of a failure in governance. For obvious reasons, we strongly recommend that no further franchising should be allowed in UK football. Wimbledon FC was, wrongly, the first to suffer this. We recognise that this cannot be undone but we urge the regulatory authorities to ensure that nothing of this nature ever happens again. January 2011

Written evidence submitted by Professor Richard Giulianotti 1. Summary 1.1 This submission of evidence draws on over 20 years of social scientific research into football at local, national and global levels. The submission is structured around six main questions or issues that were initially highlighted by the Committee. 1.2 The submission states that: — Clubs should be treated differently from other commercial organizations, for political, social and economic reasons, particularly with regard to the public benefits of football clubs, and how supporters understand their attachments to the game. — Governance rules need to be changed to improve the financial management of clubs, and to promote the wider engagement of different stakeholders, particularly supporters, in running clubs. — Debts in football are far too high, hence tighter regulations need to be in place to restrict borrowing and to improve financial management. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— The Supporters’ Trust movement has a positive mission and has had many notably achievements over the past decade; there is substantial scope to build on these achievements. — Government intervention may be directed towards promoting supporter representation and ownership at clubs; enhancing wider social access and participation in football; and, strengthening the financial management of clubs. — There is much to be learned from alternative governance models in other nations and in other sports; in football, models of club governance that involve full or partial control by supporter cooperatives provide one way forward.

2. Background 2.1 This submission of evidence has been written by Professor Richard Giulianotti, Head of the School of Applied Social Sciences, Durham University. 2.2 The submission is derived from personal research into football at local, UK and global levels, which has been undertaken since the late 1980s. Research has been conducted across the UK, Ireland, mainland Europe (notably Italy, Germany, Spain, Sweden, and Norway), South America (notably Brazil, Argentina, Uruguay, and Paraguay), (USA, Canada), East Asia (South Korea, Japan), Africa (Zambia, Zimbabwe) and the Middle East (Jordan). This research has comprised mainly fieldwork and interviews with football supporter groups, diverse decision-makers and officials in national sport systems, journalists, academics, and public commentators. Much of this research has explored continuities and differences between local and national football systems and cultures across the world. A significant strand of this research has examined different models of governance and economics in these football systems. This research has been published in various outlets, notably my authored or co-authored books: Football: A Sociology of the Global Game (Cambridge, Polity Press, 1999; also translated and published in Brazilian Portuguese); Globalization and Football (co-authored with Roland Robertson; London, Sage, 2009); and, Ethics, Money and Sport (co-authored with Adrian Walsh; London, Routledge, 2005). This research has also been published in various articles in peer-reviewed journals and edited books. 2.3 The following submission of evidence is structured around the six main questions or themes that were highlighted in the Committee’s initial Call for Evidence

3. Clubs and Commerce 3.1 The Committee asks: “Should football clubs in the UK be treated differently from other commercial organizations?” 3.2 I agree that clubs should be treated differently from other commercial organizations; I believe that this should be the case, for political, economic and social reasons. 3.3 First, like many other key sports institutions, football clubs are able to deliver many public “goods” which should be protected from the vagaries and uncertainties of the market. These goods include providing for general community association; developing fitness, health and sport education among community members; socializing children and young people into community life; promoting civic and regional identity; enabling social relations and interaction with diverse peoples drawn from other cities, regions and nations; and, promoting diverse social inclusion initiatives, such as anti-racism campaigns, education among disadvantaged groups, and social activities for the elderly. 3.4 Moreover, football is generally understood to be a vital component of the UK’s cultural heritage and social life. Football clubs are intrinsic to the game’s national standing, and provide the everyday focus for public interest and involvement in the game. Arguably, given this public status, football clubs should be treated differently to other commercial entities. 3.5 Second, as we have witnessed in the UK and elsewhere in recent years, relatively unregulated commercial environments do not provide a sufficiently secure setting for the long-term survival and development of football clubs. 3.6 Third, key stakeholders within the football community do not see their clubs, or elite football in general, as an essentially commercial domain that is driven by profit-seeking and consumerism. For example, many supporters object strongly to being referred to as “customers” or “consumers”, for the simple reason that club attachments and loyalties are based not on market interests but on deeper emotional, biographical and social ties. Many supporters point out that they cannot conceive of switching their allegiance to clubs in the same way that consumers switch brands of washing powder or toothpaste. It is worth noting that these non- commercial aspects of football are also often referenced by new owners when they take over clubs, for example when stating that they are also “true supporters” of the relevant team, or respectful of its traditions and identity. 3.7 Fourth, over the past 15–20 years, there have been substantial expressions of public unease regarding the status of commercial interests in football. This unease is centred on a variety of issues, including: the levels of debt, as reflected in the large number of clubs that have entered administration since the mid-1980s; the growing financial and competitive differences between professional clubs in the football league system; the volume of money at the top end of the game, as reflected in transfer fees, salaries, and payments to agents; the cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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lack of sufficient investment in facilities and coaching at lower levels of football; the long-term escalation in costs for attending fixtures; some groups being “priced out” of football attendance, as reflected at some clubs by the relatively high proportion of spectators who are middle-aged, male, and high earners; the restricted distribution of tickets to high prestige fixtures among ordinary supporters; and, the costs of football merchandise and paraphernalia. Public concern on these issues is often underpinned by the view that the commercial influences within the game need to be controlled and restricted by tighter regulations. These views are also influenced by growing supporter awareness and experience of how football is governed in other nations. For example, there is greater knowledge of the mutual or cooperative model at clubs like Barcelona, and also the large crowds and low ticket prices at fixtures in the German Bundesliga.

3.8 For these reasons, among others, it could be justifiably argued that football clubs should be treated differently to other entities that are in the commercial sector. This treatment would also reflect the use of non- commercial principles for assessing the strengths and successes of club football. In other words, the success of club football would not be measured in terms of its economic value or annual economic growth, but according to a wider range of criteria, such as crowd sizes and social composition, social accessibility (eg with reference to ticket prices), community and outreach schemes, national team successes, and the scale and vibrancy of public participation in football (eg as qualified coaches, players, officials).

4. Governance Rules

4.1 The committee asks, “Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose?”

4.2 Arguably, these governance rules need to be tightened and enforced more rigorously. In recent years, there has been substantial public concern over several issues in regard to football governance. These issues have included: — Corruption in the game, for example in regard to hidden payments to managers, agents, directors and players during transfer negotiations. Internal investigations by the football authorities failed to alleviate fully public concern, while further allegations of corrupt practices subsequently emerged. — The extent to which the “fit and proper” test for club owners has been applied on ethical or financial grounds. For example, in recent years, concerns have been raised about the human rights record of one English club owner, while there have been relatively limited checks undertaken on the full backgrounds of international investors. There is therefore a clear public interest in a far more robust process of scrutiny being introduced with regard to club ownership and investment. A related point here is the extent to which adequate or appropriate financial plans are produced by prospective investors. Thus, there is a compelling case—on the grounds of public interest, and protecting the club’s financial security—for preventing prospective owners from using leveraged buyout schemes to fund their takeover of clubs, as occurred in recent years at Manchester United and Liverpool. Moreover, in the context of individuals owning or holding substantial stakes in clubs, a strong case may be made for reintroducing the rule that such individuals should not seek to profit personally from these share-holdings. — Financial transparency and effective budgeting at clubs. Cases such as Leeds United and Portsmouth in recent years—as well as many clubs in the Football League—illustrate the problems. To ensure financial transparency and proper planning, there is a strong case for following some other nations which require clubs to submit their budgets for independent scrutiny on a six-monthly basis in order to secure their registration.

4.3 Two broad principles should inform the modernization of these rules.

4.4 First, the rules should promote stronger systematic engagement and dialogue with a wider range of stakeholders associated with the game, notably different spectator groups, as well as players and match officials. Indeed, these interests should be formally represented on key decision-making bodies within football. This engagement and representation would promote more positive social relations, and greater senses of partnership and trust, across the game’s stakeholders. It would also enable football’s diverse governing bodies to draw on a wider pool of expertise within the game, and would serve to enhance the public image of football in England and Wales at international level. Ideally, in the longer-term, this engagement and dialogue would be best facilitated through clubs being converted fully or substantially into cooperative institutions that are fully or largely owned and controlled by individual supporters.

4.5 Second, there needs to be a tighter array of checks and controls on investments in football, with particular regard to “fit and proper” and “public interest” criteria. The importance of these criteria is underlined if it is agreed that football clubs should be treated differently to other commercial organizations. If the first principle here—concerning greater systematic engagement and representation of more stakeholders—is also accepted, then there is a stronger likelihood that the sources of these investments will be more rigorously scrutinized. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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5. Debt 5.1 The Committee asks, “Is there too much debt in the professional game?” 5.2 There is clear evidence that there is too much debt. A UEFA report last year indicated that, for the 2007–08 season, English Premier League clubs accounted for 56% (£3.5 billion) of the net debt of all European clubs—a grossly disproportionate figure. Recent figures also reveal that several clubs have debt levels which are more than 2.5 times their annual turnover. Clubs in the Football League have also encountered enormous debt problems in recent years, as reflected in the high numbers that have entered administration or which have struggled to ward off winding-up orders. 5.3 These debts have different causes, such as leveraged buyouts, large investment in capital projects, and heavy spending on player transfer fees and wages (often, funded by large loans from club owners and share- holders). In the case of many Football League clubs, borrowings were financed on the back of future television revenues which failed to materialize after ITV Digital collapsed. 5.4 These levels of debt have a negative effect on football clubs. They undermine the long-term security of clubs. They also put pressure on clubs to maximize their revenue streams from supporters, for example by charging high season-ticket and seat prices, and directing a large number of tickets to prestige fixtures towards corporate clients or wealthy fans. 5.5 There are various regulations which may be introduced to control the debts and losses reported by clubs. The UEFA “Financial Fair Play” rules from 2012 onwards—which seek to control and ultimately, to eradicate the losses that clubs report each year—should have an impact for clubs which are pursuing European competition. Further measures in England and Wales may include prohibiting leveraged buyouts; placing a ceiling on club borrowings and/or wages relative to turnover; and, submitting club budgets to close independent scrutiny on a six-monthly basis.

6. Supporter Trusts 6.1 The Committee asks, “What are the pros and cons of the Supporter Trust share-holding model?” 6.2 The mission of the Supporters Direct movement is a positive one, in promoting supporter representation and participation in the governance of football. 6.3 The achievements and successes of the “Supporters Direct” movement should be underlined, as reflected in the agency’s own reported figures: Trusts are in place at over 160 clubs; there are over 120,000 members; Trusts contribute board directors at almost 60 clubs; and, Trusts own or control 15 clubs. Trusts have also played a key role in the survival of several clubs that have been placed in administration. This kind of proximity to club owners and directors should allow supporters to convey their specific views regarding, for example, ticket allocations and prices, club expenditure, and security in . 6.4 Some weaknesses in the the Supporter Trust system, as it stands, may centre on its uneven influence. For example, some of the largest clubs either do not have Trusts or, where they exist, have little impact on the club in terms of how it is run or how it treats supporters. The trend among the top clubs towards complete takeovers by individuals may mean that Supporter Trusts will have fewer opportunities, under current regulations, to exercise influence in the management of clubs. 6.5 Arguably, there is substantial scope for Government to intervene, to enable supporter movements and associations to build more fully on the mission and achievements of the Supporters Direct movement.

7. Government Intervention 7.1 The Committee asks, “Is Government intervention justified and, if so, what form should it take?” 7.2 The question of potential Government intervention is a delicate one, as FIFA is concerned to restrict the involvement of national governments in running football. 7.3 However, intervention is justifiable, largely for the reasons which have been set out above: that football contains a number of public goods which extend far beyond the commercial realm; that supporters should have the opportunity to exercise greater influence over their clubs, ideally through a form of mutual or cooperative ownership; that clubs currently on the whole do not engage sufficiently with all stakeholders, particularly supporters; that clubs carry excessive levels of debt; and that, while recognizing its achievements, the current Supporter Direct model does not go far enough for the achievement of these objectives. 7.4 Intervention might take several forms. First, the Government should offer more substantial and tangible support for supporter movements which seek to establish forms of mutual or cooperative ownership of clubs, along the lines of other sport clubs, such as in Germany, Spain (eg Barcelona), or the United States (eg Green Bay Packers). Consideration should be given to a form of intervention that empowers supporters to mount a collective bid for a substantial share, or a takeover, of a club, according to an independently agreed valuation. 7.5 Second, the Government should introduce some regulations to ensure that the board of directors on each club includes some representation from supporter groups and movements. These supporter representatives cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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should ensure in turn that they maximize their engagement with the wider body of supporters, notably different supporters’ clubs. 7.6 Third, the Government should ensure that stronger regulations are introduced in regard to ownership and large shareholdings in clubs. A “fit and proper” test should be more rigorously applied on financial and ethical grounds. Prospective investors should set out adequate financial plans for their running of the club. The rule that owners or shareholders should not seek to profit personally from their financial participation in clubs should be reintroduced. Leveraged buyout schemes should be banned. 7.7 Fourth, the Government should introduce a series of regulations to stabilize the financial position of clubs. Clubs should be required to submit budgets on a six-monthly basis for independent scrutiny. The levels of debt which clubs are able to take on should be restricted. 7.8 Fifth, the Government should introduce policies that promote social access to football. It should explore how measures may be introduced, in order to restrict or limit the price of match tickets or season tickets; and, in order to ensure that clubs try to diversify their spectator composition, notably in regard to age, gender, and ethnicity.

8. Alternative Governance Models 8.1 The Committee asks, “Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?” 8.2 There is much to be learned from the governance models that are apparent in football and other sports in different parts of the world. Moreover, different stakeholders in football—including supporters—are increasingly aware of these different models, hence it makes sense to engage fully with this issue. 8.3 There are various illustrations in sport of leading clubs that are at least partially or wholly owned by their supporters. This has provided the traditional model of club governance in much of South America, Spain and Portugal, and, in different ways, also Germany. In North American sports, the Green Bay Packers are a highly successful, community-owned, not-for-profit club. 8.4 Care should be taken to place these models within their distinctive sporting and cultural contexts. For example, in , revenue-sharing and the draft system for allocating players help to reduce the impact of budget inequalities between teams. In South America, the effective management and financing of football clubs have been chronically affected by massive debts and bankruptcy, mismanagement of finances by elected officials, and corrupt relations between officials and supporter movements. 8.5 In recent years, several nations in mainland Europe and South America have amended their regulations for the governance of clubs, thereby enabling individuals and corporations to acquire ownership or more substantial shareholdings in clubs that had been either entirely or principally founded on cooperative models of ownership. Thus, several models of club ownership co-exist in individual nations, as is the case in Germany, Portugal or Spain. 8.6 It is likely that a mixed model of ownership would be the most practical strategy for clubs in England and Wales. For example, at an individual club, this would involve individual shareholders and supporter associations holding substantial stakes in clubs, with potential for local authorities to also participate. Close consideration may be given to how supporter associations may hold 51% of shares, as has been the case at some German clubs. These models of ownership should include regulations that are intended to avoid the problems found in other nations, for example regarding financial mismanagement by club officials. 8.7 A wider issue here concerns the governance structures of football as a whole, which feature numerous individuals with ties to the FA, Football League, or Premier League. The wider aspirations of football in England and Wales—for example, in regard to winning bids to host future mega-events such as the European Championships or World Cup finals—would be significantly assisted by the integration and stream-lining of these structures, while ensuring that key stakeholders, including supporters, are fully represented. January 2011

Written evidence submitted by Bristol City Supporters Trust The Governance of Professional Football Clubs (1) With the aid of Supporters Direct, Bristol City Supporters Trust launched as an industrial and provident society in November 2005. While many trusts are set up as a means of opposing disliked owners of a football club or in response to a financial crisis, this was not the case at Bristol City. Our club was then and remains now in the hands of an owner generally admired and appreciated by the supporters and, thanks largely to his deep pockets, was not in need of any form of financial rescue. The Trust was set up, rather, to represent the fans in dialogue with the club, to raise funds to help the club to be successful, to help position the club as a hub of the community, to improve the supporter experience and to position fans as financial stakeholders in the club. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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(2) In just over five years since then, we have made some very worthwhile progress. (3) We have: improved fans’ access to the club chairman by—with his support—holding regular Q&A sessions, especially for exiled fans; gained a representative place on an observer basis at club board meetings; purchased shares in the club, thus giving our members a tangible financial involvement; held events to honour past greats of the club; played an active role in re-opening the “popular end” of the stadium to enable fans who had been asking for years to be allowed to return to their traditional “home end” to do just that; revamped and reinvigorated the annual player of the year celebrations; produced numerous publications; conducted surveys of thousands of fans on matchday preferences and—at the chairman’s request—on their wishes for a proposed new stadium; helped the club to design a new “membership” scheme, emphasising the need to base this on “loyalty”; re-enacted the club’s only FA Cup Final in 1909 100 years ater at the same venue, Crystal Palace; funded a plaque to eight famous past players; liaised with the club and police to give fans greater freedom in their choice of travel to certain games; and raised tens of thousands of pounds toward erecting a statue in honour of the club’s most famous player. (4) We have also challenged the club over ticketing allocations for major games, successfully intervening to have proposed allocations revised to achieve a fairer distribution for loyal supporters, and have reflected the criticism of some fans in relation to certain aspects of the proposed new stadium design, successfully achieving the inclusion in a revised design of a number of changes to take account of these concerns. (5) On the face of it, therefore, Bristol City Supporters Trust has a good working relationship with the football club and has achieved much for the benefit of supporters and, indeed, also for the club in improving its rapport with the fans, which the chairman and executives frequently acknowledge. And yet… (6) And yet, like fans up and down the country, we feel ill at ease. We still feel like outsiders looking in on our club, even though many of us have had an emotional bond with Bristol City for far longer than any of the board, senior executives, administrative staff or transient football personnel. Like many football fans, as we travel up and down the country we often feel exploited through ever-rising prices and kick-off times set to suit TV schedules rather than match-going supporters. We love our football, but we don’t feel that football loves us. (7) There is no affinity any more between the fans and the players. Fans cannot identify with multi- millionaires in baby Bentleys. When England fans booed Ashley Cole a year or two ago, it was not because they specifically disliked him, but because he stood for all that they despised in the modern footballer: someone who was so incensed by being offered “only £80,000 a week” that he nearly crashed his car. And yet when the odd player does try to show an affinity with the fans by approaching them to celebrate a goal, he gets rebuked by football officialdom and booked by the referee! Where did the passion and the bond between fans and players go? (8) While the players coin it in, fans up and down the country are asked to pay more and more to go to matches. With ticket prices at some London Premier League clubs approaching an outrageous £100, we should maybe consider ourselves lucky that matchday prices in Bristol are still mostly below £30. However, not a lot lower and for young adult working-class fans that can soon be too much—especially when what they see on the pitch are spoilt millionaires, who in their eyes are not “giving their all” for the club. Long gone are the days of blue-collar fans turning up in their droves and paying a modest admission price to provide vociferous support from the terraces for their local heroes. All-seater stadia, the increase in ticket prices and with it the gentrification of football have driven out the poorer and especially young adult fan—the core of vocal support— and replaced them with well-heeled, genteel folk in the hospitality seats, who can readily afford the high prices but contribute nothing towards creating a vibrant atmosphere inside the ground—hence the “library” feel in many modern stadia. (9) And football’s money problems—as is well known—are not restricted to the players’ salaries or fans’ ticket prices. The entire funding of the sport is a time bomb waiting to explode. At Bristol City, most fans are happy that the club is currently bank-rolled by a local man made good and don’t like to think of what would happen if he was no longer around. But when losses are running in the double-digit millions there is nevertheless an underlying unease about what the future might hold. Like so many other clubs and so many other chairmen, are we chasing a dream that may turn into a nightmare? As club the “dream” should be promotion to the Premier League. Yet many fans wonder out loud if that would be such a good thing? Why? Because the playing field there is so uneven that we would have no realistic chance of success and because the gulf between the haves and the have-nots in that league is so immense that, if a club such as ours pushed the boat out to try to compete, there would be a huge risk of breaking the bank and going bust. Better then, perhaps, to stay in the relative financial safety of the second tier. Although such resignation cannot be healthy for the game, can it? (10) So despite our relative success in achieving a good working relationship with our football club and being able to represent fans in our dealings with the club’s management and owner, we recognise that all is not well in the state of football. There must be another way. (11) One other way that we view from afar with some envy is the German way. There, it appears, the fans feel a genuine part of their clubs, are truly appreciated, have a controlling vote in the general meetings, pay prices for their tickets that even the apprentices in blue-collar trades can readily afford, can choose between standing and cheering or sitting and supping, regularly come face to face with the players at fan events before cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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and after games and in everyday life in and around their own communities and can vote out any general manager who is not doing a good job. Ah, but we hear the Premier League executives say, you can’t have the best players and the best league in the world unless you pay the highest salaries, and that means high ticket prices. But what constitutes the “best league in the world”? The one with TV rights that can be sold for the highest price in Asia or the one that creates the greatest passion and sense of belonging for its domestic audience? Going into the 2010–11 season, the fans of only three Premier League teams could have any expectation of winning the league based on the results of the previous 15 years. In that time, nobody else had ever won it. In Germany, in a more equally balanced league, twice the number of fans could realistically entertain such hope. And because the league is more open, and because they control their clubs, and because they can buy a ticket to stand at the top game of the day for around 15 euros (c. £12), and because they don’t despise the players for earning obscene amounts they turn up in their droves, with game after game on a Bundesliga weekend sold out. And—German clubs never go bust.

(12) So how do they do it? What can we learn from the German model? Brains cleverer than ours will, no doubt, be making submissions to your committee with suggestions in this regard. Suffice it for us to say the following:

(13) English football unfortunately sold out to the filthy lucre over 100 years ago. While clubs here and in Germany were all largely formed in the latter years of the 19th or very early years of the 20th century, most English clubs stopped being clubs just a few years later and transformed themselves into limited companies. In Germany they remained clubs. Just like your local tennis or hockey club. A members’ club run by the members for the members. Often running not just football teams, but also swimming, gymnastics, athletics and all sorts of other sports teams. And they remained that way for some 80 or 90 years. Then in the late 1980s, as first-team football became more professional, the German FA allowed clubs, if they wished, to spin off their first-team football operation into a limited company—but only on the proviso that 50% of the voting rights in that company, plus one further vote, remained with the parent members’ club (the so-called 50+1 rule). Thus, two historic exceptions aside, the members of all German clubs retain to this day control over their professional football operations. And as no Russian oligarch, American asset-stripper or Arab sheikh apparently has any interest in owning a club that they cannot control, unwelcome foreign investors—indeed unwelcome German investors—have been kept out of the German game, which has remained firmly in the hands of the people who care about it most: the fans.

(14) Practically everything else that is good about the German model flows from this 50+1 rule. Because the members control the clubs it follows that they are directly represented via the clubs on the executive organs of the German FA and operator, the DFL. Because the members control the clubs, ticket prices are kept at affordable levels. Yet, at the top end—for guests who want the full VIP treatment—premium prices are charged, too. The range is simply far wider than in England (for example c€15–80 compared to c. £27–30 at a typical Championship club). And while the 50+1 rule is part of the articles of association of the DFL and could be changed by its member clubs if they so wished, on the odd occasion that this has been put to a vote the clubs have voted overwhelmingly to retain it, recognising the stability that it brings to the German game and the affinity it creates with the communities that the clubs serve—reflected not least in much higher advertising and sponsorship for clubs from local businesses within their communities than is the case in England. They simply see it as their social duty!

(15) And to keep German clubs on the financial straight and narrow, there are strict licensing procedures in place. Every spring each club has to submit financial statements to prove it will be able to trade throughout the coming season with no liquidity problems. And then they have to submit interims again mid-way through the season. Failure to satisfy the auditors in the spring can result in the refusal of a licence and automatic relegation to amateur-level football, while failure mid-season can result in an immediate points deduction. The result of such strict procedures is that no German club has gone into administration mid-way through a season in the entire history of the Bundesliga. Ever!

(16) While the 50+1 principle is responsible for much that is good about football in Germany, it cannot help us here. We can’t turn the clocks back. The genie is out the lamp. Our clubs sold out a hundred years ago. They are clubs no more. They are limited companies for which, in most cases, only money counts. German financial licensing controls, on the other hand, certainly could teach us a thing or two.

(17) So can we win back the game for the fans? The thousands who, given the chance, would be the clubs’ real sub-paying members? It would clearly go against all notions of fairness to disappropriate any shareholdings in football clubs from their legal, rightful owners and nobody, we feel sure, would propose such a policy. However, there are no doubt ways being put forward by, as we said earlier, brains cleverer than ours by which the balance between owners and fans can perhaps be addressed, by which, where the owners have palpably failed, mechanisms can be created to give the fans an opportunity to step in and where all clubs can be required to act within strict financial parameters. We therefore initially offer the seven following recommendations: (a) If a club goes into administration, the administrator should be obliged by law to favour a rescue package involving participation by a recognised supporters trust of at least three years standing. (b) Clubs trading successfully should be required to put in place a mechanism whereby supporters trusts can invest over time in the football club. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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(c) Any supporters trust holding or speaking for at least a 5% shareholding in a club should have a right to a seat on the board. (d) All clubs should be required to submit financial statements to an FA auditor prior to 31 March each year showing their ability to trade solvently through to the end of May of the following year without the club’s total debt during that period exceeding a multiple of turnover to be specified by the FA after consultation with fans’ representative organisations. Failure to satisfy the audit requirements should trigger a reasonable deadline to submit revised figures. Failure to satisfy the requirements with the revised figures should result in automatic relegation by one division. (e) Prior to Christmas each year, all clubs should be required to submit financial statements to 30 November to show adherence to the commitments made the previous March. Any deviation beyond a set level should be punished by a points deduction. (f) All clubs should be required as part of their licence for their respective league to employ on a full- time basis a fan liaison officer, whose duty it is to liaise with all fan groups and as many individual fans as possible, to relay the views and concerns of such fans to the management and to act internally within the club as the fans’ champion. The minimum salary for this post in each division should be set each year by the FA. Selection of the individual to fill this post should rest with the club, however where a supporters trust is in existence the trust should have a veto over any appointment it regards as inappropriate. (g) The football authorities should give their full backing to Don Foster’s bill on safe standing and subequent to its passing clubs should be actively encouraged to install standing areas within their stadia to foster a livelier matchday atmosphere and make football more accessible to young adults and the less well-off. (18) The above may not put right all of football’s failings. But these measures would in our view represent several good steps in the right direction. (19) We hope that this submission has given you a taste of how we in Bristol feel about the state of football today—sad and disheartened, in many ways—and that coupled with all the other submissions you receive it will help you to mould a better, brighter future for the whole football family—for football’s big society. January 2011

Written evidence submitted by Bees United, the Brentford FC Supporters Trust 1. Summary — Bees United, (the Brentford Supporters’ Trust) is the majority shareholder in Brentford Football Club. — The financial model currently adopted by the majority of professional football clubs is unsustainable and unless there are changes to the regulatory regime, financial problems including insolvencies will remain commonplace. — Current regulation is backward looking (ie imposing penalties for financial mismanagement). This approach should change to become forward looking aimed at prevention. — The need to preserve the integrity of sporting competition and the key role football clubs have in their local communities mean they should be treated differently to pure commercial businesses. Financial and social responsibility should be incentivised through a new licensing regime. — Debt levels are excessive at too many clubs and limits should be applied to encourage a longer term, sustainable approach. — Supporters’ Trusts can assist in adopting this sustainable approach combined with greater transparency and stronger community links. However their financial resources are limited and they require encouragement and support. — Government intervention is justified as a catalyst to facilitate the introduction of new regulation focused on reducing debt levels and encouraging longer term financial prudence combined with greater supporter involvement and transparency.

2. Background 2.1 Bees United is the trading name of Brentford Football Community Society Limited, an Industrial and Provident Society for community benefit, which is the supporters’ trust for Brentford Football Club. Bees United has been the majority shareholder in Brentford FC since January 2006, when it acquired a 60% shareholding from previous owners, Altonwood Limited.

3. The Situation at Brentford FC 3.1 Brentford FC owns the freehold of its stadium, Griffin Park, where it has played for over 100 years. Griffin Park lacks modern facilities for spectators and for non-football revenue generation. The club finds it cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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virtually impossible to generate sufficient revenue to break even with a playing budget that enables it to compete successfully at its current level in League 1.

3.2 As the stadium is in a residential area, hemmed in by housing, it is not a suitable site for developing a modern stadium with sufficient capacity and associated commercial revenue generating facilities to enable the club to compete on the pitch and break even.

3.3 This is typical of many clubs and in common with many others the shortfall between revenue and expenditure has traditionally been met either by cash injections from dominant owners or increasing levels of debt, owed to banks, shareholders or wealthy supporters. Prior to the Bees United takeover in 2006 the club had run up a bank overdraft in the order of £5 million, secured against the stadium freehold and guaranteed by the previous majority shareholder. Bees United have refinanced this debt twice with the help of a generous wealthy supporter (Matthew Benham) and in 2010 concluded an agreement with that supporter to provide substantial equity funding for a five year period in order to stabilise the club until a new stadium could be developed.

3.4 In spite of the club’s financial challenges over the past 25 years it has developed a fantastic range of community based activities which have won it widespread recognition as a national role model for a community club. This includes Football League Community Club of the Year awards in 2006 and 2009 and Business in the Community’s Community Mark.

3.5 The community activities, in sport, education and social inclusion reach around 30,000 young people in four London boroughs and are highly valued by the local authorities and the people they serve.

4. So what’s the problem?

4.1 The financial situation at Brentford, which is typical of many other clubs, is not sustainable.

4.2 When Bees United took control of the club, the trust’s strategy and business plan were focused on responsible financial management and developing a new stadium at a nearby site in Brentford to achieve long term sustainability.

4.3 The economic crisis, associated credit crunch and housing market downturn have rendered the new stadium project unviable. The club has to find ways to survive with limited income whilst trying to compete in a League with clubs who are pursuing unsustainable strategies, which are not in the long term interests of the clubs, their supporters or their local communities.

4.4 The economic and regulatory environments in which we operate make it difficult for clubs that want to behave in a financially and socially responsible way to survive and compete with clubs that choose to take a traditional, high risk, short-term, “sugar daddy” approach.

4.5 The current regulatory regime provides little incentive to break even and/or limit debts to realistically serviceable levels. To compete, we are forced to live beyond our means or suffer potentially terminal decline for adopting a responsible approach. The resulting instability and uncertainty is evidenced by the number of clubs failing to pay their taxes, entering administration, and generally attracting adverse publicity.

4.6 The existing governance regime does not aim to prevent clubs from getting into difficulties. Instead it relies on imposing penalties after the event. The token points-deduction for entering Administration is shutting the gate after the horse has bolted.

4.7 These risks do not just damage the clubs themselves but also impact on the communities they serve and their ability to achieve the positive social impact that is a feature of the best examples, such as Brentford FC with its Community Sports Trust and Griffin Park Learning Zone. Football has the power to change lives and contribute to the delivery of public services and social policies. Clubs should be encouraged to grasp such opportunities to contribute to the big society.

5. So what’s the solution?

5.1 The only hope for clubs like Brentford to prosper in the long term is to incentivise financial responsibility, level the playing field and reduce barriers to community stakeholders by developing a regulatory regime, including the licensing of all professional clubs, that balances sporting, commercial and social objectives.

5.2 The new licensing regime must have the aim of preventing clubs from getting into difficulties rather than relying on retrospective penalties. Prevention is better than punishment.

5.3 Our aim is a set of professional football leagues with more stable, structured regulation, including financial moderation that prevents excessive debt funding, and therefore ensures financial stability for clubs which are stable community assets that produce economic and social benefits, and where Supporters Trusts can compete on a level playing field. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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6. Should football clubs in the UK be treated differently from other commercial organisations? 6.1 The answer will depend on one’s vision for the professional football industry, which at each end of a spectrum could be characterized as either of the following: A. A strictly commercial business which attracts new money, and suffers the same pressures and is treated no differently from any other entertainment business, ie let clubs go bankrupt without support, accept that clubs come and go. or B. A “community asset”—a core element of British society which benefits the country, the clubs and players, as well as society, communities, local interest groups etc, in which case it must be treated differently, must be governed for continuity and stability, and the flip side of that coin is that it must be restrained from undertaking more severe financial risks. 6.2 As a supporters’ trust, Bees United believes in aiming towards the community asset model. 6.3 Football clubs should be treated as any other enterprise in respect of general statutory requirements, company law, fiscal regimes etc. 6.4 There is a need, however, to recognise their differences from other types of organisation in respect of the specific sporting and community aspects of their activities. These special dimensions should be regulated via a licensing regime that will ensure a level playing field for responsibly run clubs in terms of sporting competition. The proposed UEFA licence for European clubs wanting to play in the Champions League and Europa League competitions in future seasons is an example of how such a scheme might work. 6.5 Financial responsibility should be incentivised by the imposition of sporting sanctions for breach of clear and appropriate financial benchmarks as in the UEFA proposals. To avoid anomalies when clubs move by relegation and promotion between league competitions, the licensing regime must enable a coherent system of sporting sanctions across the industry. 6.6 A fundamental difference between sporting clubs and any other business is that most businesses try to kill the competition—to end up as a monopoly is a good objective in their eyes. In sporting clubs if you put the competition out of business you have no-one to play and your own business fails. The integrity of the competition is as important as the success of the club. 6.7 Social responsibility could be encouraged by requiring each club to appoint a member of the club board with responsibility for community relations, with defined objectives. This could be similar to the UEFA requirement for each club to appoint a Supporter Liaison Officer. The proposed licence for all English professional clubs could broaden the concept of a supporter liaison officer to embrace wider community values and social responsibility.

7. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 7.1 The short answer is no, as evidenced by recent and in some cases continuing chaos at so many clubs from large to small that have been subject to controversial ownership issues, winding up orders, administration and general lack of confidence in their ethics. 7.2 Governing bodies?—no, there is no independence—they are all self-interest groups in one form or other, and often with limited power and/or archaic governance/leadership. 7.3 Is the governance fit-for-purpose?—no, but in which direction depends on your vision. There is little or no governance that supports stable delivery of football as a core element of society, whereas there is plenty of opportunity to maintain mismanaged clubs in their unwarranted league positions (ie it’s not a true commercial model either). 7.4 In addition to clubs with crises that become public knowledge there are numerous clubs that perennially teeter on the brink of financial disaster. Over sixty clubs have entered administration since 1992. An industry suffering so much adverse publicity and actual or potential crises should be subject to greater public scrutiny.

8. Is there too much debt in the professional game? 8.1 Pursuing a “community asset” model the answer is clearly yes, as the inability to repay debt is the single biggest threat to the stability of clubs and competitions. 8.2 There is too much unsustainable debt. Brentford is typical of others, where historic debt has been accumulated to fund losses incurred in pursuit of short term sporting success. However, the business fundamentals of expenditure exceeding income in all but exceptional years determine that there is little prospect of this debt being repaid. 8.3 Interest bearing debt should be limited to a level at which it can be serviced from normal operating income in all but exceptionally poor years of business performance. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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8.4 In many cases debt is owed to club shareholders and/or directors on interest free or soft terms and conditions, which can be just as dangerous. Often this cash is put into the club to cover short-term cashflow problems arising from a risky and over optimistic approach taken with an inflated playing budget in order to pursue short term success. 8.5 The danger for the club arises when the owner or directors concerned lose their enthusiasm or their capacity to maintain funding and want their debt repaid. This debt is usually secured against the freehold of the stadium as the club’s only major fixed asset. Repayment can therefore only be achieved by selling the stadium or the owners selling their shareholding in the club to the next willing “sugar daddy” who refinances the loans and promises to inject fresh capital. If there are no willing buyers for the club the potential sale of the ground (or, if the club does not own its stadium, the lack of a realisable asset) puts the continuing existence of the club in jeopardy. 8.6 This was the situation at Brentford prior to Bees United’s acquisition of the club. The trust was able to assemble a £5 million funding package to re-finance the club’s bank overdraft and relieve the previous owners of their bank guarantee. Prior to this the previous owners were planning to sell the Griffin Park stadium for housing and groundshare at a non-league stadium (Woking or Kingstonian) in an area well outside the club’s traditional community and catchment area. In order to avoid a future owner of Brentford being able to asset strip the club, Bees United has subsequently negotiated a golden share with rights which prevent a stadium sale under certain circumstances. 8.7 To reduce such risks, the proposed regulatory regime should impose limits (via the professional club licence conditions) on the level of debt that can be carried on a club’s balance sheet. To ensure transparency the measurement of debt should be clearly defined in terms of information required to be provided in published audited accounts.

9. What are the pros and cons of the Supporter Trust share-holding model? 9.1 Pros: The biggest strength of the trust model is a true, long-term interest in the sustainability and success of the club. Pros include: — Less short-termism: Supporters’ trusts, conscious of the risks of short-term pursuit of glory, take a longer view as they care about the club’s ability to continue for the benefit of their children and future generations. This contrasts with wealthy individuals, whose time horizon is usually measured in a short few years. — Responsible stewardship: As trusts’ access to financial resources is limited, they naturally focus on delivering a sustainable business plan based on realistic objectives, responsible financial management and sensible stewardship of assets. In contrast, wealthy individuals can be driven by short term pursuit of glory to take reckless risks funding unsustainable playing budgets. Trust ownership ensures alignment between the interests of the club and the owners. — Transparency and accountability: The democratic nature of supporters’ trusts as Industrial and Provident Societies encourages an open approach to information sharing whilst still maintaining necessary commercial confidentiality. At Brentford, the financial and corporate structure, details of debts and full annual accounts for the football club are all published and open to debate. There is no mystery about who owns the club, how it’s funded or what major deals are done. A golden share held by Bees United, means it will not be possible for any future majority shareholder to sell the club’s stadium without the agreement of the trust members that the sale is reasonable. At the very least this will enable an open debate about the merits of any proposal to sell the club’s major asset. — Strong relationships: The community ethos of the trust facilitates good relationships with communities and public bodies, particularly local authorities. At Brentford, the club and the trust have excellent relationships with London Borough of Hounslow, which provided an interest- bearing loan of £0.5 million to help facilitate the trust’s acquisition of the club in 2006. The loan is conditional on the trust remaining the majority shareholder in the club. — Social value: Whilst many clubs, regardless of ownership, have community-based activities, the specific objectives of supporters’ trusts ensure that where a trust is involved at board/shareholder level, community work is seen as “must do” rather than “nice to do”. Local communities can gain substantial social value from the work promoted in association with football clubs (see the Social and Community Value of Football report dated June 2010 published by Substance on behalf of Supporters’ Direct.). The continuation of such valuable work will be less vulnerable to waning support from the club if its supporters’ trust is actively involved in the club’s governance. — Strategic continuity: Continuing ownership by a trust should ensure that a high-level strategy of responsible management and sustainability is consistently maintained over the long term, regardless of changes in the individuals involved. This contrasts with the uncertainty introduced every time new owners take over a club and impose their personal objectives and preferences. Continuity is provided by the trust as a responsible democratic organisation rather than being dependent on individuals. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Broad resource pool: At Brentford the trust can draw on a wide range of skills and experience among its membership base. This has given the club access to highly valuable business expertise on a voluntary basis. 9.2 Cons: — Limited financial resources: Unless all clubs are incentivised to operate within their means as sustainable businesses, trust-owned clubs will always be at a competitive disadvantage when playing in a league against clubs that have access to high-risk speculative funding when such access is unrelated to the club’s ability to sustain such funding. Responsible trusts cannot compete with reckless sugar daddies. — Uncertainty of expertise: The democratic nature of a supporters’ trust means the individuals leading it will change periodically. Its effectiveness as an organization will depend on the types and levels of expertise possessed by those leaders, and their presence in the trust’s wider membership. To provide some mitigation it is highly desirable to have a strong centre of excellence in Supporters’ Direct to support trust development and share good practice.

10. Is Government intervention justified and, if so, what form should it take? 10.1 If you believe in a “community asset” model then absolutely—it is critical before the future of the game is jeopardized. The intervention should govern the financing of football clubs such that they do not take on debt that cannot be serviced, even if the club is relegated from its current division. 10.2 Government should act as a catalyst to force the industry to get its house in order by facilitating the development of an appropriate regulatory regime that balances sporting, commercial and social objectives. 10.3 Government should adopt a policy of introducing enabling legislation to establish a licensing regime with a suitable body to regulate the industry. Detailed proposals should be developed in consultation with experts, including Supporters’ Direct.

11. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 11.1 Yes. The Bundesliga model has made German football stable, sustainable and successful. Bundesliga clubs have to be owned over 50% by members and fans can watch top teams for as little as €12/€13 (£10/£11). January 2011

Written evidence submitted by Manchester United Supporters’ Association (IMUSA) Bullet Points — IMUSA is the oldest independent fans’ organisation in the Premier League. — The current problems with the modern game have their root cause in the mid-1980’s when the FA abandoned the rule that prevented owners of football clubs exploiting the game for their own financial ends. — Government intervention is desperately needed because the FA no longer has the will or power to govern the game independently of the Premier League (whose only role is to maximise income for its members). — IMUSA implores the committee to recognise that football is a cultural activity from the fans’ perspective and that it needs protecting as such.

About IMUSA 1.1 The Independent Manchester United Supporters’ Association (IMUSA) was founded in 1995 and came about because of the tensions between the fans’ natural enthusiasm for supporting their team and the clubs’ increasingly commercial approach. 1.2 IMUSA is truly independent of Manchester United, having been removed from the Premiership required Fans’ Forum in 2005 because of our vocal opposition to the Glazers’ takeover. We are also currently in dispute with the Independent Football Ombudsman because of what we consider to be their inherent bias against fans that have sought their help. 1.3 IMUSA is now one of the oldest independent fans’ organisations in the country (and the oldest in the Premiership). It represents/advises its members in disputes with the club or authorities and continues to pressure for changes that see the role of fans as stakeholders (rather than just shareholders or customers) being fully recognised and becoming central to the governance of the game. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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The Root Cause of the Current Problems in Football

2.1 IMUSA’s view is that the problems with the modern game have their roots in the FA abandoning its enforcement of Rule 34 in the mid-1980’s. FA Rule 34 used to prevent directors of football clubs deriving their main income from their ownership of a football club and stated that dividends paid on shares in football clubs could not be more than 5% of their face value. This rule effectively prevented owners from exploiting the game for their own financial ends.

2.2 The device that saw Rule 34 first being circumvented then removed from the FA’s rule book was the “holding company model” whereby football clubs became owned by companies rather than individuals. All the FA of the time needed to do to block this move was to make some minor amendments to the wording of Rule 34 but they chose not to do so.

How this has Damaged the Modern Ggame

3.1 The intervening 20–25 years have seen dramatic changes to the nature and character of the game which from the fans’ perspective have been mostly negative. That is, clubs that were originally set up for the pursuit of sporting excellence have become mainly concerned with the generation of capital. In consequence many clubs have become dislocated from their local communities.

3.2 In Manchester United’s case we have one of the biggest turnovers in world football, yet sits in one of the most deprived areas of Greater Manchester and the football ground, instead of being an asset to the local community is a blight. Ticket prices have increased to the point where only the relatively wealthy can now afford to attend matches, which has had such a dramatic effect on the age profile of supporters (increased from an average of 19 in the 1970’s to over 50 in the 2010’s with less than 10% of the crowd being under 24) that this threatens the very existence of the game.

The Impact of the Premier League

4.1 The advent of the FA Premier League (which it must be remembered is a breakaway from the Football League) has also been highly damaging to the game and to an FA charged with its governance. The PL relies on income from television and so many games are retimed and rescheduled to suit the TV companies rather than the fans who attend those matches. The worst example of this that IMUSA is aware of (albeit from outside the Premier League) was the rescheduling of the game between Torquay and York City to 8 O’clock on a Monday night and all fans of Premiership clubs have grown weary of the “Skyjacking” of their fixtures, so that they are forced to travel to remote locations at highly inconvenient times and for many a 3 O’clock kick- off on a Saturday afternoon is now an exotic rarity.

4.2 Further, whilst Gordon Taylor is to be congratulated for the fine job he has done in representing his PFA members in this time of plentiful TV money, the now huge disparity between their current income levels and that of the fans has also caused a major dislocation in a relationship between players and fans that was once a lot closer.

4.3 The Premier League has also become a procession that only a handful of clubs have a chance of winning (only three different clubs have won the Premier League since 1995 and only four ever). As Manchester United fans we should perhaps be grateful that we support one of those clubs but it has to be understood that a victory not born of fierce competition is less sweet. We are also able to empathise with fans of those clubs not in that handful who know even before a ball has been kicked on the first day of each Premier League season that their club has no chance of winning it. Unsurprisingly, this has had an effect on attendances and clubs in the doldrum between the top 3 or 4 and the relegation zone struggle to sell tickets for many games, which is further damaging to the fabric of the game.

Why Government Intervention is Essential

5.1 Given that the cause of the problems with the modern game can be traced back to a single event it should be the case that these problems can be reversed by the reinstatement of a new Rule 34. This is not however possible because of the influence the Premier League has been allowed to have within the FA. The FA structure consists of a Board and a Council. The Board is small (around 12 members) but carries the most influence. It has four Premier League representatives and all of which are committed to the Premier League’s guiding principle of maximising income for its member clubs. The Council has over 100 members, is highly anachronistic in its make up (eg a representative from each of the Armed Forces, the Public Schools, Oxford and Cambridge (but not other) universities etc etc) but just one (very recently appointed) representative of the fans.

5.2 The FA is simply incapable of making changes to the governance of the game even if it had the desire to do so and in consequence the game of football has literally no protection against those who would exploit it to its full financial potential even if that meant destroying the game as a consequence. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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The Nature of that Intervention 6.1 The current (self-) regulations to do with the governance of football subscribe to the notion that football is a business and that any restrictions on that business damage its ability to generate income. 6.2 Such a view totally ignores the fans for whom football is a cultural activity, not an economic one and the differences between a football fan and a customer of a bank or supermarket are clearly apparent to even those who do not want to see it. There are for example, many instances of families supporting the same football club for 3, 4 or 5 generations (even if they can’t afford to go to matches any more). It is also well recognised that football fans are more likely to get divorced than change their football clubs and it is indeed a truism that customers do not request that their ashes be scattered on the car park of even their favourite furniture superstore. 6.3 IMUSA’s view and the message we wish the Culture, Media and Sport Committee to take from this submission is the recognition that football is a cultural activity as far as the fans are concerned and that it needs protecting as such. 6.4 Most people with an interest in football will be familiar with LS Lowry’s 1953 painting of fans “Going to the Match”. Nearly all will be shocked by the realisation that the painting itself currently enjoys more government protection as an important part of our cultural heritage than either of the football clubs the fans in that picture were going to see. Independent Manchester United Supporters’ Association 24 January 2011

Written evidence submitted by the Newcastle United Supporters Trust Executive Summary This Report provides the Committee with: — A description of the Aims and Vision of Newcastle United Supporters Trust. — A short analysis on the findings of the recent survey of our Supporters Attitudes. — Addresses some of the issues involved in trying to raise finance from the fans. — Recommends a close examination of the German Model of football Governance as a model for here, including fan ownership and Club licensing to ensure financial probity and sustainability. — Concludes with a bullet point list of Actions and recommendations for the Committee to consider.

1. Introduction 1.1 This Supporters Trust was formed in 2009 using the model provided by Supporters Direct. Its legal form is that of a Co-operative Society run for the benefit of its members. The first election to the Board took place in March 2010, and we have spent the first year developing our Strategy and our internal systems as well as making regular contact with our members through our web site and e-mail system. 1.2 We now have 1,200 fully paid up members and 26,000 e-mail subscribers. We also in the process of establishing a Junior Supporters Trust. The Aims and Vision of NUST are as follows: — To strengthen the Bonds and dialogue between Newcastle United and its followers. — To encourage Newcastle United to take proper account of the interests of its supporters and the community it serves in its decisions and to honour the contribution made to the club by the community. — Ultimately, to promote the full, accountable, democratic and constructive involvement of supporters in the running and direction of Newcastle United including the principle of supporter representation on the Board of Newcastle United. — To ensure that NUFC is well managed and successfully run for the benefit of the Community by being placed in local ownership to provide long-term stability. — To ensure that as far as possible the Club is run democratically with a majority ownership held by the Supporters investing for the long-term and not short-term financial gain. — To develop the influence and profile of the Trust by developing its membership so that it can provide the leadership and credibility necessary to ensure Supporter ownership and Representation on the Board of NUFC.

2. Membership Development and Attitudes 2.1 We have recently conducted a survey of all our supporters with following headline results: — 83% felt the current Board was not capable of making the Club a top five Premier league team. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— 90% felt the Board do not listen to the fans. — 75% would like the Club to be owned by the fans or by a local consortium alongside the fans. — 78% believe the fans should have a financial stake in the club and be represented at Board level. — 65% of The Trust’s members are likely to invest at least £500. 2.2 We intend to present a full summary of these findings to our members in March 2011, and follow this meeting with another on the “German model” of football governance in May. 2.3 We feel very encouraged with these findings to begin a long campaign to encourage the fans to at least promise to invest in circumstances where we can tell them that a bid for the club would be successful. 2.4 We are attracted to the German model of Governance because it recognises that the football clubs, large and small, are community assets—not private companies to be bought and sold by rich individuals for private gain. They have developed the legal and financial structures to reflect this. As the President of the Budesliga says in his 2010 Report—“German professional football, unlike other European top leagues, consciously aims for sustainability and stability with its conservative licensing system.” 2.5 They have also made a strategic decision to keep entry fees for fans at a low level. The average German fan pays 20.79 Euros (£17.67) to see a match as the clubs deliberately pursue a family orientated philosophy. 2.6 The German clubs, in contrast to the Premier League, are always trying to bring into line the interests of clubs, advertising partners, media and supporters. The current situation in England with high ticket prices, overseas ownership with no connection to the clubs, and a majority of highly paid foreign players is surely not sustainable in the long term and is currently damaging the English National team.

3. Launching a Bid for the Club by the Supporters—Some Preliminary Issues 3.1 The first thing to note is that the current Constitution supplied to most Supporters Organisations does allow for Trusts to raise equity from the fans but the current limit of £20,000 equity investment per person is not adequate in our case and we feel should be raised as a limit. We have 26,000 potential investors at the moment. if we could raise £1,000 from each of them that would provide £26 million in Equity. The multiples always apply when seeking investment from a large group of people-this is often ignored in current debates. 3.2 We feel that that £26 million should bring us to the table and at least get a seat on the Board. We therefore think that the Committee should give some thought to setting some legal and financial parameters that would encourage the fans to invest in their clubs large and small. At the moment the current owners are not under any obligation to even talk to us. The German model, which encourages fan ownership, would be worth investigating in this connection. 3.3 We will shortly begin to explore with banks and Building Societies the possibility of setting up individual savings accounts for our supporters so that the Account remains in their personal ownership, but they pledge to release these funds in the event of a bid being launched which is likely to succeed. This would provide an obvious benefit to the individual supporter, and to NUST since we would be able organise around the fund and develop new interest. We would also support Supporters Direct in their recent proposal to establish a National Fund to help supporters finance bids for their club.

Conclusion * In conclusion we would like to emphasise that we agree with the All Parliamentary Report on English Football and its Governance which reported in April 2009 that “our football clubs are national assets that must be protected to ensure their long-term success and survival”, and that there is a role for Supporters to play in this by encouraging them to seek ownership and/or influence on the future direction of their clubs. In the history of Newcastle United it is the supporters who have been the one constant factor whilst owners and players have come and gone. They set the club up in the first place. * There is a need now recognise the role that supporters play throughout the country in maintaining their clubs, They should no longer be seen as passive consumers. They are and always have been the backbone of every club. We would look to the members of this Enquiry to ensure through legal and financial means, perhaps including a new Football Regulatory Authority, which the 2009 report called for, to put football on a more sustainable legal and financial footing in part by encouraging Supporter Ownership and Influence. We would like to see the Enquiry address the following points and come up with recommendations on: — Legal Requirement for Supporters to have a voice/place on the Board of football clubs. — Requirement for a stake in a football club to be given to a properly constituted Trust, or at least a requirement to allow supporters to buy a stake in a club through a Trust. — Raise the current limit of £20,000 equity investment per person through an I & PS. — Review the current Fit and Proper Person Test and its method of implementation. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Investigate the possibility of establishing a national fund to assist Supporters in the purchase of clubs, and/or the feasibility of collective savings schemes for supporters to save in order to be in a position to buy shares in the event of a likely successful bid for the club. — Establish a Licensing System to address club debt, financial instability and to ensure that clubs increase supporter influence. — Ensure that tax incentives similar to the EIS scheme are available to supporters seeking to invest in their clubs. January 2010

Written evidence submitted by the Fulham Supporters’ Trust The Fulham Supporters’ Trust is the only democratic, campaigning organisation of supporters of Fulham FC. The Trust, which grew from the Back to the Cottage campaign, was set up in 2003 in response to proposals to move Fulham away from their home and out of the London Borough of Hammersmith & Fulham. The Trust is affiliated to the Football Supporters’ Federation (FSF) and Supporters’ Direct (SD).

1. Summary — We believe that clubs should not be treated merely as UK corporations but in a manner that recognises the significant social and economic benefit they provide for local communities. — We believe that there is a chronic lack of governance in English football today, caused by the competing interests of the game’s three governing bodies. — We believe that the rampant commercialism and spiralling debt is ruining football and that financial order should be restored to the game as soon as possible. — We feel that the Trust-owned model offers fans’ a real chance of controlling their clubs, rooting clubs in their local communities and making them financially sustainable. — We believe that government intervention is imperative and should take the form of establishing a single regularity body for football, organised along the model adopted successfully in Germany. However, we recognise that there are some criticisms of the German model.

2. How to Treat Clubs 2.1 We believe firmly that British clubs should be treated differently from other commercial companies. The decisions of many owners and governing bodies to recognise football clubs as businesses can be shown to have caused many of the financial, regulatory and cash flow problems that have threatened the existence of so many clubs in recent years. 2.2 We believe that any new arrangements in the regulation of football clubs should take into account the enormous social and economic impact of the clubs on their local communities. The Social and Community Value of Football report, commissioned by Supporters’ Direct and published in June 2010, outlined the great importance of clubs to their local communities and how the results of their actions can be felt far away from the football pitch. We endorse the idea that clubs should recognise formally their social role and adopt it as one of their core purposes, investigate candidly if they are achieving this objective, and try to develop their relationships with fans, local authorities, residents and businesses on a continual basis. 2.3 The rampant commercialism and big spending of the modern game, encouraged by the largesse of the Premier League, places the social fabric and future of football in grave danger. Fans have had to become used to their clubs going into administration—and mere points penalties have not proved to be a sufficient deterrent to a succession of owners determined to “live the dream”. There are several high-profile examples of ill-fated gambles with money, designed to deliver success. Leeds United slipped alarmingly down the divisions after risking it all on qualifying for the Champions’ League and Portsmouth’s financial difficulties have been well documented over the past year. These two cases alone demonstrate that the Premier League’s self-governance model is in dire need of reform. Since the formation of the new top flight in 1992, 53 of the 72 Football League clubs have been declared insolvent—some more than once—and it has been left to the fans, lauded regularly as the lifeblood of the game but too often ignored by those at the top of the pyramid, to pick up the pieces. 2.4 Today, football fans largely reject the business rationale put forward by leading executives. The majority of English football’s leading clubs have been taken off the stock exchange, suggesting that flotation was flawed from the beginning. Unfortunately, the warning signs of the 2002 ITV Digital fiasco went unheeded by the Football League and lower-league clubs now face crippling battles to balance the books—witness the numerous skirmishes between teams further down the pyramid and HMRC. Treating clubs as just another company would disenfranchise the very people who keep them going and punish whole communities. We urge the Select Committee to examine the potential of broadening football’s outdated ownership structure to increase opportunities for supporter-ownership and supporter-representation. This could create a future where clubs would be able to celebrate their links with wider society by promoting democracy, entrenching links with the local community and providing much-needed stability in the boardroom. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3. Governance 3.1 Most football fans would accept that there is a lack of governance at the top of English football. Introducing a Westminster Hall debate on football governance in September 2010, Steve Rotheram said: “There is a crisis of governance at the top end of the football industry”. It is clear that the game’s current governance model is unworkable as the presence of three different bodies regulating the game makes genuine governance almost impossible. Once one body, like the Premier League, becomes autonomous from the others, they establish their own governance rules. 3.2 It will come as no surprise to members of the Select Committee to hear that we regard the Football Association (FA), the traditional guardian of the game, to be out of touch. Successive Sports Ministers have called into question the FA’s competency and the current Minister described football as “the worst governed sport in this country”. Having failed consistently to reform the FA Council, many fans see the FA as unrepresentative of both the professional and amateur game, it having proved either unwilling or unable to intervene to curb modern football’s excesses. 3.3 Six years on from the Burns Report, which yet to be implemented fully, the FA does not have a wholly independent chairman and its weak internal structure leaves it powerless to take on the Premier League when the situation demands. The FA’s ability to plan for the future of the game must also be called into question by the overblown redevelopment of Wembley Stadium, which has required a £200 million subsidy since 2002, with £342 million still to be paid. The cost of the new national stadium has meant that the FA has only been able to invest 2% of their income on football development and the development of the national football centre in Burton has stalled. 3.4 Since its formation, the Premier League has taken a disappointingly laissez-faire approach to governance. The top flight’s self-governance model permits the owners or chairmen of the top twenty clubs to, in effect, legislate on themselves, which might explain why the Premier League has remained remarkably tight-lipped on a number of contentious issues, from the leveraged buy-outs of Manchester United and Liverpool, the spiralling of debt at the highest level and the moving of clubs from their historical homes. Whilst there was no happy ending for fans of Wimbledon, it was only due to a concerted campaign from supporters that Fulham returned to Craven Cottage. Perhaps the most egregious of Premier League and Football Association regulations came with the transfers to West Ham United of and in 2006–07 and the failure of both bodies to take appropriate action against the club involved undermined their credibility. Regrettably, the Premier League has also sought to water down UEFA’s financial fair play policy as well as undermine the FA in internal wrangling. 3.5 Of the three organisations, the Football League does have a more impressive record on governance and engaging with the supporters, but there are still some serious failures amongst their recent record. Its determination to promote a widely derided and wholly unwelcome football franchise (namely Milton Keynes Dons) demonstrated their disregard for the community value of a football club and, despite their attempts to introduce tougher penalties for financial irregularities, some worrying cases (most notably Notts County and Munto Finance, as well as the ongoing uncertainty over who owns Leeds United) have come to light. 3.6 We also feel it is regrettable that neither the Professional Footballers’ Association nor the League Managers’ Association is represented adequately in the game’s governance structure.

4. Debt 4.1 It is indisputable that there is too much debt in football. If, as we asserted in answer to the Committee’s first question, big spending is the only way for a club to achieve success on the pitch, fans should be prepared for it (and them) to be “saddled” with the burden of debt in the years to come, be it corporate debt—amassed by a group of investors—or individual (or “soft”) debt, accumulated by a generous benefactor. Debt is the only giant that English football, in its much-heralded boom time, has failed to slay. 4.2 Having experienced years of television money, ever-rising ticket prices and big money takeovers, most clubs would have to be declared insolvent if it weren’t for their owners. The activity of the top sides, in an annual competition for a Champions’ League place to supplement their wealth, forces others to compete with them at ridiculous levels and at a worrying cost. Regardless of their own financial health, clubs continue to pay players too much money since they need to match the sums being promised by their competitors. Richard Scudamore, the Premier League chief executive, has previously responded to questions about the “debt mountain” by claiming that the debt was sustainable (as evidenced by the banks’ continued lending) and that the owners were managing them responsibly but this argument is extremely hollow. 4.3 A succession of Premier League clubs has the paid for their reckless spending. Portsmouth’s problems began when Sacha Gaydamak terminated his interest in the south coast club and the Icelandic banking crisis almost bought West Ham United to their knees. Hull City’s relegation from the top flight brought their financial worries into sharper focus and Liverpool had to disassociate themselves from their American owners in the high court. The presence of individuals like Thaksin Shinawatra in football—and some of his successors as Premier League chairman—shows that the “fit and proper persons” test is not nearly as thorough as it should be and the Premier League’s actions on debt, namely introducing a “going concern” assessment have not gone nearly far enough. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4.4 Whilst debt is not a new problem in English football—clubs have been going to the wall for decades (like AFC Newport and Aldershot)—the legacy of the modern problem could be with us for a while to come. The prolifigacy of the Premier League’s spending is not only passed down through the leagues—only recently have the League agreed a solidarity payment with the Conference—but onto the fans as well in the form of higher prices for tickets, refreshments and replica shirts. The concern is that the current debt culture places our national game in real danger and our current ownership models could lead to tangible community assets, such as stadiums as well as the clubs themselves, before lost to future generations.

5. Supporters’ Trust Model 5.1 Our previous answers to the questions posed in the Select Committee’s terms of reference have all concentrated on the problems caused by the loss of community assets and how the game has crept away from the grasp of the ordinary fan. Supporters’ Trusts are the logical way to protect these community assets from further danger and, if applied more generally, to stop the game from endangering itself. 5.2 The model, first put together by Supporters’ Direct in 2000, sets fairly stringent conditions to which trusts’ should adhere. A Trust has democracy at its very core: not just in terms of its constitution, but in its day-to-day operation as well. This gives the fans a real say in the running of their Trust—either by standing for election or proposing and voting on policy. If the Trust is in control of the club, as fourteen British sides are, this places that control in the hands of the supporters, providing a real contrast with the shadowy ownership structure of some Premier League sides. 5.3 Another point of divergence from the current ownership model comes with the fact that Supporters’ Trusts must be not-for-profit and remain the property of their members. Given that many Trusts have either wrested control from, or campaigned against, asset-stripers or individuals seeking to “make a quick buck” from their club, this much is self-evident. Yet, the crucial part of the Trust ownership-model, is that it provides the club with the stability that a commercial owner could not. 5.4 Trusts are also inclusive, by welcoming any supporter of the club who wishes to join, and affordable, by setting a low annual subscription rate. This encourages the longevity of the Trust and guards against organisations being run by cliques or becoming unrepresentative of the ordinary supporter. Whilst The Fulham Supporters’ Trust cannot comment extensively on the success of the share-holding model, since our club is still being run by a private individual, the Trust model helped our members formed an innovative, and ultimately, successful campaign to return to Craven Cottage in 2004. 5.5 Supporters’ Direct’s report on the social value of football identified explicit advantages available to clubs that are owned by their supporters. They include a greater sense of “engagement and inclusion” with fans and wider stakeholders, stronger (? and more profound) integration with the community, more responsible governance, more successful relationships with local authorities and partnerships with local voluntary organisations. The unity of purpose provided by a Trust-run club also puts in place the right conditions for sensible and sustainable development, rather than the risky paths preferred by too many football owners at present. 5.6 The disappointment is that too many Trusts remain unable to even hold a shareholding at their clubs. We believe firmly that Trust involvement in football is the future, as schemes such as “golden shares” and “asset locks”—protecting clubs and grounds from future harm—provide a genuine incentive for careful guardianship of these valued institutions.

6. Government Intervention 6.1 We believe that, due to the poor governance of a domestic game that is still riddled with money and credibility problems, government intervention in football is very much justified. 6.2 Our submission has already highlighted the problems of having three separate organisations regulating football. The decisive form of government intervention to rescue the game from its current period of uncertainty would be for the government to introduce a single, independent regulatory body for football, formed along the lines of the that employed by the Deutscher Fußball-Bund (German Football Association) for its clubs in the Bundesliga 1 and 2. This would break the impasse currently pitting the Premier League against the Football Association, and allow real reform to take place with the latter organisation. 6.3 Football could therefore be reshaped in the interest of the fans and the game’s longevity, rather than the protection of the interests of the big clubs as it does at the moment. The new regulatory body should look at all aspects of the game, from the current rules governing ownership, to the financial aspect of football, with the aim of restoring responsibility to the game’s finances. We urge the decision-makers to distance themselves from the aspirations of the European Clubs Association, which is pushing for more revenue-making opportunities, and to outlaw the staging of any domestic football overseas. 6.4 The German model is recognised by a number of prominent European football figures, including the current UEFA president Michel Platini, as being one that English football would do well to follow. The evolution of the German model also shows that it has been flexible enough not to bar their clubs from being competitive in European football. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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6.5 Until the late 1990s, all Bundesliga clubs were 100% owned by members—fans who pay to be part of the club. However, the clubs recognised the need to compete with their European rivals and that this might not have been the best way achieve this. So some, including Bayern Munich, spun off their professional football “sections” into outside limited companies, separate from the parent club, in order to attract investment. 6.6 Under DfB rules, members of clubs in the two divisions of the Bundesliga must own 50% of the shares plus one extra vote of these spin-offs. This is the so-called “50+1 model”, which makes it impossible for private investors to take over a club. This protects clubs from being bought up by rich outsiders and opening up the slippery slope to mismanagement. Bundesliga clubs are compelled to submit information about their budgets and expected expenditure, and to prove that they are financially stable in order to play in the league. Figures are checked throughout the season and fines can be issued or licenses revoked. The license system is already operational in European competition and there is no reason why it could be successful in England. 6.7 The new regulatory body should also ensure that fans are fully represented in the future direction of football. This should not prove too difficult since both of the leading national fans’ organisations, Supporters’ Direct and the Football Supporters’ Federation, are both fully democratic. The inclusion of fans in the regulatory process could also facilitate action on fans’ issues, such as safe standing, ticketing, crowd control, safety and the abuse of Section 27 and football banning orders.

7. Lessons to be Learned from Football Governance 7.1 As we have stated in answer to the previous question, we believe that the German model of football governance is the one that could be applied most successfully to English football and would urge the Select Committee to give this serious consideration. We do, however, recognise that there have been criticisms of the German model, in terms of ticketing issues and European competitiveness.

Written evidence submitted by the Board of Reading Football Supporters’ Society Limited T/A “STAR” (Supporters’ Trust at Reading) 1. Introduction 1) We in STAR are delighted that the Government have undertaken to encourage the reform of football governance rules to support the co-operative ownership of football clubs by supporters, enhanced supporter involvement in decision-making processes and to review the adequacy of current regulatory processes, including fit and proper person tests. 2) Our submission relates solely to professional football, viz, football clubs who have full-time professional players on their payroll. 3) Addressing each of the areas to be reviewed by the Committee, our views may be summarised as follows: — In some respects, football clubs should be treated differently from other commercial organisations. — The governance of football in England and Wales is wholly inadequate and the governing bodies which set the rules and apply them are, to varying degrees, ineffectual. — There is far too much debt in the professional game and there often appears to be scant regard for its repayment or the interests of creditors. — The Supporters’ Trust share-holding model has much to commend it and Supporters Direct and others will doubtless address this in detail. — Government intervention is justified, but it should be restricted to imposing a powerful, independent regulatory regime with two key objectives: (i) To establish a no-nonsense “fit and proper persons” requirement for all club owners, majority shareholders, board members and senior “decision-makers”; (ii) To ensure that every club’s strategic objectives and financial management are prudentially sound, in order to protect the interests of its employees and all interested third parties, including creditors and other football clubs, particularly those in the same league, as well as supporters. — Professional football has an almost unique role in terms of its relationship with its supporters and local communities, whilst at the same time generating huge revenues and capital injections on an international scale. A unique governance model is required for a unique industry. Self-regulation will never impose the two key objectives set out above. Other aspects of regulation, such as the Laws and Rules of the game and the organisation of the competitions, are best left to the football authorities themselves.

2. Detail a) Treatment of Football Clubs 1) Whilst many commercial organisations benefit from customer and brand loyalty, very few enjoy the passionate, generally lifelong support and prominent role in the community of the local football club. For the larger clubs, this support obviously extends nationally and worldwide. The vast majority of professional clubs cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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are over 100 years old and in that time have created an immense amount of social capital and added considerably to local identity and pride. For these reasons, professional football clubs merit rather different treatment from more conventional businesses. The same, of course, could be argued for a few other types of institution. 2) Such widespread support generates huge revenues which inevitably attracts major investors or speculators who may not share the same long-term interests of supporters or the local community. 3) Outside, fresh investment is not necessarily a bad thing and, in the case of Reading Football Club, was a “lifesaver” 20 years ago and has provided the Club with facilities that the town and supporters could only have dreamed of. 4) However, the only area of UK commerce that appears to have a regulatory regime to provide adequate governance safeguards as are urgently required for professional football is the finance sector. b) Football Governance Rules and Bodies 1) We have no confidence in the ability of football to self-regulate, still less to impose the type of regime necessary to meet the two key objectives set out above to ensure the long-term future of the professional game. 2) It appears that, whilst the Football League may have had some limited success, the Premier League, as evidenced by such high-profile cases as Liverpool, Manchester United and Portsmouth, is manifestly incapable of regulating itself where it really matters. 3) Only a truly independent regulator for all professional football clubs will suffice. c) Debt 1) Just as outside investment is not necessarily a bad thing, neither is debt, provided it is controlled, serviceable and can be repaid in accordance with its borrowing terms. 2) However, much of football seems to borrow “on a wing and a prayer”, relying on success on the pitch and/or television revenues to enable it to get by. More and more clubs’ balance sheets are becoming precarious and it is inevitable that clubs will continue to go into administration in a wholly unsatisfactory and competitively unfair way of “wiping the slate clean”. 3) Football, from the very largest clubs downwards, has demonstrated that, by and large, it has neither the ability nor the will to get debt under control. It has in general gained the reputation of being economically and socially irresponsible, leaving the tax-payer and businesses to pick up the tab whilst protecting its own via the football creditors’ rule. 4) A strong, independent financial regulator is desperately needed. d) The Supporters’ Trust Share-Holding Model 1) The Supporters’ Trust ownership model has much to commend it and we believe is the best for promoting and securing the long-term interests of the supporters and local community. We are sure that Supporters Direct will be submitting a strong case for this approach. 2) Nevertheless, we also believe that football would have to move too far from its current position to achieve this universally, although we recommend that consideration be given to requiring each club to transfer a defined minimum minority and inalienable shareholding to its Supporters’ Trust (where such a properly regulated and widely endorsed body exists) to ensure that supporters and the local community always have a voice in the running of the club. (NB This would not extend to picking the team!) 3) There is a place for a range of properly controlled ownership models. The key is to have a strong, independent regulatory regime to keep every club in reasonable check. e) Government Intervention 1) Government intervention is not only justified, it is essential for the long-term wellbeing of the professional game. A starting point for regulation is already available in the form of the Financial Services Authority (FSA). 2) The general public would probably be surprised to learn of the full range of powers (until now) held by the FSA in its regulation of banks and building societies and the regulated activities of other types of financial institution. (The fact that things still go wrong is more down to the implementation of the regulation, not the powers available!) 3) For example, every individual wanting to become a Board member, every executive or manager who reports direct to the Board and every individual carrying out a “controlled function” has to meet the criteria for authorisation and comply with the standards required before being approved by the FSA to make the appointment effective. The FSA web-site states that the most important considerations are the individual’s: — Honesty, integrity and reputation; cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Competence and capability; — Financial soundness. 4) Secondly, financial returns have to be submitted regularly to the FSA, annually, quarterly, monthly, weekly and, in some instances, particularly for the larger institutions, daily. Financial projections and regular updates have to be submitted and meetings are held with the regulator to review progress, discuss future strategy and consider major areas of potential risk and how they are to be mitigated. 5) We see no reason why a similar regime, tailored appropriately, should not be imposed on professional football clubs. As with the FSA (in future, the Bank of England), the regulator would have both: (i) the authority backed by legislation to require such information as he deems necessary to carry out his role and satisfy himself that the club is being properly and prudently run; and (ii) the power to impose limits or courses of action on a club to protect all creditors, not to mention the long-term viability of the club and the interests of its supporters. 6) Indeed, with the transfer of much of its regulatory powers to the Bank of England, the FSA could be ideally placed to assume that role in professional football. As with the finance sector, the regulator would be financed by levying a scale of charges on clubs based on their size; so there would be no cost to the Exchequer. 7) Some of the advantages of such regulation would be as follows: (i) The proposed regime would cater for all types of club ownership; for example, if a club were owned by a very rich oligarch, it would still be necessary, through the strategic review, risk assessment and financial projections several years forward, to show that the club had the resources to survive and pay its debts, even if its owner were no longer providing financial support. This might perhaps involve his lodging a legally-binding guarantee or even a financial bond to off-set that potential risk. The regulator would have the power to impose such requirements. Equally, a Supporters’ Trust-owned club would have to demonstrate ongoing access to financial resources adequate to meet its future plans. (ii) Potential creditors and clubs in the same league division would have the assurance that the regulator was independently monitoring the financial situation and acting, as far as possible, to protect third- party interests. (iii) Supporters would have the assurance that clubs could not be bought and sold simply to make money for the owner, usually leaving the club with huge debt and an uncertain future. (iv) It is a logical extension of these requirements that club ownership would have to be completely transparent. (v) Everybody would benefit from an improved atmosphere of trust that an effective “fit and proper persons” regime would bring.

3. Conclusions 1) A professional football club is an essential part of the ongoing life of its supporters and the local community. At the same time and with huge variations, professional football is big business and attracts national and worldwide interest. These two aspects are not necessarily compatible. 2) The football authorities have generally shown themselves to be unable to reconcile these two aspects and seem to have insufficient regard for, or control over, the ownership and control of clubs, especially with regard to the probity and competence of the individuals concerned. 3) Government intervention to legislate for a powerful, independent regulator who has oversight of who owns and controls football clubs and who can ensure that their finances are managed prudently to protect the long-term interests of all interested parties is urgently needed. January 2011

Written evidence submitted by Blake Welton, Editor, First e11even A) Sunderland AFC’S “A Love Supreme” Fan Magazine 1. I worked on “A Love Supreme” (ALS) September 2004–07 in tandem with my degree course at Newcastle University. 2. During my time there I witnessed two promotions and relegation amidst learning about the journalistic and (fan) publishing trade from the editor, Martyn McFadden. 3. ALS was established in 1989—pre- Generation and at a time when football fans were seen in mainstream society as principally white, working class thugs or hooligans. A stereotype compounded by disasters such as Heysel in 1985. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4. ALS was one of many fan publications to be established late-Thatcherite 1980s (Wolverhampton Wanderers’ “A Load of Bull” and Manchester City’s “King of the Kippax” being others) as many fans searched for an outlet to voice their concerns on not only their teams but the dire state of British football as a whole, the pinnacle being the of 15 April 1989. 5. However, ALS is now widely regarded as the top of fan publications—the Holy Grail others strive for or could only imagine in their wildest dreams. It almost transcends a fan magazine in the fact it is run as a full- time business with a team of staff writers and designers while still maintaining independence from Sunderland AFC and genuinely gaining credence from mainstream media. 6. The message of a fan publication has always been to argue a point, raise issues of the day to be challenged and explored intelligently and critically from a fan perspective, thereby raising the fan profile above the age- old stereotype of the sexist, lager-fuelled louts. 7. The beauty of ALS is that it has moved with the footballing times, adding style to the already obvious substance, thus making it more accessible to a larger audience due to greater potential distribution avenues, advertisements and better overall presentation. In short, ALS has become the SKY-equivalent of fan literature/outlets. 8. However, despite its positives there are still drawbacks and improvements that could be made: — Although rightfully independent from Sunderland AFC, instead of embracing or at least acknowledging ALS’s achievements over the decades and coming together to work on mutually beneficial projects and causes, there is only a grudging acceptance ALS is successful and here to stay. To me this epitomises the “Them vs. Us” attitudes clubs have towards fans and fan culture. — Direct contact is scarce as the club is sometimes hyper-sensitive to constructive criticism and the general feeling is that fans are principally customers who should have no say in the product with no independent body to bridge the gulf between customer (fan) and product (club). — Although ALS is at the forefront of fan literature/outlets, the transformation into the analogy of “The Fan’s SKY” has made it slightly less focused on fans and fan culture and more about the business side of things. — I would like to see more non-profit community initiatives that would not only raise ALS’ profile, Sunderland AFC’s but encourage the working relationship between the pair as well as improve Sunderland in general.

B) Northern Ireland’s “Happy Days” Fan Magazine 9. I began working on Northern Ireland’s “Happy Days” (HD) in August 2006 when HD’s editor, Niall Rudd, was liaising with ALS editor Martyn McFadden to achieve the same high-quality finish as ALS. 10. However, although similar in style, content and mission statement of an independent platform for fans, there are fundamental differences, most notably its relationship with the Irish Football Association (IFA). 11. The IFA are very pro-active in their support, communication, dedication and inclusion of fans/fan organisations and actively supports HD with press access, stories and sales in the club shop. 12. Geoff Wilson, Communications Officer, is something of a rarity in his open approach to issues and fans. The IFA, HD and fans are a partnership able to discuss, debate, constructively criticise and tackle issues together, supporting crucial campaigns for the benefit of not just Northern Irish football but the political, social and economic benefit of the country. 13. Coupled with HD is the fan organisation known as “The Amalgamation of Northern Ireland Supporters Clubs”, formed in 2003. This is the top of an independent network of approximately 71 supporter branches and co-ordinates these into one unified voice. 14. The Amalgamation has an AGM where any members from any Supporters Branch can attend to raise topics/issues to be rectified before results/decisions are filtered back to the Branches or IFA itself. In this respect HD acts loosely as the written magazine for the Amalgamation. 15. Together, the IFA, Amalgamation and HD have worked together to see an unprecedented improvement in the perception of Northern Irish football over the past decade which has seen triumphs both on and off the field. 16. Examples include the successful “Sea of Green Campaign” and “Football for All” promotions aimed to combat Sectarianism as well as working on wider initiatives such as Kick It Out Campaigns and Sports Development. It is little wonder with this pro-active attitude and development that Northern Ireland Fans were voted the best in Europe in 2006. 17. Granted, the deep-rooted issues of sectarianism as well as political, social and economical problems in Northern Ireland are arguably more serious than those that witnessed the birth of the likes of ALS but, without the aid of the Messianic SKY and the gold trappings it brings, the IFA turned to its real wealth, the passionate and loyal fans to improve the state of the game on and off the field of play. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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18. If international football, particularly that of Northern Ireland, was a lot more financially striking to attract rich suitors to invest and raise its profile maybe there would be a similar outcome to the domestic situation outlined with ALS. 19. The fact is that there isn’t a golden financial wand in Northern Irish football but on a small budget/ revenue stream the IFA have included fans in the majority of running and decision-making, trusting their intelligence and integrity to create a feel good factor no amount of money could buy. 20. This is in stark comparison to English domestic football (and arguably the English FA as discussed later) were fan loyalty and respect are taken for granted.

C) Preston North End’s “ Invincible” Fan Magazine 21. After finishing my Postgraduate Diploma in Newspaper Journalism and being disillusioned with mainstream journalism, I turned to my passion and experience for fan magazines. 22. Having grown up in , I saw an opportunity to put what I had learned with ALS/HD into practice and create a similar product, entitled “Deepdale Invincible” (DDI), to embrace the football fans of Preston North End with the hope in some small part to raise the profile of both the club and city. 23. It was intended as much as a community-based initiative as “just a fan magazine”—the merging of the ALS concept with HD and openly sought communication channels with the club to see how, independently, DDI could work in tandem with Preston North End Football Club. 24. Sadly, the club treated DDI and myself with hostility in what can only be described as a myopic, warped sense of self-preservation of its “official” media. 25. It seemed at the time that officials at Preston North End Football Club under-estimated myself and fans that such a professional product could be produced. The negativity beginning principally on print suggests the club were surprised fans could read, let alone write a magazine. 26. Although commendable that PNEFC would want to protect its capital interests at any point they were beyond reasonable in their methods. 27. Despite selling 750 copies in the first issue (including mail order requests to Sweden, Australia and Canada) and 450 for Issue Two there was never a third issue after a constant barrage of abuse from the club towards myself, sellers and family who were verbally abused by stewards on the apparent instruction of the Ground Safety Officers. 28. In a face to face interview with the then chairman Derek Shaw and general manager Ben Rhodes prior to the home game against Southampton on 1 November 2008, I attempted reconciliation as well as to obtain answers to perpetual questions not just PNE fans but fans nationwide continually ask week-in-week-out. 29. After receiving an apology for over-excessive hostility we started to talk about the magazine and Preston North End Football Club. The responses were all along the same three lines: (1) They simply can’t afford/budget for certain initiatives/ideas. (2) If they can, it would be futile because they cannot compete with local rivals such as Blackburn Rovers and . (3) Therefore, due to points 1) and 2) they protect their own income sources aggressively. 30. These were the blanket answers to questions such as why matchday prices were uniformly £24 when the newly-refurbished 24,000-seater Deepdale stadium is constantly half empty; why had the last decade only seen two players progress through the Youth Policy; why PNEFC did not attempt to engage more with the local community particularly the large university campus; why the club did not look to the relative wasteland north of Preston for untapped fan support (a classic line from Mr. Rhodes was anxiety over competition in this sector from the newly-promoted League Two Morecambe). 31. I pointed to the events and communications I had established in just a few months in the local community—for next to no budget; World and European Freestyle Football Champion John Farnworth was organised to attend a local play scheme, University of Central Lancashire Students had a tour of the under- used/under-played based at Deepdale for Fresher’s Week and DDI was at the local Olympic Flag Raising Event. 32. Unsurprisingly Preston North End Football Club had no answer to this and appeared content with burying their head in the sand. While the financial vultures circled waiting for the dead carcass, the club would continue to pay premium prices for anything and everything other than what mattered—the fans. 33. I warned them that without principally a change of attitude, resulting in the change of financial direction and ethos, Preston North End would struggle in the next few years. 34. Two years after I walked away from Preston North End Football Club and the city, the average attendance at PNE games have dropped by 2,000 fans, the club sit rock bottom of the Championship while Derek Shaw lost millions after a takeover bailed out his administration. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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35. The club is heavily in debt and the under-celebrated National Football Museum has moved to Manchester with post-takeover reports of unnecessary wastage and squander. 36. Preston North End are witnessing their own recession and attempting to strategise for it but in reality it is too little too late with not enough actual resources (such as large current fanbase) to rely on for stimulus and growth. 37. Although sorry for the plight of Preston North End and what their loyal, hardcore fans are currently going through, I guarantee they are more the rule than the exception. However their current situation vindicates my beliefs and observations at the time and re-affirms my belief that I know what the modern game desperately needs.

D) Burnley Football Club 38. At the end of that same season, 2008–09, PNEFC’s local rivals Burnley Football Club deservedly reached the FA Premier League, beating Sheffield United in the Championship Play-Off Final. 39. On the back of this success story, Burnley Football Club pledged 7,000 free season tickets to its loyal supporters. Granted, this was a fantastic PR story for the club who instantly became everyone’s second favourite team, but nevertheless it was a grand gesture for a club that, like so many, could have milked support for their money’s worth. 40. Similarly it is arguably a clever investment from the club, costing approximately £2 million but a season in the Premiership sun is estimated in excess of £50 million. 41. Apart from financial implications, it was an acknowledgement and appreciative gesture to those loyal fans that had stood by them for so many years. This ideology is not a one-off but symptomatic of Burnley Football Club in general. 42. Through “Happy Days” there have been numerous contact with Burnley’s Media Manager Darren Bentley who has always been approachable, friendly and accessible to player requests for Burnley’s Northern Irish stars. 43. He has continued to help and support HD and fans whenever possible, even taking time out when inundated with Play-Off Final work to personally call fans to make sure the problems with Membership numbers were resolved and tickets obtained.

E) Blackpool Football Club 44. In comparison and similar to PNEFC, Blackpool Football Club are at the other end of the spectrum, continually looking out for their own interests and income streams. 45. They rejected player interview requests/press access from “unaccredited” media such as HD and “first e11even” on numerous occasions but also have a strict policy on accredited media. 46. Whilst working for “The Preston Citizen” with media accreditation, I was rejected for press access for a game because there was “nothing in it for them”. Outraged, I pressed them further. It appears Freedom of Press doesn’t exist at Bloomfield Road; you have to sponsor the matchday programme, offer BFC ticket competitions or some sort of Del-boyesque deal to attend matches in an official capacity.

F) South Yorkshire’s “First E11even” Fan Magazine 47. Disillusioned after the Preston debacle, I took time out from any sort of football activity before slowly getting involved with Sheffield FC—the Oldest Football Club in the world. 48. In November 2009 I was encouraged to do another fan magazine but this time learning from my previous efforts and experiences and adapting the concept. 49. “first e11even” (F11) took the ethos of DDI but extended it to a regional format that could be perceived as “less threatening” than a club specific format. The response of help and support of not just fans but clubs was phenomenal—from helping with articles, club badges, feedback and press access. 50. Cynics would point to the “less club specific” angle of the publication as F11 took a broad snapshot of regional fan opinion but even so, the impression on all my dealings with the likes of Sheffield Wednesday, Sheffield United, Barnsley, Chesterfield etc. were of a dynamic, forward-thinking ethos towards the project and football fans. 51. Arguably, this could be down to South Yorkshire being regarded as “the pioneers” of the modern game so this ideology is inherent within the region. 52. This is further evident by Sheffield United (SUFC) and Sheffield Wednesday’s (SWFC) commitment to the community and events, particularly in the latter case where they have tried to maintain this ethos despite the obvious financial strife at the club. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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53. SWFC have foregone potential shirt sponsorship deals to support “The Children’s Hospital Charity” and also have strong communication links with the Wednesdayite fan group, albeit the latter being a necessity as shareholders. 54. Even so, this underlines the belief that fans, the local community and football clubs can co-exist and perhaps one day even become united on a more direct administrative level. 55. Whilst working on F11 I was also fortunate to have press access for England U21s v Greece U21s at Doncaster Rovers due to good relations with the county FA and Steve Uttley, Doncaster Rovers’ Media Manager who obviously spoke on my behalf to the U21 England Press Officer. This attendance could be a first for a “fan” publication in England. 56. The only negative observation from “F11” could arguably be the organisers of Sheffield’s “Back The Bid”. They were receptive to the project when canvassing to be one of the Host Cities but when it was chosen as a Candidate Host City the Sheffield Bid Organisers adopted a rather draconian stance. They claimed they could not endorse an “unofficial” publication as the FA were very cautious over their brand/image rights and did not want to associate with anything that was not directly ran/controlled by the FA or could indirectly damage the bid. 57. With the local clubs seeing the contents of the magazine and accepting it as an entertaining, intellectual and informative vehicle this was a pathetic statement from the Sheffield Bid Officials which was obviously a remit handed down by the FA. 58. The FA, in turn, would say this agenda was merely passed down from FIFA but regardless, if the majority of the English FA’s attitude is typified by this ideology then what hope is there for League Clubs. Obviously club attitudes/policies mirror that of the Football Associations. 59. This typifies the ignorant “faultless” culture of the modern game—passing the buck for failings or accountability as the British game self-destructs. 60. Looking at the resultant failed England 2018 Bid blame focussed on others’ failings and/or corruption rather than England’s mistakes in choosing the wrong chairman (Lord Triesman) or the PR blunders of handbags et al. 61. If the FA adopted a more open, accessible approach in general rather than focusing on being a divine entity with a divine right to anything and everything it sees fit then the perception of the current game both home and abroad would be a lot brighter.

G) “Changing Face of Football Article” 62. Whilst working on DDI and covering Preston North End for “The Preston Citizen”, I was fortunate to witness first-hand the takeover of Manchester City F C by Sheikh Mansour. 63. I was in the press area for the game against Portsmouth on 21 September 2008 when the deal was concluded and later wrote a piece for “The Citizen” comparing and contrasting Manchester City FC with Preston North End FC and the impact the deal would have regionally, not just nationally. 64. The irony of the article was in the changes at both clubs over the past decade but, with hindsight, a further article could have been written for Portsmouth Football Club’s recent plight showing the other side of the boom or bust culture currently in football. 65. Before the takeover, Manchester City were unquestionably a “blueprint” for survival amidst endless relegations, failures and mis-management, investing in the crucial areas of Youth Academies, community and more importantly fans. 66. I cannot comment on how much this remains in the current climate without proper research but certainly the squad is thinner on Platt Lane talent and heavy on international superstars. 67. However, undeniably in the dark days of League One football, the club had the right attitude, policies and potential resources (most notably a dedicated and large following) to survive, slowly recover, move forward and eventually sell itself to a global market. 68. The same policies need to be adopted to a broad spectrum of the FA and English Domestic League to make it so attractive on the international scene that we are not just the obvious choice but the only choice on the world stage for event hosting such as the World Cup.

Conclusion 1. Based on the evidence laid out I believe the only way to improve the game for football fans throughout the country is to give them a platform to voice their concerns, grievances and issues as well as Government endorsement and policies to uphold the legitimacy and authority of this. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. The structure would be a combination of all the experiences I have witnessed but predominantly follow the Amalgamation of North Ireland Supporters Clubs: — The formation of a Fans Board consisting of a representative from each of the 92 Football League Clubs that meet three to four times a year around the country to discuss matters relating to the state of the modern game in the UK, principally from a fan perspective and experience. — This Fans Board reports to the Government’s Culture, Media and Sport Committee so it remains independent from the FA and Clubs but decisions/conclusions should be passed to the FA for implementation. This gives fans freedom, trust and responsibility but with the legitimacy of the Government as well as much needed independence. However, this does not mean there is no communication with the FA and Clubs as this is paramount. All meetings are recorded and private face-to-face consultations/discussions should be carried out with FA and Clubs before any final reports/decisions/conclusions be sent to the Culture, Media and Sport Committee. Similarly, should there be a case/point where it appears the FA or Clubs are being directly obtrusive, the Culture, Media and Sport Committee can intervene as a mediator to rebuild communication or find a resolution. — Example topics could include: — Ticketing Pricing. — Safety/Security/Stewarding/Standing. — State of National Team/Player Development. — Youth Development. — Community involvement and enhancement. — Media/TV and Broadcasting Issues. — Initially the majority of representatives of the Board would consist of the main fanzines/magazines and websites whose independent dedication/passion and commitment has already been proven by their creation of an active platform for fans. — Each individual is expected to represent the fans of their club independently from the club itself but this certainly does not mean there should be no communication. Communication is encouraged to better understand football clubs and their workings and therefore report to the Board meetings with informed opinions. It should also help to promote active participation from members on a local level by hopefully helping the club with community events/initiatives. However, any hint of bribery, immoral collusion will be dealt with by the main Board and/or Culture, Media and Sport Committee. — After four to five years there will be votes to continue membership where any fan can stand for election and representation of their specific club which the position of Chair will also be up for re- election and challenges. — In tandem with this there will be media outlets to continue the work of messages, aims and initiatives. — The Board will be financed not by the Government and taxpayers’ money but by the FA, Premier League and Football League as a sign of commitment to fans and the Board.

Social Responsibility & Accountability 2. This is not just intertwined with what has been discussed regarding the FA and Clubs but goes deeper with players and the Professional Footballers Association (PFA). 2. I would like to see a greater development of players and their social responsibility, not just within the game but in society as role models, particularly for children and young professionals. 3. Professional Footballers receive a wage, sponsorship, endorsements and lifestyle that the majority of British society can only dream of—particularly in today’s climate. Although a wage cap is certainly one avenue to discuss I believe this will have to be examined thoroughly before implementation is contemplated. 4. However, top professionals have incredible amounts of time and money and the former could be used to improve society and the people/fans around them. 5. I would like to see the implementation of social activities mandatory at every Premiership, Championship and League One club where each individual player gives up an afternoon or day per week working within their community. 6. Not painting fences but more school visits to help with literacy, numeracy or the importance of fitness, “An Evening with...” events, working on disability events, Youth Clubs and Young Offenders institutes/Prison work. 7. Meanwhile, League Two players could work/help in Technical Colleges not only helping and assisting tutors but having the ability to learn trades/skills themselves which could become invaluable for a career outside or after football. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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8. The idea of Player Responsibility and Accountability through social inclusion is an idea that has already been seen at Rotherham United where players took classes in brickwork, plumbing and how to be an electrician one afternoon a week. 9. Similarly, when in League One, Manchester City had a rota of events that players were designated to attend each week which helped build the strong relationship with the fans that helped them through their on- field plight and back up the football ladder. 10. The idea comes about due to the gulf between players and fans. Many players appear to turn out passionless performances each week, pick up huge pay cheques and don’t realise the struggles of the ordinary fan whose only release/escape is often watching their team at 3 o’clock on a Saturday afternoon, often sacrificing a lot (not just financially) to show their support. 11. Players of yesteryear such as , , and were admired not just because of their skills and passion on the pitch but because they were men of the people. 12. Although this is certainly not going to be achieved in the modern game at least a few hours in a less than full week would show appreciation and be good PR if nothing else for all concerned. 13. It may look to be an idealised concept and hard to govern as we are not only dealing with 92 football clubs but the thousands of professionals that go with it but working with the PFA on an “opt in” voluntary scheme could see a huge amount of pressure on players to participate as there will be an open list of who is doing what and press attention focused on them. January 2011

Written evidence submitted by Southend United Supporters’ Club Trust t/as The Shrimpers Trust 1. Introduction — The Shrimpers Trust has a membership of over 1,100 Southend United football supporters, which currently equates to around 20% of current home attendance. Its motto is “To Help not Hinder”. — Shrimpers Trust has, along with the vast majority of our supporters, a serious concern over the future of Southend United FC. The current Board of Directors in which the Chairman has, it would seem, the only decision-making voice, displays a complete lack of transparency over what is happening within the club. In season 2006–07, Southend United were in the Championship. They now languish in the bottom half of League 2 and are reported to be losing £100,000 per month— although this figure is down on previous years. — The Shrimpers Trust would like it to be known that overall it has a good working relationship with the Football Club and this submission is not meant to imply anything different generally. There are, however, negative issues relating to specific events which we feel could have been handled differently by the Club and would not have occurred with supporter involvement in Board decisions. — The Shrimpers Trust welcomes the coalition government’s initiative “to encourage the reform of football governance rules to support the co-operative ownership of football clubs by supporters”. This is something we have been striving to achieve with Southend United without success.

2. A Brief History — Southend United supporters purchased the land and built the current stadium at Roots Hall, where the football club play their home games, in 1955. Supporters subsequently handed over and entrusted ownership of the stadium and its environs to the football club. Subsequent Chairmen have since been unable to operate the Club without making a financial loss, and have disposed of most of its assets. — The Shrimpers Trust was formed in July 2000 by members of the existing supporters club (Membership ca 300) who felt that the sale of the remaining assets of the club to a local property developer (the current Chairman) represented a real threat to our football club existence. This threat still remains today. — A lot has been said and reported about “fit and proper tests for directors”. Whilst we are not cognisant of the current requirements, there has been a lack of stability in the Southend United Board composition. We have seen a frequent change of Directors especially in the past year, the Chairman (and owner) being the main exception. The Shrimpers Trust would be interested to know what “current regulatory process” is in place and how it is policed. — A further point of note is that it would seem that the Board at Southend United is largely irrelevant as there is a perception that the owner says and does what he likes. Ron Martin owns a controlling majority of shares and therefore it is materially irrelevant what other directors and the fans think. This autocratic style of management is likely to hamper implementation of any Government co- operative initiative. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Nevertheless, the owner does make himself accessible and is prepared to listen to fans concerns and will often act on them. However, the conflict between his business interests and the Football Club make it difficult to see how Southend United will survive the next few years without something radical happening. — Contracts have been agreed between the Chairman and Sainsbury plc which is intended to result in the current stadium, Roots Hall, being demolished. This will be replaced by a supermarket and other development, with the football club moving to a new stadium which is still to be built. Plans were approved for the stadium some years ago but to-date no work has started, with the current economic recession and stubborn shopkeepers who will not sell their premises being cited as the reason for the delay. — The planned development at Fossetts Farm, including a new stadium, Hotel and retail outlets will all be owned by companies controlled by Ron Martin, the existing ground has all but been sold to Sainsbury’s. The fans have always been told that the “enabling development” at Fossetts Farm will be used to provide funds to the Football Club. However, as Ron Martin will own everything, it is still unclear as how Southend United will be able to survive at a new stadium any better than they can now. At this point in time, neither the “enabling development” nor future rent has been explained except in sound bites and generalities.

3. Recent Events — The past 24 months have been particularly turbulent with the Chairman using unpaid Vat and Tax due to HMRC as temporary banking facilities, a practice which is understood to be a more than isolated occurrence within football clubs. Players have regularly not been paid, which is felt to be a major contributing factor in last year’s relegation, suppliers regularly go unpaid for months and often a Winding up order is the only mechanism left to resolve the situation. I hate to think how much money has been spent on legal proceedings over the last two years, especially with regard to our numerous visits to the High Court to meet our friends at HMRC. — It is perhaps worth mentioning that although HMRC’s job is to collect revenue for the Government, the overzealous and unreasonable behaviour of HMRC during the court cases with constant changing of figures without giving appropriate time to react, does suggest that their tactics should be reviewed. It is my view that the public money wasted by HMRC during several of these cases has been nothing short of scandalous.

4. Financial Loan to the Club — The Shrimpers Trust was asked to loan the Football Club money during this period. I personally received a call on a Friday lunchtime from the Chairman saying that if he did not pay the PFA around £120,000 immediately, the Football league would not be able to lift our transfer embargo. At the time we had nine players available, although as we had already been knocked out of the FA Cup competition we were not playing until the following Tuesday. After a little consideration the Trust entered into a written short term Loan Agreement with the Football Club with a personal guarantee from the Chairman and loaned the Club the £60,000 required. The PFA were paid, Southend United were released from their embargo and a number of players were signed on loan. Two months later Southend United had a further transfer embargo applied as a series of other bills were unpaid. — On the maturity date of the Loan, the funds were not repaid as agreed, no contact was made by the Club, no apology was received and it was left to the Trust to establish contact. A revised payment plan was prepared ie the deadline for repayment was extended. This subsequent repayment date passed without funds being received, no contact was made by the Club and no apology was received. This scenario continued until the money was finally paid in the summer of 2010, some eight months after the repayment was originally due. Throughout this process, the Chairman was silent on the matter and the Shrimpers Trust had to continually try to make contact with him, hardly a recipe for a harmonious working relationship. The Shrimpers Trust and its over 1,000 members were useful when money was needed and then treated with contempt. — During this period, the Shrimpers Trust also had to step in several times to a) ensure suppliers were paid and b) to underwrite travel costs. — The Strategic objectives of the Shrimpers Trust when set-up were and still remain: — To be a democratic organisation that seeks to represent the views of all supporters of Southend United through open affordable membership; — To strengthen the links between the Club and the Community and to represent the interests of the Community in the running of the club; — To help raise the profile of the Club and encourage new support within the community; — To encourage the Club to take proper account of the views and interests of its supporters in its decisions; cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— To encourage and promote the principle of supporters representation on the Board of the football club. — During the loan period Ron Martin agreed that a representative of the Supporters Trust would be invited to join the Football Club board in July 2011. We did ask (without response) at the time as to why he felt we were capable of being Board members in July 2011 but not prior to that time. As we approach July 2011 it will be interesting to see if the Chairman keeps his promise. Quite clearly the Chairman is interested in what we have to say, particularly as money changes hands regularly (the Shrimpers Trust is the Youth Team financial sponsor and has made tens of thousands of pounds-worth of donations into the club’s Under-18 side; the Centre of Excellence; the Community & Educational Trust and for physiotherapy equipment over the past decade) but when it comes to decision making he has no real interest. The Government’s current initiative and intervention in this area is obviously welcomed.

5. Government Questions In answer to the specific questions presented, The Shrimpers Trust would answer as follows:

Should football clubs in the UK be treated differently from other commercial organisations? 1. As the most popular sport in the UK, football affects the lives of millions of people and therefore its health needs to be protected, to ensure its long term life. As with any business, the continued operation of Clubs with expenditure exceeding income cannot be allowed to continue. 2. Clearly football is, however, different from other commercial organisations. Generally speaking a customer of Sainsburys can go to Tesco or Asda should they be unhappy about the products or services of those commercial organisations. A football supporter usually has allegiance to only one club and would be very unlikely to consider an alternative when the product or service provided to him is less than satisfactory. 3. A useful start might be to reverse the ruling that allows HMRC to hound Supporters Trusts for Corporation Tax—one wonders how much money is spent in collecting a few pounds from the coffers of volunteers trying their best to help their local community asset, up and down the country.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 4. Great strides have been taken by both The Football Association and The Football League to improve football governance rules in recent years but, at the moment, there is clearly still an unsatisfactory situation in place. 5. Recently-departed FL Chairman Lord Mawhinney attempted to implement a wage cap at 60% of a club’s turnover, but so far only League Two is subject to this as there is objection higher up the Football League. It is important for the sustainability of football in the short, medium and long-term that this is rolled out not just within the Football League, but in the FA Premier League as well. 6. The FA, too, is attempting to improve matters; as mentioned before, the “fit and proper” persons test is a good idea, but its’ current structure sometimes makes decision-making difficult. There is a clear conflict between the professional and the grassroots game that needs to be resolved before The FA can become a progressive organisation. 7. In summary it’s difficult to see that the football governance rules have had any material impact at Southend United.

Is there too much debt in the professional game? 8. Buying success today and worrying about it tomorrow is not a great business model—it only works if you have Middle Eastern or Russian backers! So of course there is too much debt, that is only too apparent. 9. Few successful companies have prospered without a level of debt, indeed it’s difficult to expand and grow a company without taking on debt. But clearly that debt needs to be managed carefully 10. Southend United has more debt than it can cope with. All remaining rights to assets have long since been transferred to the Chairman’s confusing group of companies—not least by way of setting rent too high for the club to afford. As rent has not been paid interest has accrued. The Chairman has written off some of the rent interest and insists he has no intention of collecting the remainder, but from a book-keeping point of view it has ensured that any funds the Club were due when vacating their existing ground are no longer applicable. 11. The Club and owner’s accumulated debt appears now at a level that makes it difficult to see how a new stadium can make any sense financially and with the Sainsbury debt secured on our existing stadium, there is some serious concern as to what would happen should the planned development fall through. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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What are the pros and cons of the Supporter Trust share-holding model?

12. We feel as a trust that not only do the fans have a moral claim to the Club, but we also believe that supporter ownership offers a more appropriate business model. One that would not risk the Club’s fortune on short term or even objectives not best suited to the club. The Club would not have got in so much debt with a democratic elected board with a legal remit to manage the finances appropriately.

13. As a business model, being community owned could offer wider social and economic value. A community club should be more in tune and responsive to the needs of the local community—for example local suppliers would be paid on time. As a brand, we feel it is better for sponsorship, tapping into company’s CSR budgets and building other revenue streams as a result of the community brand. Generally the fans would be more loyal as it would be their club. If they did not like how the club was being run they could elect a new board or stand themselves.

14. Our ambitions of having an elected Supporter Director on board are public and we still have ambitions in this area. However we also have concerns—we would be a minority Board member and shareholder, almost a lone voice. The concept needs a progressive Board and clear terms of reference for it to be successful, with full financial disclosure. If this had been the case at Southend United, we would have been alerted to the financial issues earlier and may have been able to stop the debts increasing.

15. It is difficult to see too many Cons in this model—there is an argument that says “nothing gets decided by committee” but it’s not one the Shrimpers Trust subscribe to.

Is Government intervention justified and, if so, what form should it take?

16. Football clubs should be run as businesses and the Shrimpers Trust believe that government intervention is only justified when there is a clear case of mismanagement and a risk of bankruptcy. Furthermore, the persons involved should be made accountable, not the club. There have been cases of owners using the 10- point rule to effectively start afresh next season.

17. However, the worry is that whenever intervention occurs be that audit, fines, HMRC or embargos, it is actually the fans that suffer, not the management.

18. A law change requiring those individuals making decisions to be more accountable or at least their actions transparent would be a good start. Boards should be made to be more transparent—including all aspects of cash flow—that way fans and other interested parties can see if the club is being run within its means.

19. In Southend United’s case, financial information is routinely withheld—accounts are almost always late, and shareholder information few and far between. The Chairman is always able to hind behind the statement “I’m sorry that’s commercially sensitive”—clearly with the Fossetts Farm development, retail partners, CPO’s, and contracts for existing site and development in mind, a lot of the information probably is commercially sensitive, but that just adds to the frustration of the fan base who just want to know “what’s going on” and whether they are going to have a club to support over the next few years.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?

20. We are no experts at the Shrimpers Trust on alternative governance models but we understand from Supporters Direct and a well read member that the Bundesliga has a lot we could learn from. If, for example, they have not had an insolvency case in their history and there are several every year in the Football league, then this for starters is an area we could learn from.

6. Summary

We hope that his opportunity to address the failings of Governance in English football is taken fully so that fans finally have their rightful place in the decision making process at their club and that there is less pressure for clubs to spend more than they receive.

The Shrimpers Trust is pleased to have been given this opportunity to be involved in this initiative and would willingly re-engage should that be necessary. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Written evidence submitted by David Hodges This submission is from David Hodges. I was the researcher, co-author and editor for the 2009 All Party Parliamentary Football Group report into “English Football and its Governance”. I am a semi-professional footballer currently plying my trade for Corinthian Casuals in the Ryman South (step 4) and previously played for Glossop North End (step 5). I am an avid Leicester City fan and former season ticket-holder. I have answered three of the six questions that the Committee called for evidence on. I did not feel I had either the experience or knowledge to provide useful evidence on the questions which I did not answer.

Key Points Should football clubs in the UK be treated differently from other commercial organisations? — Yes. Football clubs are an integral part of a local community. They help to shape its identity in a way which other service providers do not.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? — The governance rules and structures are not working sufficiently. — The FA should alter the composition of its Board, accept and implement the key findings from the Burns review, and make the Football Regulatory Authority (FRA) independent. — An independent FRA should have powers which include: control over the Fit and Proper Persons Test; the power to investigate takeovers which include significant debt leveraging; a role to promote good governance which could include naming, shaming and faming clubs for their governance procedures; and control over a new Football Licensing system designed to prevent “financial doping”. — The FA should be the governing body of English football that is in charge of development, regulatory and technical matters.

Is Government intervention justified and, if so, what form should it take? — Yes. The Government is investing £57.6 million over the next three years in football. The Government has lost over £28 million in unpaid tax from football clubs practicing poor governance procedures. — The potential action the Government can use is: the power of the media, not supporting major championship bids without change, requesting UEFA & FIFA take action, and commissioning an independent report and binding all parties to accept its recommendations.

Should Football clubs in the UK be treated differently from other commercial organisations? i) Football clubs hold an irreplaceable position within local communities. This extends from the 92 Football League (FL) clubs to step 7 of the Non-League pyramid. There are local services which are essential but it is the service delivery and not the provider which is of ultimate importance. It is the provider and not simply the service that is deemed essential in Football. Football clubs have the power to develop and inspire communities. ii) Over the past century as society has evolved and transformed, football clubs have remained at the heart of communities. Communities have a strong history, culture and heritage that throughout the twentieth century have helped to sustain and enrich local society. To lose a key element of that would be of significant detriment to that community. iii) Local footballers are idols to many in communities. At the top level this translates into the opportunity to do much good as a role model in the community. Premier League (PL) footballers are often given an unfair reputation. The Premier League launched the Creating Chances programme in 2007. The aim was to use the power of football to increase sporting participation and encourage individual clubs to bring about positive changes in local communities. Between 2007 and 2010, through this scheme, there has been £111.6 million invested in community good causes. These range from the “Kickz scheme” where clubs work with local police forces to engage with young people in disadvantaged areas, to “Premier League into Work”, where clubs help to give jobseekers the skills and abilities they need to help find work. This positive community engagement can be found throughout the professional leagues and the non-league pyramid. iv) Football clubs should be treated differently to other commercial organisations. However, this comes with responsibility for clubs, the trade associations and the regulatory authorities. We are entitled to expect good governance with transparent, accountable leadership that acts in the interests of our game.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? i) Football governance has been a contentious issue for many years. In my view, the governing bodies, the structure within which they operate and the governance rules are not sufficient to run the modern game. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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ii) FA Governance: Good governance should be in practice from the top of the game to the bottom. However, our governing body, the Football Association, is currently not exercising good governance procedures. Lord Burns produced a report in 2005 which came up with many excellent proposals to improve FA governance. The Football Association, despite promises to the contrary, has still not implemented the vast majority of the reforms proposed. In my opinion, the FA should introduce the following reforms as a matter of urgency: — The FA Board should change its composition. It should consist of three Independent Directors, three representatives from the National Game, three representatives from the Professional Game and one member from a democratic supporter’s organisation. — All FA committees should report to the FA Board and not the FA Council. — The Football Regulatory Authority (FRA) should be made independent from its current semi- autonomous status. The commissioners should be independent. The FRA should be given greater powers. These should include: control over the Fit and Proper Persons Test; the power to investigate takeovers which include significant debt leveraging; a role to promote good governance which could include naming, shaming and faming clubs for their governance procedures; and control over a new Football Licensing system designed to prevent “financial doping”. iii) Levels of Debt and Governance: — The Fit and Proper Person’s Test should be adjudicated by an independent body. There should be a unified test for the Premier League and Football League. The test should go further than the current test to take into account the suitability of a new owner or director and how they plan to finance a takeover. — The concerns over debt leveraging and directors loans need to be addressed. Debt leveraging can be a perfectly legitimate business practice. If a football club decides to leverage debt against the club to invest in a new stadium which will bring increased revenue then that makes financial and business sense. — Debt leveraged against a club merely to allow somebody to take it over is not a sensible move for a football club. Manchester United had no debt when the Glazer family bought them in 2005. On the day of the buyout they incurred a new debt of £667 million. The new owners will service the debt (although at present they reportedly don’t cover the full interest payments on the debt each year) through the clubs revenues. All of that money will be raised through supporters. Whether directly through increased season tickets and shirt sales or indirectly through sponsorship deals. The Glazers are relying on continued growth and investment in football. This is the same cavalier philosophy that many banking institutions took before the subsequent collapse. The effect will mirror that crisis; the ordinary fan who takes to the terraces come rain or shine will be the loser. The local community will be the loser. — Another practice which is of particular concern is directors loaning football clubs money instead of investing in shares. While, this short term investment can be an important source of income it is only increasing the debt and perpetuating the problem. This practice should be another area of consideration for the FRA, especially covering new directors. — Football revenue has increased exponentially in recent years. Deloitte’s annual football report for 2008–09 showed that in the Premier League and Championship only eight clubs have recorded a pre-tax profit. Only two clubs had no debt. Roughly 60% of European football debt is English. These solemn facts surely call for the introduction of a Licensing system. A license could be issued annually on the basis of the club being compliant with its various obligations. An essential element is that expenditure should not be allowed to exceed revenue. There is an argument that you cannot have a free market in football for over a hundred years and then just pull up the drawbridge. However, league positions are currently largely dictated by revenue. At present, a club is sportingly punished if it tries to operate sustainably as others spend beyond their means and attract higher quality players. — The PL has great export potential and revenue generation for our domestic market. This needs to be sustainable in terms of expenditure. iv) Club Governance: Transparency and accountability within club governance is essential to its improvement. Top down procedures such as benchmarking, issuing reports and naming, shaming and faming can exert significant pressure to force change. An independent FRA would be well placed to examine and report on club governance. They could produce an annual governance league table which would report the good and the bad in football club governance. v) It is important that best practice is shared as widely and openly as possible. The FL and PL should facilitate regular meetings to discuss good governance. vi) The inter-relationship between the FA, PL and FL: UEFA noted in their submission to the APPG 2008–09 Football Inquiry into “English Football and its Governance” that having three or more competing governing bodies is inefficient and detrimental to the sport. The FA is the governing body of English Football. They argued that the overall framework and control of development policy and technical matters should be with the national association for all levels of football. They noted that breakaways do not often help. However, cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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we are where we are. The Premier League and the Football League are trade associations which represent their members and run their respective leagues. They should liaise with and have a positive, engaged relationship with the FA. The FA should have ultimate control for regulation.

Is Government intervention justified and, if so, what form should it take? i) The taxpayer is currently spending and absorbing losses from football: — The Government has allocated £25.6 million funding allocation over a four year period from 2009–10. Furthermore, over the next three years it has allocated £32 million to the Football Foundation. — More than £28 million of tax owed by struggling football clubs has been written off by Her Majesty’s Revenue and Customs (HMRC). Well known clubs such as Leicester City, Leeds United and Ipswich Town have gone into administration and paid a fraction to HMRC of the tax they owed. ii) This combined contribution puts a responsibility on the Government to ensure accordingly that the money they allocate is wisely spent and that good governance procedures are in operation to prevent further tax revenue being written off from clubs entering administration. Although, we are in more austere times, the principle of the Government having a responsibility and a keen interest in the money it is spending should hold at all times. This justifies Government intervention. iii) How this intervention should take place is perhaps the more prescient question. The home of good governance, FIFA, takes a dim view of direct Government intervention. Most Government money is spent on the grass roots game. Threatening to remove this money would damage the grass roots, which should not lose out from the FA’s incompetence. iv) The Government could decide to invest the money through a different structure (UK Sport). The media report extensively on football. The media report extensively on politics. Politicians should not be afraid to marry these two to create pressures on the football institutions to reform. The fuel of publicity can cause a spark that will create an intense pressure as the public become more informed about the problems with our game. The Government can make it clear it could not support major Championship bids without governance change. The Government could request UEFA and FIFA to take action which would impact on our governance. The Government could consider commissioning its own independent report, which all sides could agree to be bound by the recommendations. January 2011

Written evidence submitted by Bradford City Supporters’ Trust (BCST) Summary — The recent history of Bradford City illustrates both the strengths and the weaknesses of football in the UK: — team performances up to Premiership level and down to League Two; — periods of both financial mismanagement and of financial prudence; — two episodes of Administration; and — impressive supporters’ initiatives, including community-oriented projects and the saving of the club from extinction. — Football governance in the UK is in urgent need of overhaul, to ensure that clubs live within their means, and to establish a better sense of proportion between the different levels of the sport. — Supporters are the moral owners of their clubs, and this provides a strong argument for their participation in the governance of every club. — Supporters’ involvement can however take different forms, depending on the differing circumstances of each club. — There is no justification for the current “football creditor” rule. — The German Bundesliga provides an instructive model for the reforms needed by football in the UK. The detailed submission responds to the Select Committee’s five questions, as follows:

Q1. Should football clubs in the UK be treated differently from other commercial organisations? 1. There are some ways in which football clubs are different from other commercial organizations. They serve in most cases as important public institutions in their localities, in addition to their commercial roles. This dual character—as both a business and a public institution—requires some distinctive treatment, as argued at several points below. We do not however support the main way in which football clubs are currently treated as distinct from other businesses, through the “football creditor” rule for clubs going into Administration. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. BCST can see no justification for maintaining two classes of creditors under this rule. The application of the rule discriminates against local and commercial business interests, state organizations such as HMRC and third-sector organizations such as the St. John’s Ambulance Brigade. This has been documented in numerous cases of insolvency, including two over the last decade at Bradford City (first in 2002 and again in 2004). 3. The rule also encourages financial irresponsibility on the footballing side of clubs, by providing artificial protection for players’ wages and agents’ fees. If the rule were abolished, players transferring into clubs would have to look more closely at the financial viability of clubs, in addition to their headline levels of wage payment. This would work in favour of disciplined financial management.

Q2. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 4. The short answer is “No”. The financial power of the Premier League, and allied commercial interests, especially Sky TV, has been allowed to distort the whole structure of the professional and amateur games in England and Wales. The FA needs to be re-established as the controlling element of the sport, with balanced representation from all the major interests involved, including supporters. There is a strong case for establishing an independent Financial Regulatory Authority with sufficient power over the Premier League and Football League to ensure financial stability, as recommended by the Burns Review. The internal structures of the FA need to be opened up and modernized at the same time, to end the preponderance of the “blazerati”.

Q3. Is there too much debt in the professional game? 5. The short answer here must be “Yes”. Excessive debt incurred by some clubs undermines the position of other clubs that are run on a more sustainable and prudent basis. This problem is now recognized very widely, and the recent UEFA initiative is rightly designed to compel clubs to “live within their means”. A similar approach needs to be extended by the domestic (UK) authorities to apply at all levels of the sport, and not just at the elite level. The UEFA Financial Fair Play Initiative is worthy of close attention from the Government in this respect. 6. This is nevertheless only half of the problem, whose other side is the disproportionate means available to clubs as a result of unequal revenue streams, from TV and elsewhere. Additional measures should be introduced to reduce (or at the very least to cap) the extreme financial inequalities that have developed between clubs at different levels. Leveraged buy-outs create a third kind of problem, since the issue here is not financial advantage per se, but financial exploitation of a club and its supporters, which hampers its ability to compete on equal terms. 7. The problems of financial (mis)management are exemplified by the recent history of Bradford City. The reckless financial regime at City in the period from 1999–2002, and especially the “six weeks of madness” in the summer of 2000, came within a hairsbreadth of destroying the club. Bradford City’s more recent story from 2005–10 provides a much better model of prudent financial management, but the club has still not recovered fully from the excesses of the earlier period. In particular, the earlier mismanagement led to the loss of the club’s major physical asset, the stadium at , which is now subject to rental payments of up to £350,000 per year—a very significant sum that holds back performance at City’s current level in the Football League. 8. To underline this point, last season provided an interesting example of how the current system works to distort competition in favour of undue financial risk. The three clubs that were promoted automatically from League Two were Rochdale, Bournemouth and Notts County. Historically Rochdale had a prudent approach to their finances and this was their first promotion in 41 years, ironically in the only season that they received winding-up orders from HMRC. Bournemouth and Notts County also had transfer embargos placed on them by the Football League when they were promoted. Adventurous financial management can produce a short- term advantage, but it can also be destabilizing, and lead to a yo-yo effect of boom and bust. This is indeed one way of interpreting the last fifteen years at Bradford City. 9. The overall aim of financial regulation must be for clubs to compete to play each other off the pitch, not to price each other off the pitch. This in turn is a recipe for building the longer-term success of clubs on a more sustainable basis.

Q4. What are the pros and cons of the Supporters Trust share-holding model? 10. We do not assume that there is a single model appropriate to the circumstances and history of every club. What is essential is the principle of supporter involvement, but the principle can be implemented in a variety of different ways. 11. This key principle flows from the relationship between the club and its supporters. At most clubs, this has deep social and historical roots that go well beyond any conventional relationship of a business to its customers. Here are just three examples from the recent experience of Bradford City: — nearly £150,000 was raised by donations in 2009–10 for the Bradford University Burns Research Unit, mainly from City supporters, in a campaign to honour the 25th Anniversary of the Bradford Fire Disaster; cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— a series of events is planned for this season to mark the Centenary of Bradford City’s FA Cup triumph in 1911. This includes a memorial dinner to be held in the same room in the same hotel on the same day (and with a similar menu!) as the celebrations of exactly 100 years ago; — supporters working on an entirely voluntary basis have developed an impressive collection of exhibits on the social history of Bradford City and its local neighbourhood around Valley Parade. This includes oral history projects of what has become a multicultural area of the Bradford District. The bantamspast museum (named after City’s “bantam” symbol) now works closely with the museums section of the local Council, to help ensure that this living history survives and is transmitted across generational and cultural boundaries. 12. Initiatives such as these have often been activated by fans from the outside of Bradford City FC itself, and operated independently of the club. They illustrate the potential for a closer working relationship between the club and its supporters. They also illustrate how supporters collectively represent the bedrock and continuity of a club. The strength of their emotional bond with their club allow supporters to be seen as the moral owners of their clubs, regardless of who is in charge of its day-to-day operations. This fact deserves to be reflected in some form in the governance arrangements for every club. This is perhaps the most fundamental argument in favour of supporter involvement, and it arises from what is most distinctive about a football club. Very few other businesses have a large body of customers who are indelibly committed to the purchase of its particular product, often independently of the quality of the product itself. This also means, of course, that supporters are vulnerable to exploitation, in ways that more typical consumers are not. Supporter involvement in governance offers some safeguards against this danger. 13. Supporters’ commitment to their club gives rise to a further “back-stop” role, which typically comes into play to ensure a club’s survival in the case of untoward stewardship by the legal owners. There are many examples of such events from around the leagues, but Bradford City once again provides a case in point. The Supporters’ Trust took the initiative in raising £250,000 within a few weeks in the summer of 2004, during the club’s second Administration, and this sum saved the club from extinction. It is no exaggeration to say that without the role played by its Supporters’ Trust at that stage, Bradford City would no longer exist. 14. The participation of supporters in club governance is also likely to promote social inclusiveness, which has become a significant hallmark of football over the last twenty years. This includes the drive against racism, in which UK football now has a proud record, but social inclusiveness goes beyond this. BCST has, for example, helped to promote Bradford City’s pioneering use of cheap season ticket offers to bring the game within the reach of all sections of the community. We are a full partner in the “City in the Community” initiative, which fosters all of the club’s community links, including projects catering for “hard to reach” young people. 15. The key principle of supporters’ involvement will often take the form of shareholdings in the club, and participation at club Board level, but it may happen by other routes. At Bradford City, for example, the Supporters’ Trust is campaigning to take the ground at Valley Parade (which is not owned by Bradford City FC) into community ownership, with an element of supporter investment. Supporters would be represented directly in the governance of a new community-oriented holding company, which would then enjoy an arms- length commercial relationship with the private owners of BCFC, who would continue as leaseholders for the use of the stadium (as at present). The main financial incentive for this arrangement is to reduce the rental burden mentioned in point 7 above. The main social benefit would be the development of the stadium as a focus for community activity within the socially deprived, multicultural area of Manningham, which happens to be located about half a mile from the epicentre of the “Northern Riots” of 2001. This adaptation to local conditions shows how different business models can implement the principle of supporter involvement in different ways under different circumstances.

Q5. Is Government intervention justified and, if so, what form should it take? 16. Self-regulation of soccer has clearly failed, and the existing arrangements within the sport have become dysfunctional. Many instances might be cited in support of this view, but one of the most striking is the inability of the FA to formulate its own response to a very reasonable set of questions about football governance put to it by the previous Government. The overall record of regulatory failure since the Premier League breakaway in 1991 makes the case for Government intervention in 2010. 17. Government intervention should establish the core governance principles for the sport, and provide powers that are sufficient to protect the new arrangements from external pressures, especially those arising from the excessive commercial weight of the Premier League. 18. The core governance principles include proportionality between the different elements and levels of the sport (both amateur and professional), the necessity of supporter involvement (as argued above), and a general ethos of social inclusiveness for all football-related activities. 19. These principles need to be incorporated in governance arrangements for the sport that can be implemented in a variety of ways, to allow for the differing circumstances of individual clubs, as illustrated above in the case of Bradford City. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Q6. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 20. We think that the “German model” for football organization has much to commend it, and deserves close scrutiny by the Select Committee. The DFL are responsible for Bundesliga 1 and 2, and can refuse a licence for a club to play in the league for the forthcoming season. They verify and check financial agreements and spot problems early on, which is why they have never had an insolvency event. Aside from their financial viability, clubs are also assessed against other criteria such as infrastructure and youth development, which means there is more control over the safety aspects of grounds, and the social value of clubs’ local contribution, as well as the young talent nurtured for the national team. Supporters in the UK can look enviously at the Bundesliga for its inclusive ticket prices, its excellent facilities, its supporter involvement and its financial stability. And the performance of the German national team is a matter of record. It is worth asking whether these facets of the German football experience are related to each other, and whether this experience provides a useful model for the improvements that are necessary for football in the UK. January 2011

Written evidence submitted by Phil Gregory Summary — The following report, written by Phil Gregory, only focuses on three of the six “key points to address”. There were various other situations that I would have liked to include but with one eye on the report length recommendations I mentioned issues that I felt were the most pressing. — Sections from this report have been loosely adapted into a series of articles published on “Untold Arsenal”, to raise awareness of the issues themselves to a wide readership. The blog itself is a multi-contributor, fan-run website that deals with the various issues including the business of football and for which I am a regular contributor in this area specifically. — In the first section, I focus on “should football clubs in the UK be treated differently to other commercial organisations?” discussing how differences between football clubs and traditional businesses underline a need for supplementary accounting standards that take into consideration the complex nature of clubs. Then I look at highly leveraged takeovers, how they don’t have a role to play in football and measures that should be taken to prevent them happening. — The second section is focused on the question “is there too much debt in the game?” Here I argue against arbitary limits on debt and illustrate that borrowing can be both good and bad, using the examples of both Arsenal’s and Manchester United’s respective debts. — The final section of the report focuses on the question “is government intervention justified and, if so, what form should it take?” Here I look at the financial gulf between the leagues caused by the television deal and the dangerous effects of parachute payments on competition and financial stability in the Championship. In the following document, “n1” refers to the numbered notes included at the end of the main body of the report, while footnotes are used to give key references.

Section One: Accounting Standards 1. Given the complexity of football when compared to a more traditional business, I have always found it strange that it is subject to the current “one size fits all” model of legislation. Few other businesses pay vast fees to secure employees, nor do they pay their employees in a complex manner that includes basic pay, image rights and performance-related bonuses, and yet no special demands are made of football clubs to disclose this variety of payments clearly in their annual financial statements. 2. This greatly limits financial transparency within the industry. With outside observers relying on measures such as wages as a percentage turnover to gauge a club’s sustainability, the lack of breakdown of the “wage” means that any conclusions drawn are unreliable at best. 3. A dramatic rise in wages could be because of a significant outlay on players and the resulting salaries, or it could be because of high bonus payments due to unprecedented success. For this reason, I believe it vital that club accounts at the very least list separate figures for basic salaries and bonuses. Indeed, this situation arises despite the fact that a significantly greater breakdown of the wage bill is offered to HMRC yet only a very unreliable figure “wage” is made public. 4. The lack of transparency goes beyond salaries, however. Given the multi-million pound transfer fees paid for many players and the significant percentage of turnover this represents for many clubs, such expenditure has a bearing on the club’s financial situation going forward. Despite this, there is no requirement to detail in club accounts the amount(s) and nature of incoming/outgoing transfer fees for a financial year due to the unsurprising fact that accounting regulations were simply not written with current trends in world football in mind. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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5. The sole measure of transfer spending offered in the accounts is amortisation,n1 which can be used to gauge trends in transfer expenditure but little beyond that. “Player/football trading” figures are given in club accounts but are unreliable, often including amortisation and other charges to mask the amount spent on transfers. In addition, amortisation offers the club the ability to spread the cost of a player in the profit and loss account over the life of their contract, which doesn’t reflect adequately when payments are made. Of course as a cash-cost, such information should be ascertainable by looking at the cash flow statement, but figures are often hidden by being grouped with others, or seemingly not even given. 6. It is my belief therefore that the profits or losses of a club for a specific year should reflect much more accurately the transfer expenditure for that year. There should also be specific disclosure of the total level of transfer income and expenditure during the year, with additional information given on outstanding transfer clauses that may result in future income or expenditure to aid financial forecasting of the club. 7. Unfortunately, there are further, broader issues in regards to football and financial accounting. SSAP25, which covers the reporting of the various segments of a company’s revenue, states that: “...in the opinion of directors, the disclosure of any information required by this accounting standard would be seriously prejudicial to the interests of the reporting entity, the information need not be disclosed”1 (emphasis mine). By this, clubs can decide not to breakdown their turnover into its constituent parts if they choose not to, severely limiting the ability of an outside observer to understand the inner workings of any football club which exercised this right. In the wider business world, directors need the ability and freedom to act in the interests of their company and there are credible arguments that forced disclosure would at times be a hindrance in this regard. However I once again emphasise the fact that football clubs are unique entities with responsibilities to their supporters, and the flexibility that directors possess in other lines of business should not be granted to football. A simple solution to this issue would be the compulsory requirement of full disclosure for clubs, overruling SSAP25 in this regard. 8. Hence it can be seen that the current “one size fits all” system of accounting standards is inadequate to accurately account for a club’s various activities. The solutions proposed to the problems raised in this section could be introduced as a supplementary standard to which football clubs must satisfy, in addition to the existing regulation. Where the two standards conflict on an issue (as with SSAP25 and the option of non-disclosure) the supplementary standard must overrule the pre-existing legislation. As part of this standard, I would also add rules standardising the categorisation of match day, commercial and broadcasting revenue to ensure that financial statements between clubs are easily comparable.n2 While the suggestions here are not exhaustive and there are other issues that would need to be looked at for complete standardisation of club financial statements, these changes would be a big step in the right direction.

Leveraged Buy-outs 9. In addition to accounting standards, there is a further area in which I believe there are substantial differences between football clubs and traditional businesses, that of leveraged buyouts (LBOs). Brought to the forefront of the public consciousness by the controversy that surrounded Liverpool FC’s former owners, leveraged buy-outs are fairly common in the business world. Their primary benefit is the fact that they offer an additional way to change the management running of a company, while they also act as an incentive towards best practice for the current incumbents. 10. A person seeking to launch an LBO does so considering the costs and benefits to themselves of such an activity. In the longer term, if the LBO proves to be successful they will benefit from profits they wouldn’t otherwise have received, while conversely if it fails they suffer the costs resulting from the liquidation of their business. Such a model works well for traditional business, where the impact on society of a firm of comparable size to a “top four” football club by turnover (say a large supermarket store) collapsing is not especially significant on the national level. 11. However, one has to consider that a football club is more than simply a business, and the effects of the liquidation of a football club are much more profound than that of a similarly-sized business. A club represents an identity for fans, who should be viewed as “emotional stakeholders” in the club, whose wishes and interests should be considered like any other stakeholders’ would be. It is unthinkable that in a highly risky business venture the interests of any significant stakeholder would go completely unconsidered, yet this is exactly what happens when we consider the emotional stakeholder that every single fan is. 12. In my view additional regulation is needed to rectify this weakness in the existing rules governing takeovers, and it would not need to be especially complex. As an LBO poses a risk to a club due to the high amounts of debt secured onto it as a result of the takeover, the solution would be to simply introduce a low limit on the amount of debt that can be used to fund a takeover, for example no more than 20% of the funds used can be borrowed. In addition to this, setting a limit on the level of dividend withdrawal would close a further avenue for withdrawal of funds to pay debt costs, as well as rectifying the FA’s error in allowing Rule 34 to be circumvented in 1983.n3 This would be in line with the approach taken by UEFA in their Financial Fair Play proposals, under which dividends are included as a “relevant expense”. Such fairly simple measures would render LBOs impossible, to the great benefit of the English game. 1 http://www.frc.org.uk/images/uploaded/documents/SSAP%2025.pdf Quote taken from paragraph number six, found on page 3 of the document itself. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Section Two: Debt 13. It is my view that debt in itself is not a problem when it is both cheap (serviceable by the club’s cash- generating activities), long term and is used to strengthen the club in the long term. While these criteria unfortunately don’t apply to much of the debt within football, I feel arbitrary limits on debt are unwise as they would prevent debt being used at all, even if the intention for the debt met the above criteria. In order to illustrate how in certain cases debt can be beneficial to the game and shouldn’t be regulated out of existence, I’m going to examine the differences between the debt burdens of both Manchester United and Arsenal FC respectively, two clubs of similar standing in the Premier League. 14. Arsenal used debt to fund the Emirates stadium project and the redevelopment of Highbury into flats. Figure one illustrates the impact this had on Arsenal’s turnover, which increased by over 46% between the years 2006 and 2007 thanks to their move into the new ground. As can be seen on the same graph, this enabled wage spending to not only rise, but to do so sustainablyn4 (figure two) thanks to the turnover growth. Finance costs were low, so were no obstacle to debt repayment. The bank loans that were initially taken out were replaced by long term bonds (maturities of between 21 and 23 years), offering stability as well as saving on interest, too. Debt incurred as a result of the redevelopment of Highbury into apartments was cleared as a result of its own sales, eventually generating significant funds for the club. From this therefore it is clear to see that the debt itself was cheap and long-term, while its use is already showing signs of having improved the club’s long-term financial and sporting position. 15. Manchester United, on the other hand, gained their debts as a result of the Glazers’ takeover in 2005. The majority of the funds were provided by bank loans which were secured against the club’s assets, making it a leveraged buy-out. The remaining balance was contributed by the controversial “payment in kind” loans (PIKs) with a restrictive 14.25% rate of compound interest, although these are secured against a parent company rather than the club itself. In March 2010, Manchester United refinanced with a £500m, seven year bond issue which costs between 8.75% and 9% interest. When contrasted with Arsenal, Manchester United’s debt cannot be considered cheap, nor particularly long-term. 16 The question of whether the debt even improved the club (by financing the takeover) does not have a clear-cut answer. Looking at Manchester United’s finances since the 2005, it is clear from figure three that they have experienced a significant growth in turnover since the takeover. However, much of the growth is from TV broadcasting rights, negotiated by the Premier League. Significant commercial revenue growth is laudable, but increases in match day takings aren’t given they are largely as a result of the 47% rise in ticket prices between the start of Glazer ownership and 2009.2 Such profiteering behaviour simply prices the local fan out of supporting their team, shown by the almost total depletion of the season ticket waiting list. Given these actions are undoubtedly related to the significant funds required to service the takeover’s debts, it is an unacceptable situation and should lend further weight to my earlier concerns regarding LBOs. 17. Given this, I think it would be an error to place arbitrary limits on debt as these would have prevented Arsenal carrying out their stadium work, and similar project by other sides in the future. Moreover had the previously stated LBO reforms existed in 2005 would have prevented the debt burdens of Manchester United and Liverpool ever occuring, two of the clubs most heavily indebted during in recent times. For the traditionally smaller sides, debt is often incurred as a result of attempting to compete, a situation I will examine in depth in the next section. Overall, I believe excessive debt is merely a symptom of other problems rather than a problem in itself, and the underlying reasons for the excessive debts must be dealt with rather than simply applying the sticking plaster of arbitrary limits on debt.

Section Three: TV Deals, the Financial Gulf Between Leagues and Government Intervention 18. In my view, much of the overspending by football clubs is as a result of the desire to get into the “promised land” of the Premier League or indeed simply stay there. With its vast TV and sponsorship deals in comparison to those of the Championship, the current season’s bottom-placed side in the Premier League will get approximately £42 million. When contrasted with the £2.3 million (plus sponsorship) that the winner of the Championship will receive, it is clear why there is such a huge incentive for lower-league sides to seek promotion at any cost, literally. 19. The prevailing reasoning amongst Football League sides seems to be that excessive levels of spending can be sustained for a few years within which promotion must be achieved. After that, Premier League-level revenues can be used to pay off all the debts accrued. 20. There are two main flaws to such reasoning. Firstly, a club may not get promoted within the time frame nor ever, given there are many more clubs that seek to be promoted than can be come the end of the season. Secondly, upon arrival in the Premier League, most clubs spend even more in order to stay there, as well as incurring high bonus payments and basic salary increases reflecting the new Premier League status of the playing squad. Hence instead of securing the club’s financial position by clearing debts, clubs continue to spend unsustainably as they now cannot afford to be relegated. 2 http://www.independent.co.uk/sport/football/premier-league/manchester-united-announce-large-increase-in-ticket-prices- 446230.html Yearly increases between 2005 and 2009, to a similar level as those reported in the link given, have been the norm for Manchester United fans when renewing season tickets. Accessed online 15/1/2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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21. Of course, such a high-risk approach is fraught with danger for the clubs, but unless a club spends on a similar level to its competitors it will struggle to be promoted. Hence promotion, by rewarding overspending, actually rewards bad practice, something that should be anathema to anyone with an understanding of economics. Arsène Wenger put it best when he stated: “Something that is more irrational in football is that sometimes non-rationality can be rewarded. But nine times out of ten it doesn’t work so nine times you are in a bad situation”. Unless the cause of this irrationality, the financial gulf between the leagues, is dealt with football clubs can’t be expected to show restraint while their competitors have a competitive advantage due to excessive spending. Financial sanity can only be restored by eliminating the perverse incentives rewarding bad practice. 22. Hence the problem lies in the financial gulf between the leagues, a result simply of there being too much TV money in the Premier League when compared to the Championship. The Premier League’s wealth is no bad thing; it creates a spectacle seen all around the world with many of the best players plying their trade in our country, all of whom are paying vast amounts in tax to HMRC. While the Premier League is making more solidarity payments to the Football Foundation than ever before,n5 the Football League’s television and sponsorship rights are simply much lower, resulting in Football League sides receiving vastly smaller payments in comparison to their Premier League counterparts (figure four). 23. The biggest impact of this is that the payment received by a Championship side is dwarfed by that of a Premier League side, as illustrated by figure five. From this, it is clear to see that while TV money received by a League Two side is over 75% the amount of a League One side comparing a Championship club to a Premier League club gives a figure of only 5%. Considering the Premier League’s distribution of its own money to Premier League clubs is highly equitable,n6 and Richard Scudamore’s apparent awareness that a strong Championship is genuinely in the Premier League’s interest3 it is bizarre that they have allowed the Football League to fall so far behind in the broadcasting money stakes, given three out of 20 of Premier League are always previously Football League sides the season before. Action needs to be taken to reduce this financial gulf, but more needs to be done than additional payments from the Premier League to the Championship. My proposal would be the removal of parachute payments and the redistribution of that money to the Football League, achieved via government interventionn7 if necessary. I will explain the issues surrounding parachute payments and justify this course of action in the following section.

Parachute payments 24. Unfortunately, the gulf between television and sponsorship alone does not account for all of the issues in the Championship, parachute payments have a large role to play too by distorting competition. Parachute payments are given to relegated clubs out of the Premier League’s revenues, designed to soften the financial blow of dropping to the Championship for recently relegated sides.n8 In practice, the payments aren’t used to reduce losses, going instead towards maintaining a Premier League-sized wage bill despite Championship-level revenues, in an attempt to maximise the chances of promotion. This drives other promotion hopefuls to spend yet more money they don’t have, exacerbating an already unsustainable situation. Despite opposition from Football League chairmen, the Premier League decided it would be a wise idea to increase the amount of money in parachute payments to £48 million over four years from £32 million over two years.n9 25. When these payments are added to the club’s Championship television revenue, they are receiving a total of £18.3 million of broadcasting revenue against a mere £2.3 million for their competitors. This clearly gives recently relegated sides an unfair financial advantage (“financial doping” to coin an apt phrase Arsène Wenger used to describe a similar situation) in the promotion fight. The net result is the non-recipients spending more money they don’t have in an attempt to remain competitive in the promotion battle, worsening an already precarious financial situation. Again, hugely distorted incentives are evident and failure is rewarded, culminating in a both economically and socially undesirable outcome. 26. If parachute payments are a reward for failure and an impediment to good practice then it stands to reason that removing them would improve the overall situation. While clubs will have budgeted for the payments which prevents their immediate removal, I would propose doing so from as early a date as possible and redistributing the money to the Football League. I’ll illustrate the greatly beneficial impact this redistribution would have on the Football League in the following paragraph: 27. While parachute payments can total a maximum of £48 million for a single club, they stop if that team is promoted back to the Premier League, hence the amount received may only be £16 million if a side is goes back up immediately after relegation. From analysing sides relegated from the Premier League between the Millennium and the 2005–06 season,n10 it can be seen that a relegated side on average take three years to get promoted.n11 28. Hypothetically, complete removal of parachute payments for next season would therefore save £120 million over three years that could be redistributed equitably amongst the Football League sides. Doing this would raise the amount received by every club in the league by £1.66 million in 2011–12 season, to £3.96 million, nearly doubling the size of the Football League TV deal in relation to the Premier League TV deal in the first year of redistribution (the percentage improves to 9.36%).n12 3 “The Premier League clubs felt a stronger Championship would be greatly beneficial to both competitions” http://news.bbc.co.uk/ sport2/hi/football/eng_prem/8886558.stm accessed online 15/1/2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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29. The amount would increase by an additional £1.66 million for season 2012–13 and the same again for 2013–14, reflecting the additional money coming in from subsequent years of parachute payment funds being saved and added to the Football League’s funds. By the 2013–14 season, the Football League TV deal would plateau at £7.3 million, which would be more than 17% the size of the money received by 20th placed side in the Premier League. Solely by removing parachute payments and redistributing the money fairly, with no additional payments required from the Premier League, the size of the Football League’s broadcasting revenue has more than tripled in relation to the Premier League, reducing hugely the financial gulf between the two leagues. When that is considered alongside the benefits in terms of competition resulting from the removal of the unfair parachute payments, the financial health of the Championship going forward would be greatly improved by the adoption of these measures. 30. Premier League clubs would naturally protest such a change, as it gives lower league sides an opportunity to break their hegemony. In addition, they could attempt to point to the large difference between Premier League and the Championship revenues as evidence that they need parachute payments. While these reforms would reduce that financial gulf, a gap would still remain and relegated clubs would have to cut their costs substantially in order to remain financially secure. Instead of an undesirable yearly fire sale of players from relegated sides, all that is needed is contract clauses whereby player wages are cut in the event of relegation. Such clauses already exist but are not universally utilised, as it may be an obstacle to a obtaining a player’s signature in the first place. If this proves to be the case, it will be needed to legislated that all player contracts must include such a clause, so that clubs don’t gain a competitive advantage by not using them. Such a change is perfectly in line with the wider world, as any business that experiences a fall in revenues is forced to cut costs drastically. Indeed if the playing squad gets paid more for an exceptionally good league position, does it not make sense that relegation results in wage reductions?

Notes to the Report 1. Amortisation is calculated as the value paid for a player divided by the number of years on their contract, High transfer spending will therefore result in high amortisation charges. The year on year changes in amortisation gives an indicator of whether transfer spending is rising or falling, but offers no insight into payments for individual players. 2. Clubs could for example logically categorise executive box revenues as either commercial or match day income, leading to difficulty in cross-comparison of financial statements. There are also other less logical categorisations distorting financial statements, such as Birmingham listing a compensation fee received for manager under “commercial revenue” when it is surely a one-off payment. 3. Rule 34 prohibited directors from being paid salaries and limited dividend payments to shareholders. In effect, it stopped clubs being taken over and stripped of cash by their owners, ensuring football’s money stayed within football. The rule can be bypassed by forming a holding company above the club itself, and so the rule is easily evaded nowadays. 4. Wages as a percentage of turnover only exceeded 50% the year before the Emirates was opened, likely in anticipation of the jump in revenue which pushed it back down to its target range. 5. Prior to the current agreement, 5% of the broadcasting and sponsorship revenues went to the Football Foundation. Now, after government intervention, 6% of the first £1.1 billion, 7.5% of the next £300 million and 10% of any money raised in excess of £1.4 billion goes to the football foundation. With domestic, highlights, and international rights as well as sponsorship money coming to nearly £3.5 billion, this is a vast contribution to the Football Foundation and fantastic for the grass roots game. 6. Domestic rights are divided as: 50% equally, 25% according to number of televised appearances and 25% according to league position. All money raised by selling rights abroad is divided equally 7. Government intervention proved invaluable in securing the changes specified in note 4, and so has a good track record of results. Labour MP and former Minister of Sport Richard Caborn negotiated directly with Richard Scudamore, Chief Executive of the Premier League to extract the concessions for the Football Foundation. 8. The fact that such a thing even exists is testament to the gulf between the Premier League and the Championship. You don’t need a parachute to drop between the leagues that make up the Football League, for example. 9. This was dressed up as a solidarity payment, but as demonstrated in this section of the report it is actually greatly detrimental to the Championship, and Premier League clubs likely voted for it as they desired the money to get back promoted in the event of their relegation. They were simply voting to create a more closed shop and dressing it up as an act of charity. 10. Data ended at 05/06 in order to allow sufficient time to see if a club got promoted within four years of relegation. Using any more recent seasons would have meant that the data cut off after three, two or one year(s), distorting the results. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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11. The average is slightly deceptive here, as the results tend towards the extremes, however it doesn’t affect the results. The majority of clubs that get promoted after relegation do so after one year, the rest after two. The remaining clubs didn’t get promoted at all, so would’ve drawn on the full four year allowance of parachute payments, and so were entered as a “four” for the purposes of the average. 12. The downside not mentioned in this example is that by solely increasing the money in the Championship, the gap between that league and League One has now increased. Hence any increase in money to the Championship must also result in a proportional increase in money to the other leagues. This would slightly reduce the money available for the Championship, and therefore lower the comparative percentage against the Premier League slightly. 13. Given the increased revenue in the Football League as a whole, perhaps 25% of the total could be paid on a performance-related basis, or in the event a club reports an operating profit (prior to the payment, of course). Such a change wouldn’t distort competition but the former would reward success and the latter sustainability incentivising desirable behaviour.

APPENDIX Figure one

Arsenal’s turnover, wage bill and finance

300000 250000 200000 Wages 150000 Finance costs Turnover £(000s) 100000 50000 0 2005 2006 2007 2008 2009 2010 Season (year ending) cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Figure two Wages as a percentage of turnover

65

60

55 Wages as % of turnover 50 percentage

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40 2005 2006 2007 2008 2009 2010 Year

Figure three

Graph showing Manchester United’s turnover, with breakdown into its constituent parts

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Figure four BEAR IN MIND THAT FOR THE GRAPH BELOW, IF A TEAM FINISHED HIGHER THAN 20TH IN THE PREMIER LEAGUE, THEY WOULD RECEIVE EVEN MORE MONEY, WHEREAS FOOTBALL LEAGUE FUNDS ARE DIVIDED EQUALLY WITHIN EACH LEAGUE Graph showing the TV revenue of the bottom side of the respective leagues 45.0

40.0

35.0

30.0

s 25.0 n o i

l TV revenue bottom- l i 20.0 placed club m

, £ 15.0

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Figure five

% difference between the league’s TV revenue and that of the league above it n/a

100% 80% % difference between the league’s TV revenue and 60% that of the league above it 40% n/a 20% 0% p i ne wo sh T O

n e e o i u u p g g Lea Lea Cham

Note how each TV deal is relatively smaller than that of its “parent” league as you go up the Football league. January 2011

Written evidence submitted by Wrexham Supporters Trust This submission is sent on behalf of the Wrexham Supporters Trust and highlights the need for better regulation to ensure football clubs are better run so that their assets aren’t put in danger by people whose interests aren’t aligned with the long term interests of the Football Club.

1. The Fight to Save the Racecourse, Part1 2. The recent tale of Wrexham FC fans’ fight to save the Racecourse began in 1998 when Wrexham AFC (the name of the former club) purchased a 125 lease from by Marston Thomas & Evershed brewery for £750,000 in order to secure their tenure at the for a peppercorn rent. Wolverhampton and Brewery inherited the freehold to the Racecourse when they took over Marston in 1999. Following the cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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sale of Griffiths’ majority shareholding to Memorvale Limited in March 2002, Wrexham AFC began negotiations with Wolverhampton and Dudley Brewery to purchase the freehold to the ground on trust for Damens Limited, a company owned by Alex Hamilton.4 3. When the purchase was completed in June 2002 the freehold was transferred to Damens Limited for nothing within the same day. Wrexham AFC then entered into a 120-year lease with Damens Limited at a cost of £30,000 per annum, significantly more than the peppercorn rent they had paid to previous landlords, Wolverhampton and Dudley Brewery (Conn, 2005; Jones et al, 2006). However, the minutes of the first Board meeting attended by Mark Guterman on 11 June make no reference to the transfer of the ground to Damens Limited.5 4. The ownership of Wrexham AFC had been separated from its main asset, the Racecourse Ground. The club had only owned the Racecourse for a matter of hours before it entered into less beneficial lease than had been previously agreed with Marstons, Thomas & Evershed. Renowned football journalist David Conn would later claim that this was the first evidence that football clubs’ assets were being separated from the ownership of their clubs for personal profit.6 5. In April 2002 Alex Hamilton and Mark Guterman had entered into an agreement—which they called the “Wrexham Project”—to profit personally from the property assets of Wrexham AFC.7 However, Guterman and Hamilton fell out and went to court in September 2004 over the terms of their joint venture agreement (JVA), where details of the “Wrexham Project” first came to light.8 This agreement9 stated that: 5.1 “The management and control of the football club is to be on an equal… basis, with the main or sole objective to realize the maximum potential gain from the property assets of the football club for the benefit of [Mr Hamilton] and [Mr Guterman].” 6. According to football journalist David Conn, this agreement was a landmark moment in football, the first evidence that property developers were seeking to profit personally from the development of football clubs’ assets (Conn, 2005). The purchase of the Racecourse Ground on trust for Damens Limited also provided evidence that Wrexham AFC’s primary asset was separated from the club. This backs up the concerns raised by authors such as Holt (2003) who stated that: 6.1 “A well-publicised tendency at some Football League clubs has been to form a second (‘holding’) company and then separate the ground from ‘the club’. This has been a source of criticism from fans’ organisations who highlight the danger that this can be a first step towards selling the ground (or the land on which it is built) for the personal financial benefit of the club owner.”10 7. Alex Hamilton did not remain as Chairman of Wrexham AFC for long. He fell out with the remaining two Directors on the Board and resigned as Chairman on 1 November 2004. The Directors, faced with a winding up order from the Inland Revenue, applied for an administration order. The club was placed administration on 4 December 2004 and Begbies Traynor was appointed to run the club. The purchase and subsequent transfer of the Racecourse Ground to Damens Limited had been a key element in the incubation of Wrexham AFC’s financial problems. 8. Wrexham AFC entered administration on 4 December 2004 to prevent the Inland Revenue’s winding up order from liquidating the club. However, according to Emery & Weed (2006, pp. 11) “many [people] had little sympathy for Wrexham’s plight” and reported the view “that clubs that go into administration do so as a result of ‘stupid’ financial management”.11 The Football League immediately imposed sporting sanctions on Wrexham AFC and deducted it 10 points. Wrexham AFC appealed against the decision, but lost, in what was seen as a test of the new rules on sporting sanctions. Understandably, most Wrexham fans saw this sanction as unjust, given the fact that the club had lost its primary asset through no fault of its own. 9. Following the application for an administration order, the courts appointed insolvency experts, Begbies Traynor, to run the club. Begbies Traynor was previously appointed as administrators at five football clubs: Chester, Darlington, Doncaster, Huddersfield, Lincoln and has significant experience of the football industry. They saved all five clubs they previously worked for, which was instrumental in their appointment to Wrexham 4 Conn, D (2005). Wrexham’s judgement day is a message of hope. The Guardian. 26 October. Retrieved from the WWW on 15 April 2006 at: http://football.guardian.co.uk/News_Story/0,,1600619,00.html Conn, D (2006a). Wrexham’s ordeal exposes home truths. The Guardian. 15 April. Retrieved from the WWW on 15 April 2006 at: http://football.guardian.co.uk/comment/story/0,,1746967,00.html Conn, D (2006b). Bad Fellas. FourFourTwo, September 2006, pp. 107–109. 5 Conn, 2005; Conn 2006a, 2006b and Jones, G, Jones, L & Jones, P (2006). Wrexham Yearbook 2006–07. Wrexham Football Supporters’ Society Ltd. 6 Conn, 2006a and Hope, S (2003). The Ownership Structure of Nationwide Football Clubs 2002–03. Research Paper 2003 No. 5. The University of London, Birkbeck Football Governance Research Centre. Retrieved from the WWW on 1 April 2006 at: http://www.football-research.org/docs/ownership.pdf 7 Conn, 2005, 2006b 8 Conn, 2006; Jones et al, 2006 9 Reproduced in Conn 2005, 2006b 10 Holt, M (2003). A “fit and proper person” test for football? Protecting and regulating clubs. Research Paper 2003 No. 2. The University of London, Birkbeck Football Goverance Research Centre. Retrieved from the WWW on 1 April 2006 at: http://www.football-research.org/docs/Fit%20and%20proper%20test%20Research%20Paper-19–02–03-Holt.pdf 11 Emery, R & Weed, M (2006). Fighting for survival? The financial management of football clubs outside the “top flight” in England. Managing Leisure Vol 11, No. 1. 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AFC. When the Directors of Wrexham AFC decided to apply for an administration order they took advice from the Football League and Huddersfield Town who told them that Begbies Traynor were the best in the business. This decision proved to be pivotal to the very survival of Wrexham AFC. 10. The benefit of placing the club in administration was that the administrators had the power to challenge and overturn transactions. In particular, the administrators examined the legality of the transfer of the ground from Wrexham AFC to Damens Limited and decided to challenge it in court.12 The theory was that if the Racecourse was returned to the ownership of the football club then the club would have an asset worth millions, which would make it more saleable to potential new owners. Fortunately due to their unexpected success in winning the LDV Vans Trophy in April 2005, Wrexham AFC had the money to take Damens Ltd (who had by now changed their name to Crucialmove Limited) to court. However, due to the Football League’s rule that clubs could only spend 18 months in administration, the club had to act quickly and therefore began proceedings in June 2005. 11. Wrexham AFC won its court battle against Crucialmove Ltd in October 2005 on the basis that the transfer of the Racecourse took place without the knowledge of the Directors. The High Court ruled that the then Chairman, Mark Guterman, had not acted in the best interests of Wrexham AFC, but for himself and Alex Hamilton.13 This judgement was based upon evidence of the “Wrexham Project” provided in a court case between Hamilton and Guterman and from evidence provided by the Directors that they no knowledge of the transfer because it had not been discussed at Board meetings.14 The High Court judge, Alistair Norris QC ruled that: 11.1.1 “This is a straightforward case in which the fiduciary duty position in the club has been misused for the benefit of those interested in the exploitation of property assets.”15 12. Crucialmove Ltd appealed against the decision in February 2006 and lost, marking the end of a long battle for the ownership of the Racecourse Ground and the very survival of Wrexham AFC. 13. Wrexham AFC’s exit from administration took place in three parts, which marked the end of its immediate financial crisis. Firstly, the administrators formed a new company—Wrexham Football Club 2006 Ltd—which took on the old club’s assets and debts on exit from administration. Secondly, the club’s debts were discharged via a Company Voluntary Arrangement (CVA) and thirdly, the club and its Racecourse Ground were sold to local businessmen Nev Dickens and Geoff Moss. With the ownership issue resolved, the administrators used a Company Voluntary Arrangement (CVA) to discharge the club’s debts of £3.25 million at 28p in the pound in order to sell it on as a going concern.16 14. Wrexham FC 2006 was sold to local businessmen Neville Dickens and Geoff Moss for £3.3 million on 3 August 2006, just two days before the start of the 2006–07 season.17 The new owners announced that they planned to build a new all-seater stand and apartments on and behind the KOP end of the Racecourse Ground.18 Wrexham FC 2006 appointed a Chief Executive Officer (CEO) for the first time in its history, who was given responsibility for the day-to-day running of the club and is empowered to make decisions in the absence of the owners, who themselves ran successful local businesses. However, unlike Lincoln City, the new owners did not immediately offer shares or a place on the board to supporters. 15. Table 1 below illustrates the chronology of events in the recent ownership of the Racecourse Ground. 16. Table 4: The ownership of the Racecourse Ground. Date Event 1998 Wrexham AFC purchases 125 lease with Marstons Thomas & Evershed. 1999 Wolverhampton and Dudley Breweries take over Marstons Thomas & Evershed and inherit the freehold to the Racecourse. March 2002 Pryce Griffiths sells his 78% shareholding in Wrexham AFC to Memorvale Limited. June 2002 Wrexham AFC purchases the freehold of the Racecourse Ground on trust for Damens Limited. The Racecourse is immediately transferred to Damens Limited for nothing. June 2005 The administrators, Begbies Traynor, launches legal proceedings against Crucialmove Ltd (formerly Damens Ltd) to challenge the transfer of the Racecourse Ground. October 2005 The High Court rules in Wrexham AFC’s favour and returns the Racecourse to the ownership of the club. February 2006 Crucialmove Ltd lost its appeal against the High Court’s decision. August 2006 Wrexham FC 2006 Ltd was sold to local businessmen Neville Dickens and Geoff Moss for £3.3 million in a leveraged buy-out.

12 Conn 2006b 13 Conn 2005, 2006b 14 Conn 2005, 2006b; Jones et al, 2006 15 In Conn 2006b, pp. 109 16 BBC (2006a) Wrexham FC take-over gets go-ahead. BBC News. 30 May. Retrieved from the WWW on 27 February 2007 at: http://news.bbc.co.uk/1/hi/wales/north_east/5029356.stm 17 BBC (2006a) and BBC (2006b) Wrexham FC deal finally complete. BBC News. 3 August. Retrieved from the WWW on 27 February 2007 at: http://news.bbc.co.uk/1/hi/wales/north_east/5241130.stm 18 BBC (2006a) cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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17. The Fight to Save the Racecourse, Part 2 18. Sadly, this wasn’t to be a new dawn for Wrexham FC 2006 Ltd. After narrowly avoiding relegation to the Football Conference at the end of the 2006–07 season, the club was relegated from the Football League for the first time in its 81 year history in April 2008. To compound the lack of success on the field, an analysis of the club’s accounts for the period 2006–10 shows that the new club has built up debts of £3.7 million in the four seasons since coming out of administration.19 Once again, it is on the verge of losing its primary asset the Racecourse Ground. 19. In the intervening period since coming out of administration Wrexham FC 2006 Ltd became part of a holding company structure, whose ultimate parent was Wrexham Village Ltd, a company set up to develop student accommodation on land behind the KOP stand. In 2009 Wrexham Village purchased that land from Wrexham FC for £6 million, paying off the debts that Wrexham Football Club 2006 Ltd had taken on when coming out of administration and trading losses that had been incurred since August 2006.20 Unfortunately, the club continued to maintain its wage bill at League 2 levels and as the team performed badly, crowds fell and turnover reduced, placing the club further into debt.21 20. Since coming out of administration in August 2006, Wrexham FC 2006 Ltd has lurched from crisis to crisis, sacking three managers in its short existence. On each occasion, former managers have been paid off and new managers have brought in new players to play to different systems.22 Off the pitch, the owners have also had to face fans’ anger at the appointment and subsequent dismissal of two sales staff who had allegedly been involved in unethical charitable fundraising activities.23 Most recently, the former Chief Executive was arrested and charged with theft and fraud by the Metropolitan Police for financial irregularities.24 His contract was later terminated.25 Each episode has eroded trust in the management team. 21. In December 2009, Wrexham Village, the holding company which owns Wrexham FC 2006 Ltd, bought the franchise for the Celtic Crusaders Rugby League team and relocated the club from in south Wales to the Racecourse Ground in Wrexham.26 At the time, this was presented as an opportunity to share the costs of running the Racecourse with Wrexham FC and to secure the football club’s future.27 However, the Crusaders soon got into financial trouble themselves and entered administration in November 2010 because of bad debts, which were reportedly related to the previous owners.28 22. In December 2010 the Crusaders exited administration and formed a new company W Crusaders Ltd.29 Although the club was deducted 4 points by the for entering administration, the outcome was met with great optimism by newly appointed Chief Executive Rod Findlay.30 However, in January 2011, Crusaders’ Chairman Ian Roberts—who is also Chairman of Wrexham FC 2006 Ltd—made public plans to create a new company within the Wrexham Village group structure, which would own the Racecourse and lease it back to the Crusaders and Wrexham FC 2006 Ltd.31 23. Understandably, this caused anger and fear amongst Wrexham fans, many of whom accused the Wrexham Village owners of asset stripping, something they strenuously denied.32 The following day, the Directors 19 Wrexham Supporters’ Trust (2011). Future Strategic Direction (unpublished). 20 The Leader (2010a). Wrexham FC releases financial statement. 12 August 2010. http://www.leaderlive.co.uk/news/91918/wrexham-fc-releases-financial-statement.aspx 21 Wrexham Football Club. Directors’ Statement. Wrexham FC website. 7 January 2011. Retrieved from the WWW on 21 January 2011 at http://mobile.wrexhamafc.co.uk/runtime/wrexham/article?articleId=2261352 and Wrexham Supporters’ Trust (2011). Future Strategic Direction (unpublished). 22 The Leader (2010a) 23 Daily Post (2010a). Wrexham FC sack couple allegedly involved in charity scam. Daily Post. 15 April 2010. Retrieved from the WWW on 21 January 2011 at: http://www.dailypost.co.uk/sport-news/wrexham-fc/2010/04/15/wrexham-fc-sack-couple-allegedly-involved-in-charity-scam- 55578–26252331/ 24 Daily Post (2010b). Former Wrexham FC boss faces theft and fraud charges. Daily Post. 8 October 2010. Retrieved from the WWW on 21 January 2011 at: http://www.dailypost.co.uk/news/north-wales-news/2010/10/08/former-wrexham-fc-boss-faces-theft-and-fraud-charges- 55578–27427496/ 25 The Leader (2010b). Reds’ director’s role terminated by Wrexham FC. The Leader. 27 May 2010. http://leaderlive.co.uk/news/91171/reds-director-s-role-terminated-by-wrexham-fc.aspx 26 BBC (2009a). ’s Crusaders complete move to Wrexham FC. BBC Sport, 15 December 2009. Retrieved from the WWW on 21 January 2011 at: http://news.bbc.co.uk/sport1/hi/rugby_league/super_league/celtic_crusaders/8413910.stm 27 BBC (2009b). Super League’s Crusaders move “can help save Wrexham FC”. BBC Sport, 11 December 2009. Retrieved from the WWW on 21 January 2011 at: http://news.bbc.co.uk/sport1/hi/rugby_league/super_league/celtic_crusaders/8387114.stm 28 The Telegraph (2010). Super League club Crusaders go into administration. The Telegraph. 12 November 2010. Retrieved from the WWW on 21 January 2011 at: http://www.telegraph.co.uk/sport/rugbyleague/8128628/Super-League-club-Crusaders-go-into-administration.html 29 BBC (2010). Wrexham’s Crusaders out of administration. BBC Sport. 24 December 2010. Retrieved from the WWW on 21 January 2011 at: http://www.bbc.co.uk/news/uk-wales-north-east-wales-12074927 30 Western Mail. Crusader clinch deal and come out of administration. Western Mail. 24 December 2010. Retrieved from the WWW on 21 January 2011 at http://www.walesonline.co.uk/news/wales-news/2010/12/24/rugby-league-crusaders-clinch-deal-91466–27882594/ 31 The Leader (2011). Chairman’s plans to lease out Racecourse ground to both clubs. The Leader. 3 January 2011. 32 Daily Post (2011). Chairman Ian Roberts will not ‘asset strip’ Dragons. Daily Post. 6 January 2011. Retrieved from the WWW on 21 January 2011 at: http://www.dailypost.co.uk/news/north-wales-news/2011/01/06/wrexham-fc-owner-will-not-asset-strip-wrexham-fc- 55578–27940735/ cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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issued a statement via the Crusaders and Wrexham FC websites, which claimed that the new structure would make it easier to attract grants to improve the Racecourse. However, suspicious Wrexham FC fans monitored Companies House submissions and discovered that the RFL had taken out a charge against the Racecourse, still owned by Wrexham FC. As details of the administration exit emerged, Wrexham FC fans found that the Crusaders owed the Rugby Football League £0.7 million, which had secured its debt against an asset owned by Wrexham FC, albeit with the Wrexham Village Group.33

24. Wrexham Supporters’ Trust 25. During the first financial crisis, Wrexham Supporters’ Trust indemnified players’ contracts and took over the Club Shop making a £20,000 profit, 50% of which was shared with the club and the rest retained the rest to purchase equity in the club in the future. The Trust also gave the club £3,000 per month to support it financially while it was in administration. Since exiting administration, the Trust has contributed over £30,000 to Wrexham Football Club in the form of sponsorships and donations and we have also accumulated a six figure sum in reserves. At the outset of the second crisis, Wrexham Supporters’ Trust has developed a vision to create a community-based football club which owns the Racecourse, the oldest international football ground in Wales. 26. We view the stadium as a community asset so the Trust is encouraged by proposals within the Localism Bill to enable local organisations to purchase assets owned both publicly and privately, as this could help to facilitate the purchase of the Racecourse in the future (subject to the Bill’s approval in Wales). As the Trust gears up for a fundraising drive to implement its vision, it will need supporters and business to dip deep for support. Tax relief for investors in supporters’ trusts could help to encourage local supporters and businesses to buy into our vision, whilst match funding for community shares would provide a significant boost to the size of war chest available to purchase the Racecourse and Wrexham Football Club. 27. We believe the Trust as the democratic vehicle for fans and community is the best steward of the club. Whilst some will question the ability for the club to compete without a “wealthy” benefactor, actually there are a number of reasons financially that make sense for us to own the club. By being a community club legally we will need to reinvest all money into the club and no one person will profit plus we will also have community objectives written into our constitution. This all leads to a better brand and a collective feeling of trust which will help us attract sponsors and revenue from fans and the community. This feeling of combined ownership should lead to bigger crowds too, and even if we aren’t winning on the pitch the numbers we attract should be more resilient. By electing our own stewards they will be accountable to the fans and community of Wrexham, which will help with the transparency and communication coming from the club—something that has led to so much frustration and mistrust from recent owners and Directors. 28. Realistically we need to work in partnership to achieve our aim of owning and reuniting the ground with the football club. In our favour we know that our community club structure appeals to partners such as the local authority and other strategic and long term investors as the structure encourages working together to achieve common goals. Hopefully we can become a community club with an asset locked stadium owned by the community without the club going into insolvency again but having a right to buy period should we go bust would help strengthen our position and ensure that this vicious cycle of vested short term interest doesn’t continue to damage our club. January 2011

References Bagnall, S (2011). Wrexham Crusaders owed more than £2 million. Daily Post. 18 January 2011. http://www.dailypost.co.uk/news/north-wales-news/2011/01/18/wrexham-s-crusaders-owed-more-than-2m- 55578–28003786/ Jones, P (1992). Wrexham: A Complete Record 1872–1992. Breedon Books Sport.

Written evidence submitted by the Blue and Gold Trust (King’s Lynn FC Supporters Trust Football Governance This is a submission to the committee from the Blue & Gold Trust (King’s Lynn FC Supporters Trust) It contains details of the recent history of the club, how a greater level of governance in the game could have saved the club from liquidation and how it could influence the newly formed club in the future.

A Brief History 1. King’s Lynn football club over the last thirty years has gone from one period of financial mismanagement to the next. There have been a couple of periods of administration, several bailouts by local business people and then finally in November 2009 the liquidation of the club in the High court by the official receiver on 33 Daily Post (2011). cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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behalf of HMRC. The final debt that sunk the club was for just under £80,000 owed to HMRC. This debt was the tip of the iceberg with the club having soft debts of over £200,000 in director loans as well as many other debts to local companies. 2. The only people that knew about these financial issues until it was too late to help were the Directors in charge of the club. The common supporter and the newly formed Supporters Trust asked on numerous occasions about the situation at the club but were always denied any knowledge of the financial mess. The supporters were finally told some of the story a few days before the club was in court to be wound up. The Supporters did offer to try and raise the money that was needed to stave off the winding up order but the underlying soft debts that the directors would not write off made any such action ultimately implausible.

The question is how would better governance within the game of helped the Supporters of King’s Lynn FC to safeguard their club 3. Much stricter financial controls, bi monthly accounts to the league that the club is in, illustrating that amongst other financials that all tax affairs are in order and up to date, with these being checked by impartial committees. Late or non submission, proven untrue accounts or accounts that show issues should face substantial punishments that may act as a deterrent to clubs that are financially mismanaged. The issues at King’s Lynn FC were ongoing for more that a year, so the practice above would have at the very least alerted the supporters to what was going on. An extension of the quarterly HMRC reporting that now exists within the Conference would be welcome. 4. Banning of soft debt from the game. Monies given to the club should either be for shares (have a realistic monetary value), in the form of a financially viable structured loans or non repayable gifts. This would have meant that the saving of King’s Lyn FC in financial terms could have been a realistic prospect. Clubs should only legally, be able to take on proven viable levels of debt. 5. Supporter involvement at all levels within clubs. This would lead to greater transparency within clubs. Football clubs are at the heart of communities and should be used to bring communities together. They should never be allowed to become a business person’s plaything. Rules should be put in place that mean that supporters have to legally have a meaningful role within the club with penalties against clubs that do not follow this rule. This would mean that the supporters always play a role in safeguarding their clubs. 6. A much stronger and rigid fit and proper person test on directors at all levels of football. One of the directors at the insolvent King’s Lyn FC club had previously caused major financial issues at a previous club he had been involved at. The FA were very much aware of this but unable to deal with the appointment. 7. Any one of the above points of governance had the potential to prevent the winding up of King’s Lynn FC.

Where King’s Lynn FC is Now 8. A new King’s Lynn FC, this time with an added “Town” to the name was formed in January 2010. The club was formed after a bidding process with the local council (who own the ground). The winning local business (the newly formed Supporters’ Trust submitted an unsuccessful bid) were verbally encouraged to work with the supporters by the local authority. A legally standing arrangement would have meant that the supporters would have had to been involved. 9. Given that the club, run as a private company failed again, and our view that the football club is a community asset it would have helped us if we had been given a period of exclusivity to buy the club if voted for by the community as a whole. The Supporters Trust model and the aims that are listed by all Supporters Trusts fit the public interest ideal and are an ideal model of football club ownership because by their nature they have to be run sustainably, are open and inclusive, have community objects written into their articles and the Board are accountable to their members. In summary the ideal framework to ensure that the club was secure for the future. We were disadvantaged because we didn’t have enough time to raise money that the winning bid could lay their hands on in the short time we had, despite the current owners professing publically that they would look to get their money back out of the club in the future. In contrast whilst we had less money to begin with our ethos and rules are markedly different stating that were the community to own the club all the money we made would have had to be reinvested into the football club or in pursuit of community objectives. “Right to buy” would have helped, and resulted in our club being in much safer hands. 10. At the current time the new owners have given little cause for concern but the same issues of lack of supporter involvement, transparency and how financial investment within the club has been structured are still as prevalent now as with the previous owners. The risk of what the future holds could have been minimised with better levels of governance.

The Broader Picture 11. Football clubs should be engaged in real terms with the communities that they represent and should have supporters actively involved. This should be enforced at a national level with communities given the power to become owners within their clubs if possible. The best interests of all parties involved in clubs should be of paramount importance to ensure that football clubs remain as the heart of the communities that they lie within. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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12. Community ownership should be encouraged by government, the relevant local authorities and the football associations at all levels. January 2011

Written evidence submitted by the Foxes Trust (Leicester City Supporters Society Limited) Context 1. As the most-followed sport in the UK, football has a unique role in local communities and as part of the news/media agenda. 2. At a minimum, major football clubs occupy an important role influencing the “morale” of local communities. In addition, at their best football clubs can also add further value to their communities through their activities and individual projects. They act as a “hub” for involvement of many sorts, particularly for young people. 3. The assets of a football club include a number of intangibles which together form the “heritage” of the club. This heritage has a social benefit far wider and, arguably, more important than the clubs financial assets. It is also this heritage which provides a strong degree of monopoly power for major clubs—fans generally do not switch allegiance between clubs. Against that backdrop, football is undergoing significant change, with recent trends including: — increasing levels of debt. The cumulative balance sheet of major clubs, together with increased leverage and lack of profitability of very many football clubs suggests a very strong chance of a bubble which will have to burst at some point. — regular “scandals” of financial or other malpractice (proven or unproven). — increasing overseas ownership of major clubs—not, in itself a bad thing, but often accompanied by lack of transparency about ultimate ownership and priorities. — widening gap between “rich” and “poor” clubs, emphasised by TV money. — spiralling increases in the wages of top players, often supported by increasing debt. This is taking place at a time of so-called “austerity” in most aspects of the economy. — Like it or not, top footballers acquire role model status, yet stories of misdemeanours (and worse) are very regular.

Possible Public Policy Objectives Items (1) to (3), above, together provide a prima facie case that the ownership and running of football and of major football clubs is a valid subject for public policy. Football is a part of the private economy, and it is unlikely that a “heavy-handed” regulatory approach would be beneficial to any stakeholders. However, there are a number of possible public policy objectives for the framework which government/regulators apply to football. These include: (1) Ensuring that the intangible “heritage” and its associated positive impact on community well-being is sustained and, where possible, increased for all major football clubs. In particular, that the financial (or other) objectives of a club’s owners are not achieved at the expense of that heritage. (2) Ensuring that football, as a whole (and notably the major leagues) is run in a sustainable way, not allowing a financial bubble to build and then burst. (3) Ensuring that individual football clubs are run in a financially sustainable manner. (4) Encouraging the actions of clubs, their agents and players, in aggregate, to provide positive role models, particularly for young people. (5) Providing some means to ensure that the “heritage” of clubs can be reflected in the business decisions of clubs’ owners.

Proposed Actions We would recommend the following actions: (1) Stronger “fit and proper” person tests, coupled with increased transparency re ultimate ownership of football clubs. (2) A requirement for increased transparency about the business plans of individual football clubs, coupled with restrictions on significant activities which deviate from those published plans. (These “significant issues” might include, for example, significant changes in the amount or structure of debt, the sale or purchase of a new stadium, etc). Such a model would not in itself preclude significant actions taking place, but would provide a framework for legitimate public comment and challenge at the time plans are announced and also a means by which concerns could be raised if the activities were thought to breach the legal/regulatory framework applying to clubs. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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(3) Introduction of financial or other incentives for clubs which have governance structures which include an empowered representation of the views of supporters (as advocates for the club’s “heritage”), for example, Board position for supporters Trusts. (4) A stronger FA, with a more explicit objective focussed on the sustainability of football and its role in national life. (5) Limits on the amount of financial leverage which major clubs can operate with. (6) The possibility of including some element of licensing for football clubs, providing a means by which the public policy objectives can be monitored and enforced. January 2011

Written evidence submitted by AFC Telford United Written Submission on behalf of AFC Telford United by Lee Carter, Chairman AFC Telford United with supporting quotes from Michael Frater CBE, Chief Executive of Telford and Wrekin Council 2000–06 in relation to Item 4 of the Inquiry agenda: What are the pros and cons of the Supporter Trust share-holding model?

Introduction Lee Carter is Chairman of AFC Telford United who play in the Blue Square Conference North. After the financial collapse of Telford United with debts of over £6.5 million in 2004, Lee was part of the team that set up the Telford Supporters Trust and formed AFC Telford United. He became the clubs first Chairman in June 2004 and has overseen a period of unprecedented success on the field with the club winning two promotions in five years, narrowly missing out on a third promotion back to the Conference in May 2009. Off the field, Lee has led a committed team of co-Directors and Staff who have worked tirelessly on building a thriving business that has consistently delivered on it’s responsibility to maintain Community owned values in all aspects of it’s operations, whilst at the same time making the business a commercial and operational success. He has also been instrumental in developing partnerships with key public, private and voluntary sector organisations in Telford which have helped deliver several innovative education and social inclusion projects including the construction of a £1million Learning Centre funded by the Football Foundation. The clubs success on and off the field has attracted regional and national interest with Lee having made presentations to Local Government Association, Regional North and Development Agencies, The Plunkett Foundation and CiPFA. He has also advised several individual Football Clubs, Supporters Trusts and Local Authorities on Supporter Ownership and how clubs and Local Authorities can work better together. The club’s partnership has won LGA and Municipal Journal awards for their community work and have been commended in two early day motions in the House of Commons. Lee was made Honorary Freeman of the Borough of Telford and Wrekin and named BBC Midlands Sports Personality “Unsung Hero” in 2005.

Summary — Background—the formation of a new Supporters Trust run and Community owned club after the financial collapse of Telford United F.C. — Working in partnership for the benefit of the communit. — The Local Authority perspective: The role of the authority prior to financial collapse; How the Authority dealt with the opportunity presented by the financial collapse of Telford United FC; Reflections on the period since 2004. — Community Ownership working in practice—On the field Success and the future

Conclusion Background—the formation of a new Supporters Trust run and Community owned club after the financial collapse of Telford United F.C 1. The name of Telford United has been synonymous with non-league football for many years. “The Lilywhites” reached the FA Trophy Final at Wembley five times between 1970 and 1989, winning the competition on three occasions, whilst the club also hit the headlines during the 1980s for a string of FA Cup giant-killing victories against the likes of Bradford City and Preston North End. The 1990s, however, proved more barren until businessman Andy Shaw bought control of the club. Shaw redeveloped the club’s Bucks Head ground to Football League standards and invested significant money on players in an attempt to fulfil his promise that Telford United would achieve Football League within five years. In 2004 Shaw’s business empire collapsed and all financial support for the club disappeared. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. At that time TUISA (Telford United Independent Supporters Association) became the focus of attention. Over the following weeks, a number of people offered their services to the TUISA Business Committee which included people skilled in areas such as Finance, IT and Marketing. As the fantastic fund-raising efforts of the fans continued, the supporters went on to raise £64,000 in just four weeks. It was clear that support for Telford United was as passionate as ever and that, if organised properly, the fans could have a significant voice in the running of the club. 3. The TUISA Business Committee then came into contact with Supporters Direct, the umbrella organisation for Supporters’ Trusts nationwide. The original motive for forming a Supporters’ Trust was that it offered a legally recognised and fully democratic structure that would allow the community to have a say on how the money that the supporters had raised should be spent. The longer term benefits of becoming a Trust were also immediately apparent and so the Trust was formed and registered with the Financial Services Authority, with the TUISA Business Committee forming the interim Trust board. In an incredibly short space of time—a record for the registration of an Industrial and Provident Society (IPS)—the entire constitution of the Trust was decided and the final document signed and processed. However, despite this—and the assistance of several other Trusts—it soon became clear that the existing financial commitments of the club could not be met without a wealthy backer. Before long the inevitable day arrived when the Board of Directors announced the club’s liquidation, bringing to an end a proud history dating back more than 130 years. 4. Following this liquidation the Trust formed a new limited company/football club—AFC Telford United— within 24 hours. There was no manager, no team and the assets and ground lease were in the hands of the liquidator. Time was also running out ahead of the start of the 2004–05 season. A significant amount of work was done by the Trust to put a management team in place whilst considerable effort was made to establish community links, re-establish dialogue with sponsors and to build a financial base. In the background, there was also constant dialogue with the bankers and liquidator regarding the assets and stadium lease. A good relationship was established with the bank and discussions became more and more constructive. 5. In the end, thanks to the hard work of everybody involved, the final negotiations over the ground lease and assets were concluded just in time and AFC Telford United ran out for its first competitive game against North Ferriby United on 21 August 2004. Whilst the old club could rarely attract attendances above 1,000, AFC Telford United have regularly averaged 2,000 fans for home matches whilst more women, children and families have come into the stadium. Two promotions later, the club now finds itself in Blue Square Bet North—just one level below that from which Telford United fell and with a much more stable future. As it stands now the structure of the Governance model in operation at AFC Telford United is as follows: Telford United Supporters Trust—900 members with an annually elected board of 15. The Trust owns 100% of the issued share capital in AFC Telford United Limited. Directors of the Limited Company are appointed/ removed by the Trust and are responsible for the day to day operation of the limited company as well as developing and implementing short, medium and long term strategy.

Working in partnership for the benefit of the community 6. AFC Telford United’s on going success since formation in 2004 has been the result of the club learning from its predecessor’s failings; by understanding the benefits of partnership, capitalising on the “sense of ownership” engendered through a supporters-owned model, and by respecting and utilising tradition whilst also interacting with and understanding the wider community. 7. The basis for club’s success has been the importance of working in partnership to achieve common goals and, to this end, the Partnership have worked on the following common objectives: — To work in partnership with the public, private and community sectors; — To improve the area through physical, economic and social regeneration in a sustainable way; — To promote the Town through football and sport and put Telford on the map with the development of this new inclusive model; — To tackle disadvantage and social exclusion through learning via a range of new facilities and initiatives including health promotion; — To promote local talent and excellence in football and sport with children and young people; and — To develop a model that installs “community ownership”, civic pride and that delivers community renewal. 8. However, the partnership was only possible thanks to the support of Telford and Wrekin Council which understood the benefits to the Borough of establishing a symbiotic relationship with the football club and other partners. 9. That foresight from Council leadership means that, nearly seven years since the Partnership was conceived, all stakeholders are now reaping a plethora of benefits. For the Council the Partnership has driven improvements in a variety of areas including education, health, social inclusion and economic regeneration whilst it has also engendered lower levels of crime and deprivation as vulnerable and disaffected young people have had their aspirations raised through the power of football. Over 2,500 local children play at the New Bucks Head each year, over 4,000 attend various education and inclusion programmes at the Stadium whilst many local cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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community groups benefit from community facilities as well as health and education programmes. Meanwhile the football club has gone from strength-to-strength having been able to cultivate additional support and community involvement through its Partnership work. 10. These benefits have been achieved through a series of schemes which have reached out to the local community. For example: — Football Foundation funding was secured to finance a Learning Centre facility as well as a state- of-the-art Sports Dome located at the nearby Telford College of Arts and Technology (TCAT); — The Telford Football Excellence Centre was formed; — Numerous joint initiatives were organised which ensured interaction and engagement from local schools, Sunday League football clubs and other community ventures; — The “Telford and Wrekin Challenge” has enabled 8,000 children per year to engage in modules including numeracy, literacy, enterprise and health; — The “Playing For Success” project has provided after-school provision including mentoring by club officials; — The “Football Inclusion Project” comprises a session in the Learning Centre followed by a visit to the Dome and has resulted in improved school attendance and consequently financial savings for the Authority; — Several other schemes have engaged local youngsters. 11. The club’s lease on the New Bucks Head was recently extended from 20 years to 150 years at a peppercorn rent. This new lease, however, epitomises the mutual benefits of the relationship. It includes clauses requiring the club to deliver a wide-ranging community programme and which also preserve the right of the community to enjoy the facilities at the stadium. The club and council have also secured funding for a new football facility at the stadium and both parties are keen to establish a community-use agreement for this facility. 12. Looking ahead, the club and council are currently investigating the viability of developing a Community Sports Foundation which would bring many of the existing education and community programmes under one organisation. This body would also play a role in organising some wider sports development functions and sports facilities that are currently run by the Local Authority.

Saving Telford United—The Local Authority Perspective by Michael Frater CBE, Chief Executive, Telford and Wrekin Council, 2000–06 13. Telford United has played an incredibly important part in the life of the town of Telford in different ways for many years. The relationship between the local authorities and Telford United has changed and matured over the last 40 to 50 years as Telford, a 1960’s New Town, has changed and matured. In the 1970’s and 1980’s Telford Development Corporation (TDC), a government agency established to build the town invested heavily in the club. TDC saw the club as an important element in the social and community development of the new town. They also saw the club as an important part of the commercial marketing or “selling” of the town to inward investors.

The Evolving Role of the Local Authority 14. With the winding up of TDC in 1990’s the approach of the local authority was to work with the new owner, Andy Shaw, to create the conditions for Telford to have a football league club. This was to be achieved by using limited council resources as “sprats to catch mackeral” by attracting external resources from the New Towns Commission (the Residuary Body subsequently incorporated into English Partnerships) and the European Commission in particular. This was in order to regenerate the area including the old Bucks Head ground to provide a Council owned, Football League standard stadium on a 999 year lease to the club. 15. When I joined the Council in 2000 I was keen to continue with the regeneration initiative but took a broader view of regeneration than simply modernising or “prettying up” run down physical infrastructure. I wanted to broaden our approach to drive social, economic and cultural regeneration in the area surrounding the new stadium in particular. This was where the majority of both the Afro-Caribbean and Asian BME communities live as well as some very deprived white communities. 16. It was an area where inter racial tensions were frequently manifested along with a number of other social tensions associated with long standing social and economic deprivation. 17. The Council was keen to pursue a range of initiatives recognising the power of sport to inspire and engage young people in particular. However, it felt like trying to “push water uphill” because Andy Shaw, the owner, was single minded and driven by his single ambition of achieving promotion to the football league. It was clear from my conversations with him that anything else was a distraction. He didn’t oppose what we wanted to achieve but he was not willing to provide active support either. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Local Authority perspective-The opportunity presented by Telford United going Bust 18. The news that the club was “bust” was a huge shock to the town. I took the view that a crisis is an opportunity in disguise. Barack Obama has since talked of “not wasting a good crisis”. We were determined not to waste the opportunity that this crisis presented. I put my top regeneration officer on the project to provide dedicated project management support, co-ordination and day to day leadership, put one of my top lawyers on the case to sort the governance and legalities and my Finance Director to negotiate with the liquidator and the clubs bank. 19. My approach was that we would not put public money into the football club (there were too many examples where this had gone badly wrong) but if we could achieve a club that would help the Council and it’s partners achieve a range of social, economic, educational, health, crime reduction and other outcomes then we would be happy to “wrap public money around the club” in terms of funding for allied and joint projects. 20. Using the Council’s “good offices” and well deserved reputation for successful partnership working we convened a series of meetings with a range of people who could potentially help save the club. This ranged from the Supporters Club who were doing amazing fundraising to keep the club afloat till the end of the season to the town’s two MP’s, David Wright and Peter Bradley. David Wright made the connection with Supporters Direct whilst Peter Bradley searched for a wealthy benefactor/investor and also made connections with the Football Foundation. Peter Bradley introduced the club to Capgemini who had recently moved to Telford. They have been the clubs main sponsor for over six years and have a rolling sponsorship dela in place that will see them remain as the clubs major sponsor whilst they have a presence in Telford. Their Chief Finance Officer in the UK, Ian Dosser, was appointed to the Board of Directors of the Football Club in 2004. 21. In addition a range of other partners came together to commit resources, provide support and to think about the sort of club we would like to see arise from the ashes. These included the PCT, the Technical College, Headteachers, various community groups, the Police and many others. We were very clear we still wanted a club that could put the town on the map by achieving Football League status. But importantly we wanted a “Community Club” to act as a hub for a wide range of community initiatives not just in the surrounding and diverse communities but also across the town as a whole. We believed there could be a real synergy by harnessing the power of sport to inspire and engage young people in particular. 22. With literally just hours to spare we were able to buy the stadium from the bank, give the club an initial 20 year lease (subsequently extended to 150 years), a rent-free first season and a safety certificate so that the new AFC Telford could compete in the new season about to start. At the start of the season I stood in the centre of the pitch with the Mayor whilst the Council was applauded and cheered by over 2500 fans. Believe me that doesn’t happen very often!! But it was more than just the Council, much more. It was a range of partners and the community coming together not just to save their club but to create a new community club.

Local Authority perspective-Reflections six years on. Did it work, was it worth it?: 23. In terms of the reasons that the Council got heavily involved, social and community wellbeing, we had high ambitions and aspirations and these have been massively exceeded. I quickly lost count of the number of fantastic community based projects (not all of them sport based) that started within weeks and months and continued to grow with buy in and commitment from the community and partners. The role of the club in the community has continued to grow and develop despite the effects of the recession in a town that is always disproportionately affected by economic hard times. 24. On the face of it this might look like a commercially risky venture with the club’s commercial viability directly related and determined by success on the pitch. Everyone in the club knows that and it provides an “edge” that wouldn’t be there with a single wealthy owner. Because the club is owned by it’s fans there is also a commitment to continue to turn up and support the club even when things aren’t going well on the pitch. 25. In my dealings with the club before and after going bust I have dealt with two very different ownership models, Single wealthy owner and Industrial and Provident Society supporter owned. The single wealthy owner was not interested in the idea of a community based club and then went bust. The Industrial and Provident Society model owned by supporters has embraced the community model with energy and enthusiasm and has since 2004 gone from strength to strength in footballing and financial terms as well as providing enormous community benefit. 26. Based on my experience it’s a complete “no-brainer”.

On the Pitch Success 27. The success of AFC Telford United in its work with the community has also been mirrored by the club’s success on the football field. Two promotions and another ultimately unsuccessful play-off final have been achieved through sensible budgeting, regular financial monitoring and an ability to maximise sources of income; for example by cultivating support from within the community through Partnership work. 28. Notably, the financial problems of its predecessor mean that AFC Telford United still cannot gain an overdraft or credit facility and so the club’s on-field achievements have been made only by spending its own cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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income. Whilst some have argued that football clubs cannot be run by supporters, AFC Telford United has just registered its seventh consecutive year of profit; a feat achieved by very careful financial monitoring, utilising the non-contract registration system and by rewarding players for results rather than reputation. In addition, there are other key aspects that underpin the continued financial sustainability of the club: — Directors have no power to issue share capital in the Limited Company because this power has been withdrawn. The power now lies with the Board of Trustees; — Through the constitution of the Limited Company, Directors are prevented from authorising any borrowing without the express permission of the Board of Trustees; and — As members of the Football Conference, the club are compelled to comply with the Financial Reporting Initiative. This requires the completion of a quarterly financial report which is submitted to the management accountant employed by the Competition. This report requires information on amounts outstanding to HMRC and other creditors as well as details of any repayment arrangements in place with HMRC and expenditure on salaries. As part of this initiative the club has to sign a tri-party information-share agreement between the Football Conference, the club and HMRC.

Conclusion 29. AFC Telford United’s success story shows what can be achieved through the power of supporter ownership and the club’s achievements have not gone unnoticed. The club has won the LGC Community Involvement award, been shortlisted for the Enterprising Solutions “New Social Enterprise” Awards and also provided the main case study at the NWRDA and LGA conferences on the “Power of Football”. The club has also regularly been asked to offer advice to other football clubs and Local Authorities. 30. It is testament to its wider benefits that the AFCTU Partnership has now endured the tenure of three Council chief executives as well as two separate political administrations. 31. Along with council support, the club attributes its success to the following key principles which underpin the supporters-owned model: — Taking a long-term view whilst providing consistent delivery to the highest of standards; — Strong leadership and hard work from all the key partners; — Learning from other organisations and putting this learning into practice; — Being prepared to work in partnership; understanding the “win-win” and not adopting the “all or nothing approach”; — Building resilience to downturns in performance or wider influences through increased loyalty; and — Displaying good communication. In conclusion, the story of AFC Telford United shows the benefits of utilising the power of “Fan Owned Football” to build foundations for the future—both on and off the pitch. January 2011

Written evidence submitted by Daniel York and Ben Westmancott on behalf of the board of Fisher FC Summary — The history of Fisher Athletic’s bankruptcy and reformation provide important real-life evidence of the failure of current governance arrangements for football clubs, and of new ownership models that can benefit the game. — Fisher FC is a supporter owned and run community football club and we are developing and growing on a sustainable basis. The governance model that Fisher FC use is successful at many other football clubs at professional and amateur levels, and embeds democratic ownership within the supporter base—the people who care most about the club. — There are numerous examples of the football authorities failing to ensure good governance at football clubs. Self-regulation is not working. — Football clubs are important emotionally and economically to local communities, and must be treated differently to other commercial organisations. There is an urgent need for government intervention to prevent the asset stripping and poor financial management that is prevalent in modern football. — Spectator sports clubs run sustainably and on a not for-profit basis can and will be successful on the pitch.

Background and Context 1. Fisher FC was formed in May 2009. But our history does not begin there, it begins in 1908 when a Bermondsey schoolteacher formed the Fisher club to provide underprivileged children with the opportunity to cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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take part in sporting activities. Over time Fisher developed a senior side, and Fisher Athletic became one of the most well-known non-league clubs in the country with a spell in the Conference—the top level of non- league football.

2. In 2004, the club was taken over by local businessman and property developer Sami Muduroglu. A number of events followed this takeover that will be familiar to fans of other clubs around the country, and they are events that could be prevented with strong government action on the governance of football clubs.

3. Mr Muduroglu, who after being banned as a company director was replaced by his brother Eren as Fisher Athletic chairman, separated the ownership of Fisher’s ground (the Docks Stadium) from the football club. The freehold was purchased from the council, and ownership of the stadium transferred to Stadplex Ltd, a separate company to the football club.

4. On the pitch, things were apparently going well as Mr Muduroglu invested in a high quality playing staff. Fisher moved through the divisions. The club moved out of the Surrey Docks Stadium and into a groundshare with Dulwich Hamlet, as planning permission was granted for the redevelopment of the ground—including some residential development alongside.

5. The first warning signs appeared in 2007, when new plans were announced to develop a stadium in Southwark Park. These plans, which included a 10,000 seat stadium for a club with an average attendance of 200, never progressed beyond some sketches. Meanwhile, the Surrey Docks Stadium and surrounding land stood derelict, and the money began to run out as the credit crunch arrived. The club did nothing to build links with the community, and crowds did not grow despite the on-field success. Links with the Fisher Athletic youth teams, who provided opportunities to play sport to local young people, fell away through neglect. Links with local businesses were dropped; sponsorship came from another company owned by the Muduroglu family.

6. Mr Muduroglu stopped funding the club in 2008, with the club in the Conference South—one level below the Conference. Without a regular cash injection, the club’s position was unsustainable and the players left. A group of supporters and some unpaid players kept the football side going although the team was regularly beaten and crowds dropped. HMRC issued a winding up order, and after a couple of deferrals Fisher Athletic were wound up in the High Court in May 2009.

7. For Fisher supporters this meant two things. Their club had been wiped out, having been allowed to spend far more than it could earn over a number of years until an unmanageable level of debt had been racked up. Secondly, the club’s ground—it’s sole and most important asset—was now owned by a private company.

8. We have reformed our club as Fisher FC, and received much practical and moral support from Supporters Direct in order to do so. We are owned by the fans, and operate on a not-for-profit model. Our aim is to build a sustainable club that is part of the community and provides the same opportunities to Bermondsey youngsters that the original Fisher club did a century ago.

9. But we are starting again with nothing. The motives of our former owner remain unclear, and are probably irrelevant. What destroyed Fisher, and 100 years of history, was that it was so easy for a small club to rack up incredible debts through uncontrolled spending. And that it was so easy to separate the football club from its major asset, the ground that provided the income stream and opportunities that could have allowed Fisher Athletic to work as a sustainable club at the heart of its community. Instead the ground lies derelict, attracting vandals and anti-social behaviour (see Appendix) while the club starts again on the bottom rung of the football ladder.

10. Supporters of , Wrexham, Chester, Mansfield and many others will provide you with evidence that Fisher’s experience is not unique. It is clear that the current governance arrangements for football clubs do not promote sensible, sustainable development. They do not protect football supporters from having their club used and asset-stripped by property developers. There must be change to the way that football in the UK is governed and regulated.

Consultation

11. Fisher FC’s views on the specific questions raised in the consultation are below.

Should football clubs in the UK be treated differently from other commercial organisations?

12. Yes. Football clubs are different, they are not shops or banks. Football clubs have a role and standing in the community which makes them different from other business which can be taken over, moved etc with less impact on customers. There is a lot of evidence that highlights the positive role in community life that a football club plays and safeguards are required to ensure that football clubs can continue as part of the local community landscape as a positive influence and not be subject to takeovers and asset stripping that is common in the game at present. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 13. Clearly not. The “Fit and Proper Persons” test has not succeeded in preventing individuals from taking over football clubs for the sole purpose of making money by taking control of the club’s major asset: its ground. Clubs can also fall victim to benign but incompetent management—racking up huge amounts of debt, and operating business models that are unsustainable and will lead to bankruptcy. Because football clubs are different, the failure of a football club affects people and communities in a way that the failure of another commercial organisation simply doesn’t. The current governance arrangements do not do enough to prevent this from happening. 14. Corporate Governance and football don't often get spoken about together. Football clubs need to be protected from unscrupulous types who use them for their own ends. Our Treasurer is an Associate member of the Institute of Chartered Secretaries and Administrators (ICSA)—the world's leading authority on corporate governance. We would welcome an increased role for the ICSA in strengthening governance arrangement of football clubs. 15. If the FA and other bodies are not going to be able to enforce good governance then local stakeholders need to be empowered to do more. It makes sense that fans of a football club are very well placed to provide scrutiny at a local level. An increased role for Non Executive Directors could also be beneficial with representatives from Local Authorities and other local stakeholder groups/bodies well placed to add value.

Is there too much debt in the professional game? 16. The steady stream of clubs attending the High Court to answer winding up orders suggests that there is too much debt, and that the debt is a result of running unsustainable business models. Often that money is owed to local businesses, or organisations such as St John’s Ambulance. When the football club can no longer pay its bills, it is not just the fans who suffer—small local businesses who have provided services and support also lose out.

What are the pros and cons of the Supporter Trust share-holding model? 17. There are many positives to the model. Fundamentally, the model secures two things: that clubs are run sustainably, on a not for profit basis, and are not used by individuals to make themselves richer at the expense of the club and community. It also puts the supporters at the heart of decision making because the model is democratic. 18. The Supporters Trust model is no bar to clubs obtaining finance in order to grow and develop—but it does ensure that this is done in a way that reduces the risk of the club borrowing money it cannot afford. FC United’s community shares scheme is an example of this. 19. The model embeds local ownership within the community that surrounds the club and puts power directly into the hands of that community. 20. The case can be made that because ST-owned clubs have to be run sustainably, they find it difficult to compete at the higher levels of the game where other clubs have greater access to finances through loans, or individual benefactors. But that is not an argument against the model, because those competing clubs are often being run in a way that puts their future at risk—while they may achieve short-term success, in the longer term they run the risk of serious financial problems. Watford, Hull City, Portsmouth, Sheffield Wednesday, Leeds, Leicester, Plymouth Argyle, and many other clubs who have spent beyond their means in order to chase success on the pitch have all suffered varying degrees of financial problems over the last few years. Many of those clubs entered administration, and when they exited administration they left behind a trail of unpaid bills to local firms, charities, as well as unpaid tax.

Is Government intervention justified and, if so, what form should it take? 21. Government intervention is justified because football clubs are so important to communities, and to supporters. They are also highly vulnerable to exploitation because many of them own valuable land, which is attractive to people who are looking to make money for themselves regardless of the impact on local communities. 22. Intervention should actively encourage sustainable models of ownership. This could be through tax incentives, and through regulation that addresses the excess debt incurred by poorly-run clubs. 23. It is absolutely essential that the government acts to prevent asset-stripping of clubs by protecting football stadiums. Football must no longer be attractive to individuals who are looking to exploit clubs for personal gain rather than for the good of the local community. 24. The FA has not shown itself able to promote good governance and Government intervention is now essential to strengthen the game and ensure that football takes good governance and good financial stewardship seriously. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 25. Yes. There is clear evidence that the governance of football in the UK is flawed, and that the FA are not willing or able to address the flaws. 26. In the USA, the Green Bay Packers provide clear evidence that a not-for-profit, supporter owned sports team can be successful and competitive in a harsh commercial environment, competing against sides with wealthy owner-benefactors—and winning. The Packers are owned by their fans, and have a governance structure that requires them to publish a balance sheet each year (the only organisation in all major league American sports to do so). They have a clause in their Articles of Incorporation that means that if the franchise is ever sold, all profits from the sale will go towards the building of a soldier’s memorial. This clause means that no property developer, or asset stripper, can profit from buying the Packers and moving them away from their home. Consequently, unlike so many other US sports teams, the Packers have remained in Green Bay since their formation in 1923.34 27. On 6 February 2011, the Packers will compete in the SuperBowl. Their 112,000 owners will be cheering them on as they attempt to win one of the most high-profile sports championships in the world. January 2011

Written evidence submitted by Adam Franks FCA CFA 1.0 Introduction 1.1 This submission is made by Mr Adam Franks FCA CFA, a Director of Brighton & Albion Football Club. 1.2 This submission is made entirely in my personal capacity and doesn’t necessarily reflect the views of the Club. 1.3 I am grateful to Mr Sean Hamil and Dr Geoff Walters under whom I am currently studying for a MSc degree in Sport Management and the Business of Football at Birkbeck, University of London. 1.4 This submission therefore presents the realities of the challenges faced by a Football League club, as seen through the eyes of a serving Director, grounded in both finance and relevant academic studies.

2.0 Executive Summary 2.1 The central theme to this submission is that the function of Football League clubs is to both supply football as a commercial product and also to play a key role in their local communities. As such they should not to be regulated and taxed as normal businesses, but rather as something special to be cherished, a cultural asset. 2.2 For Brighton & Hove Albion, these twin aims overlap at all levels of the club, stadium company and award winning charitable arm, Albion In The Community. But while we are fortunate to have found ourselves in a very healthy financial, governance and ownership position, I increasingly fear that something of the fabric of society is being lost alongside the “soul” of football as the list of Football League clubs in financial distress lengthens. 2.3 Five recommendations are made for your consideration in the areas of; — a more favourable taxation of investors—to recognise the real nature and motivation behind investment into Football League clubs; — a relaxation of planning rules for football grounds—so that the costs and uncertainty for the community are reduced; — a review of the decision to move to all seater stadia—so that the mix of fans in the stadium on match-day better reflects the community the club serves; — a cap on the maximum debt level a club can carry and a change to the sporting penalties that are incurred when an administration event happens—so that the risk of damage to the community is mitigated; and — the implementation of salary caps on Football League clubs—so that the desire to win at all costs does not lose touch with the financial cost of attempting to do so in a league where many other adopt the same utility maximisation strategy.

3.0 Should football clubs in the UK be treated differently from other commercial organisations? 3.1 Yes, absolutely because as will be illustrated throughout this submission, football clubs, especially those in the Football League, are fundamentally different to other commercial organisations. 34 http://en.wikipedia.org/wiki/Green_Bay_Packers#Public_Company cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.2 This is self-evident in the case of Brighton & Hove Albion FC (“BHA”) and, I suggest, many other clubs by reference to its poor financial performance throughout the business cycle, the special relationship we have with our fans, our complicated relationship with competing clubs and a desire to utility maximise. 3.3 These are explored further below, but beyond these factors there are more fundamental reasons why clubs like BHA are not like other commercial organisations and so deserve to be treated differently. This can best be illustrated by exploring the special position of the club in the context of its local community. 3.4 I am acutely aware of the role the club plays locally in shaping conversation, in providing employment opportunities, in providing a mechanism to deliver community services (adult education, sports participation, social inclusion, disability, health and community relations), to those in need or at risk, in providing a focus for aspirations and in encouraging social and community cohesion. Clubs can energise and mobilise communities in a common goal in ways that no pub, supermarket or bank ever could. 3.5 At the level of the family, I point to weddings which have been delayed by over a year until our marriage license will be granted in the summer of 2011, as well those families who have urns of ashes stored temporarily as they await a final resting place for their loved ones in our new stadium. 3.6 Within our Boardroom, I certainly feel a weight of responsibility to our local community as well as our fans and believe that it is therefore beholden on us to consider these stakeholder groups and to manage the club so as best to meet their needs as well as our own. 3.7 If my experience is replicated in Boardrooms of other Football League clubs as well as other clubs who strive to become Football League clubs, and I strongly suspect that it does, then the footprint for good that clubs make is a matter of national importance and pride. 3.8 We were delighted by the most recent annual Christmas message in which Her Majesty stressed the powerful way that sport can build communities and create harmony between people of different backgrounds and parts of society. We could not agree more and indeed this is a theme that repeats throughout this submission. 3.9 I suggest that protecting this rich cultural and social heritage is too important to be left to market forces alone and that the special status of clubs should be recognised and protected. 3.10 Prior to 1992, when serious money first began to flow into the sport, this was not problematic because the absolute level of losses was low. Now though it is an acute problem which means that a succession of investors in the vast majority of other Football League clubs, have seen their equity investment wiped out over time. 3.11 It is not obvious why new investors should step forward to invest equity in clubs when the investment case is so poor. BHA are fortunate to have source of equity funding in the form of a businessman with deep local roots in the community and club, our Chairman Mr Tony Bloom (“Tony”). 3.12 Tony is the third generation of his family to serve in the Brighton Board room. His motivation for investing is not to obtain a fair return, although it’s quite legitimate for investors to expect a financial return for the risk they run, but rather because the club is a vehicle through which he can proactively “give-back” to his local community. 3.13 He is rightly proud of his birth place, of the community where he grew up and of the club that he has supported from childhood. His investment in the club and especially into its new stadium will provide a lasting legacy and in his words “ensures that my young son and his generation of Albion fans can look forward to watching their team without the fear that the club will ever again be homeless”. 3.14 Sadly, other clubs are not in this fabulous position and it leaves them open to lower quality investors obtaining control. 3.15 Still, this begs the question; why should investors in clubs not expect a financial return? One answer can be illustrated by the aspirations of many club boardrooms which hope to deliver excellence both on and off the pitch within the context of financial break-even over the medium term. Even this hoped for result would mean that club investors will forsake both the interest they could have earned on their money and the opportunity to have invested in other more financially sound businesses. 3.16 This again indicates that Football League clubs are overwhelmingly run as philanthropic efforts. At Brighton, in parallel with the efforts of the club to engage with school children and other community efforts, we are very proud of our award winning community scheme. In 2010 AITC delivered services to over 60,000 people at a high level of quality as evidenced by the three national awards won last year alone—“Best Community Project” at the 2010 Football League Awards, The Football League Trust's “Make Every Player Count, Best Disabled Player” and The National Deaf Children Society’s “Best Project Partner”. AITC’s work also provides a catalyst for other businesses with a large local presence, for example American Express, to meet their own Corporate Social Responsibility objectives by partnering with AITC, our stadium company and our club. This validates the view that BHA deliver excellence and continue to play a key role within their community. 3.17 BHA have a special relationship with our fans. Many clubs would have not survived the loss of their ground (the Goldstone Ground was sold in 1996 in less than the best circumstances) two seasons of playing cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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“home” fixtures in Gillingham and then 13 years playing in a rented ground at the athletics stadium which is widely recognised as one of the worst grounds in the Football League. 3.18 Through this long period fans have fundraised in the “Alive and Kicking” campaign, marched, petitioned and remained optimistic through the longest ever planning applications. 3.19 We suggest that no normal business would get this level of support from its customers. This deep loyalty of fans, “fan equity” to use terminology from sports economics, arises from the apparent irrational behaviour of fans. Simply put, clubs have something akin to a local monopoly because fans are hugely reluctant to change their allegiance and switch to an alternative team. 3.20 Monopoly holders normally seek to exploit their market position by making excess profits but in the context of a club committed to their community, fan equity presents challenges and makes commercial decisions, such as ticket allocation & pricing, contentious and even more difficult to consistently get right. 3.21 I also recognise that while rivalry with opposing teams is healthy and generates fan interest, this competition is limited in a way that commercial rivalry is not. For example, at the time of writing BHA are top and Walsall are bottom of League 1—but we both need every other club in our league to be financially sound since the product we produce, our performance on the pitch, is also a joint product (the league table). I have seen and the club has benefited from many example of cooperation, off-the-field, with rival clubs in areas such as marketing initiatives, stadia design and supplier recommendations. 3.22 While BHA are fortunate not to have suffered an administration event since being founded in 1901, it is sad to note the frequency of administration events at other Football Leagues clubs. I suggest that this, in part, simply demonstrates that the base economic assumption underlying commercial organisations of profit maximisation is demonstrably not present in football clubs. Rather it is utility maximisation; the desire to maximise sporting success. 3.23 In conclusion, Football League clubs have a magical ability to deliver services to and provide a central rallying point around which communities can gather and draw strength. I suggest that if clubs can control, or be forced to control (see later), their utility maximising tendencies and live within their means then they can continue to play an important societal role.

4.0 Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 4.1 I suggest that governance by the Football League and the Football Association in conjunction with all the laws and regulations governing UK companies creates an overly complex operating environment. This increases legal & compliance costs as well as raising uncertainly. My preference therefore would be a streamlined solution because I suspect that the current position is not sustainable but I suggest that this question would be better answered by the governing bodies themselves.

5.0 Is there too much debt in the professional game? 5.1 BHA currently carries no debt with both ongoing operations and the construction of our new home, The American Express Community Stadium, is being financed by a combination of equity and quasi equity (convertible loans carrying 0% interest) provided by our Chairman. 5.2 Not withstanding a fully developed and validated business model, significant levels of equity and equity commitment, strength in the boardroom and the new stadium being constructed to time and budget, I have had a very bad experience in talking to banks about debt finance. 5.3 Some institutions have taken the view that they simply will not lend to the sector and others have appeared open for business but in fact have no appetite. 5.4 Frustrating as this is, for I would like BHA to carry a reasonable level of serviceable debt, this reticence is the natural reaction to factors outside our control; specifically; the banking crisis and the poor record of lenders to the sector who have suffered both losses and poor publicity as a result of clubs failing to meeting their debt obligations. 5.5 However, I don't think that insolvency events, even the first Premier League club administration (Portsmouth), necessarily indicates that debt levels are too high, rather it indicates that lenders to the football sector have previously been too keen to lend on overly aggressive terms. This can be seen as a market failure by both the lenders and also by utility maximising owners. 5.6 Now, naturally, the pendulum has swung back the other way around to overly cautious lenders. 5.7 My view is that not all debt is bad and that debt at serviceable levels is acceptable. However owners need to be protected from themselves (or else they might chase sporting success at any cost). This is important both because of the joint nature of the product and also because league competitive balance is destroyed by some clubs taking an “all or bust” approach and using long-term debt to buy (short-term) player talent. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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6.0 What are the pros and cons of the Supporter Trust share-holding model? 6.1 I do not believe that my club has explored this option in any great depth. The reality for BHA was that the new stadium required over GBP90M of investment and so was beyond the means of our supporters to significantly contribute to in monetary terms. 6.2 Our boardroom discussions and our mix of directors, the majority of whom have actively supported the club as fans since their childhoods, keep this important stakeholder group very much central to our decision making progress. As necessary, we take soundings from key individuals & supporter groups (recently for example over proposed changes to our logo and the positioning of the supporters bar at the new stadium) and hold regular fans’ forums. 6.3 I suggest that the supporter trust share-holding model is best evaluated on a club-by-club basis, rather than by making broad statements about its applicability to clubs in general. In general though, I feel that clubs should be encouraged to make efforts to ensure that fans are not a voice excluded from the decision making process in “their club”. 6.4 I would argue that the other side of this coin is, that fans are far too quick to call for managerial or boardroom change or to put pressure on the club to buy players on the back of a poor run of form.

7.0 Is Government intervention justified and, if so, what form should it take? 7.1 In the light of my stated position that clubs are special entities which have a unique philanthropic role to play in their local communities, I make five suggestions: 7.2 Firstly, the social purpose of clubs should be recognised as such by Government. To that end, we would welcome a change in the way that “investors” in clubs are taxed with their investment money being recognised as attracting tax relief. This would require HMRC to take a pragmatic view that the benefit that investors receive, typically in the form of free match tickets and boardroom passes, are negligible compared to a material investment. 7.3 A side effect, which some commentators would welcome, would be that this tax relief would make an investment into a club by a UK resident (as opposed to a foreign individual) more likely. 7.4 Secondly, as outlined above, obtaining planning permission for BHA’s new ground at Falmer, the American Express Community Stadium, was a very drawn out process which ultimately required approval by the Office of the Deputy Prime Minister. Even that, due to a small technicality, required a judicial review. I suggest that this was a severe and unreasonable test of fan equity, caused millions of avoidable costs and created uncertainty for all concerned. 7.5 I therefore argue for a relaxation of some restrictions &/or a fast-track process to planning laws in recognition of the cultural status of football clubs in their community. 7.6 Thirdly, football has noted a change in the demographics of fans who traditionally were working class but are now middle class. We suggest that one of the reasons for this shift was the decision to move to all- seater stadia following the Taylor reports which chronicled the Hillsborough disaster. An unanticipated result of this decision was that some fans, most especially in lower socio-economic groups, were priced out of the clubs and could no longer afford to be season ticket holders. 7.7 Twenty years later I suggest that, subject always to the Liverpool community’s wishes being respected, it is legitimate to ask if this restriction remains appropriate or if a move to “safe-standing”, used widely in the German Bundesliga, could herald a return to authorised standing on the terraces. I note that this subject has recently been considered in Parliament as Don Foster MP tabled a private member’s bill in early December 2010. 7.8 Fourthly, due to the huge financial damage done to local businesses and the uncertainty it creates for communities (the typical victims of an administration event), I suggest that clubs should only take on reasonable levels of debt. I am not in a position to say whether this should be delivered in the form of government intervention, but it is within the remit of government to ensure that where possible HMRC work in partnership with clubs and recognise that forcing clubs to the wall has serious and far reaching effects. 7.9 It may be, as others have suggested, that the sporting sanctions applied to clubs in Administration could be tailored so that a distinction is made between those clubs which at one extreme just slipped into administration and another which went charging headlong into administration with a huge debt burden. It would appear that the number of pennies in the pound available to unsecured creditors is a good proxy for this as suggested by research at the Birkbeck Sport Business Centre. 7.10 Lastly, the labour market is an area of great concern. Players have monopoly power over their labour which in combination with utility maximising owners (win at all costs), has meant that the wall of money which has flooded into the sport since the first BSkyB deal in 1992 has largely gone to enrich players and their agents. 7.11 Somewhat obviously, if a club spends too much of their turnover on player wages then it will soon be in acute financial peril unless it has equity reserves or soft loans to utilise. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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7.12 Football has flirted with the idea of a , enforced at the level of the club, which would allow spiralling wage inflation to be controlled. So while recognising that there are difficulties in both defining, monitoring and enforcing a cap as well as setting-in-stone a competitive advantage for bigger clubs, we would wish to see the voluntary cap of League 2 clubs extended to all Football League clubs. 7.13 Since Football League clubs are not as active in the international market for labour as Premier League clubs, I do not think that a European or Global implementation of this rule is a pre-requisite for its introduction in the Football League. 7.14 I also mention that there needs to be a mechanism which enforces the salary cap. One solution would be a form of luxury tax, as found many US Sports which are typically paid by a club whose payroll exceeds a pre-set limit or thresholds above a league average. 7.15 An alternative, drawing on how governments seek to control emissions by polluters, is to set a cap and then let a market develop for more frugal teams sell their unused “payroll capacity” to overspending clubs. I suggest that a “salary cap-and-trade” scheme along these lines would change the dynamics of the labour market.

8.0 Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 8.1 UEFA’s club licensing and financial fair play rules are seen by UEFA as crucial to ensure footballs long- term stability. These rules, designed to ensure that clubs break-even, are due to be phased in over the next three years. To quote the UEFA website downloaded on 11 January 2011 “Under the break-even requirement, clubs may not spend more than the income they generate. Clubs will also be assessed on a risk basis, in which debt and salary levels are taken into consideration. They will have to ensure from next summer that their football liabilities are paid punctually.” 8.2 This appears to get to the heart of the financial concerns raised by many commentators and some of the questions raised by your Committee. What is less clear is how clubs who do not participate in UEFA competitions will be impacted and by what mechanism any benefits will flow down the football pyramid. 8.3 I close by stating that the promotion and relegation feature of the English football pyramid gives hope to every club, and their communities, that they could rise to the very top in seasons to come. This defining feature should not be lost. January 2011

Written evidence submitted by Schwery Consulting FOOTBALL CLUBS ARE MORE THAN JUST BUSINESSES; THEY ARE CULTURAL INSTITUTIONS Summary — Structurally, clubs are like any other business. Functionally, they are more; with unique attributes that benefit communities. — Professional football clubs often demonstrate less ethical business practice than their sponsors, despite having “consumers” with much higher loyalty. — Fan loyalty can be explained by historically close ties with the community, and the inherent nature of sport. — To ensure longevity and stability of clubs, regulatory (push factors) would involve effective control mechanisms to ensure that clubs have clear responsibilities in terms of reporting and disclosure obligations. — Incentives (pull factors) may include qualification to a competition, or an annual donation, to the club that produces the best CSR report, based on an internationally accepted reporting framework. — Responsiball is an online platform that supports the work that visionary clubs do by functioning as a central resource to share good practice, connect practitioners and benchmark using socially responsible indicators. — To underline the potential of responsible football clubs and, therein, the raison d’être of Responsiball, examples of good practice are featured. — To maintain the loyalty of fans and increase the social value of football, it is in the best interests of football clubs to adopt a structure that is more considerate of stakeholders, and especially fans. — All of the examples from the Responsiball good practice database serve to emphasise the notion that football clubs can serve the needs of their many stakeholders in a unique, invaluable manner, and still be run as a commercial business. 1. Football clubs are more than just businesses; they are cultural institutions. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. Structurally, they are businesses, and should be run according to the rules and regulations of any other commercial entities. And yet, in function, they are more than businesses due to their unique standing within the community and the great potential they have to provide social benefits. 3. This added dimension calls for football clubs to be even more considerate of their stakeholders than other commercial businesses, which are primarily concerned with delivering financial returns to their shareholders. 4. However, only very few visionary clubs have identified the longer term benefits involved with operating in this way, while others, despite being registered as commercial business entities, actually operate below the ethical standards demonstrated by many of their sponsors. Indeed most Premier League football clubs do not produce a credible non-financial report, a CSR report that provides information on issues such as ownership and governance, sponsorship and environmental impact. 5. The possible explanation for this current situation is that regulation is not tight enough (the “push”) and incentives are not strong enough (the “pull”) for all football clubs to act responsibly. 6. Football clubs enjoy high levels of loyalty from fans that is unmatched by consumers of other commercial organisations. This culture is due to the fact that football clubs grow up in the community as clubs, not businesses; as put by Smith and Westerbeek (2007), “sport organisations are already implicitly woven into society, an integrative characteristic limited in commercial business organisations”.35 7. The values that a football club represents is perhaps also why regulation has been slow to keep up with that in other industries, with football seen as a kind of sacred cow, treated with sincere reverence by regulators. 8. Fans often remain loyal to their clubs despite knowledge of underhand business transactions. And for this reason, many clubs take their fans’ loyal support for granted. Although fans may not be happy, and voice concerns to prevent unfavourable changes, only a small fraction of them will turn their backs on the club, and an even smaller fraction then would support another team. 9. Albert O. Hirschmann wrote a paper in 1970 examining the conceptual ultimatum that confronts consumers in the face of deteriorating quality of goods: either “exit”, or “voice”.36 The general principle to his work is that the greater the availability of exit, the less likely voice will be used. However, where there is loyalty to the organisation, exit may be reduced, especially where options to exit are not so appealing.37 10. Generally speaking, high loyalty, high voicing and low exiting would seem to sum up the situation for fans of football clubs. Although we are not able to back this up with a specific reference, a quick search on the web for football club forums would open up the floodgates of fans voicing their concerns over the decisions made by their football clubs and, perhaps in the same paragraph, their loyalty to the club. 11. While the majority may remain loyal, there is a small minority that do exit: the group of fans that do pose a problem to apathetic football clubs. One option these fans have is to decrease, or discontinue, their support for the club. Another solution that has been popular recently has seen disgruntled fans leave to follow newly formed clubs, based on a philosophy of closer community ties, as seen at AFC Wimbledon, Chester City FC, and FC United of Manchester. 12. These scenarios will lead to a decrease in club revenue. The latter may be an insignificant threat to the bigger clubs but developments are currently attracting a large wave of media interest as it does offer an attractive alternative to fans that have the opportunity to support a new club with a clean slate. 13. Despite such threats, many clubs are unwilling to self-regulate due to the pressure of intense competition among rivals. If, in the short-term, the advantages of conducting unethical business outweigh the disadvantages, it should be understood that some clubs will act in this way. 14. Approaching this problem with push factors would mean tighter regulation within the industry to ensure the longevity and stability of football clubs. This exists, to a degree, in the Premier League where, for example, it has installed a fit and proper person test potential directors or clubs. Arguably more promising is UEFA’s financial fair play concept that, among other things, encourages clubs to compete within their revenues. 15. A focus on fan work to encourage dialogue between clubs and fans and enhance security is another issue that should be more closely regulated. Transparency on the player transfer market, and greater barriers to prevent match-fixing are two more issues that could be enforced by a zero-tolerance code of conduct to prevent against all forms of corruption. 16. In summary, effective control mechanisms would be needed to ensure that football clubs have clear responsibilities in terms of reporting and disclosure obligations. 17. On the other hand, we could look at the pull factors: providing more incentives for football clubs to improve their governance structures. Such incentives may include qualification to a competition, or an annual donation to the club that produces the best CSR report, based on an internationally accepted framework such 35 Smith, A, Westerbeek, H (2007), Sport as a Vehicle for Deploying Corporate Social Responsibility, Journal of Corporate Citizenship, 25, 43–54. 36 Albert O Hirschman. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, MA: Harvard University Press. ISBN 0–674–27660–4 (paper). 37 http://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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as the Global Reporting Initiative, and externally certified by a panel of experts. Pull factors could be used in unison with push factors to create a more clean-cut culture in football. 18. This is a culture that many individuals and organisations envisage for football clubs. One such initiative, Responsiball, was conceived to accelerate the momentum that has been created by clubs that have already begun to act responsibly in certain areas. It is an online platform that supports the work that football clubs do by functioning as a central resource to share good practice, connect practitioners and benchmark using socially responsible indicators. 19. Where clubs are active in any issues of community development, consideration of environmental impact, and good governance, Responsiball encourages progress by showcasing their work to raise awareness among all stakeholders. 20. In the UK there is a strong sense of responsibility to conduct community work. Football in the community programmes have been conducted in some form since the 1970’s and 1980’s in some clubs. These usually take the form of coaching sessions that promote sport for its inherent values—character-building and so on—and player appearances at local schools and hospitals. Only in the past few years has this become more formalised and structured, with many clubs establishing charitable organisations through which to continue this work and include educational work through football. 21. To underline the potential of this work and, therein, the raison d’être of Responsiball, three examples have been taken on the topic of community development from Responsiball’s good practice database: 22. Queens Park Rangers F.C. / Tiger Cubs: Through its charitable arm—QPR in the Community Trust— the club has established a project that aims to provide children with Down’s Syndrome the same benefits of being on a team as their able-bodied peers and to improve the participants’ overall physical, social and emotional health. A professional coach teaches participants with each session focused on developing the core fundamentals of football. While participants are learning physical skills, they are simultaneously increasing their own social and emotional abilities. It also gives them a rare opportunity to interact with adults other than their parents and with other children with Down’s Syndrome. An added plus is that the parents have formed a tightly knit support network where they can discuss issues with each other and provide support. 23. Wigan Athletic F.C. / Girls Health & Well-Being Project: This project aims to improve the health and well-being of teenage girls living in disadvantaged communities. The objectives are to create an understanding and knowledge of healthy lifestyles including related topics (smoking, drugs and alcohol, nutrition, sexual health and fitness, improving decision-making and problem-solving skills), and to increase participation in sport and fitness activities. The project delivers five workshops to eight high schools every week, including topics such as smoking cessation, alcohol and drugs, fitness, nutrition. The girls are provided with gym sessions with qualified instructors, lunch-time multi-sport sessions of their choice, practical sessions in nutrition provided by Wigan Athletic FC players, and free match-day tickets as rewards for such things as 100% attendance. Girls’ representatives are invited to steering group meetings every six weeks to express interests and activities that the groups would like to do. 24. ADO den Haag (Dutch first division club) / The Mondrian Education: Since 2005 ADO Den Haag has received about 450 new “Hagenaars”, participating in an integration programme: the Mondriaan Education. They arrive in groups of about 75 spread over several games. The participant is received on match days by the Hague council, and visits the South Park Stadium as part of an excursion in the Hague to create new bonds with the city. It forms part of a larger initiative, which highlights typical Dutch habits and customs. This activity uses football as a “universal binder” to teach participants about a typical leisure pursuit, which occupies an important place in the lives of many Hagenaars. As the only professional football club in the residence club Haaglanden plays an important role. 25. Where community development is an external manifestation of social responsibility, good governance and open decision-making is internal. The following good practices give examples of clubs that are demonstrating good business practice. 26. BV (and other Bundesliga clubs): All professional football clubs in Germany were structured as registered members’ associations (eingetragener Verein (e.V.)) prior to 1998. However, since then clubs were given the option to convert their professional section into an external limited company. There are different structures of limited companies football clubs have adopted, BVB Dortmund, is one of the majority of clubs to select the most common: a GmbH &Co KG aA & GmbH & Co KG—a combination of a limited company with a Kommanditgesellschaft (KG) (limited partnership) or a Kommanditgesellschaft auf Aktien (aA) (stock company). 27. It consists of two different types of shareholder: general partners with unlimited liability and limited liability shareholders. The modified DFB—(German Football Association) approved form, GmbH & Co. KGaA, however, allows the partner with unlimited personal liability to be a company, which itself, has only limited liability. The foundation of a GmbH (limited liability company), acting as general partner of the KGaA (a limited partner with share capital), minimizes the risks inherent in unlimited liability status. The DFB’s special provisions concerning this legal form of business organization not only allows the company to gain more capital through the stock exchange than would be possible for an AG (public limited company), but enables the club to retain control over the company. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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28. Arsenal F.C.: Arsenal is valued at about £640 million and each of its 62,000 shares trades at £10,250. Fans are encouraged to buy portions of shares through the Arsenal Fanshare Scheme, which was established by the Arsenal Supporters Trust—with the support of Arsenal FC—as part of its objective to widen supporter ownership, representation and influence at Arsenal. Fans are invited to pay a minimum of £100, either up front or in £10 monthly contributions, to buy one fanshare—one hundredth of an actual share. In return, the member will secure full shareholder’s rights: the chance to attend the annual general meeting, ask questions of the directors and vote on policy. 29. F.C. Barcelona: FC Barcelona is a not-for-profit sporting club that is owned by over 150,000 members, or socios. From 2003, the Club established a campaign called “El Gran Repte” (The Big Challenge) in order to reassert member democracy and to improve the transparency of club governance. As a result club membership was increased as a vehicle to build financial strength; corporate social responsibility practice was established; an aggressive commercial strategy was promoted; and sporting success was prioritized. Club members are given the right to vote in presidential elections and in the annual delegates assembly, and to participate in areas of the club in accordance with club regulations and to express themselves via privileged communication channels. 30. In addition to good governance and community development, football clubs have a varying impact on the environment within their communities. According to our prognosis, environment is the third topic of social responsibility that football clubs should consider, and aim to decrease their impact in a number of ways, as the following three case studies demonstrate. 31. Dartford F.C.: The architect for Dartford FC’s new ground, built in 2006, met the two challenges of ongoing drought conditions and a desperate need for high quality grass on the field by building two lakes nearby to store rainwater for watering the pitch. The rainwater is collected from large flat areas, such as the club’s rooftops and its artificial turf community pitch, and directed into the two lakes. In an average year the ground staff should not need to take any water from the main supply to water the pitch, which needs approximately 20,000 litres of water a day. In a complete drought the ponds will be able to supply water for almost two months without being topped up. The lakes will make the stadium self-sufficient, look pretty, and attract local wildlife. 32. Manchester City F.C.: The club has been implementing a transport and traffic strategy since 2003. It links the stadium and the city centre with safe, accessible and environmentally friendly transport. The strategy includes active promotion of public transport, walking and cycling. Here, Manchester City FC has joined up with the City Council and established a safe walking route between the stadium and the city centre using innovative signposting and public transport-oriented, web-based travel information and the provision of over 200 bicycle spaces. “The Club estimates that the emissions associated with car travel to and from the venue is approximately 1,500–2,000 tonnes per annum, and emissions associated with public transport use a total of approximately 100–150 tonnes. This is based on assumptions regarding visitor and staff numbers, public/private transport proportions and average journey lengths.” 33. F.C. Zurich: The stadium in Zurich, Switzerland, is owned by the city of Zurich and is home to FC Zurich. It also hosts open-air concerts and the Weltklasse Zurich athletics event—part of the IAAF Golden League. It was renovated and reopened in 2007 with a “green roof”. ’s green roof is comprised of a 2,500m2 photovoltaic system that can supply enough energy for around 80 households, and 90m2 solar collectors for the heating of warm water. 34. As these examples demonstrate, the social role of football has developed through the years to a point of no return.38 To maintain the loyalty of fans and increase the social value of football, it is in the best interests of football clubs to adopt a structure that is more considerate of stakeholders, and especially fans. 35. Clubs can serve the needs of their many stakeholders in a responsible manner and still be run as a commercial business, while being valued as much more. January 2011

Written evidence submitted by FC United of Manchester 1. FC United is a fan-owned community based football club formed in the wake of the unwelcome takeover of Manchester United FC (MUFC) by the Glazer family. 2. The supporters of Manchester United had opposed the takeover in large numbers. Supporters organised a well coordinated campaign of demonstrations, and lobbied key figures at the club, the FA and Ministers in Government. It was a campaign based on the belief that the takeover would ultimately damage not only Manchester United, but also have a detrimental effect on the wider game of football. 3. Ultimately however the campaign was unsuccessful despite the widespread support it had garnered and a 127 year-old institution was sold to owners nobody appeared to want, bought with borrowed money; a leveraged buy-out that would see supporters having to pay off the resultant debt for years to come. 38 Adapted from a quote by Peter Gheysen (2009), Community Coordinator Club Brugge KV. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4. The idea of a new club was proposed, one dedicated to flying the anti-Glazer flag, but also one that would campaign on the positive agenda and wider demand that fans and the local communities should be central to every football club as a counterweight to the rapacious drive for success and personal gain. This was seen not only as an extension of the campaign to remove the Glazers but as a mechanism to demonstrate the benefits of supporter ownership. 5. Whilst the takeover proved to be the catalyst for the formation of FC United it is also undoubted that amongst supporters there had been a growing disillusionment with top flight football over the preceding decade, a growing sense that the Premier League for all its self-proclaimed success was leaving its core supporters behind in its voracious pursuit of expansion. Indeed the same accusation had been levelled at our own club, Manchester United. The irony that this increasing disillusionment and disenfranchisement occurred during a period of MUFC’s most successful period on the pitch was not lost on any of the campaigners at the time. 6. Ever changing kick-off times, the whims of television companies becoming more important than the interests of the match going fan. Commercialisation demonstrating an insatiable thirst for expansion. Rocketing ticket prices that appeared to serve one main purpose—to increase the bank balances of players we idolised and agents whom we mistrusted. All these issues had a cumulative effect on the morale of supporters. 7. And yet the dissatisfaction ran deeper than even these issues. At the core of this disillusionment was a lack of a voice within the game, an erosion of supporter influence and an absence of any form of democratic input. National bodies such as Supporters Direct (SD) and the Football Supporters Federation (FSF) campaigned vociferously, articulately and intelligently on behalf of supporters but progress felt slow. Football Task Force recommendations were routinely ignored. Fans Forums were set up at Premier League clubs in an attempt to allow supporters their say, and carefully selected or in some cases democratically elected supporter representatives had the opportunity to sit across the table from club executives and make their points. But the exercise masked a reality; forum members had no legitimate authority, no tangible influence and thus, paradoxically, the disenfranchisement swelled rather than diminished. 8. Therefore when FC United was taking shape, supporter ownership was fundamental to our plans. The model for our new club had to firstly protect us from the threat of predators but crucially had to empower supporters. With the assistance of Supporters Direct the model of an Industrial Provident Society (IPS) was adopted as the basis on how the club would be structured, a “one-member one vote” ethos running at the core of the model. During the tumultuous summer of 2005, donations flooded in, fuelled by a sense of purpose and energised by the opportunity to create something of our own, in which we would all have an equal say irrespective of financial means. Whether supporters donated five pounds or five hundred pounds, each was awarded one equal share which could neither be sold nor transferred, but that guaranteed founder member status, the ability to vote on fundamental issues and the opportunity to elect the club’s first board. 9. At the first General Meeting in August 2005 the IPS was adopted, members voted on the name of the club, the badge we would wear, whether to accept a shirt sponsor, debated and adopted the club’s constitution and elected a board. 10. Biannual meetings have taken place in each subsequent year. Members submit resolutions to be debated and voted on, new board members stand for election and full, transparent reports are provided by the board. However, FC United members are acutely aware that democracy doesn’t begin and end at the ability to elect a board. They know that being a member, (indeed a co-owner) of their football club, carries its own responsibility. A responsibility to ensure the board is carrying out its duties in line with the club’s constitution, to engage in debate and to help shape the strategy and direction of the club. 11. This is a responsibility members take seriously and was never more evident in the summer of 2009 when the board proposed a radical approach to the selling of that year’s season tickets. Members had voted in previous years on how much prices should be set at, but in an unprecedented move the board proposed that supporters be allowed to pay whatever they could afford, to set their own value on watching their team. In the midst of a recession, the club itself not immune from the financial pressures that faced the country, it was considered a brave move, bordering on foolhardy by some. The board though never doubted for a moment that supporters would exploit the offer. Due to the sense of ownership FC United supporters feel, why would anyone jeopardise the future of the club they own? The result? The average price paid by supporters actually increased on previous years. Some supporters, able to bear the cost, had paid more than they had the season before, effectively subsidising those only able to pay a reduced amount. No-one begrudged anyone else’s circumstances, and everyone made a collective effort for their club, an unprecedented response to a unique scheme. 12. Indeed there is a real sense of energy at FC United, with a “hands on” mentality permeating every aspect of the club, with the bonds between players and supporters a refreshing antidote to the remoteness of the professional game. Over 300 volunteers regularly assist the two full time staff in keeping the club running, further evidence of the collective spirit of the club. 13. On the pitch, success has followed. Promoted three times in five years, picking up a number of other trophies along the way, the club currently plays in the Northern Premier League, three divisions below the football league. With an average crowd of more than 2,000 and a membership in excess of 3,200 the club’s base is more akin to League Two than the seventh step. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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14. Rather than viewing it as an “add-on” or a forced obligation, the club’s approach to its community responsibilities is at the very core of the club’s constitution; a declared intention to be accessible to all, discriminating against none, with the structure of the club allowing for such an approach. The community coaching team consists of players, management and supporters. The projects we become involved in are driven by the community groups we work with. This “bottom-up” (quote marks) approach has been welcomed by local politicians and community organisations alike, and whilst it is a constant challenge to respond, it allows our coaches to gain satisfaction that they are meeting genuine need and winning new recruits to our cause along the way. 15. Any Sporting organisation, particularly one with the ambitions of FC United, would struggle without a base to call home, and the club board has been working to secure a ground since its formation in 2005. Raising the necessary finance to build a ground is a major hurdle especially for a relatively new organisation—as a Community Benefit Society we have limited means of raising finance capital, at least until we were fortunate enough to be included in the Cooperatives UK Community Shares pilot project. 16. The Community Shares initiative provided an ideal template for our kind of club, in that we do not have to sacrifice our cherished “one-member one vote” structure to raise the funds we need to develop our ground; nor do we have to become over-reliant on commercial borrowing. 17. Our members embraced the idea and changed our constitution to allow the issuing of “capital funding shares”. We have also added an asset lock clause acting as enhanced security for our community purpose and, given the circumstances of our “birth”, as a very public sign that our club is not to be easily overrun by speculators and chancers. At the time of writing, a few weeks before the share scheme closes, the club is well poised to hit the £1.5 million target set. To raise such an amount of money from a base of 3,200 members is a phenomenal effort and further proof, if it was required, of the belief in the vision of the club. 18. It is often asked of us if a supporter ownership model has hindered our progress, whether such a level of democratic input prevents decisions being able to be made swiftly. The answer is that the opposite is true. Day to day decisions are taken by the board, for which they are fully accountable. Footballing decisions are taken by the coaching staff and major strategic decisions are taken by the membership and, far from hinder us, the structure has allowed us to flourish. A true sense of community has developed and a thriving membership takes the responsibility of ownership very seriously. 19. We are also regularly asked if the model can be replicated elsewhere. It is true that a particular set of circumstances led to the formation of our club, but that would be to discount the underlying dissatisfaction that supporters felt preceding the takeover, sentiments that are undoubtedly prevalent throughout football. It may not require such a dramatic course of action that we took to affect change, but supporters should be afforded the opportunity and be provided with the mechanisms by which they can re-claim some of the game they love. FC United believe we are a part of a movement aimed at creating a “better way for football”. Supporters are at the very heart of that movement. January 2011

Written evidence submitted by the Wimbledon Independent Supporters Association (WISA) Introduction 1. WISA is the Independent Supporters Association of supporters’ trust-owned AFC Wimbledon, the club formed following an FA Commission’s approval of Wimbledon Football Club’s move to Milton Keynes. We believe we have a unique insight into the abject failure of football governance in this country. WISA was formed in 1995 during the club’s exile at Crystal Palace’s , 10 miles away from their home in Plough Lane, London SW19. Club owner Sam Hammam (later owner of Cardiff City) had moved it there in 1991. WISA was created to meet a need for dialogue between the club and supporters, and in particular to campaign for a return home of the Club to its historic home borough of Merton. Two years after its formation, WISA campaigned against the attempt to move Wimbledon Football Club to Dublin. But its biggest and most passionately-fought battle came with the Club’s proposed move to Milton Keynes. WISA came of age, inspiring and mobilising Wimbledon fans’ united opposition to the move in a determined and professionally-run campaign which caught the imagination of both the Club’s fans and football fans throughout the country. It was during this campaign that WISA and Wimbledon supporters in general then created The Dons (Supporters) Trust, with the help of Supporters Direct. 1.1 In summary, WISA advocates the following: 1.2 Ownership of a club by its Supporters’ Trust is a far more appropriate model for ownership of a football club, as it properly protects the sporting, cultural and community characteristics of a football club, and provides for supporters to be consulted and balloted on key decisions affecting their club. 1.3 Football clubs would benefit from at least a mandatory presence of a supporter on the board. We believe that Supporters’ Trusts best fit this purpose. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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1.4 The governance of football must be rebalanced in order for the leagues to be able to administer their competitions, and for The FA to regulate. The too often malign self-interest of the professional clubs, led by The Premier and Football Leagues, leads to an organisation driven with self-interest, incapable of properly regulating the game. 1.5 Implementation of the 2005 Burns Report in full, including independent non-executive directors on the Board of The FA; a truly independent Chair; a concomitant reduction of the influence of both Premier and Football Leagues and the FA Counties; and a reduction in the size of the FA Council itself, so as to create a “Parliament of Football”. 1.6 We also believe that, specifically in serious matters judged to be in the wider interests of football, these disputes must be ruled over by The FA, and take into account clearly the needs and wishes of all stakeholders in a club. 1.8 We believe that the path to a proper framework ensuring that football is run much more in the interests of the people who stick with it through thick and thin lies in active government intervention to ensure that our game is suitably regulated. Given the government’s annual contribution to The FA—a contribution funded by the taxpayer, many of whom are themselves supporters—this seems only fair.

2. Should football clubs in the UK be treated differently from other commercial organisations? 2.1 We believe that this issue is directly connected to the failures in governance on the part of the authorities, which we address in part 3 of this submission 2.2 Football clubs are sporting, cultural and community assets first, and must be treated as such. However there is a clear contradiction in their legal status as, in the main, private limited companies, the objective of which is to deliver a profit and be principally concerned with their shareholders. The case of Wimbledon Football Club over a number of years illustrates the need to properly address this contradiction. 2.3 Over the years, key decisions were made by directors and at most a handful of shareholders of the company that failed to even take into account the views of the supporters of the club, much less actually ballot or consult in any binding way. 2.4 The first instance of this failure was when Sam Hammam, owner of Wimbledon FC, was given permission by the Board of The Football League to move the Club to groundshare with Crystal Palace, citing the imminent introduction of all-seater stadia as the reason 2.5 The second instance of failure was in 1997, when The Premier League ruled that it had “no objections” to the Club being moved to Dublin, as it was keen to “explore new markets”. This move was only scuppered by the intervention of the FAI (Football Association of Ireland) and FIFA. At no point did anyone from The Premier League or The FA intervene. 2.6 The most obvious instance of failure in the case of Wimbledon Football Club came to a head on the eve of the 2001–02 season, when the owners and Chairman of the Club, Kjell Inge Rokke, Bjorn Gjelsten and Charles Koppel, announced they had signed a deal with the “Milton Keynes Stadium Consortium” to “move” the Club to Milton Keynes. 2.7 It is clear to us, and we believe to anyone who agrees with our view that football clubs are not merely private entities with shareholders, that Wimbledon Football Club operated almost exclusively as a private company, which on all key decisions properly consulted only shareholders. 2.8 As supporters of a club owned by its Supporters’ Trust, we believe this to be a far more appropriate model for ownership of a football club, as it properly protects the sporting, cultural and community characteristics of a football club, and provides for supporters to be consulted and balloted on key decisions affecting their club. 2.9 We also believe that all football clubs would benefit from at least a mandatory presence of a supporter on the board. We believe that Supporters’ Trusts best fit this purpose. 2.10 However, we also believe that the manner in which football is run, both by The FA and the Leagues themselves, desperately needs overhauling, and the better regulation of these essentially private entities.

3. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 3.1 The three incidents outlined in Section 2 illustrate the manifest failure at the most extreme end of the governing bodies of football to govern in the wider interests of football, and specifically of supporters. 3.2 In the case of the Club’s groundshare at Selhurst Park, although the move to all seater stadia was an acknowledged problem for clubs, there was also no such rule or guidance preventing Wimbledon from remaining at Plough Lane whilst a replacement was built, or a new site found—as has been the case with any number of clubs since then. Not only did The Football League fail to properly scrutinise the proposals, it also failed to attach any conditions to the groundshare, such as a new ground being built on the old site, or a new site being identified,. Thus Plough Lane never saw first team football again. It is this incident that can be seen as the precursor to the Club being moved to Milton Keynes by its shareholders. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.3 The attempt by the Club’s shareholders to move it to Dublin was only scuppered by the intervention of the FAI (Football Association of Ireland) and purportedly, UEFA and FIFA. At no point did The Premier League intervene. Indeed it is our understanding that The Premier League actively wished the “exploration of new markets”. We are also not aware of any public intervention in the matter on the part of The FA.

3.4 In the case of the shareholders’ successful plan to move the Club to Milton Keynes, the Board of The Football League did, properly, refuse permission when the plans were formally presented. However the decision was subject to appeal by the shareholders. The Board’s verdict was overturned by an arbitration panel convened under FA rules. The panel consisted of then Arsenal Chairman David Dein, Charles Hollander QC, and York City Chairman and FA Council member Douglas Craig, who was later to sell York’s ground to a property developer, precipitating the demise of that club.

3.5 Following the matter’s return to the Board of The League, it was then agreed that an Independent Commission, under the rules of The FA (not “by” The FA: this rule is provided to resolve disputes between parties within football) would be established. This Commission, made up of lawyer Raj Parker (Freshfields Solicitors), Steve Stride, Operations Director of Aston Villa, and Alan Turvey, FA Council Member and Chairman of the Ryman (Isthmian League), voted 2–1 in favour of permitting the “relocation” (it is widely accepted that Alan Turvey was the single vote against, though he has never confirmed this).

3.6 The Commission’s report, riddled with contradictions and inaccuracies about the financial state of the Club, the consequences of such a precedent (ie the move) being set, even opined that the fans’ vow to form their own club should the move be approved was “not in the wider interests of football”. Although both WISA and The Dons (Supporters) Trust were called to present evidence, the clear understanding was that the two parties involved were The Football League and Wimbledon Football Club; the fans had no mandatory right to be heard, much less directly consulted. We urge members to read this report, which we have attached in the appendices to this submission (5.1), as it underscores the points we are making in much of our submission.

3.7 As if this were not failure enough, the verdict and report itself was only announced following significant pressure being applied by Supporters Direct, the then Football Supporters Association and the National Federation of Football Supporters Clubs (the latter two now amalgamated as the FSF).

3.8 In The FA’s statement, despite being the regulators of the game in this country, it was made plain that they not only opposed the decision, but were unable to exercise their governing role: “However, this [decision] is binding on everyone under the Football League rules—there is no appeal.” (Our emphasis). That was a failure of governance of astronomical proportions: how can a regulatory body be forced to approve something it knows is wrong, and is in fact contrary to the over-arching principles of the game (that clubs should not be franchised), because its own rules have been exploited to the letter by a small number of self-interested individuals? We suggest this is because of the excessive power held by the Professional Game in The FA (The Premier and Football Leagues). We have also included this statement in our appendices (5.2).

3.9 This was seen as a proprietorial dispute between The Football League and the shareholders of Wimbledon Football Club, not a crucial matter on which a regulator had to intervene, and on which the views of supporters were seen as a vital part.

3.10 The Football League and The Premier League are groups of shareholders in a private company who pursue their own interests, often against those of the wider game, and certainly against those of supporters. The FA is a body established, it is widely assumed, to govern the game in the best interests of the game. Yet because of the excessive influence over The FA by these private bodies, and the lack of any will to actively involve themselves by the counties/“National Game”, The FA is rendered impotent on even the most critical matters. In other words, there is no alignment of interests between the legal owners of a club, and the people who have invested far more in that club, emotionally and financially, relative to their own means—ie the supporters.

3.11 We believe that the governance of football must be rebalanced in order for the leagues to be able to administer their competitions, and for The FA to regulate. The too often malign self-interest of the professional clubs, led by The Premier and Football Leagues, leads, to paraphrase FA Chief Executive Ian Watmore on resigning in March last year, to an organisation riven with self-interest, incapable of properly regulating the game. Even the Sports Minister, Hugh Robertson, has described football as the “worst run sport in the country”.

3.12 The minimum requirement for change to the governance of The FA must be for the 2005 Burns Report to be implemented in full. This would include independent non-executive directors on the Board of the Association; a truly independent Chair; a concomitant reduction of the influence of both Premier and Football Leagues and the FA Counties; and a reduction in the size of the FA Council itself, so as to create a “Parliament of Football”. Only then would The FA even begin to resemble a body that could be regarded as “fit and proper”.

3.13 We also believe that, specifically in serious matters judged to be in the wider interests of football, these disputes must be ruled over by The FA, and take into account clearly the needs and wishes of all stakeholders in a club. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4. Is Government intervention justified and, if so, what form should it take? 4.1 If The FA is to perform an effective role as regulator of our national game, then it must be permitted— perhaps forced—to actively regulate on all major decisions such as Wimbledon Football Club’s move to Milton Keynes. That it was not able to intervene in such a critical case would not be permitted in almost any other area of regulation, for example in the media industry. 4.2 We believe that the path to a proper framework ensuring that football is run much more in the interests of the people who stick with it through thick and thin, whose only desire is the joy and the fun of having a club to support and to see it do well, lies in active government intervention to ensure that our game is suitably regulated. Given the government’s annual contribution to The FA—a contribution funded by the taxpayer, many of whom are themselves supporters—this seems only fair. The game of football will not change on its own, and supporters—however many take over their own clubs, or like us, start again from the bottom—cannot on their own create the magnitude of change needed.

5. Appendices 5.1 FA Independent Commission of Inquiry: Summary of the Commission’s Decision http://www.wisa.org.uk/cgi/l/articles/index.cgi?action=show&id=116 5.2 FA statement on decision of the Independent Commission http://www.wisa.org.uk/cgi/l/articles/index.cgi?action=show&id=111 January 2011

Written evidence submitted by Olswang Submission to the Enquiry into Football Governance 1. Olswang conducts M&A in a variety of sectors, including media, technology, leisure, entertainment and retail more recently has focused its energies on acting on the sale and purchase of football clubs, particularly those in the Premier League. 2. Over the last 12 months, we have been retained to act on the purchase (and sometimes sale) of several Premier League and Championship clubs. 3. During this time, we have conducted legal and commercial due diligence on a number of clubs, spent time negotiating with the high street lenders, reviewed financial due diligence reports from the main reporting accountants to clubs in England, talked to owners and prospective owners, negotiated with the key corporate finance advisers in the football industry, had numerous discussions with interested journalists and worked alongside the key football based insolvency professionals. 4. We have also acted for a large listed Premier League club for many years in relation to its corporate and commercial needs, including acting on public fundraising transactions as well as advising on a variety of media and rights based agreements and believe know what a well run and adequately funded club looks like and how such operates. 5. Thus we have what we hope will be a valuable insight into the football industry. 6. Given that all of the sale and purchase processes in which we have been involved concerned clubs that have been in varying degrees of distress, our comments only apply to such clubs. 7. It should be noted that in addition to the above, Olswang provides commercial legal advice to several of the larger Premier League clubs and we stress that such clubs are materially different to the clubs we have diligenced in that they have financial and corporate governance systems in place, are managed by professional non-football persons and, importantly, are run within their means. 8. However, in relation to the business affairs of the troubled clubs we have reviewed we set out the landscape that we discovered below. 9. Without a radical overhaul and a rethink about how football is funded and managed in this country, we are concerned for the long term health and viability of the industry.

What We Have Found 10. The common denominator of the troubled clubs we have diligenced over the past 12 months is, without doubt, a chronic shortage of working capital coupled with an ever diminishing set of options to raise further cash, which leads to a state of perpetual crisis management; rendering it difficult for incumbent management to operate the business in the medium to long term. 11. The characteristics of the businesses we have reviewed are set out below. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Funding 12. We found that the way that clubs had raised money in the past and secured such borrowings was not really appropriate for the type of cash flow business that a football club operates nor for the type of assets that a football club has. 13. We found that senior lenders had typically taken fixed and floating charges over the assets of the club (including the stadium) which resulted in the club being unable to properly use their assets to secure further cash flow requirements. By this, we mean that in return for a senior lender advancing, say, £20 million of funds, the lender has been granted a charge over all of the club’s assets (which may be significantly in excess of the funds loaned) but, going forward, the lenders have been extremely reluctant to relinquish any “spare capacity” in their security package to allow the club to secure other much needed borrowings. This means that club’s borrowings have typically been inefficiently structured. 14. This means that clubs in such a position have been unable to raise further capital using traditional banking means (as subsequent lenders were not prepared to lend without having adequate security) and thus the avenues open to clubs that have exhausted the traditional banking sector are relatively high risk and high cost in nature. 15. Further, whilst clubs offer up their stadium as security, this is not particularly useful security for a bank as, in the event of a default, it is unlikely that the bank will willingly step in to take control of the stadium, tear it down and sell the land to, say, a supermarket chain to recoup their losses. Stadia tend to benefit from bespoke planning permission, meaning that there is little alternative use for the property. 16. Many clubs have resorted to securitising or forward selling their future rights in order to obtain desperately needed short term cash. This involves receiving cash today for future revenue streams such as next year’s season ticket sales, next year’s shirt sponsorship funds, future years’ catering contract revenue and so on. In every situation we looked at, clubs were effectively selling next year’s revenue to pay this year’s (or last year’s) debts. Such a business model is of course not sustainable in the medium or even short term. 17. As a result of a desperate need for cash, we typically found that senior management’s attention was almost solely focused on raising short term cash to meet immediate debt demands from, in particular, HMRC but also the club’s football creditors, trade creditors etc. This led to an inevitable downward spiral and an inability to plan for the long to medium term needs of the business or the ability to create new forms of commercial revenues to support the club in the long term. Long term planning was a luxury that the cash flow needs of the club did not permit the management the time to worry about. 18. This has led to the practice of using cash set aside for HMRC as working capital for the club. In any other industry, this is an incredibly serious offence that typically leads quickly to a winding up petition and personal consequences for those involved. Based on anecdotal evidence, this seems to be a relatively widespread practice in football, with HMRC being owed more than £20 million by Portsmouth for instance. Whilst we have noticed a marked reduction in patience by HMRC in relation to unpaid PAYE and NICs since the Portsmouth situation, the fact that this practice was widespread in football is evidence of the parallel universe that has long surrounded the operation of a football club in this country. Many clubs appear to operate outside the accepted commercial and legal boundaries that other businesses must adhere to.

The Business Model 19. We began to realise that one of the key issues with clubs we were reviewing was the fact that, unlike every other sector of business (outside the charity sector) in this country, the main aim of most football clubs is not to make a profit. For that reason, profits are rarely heard of in the industry. The purpose of a football club is actually to achieve an on field footballing performance which is commensurate with the expectations of the fans and the owners. 20. This leads us to wonder whether, for the vast majority of football clubs in the country, the use of a limited liability company really is the correct vehicle. 21. We believe there may well be a better model under which all but the upper two tiers of football in this country are owned via a different model of ownership, such as a community interest company (“CIC”), a company limited by guarantee or an incorporated association where the aims of the entity are non-profit related, where ownership can be widespread and community based and where the club can be better integrated into the structure of a community. 22. In Australia for instance, most of the rugby league clubs are owned by companies limited by guarantee where the members (ie the local fans) are members of a licensed local club (called a “Leagues club”) that raises funds for the team via traditional leisure and hospitality offerings (restaurant, bar, nightclub, hotel etc) that generate revenue to cover running costs of the Leagues club and the balance is then ploughed back into the team. The key is that such clubs are not for profit, can enjoy special tax status and provide a very useful social bonding effect within a community. 23. We would welcome further consideration of the CIC model being discussed by the committee. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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The Nine Point Deduction Rule

24. Given that our experience to date has been predominantly based on acting for potential purchasers of clubs, it appears to us that the best way to encourage the efficient passing of control between underfunded clubs to better capitalised new owners is via the administration, CVA or insolvency process.

25. At present, in order to purchase a club, there are a number of stakeholders who are owed money (typically including the banks, the directors, the owners, the football creditors, bond holders as well as trade creditors) and on a solvent basis, it is incredibly difficult to secure a deal which satisfies the needs of all such stakeholders, particularly when the banks (who generally are actually the legal controllers of the clubs) are keen to encourage the sale to be seen as a process instigated by the owners, meaning that you are negotiating with owners who are desperately keen to argue there is equity value in their personal positions when generally, there is not.

26. In every other sector, the major creditors of a troubled business would merely appoint an administrator who would assume executive control, assess the merits of the business and merely decide to sell or wind up the business. This does not happen in football nearly as much as it should and we believe the key impediment to such is the nine point (10 points in the Championship) deduction rule.

27. “Men of football” will tell you that this is a vital rule designed to punish clubs that spend beyond their means and try to “buy promotion”. Whilst there is some merit to this, we believe that the nine point deduction rule (and their equivalents in the lower leagues) is actually acting as a potentially harmful impediment to what should be a much more orderly transfer of control and should be suspended to enable the sort of restructuring that is occurring in almost every other sector in the country, other than football.

28. The nine point rule was designed to give the administrators of the game a stick with which to beat clubs to encourage them to stay on the financial “straight and narrow”. The policy behind the rule is that by imposing such a drastic footballing consequence on a company operating a football club, such entities either followed sound and responsible financial practices or suffered the unfavourable football and business consequence of losing hard won points, which may lead to the ultimate punishment, relegation.

29. Thus, the rule was designed to incentivise clubs to ensure they operated solvently, that they were able to pay their debts as and when they fell due and to ensure that they managed their businesses and finances responsibly and did not let their debt positions get out of control.

30. We believe that the rule is not currently acting as an effective deterrent. The influx of significant amounts of cash from the sale of media rights, the lack of any salary cap or downwards salary pressure on players’ wages across Europe, the perceived need to sign the world’s best players in order to maintain competitiveness and thus maintain sponsorship, media rights and other commercial revenue streams and the lack of consistent standards of financial management and corporate governance that you might expect from businesses with multi- million pound turnovers has meant that several clubs have reached a point where without the ongoing support of their creditors, there is no obvious way for them to avoid insolvency.

31. Practices across many top flight UK football clubs have become grotesque when compared with normal business benchmarks; for instance the almost universal rule of thumb is that salary costs should never be greater than 33% of a group’s turnover. Against this, figures of 70% and above are not uncommon in the Premier League. In fact, the recent UEFA report into football finances identified 57 clubs whose wage bills equated to 100% of turnover and also found that 56% of all European footballing debts reside within the Premier League. The figures speak for themselves.

32. Given the draconian consequences suffered by Premier League clubs such as Portsmouth in 2010 as a result of appointing an administrator, boards of directors of other clubs are loath to follow the same steps in similar circumstances. This leads to clubs continuing to trade, risking allegations of wrongful trading and personal liability for the directors, rather than going into administration. A footballing consequence should not discourage a board from complying with the law and potentially causing unnecessary additional losses to creditors. As a result, clubs never properly deal with their debt burden and enter into a vicious cycle of spiralling debt which, if left unattended, leads to the situations that clubs like Portsmouth and others have found themselves in.

33. Further as the new UEFA financial fair play regulations come into force, it will become clear that if the Premier League wants their members to be participating in Europe, many of their members will need to radically restructure their debts; and quickly. Administration may well be one route to achieve such.

34. Thus, we are concerned that rather than encouraging clubs to adopt sound financial practices, the nine point rule can operate to positively discourage the boards of clubs from taking advice and where appropriate appointing administrators, which is what the law may require when a club is no longer able to pay its debts and is what many clubs need to do in order to address their unmanageable levels of debt. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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The Fit and Proper Person Test 35. We note that you have asked for views on the effectiveness of the fit and proper person test. 36. Whilst we note that the Premier League has widened the range of offences that are relevant for consideration before granting consent, we believe that the key aspect that is not dealt with is not the character of the new owner, but the financial wherewithal of the new owner. 37. Surely the test should be, in addition to the present matters, whether or not the new owner has the financial ability to place the club in a better situation by repaying debt and putting in place a sustainable business plan for the club going forward. Any new owner must deal adequately with historical debt. 38. Whilst circumstances may change for an owner (as was the case in relation to West Ham’s Icelandic owner for instance), there are clearly owners who have taken control in circumstances where they never had the financial resources to deal with the club’s financial difficulties. 39. Indeed, we often here the phrase “all you need is £x million to nick the club” which is generally the smallest amount possible to get the banks to agree to lift their charge and allow the shares to be sold to the new owner. 40. Thus, we believe the business plan of a new owner should be vetted by the Premier League in parallel with their fitness for occupying a board seat at the club and a plan to significantly reduce debt should be a pre- requisite for the gaining of consent.

Attachment 1 Specific Questions Should football clubs in the UK be treated differently from other commercial organisations? We see no valid argument in favour of football clubs deserving special treatment. Ultimately, it is a game that is loved by many in this country, but, nonetheless, as a corporate entity with debts, creditors, employees and staff, clubs should be treated no differently from any other operating business in the country. Any business that does not meet its HMRC obligations, that trades whilst insolvent, that does not pay its creditors nor its lenders is not viable and the laws of the land deal very efficiently with such businesses. Rules such as the nine point rule and the football creditors rule ensure that football and the football industry operate outside the laws of insolvency which should not be tolerated any longer.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? Given the size of the businesses in the top flight of football, thought could be given as to whether the principles of the UK Corporate Governance Code (formerly the Combined Code) which sets out standards of good governance in relation to board constitution, remuneration, accountability and relations with shareholders for listed companies, should apply to football clubs, particularly those in the top two flights of the game. All companies with a premium listing of equity shares in the UK are required under the UKLA’s Listing Rules to report on how they have applied the UK Corporate Governance Code in their annual report and accounts and perhaps this can be applied to football as well. Alternatively, perhaps a more gentle approach might be similar to that adopted by companies listed on the AiM market of the which are encouraged to comply with the corporate governance guidelines of the Quoted Companies Alliance which are aspirational in nature and represent best practice. The better run companies thus tend to comply with the guidelines, particularly those seeking investment from serious institutional investors. If clubs want to attract investment from third parties, pension funds and fans alike, the first step would be to do what any other company in the country does, namely, put in place an impressive management team, adopt a business plan that is professional and which demonstrates an ability for the club to manage its cashflows, have a blend of non-executive and executive talent on the board, put in place robust and transparent governance and reporting structures as well as document its affairs in a professional and organised way.

Is there too much debt in the professional game? Whilst every club is different and there are wildly differing issues and owners, certainly the clubs that we have diligenced have been saddled with levels of debt that were utterly unsustainable and in relation to which they had limited prospects of being able to service out of their own cashflow. We would support a change in emphasis on using equity to fund clubs going forward, in particular equity supplied by supporters. We have seen structured financial products in the market that could easily be adapted to the football industry that would access SIPP investments from fans for instance. We have a number of interesting ideas about how to move away from the debt funded model. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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What are the pros and cons of the Supporter Trust share-holding model? We do not have sufficient information on the supporter trust shareholding model to pass meaningful comment. However, we suggest that CIC’s, particularly for lower league clubs, may well be a very useful model to encourage clubs to adopt. A CIC is formed primarily for social enterprises that are being carried out for the benefit of a community and this remains the primary focus of the company for as long as it remains in existence. Importantly, the Companies Act 2006 permits the use of CICs already so no legislative change is required. CIC’s are not for profit, provide the directors and shareholders with the benefit of limited liability and their primary purpose is to pursue activities designed to benefit the community, which is a core principle incorporated into the legislation and set out in terms of the “community interest test”. We would be happy to discuss further the merits of the use of such entities. We also believe that creating a licensed club within the community that is linked to the local club and funds it, much as the way that rugby league if funded in Australia for instance, is a model worth considering.

Is Government intervention justified and, if so, what form should it take? This is a difficult issue and one that we have not developed an agreed position on. One could argue that, in order to lift standards of corporate governance in the football industry, all that is arguably necessary is for the full force of the law to be applied to the football industry in the same manner as it does in other sectors. This would ensure over time that good governance was rewarded and bad governance punished. We are strong advocates of ending any perception that football be viewed as a special asset class where the normal rules do not apply. For so long as proper standards of corporate governance, such as a majority of non-executive directors, independent chairman, employing a qualified finance director, adopting and complying with written policies (eg the Bribery Act) and the use of committee structures similar to listed companies, are not commonplace in football, it is difficult to imagine the industry recovering to benchmarks set by better run industries. New management, possibly with non-footballing backgrounds, are desperately needed to enter into the industry, in particular, those with no great love or affinity of football, merely the skills, experience and talent to assist to put in place proper systems and follow best practice. Apart from an influx of new managerial talent and an increased emphasis on corporate governance, the Government could help by announcing its intention to apply the full force of the law to clubs. This would mean HMRC aggressively pursuing clubs that withheld PAYE and NICs payments, the FSA pursuing directors that allow their clubs to continue to trade whilst insolvent and passing legislation to render inoperative the football creditor rule in insolvency situations. Every other industry is subject to these realities, so should football. Another option, and one that we also have sympathy with, is that without central leadership and specific intervention, it is unlikely that the football industry will change from within and if it does, that change will take too long. We would be in favour of a super regulator being implemented to be responsible for football in this country; one that policed the game much in the same way as the UKLA and FSA policies those entities admitted to trading on the London Stock Exchange. In order to ensure that the regulator was not politicised or, perhaps to ensure that politicians did not baulk away from taking these necessary steps for fear of voter backlash, perhaps the regulator should be an independent body both in management and funding (and funding could be achieved via a levy paid by clubs or indeed the Premier League and Football Association for instance). The role of the independent football regulator could be many and varied. Whilst we acknowledge that there may not be a great appetite for additional public bodies during these austere times, the regulator could: — Governance: taking its lead from the Combined Code and QCA Guidelines, create corporate governance, financial and commercial benchmarks and levels of expectation about how the game should be run in the UK and bring about changes in the way it is administered and governed so that the football industry was sustainable and financially viable in the long term and, perhaps, with an aim of making it more likely that the national team was successful; — Compliance: require each club to have a compliance adviser (which could be a law firm) whose role it would be to independently assess the management of a club against best practice corporate governance criteria and report back on the administration of the club against a set of acceptable corporate governance and financial benchmarks; cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Licensing: consider putting in place and then administering a licensing scheme for instance under which all clubs in the land would be required to satisfy an ever increasing list of criteria that would focus on corporate governance and sustainable operating practices; — Regulate FA: regulate the affairs and policies of the FA and, in so doing, seek to overhaul its administration, rules and promote levels of corporate governance in the game; — Financial management: take steps to restructure the finances of the game in the country or—as we suggest—introduce gradual changes to the football landscape towards a more sustainable and financially viable game; — Restructure of football: acknowledge that perhaps there are perhaps too many clubs and not sufficient funding available for all football clubs to continue in the UK indefinitely. If that premise was accepted, the Regulator may well oversee the gradual transition of football into a new smaller, sustainable two tiered model. This might involve for instance: — creating a permanent division between the top two divisions of football in this country and the remaining divisions, thus ending the romance of a third division club making its way into the Premier League; — this would be done gradually by putting all clubs on notice now that promotion and relegation into the Championship will cease in five years time; — once that five year period was over, for the next three years, the bottom three clubs in the Championship could be permanently relegated (thus shrinking the top tier of football in the country to a more manageable and financeable level); and — clubs could be incentivised to merge or be wound up or convert to CIC entities across the country. There are obviously many other roles that a regulator would or could play in football. The above represent merely a few suggestions which we would be only too happy to expand upon should you wish.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? No comment. January 2011

Written evidence submitted by the National Association of Disabled Supporters (NADS) 1. NADS was established in 1998 to represent disabled football fans in England and Wales. NADS works with key stakeholders to improve access to sports stadia. By using the special influence of football, NADS aims to raise awareness for a more accessible society whilst encouraging more disabled people to attend live football and other sporting events. 2. Background. More than 10% of the population is disabled. One in four families includes a disabled person and six out of 10 people know a disabled person. People with reduced mobility represent more than 40% of the population. 3. 50% of all disabled people have never participated in leisure or sport activities. It is difficult to establish the exact numbers of disabled fans currently attending football matches. We estimate it to be at least 30,000, but this should of course be much higher and provided we can ensure equal access within our stadia on matchdays. 4. Supporting football and attending live matches is an integral and vital part of our culture and tradition. Matchday crowds are increasingly diverse and more representative of our multicultural society. This should naturally include many more disabled people. 5. NADS has many testimonies of the health and well-being benefits in attending live football matches. But beyond these personal stories, we should never forget that social inclusion and equal access is a basic human right and fundamental pillar of social justice. 6. It is clear that people experience great joy and a sense of belonging in being able to follow football alongside family and friends. It is important to recognise the moral, legal and good business cases for providing truly accessible stadia. 7. The annual spending power of the UK disabled community is over £80 billion. Disabled people should be seen as valued customers with accessible venues and services making good business sense. NADS is working with the football authorities to ensure this message is clearly heard within the game. Good access equals good business and disabled people do influence choice. When they can’t attend an event or use a service, then most often, nor will their family or friends. 8. State of the Game. Some clubs provide excellent facilities and services, but we believe that many professional clubs do not comply with legislation and regulations and as such are discriminatory to disabled cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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fans. Many are failing to meet football’s own guidance and minimum standards. This is unacceptable within an industry that remains collectively wealthy with record broadcasting sponsorship in 2010–11. 9. There is a substantial shortage of accessible matchday seating within many stadia, such as places for wheelchair users and amenity seating for fans with limited mobility or who use an assistance dog. Many football clubs are struggling to fill their stadia on matchdays, but still there are insufficient numbers of wheelchair spaces in particular. 10. Our best information is as follows. Only 13 of the 92 professional football clubs provide the minimum recommended numbers of wheelchair user spaces and amenity seats. Many clubs offer very few away spaces, some as low as 3. Consequently, many disabled people are unable to gain access to matches. 11. Only 37 English League clubs enable disabled away fans to sit with their own supporters. 12. Poor sightlines or views within disabled seating areas are commonplace with views often completely blocked by stewards, police, players warming up, match officials and other fans that stand at key moments of the game or who persistently stand. 13. Many clubs offer only pitchside accommodation to wheelchair users with no shelter from the rain or ball. At some clubs, especially where seating is pitchside, the roof edge of the stand ends directly above the disabled fans and pours water onto them. 14. Only 21 of the 92 provide a full audio described commentary service for partially sighted and blind fans. Accessible parking and club amenities are often limited, of a poor standard or nonexistent. 15. Accessible services for blind and partially sighted, hard of hearing and Deaf and learning disabled fans are provided at some clubs but this is an area that needs further attention. Clubs should provide large print and audio match day programmes and accessible club websites with clear information. Hearing loops and accessible text phone services should be routine. Audio descriptive commentary should be offered at every professional club. 16. Being able to attend a match and sit with your family or friends is taken for granted by most fans. This is frequently denied to disabled fans and they often have to sit in a completely different stand and use a different entrance. Disabled fans with children and families with a disabled child can find this an impossible situation. 17. Disabled fans often face having to sit with home fans as away supporters and many have stopped travelling to away games because the situation is so dreadful. This is completely unacceptable in terms of the football fan experience; it is quite simply miserable to have to sit with the opposing set of football fans. Disabled fans are often asked to hide their team colours, to refrain from celebrating goals and so on. 18. However, it can also be an intimidating and hostile experience. Disabled fans have been verbally abused and threatened and some have had coins, cigarette lighters, urine and other items thrown at them. We need to address this issue urgently, before someone gets hurt. 19. Let’s also be clear about the matchday experience. 82% of British football fans agree that being around other fans in the atmosphere of the grounds is as important as watching the game itself. 85% of British football fans associate football with friendship and camaraderie. (Football Passions Report 2008.) Disabled fans should not be deprived of this experience. 20. Existing stadia and venues can be improved and adapted to remove physical, sensory and intellectual barriers. Several clubs have used smart inclusive, lost cost design solutions and implemented good practice to improve access to their stadia. 21. There is an opinion among some people in the game that what we are asking for cannot be achieved because stadia are old and nothing can change until clubs move to new premises. We have to end the myth that clubs cannot make reasonable adjustments without incurring prohibitive costs, in almost every case, this is simply not true. 22. Several clubs stand as good practice examples in showing what can be achieved at existing stadia to meet footballs own minimum standards. Derby County and Everton have proved that elevated disabled fans seating positions can be added to existing stadia. MK Dons has installed flexible disabled seating in its new stadium but this is also a solution for some existing stadia. Arsenal added prefabricated aluminium super-risers to further elevate several wheelchair platforms originally built with obstructed views and we understand that a few clubs are now considering the installation of similar platform super-risers in wheelchair user areas. We firmly believe that with the will and some careful planning a great deal can be achieved and certainly that which is reasonable. 23. The claim is often made that many non-disabled fans can’t get tickets to games. Whilst it is true that some clubs sell out for some high profile matches, it is apparent that all clubs now have to be more creative in selling their matchday tickets. 24. Most clubs sell tickets on the gate or through their ticket office on matchdays. Meanwhile, disabled fans are frequently unable to get tickets and we have received complaints from disabled fans who have tried to purchase tickets before a match along with family or friends only to be turned away because there were cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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insufficient wheelchair spaces and yet there were as many as 20,000 empty seats in the stadium at the game. Clubs are literally turning away valuable customers and good business. 25. Some clubs continue to deny disabled fans an equal right to season tickets because they do not provide sufficient disabled seats such as wheelchair spaces—the waiting lists are disproportionately long and the information and process is not always clear or transparent. One club in particular refuses to sell season tickets to wheelchair users and currently applies a pre-assigned rota scheme with no choice of which matches are allocated. 26. By providing adequate accessible facilities and services for disabled fans and customers, clubs can increase their business and revenue. Disabled people will become loyal fans and worthwhile customers and will often bring family and friends as new customers too. 27. In 2008, NADS gave evidence to the All Party Parliamentary Football Group Inquiry into English Football and its Governance. In their subsequent report, the APPFG made a number of recommendations for improving the situation for disabled fans. 28. The APPFG was especially concerned “to hear of the troubles that disabled supporters still face in both accessing the stadiums themselves and then viewing and enjoying the game once inside” and noted that the provision for the disabled is clearly unequal. They supported NADS’ recommendation for an independent access audit of all clubs, with the necessary improvements identified and a clearly defined business plan prepared. 29. The APPFG further noted that “that where finances prove to be a genuine issue for some clubs, funds should be made available from the Football Stadia Improvement Fund (FSIF)”. 30. The report also recommended that NADS be appointed as the game’s disabled supporter consultants and extend the services they currently provide to the FSIF in which they are consulted on all improvements and additions at a club that is awarded an FSIF grant. 31. The APPFG also supported NADS in its bid for core funding in line with that provided to other representative football supporters groups by the football authorities. “NADS is making a significant and important contribution to the football family providing support to the football authorities, clubs and disabled supporters on a daily basis. We recommend that NADS should be afforded the same level of financial support from the game as that enjoyed by their non-disabled peers.” 32. There have been recent developments with respect to fans funding and we understand that a fans fund is being set up. NADS is in discussions with the football authorities and will be submitting an application for core and project funding. We hope that from next season, we will be better funded by the football authorities so that we can continue to support all stakeholders in the game and to develop our awareness projects and contribution to improving inclusion for disabled people within football. 33. With respect to the legal case and disability legislation and regulations for football clubs—football has a regulatory framework which fits into three broad categories: (a) External legislation—the law. The Equality Act 2010 (previously DDA); Building Regulations— British Standard 8300:2010 and Part M Building Regulations 2004 (with Accessible Stadia Guide imbued into Part M); Equality Act 2010: Explanatory Notes; and EHRC guidance: What equality law means for your business when you’re providing goods, facilities or services to the public; Disability Rights Commission—Code of Practice Rights of Access: services to the public, public authority functions, private clubs and premises. (b) Internal football and government regulations. The Accessible Stadia Guide published by the Football Licensing Authority (FLA) and FSIF in 2004; the Guide to Safety at Sports Grounds 2008; Football Association: Addressing the Requirements of Part III of the DDA 1995—A Management Guide for Football Clubs 2003; Premier League: Guidance for Clubs on Disabled Fans and Customers; and Football League: Guidance for Clubs on Disabled Supporters and Customers (c) Independent reports and recommendations. The , 1990; 1998 Football Task Force Report; Independent Football Commission (IFC) 2003 Annual Report; various reports, surveys and guidance documents, including Designing for People with Disabilities, Fans at the Track Side, and Leaving the Trackside. 34. External legislation—the law. Alongside building regulations, the Equality Act 2010: Explanatory Notes Section 20 explains what is meant by the duty to make reasonable adjustments for the purposes of the Act. The duty comprises three requirements which apply where a disabled person is placed at a substantial disadvantage in comparison to non-disabled people. The first requirement covers changing the way things are done (such as changing a practice), the second covers making changes to the built environment (such as providing access to a building), and the third covers providing auxiliary aids and services (such as providing special computer software or providing a different service). For the second requirement, taking steps to avoid the disadvantage would include removing or altering the physical feature where it would be reasonable to do so. 35. Independent reports and recommendations. Lord Taylor made several recommendations for disabled fans in 1990. These included “provision for safe, spacious seating for wheelchair users with a seat alongside cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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for a companion, protected from the weather, accessible to disabled toilets and easily reached from a car park. Facilities should also address the needs of the ambulatory disabled and the visually and hearing impaired.” 36. In 1998, the Football Task Force Report made 52 recommendations. Seeking to put right and set mandatory requirements on minimum numbers of wheelchair spaces, and adapted seats for disabled people. Recommended improvements for disabled fans in line with the DDA, including views, shelter, access, toilets, refreshment bars, parking, ticketing and stewarding. Annual visit of “hit squads” to all grounds to conduct audits of facilities and to monitor progress on improvements with a proposal that NADS should carry out these assessments. The ability for home and away disabled fans to sit amongst fellow spectators at all grounds. Provision of wheelchair access to all existing social and retail facilities at grounds. Harmonisation of ticket allocation for disabled spectators with those for general ticket allocation. 37. In 2000–02 NADS carried out access appraisals of all clubs in the professional game with funding from the FSIF. No further funding was made available to continue this area of work. 38. The Independent Football Commission (IFC) an independent football arbitrator reported on the lack of progress in implementing the 1998 Football Task Force recommendations in its 2003 Annual Report. 39. Internal football and government regulations. In 2004, the FLA and the FSIF published the Accessible Stadia Guide (ASG) following consultation with a working group of representatives from across football including; the FLA, FSIF, NADS, the FA, the Premier League, the Football League, Sport England and an Observer from the Office of the Deputy Prime Minister. The ASG provides guidance on the design of facilities to meet the needs of disabled spectators and others. It was imbued into Part M of Building Regulations in 2004. It stands today as a good practice guidance for all football clubs and sports stadia and sets out football and governments own minimum standards. 40. With advice from football’s governing bodies some football clubs commissioned access audits in and around 2004 and in anticipation of DDA Part 3 amendments. We believe that many of those clubs put these reports away and did not develop and implement an access improvement plan in line with their evolving duties. 41. With support from the FA and the Premier and Football Leagues, NADS launched an Access Audit programme for football clubs and sporting venues in 2010. The audits are conducted by a qualified NRAC auditor in line with legislation, regulations and football’s own guidance. It is a thorough audit which also provides the club with an access business plan of improvements that are reasonable. We are currently encouraging clubs to commission professional audits rather than well intentioned non-professional access appraisals. 42. NADS is always keen to acknowledge those in the game who work hard to ensure equal access and the many that are ready to do more. Wembley, our national stadium stands as an example of good practice, with world class accessible facilities and services. NADS continues to work with the FA and Wembley to ensure that these standards are maintained. 43. In closing, NADS would like to propose a plan for change. The goal is to achieve equal access and to ensure that the game and its clubs meet their duties to disabled fans and customers. 44. Some would say that each club is an individual business and as such makes its own decisions with respect to the law and equal access. We believe that the football authorities should do more. 45. Football is our national game and we believe that its governing bodies should look to implement rules and regulations regarding reasonable access to their professional clubs. This would ensure that disabled football fans are treated fairly and equally within the law by all clubs in their League and Cup competitions. 46. In 12 years, football managed to convert most stadia to all seated. When football and government put their mind to a project, anything is possible. We must now work together to put things right for our disabled fans. 47. NADS requests that there be an official audit (or measure) of the current level of accessibility at all professional clubs. The Football Licensing Authority could act as the arbitrator, considering the recommendations clearly described within the Accessible Stadia Guide and ensure that all aspects are assessed and monitored. 48. The FLA already overseas safety and licensing of stadia, so it would seem logical that the FLA should also consider whether clubs meet football and government’s equality legislation, building regulations and minimum access standards for disabled people. 49. The FLA could provide ongoing support to clubs, advising them in making access improvements in line with worked examples within the ASG and in implementing football’s own policy guidance including that which has been most recently provided by the Premier and Football Leagues to its clubs. 50. As the national representative body for all disabled fans, it would be sensible for NADS to play a key consultative role. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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51. It could be a condition of licensing that clubs should have commissioned a professional access audit such as the NADS Audit. The FLA would then agree an access strategy or business plan of reasonable adjustments and improvements with each club with fair and sensible timelines. 52. The FLA would monitor the progress of the agreed access strategy at each club and ensure that improvements were made. Penalties could be considered for clubs not meeting their agreed improvements. It could also be possible to suspend the license of a club that repeatedly failed to comply with the law. This could be a duty performed by the FLA on behalf of the football authorities to ensure that their clubs are fit for purpose for public events. 53. NADS believes that many clubs fear the expense involved in making access improvements and reasonable adjustments, however most improvements are not prohibitive. 54. The FSIF currently stands at approximately £5.5 million per annum and is described as “The Football Stadia Improvement Fund (FSIF) provides grant aid to clubs in the Football League, the Conference and the , down to step 7 and below that want to improve their facilities for players, officials and spectators...... We have also published Accessible Stadia, a good practice guide to the design of facilities that meet the needs of disabled spectators and other users.” 55. The FSIF could not support applications from every club wishing to complete outstanding access works nor should it be expected to. However, where finances prove to be a real issue for individual clubs then funding or part-funding could be made available—perhaps with a short-term increase of funding available to the FSIF. 56. Clubs that needed financial assistance should require it once only to make all necessary reasonable adjustments to achieve a level playing field. Any future improvements or additions to the stadium or new build would in any case be subject to inclusive design regulations. January 2011

Written evidence submitted by Paul Baggaley, Chairman, Newark Town FC 1. Charter Standard Club, qualified referee, level 3 coach, school governor particular interest school sport, Chairman local Community Sport Network. Previously worked for Sport England assessing bids for funding, mainly schools. Worked for Derbyshire County Council £6.5 million portfolio to develop community use facilities on school sites. Previously Chief Executive Officer for the National Federation of Anglers now the Angling Trust, NGB for the sport of angling, led the modernisation of the sport. 2. Report submitted as Chairman of local CSN, Chairman of Newark Town FC and my own personal views as a coach referee and volunteer.

Should football clubs in the UK be treated differently from other commercial organisations? 3. Yes. 4. Professional football Clubs are commercial organisations, but often have links to local communities through their supporters network and community schemes. However, it is unlikely almost certainly impossible for supporters to affect the running of their clubs and the bigger the club the more difficult the task.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 5. No. 6. I have been involved with Football for over 40 years and despite constant attempts to change and reform football governance at local regional and national level almost nothing has changed. The FA has failed to address issues from the most simple to the most complex. 7. I could write a book. The biggest issue is that the FA is bad at relationships, they try to be all things to be all people and they constantly fail because of vested interest groups working in the sport. The pro game wants and needs a different approach to the amateur game. The FA pays little attention to the grassroots and find the County FAs and Leagues difficult to deal with. They deal badly with FIFA and UEFA. The relationship issue is the overarching problem and has never been addressed.

Is there too much debt in the professional game? 8. Yes. 9. However, shareholders and owners can run their businesses as they see fit. I doubt whether the FA is powerful enough to introduce rules that will limit the financial risks that clubs take. They might be able to working with UEFA, other national NGBs and FIFA, but once again this comes down to relationships. Licensing of clubs would be step forward if it could be implemented. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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What are the pros and cons of the Supporter Trust share-holding model? 10. Pros, the asset lock, community ownership and involvement, an awareness of public benefit and sustainability. 11. Cons, some club officials and supporters still want success at any cost. The model limits ambition. Some people would see this as a disadvantage.

Is Government intervention justified and, if so, what form should it take? 12. Yes. 13. The FA know what they need to do they have just failed to do it. The Government should set out what the FA needs to achieve and monitor performance using Business Assurance or Performance Management Process. The Government can sanction the FA through withdrawal of funding and grants. The Government has been complicit in the FAs failure, because it has continued to support the FA despite poor performance. If the FA was a school and subject to Ofsted it would in special measures. I am not suggesting a sporting Ofsted just effective performance management.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 14. Yes. 15. Germany appears to have a governance model that limits risk taking. There is also an issue of fair play and level playing field. In England the dice roll in favour of clubs with the most money, should this be the case? 16. Swimming has been successful in coordinating its sporting network although it is difficult to make a comparisons because it is the uneven balances of power that make football difficult to govern. The FA is far less powerful than some of the Clubs and Leagues that they are trying to govern. This is not the case in other sports. January 2011

Written evidence submitted by Chester Football Club Introduction 1. Chester Football Club is a relatively new club, formed in 2010, but with a history in the community going back to the formation of the original Chester Football Club in 1885. The reformed club of 2010 is supporter owned through the vehicle of an Industrial and Provident Society and came about following the liquidation of Chester City Football Club in March 2010. The board of the new club welcome this opportunity to report our ongoing journey to the Commons Select Committee and hope you will find it useful and informative. 2. This report is a case study of our journey. With reference to the objectives of the Commons Select Committee, we believe our experience contributes valuable evidence on the following matters in particular: — Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? — What are the pros and cons of the Supporter Trust share-holding model? 3. In this report we will: — Document 20 years of almost total despair with the club in private hands. — Provide evidence that the FA “Fit and Proper Person” tests are toothless and not fit for purpose. — Provide evidence of poor governance caused by political agendas between football’s various governing bodies. — Document our rebirth following the inevitable liquidation after 20 years of neglect from both owners and ineffective authorities. — Demonstrate that supporter ownership is not only viable, but is highly advantageous from a business perspective and also a powerful catalyst for social inclusion and civic pride.

The Slow, Agonising Death of Chester City FC 4. The recent history of the club begins in 1990 with the loss of our old ground to developers following financial issues which caused the club to sell up and play in exile at Macclesfield’s ground for two years. The club returned to Chester to the newly built in 1992, a smaller but functional stadium at the bottom end of the Sealand Road Industrial Estate. 5. Off field problems were never far away. Property developer Mark Guterman was installed as chairman in 1994 and his tenure saw the club face several winding up orders and threats of player strikes for non-payment cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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of wages. After a long and protracted series of crises, the club finally went into administration in October 1998 with Begbies Traynor appointed as administrators by the courts. 6. Chester’s main supporters’ organisation during this period of crisis were the Independent Supporters Association (ISA). The ISA organised leafleting campaigns throughout the city to encourage the local populace to attend matches in numbers to help stave off the financial crisis. Fans of other clubs were also encouraged to attend matches to show their solidarity with the Chester fans. The ISA’s efforts were acknowledged by the administrators who went on record in February 1999 stating that without the commitment of the fans, the club would have already folded. 7. In July 1999, the club was eventually purchased and brought out of administration by American Terry Smith, son of a wealthy North Carolina motor dealership owner and a former American football player. His tenure was naïve and eccentric to say the least. He got off to a poor start with the fans by immediately appointing himself as manager and using American football coaching techniques to coach a bewildered English “soccer” team. Eventually Terry saw the error of his ways and appointed as manager, but it was too late and despite an heroic effort by Ian and the players, backed by a mammoth “great escape” campaign orchestrated by the ISA, the club were eventually relegated from the Football League for the first time since their appointment 69 years earlier, on goal difference, on the final day of the season. 8. Life was not to be any easier in the Nationwide Conference. Terry initially appointed as manager to appease the fans, Graham being a popular midfielder who had played for the club from 1986–94. Graham’s position was undermined though with Smith interfering in first team matters, culminating in Barrow being sacked at the end of the season despite a decent 8th place finish, a move highly unpopular with the fans. 9. The following season was a disaster. It started with a stewards walkout, resulting in the withdrawal of the club’s safety certificate, and fans staging boycotts outside the stadium due to Smith’s chaotic reign. Gates fell to around 600, some 2,000 down on the average during the relegation season. A protest march organised by the ISA saw fans carry a symbolic Chester City FC coffin down Bumpers Lane to the stadium. A Supporters Trust, affiliated to Supporters Direct, was also set up by the fans during this period in November 2000. The club finished the season in the bottom half of the table after avoiding another relegation. Terry was eventually forced to admit defeat, and sold the club to boxing promoter Stephen Vaughan in October 2001. 10. The internet age now being upon us, Chester’s fans forums were immediately besieged by supporters of Barrow Town FC in Cumbria, Vaughan’s previous club, warning us that his tenure there had seen attempted asset stripping of their Holker Street ground and an investigation into suspected money laundering by HMRC. Vaughan, however, had come to Chester promising a great revival and quickly delivered with investment into new players under manager and former England defender Mark Wright. A first season of consolidation saw a promotion push the following season with Chester missing out following defeat to Doncaster in the play-offs. With Vaughan apparently delivering and Chester fans simply glad to see the back of Smith, the warnings from Barrow were soon forgotten. Success finally came in season 2003–04 with Chester promoted back to the Football League in front of a capacity crowd at the Deva Stadium, winning 1–0 to Scarborough to secure the title on 17 April 2004. 11. The good times were not to last, however. A warning came even before the first game of the next season, with Mark Wright being sacked on the eve of Chester’s first game back in the Football League. Vaughan soon followed in his predecessor’s footsteps, meddling in first team affairs under a string of short-lived managerial appointments as the rot set in. The club became a family and cronies affair with two of Vaughan’s sons and several friends on the playing staff matching similar appointments in the boardroom. Late and non-payment of bills became the norm and fans and local businesses alike became disenfranchised. 12. The club was now in terminal decay with fans starting to drift away. The erosion accelerated in November 2007 when fans were asked to pay respects to a “major club benefactor” who turned out to be a Liverpool gangster gunned down in a gangland shooting. Crowds continued to drop with Vaughan racking up huge debts proclaimed to be loans from his own businesses. The club soldiered on for another 18 months before being relegated back to the Conference at the end of the season and put into administration in May 2009 with Vaughan claiming the debt to himself and his companies of a staggering £4 million, much of it secured through debentures. 13. A creditors meeting followed in June which saw the club pass into the ownership of a new company, owned by Vaughan, through a CVA which allowed no competition on favourable terms to any rival bidder due to the presence of the debentures. HMRC contested this CVA through the courts during the course of the close season, and successfully challenged the level of debt claimed by Vaughan-associated creditors, causing the courts to annul the CVA. 14. Chester then became the pawn in a three-way power struggle involving the Football Association, Football League and Football Conference. Without the CVA, Chester should have been prohibited from taking part in the Conference competition, but the Conference came under intense pressure from the Football League to accept Chester; relegated clubs being accepted into the Conference being part of the contract for the two-up two-down promotion and relegation places between the two Leagues. With the two promotion places under threat, the Conference eventually relented with clubs voting to break their own rules and admit Chester into cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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the league several weeks into the season. The FA subsequently transferred the FA membership to Vaughan’s new company, but also fined the Conference for breaking their own rules. 15. Vaughan’s desperate attempts to retain ownership and cast aside debts had temporarily succeeded, but it was to be short lived. He was disqualified as a director in November 2009 for an alleged VAT fraud elsewhere. Despite the events at Barrow and the dubious CVA of the summer before, it was only this event which caused him to finally fail the FA’s “Fit and Proper Person” test. Ownership of the club was subsequently and quietly transferred to his son. 16. Fans were staying away in droves though and crisis followed again in February 2010 when the club failed to fulfil a fixture away to Forest Green Rovers due to players refusing to board the coach until they were paid and the coach company refusing to depart the stadium for the same reason unless paid in advance. The next home game against local rivals Wrexham also fell victim to unpaid bills, the police refusing to provide cover for the event due to unpaid bills leaving the Safety Advisory Group no choice but to revoke the stadium’s safety certificate. 17. HMRC had also filed another winding up petition against the new company, trading only since the previous summer. A crisis meeting of Conference clubs was called due to the unfulfilled fixtures and this time there was no hesitation. Chester, unrepresented by anyone from the club, were expelled on 26 February and effectively ceased trading. The result of the winding up order then became a mere formality, and on 10 March 2010, 125 years of football history in Chester came to a sorry and tragic end in a 30 second hearing at the High Court in London.

City Fans United 18. Well, it didn’t quite end there, and for one simple reason. Football clubs are not limited companies or PLCs. The heart and soul of any football clubs lies firmly with its loyal supporters. Weary from the chaos of 20 years of mismanagement, Chester fans once again rallied for one final, mammoth battle to rescue their club from the abyss. 19. In August 2009, during the crisis of being refused to play the first games of the season, Chester fans held an emergency meeting and the seed was sown to merge the ISA and Supporters Trust to form a new organisation which became known as City Fans United (CFU). CFU was launched in October 2009 and formalities were completed in December 2009 with the election of the board. 20. 500 supporters packed the GuildHall in Chester on 18 February 2010 with the crisis nearing its conclusion, to hear from the board of their plans to re-launch a club should it become necessary. Representatives from AFC Telford United, FC United of Manchester and Supporters Direct were also present, all experienced in forming new fan owned clubs through adversity. The largest applause of the evening came at the end of a presentation from Telford, who were by then fan-owners of a vibrant, thriving, community-focussed football club, six years on from the liquidation of Telford United. Chester fans were ready for what was to come. 21. The next three months saw huge activity as the board put the business plan together with assistance from Supporters Direct and three other fan-owned clubs affiliated to them. With their guidance and support the structure was put in place to form a new club following the events of 10 March. With the lease to the Deva Stadium safely secured from Cheshire West & Chester Council on 6 May, Chester Football Club was formally re-launched on 20 May, fans again packing the GuildHall to witness the unveiling of the new crest and hear encouragement from several former players. Neil Young was appointed as manager the following day and began to assemble his squad of players. 22. Membership of CFU had risen sharply during the first half of the year as the phoenix first emerged tentatively from the flames and then soared and took flight. Volunteers came forwards in droves to help with much needed maintenance work and redecoration of the stadium and to take on roles in the new club. A major sponsorship deal with MBNA was secured. In addition to sponsoring the club’s shirts, they also provided the temporary secondment of one of their employees, a lifelong Chester fan, to work full time as CEO of the new club during the crucial setup period. Positive news only was now flowing from the club; the fans had hope for the future for the first time in years. The scene was set.

Chester FC How a community can make the world of difference 23. After a long pre-season, Chester played their first competitive game against Town on 24 August 2010, drawing 1–1. The first home game of the season on 8 September saw 2,734 supporters turn up to witness a 6–0 victory against Trafford, an attendance some six times larger than the 460 who had witnessed the previous fixture at the stadium in February, three divisions higher. 24. At the time of writing, January 2011, Chester now stand 8 points clear at the top of the Evostik Division 1 North with home crowds at the now sponsor-named Exacta Stadium averaging 2,359 in the league fixtures. The football side is up and running, the club profitable and stable, but it doesn’t end there. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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25. Chester Football Club is founded upon the Club motto, “Our City. Our Community. Our Club”. The 2,700 members, all of whom enjoy equal voting rights, made it very clear to their elected board that they wanted a football club they could be involved in. They wanted a football club that was a cornerstone of our community; one that would be a source of pride for them and the people of our beautiful historic city. 26. Key to this was our engagement with our local communities. To this end, we have worked with our local schools; our community coaches have been into over 40 different schools, and worked with over 3,000 children, coaching them and educating them in healthy lifestyle. We have given away over 2,000 tickets to schoolchildren, and worked with local schools to incentivise challenging children. 27. We have worked with children within our areas, visiting community schemes, schools and working with one of the local schools in these areas to deliver a seven week year 8 PHSE course on making new beginnings. This course was delivered with the local Fire authority, and will be rolled out to other schools within the area over the coming months, this time with involvement from Cheshire Police. 28. The Deva Stadium, for so long the pariah of the footballing community within the city, has become the hub. Local amateur and junior leagues use the facilities for meetings, and all of the Chester and District FA finals are to be held at the ground this year. This includes two days of junior and mini soccer finals, where over 400 children will get the opportunity to play at the best stadium in the city. 29. We are encouraging the children and youth of Chester to shape the future of our game too, with 21 local sixteen year olds currently on an apprenticeship scheme in sports management at the Club. Cheshire FA refereeing courses are held regularly at the ground, and the introduction of a youth development programme for local youngsters has just been announced for next season. 30. We have also worked hard to build up strong relationships with our local health authority, who use our facilities during the week for drop in clinics and for a less formal environment to engage their mental health patients. We held a “think pink” day for our local breast care unit, raising almost £4,000 for them. They are one of many local charities we work with. 31. Whilst we see a benefit from our community programmes in developing a stronger supporter base, we take real heart in receiving letters from our members telling us of their pride that the Club they support and own is making a real difference to people within our society. Our members feel, as we do, that we are part of the Big Society, actively contributing to the greater good of our community.

Supporter Involvement Through Volunteering 32. Another big part of the Chester FC business plan was the ability to utilise volunteers. This was always a concern of the board, as volunteers are often difficult to source and motivate. What we have found has been the complete opposite. Due to the success of the Club in building up a good reputation within the community, and the very nature of being the Club owners, our members have a massive sense of pride and belonging. 33. This has led to us being blessed with a volunteer database that gives the business hundreds of work hours per month for free. Our volunteers do everything and anything, from building maintenance, to cleaning the stands and dressing rooms, and manning our front office all day, five days a week. Our thank you to these great folk, a Christmas party, had over 120 people on the invite list. This level of supporter involvement gives people a real feeling of ownership, which we feel is extremely important for the longevity of the business. 34. There is a real co-operative, roll up your sleeves spirit developing here. People will encourage others to pick up their own litter, because if they don’t, “one of us will have to pick it up”. A website appeal for people to lay pitch covers results in 25 people turning up in minus 2 degree temperatures. This feeling of being in it together, a family, was what we had missed all along. The football almost becomes secondary, as “the Club” becomes the focal point. 35. The benefits of being a community focused, not for profit Club as a business are tangible. The Club has sold around 1,000 season tickets this season, a 20 year high. Attendances at home are averaging over 2,300, the highest since 2004 (a Championship year). We have sold over 1,000 replica shirts, 700 scarves, 600 tee shirts etc. Our shirt sponsors are the biggest employers in the city, MBNA Bank of America, our three free stands have paid sponsors, and we have sold out of match day, match ball and programme sponsorships for the season. Not bad for a part time Club at level 8 of the national game. 36. Everything that we have achieved thus far would not have been achievable were we not a supporter owned Club, that was not for profit. We find that as a supporter owned Club, garnering the trust of our community, our schools, sports clubs, local authorities, business community etc was a lot easier than it would have been as a privately owned Club. People and companies are a lot more willing to be generous with facilities, time and money, when they know that it will be used in the right way. 37. Football is a great vehicle and the ethos of “using football for the common good” should, in our opinion, be at the core of the Big Society programme. We have got a long way to go, but out of massive adversity, Chester now has a football club to be proud of. The people and the great and good of the city are supporting it, and the community are benefiting. So should communities everywhere. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Acknowledgements 38. The board would like to take the opportunity to place on record our thanks to Supporters Direct, AFC Telford United, FC United of Manchester and AFC Wimbledon for their incredible support over the last 12 months in guiding and supporting us to build a business plan and form a club. Finally, we pay tribute to and thank our volunteers and supporters for the tremendous backing they have given to their new club. The efforts of everyone are now being well rewarded. January 2011

Written evidence submitted by Stephen Temple Introduction 1. I welcome this government inquiry into the governance of professional football clubs and the opportunity to be able to comment on the key questions being asked by the Department for Culture Media and Sport (DCMS) Committee. 2. The subject area is of particular interest to me as a Chartered Accountant, a member of the Board of the Supporters’ Trust for Watford Football Club. Having been a supporter of said club since 1977, I am only too aware of the positive and negative impact that clubs can have on their local business and social communities and their own fan base. 3. In recent years, the high profile coverage given to the events at Liverpool and Manchester United has placed this subject into sharper focus. It is a disappointment that has taken these two events to trigger this inquiry. The recent history of the game contains numerous examples of club owners taking excessive financial risks and creating emotional and financial burden on local businesses, communities and the fanbase. These incidents have led to the establishment of a number of supporters’ organisations which recognise that local communities and fans of football clubs have been and will be around for longer than the owners of the clubs themselves. 4. In writing this submission, I have responded to each of the questions being addressed by the DCMS Committee. In drafting this response I have also sought the views of my colleagues on the Board of Watford Supporters’ Trust and fellow Watford fans on one of the main supporters’ forums (the Watford Mailing List).

Should football clubs in the UK be treated differently from other commercial organisations? 5. A football club (or any professional sporting club) is a commercial organisation that has stronger roots in the local community than any other commercial organisation. If a team is performing well, then the local community is often lifted by that success and there is an opposite effect if the team is struggling. 6. There are very few companies that can affect that number of people in one community in that way. While companies regularly go out of business, the impact of such an event does not tend to go much beyond the immediate suppliers and the employees and their families. It would be particularly interesting to compare the social and economic impact of a football club and similarly size business (in terms of turnover and number of employees). 7. As commercial organisations, football clubs should operate as businesses and be run professionally. Directors and staff should follow the law of the land and treat their employees, creditors and customers equitably at all times. Of particular contention here is the “football creditors” rule. This enables clubs to settle football related debts ahead of monies owed to (for example) HMRC, non-playing staff employee salaries and local businesses. Recently highlighted cases of where local St Johns Ambulance staff have not been paid on time only serve to illustrate the inequity generated by this rule. Further, the rule reinforces the short term mindset of many club owners who continue to increase football related debts (and therefore overall debts) in the pursuit of competitive success. While this has always happened throughout the history of the game, its frequency is increasing and many boards appear to over-ambitious to the point of risking the existence of a club in a gamble to get promotion or European qualification. In this context, I’ve welcomed the HMRC’s recent challenge of the “football creditors” rule and I believe many supporters feel the same way. 8. The “short-term” mindset mentioned above is further reinforced by the punishments available to the football authorities. While the authorities have the ability to deduct points if a club goes into administration, this punishment often punishes the fans and the new owners of a club rather than the owners that created the difficulties. 9. Having said that football clubs should be treated the same as other commercial organisations on a financial basis, sight should not be lost of the fact that clubs are a vital part of their local communities. If a professional football club were to go out of business, it will affect tens of thousands of lives emotionally and financially. Clearly, a number of clubs have been lost throughout the history of the league but the potential impact is now magnified because of the national and international popularity of the game in the UK. In a sense, there are similarities here with the impact that a banking failure can have on a local, national and international level. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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10. Therefore, any new governance arrangements within football need to reflect the social responsibility that owners have for running a sustainable club, as well as their financial responsibility.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 11. Ever since the formation of the Premier League in 1992, there has been an increasing feeling amongst fans that the league is self serving and not in the interest of the national games of England and Wales. There is no doubting the quality of the football in the league, its high standard in comparison to leagues in other countries, its popularity or its financial success. 12. However, a national level I don’t believe the league is putting enough into its foundations to help ensure the game continues to be as successful as it is. There are a number of examples of how current governance arrangements go against the long-term interests of the game: (a) The lack of apparent co-ordinated strategy whereby the FA, Premier League and Football League work together for the good of the national game and the success of the English and Welsh national teams. (b) The ability of wealthy benefactors to put money into clubs and take it out again at a moment’s notice, or indeed to raise finance off the back of a club’s assets to acquire a club, leaving the club in financial jeopardy. (c) The lack of effective pro-active governance controls that are able to prevent situations occurring or able to react quickly to punish those at fault. The imposition of a points deduction for going into administration is a good example of this as it damages those who are left behind to pick up the pieces. 13. From a fan’s point of view there is very little scope to influence the rules or know what is going on at their club, voice an opinion or raise concerns. Instead it feels that all decisions are made by those who are far removed from the ordinary fan. It also appears that the FA is too influenced by the interests of the big and powerful clubs at the expense of the rest. 14. I am disappointed that many of the recommendations coming out of the Burns Review have not been forthcoming particularly when it comes to the governance of the F.A. and I worry that without Government intervention this review will collect dust and not be implemented as others have done before. In addition to revisiting Burns comments about the F.A. I’d like to see an independent review into the governance models of the Premier League, and the Football League and consideration of whether their combined effect is in the interest of the national game (and the national economy). I suspect that there are instances where individuals have dual memberships of key boards and committees and there are numerous conflicts of interest. This creates the impression of a nepotistic governance culture with a lack of demarcation lines. In addition, there does not appear to be a clear flow of strategy from the three bodies to football at a grass roots level. 15. In conclusion for this question, I’d like to see a lot more transparency in the game and would fully support a new governance model where clubs are independently inspected in areas such as financial control, financial strength, player development, and corporate governance (for example, remuneration committees, audit committees, internal audit). Clearly not all clubs should be expected to run the same types of controls as available resources differ so widely. Therefore, the independent assessments should be undertaken against a controls maturity model which recognises that clubs in lower leagues do not have as many resources to implement many controls. In effect we would have a licensing system which would need the ability to stop a club competing in the league before the start of the new season if these criteria weren’t satisfied. 16. Initially these assessments should be undertaken annually and made publicly available; in a similar way in which annual reports are made available. In time, the governance model could be risk based whereby well run and stable clubs are inspected less often. 17. For detail of how this type of governance regime could operate, I would suggest looking at aspects of the inspection processes of regulatory authorities such as the Financial Services Authority, Monitor (in the NHS) and Ofsted.

Is there too much debt in the professional game? 18. The general view of fans is that there is too much debt in the game and this view is based on the number of clubs who have been in financial trouble in recent years. My view is that debt is only bad if it is unsustainable. Where debt consists of external lending then commercially the lender will have taken a risk based decision to lend the money and will often have the opportunity to secure that lending. 19. However, many clubs appear to be irresponsible in the way that they manage their finances with respect to player contracts. At Watford and Portsmouth there have been recent instances where players are prevented from playing because further games trigger, for example, further payments to another club or automatic contract extensions. Unfortunately in addition much of this lending seems to be against the assets of the clubs, and predominantly the ground which results in countless clubs now either becoming homeless, paying high rents to play at a ground they once owned and/or having to raise vast sums of money to buy back the stadium. In most cases the people who have got them into this mess are long gone and often pocketing a tidy profit for their work. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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20. My view therefore is that it is not debt per se that gets most clubs into trouble, but poor financial management, poor cash flow predictions and poor understanding of the short and long term financial commitments that clubs have made. 21. Clubs which have overly burdensome financial commitments clearly give themselves a temporary competitive advantage; an advantage which is only removed if they generate sufficient success or, more often, have to undertake radical cost cutting. Financial revenues at many clubs are highly variable (particularly for those clubs involved in relegation battles and promotion campaigns). Because of this, it would appear only right that there should be more transparency of club finances to the supporter and to potential suppliers.

What are the pros and cons of the Supporter Trust share-holding model? 22. Because of the importance of football clubs in their communities, it only seems right that supporters have a mechanism which they can use to organise themselves, voice opinions and be what is generally recognised as the “critical friend”. 23. For the current climate, I believe the Supporter Trust model through Supporters Direct has the right aims and objectives, namely: (a) campaigning for the wider recognition of the social, cultural and economic value of sports clubs; (b) working to ensure that clubs are run responsibly and are financially sustainable; (c) creating conditions in which supporters can secure influence and ownership of sports clubs; (d) providing guidance and support to Supporters Trust groups; and (e) promoting the value of supporter ownership to sports fans, empowering them to set up supporters’ trusts or become members of existing Trusts. 24. Supporters Trusts are encouraged to acquire shareholdings in clubs to help ensure they can be in a position of influence. The positives of this model are. 25. For smaller clubs, the Trust model can be highly effective at keeping supporters close to the operation of the club. I know of instances at a number of smaller clubs in football and where the Trust is actively engaged in running the day to day operations of the club and has enabled the club to keep operating. However, these have only been successful where the members of the Trust have had the required skills to run a club. 26. The negatives of this model are: (a) Trusts can only acquire significant influence if they can acquire a significant shareholding in their club. Without a significant stake, it is debatable whether there is merit in having one at all. (b) There are limits to the amount of capital that Trusts can raise, and therefore the amount of influence through this route alone. (c) Where clubs shares are quoted on the stock exchange it is very easy for the value of the shareholding to be eroded. (d) There is difficulty in finding and replacing Trust officers and volunteers. The time required can be significant and it can be hard to find genuine and capable people, particularly when conditions aren’t favourable for the Trust to succeed and in some cases the Trust is portrayed as an irritant by the club to deflect what the Owners are doing. 27. Not having a shareholding in a club does not prevent a Supporters Trust from being effective. Alternative models can exist where the Trust can have a positive influence on the club. These include: (a) A Director of a Supporters Trust being on the Board of Directors of the football club. The purpose of such a role could be in a Non-Executive capacity and be there to bring expertise to bear, be a “critical friend” and so help ensure that the fans are considered when structural or day to day decisions are being made. At present, clubs appear to pay lip service to this and seem to assume that supporters don’t have the necessary expertise, skills or business knowledge. (b) The establishment of regular contact between the Supporters Trust and key decision makers at the club. In this respect I believe that all clubs should have a designated supporter liaison role whose responsibility should include communication with the Supporters Trust. This role should be in the remit of a Board Director or other senior officer.

Is Government intervention justified and, if so, what form should it take? 28. From a personal viewpoint, I welcome this enquiry by the government as the stability of the football industry has caused significant frustration for fans and financial problems for the taxpayer. The evidence shows that this instability has been growing in recent years and that the football authorities have either allowed the situation to develop or have been unable to act with sufficient strength or speed. 29. I suspect long term Government involvement would create more difficulties than benefits. However, at present it is clear that football has consistently shown that it is unable to effectively govern itself so the question is more about the form and longevity of Government involvement as apposed to whether it needs to step in. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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30. If the government is committed to its “Big Society” principles of devolving power then it would seem logical that these principles should be applied to football, with a requirement for fans to be consulted. 31. At a macro level, I’d like to see the government lead an initiative to build an international consensus on the reform of FIFA. There is significant dissatisfaction with the recent decisions to award the World Cups to Qatar and Russia (less so). This dissatisfaction is not just around the independence of voting but also on the seeming waste of taxpayers money as many are questioning why the UK bothered bidding in the first place. 32. I would also like to see the government involved with ensuring the proper implementation of the UEFA’s Financial Fair Play measures. In March 2010 the Premier League negotiated concessions to these measures and my concern is that they will continue to push for such concessions rather than recognise the precarious state of football finances. 33. At a micro level, I’d like to see the government facilitate a process that helps give football back to the fans. One obvious example of this is to reconsider the rules regarding all seater stadia by allowing the creation of safe standing areas. 34. Overall I am keen that supporters are given more influence in the game as it is clear that the football authorities can not govern themselves, so I would welcome Government intervention to ensure it does happen. When the government gets involved then I’d been keen to see that any new committees formed involve people in touch with the grass roots of the game.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 35. Unfortunately, my knowledge of other governance models in other sports or in football abroad is not of sufficient depth to be able to comment on this question. 36. I am aware that the German governance model contains a number of the governance features mentioned above, with a licensing system linked to assessments of club liquidity. This is a system far in advance of the UK and while German clubs have been less successful than UK clubs in European competition, their international team has had much more success. 37. In terms of developing natural talent, we are not producing enough Premier League/International/World Class footballers. There needs to be a 10 year plan put in place which addresses the issues. It might not be the solution for all, but Watford’s Academy structure is starting to produce positive results for pupils and graduates of the Academy. Maybe, this is the way forward for some clubs, but it is a huge financial commitment and requires a long term view—ie 11 year olds will take at least 7+ years to break through into First-team football. The short-termism in the game does not suit this development, which until addressed will always leave us lagging behind other countries.

About the Author 38. Stephen Temple qualified as a Chartered Accountant in 1991 and has worked with a wide range of organisations in both the public and private sector on risk management and governance issues, mainly around Information System implementations and security, but always in the context of governance frameworks such as the Combined Code and the FSA handbook. 39. Stephen has been working with Watford Supporters’ Trust for the last 18 months. Watford FC was close to being placed into administration in December 2009 and, at the time of writing is the subject of a potential takeover bid. January 2011

Written evidence submitted by the Centre for the Study of Law, Society and Popular Culture, University of Westminster Summary Key findings: — the law, and regulatory structures, need to be framed differently when dealing with areas of culture and in particular should take account of the “specificity of sport” and clubs’ roles in their communities; — there is a danger that we are left with a governing body that the government has very little financial or legal leverage over, and some serious doubts about whether football can adequately regulate itself; and — serious consideration should be given to the role of fans within these processes both as consumers of a sporting-cultural product and as a group capable of owning and running a community asset. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Submission 1. We note that there have previously been a series of reviews and reports looking at football, and particularly looking at issues of governance in football. The Burns Report (2005) for example made a series of recommendations such as the creation of a new FA Board and a widening of representation on the FA Council. The Burns Report was ratified by the FA Council in 2006. Similarly, in 2009, the All Parliamentary Football Group (APPFG, 2009) published the results of their inquiry and made a series of recommendations on issues such as FA Governance, club governance and the fit and proper persons test, and supporter involvement amongst other things. On that basis there is much useful previous material to consider, but it appears to us that, rather like Lord Taylor when noting that “it is a depressing and chastening fact that mine is the ninth official report covering crowd safety and control at football grounds” (Taylor, 1990, 4) it is of some concern that much of the good work and solid recommendations in previous reports have not been fully implemented or considered. Rather than go over this ground, we have attempted to look at the Six Specific Questions for the Committee, and have decided to concentrate on the areas where we feel we can add something new, or perhaps give a different perspective, rather than spend time excavating old ground. That said we are in broad agreement with many of these previous recommendations, such as the principles of accountability and transparency (see APPFG, 2009, 3–4) and suggest on this basis that policies such as full financial disclosure of transfer agreements, and of payment to agents, are fully developed. In terms of the submission, we have concentrated on the following questions posed by the committee:

2. Question 1—Should football clubs in the UK be treated differently from other commercial organisations? This question is one that is important not just for football, but for other parts of the cultural industries more generally. Essentially, the argument would be that there is something different or atypical about these areas that necessitates a different approach being adopted towards them. An oft made point as regards football is that the relationship between the supporter and the club is not one that can be evaluated as a normal market transaction. One side of this is that the fan is potentially subject to exploitation because of the fact that “brand loyalty” to these clubs means that there is no real alternative to what is consumed as there may be in other areas (Hamil et al, 1999 & 2001). Whilst the club plays a crucial role within football, both in terms of a focus for the team but also more broadly in terms of its role within the wider community, its position and role allows it to “capture” supporters. More broadly, there have previously been arguments made that sport should be treated differently by the law. There is much European case law concerning the applicability of competition law to sport for example, and whether sport should be treated as a business (and therefore subject to the relevant legal framework on free movement etc) or instead be dealt with as something different. The positive benefits of sport, and the role it can play in terms of contributing to “smart, sustainable and inclusive growth” is made clear in the European White Paper on Sport (2007), and further developed in the more recent Developing the European Dimension in Sport (2011). As such it is clear that there is something specific about sport that necessitates an approach that can protect and nurture this. This has been at the heart of arguments suggested sport is a special case, such as those arguments propounded in case law such as Bosman for example. This ties in to wider calls for areas of culture to be treated differently to commercial areas. For example, independent record labels have been championed and celebrated for offering cultural diversity in contra- distinction to the approach of the “major” record companies that focus upon largely commercial considerations (see Peterson and Berger, 1975 and 1996; Chiscenco, 2010). In areas of high cultural industry concentration there were found to be low levels of diversity, and on the basis that diversity should be supported where possible, Chiscenco made a strong argument for the need for a new jurisprudence in relation to mergers and acquisitions in cultural industries. Effectively Chiscenco argues that new competition rules are needed to address the specificity of culture. If we understand sport as being part of culture this approach has much to recommend it in the context of football. A related point to the atypical fan/club relationship is that there are a number of key differences between sport and ordinary businesses. First, sport clubs may not actually have profit as their main aim, but may have broader more socio-cultural objectives. Secondly, all clubs in a league are interdependent. Whilst in an ordinary business environment a firm is better off the fewer competitors that survive, in sport generally, or football specifically, all clubs are dependent on other teams doing well to ensure uncertainty of outcome and the issue of competitive balance is highly critical; some competition is needed for the sport to succeed and indeed competition is necessary (see generally Szymanski and Kuypers, 2000). As Gratton notes (2000, 12); “The conventional textbook firm in economic theory has an interest in increasing market power and ultimately it maximises its own interest (and profit) when it achieves maximum market power as a monopolist. In professional team sports once a team becomes a monopolist, revenue would disappear altogether; output would be zero since it would be impossible to stage a match”. The arguments above all support our contention that the law, and regulatory structures, need to be framed differently when dealing with areas of culture. It is apposite here to look at Question 5 set by the Committee as this allows us to elaborate on the issues raised. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3. Question 5—Is Government intervention justified and if so what form should it take? As noted above, Question 5 overlaps or intersects with Question 1. The debate around whether Government or independent intervention into sport is appropriate is a well-worn one. Foster (2000) for example argues that there are a number of elements to the debate as to how sport should be regulated. One is a debate about the provenance of sports law and whether law should “cross the touchline”, and one view of this is that sport has its own constitutive framework and that this should not be disrupted by external legal intervention. Another is a wider debate about the nature of regulation and whether certain industries should be self-regulating or whether there should be statutorily backed regulation. If we look at the area of media more generally, and in particular the regulations of the press and the advertising industries, we see that they are partly viewed by the industry as a public relations exercise designed to show external bodies, such as Parliament, that legislation is not necessary to regulate them. As Robertson and Nicol (2007, 757–8) note: “Press proprietors are prepared to invest £1.5 million each year in the PCC (Press Complaints Commission) because its existence offers a form of insurance against new laws to safeguard personal privacy, prohibit chequebook journalism and to guarantee a right of reply .The advertising industry funds the ASA (Advertising Standards Authority), to a tune of more than £3 million annually, to avoid exposure to laws against deceit and indecency”. This approach can also be partly seen in the responses of the football industry to the Task Force recommendations concerning the need for an independent regulator. A key problem in terms of the regulation of football is that there is a danger that we are left with a governing body that the government has very little financial or legal leverage over, and some serious doubts about whether football can adequately regulate itself— this provides further weight to the argument that the role, extent of powers, and effectiveness of the Independent Football Ombudsman ought to be revisited and reconsidered.

4. Question 6—Are there lessons to be learned from football governance models across the UK and abroad, and from other sports? The Burns Report, in its structural review document (A Review of Comparator Sporting Organisations) presented a number of findings concerning sporting organisations and governance both within international football and in other sports. We do not propose to go over this ground here. One thing that is of interest however, is the role of fans within these models. Even though English football is extremely popular in terms of live attendances and TV audiences, there is evidence that other forms of relations between fans and clubs have also proved fertile. German football is a huge success, and has managed to keep prices at a more modest level. In some smaller countries like Norway, Supporter Associations have developed both formal and informal relations both at the club level and the national federation level. This means, among other things, that fans are consulted when it comes to several questions relevant to them, like pricing policies (members of supporter associations often enjoy very favourable prices). Further, the apparent contradiction between “fans” and “families” with regards to how these groups apporach a football event, has not led to significant conflicts. Rather, it seems that the atmosphere and the spectacle created by supporters have been constructive rather than destructive in attracting new groups of spectators, and that serious consideration should be given to the role of fans within these processes. In addition, we are hopeful that the new UEFA licensing rules will help to promote good governance at club level amongst all top flight teams and those aspiring to compete in European competition. We would argue that financial stability should be encouraged and promoted along these lines. For more on this see: http://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/50/09/12/1500912_ DOWNLOAD.pdf. Mechanisms such as these are of particular importance to football as the financial controls operated in other sports, such as salary caps in both codes of rugby, are unlikely to be workable in football because of the greater internationalisation of the labour market and the impossibility, and possible illegality, of setting a pan- European cap. We hope our submission has been of some use, and are happy to discuss anything arising from this or further develop these points if the Committee wishes.

Sources Burns, Lord (2005) FA Structural Review. Chiscenco, O (2010) The Record Industry and Competition Law in the Twenty first Century University of Westminster, unpublished PhD thesis. Developing the European Dimension in Sport COM (2011) 12 final, 18.1.2011. European White Paper on Sport COM (2007) 391, 11.7.2007 Foster, K (2000) “How can sport be regulated?” in Greenfield, S and Osborn, G (2000) Law and Sport in Contemporary Society Frank Cass: London. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Gratton, C (2000) “The Peculiar Economics of English Professional Football” Soccer and Society Volume 1, 11. Hamil, S, Michie, J & Oughton, C (1999) A Game of Two Halves? The Business of Football Mainstream: London. Hamil, S, Michie, J, Oughton, C, and Warby, S (2001) The Changing Face of the Football Business. Supporters Direct Frank Cass: London. APPFG (2009) English Football and its Governance All Party Parliamentary Football Group. Peterson, R and Berger, D (1975) “Cycles in symbol Production: the case of popular music” American Sociological Review 40, 158–73. Peterson, R and Berger, D (1996) “Measuring Industry Concentration, Diversity and Innovation in Popular Music” American Sociological Review 61, 175–178. Robertson, G and Nicol, A (2007) Media law (Penguin: London). Szymanski, S and Kuypers, T (2000) Winners and Losers. The Business Strategy of Football (Penguin: London). The Taylor Report (1990) “Lord Justice Taylor, the Hillsborough Stadium Disaster Final Report” HMSO:London Cm 962. January 2011

Written evidence submitted by Scarborough Athletic Football Club Introduction This brief document is to highlight various aspects of the supporters owned club Scarborough Athletic FC to be reviewed in the debate on football governance including: — The demise of the old football club and the departure of a senior footballing side from the town of Scarborough. — The inception of the Scarborough Supporters trust and formation of the club. — Progress made since the formation of the club. — Future plans and ambitions. — Support and help gained from Supporters Direct.

Background and the Demise of the Old Club 1. After years of decline, Scarborough Football Club was wound up in the summer of 2007. This followed the clubs fall from the football league and down the non league pyramid. As the trust was formed before the demise of the old club, they looked at trying to keep the old club going. The club had not filed accounts at company’s house for over four years and details and records were unable to be attained. Dave Boyle who was assisting from Supporters Direct at the time had said “he had been involved with the establishment of over 150 football trusts and Scarborough FC was the worse case he had seen!” This may have been avoided with more stricter and enforced “Fit and proper persons tests” and much stricter FA financial reviews of football club affairs which could have prevented the old club from getting into the state it was allowed to get. 2. The club had entered a CVA and liquidators had been appointed. The CVA was “irretrievably breached”, when the directors of the club formed a new company “SFC Seadogs Limited” and obtained a deposit of £ 30,000 on the promise of the building a new ground from another company and proceeded to use this money to pay players and acting outside the terms of the CVA, the club was then declared bankrupt. In light of this evidence the club had placed Scarborough Borough Council in an impossible position and that the improper conduct of the directors meant that the council could not help even though they recognised the value that a senior football club brought to the town and its businesses. 3. In June 2007, following the winding up of Scarborough Football Club Limited a Liquidator was appointed and took control of the McCain stadium at Seamer Road. The stadium site was subject to covenants that had been in place since 1960, when the Council sold the football stadium to Scarborough Football Club Limited. These covenants protected the council’s interest in the land and required that the land was to be used for the purpose of football or other sports or pastimes. In addition the council retained first right to buy back the land subject to reaffirm the purposes for which the restrictive covenants on the football ground where established and ensure that the Councils interest in the land was safeguarded. 4. Recognising the problems that were developing for the club, in March 2007, Scarborough FC Supporters Society Limited was formed and on 25 June 2007 Scarborough Athletic FC was formed. 5. Following arbitration the stadium was purchased by the Council for £1.335 million in December 2008. In January 2008 a report was presented to the Council detailing that neglect of the security of the ground during the period it was retained by the Liquidator had resulted in a period of theft and vandalism. An assessment of cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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the cost of returning the ground to an acceptable standard to resume playing football was estimated at £1 million. It was identified that even with the expenditure identified above, the repair and maintenance costs of the existing stadium with its single remit for football would place an unsustainable burden on the football clubs that would use the stadium and lead to similar problems to those faced by the former Scarborough Football Club. 6. In the absence of a stadium, Scarborough Athletics newly formed side thanks to the formed trust had to move and play their home games some 22 miles out of the town in Bridlington competing in the Northern Counties East League Premier Division.

What has Happened since the Trust Reformed The Club 7. Created a new and active trust membership base which then voted and elected a board of representatives/ directors to help move the club forward. This membership has since been growing and now stands between 600–700 members 8. The trust negotiated a deal with neighbours Bridlington Town which allowed a newly formed football club to be able to hold and play their home league games there which would enable the new club to compete at a decent standard. 9. The trust negotiated with the FA and the NCEL to enable the newly formed club to compete at the highest standard they could at the time compete in. 10. The trust appointed a management team that assembled the playing squad for the year and also created a pool of volunteers who would help out on match days and with fund raising. 11. Trust established a working relationship with the old club’s Supporters club which has flourished since with both parties working together on various aspects of the club. 12. The trust have been working hard to keep the identity of the club alive in the town itself, with regular school visits and clubs been run during the year. Holding regular board and fans meetings in various locations around Scarborough and holding various fundraising events around the town as well as plenty of PR work and advertising. 13. Helped to create a regular attending fan base of around 400–500 fans for home matches whilst increasing trust membership and support to 600–700 members. 14. Since formed the club have created a Reserve side which was designed to give local players a chance to showcase their talent and push towards getting into the first team. This also was a step in helping bring the local community closer to the football club. 15. Also since the trust formed the club have now created an under 19s side which as mentioned above will go further to strengthen local community ties with the town of Scarborough. The under 19s are hopefully going to be launched for the next coming season in a competitive league. 16. The trust are continually working with creating a working relationship with the towns other football and sporting organisations with a view of trying to seek future co operations for the benefit of football and sport as a whole for the town of Scarborough. 17. The club are now in their fourth competitive league season since the formation of the club by the Trust and have achieved promotion to the NCEL Premier League. 18. The club have their own commercial revenue streams with merchandising and sponsorship opportunities of which the club have gained from local businesses in the town. 19. Created a self sustaining football club which has recorded profits two out of its first three years of trading, whilst six months into the current trading year the club has posted profits circa £ 4,000. The club also boasts a strong balance sheet with no loans or debt and with money in the bank, although whilst currently playing out of the town the club holds little fixed assets.

Ambitions to Bring the Club back to Scarborough 20. It is recognised by the board and the club that for the future security and progression, the importance of securing a move back to its home town within the next few years. 21. The club is currently in regular dialogue with the Scarborough Borough Council over the situation and working with them in respect of their proposed Sports Village which would encompass in part, a new football stadium for the football club. The council aim to dispose of three sites which contain a swimming pool, sports centre and the old football ground and then to create a new sports village encompassing a range of different sports to hopefully enhance and better Scarborough sports facilities and in turn sports for Scarborough as a whole. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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22. The club will be involved in the consultation process of construction of the proposed new ground within the complex which is to be built to a suitable FA Step C Level with scope to improve to FA Step Level A if required. 23. However under the current economic climate and cuts in funding, this proposal has risks of been deferred and delayed. 24. The club are also researching and looking into the Community Share Scheme idea adopted by FC United of Manchester in order to possibly raise funds to help facilitate their move back to the town. Hopefully there would be opportunity for the club to purchase the ground off the council and have ownership, and or part of the sports village. Failing this then the club could look to raise funds to purchase all year round money making assets to help make the club more sustainable and stronger for future progression. Such items could include property, 3G pitches to hire out all year round etc.

What Would Help?—Community Shares/Tax Relief etc 25. Community Share Schemes and access to various funding/grants would be very beneficial to the trust and club in: 26. Raising funds/capital to possibly purchase its own land/stadia/football facilities back in the town of Scarborough and progressing with the strengthen of the clubs balance sheet and assets held. 27. To raise funds to purchase money making/fund generating assets ie property/3G pitches/bar/restaurant etc. 28. This scheme would help to engage and bring the local people and businesses of the community from different and new target audiences together behind one community cause. 29. Tax reliefs and other benefits of such investment schemes would help encourage and attract a lot more investors to buy shares. Not only would they start to get a modest return annually with a view of receiving their investment back in the future, they would also receive a one off tax relief during their initial investment year which would save them a sum of money making it a much more attractive proposition. This would be very encouraging for investors and also see local communities taking more responsibility for their football clubs The community share scheme issue could possibly prove to play a pivotal role not only in the club returning home to its town, but to putting in place a structure and long term sustainable business model run by the community for the community of Scarborough.

How have Supporters Direct Helped Scarborough Athletic 30. Helped the initial trust members form a committee and in turn a board. Also assisted with the formation of the trust and essentially the new club. They helped provide us with a management structure detailing how we should establish a board. 31. Helped form the club society rules and regulations from which the trust is governed and run by. Provided guidance in establishing the Trust constitution and governance and did the same again when we became a football club instead of a trust. 32. Have always offered advice and support on matters when needed. 33. Have helped in the provision of legal and professional support from linked supporting bodies. 34. Provided regular courses and workshops to help enhance the directors various abilities required to run a football club and therefore enhancing their abilities and skills. 35. Provision of readily available access to information and guidance and governance updates. 36. Support and guidance on initial research into the community share issue scheme as well as various other schemes in operation. January 2011

Written evidence submitted by the Yorkshire Division of the Football Supporters’ Federation 1. Introduction 1.1. This is the evidence of The Yorkshire Division of the Football Supporters’ Federation (FSF) as to why we endorse the evidence separately submitted by our National Council and partners at Supporters Direct.

2. Evidence Is Government intervention justified and, if so, what form should it take? 2.1 Football is our National Game. As such Government has a duty to protect the game at all levels for future generations. This has been accepted by successive Governments, who in their time have also seen it cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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necessary to order an enquiry into the state of the game in this country, the last two occasions being the Burns Enquiry and the Football Task Force. 2.2 These two enquiries made far reaching recommendations as did previous enquiries. Unfortunately, in common with other enquiries, the main recommendations have been allowed to be watered down by the professional game with promises that they can effectively run the game themselves and that they do not need outside regulation. We would argue that the facts do not support their view, as outlined in other submissions.

Is there too much debt in the professional game? 2.3 This is an easy answer, yes obviously there is. It has been allowed to get out of control because of the failure of the game to regulate itself and the unequal way money is distributed throughout the game 2.4 More than two thirds of the professional clubs in this country have either gone into administration or faced severe financial re-structuring to stop an administration. Numerous other clubs are still under severe financial pressure and more are sure to follow if action is not taken. 2.5 This is happening at a period of time when the game has had more money coming into it from outside sources than ever before. 2.6 One of the main causes of all of this turmoil is the way the money is distributed. The vast majority of TV money goes to the top clubs. This has created a “chase the dream” scenario in football. The dream is being in the Premiership and the huge financial prize that follows. The problems occur when the dream fades and relegation follows. 2.7 Parachute payments (which are paid for failure in terms of relegation from the Premiership) have a very real and very obvious potential to become an increasingly significant anti-competitive factor in the Championship. It is very difficult to envisage any sort of level playing field between for example a relegated relatively larger club and a smaller club which may have just been promoted from Division 1. The presence of parachute payments must in future have the effect of cranking-up the pressure to chase the dream (financially) which will be brought to bear on Championship clubs. Risking everything to achieve promotion to the premiership and thereby the entitlement to parachute payments even in the event of subsequent failure will increasingly appear to be the holy grail. A more equal distribution of the available funds for Championship clubs must be a worthwhile objective and help to preserve the integrity of competition in that division. It may be that some alternative mechanism needs to be established (possibly some sort of centrally and separately administered fund) under which the financial and contractual rights of relegated players are safeguarded whilst at the same time helping to maintain a more level playing field between the clubs. 2.8 The evidence of this is that the vast majority of clubs that have had or experienced financial trouble over the last 20 years involve clubs relegated from the Premier league. 2.9 We would submit that an easy way of solving this problem is that the Premier League and Football league should be removed and replaced by one overriding body that controls the Professional game, as was the case until the formation of the Premier league in 1992. It’s not unreasonable to suggest that extra financial problems have occurred since that date. 2.10 A separate body for the semi, non professional game should be created. These bodies could have their own separate boards/structure to administer different leagues within the overall structure, as with the Football League at present. 2.11 A more equal system of distribution of Television and Sponsorship fees. After all not all Subscribers to TV Channels and Sponsors support Premier League Clubs

3. Concerns Over Free Market Ownership Should football clubs in the UK be treated differently from other commercial organisations? 3.1 The Mismanagement of Clubs has led to a situation where all but two of our Premier Leagues have been the subject of takeovers in the last 15 years. 3.2 The two clubs that haven’t been involved in this process are Arsenal and Everton. Even with these, it is known that there is an ongoing battle at Arsenal over who is likely to take over and when. Similarly with Everton, it is known that they would welcome financial investment or a takeover to allow them to compete in the Premier League financial markets. 3.3 In Yorkshire during the last 25 years every one of our professional Clubs, have either been in administration or had a re-structuring buy out. This also extends all the way down to some of our Non League clubs, ie York City, Harrogate Town and Farsley Celtic to name just three. 3.4 Our concern on ownership is that there has been, up until now, someone willing to buy our premiership clubs and to some degree clubs lower down the football pyramid. What if this ceases? cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.5 What has become obvious is that most of these buyers have been from overseas. If we look at the Premier League 10 clubs, or put another way, half of all clubs are in foreign ownership. We already have six clubs in the Championship that have foreign owners. 3.6 We have nothing against these owners as individuals or corporations. However our concern is that they may not share the same sense of loyalty to the game of football in England as we do. They may put profit and their own well being over the longer term state of football in this Country. 3.7 We have already heard of being raised by the Premier League, with the intention of taking games abroad. This is similar to the way American Football and other sports work in America. 3.8 The way football is run at present, each league can pass its own rules at their Annual General Meetings. It would only need a couple of takeovers by overseas owners or even three clubs to get promoted from the Championship and our main League and football pride could be changed forever by overseas owners. 3.9 This may be good for business but we would argue that it may not be good for football in this country. Rules should be put in place so that the balance of decision making cannot be removed from the UK. 3.10 This could be in the form of an Independent Regulatory body to oversee any rule changes and make sure clubs abide by the rules this body has laid down. 3.11 Special Status and Ownership Rules could be put in place to protect against this becoming a reality.

4. Case Studies 4.1 Sheffield Wednesday Sheffield Wednesday is one of our oldest clubs with a proud tradition and history. For years they were a local club that operated within their means and were in the main owned, like most clubs with this history through shareholders based in and around Sheffield. They held Annual General Meetings and elected the Directors. To be fair these were mainly the large shareholders and local business men. This changed with the formation of the Premier league in 1992. Over a period of years they lived beyond their means, borrowing large sums of money from the banks on the back of the money coming in from the Premier league. This was used to pay over inflated transfer fees and salaries on players. This was done to try and retain their status in the Premier league. Very little was invested in youth set up. As a result very few local players came through from Youth Level. Debts were allowed to build up to a reported level of £35,000,000. Around six years ago a takeover/buyout was arranged and around 40% of the club shares were bought. These were distributed to three Directors who only retained around 9.9% of the shareholding. The other 9.9% was handed over to Wednesdayite, the Supporters’ Trust at Sheffield Wednesday. By only retaining 9.9% per this group, it allowed them to have “non influential status” under company law. The reality was that they could combine their vote and have a significant say in running of the club. This is evidenced by the fact that one of them became Chairman and the other two were elected onto the board of Directors. To be fair to them, it would appear that they tried to run the club on good financial lines and improve the debt levels. One even started loaning money to the club to meet the ongoing commitments. Initially interest was accrued on these loans. Later on from information and public statements this interest was waived. These loans then rose to around £2.5 million. At no time throughout this period when the debts were allowed to accrue was any action taken by the authorities to stem this debt or indeed ask the club what it was doing to remove them. The new directors were trying to get investment into the club. In the current climate and the fact the club had being relegated to the Championship and now subsequently to league one, investment was hard to get. The Supporters obviously became frustrated with what was happening to their club and eventually forced the Chairman to resign and leave the club. He did though retain his 9.9% shareholding and held loan notes up to around £2.5 million. He subsequently went and invested in Chesterfield FC. He was then required to give an undertaking that he no longer would influence what happened at Sheffield Wednesday. Over the last two years it has been reported that certain investors wanted to buy into Sheffield Wednesday FC. These were blocked by someone over the loan note issue. Just before Christmas 2010 Milan Mandaric, the ex owner of Portsmouth and Leicester City bought the controlling interest in Sheffield Wednesday. This clubs highlights the lack of regulation and investigations in the game today. A big cub was allowed to build up totally unsustainable debts on the back of the money from the Premier League and yet nothing was done to stop it. An ex-Chairman was allowed for two years to influence decisions at this club whilst being a Director, and according to Chesterfield FC website majority shareholder of another club contrary to Football League rules. Sheffield Wednesday has now got a new owner with no ties to Sheffield Wednesday or the community. He has already proved he is willing to move from club to club. In both his previous clubs he has built up significant debts before, fortunately for him selling onto new owners from abroad. So how can Sheffield Wednesday look forward to long term security? cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4.2 York City York City is a good example of what can happen when a Club owner decides to become an asset-stripper, and the failure of the existing regulatory framework to prevent that and the weaknesses of the fit and proper persons tests. Douglas Craig had been the majority shareholder of the Club for a number of years when he wrote to all shareholders explaining that it was in the best interests of the future of the Club for the ownership of the ground to be put into a separate company from the club. The letter did not explain exactly why this was the case but no doubt its recipients saw no reason to question the judgment of the Chairman on what seemed to be a technical matter. Having done this, Craig decided to both sell the Club and give it notice to quit the ground, to enable him to personally benefit from its sale. This is a ground whose original acquisition back in the 1930s and its subsequent development over many years has benefitted from the voluntary efforts of supporters of many generations. This created a crisis at the Club which was only resolved by a loan from the Football Foundation to enable the ground to be purchased from Craig, with the loan being subsequently converted into a grant to which the Club would be entitled for a new ground. A number of years down the line, the new ground still has not happened and the Club has to bear the costs of servicing the loan which is a major financial drain on its very limited resources. To make matters even worse, Craig sold the Club ( which was worth very little without the ground) for £1 to the late John Batchelor. Batchelor was on record as saying that asset-stripping struggling companies was “what I do”, with a record of creating insolvencies in other industries. He also has some eccentric ideas about football. Both before and after his ownership of York City he expressed interest in acquiring other football clubs, including a proposal to change Mansfield Town FC to a fictional team, Harchester United. He also had connections with motor racing and changed the York city strip to have a black and white chequered sleeve. Eventually Batchelor was forced out of York City and the club was acquired by a Supporters Trust, but not before Batchelor, who circulated money between his different companies, walked off with £400k which by his own subsequent admission was properly the money of the football club. After a few years, the Trust found that it could no longer sustain the Club in the perilous financial position created unnecessarily by Craig and Batchelor. The majority shareholding was acquired by a company owned by a family of York City supporters who had been active in the Trust, with the Trust retaining a significant shareholding and rights of veto over certain things. This sorry tale illustrates that there should be rules preventing the separation of the ownership of the ground from the club and preventing people with a record like that of John Batchelor from owning football clubs.

4.3 Leeds United The events at Leeds have been so dramatic and extensive over recent years that the club could be the objective of a major study all of its own which would provide insight into much that was wrong with the governance of football and much of which remains wrong today. When considering the main factor which brought about the initial collapse it is perhaps that the club was able to use its football ground as security against major borrowing. A lesson to be learned for football more widely might be that some mechanisms might be sought that: (a) protects football grounds from irresponsible owners/directors by prohibiting their use as security against debt other than to finance stadium development itself and (b) protects football grounds from being a target for predatory property developers. An example might be that any new proposed stadium has to be handed to the club (and vetted under a laid down procedure) before anything can happen to the old ground including any change in ownership of that ground. As Leeds reached its nadir and worked towards recovery it became clear that the Football League faced very real difficulties in dealing with the tactics employed by Leeds' owners and that the FL was constrained by the current legal framework under which it and the clubs must operate. These events in themselves must point towards the requirement for special legal arrangements for Football clubs which go beyond the rights and obligations laid down by the law as it applies to “normal” businesses, which football clubs clearly are not. The FL might be empowered by such special legal requirements on football clubs and might thereby be freed from the onerous current mechanisms under which it must seek powers from its own members in order to go beyond the requirements of law of the land (in dealing with its own members). The current arrangements in many ways require that Turkeys must vote for Christmas in order to bring about improved regulation and control. It is understood that Leeds United attempted footballs first pre-pack Phoenix administration. Whilst such an administration procedure may offer wider community benefits when used to rescue a local business and local jobs, for example, it is much more difficult to justify any mechanism which permits the owners of a football club to engineer its administration and legally to emerge still retaining the clubs ownership at the end of the process. In such instances the benefits of the process appear to accrue disproportionately to the owners of the cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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club rather than to any other interested parties or legitimate stakeholders. It may be that this illustrates that a more restrictive insolvency and/or administration procedure needs to apply to football clubs than applies under the general legal framework as it exists for other businesses. This might be for the greater benefit of football as well as to the benefit of society more generally. The tactics employed at Leeds of systematic attacks (some public and some legal) upon supporter groups in a very clear divide and conquer policy, together with the setting up of an expensive official membership scheme (which initially have very few benefits other than conferring the right to buy tickets, especially to play-off finals) also should ring alarm bells. Any progress which is made towards supporter involvement in governance and control needs to take very careful steps to ensure that the supporters involved are independent and not subject to intimidation by the clubs ownership. This has been an extremely serious development at Leeds and it may be even that some mechanism needs to be found to allow the voice of protest whilst at the same time protecting such voices from bullying legal tactics using big name libel lawyers for example. The legal merits of such actions might be poor but the intimidation levels achieved are much greater. Any proposals need to be mindful that they do not offer up the supporters who become involved as sacrificial lambs to slaughter at the hands of powerful millionaire owners. Involved fans also need to be protected and these dangers are very real and very easily overlooked. Subsequent arrangements made by the undisclosed owners of Leeds should also bring into question the acceptable ownership models allowed to English League clubs. The Premiership and recently the FL have sought to impose public declaration of ownership, but Leeds have cynically sought to avoid these regulations by means of a labyrinth statement of ownership issued a matter of hours before the new ownership disclosure requirements came into force. Whilst this statement of ownership structure may be legally acceptable for a UK business, serious consideration needs to be given as to whether this again represents an instance where football requires additional regulation in the public interest. It may be that ownership of a UK football club by offshore trusts with undisclosed beneficiaries is considered not to be an acceptable model of ownership. Certainly it is impossible to ensure that other requirements imposed within football are being met by these Trusts and by their trustees and beneficiaries. A statement by such a Trust is insufficient proof or guarantee that all requirements are being met and that they will be met in the future. Positive proof of compliance must be the minimum unavoidable requirement and which is backed up by independent and auditable legal documentation subject to the courts of the UK. January 2011

Written evidence submitted by The Professional Players Federation 1. Introduction 1.1 The Professional Players Federation is the national federation for 10 player associations in the UK covering a range of professional sports. Our membership includes the Professional Footballers Association and the League Managers Association and we are pleased to endorse and support their submissions to this inquiry. 1.2 The PPF submission is intended to compliment the evidence from our individual members as well as focussing on a number of important generic issues about sports governance that will affect football in England.

2. Should football clubs in the UK be treated differently from other commercial organisations? 2.1 It is widely accepted by governments and the national and European courts that the specific nature of sport is such that it should not and can not be treated solely as a business. The “specificity” of sport therefore needs to be recognised, though we would stress that this does not imply that sport should be automatically exempt from normal rules. Rather it is a question justifying the special nature of sporting rules on a case by case basis, in partnership with the relevant stakeholders. 2.2 According to the recent European Commission policy on sport,39 “Good governance in sport is a condition for the autonomy and self-regulation of sport organisations”.

3. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 3.1 The problems with the governance of English football are well documented as are the challenges the governing body faces in regulating the professional leagues. 3.2 The principles that underpin good governance include autonomy within the limits of the law, democracy, transparency and accountability in decision-making, and inclusiveness in the representation of interested stakeholders. 39 Developing the European Dimension in Sport. European Commission. 18 January 2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.3 The PPF has no doubt that the Football Association would benefit from improving its governance structures so that players, managers and supporters have a meaningful input into the governance of domestic professional football.

4. Is Government intervention justified and, if so, what form should it take? 4.1 It should be noted that the autonomy of the Football Association is fiercely protected by the world governing body, FIFA, and that this will severely limit the opportunities for direct government intervention. Nevertheless government and its agencies do have a number of financial and regulatory mechanisms to exert considerable influence upon the governance of football. 4.2 It is important that any government intervention is set against clearly defined objectives and that these objectives should be developed in cooperation with the stakeholders in the national game, including players, managers and supporters.

5. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 5.1 The PPF is aware of reservations about the European Commission’s involvement in sport. Nevertheless the Lisbon Treaty has provided the EC with a “soft competency” in sport which means that it is now developing European sports policies. It is therefore important that HM Government works with its colleagues in Europe to develop a coordinated approach across Europe to improving the governance of sport, which is one of the areas the EC has identified for possible action. 5.2 The work that UEFA has done on football licensing and financial fair play is an important model for the Committee, as well as sport and government, to consider. However we share the concerns raised by the LMA that it does not address some of the transparency and accountability issues around clubs owned by off- shore companies. 5.3 The PPF would draw the Committee’s attention to the need for improvements in the governance of the international sporting federations. This is an area where the European Union has an important role to play as one of the few organisations that has the ability to influence these international federations. The benefits from improving the governance of our national sport are likely to be limited unless they are accompanied by similar improvements in the governance of international sporting federations. 5.4 Within the UK we note that a number of other major professional sports have governance structures that include the player associations as key stakeholders. For example, in cricket the Professional Cricketers Association’s chief executive is a full member of the ECB Executive Committee. In rugby union the Rugby Players Association’s chief executive is a member of the RFU Council. Such arrangements bring added benefits to the game as the players opinions are represented at an important level of decision making within the governing body. This helps to ensure that sporting decisions are made according to the best interests of the game and its participants. 5.5 In conclusion, a significant step to improve the governance structures of football would be for the PFA, LMA and Football Supporters Federation to be full members of the Football Association’s Board and formally involved in its decision making processes. This will ensure that different concerns within the national game are properly represented at the highest level of its governance. January 2011

Written evidence submitted by the Darlington Supporters Trust This document has been prepared by the Darlington Supporters Trust to outline: — The background to the Darlington Supporters Trust. — Objectives of the Darlington Supporters Trust. — Why the Trust exists and the experience suffering several periods of our football club experiencing numerous cash crises, insolvency and periods of Administration. — The relationship between the fans and the club they support. — The future of football. — Football, government and Parliament—an opportunity to introduce sustainability into the national game.

About Us—The Darlington Supporters Trust 1. This submission is presented on behalf of the Board of the Darlington Supporters Trust, an Industrial & Provident Society formally constituted in 2002. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. Members of the Trust each have a single share and are able to exercise full control over the Board which is elected by the membership at an Annual General Meeting in line with the Constitution which was produced in consultation with Supporters Direct, of which the Trust is a full member. 3. The Trust is also a member of the National Association of Disabled Supporters and the Football Supporters Federation. 4. Membership of the Darlington Supporters Trust typically stands at over 15% of the average home attendance for Darlington Football Club.

Our Objectives 5. We campaign to create conditions where we can ensure that the club we support is run responsibly and that it is financially sustainable. 6. We work and actively campaign to create a situation where supporters can secure both influence and ownership of the Club we support. 7. Seek to work with Darlington Football Club to secure the appointment of a democratically elected Supporter Director to sit on the board of the football club. 8. Undertake fund raising, including significant contributions to Football in the Community and to youth development at the Football Club. 9. Managing a ring fenced crisis fund raised by fans in case of future requirements.

Why Does the Trust Exist? 10. Darlington Football Club was formed in 1883 and gained the reputation of being “the family friendly club”. 11. The Club turned professional in 1908. 12. The Football Club experienced its first financial crisis when ground improvements, started prior to the First World War, left the club with a cash shortage during the war years and only survived when the chairman of the Darlington Forge Albion financed the completion of the work. 13. In 1960, fans raised £20,000 to pay for the roof at one end of the Club’s ground at Feethams and for floodlights. 14. During the 1970s, the club had to apply for re-election on several occasions, but the fans remained loyal to the club, although fund raising had to be undertaken once again by fans. David Frost notably presented a documentary about the situation in Darlington. 15. The Club had yet another financial crisis in 1982, but again was saved by fund raising efforts of fans in the town. 16. In May 1999, George Reynolds a businessman who had previously been jailed, arrived as Chairman of the Club, promising to put millions in to it and to take it to the Premiership. 17. He also made it clear that he would move Darlington away from the gentility of their ground at Feethams, which they shared with the cricket club (and which had been left in Trust to the people of Darlington), and build a lavish, 27,500 seater stadium on what was prime commercial land on the outskirts of the town. 18. In 1999, George Reynolds UK Ltd put money into the club to pay off the debts. 19. Darlington Football Club became the laughing stock of many which slapstick attempts to sign Faustino Asprilla and with allegations from Mr Reynold’s wife that matches were “thrown”. 20. Nevertheless, with the land acquired, plans to move to the new stadium went ahead with a building that Reynold’s claimed was to cost him £18 million. 21. At the same time as this, the Darlington Supporters Trust had identified serious business problems in the company that Reynolds was using to finance and develop the stadium. 22. Reynolds response was to confront his critics at their home, often early in the morning, or making threats to them and their families. Whilst footballers were charged by the Football authorities for “bringing the game into disrepute”, no action was taken against a Football Club chairman who made direct threats to individuals. 23. 1n 1999–2000, George Reynolds UK Ltd lost £2.5 million and in the following year lost £9 million. 24. George Reynolds UK Ltd went into liquidation in 2003, owing £3.4 million to creditors, most of whom had built the new stadium. 25. Ask most observers outside of Darlington and they will say that the (now Northern Echo) Arena was built by George Reynolds—ask most people in Darlington and they will say it was built by his creditors with money that he never had. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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26. Reynolds was subsequently disqualified as a director for eight years and then jailed for a separate offence. 27. The question of his eligibility to own a football club in the first place then became an issue. When Reynolds took over in May 1999, his criminal convictions were, of course, long since served. The money he was putting into the club was, though, improper, as it came from his own business which was clearly insolvent and going bust. 28. The Fit and Proper Persons test for football club owners is still, we would argue, ineffective in dealing with issues such as this. 29. George Reynolds had been forced to hand over the Club to the Sterling Consortium who acquired the Club to bring it out of Administration, with Steward Davies taking over as Chair. 30. The Sterling Consortium had previously made secured loans to Darlington Football club. 31. In 2006, the Club was sold to a Property Developer, George Houghton who placed the club in Administration again in February 2009. This resulted in a 10 point deduction which destroyed any chance of promotion that season. 32. Fundraising efforts continued by the Supporters Trust and fans, but no buyer could be found (not surprising, given the operating costs associated with a 27,500 seater stadium for a club with a fan base that was more typically 2,500 per match). 33. In May 2009, Houghton returned to the Club as Chairman and came to a deal with another local businessman, Raj Singh, who became Chairman of the Football Club 34. It is believed that Mr Singh owns the football club, but the ground and the land upon which it is built, is under separate ownership.

The Fans and the Club 35. Throughout all of the above, the fans have remained dedicated, loyal and supportive, including raising significant amounts of money to keep the club going. 36. At no point in the history of Darlington Football Club, has an offer of the appointment of a Supporter Director been seriously considered or proposed by the football club, in spite of public pronouncements to satisfy media curiosity on occasions.

The Future for Football 37. The Darlington Supporters Trust is concerned that the “benefactor” model of ownership is not sustainable in the long term and there needs to be a major overhaul of the way that football clubs are owned and managed. 38. The Trust believes that there should be absolute transparency in the accounts produced by football clubs and in the details of the owners of football clubs. 39. The Trust also believes that there should be a level playing field in terms of the investment in clubs. The Darlington Supporters Trust has great admiration for the work of clubs such as Exeter City and AFC Wimbledon, which are run by supporters on a sound, financial footing. They compete, though, in leagues where other clubs spend more than they can afford (as indeed Darlington has done in the past) leading to great inequality in the competitiveness of our national game. 40. Supporters of Darlington have seen the Club go from one where it was financially viable at its own ground (the old ground at Feethams was one that could cope comfortably with crowds on match days), to one which carries significant overheads (and which is largely empty on match days). We have seen successive periods of cash crisis and several Administrations when we felt that our club was likely to close for good. The move to the new stadium has been regarded by many long term fans as a betrayal of trust with the supporters and has been described as a “monument to the ego of one man”. 41. It is with this experience in mind that the Darlington Supporters Trust would wish to see more supporter involvement in the ownership of the club. However, supporter investment is difficult to organise and implement and works over a longer timescale than conventional finance raising. Supporters Trusts should not be seen as money of last resort for failing football clubs, but as vehicles that can be used to ensure longevity, sustainability and fairness. 42. The Darlington Supporters Trust looks to the governing authorities to ensure that they are able to regulate the game to ensure sustainability and to avoid a repeat of the crises that fans at Darlington have been subjected to. 43. Indeed, the future of our national game depends, we believe, on its ability to be well managed and sustainable. Without that, there is nothing. 44. We know that in comparison to other countries, English football is, to all intents and purposes, under regulated, largely as a result of football clubs being treated as ordinary companies accountable to their shareholders. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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45. Accordingly, the Darlington Supporters Trust looks to see better regulation to ensure the social and sporting dimensions of football clubs is fully reflected—the chairman of a football club or the owner of a football club may come and go, but the fans remain loyal throughout. The days of the chairman of a football club being able to say “I am the biggest fan of this club—look at the money I have put in” should be put well behind us.

Football, Government and Parliament 46. That our national game—at all levels—be properly managed and subject to good governance should be taken as sine qua non and we firmly believe that the intervention of government and Parliament would be welcomed in pursuit of these objectives—indeed firm timescales should be laid down to ensure that this is achieved. Football is our national game and it is right and proper that government and Parliament should look at these issues seriously. 47. We would recommend revisiting the legal framework so that the creation of a legal vehicle for sports clubs could be established which would enable the governing bodies to act with more confidence in terms of governance issues. Norway, France and Spain have specific legal vehicles for sports clubs which give certain benefits to them whilst also giving rights to stakeholders that are greater than those for normal companies. 48. Football clubs are part of the communities they serve—in Darlington, since 1883. As such, they can not just be viewed as normal commercial organisations. There is an intrinsic “persona” of the club which is entirely distinct from the private ownership that, in Darlington’s case, has overseen successive periods of Administration and uncertainty. 49. Darlington has survived thus far, not because of good governance, but because of its supporters, without whom the club would inevitably have gone out of existence completely. This has been the case because of the clear, emotional attachment that many fans feel towards Darlington Football Club, rather than its owners. In simple terms, if a customer does not like the supermarket they go to, there are others available—for a football fan, because of the emotional attachment, no such alternative exists. 50. There is a very real alternative, of course, where a club can be owned by its supporters or where supporters, through representation on the Board of Directors, can have an influence. Raising finance, of course, is fraught with difficulty for a Supporters Trust, particularly in the present climate, but also as a result of FSA rules. When fans raise money for ownership, they do so because of their support for the club, not for financial return. The dissolution of the FSA presents an excellent opportunity for government to look at options whereby raising for capital by a Supporters Trust can be more achievable to ensure the overriding principles of sustainability. January 2011

Written evidence submitted by Jonathan Keen This evidence is submitted by Jonathan George Keen, supporter of Reading Football Club since 1976. Although I am a member of football supporters’ organisations, this evidence is submitted wholly on my own behalf and in my own name. In this, I hope to demonstrate to the Select Committee the nature of the relationship between supporters and their clubs and the concerns that I, together with many other ordinary supporters, have for the future of the game we love.

Summary of Evidence (i) The relationship between supporters and football clubs is unique and the legal status of clubs is not appropriate to this and should be changed to a model involving supporter ownership. (ii) Controls on club owners, their intentions and conduct are insufficient and must be strengthened and properly enforced. (iii) The body to do this is the Football Association, but that is currently not fit for purpose and needs major reform imposed to make it democratic, effective and independent of vested interests. (iv) Wealth distribution within the English game is causing real damage to the game at all levels and encouraging debt—debt for non capital projects must be prohibited and the German model of football governance provides an ideal template for this. (v) Deficiencies in this German model relating to supporter representation must be overcome, and supporters’ organisations should be properly funded by the football industry.

Detailed Evidence 1. I have been a supporter of Reading Football Club since 1976, when I was aged 14. Throughout this period the fortunes of my team have been a major part of my life, taking up a significant proportion of my time and income. =As well as deriving a lot of pleasure and emotional pain, I believe that following a football team and experiencing the highs and lows that this brings has been a major formative experience and has helped turn me into a more rounded and well-balanced member of society. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2. Both my father and my grandfather would have been able to tell similar stories, since they spent the majority of their lives as Reading supporters—indeed, it was the revenues paid by my grandfather and his many contemporaries which was used to expand and improve Elm Park when Reading entered the Football League in the 1920s. There are a great many supporters of football teams at all levels of the game who have similar experiences and similar commitments to the clubs they support. 3. The support and dedication of football supporters to their teams is a quite different relationship to the normal commercial relationship between supplier and customers. Should Tesco raise their prices or decrease their level of service, a customer is likely to switch to Asda or Morrison’s, etc. However, should Reading FC raise their prices or decrease their service level I will not switch to watching Oxford United or Aldershot Town—I am more likely to cease to be a supporter altogether. Although it is something of a cliché it is also a truism that no-one has ever requested that after their death their ashes be sprinkled in their local supermarket. 4. The dedication and commitment of football supporters is often abused by football clubs who gain commercial advantage from placing obstacles in the way of match going supporters: eg high ticket prices, short-notice rescheduling of matches for TV broadcast, etc. 5. Despite this, many supporters of clubs feel that it is an integral part of their life and a vital part of their identity. For these millions of people their football team has a far greater significance than a work of art or piece of architecture, and as such can legitimately be considered a part of both the local community’s and the nation’s culture and heritage. 6. All other elements of national/community culture and heritage are protected to one degree or another by regulation—for instance by export licensing of works of art or listing of historic buildings, etc. No such protections exist for football clubs, which in legal terms are regarded solely as companies like any other business. 7. Supporters, however, do not feel that football clubs are “any other business,” and believe that their value to individuals and communities is much greater than the basic commercial value of the business. As such, supporters are looking to the Government to intervene in order to ensure the legal protection for the football clubs which they value so much. 8. The legal status of football clubs as commercial businesses is inappropriate to their purposes and is letting down supporters of those clubs. As they are businesses, the prime duty of owner and directors is to make money for the shareholders, taking precedence over all other considerations. This is incompatible with the objectives of a sporting organisation, which is success on the field of play. 9. This requirement to operate as a commercial organisation also disenfranchises supporters from meaningful participation in the way that their football club is run. Supporters are typically unable to raise the levels of investment required to acquire a meaningful shareholding at all but the smallest clubs, and in any case there is almost certainly a conflict of objectives between of supporters and directors. 10. The treatment of football clubs as businesses leaves them vulnerable to asset strippers who would purchase a football club purely for the commercial value of its assets, as happened to Brighton and Hove Albion in 1997 and has been threatened at several other clubs subsequently. In strictly legal and commercial terms this is perfectly legitimate, but again it assumes there is zero value in the football club apart from the physical assets, when to supporters and community the value of their football club is immeasurable. 11. It is vital that football clubs are provided with a special legal status which recognises and values their place in the community and their cultural importance, and which prevents them being valued in purely financial terms. Such legal status would provide safeguards against asset strippers and would be a perfect vehicle to enable supporter participation and/or ownership (in full or partially). The German “50%+1” model, where regulations require supporters to hold 50% + 1 of the shares is a perfect example of such a model. 12. The lack of a defined and enforced ownership model for football clubs leads to uncertainty and anxiety amongst supporters, since a change of ownership or ownership model—about which they will almost certainly have no input or representation—can change the whole direction, ethos and financial situation of a football club almost instantly. 13. As an example, Sir John Madejski, owner of Reading FC, has made it publicly known for several years that he is willing to sell the football club to “the right buyer”, although he has not stated if that “right buyer” will need to meet any other criteria other than having the ability to pay the asking price. 14. In his time as Chairman of Reading FC, Sir John has presided over a period of success both on and off the field, which has transformed the club from one largely in Tiers Three and Four to one established in Tier Two and pushing for promotion. This has been done largely through investment in infrastructure, and Reading FC is currently one of the few football clubs on a sound financial footing, running a balanced budget with no outside investment. 15. However, Reading supporters are worried that any new owner might not follow this pattern of responsible financial management, or even be visible to them, and feel there are no significant checks or regulation in place to ensure this. Whilst supporters are unable to participate in the way the football club is run they have no cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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influence over this and should a “rogue owner” purchase the club they will be powerless to do anything other than watch its financial demise. 16. Supporters believe there needs to be proper controls on club ownership, including checks on the bona fides, financial backgrounds and intentions of potential owners. These checks must be thorough and must be performed before any planned takeover is allowed. I would suggest that the German model of financial regulation for football and that of NFL/NBA in North America are best practices which would greatly benefit football in the UK. 17. Such pre-purchase investigations should include checks upon the source of finance for potential purchase of football clubs. Leveraged buy-outs, as has happened at Manchester United and Liverpool FCs must be prohibited. To mortgage a football club in order to purchase it, at the same time lumbering it with substantial debt and correspondingly high interest payments is an outrage to the supporters who have invested so much emotional and financial capital into that club. It just adds insult to injury to discover that current financial legislation makes such leveraged buy-outs extremely tax efficient. 18. The use of overseas holding companies and similar financial strategies which hide the true ownership of football clubs is wrong and must be prohibited for any sporting organisations. 19. In addition to the pre-purchase checks detailed above, it is also vital that there be effective investigation and enforcement in order to ensure that clubs and their owners adhere to rules. This includes the consistent use of effective punishments, of significant magnitude to ensure adherence to regulations, but a properly resourced investigative team with sufficient powers detect rule breaches. 20. The number of insolvency events amongst football clubs at all levels, including Portsmouth in the Premier League in 2010, demonstrates that current financial regulations, notably the “Owners & Directors Test” (previously the “Fit & Proper Persons Test”) are hopelessly inadequate and not effectively policed or enforced. 21. Under the current regulation structure of football, each league or other regulatory body is structured so that it answers to its member clubs and acts to benefit them. This is a natural disincentive to the introduction of effective regulation, and since the football industry has had many years in which it could reform itself but short-term self-interest has prevented this from happening, it is clear that the only option is the imposition of effective regulation onto the football industry by government regulation. 22. As each individual league currently enforces their own financial control regulations, the current system is confused and inconsistent. There must be a single set of financial regulations and punishments which apply consistently to clubs at all levels of the game, and which are enforced by a single regulatory authority. 23. The natural body to perform this role is the Football Association, since a clear part of their remit is to be “Guardians of the Game.” However, a majority of supporters has no confidence in The FA’s ability to govern the game for the benefit of the game. The FA is patently not fit for purpose—it is unrepresentative, mired in outdated views and processes, closed to outside scrutiny and clearly too much in thrall to the interests and power of the Premier League. A common perception amongst the vast majority of supporters is that The FA is effectively a Premier League “puppet” with decisions being taken to benefit the Premier League and its clubs rather than clubs at lower levels or the game as a whole. 24. As such, it is vital that there be significant, enforced, reform of the FA. This must be done so that the reformed body has sufficient strength to govern effectively and consistently across the game at all levels in England, and also has sufficient independence to be insulated from the financial interests of each member league, and particularly the Premier League. 25. Whilst being independent, a reformed FA must also fully represent all stakeholders within the game, including supporters, and must be demonstrably open and answerable to them all. This means proper accountability to all stakeholders, with power to stakeholders to remove representatives who are not performing as required. This will bring to an end the familiar image of “aged blazers” who have a post for life regardless of their capabilities. 26. However, the balance of power within a reformed FA must be sufficient that no single group or set of stakeholders holds the balance of power, no matter what their wealth or commercial power might be. 27. Within a reformed FA, the regulatory body referred to above must be sufficiently independent of the FA’s own hierarchy to be able to effectively investigate and regulate all member clubs and other bodies, even those in positions of power within the FA itself. This independence is fundamental good-governance in any organisation. 28. One of the major issues currently choking football at all levels is the issue of debt, the levels of which are quite staggering to ordinary supporters. Whilst debt in itself is not always a bad thing—for instance debt incurred for stadium or other capital improvements is perfectly justified—the level of debt which some clubs have incurred in order to meet basic operating costs like player salaries is unacceptable and can only damage the game. 29. The sums paid to many footballers at the high end of the game are excessive and outside the imagination, let alone the experience, of many supporters. 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where “stars” are worth such sums is as incompatible with the relationship between supporters and clubs as the concept of clubs being any other type of business, as detailed above. 30. These wage levels at the top end of the game are not only a major cause of debt, but they are damaging the game at all levels. Increases in wages at top levels of the game cause a domino effect, with “benchmark” wage levels increasing at all levels below, damaging the finances of clubs at these levels. This is even more galling to supporters since most are aware that the primary reason for ever-increasing wage increases at the top level is an on-going battle for status between players and owners, and not any genuine financial reasons. 31. The levels of television income in the top tier of football, coupled with the additional TV income received by a small number of clubs involved in European competitions are distorting the whole financial structure of the game, and leading to increasing debt. Income in Tier One is so high, and the financial chasm so great between Tiers One and Two, that clubs are increasingly incurring unsustainable levels of debt in an effort to either stay in Tier One or gain promotion to it. 32. For those clubs relegated from Tier One, the resulting loss of income is significant, and has caused insolvency events at clubs like Ipswich, Leicester, Southampton and Leeds. This means there is a clear incentive for clubs in the lower reaches of the Premier League to incur extra debt—a club that knows their financial position means they will not survive relegation has nothing to lose by gambling the club on avoiding relegation. If they fail, they will go into administration anyway, and they might as well go do so for £200 million as for £20 million! This is clearly bad governance but a club in such a position has nothing to lose. 33. For promoted clubs, however, the gap is just as large, and the aim of every club promoted to Tier One club seems to be only to avoid relegation rather than to compete effectively at that level. This cannot be healthy, as it reduces genuine competition within the league, as shown by the small number of teams to have won the Premier League since its formation in 1992. This also perpetuates the financial divide between “haves” and “have nots” by reducing the number of clubs likely to finish in the higher positions who will earn TV income from European competitions. 34. As an example of this, in 2006 Reading won the Coca Cola Championship (Tier Two) by a record margin of 16 points, setting numerous records including highest ever points total. In previous decades clubs who had so dominated Tier Two might have been expected to compete in Tier One upon promotion—Ipswich, Derby and Nottingham Forest all won Tier One shortly after promotion—but Reading were unable to compete effectively, with an 8th place finish followed by relegation. Reading FC Chairman, John Madejski, was faced with the choice of either throwing large amounts of money (possibly incurring debt) at the football club in an attempt to match the spending of the top teams, or see them not compete. He chose the former, but many other club owners have instead chosen to “live the dream”. 35. The Premier League distributes the vast majority of the many, many, billions it earns each year from TV revenue this amongst its own 20 clubs. This concentration of football’s wealth at the very top of the game, with disproportionate wealth-gaps between tiers, will inevitably result in a fewer clubs at lower levels. It will also create an “elite” of fewer than 30 clubs with TV money which can compete to one degree or another. Mobility by merit has always been one of the great things about the English football pyramid, but the concentration of football’s wealth at the top means that the prospect of a club like Wimbledon ever rising from non-league to top tier has become very remote. 36. The Premier League does distribute a small proportion of its income to the Football League in the form of “Solidarity Payments”, but these are too small to make a significant impact upon the competitiveness of clubs, and strings are attached on what much of this money can be spent on. Also, in order to secure the continuation of Solidarity Payments”, in Summer 2010 Football League clubs were forced to accept increased parachute payments for those clubs relegated to Tier Two, a move which can only further distort financial equality and encourage Premier League Clubs to further stretch themselves financially. 37. A perfect example of how debt distorts competition and affects clubs at all levels is the transfer of Tommy Smith in August 2009. Reading FC had agreed a fee with Watford FC for the purchase of this player, when at the last minute they were “gazumped” by Portsmouth FC, who purchased this player for a higher sum and on much higher wages than Reading could offer. It later transpired that Portsmouth FC were not in a financial position to do so, and within a few months were in administration. 38. A lack of control over debt gives debt-ridden clubs an unfair advantage both on and off the field, at the same time penalises those clubs who are run responsibly. This must be unsustainable in the long term, and it is vital that debt incurred for non-capital projects is prohibited. Again, the German model of club licensing, with submission of financial plans at the start of each season, punitive penalties for non-compliance and the prohibition of provides a perfect template. 39. Even the German 50+1 model of supporter representation is not completely perfect, since there are opportunities for voting rights to be restricted to only certain members under this model. In the UK there must be a properly defined representative model where supporters are properly represented, in a fully-democratic and open fashion, with proper accountability. This must be imposed upon club owners since they are unlikely to instigate this themselves, but it must also go hand-in-hand with the changes to the legal status of clubs discussed above. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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40. In order for supporters to be able to properly play their part in the football industry as above, they must be properly funded. This includes funding of supporters’ organisation at local (club) level as well as guaranteed core funding at national level. January 2011

Written evidence submitted by Dr John Beech, Head of Sport & Tourism, Applied Research Centre for Sustainable Regeneration, Coventry University The views expressed are the author’s, and not necessarily those of the organisation.

Summary The governance of football has evolved without any over-riding sense of strategic direction. As a consequence of this lack of direction it has become in part dysfunctional, and has in particular failed to address the issues of indebtedness, insolvent trading and disparity across the vertical dimension of the football pyramid. The lack of initiative to drive the necessary fundamental changes as a result of self-regulation, combined with the European “specificity of sport” debate, provides a unique opportunity for the UK government to seize the initiative in driving through reform and ensuring the sustainability of professional football.

1. Introduction 2. The current state of the English football sector40 is a cause for considerable concern. The phenomenon of the English Premier League and its 20 clubs (and alongside it the Football League and its 72 clubs) is often presented as a success story, combining the best of football and financial success for the clubs who make up its membership. Deloitte (2010), for example, opens with the sentence “English football’s domestic and international profile and deeply rooted supporter commitment has underpinned stellar rates of revenue growth”. What this ignores is the stellar rate of growth in costs, to an extent that many clubs teeter on the verge of trading insolvently. 3. Since 1991, there have been 52 clubs which have played in the top 92 (ie the Premier League plus the three divisions of the Football League) which have suffered insolvency events, typically having to seek the protection of the courts from their creditors through going into Administration. The desired exit from Administration from the perspective of football’s governing bodies is the formation of a Company Voluntary Agreement (CVA) under which the company agrees to repay debts at a rate of so many pence in the pound over a specified period. In the case of football clubs, the emergence of a CVA which writes debts down typically provokes a change in ownership. Indeed, prospective new owners tend to hold back from taking over a club in financial difficulty until the CVA has been agreed. The frequency which this has happened in recent years has resulted in an increase in the number of owners of football clubs who lack experience in managing a business in this highly specific sector. 4. If we include clubs which have played in the Conference (the next Tier, with an additional 24 clubs), the number which have experienced insolvency events rises to 73. 5. This rate of insolvency is unmatched in any other business sector. 6. The breakaway of the top 22 clubs to form the Premiership marked a watershed. The increased television revenues secured from BSkyB resulted in an escalation of players’ wages as a direct result of the obvious increase in revenues. The gap between revenues and expenses has never been successfully bridged, and the level of indebtedness is deeply worrying. 7. The operating profits of Premier League clubs stand up well in comparison with top tier clubs in France, Germany, Italy and Spain, as is shown in Table 4. 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 England 222 240 200 141 234 93 France (102) (15) 37 23 (84) (64) Germany 89 183 82 250 136 172 Italy (234) 1 (1) (40) (66) (116) Spain 64 64 64 62 63 63 Abstracted from Deloitte (2010) 8. This data suggests that English, German and Spanish clubs in the respective top tiers have been operating successfully from a financial point of view, as opposed to French and Italian clubs. This is however misleading, as the debt level of clubs is not apparent. Pre-tax profit/loss figures over a five year period for the English Premier League clubs show a less healthy picture however. 40 This submission is based on evidence from the author’s researches regarding clubs in the English league system and the governance system under which they operate. It hence draws also on the condition of a small number of Welsh clubs. Much the same evidence could be drawn from Scottish clubs. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2001–02 2002–03 2003–04 2004–05 2005–06 Premier League (£137m) (£153m) (£128m) (£78m) (£69m) Championship (£36m) (£126m) (£47m) (£65m) (£47m) League 1 (£28m) (£34m) (£16m) (£13m) (£17m) League 2 (£3m) (£5m) (£4m) (£4m) (£4m) Total (£204m) (£318m) (£195m) (£160m) (£137m)

9. In five seasons, the 92 clubs lost a total of £1,014,000,000, although it should be pointed out that Chelsea accounted for almost a quarter of this in the two seasons 2004–05 and 2005–06 alone, attributable to the “benefaction” of Roman Abramovich. Abramovich had poured money into the club in the form of so-called “soft” loans, which, with the approach of UEFA’s Financial Fair Play protocol, he has now converted into equity, the sum involved in the final purchase of shares amounting to £360 million.

10. This process of supporting a club through the medium of soft loans from its “benefactor” has resulted in very heavy levels of debt being incurred. Over last two years for which data is available (barring Portsmouth in 2009, where accounts had not been filed because of the club going into Administration, with debts widely reported as being over £100 million), Premier League clubs have been operating with aggregate debt levels of over £3 billion. Whether operating with such high debt levels is sustainable is clearly open to question. Two scenarios need to be considered. The first is that the debt, albeit “soft”, is serviced. The examples of Manchester Utd. and Liverpool, with leveraged debt taken on as a result of new ownership by the Glaziers and Messrs. Hicks and Gillett respectively, suggest that, even where the underlying business operation is oriented to profit maximisation through the development of new revenue streams, most notably in the Far East, debt servicing remains highly problematic. The refinancing of Liverpool’s debt, for example, proved problematic ultimately, resulting in its sale again.

11. A key performance indicator for the financial health of a football club is its wages/revenues ratio. Here again, an initial glance would suggest that the Premier League offers an example of good practice. With the exception of a slight turn for the worse in the most recent season, the English figures hold up well against those for Italy, and are comparable with those for France and Spain, but are not as encouraging as those for Germany’s Bundesliga.

12. However the use of averages hides a less encouraging picture in the case of the majority of Premier League clubs. The table below presents a deeper analysis, looking at the individual clubs which constituted the Premier League in season 2008–09. It reveals that only five clubs have been operating within the 60% limit generally advocated as good practice. These include three of the so-called “big four” of English football (Arsenal, Liverpool and Manchester United, but not Chelsea), who have the highest wages and revenues, thus skewing the average for the whole league. Just over half the clubs have wages revenues ratios of over 70%, with worst practice at Wigan Athletic, with a five-seasons ratio of 87.5%. Among the data are some particularly worrying examples of ratios above 100%—Wigan with 100.3% in season 2006–07, Stoke with 105.9% in 2007–08, Portsmouth with 108.8% in 2008–09, Hull with 129.0% in 2007–08, and Wigan again with an amazing 208.3% in 2004–05.

13. Such figures are clearly unsustainable without the “bankrolling” of a benefactor.

14. The Benefactor Model in Practice

15. The commonest form of benefaction is the provision of “soft” loans. These appear as directors’ loans in the company’s accounts, but they are made on the understanding that there will be no pressure for repayment. This in itself is slightly surreal, as at clubs where they are made there is no significant evidence that the club will ever be in a position to make repayments. They are made on the assumption that significant cash injections will result in success on the pitch, a version of one needs “to speculate to accumulate”. With the exception of such investment on the scale made at Chelsea and Manchester City, there is little evidence that on-the-pitch success can be bought. Examples of long-term failure by a “benefactor” to buy success through benefaction include Middlesbrough (Steve Gibson) and Wolverhampton Wanders (Jack Hayward).

16. The author currently monitors the financial state of over 200 clubs, and examples of “soft” debts suddenly turning “hard”, ie requiring unexpected repayment, which the club is particularly badly placed to make directly as a result of operating with a high wages/revenues ration facilitated by the provision of the “soft” debt’, are all too common. Examples to illustrate the potential unsustainability of support through ‘soft’ loans include: — Darlington—the owner was imprisoned for tax fraud. — Doncaster—the owner was arrested for arson, specifically the burning down of the club’s the main stand in order to collect the insurance money. — Harlow Town—a disputed divorce between the co-owners paralysed the finances of the club while a divorce settlement was reached. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Portsmouth—one “benefactor (Sascha Gaydamack) sold the club to another “benefactor” who turned out to be not actually very rich (Ali Al Faraj), who quickly sold the club on to yet another “benefactor” of a similar ilk (Suleiman Al Fahim). — Rotherham—two sons took over their father’s business interests as he grew old, yet lacked the genuine love of the club that their father had inherited. They arranged for the ownership of the club’s stadium to transferred to them as settlement of the “soft” debt, and then pushed the rent up to a level that resulted in the club moving out and into exile. 17. The commonest reasons, however, seem to be that the owner’s primary business hits financial trouble and/or the owner simply loses interest in the club. 18. “Benefactors” make “soft” loans not only to improve the club’s playing squad, but also either to facilitate stadium redevelopment, or the building of a new stadium. There is a naive “cargo cult” belief which damages sustainability—that a club needs a new stadium, usually far too big a one, and that increased capacity will automatically be taken up by entirely new fans. A classic example of this occurred at Darlington, where the “benefactor” financed a new stadium as the prerequisite for “bringing Premier League football to Darlington”. The capacity of the new stadium was 25,000, and the opening game attracted only 11,600 spectators (which is still the record attendance). Darlington has since been into Administration, the club is currently in the fifth tier of the English pyramid, the capacity is currently restricted to 10,000 (with large parts of the stadium unmaintained, and closed on health and safety grounds), and an average attendance is approximately 2,000. 19. The author’s scoping of the state of finance in English football clubs, and their problems with insolvency, has led to an ongoing research project into the nature of “benefaction”. It might be expected that people who have made their money through a successful primary business would apply the skills learned to running a football club as a secondary business with a similar acumen. It would appear that this is in general not the case.

20. The Core of the Problem 21. English football has progressed unchecked from a professionalised era (1888 to 1990) to a commercialised era (since 1990). 22. The surge in funding from broadcasting rights has been overtaken by a surge in costs, in particular, in transfer fees and in wages. 23. This has resulted in pressure on “benefactors” to assist clubs, generally through “soft debts” in the form of loans. 24. When the “benefactor” can no longer (or for whatever is unwilling to) sustain expenditure, the club is in danger of losing its stadium in cases where the so called “soft debt” has been provided against the stadium as security. 25. As the scale of finance and hence debt increases, clubs turn increasingly to richer foreign “benefactors”. Although foreign investors per se do not present a problem, their increased likelihood of being owners who are absentee and/or unaware of the social construct surrounding a club in its community does. We have now reached a position where half the Premier League clubs are in foreign ownership. 26. The increase in final scale at the top of the pyramid has, through a lack of altruism in dividing out broadcasting revenues, has led to a distortion across the layers of the pyramid. For example, in the top three layers of the pyramid there is now the following disparity in guaranteed minimum income through central league funding: Premiership £41 million (minimum) Championship £4.9 million League 1 £1 million The introduction of parachute payment has to some extent eased the burden facing clubs on relegation, but, without “rocket payments” to assist promoted clubs, they stand on an uneven playing field in the new higher league, while the club they have replaced starts life in the lower division with a substantial subsidy—clubs are rewarded for failure and constrained by success. 27. The continued dependency on the “benefactor” model and the lack of effective financial regulation has, as identified in a report by the Financial Action Task Force (FATF), an inter-governmental body, made football particularly vulnerable as a vehicle for money laundering.

28. The Contexts for Addressing the Issues 29. There are three frameworks within which the football sector is regulated. 30. The most immediate of these is the context of self-regulation. While in theory the ultimate governing body in England is the Football Association, their authority has been eroded through their complex committee structure, and the representation on those committees of league representatives. The chances of reform through self-regulation seem slim; the appointment of a new Chairman whose background is as a Premier League does not suggest that there will be an agenda of radical change. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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31. Self-regulation with respect to insolvency has so far been dysfunctional. The author has produced a research paper analysing the effectiveness of the points deduction system. It is clear that deducting points does not deter clubs from becoming insolvent, and it is ineffective in preventing repeat occurrences at the same club. Furthermore, as the ownership of clubs tends to change hands during a period of Administration, the sanction is imposed upon a new ownership who have no responsibility for the causes of the insolvency, and who are attempting in many cases to simply ensure the survival of the club. A classic case in this respect is that of Luton Town. 32. At the other end of the spectrum there is a European context, both in the form of the European Union and UEFA. UEFA are taking appropriate action to regulate through the Financial Fair Play protocol, which requires control of indebtedness and trading solvently. The effectiveness of this protocol will, however, be limited in the English context because the only sanction for non-compliance will be a ban from European competition, a sanction which is only a threat to the top dozen clubs or so. The desired outcomes of the protocol are thus highly desirable but will have little impact further down the football pyramid. It should be borne in mind that the English pyramid has five to six levels at least of professional football, more than in other European countries, and UEFA regulations and protocols are designed for the more typical country. 33. The European Union offers hope for the regulation of professional sport in general through the introduction of the concept of the “specificity of sport” in the Treaty of Lisbon. UEFA has responded through a position statement which is encouraging, but the prospects of UEFA driving through radical change in English football are not immediate. 34. The Treaty of Lisbon does however open the door on the possibility of the United Kingdom government shaping the future of football governance in the home nations.

35. Possible Remedies 36. The specific areas in which change in the governance of football are necessary to ensure the sustainability of the sector are: — returning the culture of football clubs to one in which the sporting ethic is recognised as much as the profit motive; — club ownership; — the practice of indebtedness and solvent trading; — the distribution of broadcasting rights; and — the reunification of lead authority in a single governing body which is not unduly influenced by leagues of clubs. 37. Realistic objectives of UK government-driven change include: 37.1 Taking the initiative in shaping a definition of the specificity of sport which not only embraces employment law but also competition law, but recognises that (a) competitive balance is an essential component of sport and (b) financial doping is ethically unacceptable in sport. 37.2 Promoting ownership of clubs which is locally based and fan-based. This can be achieved through incentives for clubs to form as mutuals or as community interest companies (CICs), and to offer fan involvement through supporter’s trusts which have a majority of seats on a club’s board. 37.3 Prohibiting the practice of financial doping, in order to maintain competitive balance and equality of opportunity. 37.4 Ensuring that effective “fit and proper persons” criteria are practiced, and that the rules are not circumvented by the use of de facto shadow directors. 37.5 Reigning in the repeated high levels of debt to HMRC. 37.6 Enforcing the requirement that companies in the football sector trade solvently. 37.7 Ensuring that the football sector does not practice tax avoidance. 38. It is recognised that he UK government cannot in practice directly influence the distribution of broadcasting rights or the relationships of the governing bodies, but it would be naive to imagine that HMG lacks the power to exert substantial indirect influence. 39. A licensing scheme for professional sports organisations, as already practised in German football for example, could go a long way to meeting these objectives. 40. Given the contexts discussed above, the UK government not only has a unique opportunity to effect change in football governance but also finds itself in a situation where professional sport needs to change if it is to survive. If self-regulation continues in its present form, the decline of the football sector will continue and may indeed fail, a situation that would be in nobody’s interests. While it is certainly not imperative that the UK government should take an active part in the overall governance of sport, it needs to seize the initiative in implementing change—it appears that no-one else will. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Reference Deloitte (2010) Annual Review of Football Finance, Deloitte Sports Business Group, Manchester. January 2011

Written evidence submitted by Lawn Tennis Association (LTA) 1. Overview and Introduction 1.1 The Lawn Tennis Association (LTA) is pleased to provide evidence to the Committee’s Inquiry into Football Governance as the Committee and its members have expressed an interest in the different models used across sport to share good practice. 1.2 The LTA recognises that different management and Governance structures may be appropriate for different organisations, including national governing bodies, and for different sports. 1.3 As the National Governing Body for tennis in Great Britain, the LTA invests heavily in developing tennis at the grassroots, alongside work to develop talent and help players to excel. 1.4 The LTA recognises the importance of effective corporate governance and works to identify improvements on an ongoing basis as part of this commitment. It has made some important reforms in recent years to modernise and strengthen its governance across a range of areas, guided by best practice across sport and the wider corporate sector. 1.5 The LTA is majority funded through the revenues generated through its involvement in, and joint management of, The Championships, Wimbledon, and other commercial income. While it is not a public body, it is also a recipient of public funding, notably via Sport England (Whole Sport Plan). As such, the LTA fully recognises that effective management and governance structures are fundamental requirements for receiving public funding. 1.6 The changes to corporate governance made by the LTA are designed to mirror those of a FTSE 250 company, and the organisation has been recognised by Sport England as having sound—and improving— governance structures in place through full audits of the association in 2008 and 2010. This is in addition to the annual national governing body (NGB) self-assurance process.

2. Summary of Recent Changes to LTA Governance Current structure 2.1 The current Corporate Governance structures are described in full on the LTA website at http:// www.lta.org.uk/Articles/About-Us/Corporate-Governance/. Summary detail is also provided below in section three.

Overview of recent changes 2.2 The current structures are the result of significant reforms introduced since 2004, including moves to improve the quality and speed of decision making, to boost the number of independent non-executive Directors on the Board; reform the Council by increasing representation from “non-traditional” areas of the sport (ie beyond the traditional County structure) as well as reduce the overall size, and reforming the committee structures. Alongside this, the organisation has also worked to introduce more appropriate checks and balances, strengthen its risk management procedures, and create a culture of transparency and accountability within the organisation through strong reporting structures to the Executive, Council and Main Board.

Speed of decision-making 2.3 Following a report commissioned from external advisers Deloitte, the LTA Council agreed a restructure in 2004 which passed responsibility for operational decision making to the executive team, known as the Executive Team. This move was designed to improve the quality and speed of decision-making at the LTA.

Council Reform 2.4 A range of reforms to the LTA’s Governing Council were discussed, agreed and implemented during 2007–10. This included work to establish: 2.4.1 A clear role and purpose for Council and refresh its composition—with changes to the membership, structure and make up of Council, including a phased reduction in membership from around 140 to around 84 members eligible to attend meetings in 2011.41 These changes were designed to improved co-ordination of all constituent parts of British Tennis through enhanced 41 In 2011 there are a total of 113 LTA Councillors, of which only 84 are eligible to attend Council meetings. This follows changes to restrict the length of time, for example, former Presidents and Life Vice-Presidents are eligible to attend. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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representation from the different parts of tennis, and improved decision-making through a more stream-lined Council. 2.4.2 A clear and accepted role for a Councillor—following a full review of the required characteristics of Councillors—age; appointment processes; succession; length of service; characteristics of Councillors, clarify their roles and responsibilities, and look at how their role and contribution is monitored and evaluated. 2.5 These changes resulted in improved representation from the constituent parts of tennis through the introduction of Councillors representing the education sector, local authority tennis and the commercial sector, as well as disability tennis and professional players, at the same time as an overall reduction in the size of Council to improve its effectiveness. 2.6 Other improvements relating to the Council in recent years include the development of a skills matrix; improvements to succession planning; the introduction of induction and training for all new Councillors; greater involvement of LTA Councillors in All Colleague (staff training) Days and, from 2010, the introduction of a bespoke annual briefing weekend for Councillors and other lead County volunteers on priority business areas of the LTA.

Main Board 2.7 Recent reforms at Main Board level have included the appointment of two Independent Non-Executive Members of the Main Board. Boosting the numbers of Board members with a “non-tennis” background reinforces the ongoing commitment to professionalise the running of the sport. The two current independent non-executives are Val Gooding CBE and Richard Baker. Val was the CEO of BUPA, is a Non-Executive Director of Sainsburys and the BBC. She sits on the Remuneration Committee of the LTA. Richard Baker was the CEO for Boots from 2003–07, is Chairman of Virgin Active and an active Director of several companies. He chairs the Audit Committee. Richard joined the Board in 2010, after the previous incumbent, Sir Bob Phillis sadly passed away in late 2009. The President’s nominee to the Main Board also provides a mechanism to bring in additional expertise, including where skills gaps have been identified. The current President’s nominee is Peter Littlewood, the former chief commercial officer of Allied Domecq and previously Senior Vice-President of Marketing for Mars Inc. He has played a key role in advising and supporting the LTA’s commercial team in the successful re-launch of its sponsorship and major events programme. 2.8 As you would expect in a mixed sport, the LTA has a history of female representation on the Main Board. The 11 person Board currently includes two women, Council elected member Cathie Sabin, who became the first female Vice President of the LTA in December 2010, and Independent Non-Executive Val Gooding CBE. As Council-elected representatives and the Chairs of the Principal Committees on the Main Board change regularly, this number tends to change every year. Appointments to the Board are made on the basis of nominations made, but the LTA recognises that more can always be done to ensure appropriate representation of women at all levels of the organisation. We believe that the changes made to Council and the Committee structure will improve the process for identifying potential Board members of either gender. 2.9 Reflecting the changes to Council detailed above, other changes relating to the Main Board in recent years include the development of a skills matrix, improvements to succession planning, induction and training for all new Board members and the introduction of an annual review process with the President. There is a clear programme of business (published on www.lta.org.uk) covered by the Main Board, with robust, regular reporting structures in place to ensure accountability.

Committee structures 2.10 The number and role of Committees was reviewed in 2004, and again in 2010. The latter focused specifically on the Advisory and Scrutiny Boards with the recommendations from the project group being approved by the Main Board in July. The outcome of the review recommended that two new Principal Committees, the Tennis Development Committee and the Tennis Performance Committee be formed, which are sub-committees of the Main Board, in place of the current Advisory and Scrutiny Boards. These came into effect from 1 January 2011. The new Terms of Reference of these Principal Committees and necessary amendments to the LTA Standing Orders were approved by the LTA Council 24 November 2010. An effective Committee structure, combined with clear roles and responsibilities respectively for the Governing Council, Main Board and the Executive Team is designed to ensure effective structures for strategic development, decision making, reviews of progress, check and challenges, as well as providing the Executive with access to added expertise and support, and supporting succession planning and volunteer skills development, by helping to identify those with the skills for future appointments to the Main Board. 2.11 Specialist committees also support the Main Board in a number of areas. These include the Risk Advisory Committee, which was established following a recognition that more needed to be done to identify, track and manage risks to the LTA and British tennis. Supported by an Executive-level Risk Advisory Group, recent improvements in this area have been recognised in Sport England audits. 2.12 Another specialist Committee, the Child Protection Committee (established in 2007) is appointed on the basis of expertise, and includes a number of independent and external appointments. This includes its Chair, cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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leading child protection expert Eleanor Brazil, who is currently Interim Director of Children’s Services at Birmingham City Council. Also, the Coach Licensing and Registration Committee, which oversees the appointment of licensed and registered coaches, is required to be chaired by a legally qualified Chairperson, currently Michael Sayers, the Secretary of the Law Commission (independent Chair since January 2009). This shows ways in which the new structures enable the LTA to bring expertise from beyond tennis into the sport.

Affiliation to registration 2.13 A further example of improving and more transparent governance is the transfer from the previous affiliation of traditional clubs to the LTA, to a system of registration by all places to play tennis, whether “traditional” clubs, commercial clubs, indoor tennis centres, park and school based programmes and universities. Now all “places to play” register with LTA County Associations on a per-court basis rather than per-member, as under the old affiliation system. The LTA believes that the per-member system acted as a disincentive to clubs increasing membership, so this is a very important change to support the LTA’s ongoing work to grow participation in tennis. 2.14 Given the allegiance in many NGBs to the Club and County structure, this marks an important shift at the LTA, with other places to play and their members now accessing the same benefits. 80% of LTA registered clubs have benefited from this change, and it has left £1.3 million in the hands of those clubs, parks and tennis centres already linked to us. Effectively this forms a major revenue reinvestment back into the front line of tennis, and the LTA’s County-based field team are working with them to ensure that these savings are reinvested back into developing tennis locally. The registration scheme was introduced in October 2010, and already clubs are investing the savings in free introductory sessions, subsidised coaching or scholarships for talented youngsters. These will help to widen access, sustain and increase participation in tennis.

Future Changes—Incorporation 2.15 Following its approval at an Extraordinary General Meeting of the LTA in December 2010, the LTA will be incorporating on 1 October 2011. Previously the LTA was an unincorporated association, as many other national governing bodies were established. Being an unincorporated association was an archaic structure which led to unnecessary complications. This includes the need to set up different entities to enter contracts on our behalf, and exposed our members and associates to unlimited liability. Incorporation will limit each member’s liability to £1.

3. Governance Structure of the LTA Overview 3.1 The LTA is currently an unincorporated association whose constitution is set out in the Rules of the LTA. The stated object of the LTA is to be the governing body of tennis in Great Britain, the Channel Islands and the Isle of Man with the general object of advancing the interests of tennis and the LTA. 3.2 Its members are organisations which have an interest in the development and promotion of tennis in Great Britain including the 38 English counties, Tennis Scotland, Tennis Wales, Channel Isles LTA and Isle of Man LTA, the All England Lawn Tennis and Croquet Club (AELTC) and the Tennis Foundation (TF), as well as other affiliates such as BUSA. 3.3 The LTA Council approved the LTA’s incorporation proposals at its meeting on 24 November 2010. This was then approved at an EGM on 15 December 2010. The LTA will be incorporated with effect from 1 October 2011. 3.4 A diagram setting out where strategic and operational decisions are made at the LTA is set out on www.lta.org.uk, and can be summarized as follows: — Council approves strategic issues, generally with a three to five year perspective, for example the Blueprint, on the basis of proposals submitted by the Main Board which, in turn, are based on proposals submitted by the Executive with assistance from Main Board members, the Principal Committees and other specialist advisers. — The annual operating plan is decided by the Main Board on the basis of proposals submitted by the Executive. — This is underpinned by Departmental Plans and Projects, led by executives. — Two Principal Committees report to the Main Board.

The Council 3.5 The LTA Council is the democratic forum representing those bodies which are members of the LTA. Its composition and powers are governed by the Rules of the LTA. It consists (inter alia) of the President, Deputy President, Honorary Treasurer and Councillors (including representatives nominated by the various member organisations, player representative Councillors, LTA Nominated Councillors, Councillors nominated by the Tennis Foundation representing the education and local authority sector and a Councillor nominated by the Tennis Industry Association). cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.6 The LTA Council manages the LTA through the Main Board and the various boards, committees and panels. The Standing Orders of Council set out how the Council determines the composition of, and appointment to, the Main Board (and other boards, committees and panels) and delegates its power to the Main Board. 3.7 Decision Making: The Council, based on proposals submitted by the LTA Main Board, agrees the strategy for the LTA. Strategic matters that are submitted to Council for approval include the general vision, ie the LTA’s mission, strategy ie matters generally having a three to five year perspective and budgets, the annual report and accounts. 3.8 Nominations: Council also regularly approves the nomination of the Officers, for example nominations for the President, Deputy President and Honorary Treasurer, the Deputy Honorary Treasurer (if appointed) and Council representatives to the Main Board as well as certain other office holders as set out in the Standing Orders/Rules. It also reserves the right to approve amendments to the Standing Orders and LTA Rules (also subject to the AGM’s approval), and to approve any significant major transactions. As they are matters of direct financial interest to member bodies, annual registration fees and the rate of interest to be charged on LTA loans are matters on which Council decides. The Council currently receives reports from the LTA Main Board four times a year as well as at the Annual General Meeting. 3.9 Additional detail relating to Council business is available on the LTA website, or on request from the LTA.

Main Board

3.10 Membership and representation: The Main Board currently has 12 members, and cannot exceed 15. Its membership includes the President, Deputy President, Honorary Treasurer, the Chairs of the Principal Committees namely Tennis Development and Tennis Performance, two Council-elected members, one President’s nominee, the Chief Executive, the Finance Director, up to two Executives appointed by the Chief Executive and up to two unpaid outside independent Main Board members. 3.11 Appointments: The appointment of the independent Main Board members is subject to Council approval in the same way as current Board members are. 3.12 Role: The Board undertakes a formal review of the LTA Strategy and its performance against its Measures of Success annually, with regular monitoring throughout the year. Many of the Council’s powers and duties are delegated to the Main Board including: — Operational, performance and budget matters such as the agreement of the annual operating plan and budgets. — The approval of any single new event or project proposal where costs exceed £250,000. — Financial, Audit and Risk Matters.

Committee Structure

3.13 The LTA has a number of Committees, including two principal committees, whose role was reviewed in 2010. These two Committees report to the Main Board through their Chairperson who are members of the Main Board; they do not have any decision-making powers but have delegated responsibility from the Main Board and provide added expertise, advice, monitor progress, check and challenge. These are: 3.14 Tennis Performance Committee: makes recommendations to the Main Board on strategic performance areas of the LTA’s strategy “Blueprint”; and the performance infrastructure for player programmes, including: National Teams; High Performance Coach Development; High performance competitions—national and international events; and High performance places to play infrastructure (Performance centre network). 3.15 Tennis Development Committee: makes recommendations to the Main Board on the effective execution of growing tennis strategies linked to the development of the sport. 3.16 Other formal Board level committees include: the Audit Committee; Remuneration Committee; Nominations Committee; Risk Advisory Committee; Risk Advisory Committee; President’s Committee and Funding Committee. The Committee structure, including responsibilities and membership are described in full on the LTA website at http://www.lta.org.uk/Articles/About-Us/Corporate-Governance/

4. Summary 4.1 Although as the National Governing Body for tennis the LTA is unable to answer the Committee’s specific questions relating to football, given Members’ expressions of interest in governance in other sports, we hope the information in our submission provides useful background relating to corporate governance in tennis, and reforms to the sport over the last ten years. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4.2 Subject to the Culture, Media and Sport Committee Members’ interests, the LTA would be happy to provide oral evidence or additional written information relating to our submission or any other aspects of governance in tennis. January 2011

Written evidence submitted by John Bentley I am writing to you as Chairman of the Commons Media Select Committee before the Wednesday 26 January deadline with my personal views on football governance as a grass roots fan and hope that my small contribution will be of some value and support in your deliberations and future recommendations. As a recently retired college and university lecturer in business studies, management economics ]and business ethics [2008], I still retain a professional as well as a personal interest in the field of business ethics across all sectors of the economy, not merely in sport or football. I have broken my letter down into two parts and tabulated my points for ease of reading. In supporting some of my points, I have drawn on the article in “The Guardian” by Dave Boyle—chief executive of Supporters Direct dated 20 January 2011. Let me add here that I am not in any way a member of that organisation and have no dealings with Mr. Boyle. I do however, like many fans throughout the country, support their views.

Part One—Governance Issues — Foreign Ownership of Clubs—This is particularly prevalent in the Premier League but is also found in the lower English leagues. Clubs that are structured as public limited companies with shares quoted on the Stock Exchange can, under existing company law be subject to take-overs. Premier League clubs such as Chelsea [ Russia], Manchester City [Saudi Arabia], Manchester United [USA], Liverpool [USA], Aston Villa [USA] and Blackburn Rovers [India] are examples of such ownership patterns that have grown with the establishing of the Premier League in the 1990’s and the lucrative television rights deals with satellite and terrestrial broadcasters. The free market growth in foreign ownership of clubs has not always turned out to be the salvation of clubs. — Debt Burden on Clubs—Some Premier League clubs like Manchester United have debts in excess of £700 million with excessively high interest payments. The Liverpool case under the co- ownership of Hicks and Gillette impacted on the team, the leaving of the manager, Rafael Benitez and a boardroom revolt and the plans for a new stadium still unresolved. In the case of Portsmouth, the foreign ownership was not only disputed between certain individuals [one of whom was never seen], but led to a financial crisis with the Royal Bank of Scotland demanding repayment or foreclosing the club. In the end, the club were docked points and were relegated into the Championship League. The financial lesson provided by Portsmouth is a warning to other clubs of the risks involved with foreign ownership. — “Fit and Proper Person” rule—In Portsmouth’s case, this lax regulation was flaunted. How could the F.A. and Premier League bodies approve a person to be a “Fit and Proper Person” to be the owner of Portsmouth F.C. when they never even met him or interviewed him to inspect his financial assets? In the on-going case of Leeds United in the Championship League, the secrecy concerning just who owns the club is another example of unacceptable weak levels of regulation. By hiding the true ownership, the club Chairman, Mr. Ken Bates is suggesting that the people involved are not fit to run the club. — Laissez Faire Governance—On the issue of ground safety, it took the horrific disasters at Bradford and Hillsborough, Sheffield, to force the F.A. and League bodies to invest money in all-seater stadia following the Taylor Report. In short, it required government intervention to expose the shortcomings of the football authorities who had dragged their feet on the issue of ground safety for years. This was, and remains, in part, the result of the internal structures of the football authorities. In the recent cases of Wayne Rooney at Manchester United and Carlos Tevez at Manchester City, their money-orientated transfer requests were left to their respective clubs to deal with. There was no word or intervention by the Chairman of the Premier League, Mr. Richard Scudamore, on the issue of controlling the role of players’ agents. This is another area of lax regulation and governance which is bringing the national game into disrepute. — Need for a New Model of Club Ownership—With the weaknesses and potential on-going dangers of current football governance, some of which have been outlined above, as we move into the second decade of the new century, there is a growing call for a new model of club ownership. Quoting from “The Guardian” article by Dave Boyle, Chief Executive of Supporters’ Direct, “...... FC United of Manchester have raised £1 in. in a community share issue via a one member, one vote cooperative. AFC Wimbledon was reformed by fans after their club was stolen from them. Exeter City’s supporters trust picked up the pieces of a club in decline and it has now been promoted twice, with gates increased by 70%”. My local club Port Vale F.C. based in Burslem, Stoke on Trent, is run on democratic lines with a share contribution scheme for supporters—[contact Mr. W.A. Bratt, MBE., Chairman, PVFC], which has proven to cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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be very successful. Boyle goes on to say that “Over the last ten years, we have helped fans form over 170 supporters’ cooperatives across the UK representing over 250,000 supporters.” Citing Arsenal as an enlightened Premier League club, Boyle states that there are benefits to a dialogue with supporters’ groups, but that the sad reality in the majority of cases is that “..... the contribution of most chairmen is merely to highlight the need for supporter democracy through their own greed, mismanagement and, in some cases, criminality.” These are strong words, but they do have a resonance with many football supporters nationwide. On the continent, in Spain and Germany, for example, this new model of club ownership has been the chosen governance structure since the inception of their respective leagues. There is no chance of any foreign owner taking control of Real Madrid or Bayern Munich. As a result, there is continuity of ownership, financial security, a solid, loyal fan base and community involvement, all of which I would argue are essential for the future of the English game.

Part Two—Proposals Having outlined a number of areas where I feel reform is needed, I list below a number of proposals for your committee to consider. In my opinion, it will not be sufficient to produce a report which makes only “recommendations” to the footballing authorities to get their house in order. Something stronger will be required if “greed, mismanagement and, in some cases, criminality”, are to be rooted out of our national game. — Change the composition and voting rights within the main FA Board and its outdated Council. The proposal of Hugh Robertson, the Sports Minister, to introduce non executive directors to these two bodies should be a key priority. Non executive directors should also be mandated by government to the Premier League Board and that of the Football League also. — Full legal disclosure of club owners should be made mandatory, with tough legal sanctions for non-compliance. — The “Fit and Proper Person” rule on club ownership should be scrapped and replaced by a more robust investigative procedure—perhaps with a role for the Financial Services Authority, the Competition Commission and the Inland Revenue — A mandatory 10% of shares issued by a football club should go to genuine football supporters with strict rules on share transfers. In conclusion, the future popularity of football lies where it has always been—with its supporters. Many clubs at all levels have commendable involvement in their local communities, helping schools, disadvantaged people, the unemployed , the disabled and others. I urge you to consider this important social / ethical aspect in your forthcoming report. Football clubs do not enjoy a near monopoly on how people spend their leisure time today as they once did. There are many competing alternative leisure activities to choose from—cinema, theatre, concerts, etc. If English football is to compete with these many alternatives, maintain its popularity , and not suffer declining gates as a result of ever increasing admission costs, its governance should be fit for purpose in the twenty first century. Accordingly, I present these issues and proposals for your consideration and wish you and your colleagues well in your deliberations. I look forward to reading your forthcoming report with much interest. John Bentley B.Sc. Econ., P.G.C.E., M.A.

Written evidence submitted by Rick Duniec 1. Biographical Note I have been a match-going football fan for about 45 years and currently still attend games, mostly at , Leeds United. I am a former chairman of the Leeds United Supporters Trust and am currently the Trust Secretary. The Trust is a member of Supporters Direct and also a member of FSE—Football supporters Europe. I was previously heavily involved in SLU (Save Leeds United) which was an ad hoc group of concerned supporters during the time of the meltdown of the Leeds United Plc and up to the winding up of the Plc. I am personally also a committee member of the Yorkshire Division of the Football Supporters Federation and I attend Executive meetings of the Leeds United Supporters Club. This submission is, however, a personal submission.

2. Summary of Recommendations 2.1 The formal recognition that Football clubs are Monopolistic suppliers as far as the vast majority of their fans are concerned and that this monopolistic position in itself means that football clubs are not just like any other (non-monopoly) business. Such monopolies exist even when clubs are in close geographical proximity to each other. 2.2 The recognition of this monopolistic position presents legislators with an easily understood and generally accepted basis that may be used to justify intervention and regulation beyond that which applies to other (non monopoly) UK businesses. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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2.3 The encouragement of the use of the “monopolistic” description at every available opportunity in relation to the football business and to football clubs so that public perceptions may be changed over time and with the objective that football clubs can no longer use the spurious argument that they are just like any other business and that they should be treated as such by law. 2.4 That additional legislation is enacted to better control footballs monopolies in ways that the Football League (for example) may never find itself in a position to do, as a result of its internal mechanisms for voting upon such changes. (Turkeys needing to vote for Christmas)

3. Statement of Evidence I personally endorse the evidence of the Football Supporters Federation, the evidence of Supporters Direct, and the evidence of the Yorkshire division of the FSF. This is a statement of evidence based specifically on my personal experiences as a supporter.

4. The Football Fan and Choices of Supplier 4.1 There is a well known joke that says whilst you might change your wife (or your husband) you can NEVER change your football club. Within this joke lies a profound truth which reveals the nature of the relationship between the fan and their “chosen” football club. There are of course a small number of exceptions but these serve to prove the rule more than anything else. 4.2 Bill Shankley is well known for his un-PC joke that essentially football was more serious than life or death (to its fans). 4.3 Mrs Sophie Ridsdale gave her husband, Peter Ridsdale, a present of a cushion embroidered with the words—“Life is a game. Football is more serious”. She was closer than most to the reality and intensity of the game. 4.4 All of the above are light-hearted acceptances of the deep importance of football to its followers and of the fundamental, even blind, loyalty which many fans show to their chosen club. 4.5 Not only is football a vital product to those who consume it, it is almost beyond comprehension that for example a fan might willingly decide to change his allegiance and move to another club. Players, managers and coaches will do it as a matter of course, board members and administrators might do it, increasingly we see owners doing it, but the fans remain in place and as loyal as ever. The fans do not move to follow another club. Even if they attend another clubs game from time to time, their thoughts will always be on their “real” clubs result. 4.6 The reality for most football fans is that no matter what their club does, no matter how much it takes them for granted, no matter how badly it treats them, no matter how much it attempts to exploit them, they will remain loyal to the brand. Fans will find some part of the clubs organisation to vent their anger and frustration upon but loyalty to the “concept” of the club does not significantly waiver. In many ways the fans ARE the club and everything else is temporary and transient. 4.7 There is little known evidence that Fans of Bristol City for example will in any significant numbers simply up sticks and take their business to Bristol Rovers. Everton fans were not known to cross Stanley park and become Liverpool fans even when Liverpool were dominating Europe. Huddersfield fans do not change allegiance to Bradford City. 4.8 Football shows almost zero similarity to the situation where a bad experience or overcharging at Sainsburys will result in customers drifting away to Tescos and any suggestion that the market for football fans custom works in this way is misleading. 4.9 In economic terms this is very imperfect competition and represents something approaching a monopoly supply situation. Take it or leave it but you can’t get it from anywhere else. 4.10 This is very different to the market competition which other businesses experience and which imposes checks and balances upon the behaviour of businesses operating under such competition. 4.11 Football clubs are privileged to have the captive market of their fans and this situation allows them to abuse this privilege and in some instances this produces the inappropriate financial exploitation of the fan base. 4.12 An example of this might be an official membership scheme with arrangements such that paid up members can buy, say, four tickets for the same game with the result that almost nil tickets are available for sale to non members. In other words—if you want a ticket you must pay up and become a member even if there is no other benefit of membership for that individual fan. One ticket per member and the opportunity to have first choice may be justifiable, but as the member can only use one ticket themselves, there is little justification for them having access to more than one ticket as a result of their membership. Such practices are naked exploitation. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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5. Economic, Public, and Political Perceptions of Monopolies 5.1 In the UK there is a long history of recognition of the dangers (and sometimes the benefits) of monopolies. Even where monopolies are permitted (or even protected) there is a long accepted understanding of the need for additional controls, focussed legislation, checks and balances, and sometimes all-powerful independent regulators or ombudsmen, all of which has the objective of preventing the monopoly from inappropriate exploitation of its position. 5.2 Football has escaped such controls by perpetuating the fallacy that it is no different from any other business. 5.3 In reality football clubs are no different from any other monopoly. Some may be benign or benevolent but others are far from being either of these things. 5.4 Fans who are customers of these monopolies deserve to be protected from potentially excessive exploitation in the same way that customers of other monopolies need and deserve similar protection. 5.5 Economists have demonstrated, and politicians have taken on board, that additional constraints are required in order to moderate the potential worst excesses of monopoly suppliers. Monopolies cannot be relied upon to always restrain themselves in all potential circumstances. 5.6 The public will generally understand the need for additional controls when the example of monopolistic utility suppliers is used for example.

6. Changing Perceptions and Justifying Intervention 6.1 Emphasising the reality of football monopolies and encouraging the common use and reference to this concept will gradually result in the truth of the position of football clubs to become more commonly accepted and understood. The argument that football clubs are just like any other business will be revealed as the falsehood that it is, and may be replaced by the statement that football clubs are just like any other monopolistic supplier. 6.2 Far from imposing special rules for football clubs, legislators can be shown to be applying similar constraints as have been applied to other monopolistic suppliers which have the objective or customer protection, however willing those customers may be. 6.3 Treating football clubs in a similar way to other monopolistic suppliers is a justifiable stance for government to take and draws upon precedence. 6.4 The Football League may internally believe that many additional controls are needed (and there is some evidence of progress being made) but its own mechanisms for formally adopting self-imposed additional controls requires a majority vote (by football club chairmen) in favour of their imposition. 6.5 This may be likened to a self interest group of monopolists being asked to vote on imposing anti- monopoly controls upon themselves and can be seen to be desirable nor likely to be effective. 6.6 Where a body such as the Football League is shown to not have the mechanisms within its own structure to bring about progress and improvement, then assistance is required by outside authority which can enable and empower football to better help itself. 6.7 Such assistance is of positive benefit to football and to football clubs, but most importantly it is of positive benefit to football fans. January 2011

Written evidence submitted by the Pompey Supporters’ Trust Executive Summary This report looks at the current governance situation in English football and gives specific examples, particularly in relation to the experience of Portsmouth Football Club. It examines the rules which currently govern the industry, especially with regards to the ownership of clubs, which the Pompey Supporters Trust (PST) feel are currently far too weak. It also references the level of debt within our game, which the PST feels is much too high. We’ve also identified the weakness of the rules which allow owners to pursue high risk strategies, which often put the club at risk rather than them as individuals. All these factors, in our opinion, have led to a drift of football clubs away from the communities that they used to represent. Football clubs are a unique type of business, but they need to be able to run self-sufficiently and not rely on large debts. Despite the growing importance of TV revenue, merchandising and sponsorship, supporters and the local community remain extremely important to football clubs. As such, the Clubs need to start engaging more with the fans and the PST see’s many benefits in fan ownership and/or board representation. We believe that the Select Committee should also be looking at football models abroad, and across a variety of other sports, in order to understand how the various governing bodies protect their sports. We think that cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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without government intervention in English football, there will be irreparable long term damage to the clubs’ fans and to their local communities. This report recommends that stricter rules must be implemented on who can own football clubs and how those clubs are run. It also calls for debt to be reduced to levels that are predetermined by the amount of a club’s ongoing sustainable income. And we believe that fan representation at clubs, ideally through share ownership, or at the very least through participation at board level, will both protect the critical position of the fans and the local communities and encourage adoption of prudent business plans. Finally, we believe that the practice of buying players using future instalments, the automatic points penalty for clubs in Administration, and the Football Creditor rule, are three other areas that need to be addressed.

1.1 Football Clubs as they are today 1.2 Football Clubs as commercial businesses A football club is completely different from a normal commercial business in so many different ways. Rarely will a commercial business affect the morale and togetherness of a whole community in the way that a football club does. Football clubs are part of our cultural heritage, our histories and our memories; they are part of the community and represent the community. People who support their football club do so with a connection or bond that normally results in commitment and loyalty to that club. This is unlike a supermarket brand, say, where a customer may start using the next one down the street if they are unhappy. An unhappy football supporter may vent their discontent, but they are likely to stay loyal to their club and to continue to support it with time and money. In many ways, the football club has a monopoly position; the fans are unable or unwilling to support a competitor. Historically, fans have been the lifeblood of football clubs through their role in providing gate money and buying merchandise. As such, the power of fans to influence and cause change shouldn’t be underestimated. However, with changes to the football industry increasing the importance of external factors like television revenue, the views and wishes of fans have sometimes been downplayed in importance by football club owners as they seek to meet their own particular objectives. Such objectives might include the maximisation of short term profit at the expense of long term stability, attempts to “buy success” through less than prudent financial management, or even running the football club as a hobby rather than as a business. Whatever the objectives, the consequences of following strategies that are out of line with normal business practice inevitably have a significant impact on the local community. Unfortunately, although there are plenty of reasons why football clubs are often very different from commercial businesses, resulting in strategies and actions which can damage the local community, there are not sufficient rules in place to prevent owners creating such damage. The Select Committee needs to consider whether football clubs are just another business, or whether they are a part of the local community. We at the Pompey Supporters’ Trust (PST) believe they can be both, but without stricter Football governance rules, clubs may cause reputational and financial damage as well as strategically drifting further away from the communities that they’re supposed to represent. Failure to act now may result in an unwelcome and permanent shift in the nature and characteristics of football clubs and a sense of identity which is far removed from that of the local community.

1.3 Football Governance Rules The current “Fit and Proper” persons test for a football club director lays out the following test criteria: — Must not be involved directly or indirectly with another club. — Must not have a significant interest in another Club. — Must not be prohibited by law to be a director. — Must not have any of a list of criminal offences. — Must not have been made bankrupt or taken voluntary bankruptcy. — Must not have been a director of a Club that’s suffered two separate events of insolvency. However, this test criteria doesn’t necessarily mean that a “qualified” person is the right man or woman to run a Football Club. There is no financial evidence required to guarantee meeting future payments or questions about how the club will be funded. Only recently did the Premier League state that an owner had to be able to meet financial liabilities or in fact meet the Premier League officials themselves. The laxity of the current rules is highlighted by the fact that a previous owner of Portsmouth Football Club, Al Faraj, was clearly not capable of running the club and, indeed, his lack of credentials and evidence of his position, led many people to suggest that he didn’t even exist. Once a new owner has passed this relatively weak criteria test and become an owner, there are very few rules preventing them from doing what they like. They have no need to be accepted by the fans or the community, nor do they have to make their plans known. They are able to burden the football club with astronomically high levels of debt and directors or owners are able to pursue high risk/high reward strategies in the pursuit of quick financial return with the risk normally falling on the club and its assets not themselves. These rules have been created on the basis that football is a cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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normal business, which it is not, and none of the above criteria have really considered the fans or the community. Even once it is clear that the owner and directors have got it strategically wrong and that the club faces financial meltdown, the applicable rules are still confusing. The Football Creditor rule (which protects Footballing creditors from losing any money after a Club enters administration) results in the protection of the “football industry” but not local businesses and charities who are left to accept as little as a few pence in the pound on money owed. There is an argument that the Football Creditor rule in fact further increases the likelihood of a club spending outside of its capabilities with payments stretched for players sometimes over many years. The contracts of players too have to be fulfilled even when a club enters Administration having spent beyond its capabilities; the Administrator is unable to make these players redundant. As an example, kit suppliers at Portsmouth refused to give them credit on merchandise, yet the club was still able to sign players based on paying future instalments, because the other clubs knew they were protected by the Football Creditor rule (other than in a liquidation scenario). The football creditor rule also rightly aggravates HMRC who become more aggressive towards the club as they know they’re debt isn’t protected. The problem is that it isn’t the people running the club that suffer it’s the fans and community who have to pick up the pieces. Until the game is correctly governed our clubs are continually put at risk. The local community clearly suffers both financially and in terms of morale, when its football club is in financial meltdown. But even when the club has managed to get rid of directors and owners that would not have passed a more stringent “Fit and Proper” persons test’ in the first place, the club (perhaps in Administration) is still left to pay players under the Football Creditor rule, and is hit with a point’s deduction. But who is this points deduction designed to punish? The fans and the unsecured creditors are the ones who are hit hardest by this points penalty as it adds to the club’s spiral of decline. Further, owners and directors who still qualify under the existing “Fit and Proper” persons test are even allowed to take over at another Club, or in the case of Portsmouth Football Club the same club! The owner who put Portsmouth into Administration was then allowed to buy it out of Administration. Surely the regulation should be tightened to only allowing a Director to be involved in one insolvency event to stop this tactic. The rules need changing both in relation to “Fit and Proper” persons, and for when a Club gets into financial trouble. Tightening of the laws on who can own Football Clubs and what the people running Football Clubs are able to do, will provide better financial safeguards and limit the number of teams faced with Administration in the future.

1.4 Debt in Football If the Select Committee needs an example of the extraordinary lengths to which desperate owners and directors of Football Clubs will go to keep a Club operating in the face of clearly impossible financial debt burden and liabilities, they need look no further than Portsmouth Football Club. How was the owner at Portsmouth, Alexandre Gaydamak, allowed to run up such a level of debt that even the maximum possible income that could be achieved by the Club wouldn’t have come close to covering it? Then consider how this owner, who put the Football Club into financial ruin with no investment into the Club’s infrastructure, can now be owed millions under the Company Voluntary Arrangement (CVA) and now owns the land surrounding the club’s stadium, . He was allowed to run a Club which, in 2008 had debt of 57.7 million, wages at 78% of turnover and a loss before tax of £17 million, without any intervention. By 26 February 2010, the club was in administration with a staggering 138 million pounds worth of debt. You can then look at Manchester United who pay a huge amount of money in interest rates. While they are one of the largest Clubs in the world and continuing to have success, they can currently cope with the level of debt, but with such large sums of money leaving the Club to cover interest rates, it raises the question of what will happen if the fortunes of the club turn down. Not surprisingly, there is a groundswell of supporter unrest against the owners and, once more, the local community is becoming an issue. It doesn’t matter if it’s Manchester United, Portsmouth or a non-league club like Havant and Waterlooville, the point is there is no control or regulations on how much debt football clubs can take on. Owners are able to lend money to the club, charge whatever interest on that loan they wish and even pay themselves a salary without investing any of their own money. Instead they use the club’s assets as security. Debt can be used by owners to pursue the high risk/high reward strategies I’ve referred to in section 1.2 and 1.3 of this report. Governing bodies within football seem frightened to address the issue of debt. This is possibly because they share the same vested interest in seeing clubs expand and grow at the expense of foreign leagues. However, such a benign attitude could easily lead to a bank-like crisis within football. Government intervention is required to ensure that genuinely “Fit and Proper” persons run football clubs, and that they do so in a financially prudent manner with a limit on the level of debt. Without this, there will be irreparable long term damage on the clubs’ fans and on the local communities.

2.1 What could change at Football Clubs? 2.2 Fan ownership models The Pompey Supporters Trust (PST) believe that it would be unreasonable to expect every Club to move into a situation of full or part, fan ownership, but Government legislation can encourage clubs to move back cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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towards their communities. Some element of fan share ownership and/or board representation could help bridge the dividing gap between the fans and their club and that can only be a good thing for the future of our game. Supporters’ Direct are the perfect vehicle to support non-profit and democratic football clubs. We believe that fan ownership should be encouraged by those in power, especially in the lower Leagues where the clubs rely on their community rather than their TV monies. The Government could look at ways to incentivise fan investment into their clubs or reward clubs that involve fan involvement at Board level. Unfortunately, until those with the power control the level of debt and ambitions of those in the higher leagues, we are likely to see them continue to downplay the importance of supporters and the local community. Legislation on ownership isn’t the only way to increase fan involvement and many Supporters’ Trusts would settle for representation at board room level. At a minimum, we must find a way to ensure that boards communicate with supporters’ groups even when they have no formal representation or shareholding.

2.3 Government Intervention The justification for government intervention is clear: football clubs are, in the majority of cases, being taken away from their communities. Those regulating Football are pursuing an ambition to have the greatest leagues in the world, especially the Premier League and are blind to the damage being done, which is in danger of becoming irreparable without government intervention. The key question is how best to interfere for the good of the game? It must be remembered that every football club is different and, as already expressed above, the level of debt of some clubs could not be justified or maintained by responsible owners or by a Supporters’ Trusts. Government intervention is needed to ensure fit and proper people run clubs in a financially prudent manner. Debt levels need to be monitored so that warnings are clear at an early stage and football clubs need to move back towards their communities by encouraging board representation and share participation. While football clubs need to make profits, by ensuring that only sustainable levels of debt are utilised in football clubs and that appropriate amounts are spent on transfers and players’ wages, the importance and role of the fans and the local community will be naturally elevated. The Select Committee must consider how to bridge the gap between clubs and community and accept that those currently in charge of football have lost touch with the paying public.

2.4 Lessons to be learned Germany is often held in high regard for its governance model where all major clubs are part owned by fans. The Germans have kept their feet firmly on the ground financially, and yet are still able to compete on the international stage, in modern stadiums which cost a fraction to get into compared to their English equivalents. Lessons to be learned across other sports as well when it comes to wage caps: — American Football (salary cap limit penalties paid to other clubs). — (luxury tax for high salary payers to lower clubs). — Rugby Union/Rugby League (total wages paid limit).

3.1 Recommendations It is up to the Select Committee to consider the evidence but hopefully it will agree with the PST view that the gap needs reducing between the clubs and the community that they are supposed to represent. We think the biggest threats to football clubs are: — Inappropriate ownership. — Too much debt. — Not enough communication with fans and the local communities. Firstly, the “Fit and Proper” persons criteria need to be strengthened considerably. Secondly, we believe that there have to be new rules which protect clubs from owners buying them without a solid and prudent business plan. Additionally, there need to be rules which require the owners to provide proof of funding (for say a predetermined percentage of the clubs costs). Any debt being used to buy the club should be restricted in terms of using club assets as security. Debt levels within football are extremely high and we’d like to recommend that over an agreed period of time clubs would have to reduce debt to a level that’s proven to be sustainable. Further, owners shouldn’t be able to transfer the grounds into their names and nor should they be able to secure loans against it or any other facilities at the club. The amount of money going into football clubs should, for the good of all, be directed towards infrastructure and youth development, and not be predominantly used to pay interest on debt. Football clubs need to keep their fans informed and should be pressured into doing the right thing by the community. We believe that fan share ownership should be encouraged and that it should be compulsory for someone to be elected to the board by the fans or, at the very least, someone employed by the club should be responsible for meeting fans and expressing their views to the club’s board. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Buying players using future instalments, the Administration point’s penalty and the Football Creditor rule are three other areas that need addressing. January 2011

Written evidence submitted by the Football Licensing Authority 1. I am writing as the Chief Executive of the Football Licensing Authority in response to the invitation to submit written evidence on matters of relevance to the Select Committee Inquiry into football governance. 2. Given our remit, this response relates primarily to governance in so far as it affects spectator safety. I recognise that this is a specific issue, but it is an important one, and some of the points raised are likely to be applicable to wider governance issues.

Summary — While the Football Licensing Authority regulates local authorities in their roles in relation to safety at football grounds, it is primarily football clubs who are responsible for spectator safety. Good governance and a clear commitment from the highest levels within a club are critical to successful safety management. — We believe it remains important to regulate in this area, but we are committed to doing so in a light touch way, through a combination of guidance, assistance and monitoring. We aim to help bring about the permanent change of culture whereby consistently high standards of safety are maintained by clubs or ground management taking responsibility on their own initiative. — Improvements to spectator safety in football over the past 20 years have been significant. In a number of cases the requirements placed upon football are more rigorous than those placed on other sporting or commercial organisations. The role of the UK in addressing spectator safety is internationally recognised, and football must claim its share of the credit for raising standards and making stadia both safer and more inclusive.

The Role of the Football Licensing Authority (FLA) 3. The FLA is an independent public body set up under the Football Spectators Act 1989, and funded by the Department for Culture, Media and Sport. It has a statutory responsibility to keep under review the discharge by local authorities of their functions under the Safety of Sports Ground Act 1975. This legislation covers Wembley Stadium, the National Stadium Cardiff and all Premier and Football League grounds. 4. Our primary role relates to spectator safety. The FLA works with 92 league football clubs and 81 local authorities. We issue annual licenses to each of those clubs and provide advice, training and support to them and a wide range of related bodies. We have played a critical role in transforming spectator safety at football grounds over the past 20 years, and we are widely regarded as a world leader in this field. 5. While the local authority will issue a safety certificate for a particular football ground, the responsibility for the safety of spectators rests not with the local authority but with ground management (usually the football club). Our interest in good governance within football therefore primarily relates to its impact on spectator safety, and our role as the Government’s main advisor and regulator in this area. 6. It is our experience that good governance, and having proper policies, procedures and training arrangements in place within clubs is critical in relation to spectator safety. Anecdotal evidence suggests that a clear commitment and understanding of the issues from the highest levels within a club can have a very positive impact on safety management and standards. 7. One example of this relates to the training of stewards. It is the responsibility of sport ground management to ensure that all safety personnel are trained and competent to undertake both their normal duties and their roles under the management’s emergency and contingency plans. Training should be conducted by occupationally competent persons using suitable training resources and material that will provide the relevant underpinning knowledge to satisfy the requirements of the National Occupational Standards for those relevant vocational qualifications. 8. With many clubs facing financial pressures, and a reported reduction in the level of external funding available for steward training, many who work within football safety are concerned about the possible impact on spectators. The football authorities (the Football Association, the Premier League, the Football League and the Football Safety Officers Association) have developed resources to help stewards achieve vocational qualifications and develop relevant skills, knowledge and attitudes42, and clubs can demonstrate a clear and ongoing commitment to safety through the training and development they provide at a local level. Failure to invest now in training and development could lead to a detrimental impact over the longer term. In the case of reduced steward training, levels of qualified stewards could drop, clubs might not have the resilience to deal with staff turnover, and levels of safety for spectators could be affected. While this example relates specifically to a safety issue, the questions it raises (such as how to secure and sustain investment in the current climate 42 “On the Ball” training resource cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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for activities which may be perceived to be of lower commercial value, or as “back of house” functions) could be applicable across a range of other areas.

New Style Safety Certification and Light Touch Regulation

9. While we strongly believe that there is an ongoing role for the FLA as a regulator in the area of football spectator safety, we are encouraging football clubs and local authorities to move towards a less prescriptive approach to safety certification, whereby clubs are positively engaged in identifying and implementing appropriate conditions and safety procedures to which it can fully subscribe and that provide the appropriate level of safety for spectators.

10. We believe this approach will bring the regulation of spectator safety at sports grounds into line with other areas of public safety where requirements are more overtly based upon a series of risk assessments and operations manuals. This leaves the initiative and the responsibility with the management, which is able to tailor the requirements more closely to its particular needs and circumstances. However, for such an approach to be successful there needs to be a safety culture throughout all levels at the club, and particularly within the board.

11. Part of the FLA’s role is to bring about, through advice and persuasion, a permanent change of culture whereby consistently high standards of safety are maintained at every Premiership, Football League and international football ground by the clubs or ground management taking responsibility on their own initiative rather than in response to requirements imposed by other bodies. We will continue to work with the football authorities to achieve this aim.

Football’s Role in Raising Standards and Making Stadia Safer

12. One question posed by the Committee was “Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?”

13. In relation to spectator safety at football grounds, the UK is seen by many to be leaders in the field. In November 2010, , President of FIFA, said to the Prime Minister “You have given to the world security in the stadiums. You have built all your stadia, there are no fences and everyone is sitting. This is a big legacy, an important legacy you have given to the world. If only all the national associations in the world, and their leagues had stadiums like this, we would have more fair play in our game.”

14. Spectator safety at football grounds has been transformed over the past 20 years, and the UK has been at the forefront of many of the improvements. The Football Licensing Authority is the author of the World’s leading sports safety publication (the “Green Guide”) which is used around the world. Recently the Kenyan Premier League used it to develop guidance after a tragic incident at the Nyayo stadium in 2010. This is not the only example of our advice or guidance being used internationally. While our remit currently extends to England and Wales the Sports Ground Safety Authority Bill, which is currently passing through Parliament, would, if enacted, see our role expand with the possibility of advising other sports and other countries. This will help provide greater consistency in the application of sports grounds safety advice, both nationally and internationally.

15. While coverage is often given to problems within football governance, it is important to acknowledge where improvements have been made, and those areas in which the UK leads the field, such as sports ground safety. Some might suggest that improvements to spectator safety in football clubs in England and Wales are in spite of, rather than because of, the level of corporate responsibility for safety within management boards of football authorities and clubs. I would hope that it is not the case, and want the FLA to continue to develop and maintain strong relationships with football authorities and clubs at all levels, and to build together on the successes and achievements in this important area.

16. I appreciate that the committee will wish to consider a much broader range of issues than spectator safety when reaching conclusions on football governance, but it may be illustrative of some of the wider issues faced, and is hopefully of interest in relation to the questions posed about how football serves spectators.

17. The FLA has previously said that it believes that true safety comes when those who are responsible understand and believe in it for themselves. It cannot be imposed through external regulation, and we therefore seek always to educate, advise and persuade. We do not rely upon our statutory powers unless there is no reasonable alternative. By and large this has been an approach which has ensured that, in terms of their safety at sports grounds at least, current and future generations of football supporters of clubs across the country are very well-served.

18. We would be happy to provide more information if that would be helpful. January 2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Written evidence submitted by Swansea City Supporters Trust 1. Introduction 2. This submission is from the Swans Supporters Trust, of which I am currently the elected Chair. 3. Given that we have significant legal influence at our club in the form of a shareholding and Board positions, and that at present our club is the highest placed in the league pyramid to have this level of influence, we have focussed this submission almost entirely on the question ‘What are the pros and cons of the Supporters Trust share-holding model?’ 4. The following is a brief history of how we got the club back into part community ownership and the benefits that brings.

5. Swansea City 6. A small group of Supporters initially met in Port Talbot, where it was decided that a Public Meeting would be called at the Brangwyn Hall on Saturday 8 July 2001, at which over 150 interested in the idea of a Supporters Trust attended. 7. A follow-up meeting was held on Sunday 22 July at Manselton/Cwmbwrla Community Centre to agree a Constitution, arrange a bank account and form sub-groups from the 50 plus who attended. 8. At this meeting it was reported that Ninth Floor had dismissed Neil McLure as Chairman on 20 July 2001, this news was greeted with a certain amount of pleasure, bearing in mind the uncertainty surrounding the Club’s future, especially as it was announced that Ninth Floor had no intention of taking Swansea City back into their ownership. 9. Further, Ninth Floor had finally cut its losses and sold the club for £1 to the former Commercial Manager Mike Lewis, but Lewis was saddled with a debt of £801,000 which was repayable to Ninth Floor. Lewis was struggling to run the club alone and set about looking for buyers. The lines were now drawn and the meeting determined that we were all fully committed to saving our Club, to become part owners and invest in the Club whatever was right for the Supporters, and that a Supporters Trust could be trusted by the fan base. 10. Dave Boyle was present on behalf of Supporters Direct to outline why we should consider becoming an IPS, which is a not for profit organisation and which could run the Club if necessary. Working Groups were set up from those in attendance and the Working Party would comprise those who signed the Constitution, until formal elections could be held. 11. A further meeting was arranged for Sunday 5 August when arrangements would be made for the Official Launch of the Trust, which would take place at the Patti Pavilion on Bank Holiday Monday 27 August after the home game against Cheltenham. 12. The launch was extremely successful with over 600 signing up on the day to join what was now a constitutionally set up body ready for an involvement in our football club, in anticipation of the day arriving when Shares became available to purchase in the event of a change of ownership. Membership fees and the auction held raised over £3,000. Backing for the Trust came from far and wide with , John Hartson, Max Boyce, , Rhodri Morgan AM, Martin Caton MP, Kevin Johns, Eurig Wyn MEP, Steve Hamer, and amongst many pledges of support. 13. A meeting was called in Bristol where (Midlands, Avon and Gloucester Swans) members London and Swansea based fans met to discuss financial matters with past Club Chairman Steve Hamer. The meeting was designed to give a financial picture of a football Club’s affairs and how Supporters could become involved financially in ownership. 14. There were e-mails flying thick and fast from Llanelli to Moscow, Cardiff to Swansea, Gloucester to Kingston-Upon-Thames, between fans who were Accountants, Solicitors, Financial Advisers and Businessmen, all determined to ensure the survival of our Club. As the Supporters Trust was now a full constitutional body we became the nerve centre of information for the way forward. 15. The scenario that we had been anticipating arrived sooner than expected when, in October 2001, Mike Lewis sold the Club to Tony Petty, a Londoner based in Australia, again for £1, but crucially the debt of £801,000 was still due to Ninth Floor and became Petty’s responsibility. A hastily convened gathering of Swans fans, with Trust representation, took place at Swansea Rugby Club and it was decided at that meeting that we would offer Tony Petty £10,000 to purchase the Club. 16. Tony Davies (Trust), who had previously met Petty, rang him with the offer, which was rejected out of hand. Following further discussions over the next few days it was eventually agreed to make an increased offer to Petty of £50,000, but this again was rejected and we were back to square one. 17. At the Trust’s first AGM in the Patti Pavilion in November 2001, Chairman John Parkhouse asked supporters to explore and research all appropriate avenues of inquiry with relevance to bringing them into the public domain in the battle against the current owner, and openly offered the newly formed Trust as a vehicle for transferring control of the Club to local people, in the promise that the future of the Club would be secured. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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18. Further behind the scenes Trust led discussions took place and it was evident that there was a reluctance by any one individual to move forward in taking the risk single handedly. This resulted in the Consortium being formed, and the Trust were charged with co-ordinating future meetings with potential investors. At this time we were aware that Ninth Floor were prepared to sell the £801,000 debt for £100,000, and with this in mind a hastily convened meeting was called at the Tudor Court Hotel, where fans met to discuss the possibility of raising the £100,000 to purchase the debt. 19. This debt purchase would have given the Consortium an asset to raise further funds to send Petty on a one way journey back to Australia. However, with time being the absolutely critical factor for the survival of our football club, there was inevitably much going on in the background, and the Group learnt that the Chairman of Ninth Floor, Alan Wix, had met with Mike Lewis and Mel Nurse and agreed on a sale of the debt to Nurse. The Trust then became fully involved in discussions with Mel Nurse’s Solicitor and the Insolvency Practioner in helping to provide as much information as possible from various sources, not least the Football Association. Members of the Trust Board were very supportive of Mel Nurse in his Court case against Tony Petty, and many attended Court during the hearing. 20. The Trust arranged further meetings adding to the consortium some of whom wanted to remain as individuals others who wanted to put money into the Trust as they agreed with the ethos of community and fan involvement. 21. Petty was in discussions with a consortium, but the Trust were concerned that it was not locally based and once again urged Petty to transfer his entire shareholding into local ownership via the Supporters Trust, which was fast becoming the main thrust of attempts to rid the Club of Petty. A rally attended by almost 2,000 fans marched from Castle Square in the City to the prior to a game, and a further crisis meeting with over 1,000 fans present was held in the Patti Pavilion. With television crews in attendance, speakers urged supporters to back the Trust in its attempts to wrest control from Petty. 22. Mel Nurse had now become the figurehead and the man determined to take Petty on in Court to save his and the fans football Club, and the Supporters Trust were at his side at every twist and turn, unfortunately as the result of a very weak Barrister, Mel Nurse lost the case. However, the fans and the Supporters Trust were more determined than ever to oust Petty. 23. In January 2002, a package and draft Consortium agreement was put together with the aid of Swans fan and Solicitor Steve Penny, who had offered his services free in the campaign to oust Tony Petty, and he, along with a trust Consortium travelled to a meeting in Cardiff to meet Petty. Thankfully, the offer of £20,000 to buy out Petty was accepted and a further meeting was called in the Sea Haven Hotel on 6 February to discuss the Consortium Agreement, which would become a signed agreement for the formation of Swansea City Football 2001 Limited. 24. The document was produced and was signed by the Trust representatives at that meeting. Other investors had agreed to become financially involved and alongside the Trust comprised the shareholders in the “new” Swansea City FC. 25. The Trust were allowed additional time to obtain their £50,000 investment as the other consortium members were Corporate bodies, there was also agreement that the Trust could have a Director for their investment and also be allowed to invest a further £50,000, which would entitle them to a further seat on the newly formed Board of Directors. 26. The Supporters Trust were paramount in ensuring that the Consortium became a reality, something which is not universally appreciated by fans and investors alike. The current Club Board and current Shareholders, apart from the Supporter Director, were not involved at the outset but became involved as the months progressed. We are firmly of the belief that as long as there is a Swansea City Football Club there will be a Supporters Trust, a body that will remain a Shareholder long after other current Shareholders.

27. The Role Of The Trust 28. Swans Trust has a daily input into the football club through our Supporter Director. It has been agreed within the shareholders agreement that this directorship cannot be removed irrespective of future dilution of the shares through further issue. Currently the Trust is the third biggest shareholder in the club with 19.99% shareholding. 29. The Swans work on a business model that is very much “live within your means” operating on a tight budget that is dwarfed by many clubs at their level. Along with fellow directors, the club have not paid director salaries/expenses with all directors offering their services FOC to progress the club. It has long since been documented that we prefer not to spend money not due that season and the club record transfer fee remains at significantly below £1 million and until three years ago stood at £375k in a day and age where even League One sides spend £1 million to buy players. 30. Trust involvement at the club aside from day to day duties has included. 31. Involvement in acting on supporter issues with both club and stadium management. 32. Foundation of the annual awards dinner—now the most popular event on the club’s social calendar. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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33. Organisation and running of the only two open days the has ever held. 34. Maintaining of social events to bring the club closer to the community including fans forums in areas outside of the city. 35. Management of a bus service to bring supporters from West Wales to the ground. 36. Involvement in the reduction of season ticket prices making the club more affordable. 37. Involvement in all family fun days which has led to the club being awarded in this sector by the Football League. 38. Organisation of the fund raising committees that now sees the Statue and Robbie James bust sit outside the Liberty Stadium. 39. Production of the Vetch Field commemorative box set marking our departure from the Vetch in 2005. 40. Current organisation of the centenary collection which will mark our centenary in 2012–13. 41. Our first supporter director—Leigh Dineen—was appointed vie-chairman of the club and still now retains a directorship in his own right. 42. It is hard to quantify further in terms of what the Trust brings to the football club but suffice to say that the directorship is one that allows for as much input as you would imagine a director to have.

43. Conclusion 44. So to summarise in answer to the original question without the work of the Supporters Trust there may well have not been a football club at Swansea City if it wasn’t for the work that went in to save our club. Critically now following that crisis the supporters and the community have a voice in the way the club operates which adds to that feeling of togetherness and trust that seems to be sadly lacking from most other clubs where fans are purely seen as customers. We add a lot more than money to the club; be it professional skills, a unique understanding of our heritage and community, volunteer time, check and balance to the financial strategy, two way communication between the fans and the Board—the list goes on. 45. From our own experience at Swansea we would urge the Committee to look to ways they can facilitate meaningful supporter involvement like ours at other clubs, and where a privately owned club fails to explore legislation that enables a new club to be owned or part owned in the future by the fans and the community. January 2011

Written evidence submitted by Co-operatives UK About Co-operatives UK 1. Co-operatives UK works to promote, develop and unite co-operative enterprises. It has a unique role as a trade association for co-operative enterprises and its campaigns for co-operation, such as Co-operatives Fortnight, bring together all those with a passion and interest in co-operative action.

The Co-Operative Economy 2. There are already over 4,990 co-operatives in the UK, owned by more than 11 million people—and these numbers keep on growing. 3. Co-operatives are business that exist to serve their members, whether they are customers, employees or the local community. They work in all parts of the economy including retail, banking, food and farming, design, renewable energy and football. Co-operatives also deliver a range of public services including housing, social care, sport and leisure, recycling and healthcare. 4. Members are the owners, with an equal say in what the co-operative does. So, as well as getting the products and services they need, members help shape the decisions their co-operative makes. 5. Further information about Co-operatives UK and the co-operative sector can be found on our website www.uk.coop

General Comments 6. Co-operatives UK welcomes the opportunity to comment on the Culture, Media and Sport Committee inquiry into the governance of professional football clubs. Co-operatives have, at their heart, a commitment to promoting democratic involvement as well as ensuring there is accountability, openness and transparency at every level. 7. The Committee’s inquiry to look at the scope for enhancing supporter involvement in decision-making within football clubs is based on a subject we, with others, have long championed and a co-operative structure cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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can go a long way to ensuring clubs exist for the local community rather than solely to generate profit for a handful of owners. 8. It is arguable that it is a hollow point to complain of private investors rigging loans in their favour or selling the rights or interests in community facilities when this is what the investor model is designed to do. If investors own a firm, they can appropriate the profits and benefit from increases in share values. 9. However, when an organisation is co-operatively owned, the interests and incentives of the corporate body and its members can be aligned. 10. There is a new public appetite for greater ownership by fans as a result, no doubt, of the pioneering work of Supporters Direct in assisting the formation of over 170 supporters’ trusts, based on a co-operative ownership model, over the last decade. 11. Clubs need to run in sync with their true nature and need to be owned by those affected most by the decisions, who respect the club’s history and heritage and—crucially—must trade on their own resources. When and where people make key decisions, they need to be accountable for the decisions they make. 12. As mentioned above, co-operatives have, at their heart, a commitment to promoting democratic involvement and a model based on a co-operative form of ownership ensures these objectives can be met. 13. A survey conducted by Co-operatives UK in 2010 asked respondents if they thought their club would be in better hands if it was owned co-operatively by the fans. The results were clear: 83% of Manchester United fans and 72% of Liverpool fans who expressed an opinion felt their club would be in better hands if it was owned co-operatively. Across the country, 56% of fans who gave an opinion felt the same way. 14. Our research also confirmed for the first time that fans would be willing to put their money where their mouth is and invest in the club to take it into co-operative ownership. Manchester United supporters would be willing to invest an average of just over £600 each to buy their club. If all the club’s supporters in Great Britain did this they would be able to raise £2.34 billion—more than enough to buy the club. 15. This challenges the assumption that the only way to get rid of one billionaire is to find another. For less than the price of a Premier League season ticket, fans could share in ownership of their clubs and ensure that they are run in the long-term interests of sport. 16. If the supporters are the people who own football clubs, or who should own them, this does raise question of who actually does. 17. This sense of ownership, critical to all spectator sports clubs, has been maintained by cricket and rugby clubs in the United Kingdom, who chose co-operative forms of incorporation to ensure that the members—the supporters—retained control of the enterprise, and made the key decisions about the club’s strategy. 18. Unfortunately for British football fans, privately owned companies were the corporate vehicle chosen, which has ensured that private objectives reflect not the commonly agreed plan of the core community of fans, but instead the individual wishes of a particular club’s owners. 19. Supporter ownership in football is not a new concept—Germany’s Bundesliga, for example, which has over taken the Premier League as the world’s most profitable league in 2010, already has co-operative structures in place. 20. Given English clubs’ net debt is more than the rest of its European contemporaries combined, the fans are, inevitably, the ones most likely to foot the bill for the suicidal expenditure of English clubs. 21. In countries like Germany it is the co-operative model of ownership by fans rather than the shareholder model that is established and flourishing. Many German fans treasure their system, believing it has been instrumental in keeping German football close to its fans, even in the modern commercial environment. 22. No Budnesliga club has entered administration in its 42 year history. Since 1986 there have been 68 cases of clubs in English leagues becoming insolvent and this shows no signs of receding in the near future. 23. Several Clubs in the UK, from Portsmouth to Cardiff City, have faced a daily struggle to survive with the reality of debts and the threat of administration hanging over them. There is a real chance that a vital community asset could be lost in many of these instances. 24. Where this has been a real threat, due primarily to the failure of previous ownership models, such as at Exeter City, the co-operative model of ownership by fans has been used to great success. There are also instances of new clubs being formed and owned by their supporters trusts due to unacceptable events at their former clubs, such as the case with FC United of Manchester. 25. The 170 plus supporters trusts set up in the UK are registered as Community Benefit Societies with the Financial Services Authority, the registrar of Industrial & Provident Societies (IPSs). IPS legislation has a number of unique attributes that make it an ideal form for community initiatives. 26. The legislation governing the IPS legal form ensures democracy is enshrined and the protection of members' rights—whilst it is possible to state a company should be one member, one vote this can be overturned by the members. An IPS has to be one member, one vote—regardless of the number of shares cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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owned. In an IPS members have the right to appoint and dismiss directors and determine the affairs and rules of the society.

27. Additionally, the amount of interest payable on shares held must be limited to what is “necessary to obtain and retain enough capital to run the business”. This is set out in statute and ensures that IPSs must ensure they can remain as viable going concerns.

28. IPSs set up as Community Benefit Societies have the option of including a statutory asset lock, similar to those asset locks available to Community Interest Companies (CICs) and charities. This prevents the IPS being sold and the proceeds distributed among members.

29. The IPS legal form also ensures a supporters trust can exist for a social purpose but can achieve this purpose through commercial trading, reinvesting any profits back into the IPS and ensuring there is accountability, transparency and ensuring that, if dissolved, the assets and interest in the assets are passed on to a third party organisation with similar aims and objectives, ensuring individuals cannot benefit materially.

30. This unique combination of attributes means that IPSs can be treated differently when raising capital in the form of withdrawable shares from their members (known in some areas as ‘community shares’). When an IPS undertakes to issue withdrawable share capital, this is not a regulated activity subject to the Financial Services and Markets Act 2000 (FSMA).

31. There have been a total of 40 new schemes undertaking this form of share issue in 2010 alone. The registration of new Industrial and Provident Societies more than doubled in the last quarter of 2009 and recent initiatives have raised more than £42,000,000 from over 30,000 community investors across the United Kingdom.

32. The issue of withdrawable shares has a number of benefits that are unique to IPSs. It provides societies with a less expensive and less burdensome form of borrowing than bank borrowing. However, it also reinforces the member commitment to the society as the capital is risk capital: If the venture fails, the members can lose their investment.

33. Many investors in “community shares” will be motivated not only by the financial return on offer (which must be limited in any event), but also by the potential social impact of their investment, as well as the fact the investment is also wholly contingent on community engagement. Nowhere is this more evident than in the case of FC United of Manchester.

34. As a member owned club, FC United of Manchester are undertaking a unique development in English Football: building a football stadium and community facility at Lane in Manchester, part funded by an issue of community shares in the Club. The Rules of FC United also contain the statutory asset lock, which cannot be removed by the members, so the interest in the stadium cannot be cashed in.

35. The FC United Community Shares initiative goes from strength to strength with investments received of £830,000 towards the £1.5 million figure, with pledges taking that figure to well over a million pounds.

36. This has undoubtedly been helped in part by the fact the initiative has been granted Enterprise Investment Scheme (EIS) tax relief eligibility from HMRC, ensuring investors can reduce their tax liability by 20% of the amount invested. EIS and other such tax relief incentives are integral to engaging investors in community owned enterprises and this should be acknowledged if communities are to fill the void when having to provide their own services and facilities.

37. UEFA and Supporters Direct have called for Football clubs to be governed in ways that prioritise sporting objectives above financial ones, allied with the involvement of fans in the democratic running of clubs. As the Committee have identified, there is evidence to suggest that a model based on a co-operative form of ownership ensures these objectives can be met.

38. A recent report published by Co-operatives UK, Good business? Public perceptions of co-operation, shows that organisations organised and operating as co-operatives are viewed as local, honest, trusted and a good way to run a business. A model of ownership based on a co-operative form of ownership goes a long way to ensuring these ideals are not simply exercises in public relations but are fundamental and integral to the way an organisation is operated and owned. January 2011 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Written evidence submitted by Vince Cullen Summary — Football clubs should be treated differently from other commercial organisations because football is not simply an ordinary commercial business and a monopoly situation exists whereby fans are at risk of being exploited. There are responsibilities to local communities, to cultural considerations and to the good of football overall that need to be safeguarded. These require a different governance, and I would argue legislative, framework. — It would appear that the governance rules and governance bodies in English football are not fit for purpose. The situation where the recommendations of the Burn’s report on the structure of the FA have yet to be implemented fully and the debacle of Premier League clubs in a financial mess, would suggest that governance is in need of major reform. It may be necessary to establish a separate, independent football regulatory authority if reform to the FA proves too difficult. From a fan’s perspective it seems that the authorities running football lack transparency and accountability. — There seems to be far too much debt in the professional game. Spiralling players’ fees and wages and the unbridled ambition of clubs, fuelled by transient availability of finance through wealthy benefactors—the so called “financial doping”—seem to underpin this. This will ultimately lead to lack of serious competition and diminish football as a spectacle for fans. Even Formula 1 racing has attempted to reform its financial aspects to improve its appeal for spectators and to make it more competitive. — The greater involvement of fans in club ownership in the Bundesliga in Germany seems to have aided stability and has led to less debt, and greater profitability, relative to other European countries with significant football leagues. Criticisms of this model include the reduced proportion of shares to attract external investment and the inability to afford the higher wages demanded by the world’s top players. However, the benefits include reinvestment of profits into the club, consideration of fans in setting ticket prices (thereby raising match attendance figures) and in negotiating TV deals. In general, the emphasis is on acting in the best interests of the club and its fans, and in doing so the integrity and stability of football itself is maintained. Perhaps a 25.5% proportion of each club could be allocated to ownership by supporters’ trusts so that the club would be protected from being taken into private ownership. — Government intervention is justified in protecting the heritage of clubs as national assets and the interests of a significant number of fans, primarily by ensuring effective legislation is enacted. It can also be involved in ensuring the processes for governance are carried out properly, such as providing effective oversight bodies that have “teeth”. These need not be exclusive bodies just for football but may be a responsibility of a government department, for example. Government should be involved in a leadership role to promote the need for reform and to ensure that effective change occurs. — One thing is clear—decisive action is needed. Ideas have been mooted for years and there has been a lot of talk about good intentions for embracing fans and so on, but little has changed really. Even major recommendations have been slow in implementation or in impact. For example the Burns Report made significant recommendations for reform of the FA some five years ago now. It is important that this current investigation does not go the same way in its recommendations being ignored.

Introduction 1. I have been an Arsenal fan since I was six years old. I remember watching Charlie George lying down on the pitch after scoring the winner in the 1971 FA Cup against Liverpool, and in 1989 Brian Moore shouting: “Arsenal come streaming forward now in surely what will be their last attack. A good ball by Dixon, finding Smith, for Thomas, charging through the midfield. Thomas, it’s up for grabs now!” 2. I say all this not to practise boring any future grandchildren I might have, but to give a flavour of one individual’s experience, the type of which is repeated for thousands of others who love football! It illustrates the impact football has in people’s memories and lives, and the bond that forms between them and their “beloved” club. This bond is good news for business for football clubs but it is one that has been systematically abused by many clubs over the years, and particularly in more recent times. They have been preying on the loyalty of fans and abusing their position of monopoly. This includes the financial demands made by players. Yes, in the past players were not for the most part rewarded as well as they should have been, but the situation has moved too far towards the opposite extreme nowadays, and it is seriously undermining the future of the game. 3. It is ironic that some of my greatest memories also involve Liverpool FC and it genuinely saddens me to see the predicament the club seems to have got itself in to in recent times. It has always been a great rival club and that’s the point, it’s what English football is all about. Great rivalry means great games, classic moments and fond memories. It is also disturbing to see that Man Utd FC should be saddled with such a large debt when it is one of the world’s most successful sports clubs. What is happening? cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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4. I take some comfort in that Arsenal seems to be run well financially and does not seem to take advantage of its fans’ loyalty. Nevertheless, over the past few years there have been concerns that a rich majority shareholder might take overall control and jeopardise the club’s sound running and apparently benevolent approach to fans. With Arsenal it seems that its plurality of ownership model, with a spread of shareholders, has maintained stability for the club so that no one person has been able to embark on an autocratic vanity project. Of course, this balance depends on the good intentions and integrity of the shareholders, and who knows what might happen in the future?

Comments Position of football clubs 5. Fans’ and community attachment to clubs transcends ordinary operational considerations and temporary club ownership. This means that the clubs effectively have a complete monopoly, and many abuse this position. There needs to be effective safeguards to protect fans and club staff from the excesses of some clubs, such as wealthy owners parachuted in for a short period and then leaving, causing untold damage in some cases. 6. Fans maintain the identity of the club and its link to the local communities. The opening up of UK football to overseas players has been welcome and important, and there should be no problem with bona fide overseas board members, but some “globalising influences” have been less beneficial for the game and loyal fans. A balance has to be struck between a club’s responsibility to its local fan base and its global commercial aspirations.

Football governance and governing bodies 7. Unfortunately for football, the composition of the existing English football authorities means that they function more as members’ organisations rather than as a regulating body—it is like the difference between the British Medical Association, as a professional member representative organisation, and the General Medical Council as a regulator. The latter is primarily concerned with the interests of patients rather than doctors, but also in contributing to the advancement of the profession of medicine by ensuring important infrastructure elements like ensuring high practice standards. An independent football regulatory authority could fulfil a similar function by ensuring that the interests of fans and the long term health of football are protected. Rather than necessarily a separate body, the reconstitution of the FA may be able to achieve this function. Perhaps the FA’s remit should be more about protecting the integrity and future of football and less about being a members’ association. If this is not palatable for the FA then an independent body is the only option for achieving a fair and impartial governing of the game. 8. Coherence in governance is essential. The English Premier League’s operating as a separate entity seems to have undermined the FA’s authority and seems to have contributed to disharmony and a fragmented governance of football. The relationship between the governing body of football in Germany, the Deutscher Fußball-Bund, and the operator of the Bundesliga, the Deutsche Fußball Liga, would appear to much more successful. 9. Of course in making significant changes in football governance it is important to recognise the successful aspects of what has been achieved in UK football and to acknowledge the contribution of the various bodies. However, simply leaving these bodies to cooperate with each other, and to manage their own internal difficulties, does not seem to have worked for the good of football. The lead needs to be taken by an independent external influence, and I would suggest that this needs to be the government because of the inevitable legislative changes that will have to occur. I believe it is also important that significant representation of fans should not just happen at clubs but also in the FA, the Premier League and any future football regulatory authority. 10. By ensuring effective governance in the top football authorities, this will set a good example for governance in clubs and throughout the whole of football’s infrastructure. 11. There are many issues that a successful governing body and system will need to address effectively. Major important ones from my perspective as a fan include: — It is necessary to remove vested interests from the bodies running the game. — Effective test for fit and proper persons in positions of major management responsibility in clubs. — Need to ensure that local talent gets a fair chance to help maintain a healthy pool of national talented footballers. — Careful consideration needs to be given to the development of women’s football, including investment, and to ensure proper representation of women in the governance structure. — Wage structures—the situation across Europe where many clubs are spending significantly more than they earn is ridiculous. I have often heard the excuse that players will go elsewhere. With UEFA’s new financial fair play rules coming in. there is a chance to tighten up the requirements for English football. More effective regulation of agents is probably required to ease pressure on inflated player fees and wages. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— May need some sort of constraint for clubs to stop inflation of player fees and wages so that the big clubs are not able to create a huge grip on success in the league simply by their spending power , to the detriment of smaller clubs. This stifles competition and could ultimately make watching football predictable and less attractive for fans. — Clubs need to be run with integrity and sound financial management. — An effective mechanism of feeding money down to properly support lower league and grass roots football. — The way football managers are treated by major top league clubs is appalling in many cases. As criticism of managers and their dismissal is so prolific, has a high media profile and is done in the glare of publicity, this sets a poor example for employment rights and for loyalty aspects. It gives the impression that clubs are not professional. — There needs to be a better system of handling TV rights that considers fans. There appears to be too much of a monopoly by one TV company. The respect for fans should extend to how football is broadcast also. — There should be reasonable control on ticket prices to ensure that young people, and those of limited means can afford to go to games, and on merchandising to protect fans from unreasonable demands on their finances (such as a too frequent kit change, for example). — Owners and boards are custodians of clubs and need to respect the club’s heritage. — Require proper business financing for borrowing to purchase or fund a club.

Debt in the professional game 12. Stricter financial parameters are required to avoid “financial doping” that effectively is “cheating” due to overspending by an injection of finance that is not generated by the operations of the club. 13. This needs to go hand in hand with tight financial regulations that limit spending to what can be afforded by income. There should be strict financial parameters for clubs to operate within that are enforced effectively and not open to abuse or influenced by vested interest. Even Formula 1 racing, that leviathan of corporate spending and excess, has curbed spending in recent years in order to make it more competitive and attractive to watch. 14. Clubs should be required to break even financially. Costs should not exceed income and this should be a requirement of continuing to operate as a football club. We should build on UEFA’s Financial Fair Play initiative to ensure a more equitable financial situation between clubs. The Premier League would appear to generate the most revenue in world football and yet its clubs have financial difficulties. Surely something is not right? This must be due to uncontrolled costs and if clubs were required to spend only what they earn, presumably the income generated from being in such a successful league would be sufficient to enable the clubs to do well financially with increased profitability. One is really only financially wealthy in relation to one’s expenses.

Supporter trust share-holding 15. There should be a requirement for a proportion of a club to be owned by fans because many clubs and the football authorities seem to regard fans very low in their priorities. The transient nature of football club ownership and the tenure of operational officers at clubs and football authorities is transient when compared with the long term affiliation of fans to clubs and to the game in general. Simply having a fan representative on club boards is not sufficient any more; there needs to be real, tangible influence that comes with having a stake in the club. 16. There will be difficulties in choosing a model for this to operate but there are apparently successful models elsewhere, such as in the Bundesliga and the Green Bay Packers NFL team. I am sure there will be obstacles to overcome but the anticipated cry that it will stifle Premier League development does not seem credible. It is not simply down to the Premier League that England’s top league is so popular—there is a heritage in English football going back decades to point towards the current success of the top league. Besides, fan ownership in the examples given above does not seem to have hampered success. 17. Giving a fans’ trust a proportion of the shares would ensure effective fan representation. While 51% of the shares, as in the Bundesliga, is a mouth watering prospect for a fan, I think around the 25% proposed by the last Labour government would be a good balance. It enables a lot of potential investment opportunity in the club by the business sector but crucially enables fans to have an influential voice and, to ensure that the club cannot be made private by an individual, I would have thought 25.5% should be the figure for fan ownership.

Government Intervention 18. In a Utopian moment I think it would be great to let everything be open and liberal so that everyone could benefit from less constraints, but I fear that, like banks in the recent financial crisis, football institutions will not curb excesses, nor taking unreasonable risks, of their own volition. Stifling of innovation and cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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opportunity is often cited by the “business” world as resulting from government interference. However. I would point to an example of how government and public sector “interference” laid the necessary foundations and infrastructure for a subsequent huge success—the internet. I believe government has a role to play in acting as a catalyst for changes that ensure the long term success for football in the UK. 19. FIFA rules seem to prohibit too much government interference, but they would say that wouldn’t they? If any body was particularly in need of reform it is FIFA. Nevertheless, government “interference” is surely justified when it involves the rights of consumers? Legislation is evidently needed as collectively those running football have mostly demonstrated that fans are not regarded with the respect they should be. The government could prepare the way for much needed change by forging a legislative path to enable a more democratic model of football governance to emerge. The Premier League is evidently wedded to its free market model. Ideally there should be as much freedom as possible, but history has shown that some people seem to exercise their free rights to the detriment of others’.

Other Governance Models 20. The football governance model in Germany stands out to me as one that warrants careful scrutiny. With its blend of significant fan ownership, coherent regulatory governance structure and tight financial rules, the Bundesliga appears to be successful in terms of numbers attending matches and profits earned by clubs. 21. Also (and of course I have to declare an interest here!), Arsenal FC seems to have developed an effective financial operating model, and its approach to respecting fans seems to be good. Perhaps this needs further study also. January 2011

Written evidence submitted by Cambridge City Supporters Trust 0. Preface 0.1 This submission aims to report the experience of Cambridge City Football trust, specifically to inform the committee in its deliberations on the following questions: — Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? — What are the pros and cons of the Supporter Trust share-holding model? — Is Government intervention justified and, if so, what form should it take?

1. Summary 1.1 Without the Supporters Trust model, Cambridge City Football Club would likely have ceased to exist. 1.2 The existence of the Supporters Trust model continues to have a positive effect on Cambridge City Football Club, and on the local community. 1.3 An asset lock on the football stadium would have been beneficial to the long term interests of the club.

2. Background 2.1 Cambridge City Football Club (CCFC) is a non-league community football club currently in the Southern League Premier Division. Average attendance for the season 2009–10 was 309. CCFC is the second largest football club in the City of Cambridge, with ex-league Cambridge United FC having a considerably larger supporter base and profile. CCFC currently operate a first team, a reserve team (almost all of whom are under 18), a boys U14 side and six girls sides. 2.2 Supporters of CCFC are represented by Cambridge City Supporters Trust (CCST) which is an industrial and provident society run by a board of democratically elected volunteer directors. We raise money through membership subscriptions and donations, and expend money on fulfilling our aims, which are attached as an appendix. Currently the largest item of expenditure consists of increasing our shareholding in CCFC. For the season 2009–10 our membership was 163.

3. Crisis 3.1 The Supporters Trust model has been extremely important for the survival of Cambridge CCFC. In 2006 the board of directors of the club announced plans for CCFC to be subsumed into our neighbours Cambridge United Football Club. Such is the disparity in size of the two clubs, this could not have been seen as a merger of equals—more a transfer of what assets were then held by Cambridge City. The ground had been sold, which has necessitated City remaining at their Milton Road home only through a number of short leases with the ground owner. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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3.2 A grass roots campaign by concerned supporters made some impact, but it was the decision to form Cambridge City Supporters Trust (CCST) that made the difference. By this point, the majority of shareholders had little connection with the club, and were a very inactive set of owners. The fear was that this situation left the club open to asset stripping from a third party. A CCFC AGM gave CCST the power to appoint directors in the club, and it is of these trust directors with our club chairman that has ensured the continuing existence of CCFC. The democratically accountable legal entity that is a supporters trust was vital to represent and engage our supporter base. Supporters Direct provided key support for both CCFC and CCST throughout this process and cannot be praised too highly. 3.3 It is the trust’s opinion that an asset lock on the stadium prior to the crisis period would have been extremely beneficial to the long-term interests of CCFC. There would have been a sharper focus on sustainable running of the club, without the temptation of the capital release that occurred on the sale of the ground. 3.4 Similarly, it is exceedingly unlikely that the negative events would have transpired with supporters trust representation on the club board, ensuring alignment between the interests of the club directors and the long- term interests of the club.

4. Rebuilding 4.1 From 2006 to 2010 CCST was in the unusual position of having a number of powers and duties (such as the appointment of directors) with regard to CCFC, despite having no shareholding in the club. A CCFC AGM in 2010 allowed for a mix of shareholder and trust representation on the board, and a share issue ensued under which CCST gained a significant shareholding. 4.2 CCST now has one representative on the board of CCFC, and seeks to grow its shareholding through further share issues were possible. This way we simultaneously increase our sustainable shareholding in CCFC and raise funds for the club as they search for a new home. 4.3 CCST also partakes in various community projects, including free tickets for schools and local residents and support for a mental health awareness football day. We have plans for a community art project to take place when we finally vacate our Milton Road ground.

5. The Future 5.1 In the medium term, the trust wishes to continue fundraising from its members in order to continue increasing our shareholding in CCFC. Members who donate considerable sums in this way transfer funds from their private reserves to CCST for the benefit of the community. This transfer is to be applauded, and we would appreciate mechanisms for the government to encourage such generosity. 5.2 Although we have a very good relationship with the current board of directors, we are acutely aware of how quickly private ownership of football clubs can change. We seek to increase our shareholding in order to provide a bulwark against a future move by a new set of owners to run the club against the supporters interests. 5.3 In the very long term we (as CCST) are interested in the fully trust-run model of running CCFC. Such a move would necessitate a majority shareholding and engagement with all other stakeholders, and a feasibility study to ensure the sustainability of this course of action.

6. Appendix—Objects of CCST The Society’s objects are, either itself or through a subsidiary company or society trading for the benefit of the community and acting under its control: (i) to strengthen the bonds between the Club and the community which it serves and to represent the interests of the community in the running of the Club; (ii) to benefit present and future members of the community served by the Club by promoting encouraging and furthering the game of football as a recreational facility, sporting activity and focus for community involvement; (iii) to further the development of the game of football nationally and internationally and the upholding of the rules; (iv) to encourage the Club to take proper account of the interests of its supporters and of the community it serves in its decisions; (v) to encourage and promote the principle of supporter representation on the board of any company owning or controlling the Club and ultimately to be the vehicle for democratic elections to the board; (vi) to promote, develop and respect the rights of members of the community served by the Club and people dealing with the Society as set out in the Charter of Fundamental Rights of the European Union, having regard in particular to the need to provide information to members and conduct the affairs of the Society in accessible and appropriate ways; cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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(vii) to secure a long term future for the Club in or close to the City of Cambridge; and (viii) to take over the running of Cambridge City Football Club. January 2011

Written evidence submitted by Hendon Football Club Supporters Trust Summary — The level of governance in England and Wales is gradually improving, but much more needs to be done to properly regulate the game. — Debt is having a detrimental effect on the game at both professional and semi-professional games and can affect the competitive balance of a league during a season. — While Supporters Trusts are well placed to help a Football Club ride out a crisis better than the individual ownership model, the Trust suffers from certain financial penalties that can discourage community activities.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 1. While some rules have been brought in at various levels to improve the level of governance in football, it is my belief that these offer little protection to Football Clubs themselves from owners with goals that don’t align with the club’s. This has been evident at two recent stages in Hendon Football Club’s history. 2. In 1993, the club was owned by a Mr Victor Green, who midway during the season was courted by Stevenage Borough (then playing in the Isthmian League, a division below Hendon) to invest at their club rather than into Hendon. As his plans to renovate the ground at Hendon’s Claremont Road ground were stalling while awaiting planning permission, he decided his future lay with Stevenage, but not before releasing the club’s two star players—Gary Crawshaw and Simon Clark—on free transfers. Both players soon signed contracts at Stevenage. 3. Two days after releasing these players, Victor Green resigned as chairman of Hendon FC and sold his shares to his wife, Elaine Green while he—in an apparent conflict of interests—joined the board of at Stevenage Borough FC. Elaine ran the club through to the end of the season before deciding to sell her interest in the club, and with few interested parties until the last minute, Hendon were only saved at the last minute by local firm Arbiter Group PLC (a local firm who primarily traded in musical instruments) on Monday 15 August 1994. 4. Not only were few questions asked by the football authorities about the Green family’s apparent conflict of interests during the 1993–94 season, but Hendon were allowed to start the season on Saturday 13 August, before any takeover had been agreed, despite public knowledge that the club was liable to fold within days. 5. It is fair to point out that the Isthmian League, and most other football bodies, have made significant moves to resolving the latter situation—usually now requiring bonds of member clubs in trouble and suspending clubs until problems are resolved as a matter of duty of care to other teams and players (See Croydon Athletic, 2010). 6. However, I believe that that more needs to be done to ensure that owners of football clubs cannot easily get around the long standing rules preventing them from having a significant interest in two teams or from taking assets (players or otherwise) from one club to another as easily as they currently can. In a more recent example, made a similar mid-season move from being majority shareholder and manager at Farnborough Town to manage Stevenage Borough, taking as many as seven contracted players with him. 7. The Arbiter Group invested heavily in the team at Hendon, as well as building a set of costly banqueting facilities. However, unbeknown at the time to supporters, all the investment in Hendon Football Club Limited was being put through the accounts as a loan from the parent group. By the middle of the 2000s, the football club had a liability of over £2 million to the Arbiter Group who by now had moved in private ownership and were no longer willing to fund the football club. 8. The company made clear to the supporters that they would no longer fund Hendon FC and that their intention was to work with Barnet Council (who owned the freehold of the club’s ground at Claremont Road) to sell the land for development, sharing the receipts between council and the Arbiter Group Ltd. Arbiter Group would then allow Hendon FC to be sold to any interested group for a token fee. 9. With the help of Supporters Direct, supporters of Hendon FC formed a Supporters’ Trust and signalled their intention to purchase the club following the sale of Claremont Road and continue running it. Without going into full detail of the various agreements that took place between the FA, Hendon Football Club Ltd (the Arbiter Group), Barnet Council and Hendon Football Club Supporters’ Trust, suffice to say that Claremont Road is now owned by a company called MontClare Developments and lying derelict, while Hendon Football Club have been taken over by the Supporters, albeit now homeless and unable to play in their community. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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10. While the Football Association did their best to request that Barnet Council and the Arbiter Group agreed to provide a token sum to the Supporters’ Trust before agreeing the transfer of the football club’s membership to the Trust, it was plainly apparent they were unable to impose any conditions to assist the Trust, nor prevent the owners from separating the Football Club’s primary asset from the club for their own benefit. 11. However, it is fair to say that Hendon FC’s case, while the process was delayed by their attempts at intervention in the ground situation, the FA’s membership committee were helpful throughout the transfer of membership, as were the Isthmian League and both London and Middlesex Football Associations. 12. As has proved the case at numerous other clubs, a lack of transparency, lack of asset protection and lack of accountability of owners to the fans, community and football authorities has allowed debt to build and generate a situation where the football club have been forced out of their community to survive, and local people in a deprived area of London have lost access to a community asset. 13. With more oversight of clubs from the governing bodies and/or some form of licensing, as pioneered in the Bundesliga with the Lizenzierungsordnung, some of these problems could most likely be averted due to the danger of being denied entry into competition while for most of the others, it would at least act as some form of early warning system.

Is there too much debt in the professional game? 14. In terms of the professional game, I have little evidence to offer. However, it is worth noting that wage inflation in the professional game, partly fuelled by debt incurred as clubs “chase the dream” has a significant impact on wage demands at lower (semi-professional) levels. 15. Indeed, debt isn’t solely a problem in the professional game—many non-league clubs have suffered for similar reasons in recent years. A significant number of clubs have become insolvent and entered administration with mounting debt or folded as a result in recent years either partly or largely as a result of high wage costs, For example, Hornchurch FC (2005), Weymouth FC (2009), Lewes FC (2008), Leyton FC (2011), Kingstonian FC (2004). 16. In a number of cases, these clubs have been forced to play severely weakened teams at very short notice mid-season, distorting the league table where some teams had played a much stronger side than others. For example, after jettisoning their first team as their problems first mounted in December 2007, Leyton lost 11–1 to home to Hendon and only managed to earn one point out of a total of 16 that season in their remaining fixtures. 17. Indeed as outlined above, Hendon FC loss of the facilities at Claremont Road is partially down to the unchecked and mounting debt built by Arbiter Group Ltd/Plc, much of which was down to overspending on wages—in the 1998–99 season, Hendon spent their entire gate receipts (approx £28k) on a single player’s wages (Junior Lewis).

What are the pros and cons of the Supporter Trust share-holding model? 18. It is my belief that a Supporters’ Trust provides the most stable ownership model for a Football Club, as the interests of the owners are unlikely to diverge from those of the club itself and the community around the club. The model rules drafted by Supporters’ Direct ensure that a club cannot be stripped of assets (such as their ground) for the benefit of the owner, while it is in the interest of the fans not to run up unsustainable debts as the club would most likely suffer sporting penalties such as a points deduction. 19. The Trust also helps ensure that a club does not become reliant on a single benefactor/director, benevolent or otherwise, who may be the only individual with the power to fund the club, yet—through outside circumstances—suddenly be unable to do so. Croydon Athletic FC suffered this problem during the 2010 Pakistan Cricket Betting scandal, and both Gretna FC suffered terminally in 2008. By contrast, as a Trust has to have a board of a certain size by law and even if it encounters funding problems, should consequently always be in a position to at least function. 20. Indeed, in Hendon Football Club’s case, it is clear that had the Supporters’ Trust not been formed, there would no longer be a club at all as no “white knight” came forward to take over and the attached youth setup— albeit limited at present—would most likely have folded entirely, leaving youngsters without a team. Similarly, it has been particularly noticeable from experience at Hendon FC that the emotional buy-in, and community spirit fostered by supporters owning our own club has encouraged more people to volunteer and help with fundraising, administration and matchday activities. 21. Supporters Direct’s original model rules also ensure that the board is legally obliged to work in and with the local community, to strengthen bonds between Club and community and promote sport as beneficial to the local community. At Hendon this has led to the Trust nominating a local charity, Rays of Sunshine, as the club’s charity and now directing funds from some fundraising activities this way, while larger clubs have worked with local junior clubs, assisted with Football in the Community Schemes, or in Brentford’s case have gone as far as to take on the scheme themselves. 22. It is, however, clear that a Trust owning a club is no silver bullet to all of the problems of other ownership models: Notts County, for example, suffered from problems with supporter pressure for investment ultimately cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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leading to the Trust selling the club and the recent abortive Munto/Quadbak takeover. Similarly the Trust model has been slightly modified and used to take-over, or run clubs without the emotional attachment normal amongst traditional Trusts. 23. MyFootballClub.com experimented with this model and took over Ebbsfleet United FC, but although they reached 31000 paid members by September 2008, only around 800 members renewed by February 2010, leaving a large deficit in finances. Similarly, Southill Alexander FC were formed by disaffected MyFC.com members under a similar format to start the 2009–10 season, but midway through their second season in January 2011 the club withdrew from their league amid some acrimony. 24. As rewarding as running a semi-professional football club is, it can also be somewhat difficult to balance the books, even while running on an uncompetitive wage bill. As such, it can be difficult to justify the funding of youth football, particularly as the Club can often be denied funding from some schemes available to other Youth Football Clubs based on the status of the Senior team. 25. Similarly, it can be difficult to obtain funding for larger schemes such as the building of a new ground (FC United of Manchester), important for a homeless club to build community links—It would assist heavily if tax-breaks were available to Community-based Supporters Trusts developing large scale capital-schemes where a community benefit can be demonstrated. This would help level a currently uneven playing field, where individual owners can lend money to their clubs and borrow personally at tax efficient rates. 26. Similarly companies owned as part of a wider group have another tax benefit over Trust clubs, where the parent group can offset tax due on their wider profits against losses made by the football club. Due to the nature of Trusts, the effect is again to provide a financial opportunity to other models that simply isn’t available to Trusts. Again, a corresponding break targeted at assisting Trusts would help encourage community ownership. January 2011

Written evidence submitted by Mark Usher Summary This submission has been provided by the author Mark Usher in a personal capacity. Mr. Usher is a lifetime supporter of Watford Football Club in addition to being an enthusiastic follower of the England National Football Team. As a result, part of this response can certainly be viewed from the perspective of a fan and a football community member at the club and country level. Mr. Usher has also been a consultant to private and public sector organizations for over fifteen years and, consequently, this response has also been written from the perspective of an individual whose professional responsibilities have focused on guiding organizations through transformative change. The submission to the Select Committee’s Inquiry into Football Governance has been provided in the form of answers to the following six questions posed by the Committee in its Call for Evidence: — Should football clubs in the UK be treated differently from other commercial organisations? — Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? — Is there too much debt in the professional game? — What are the pros and cons of the Supporter Trust share-holding model? — Is Government intervention justified and, if so, what form should it take? — Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? The first four of the above questions are answered by the responses in Paragraphs 1–4 below. The last two questions are answered in a combined form by the response in Paragraph 5 below.

1. Should football clubs should be treated differently from other commercial organisations? Numerous articles and reports have discussed the transition of football clubs from purely sporting and socially focused organizations within specific geographic communities to, in the cases of some top-flight clubs, commercial enterprises with global reach. One of the common themes—one with which I agree—is that the pendulum in English football has swung far too much towards commercial objectives as opposed to the social, cultural and sporting objectives that originally defined the very reason for existence of the first football clubs. Fans are now customers, clubs are now enterprises, and football is in the entertainment industry. In the late nineteenth century when the Football Association saw commercialism rearing its head in the game it allowed all clubs in the Football League to form private limited companies but restricted the profits that could be distributed back to shareholders to a maximum of 5% of the value of shares held. This and an accompanying regulation that disallowed payments of salaries to directors formed the FA’s Rule 34. The intent of Rule 34 was to enable football clubs to operate basically as non-profit businesses that served the ongoing cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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social and cultural needs of their communities while delivering a fair but conservative rate of return back to their owners. The FA correctly believed that because football clubs were serving an important community purpose it was necessary to implement safety measures that ensured the majority of any profits generated were reinvested in the club and did not simply line the pockets of profiteering entrepreneurs. The very presence of these safety measures also meant that, generally, only true “football-loving” people would be interested in owning a football club during these early days.

In addition to Rule 34 the FA, in collaboration with the Football League, also implemented two other measures during this period that kept football in balance. The first of these was the maximum wage for players, set to prevent the escalation of costs that might occur if clubs had to increase their players’ wages to prevent them being enticed away by competitors offering them more money. The second was revenue redistribution. This required that match day gate receipts—the only source of revenue for clubs at that time—be shared between the competing teams and that an additional percentage of the total receipts go into a pot for redistribution among all Football League clubs. The objective of revenue redistribution was to prevent smaller clubs being at a disadvantage to those clubs from larger towns and cities who could draw upon larger fan bases.

From the turn of the twentieth century to the early 1980s, Rule 34 and revenue redistribution succeeded in preventing over-commercialism and profiteering within football. Throughout this period the social and cultural needs of communities and fans were successfully and affordably met by their local football clubs. Even when the maximum wage was (rightly) abolished in 1961 there followed a further 20 year period when the big clubs were still able to pay the higher wages that many of their top players demanded without drowning in red ink and the small clubs were still able to match their cost structures to their revenue bases. And every now and then one of the smaller clubs would manage its limited resources particularly well and rise through the divisions to become, well, a big club. This was important since it demonstrated that enough of a level playing field existed to allow the smaller club lacking the revenue generation power of its larger neighbor to still harbor hope of achieving parity in sporting terms. It should also be noted that it was during the sixties that the additional revenue stream of TV licensing rights became available to clubs. These early TV rights deals were negotiated by the Football League and, regardless of which team’s match highlights were shown, the revenue from these deals was distributed equally among all 92 clubs.

If this story ended at 1980 then one would have to say that the FA and the Football League had successfully established a model that proved football clubs could be run as financially healthy commercial organizations that put the social, cultural and sporting needs of their communities first. In other words for almost 100 years football clubs were indeed treated differently from other commercial organizations and it worked. So what went wrong? Well, two things basically—greed and weakness. Greed on behalf of a number of the larger clubs who, in response to massive TV deals that were on the table, decided to break away from the Football League and its revenue redistribution policy and keep all the TV money to themselves. And weakness on behalf of the FA who allowed this breakaway to happen. Prior to the breakaway which ultimately led to the formation of the Premier League the FA had also shown weakness some years earlier in 1983 when they allowed clubs to circumvent Rule 34 by forming holding companies, a loophole that enabled clubs to siphon off unlimited profits in excess of the FA’s limit on shareholder distributions. This earlier lapse in the FA’s resolve to protect the sporting and cultural integrity of English football proved to be the first breach in the dam that eventually led to the mutiny of the big clubs and hyper-commercialism of the game.

Returning to today, the fact that the Premier League places its emphasis squarely on commercial rather than social and community objectives does NOT prove the rule as some might think that football clubs can indeed be treated like any other commercial organization. On the contrary, the Premier League proves that the 100% commercially focused football club is NOT a financially sustainable model due to the nature of its ever escalating cost structure driven by player wages, the high risk associated with an over-dependence on a single source of revenue (TV deal money), and the commonplace practice of football club owners using leveraged debit to finance the acquisition of clubs. The Premier League has comprehensively validated the fact that football clubs MUST be treated differently than other commercial organizations not just to protect the social and cultural heritage of our game but also to put in place the safeguards needed to protect clubs from the potentially suicidal financial strategies of their owners.

2. Are football governance rules and the governing bodies which set and apply them fit for purpose?

2.1 Reason 1: The vision and mission for the governance of English football are at best unclear and at worst completely undefined

The “Who We Are” and “What We Do” pages of the FA’s web site read like a laundry list of roles and responsibilities and give no indication of the FA’s most important and urgent priorities. The closest to a vision statement that can be found on the FA site is “we are committed to making football accessible, enjoyable and safe for everyone, regardless of race, religion, gender, sexuality, background or ability”. This is a commendable goal but surely represents only one dimension of the FA’s reason for existence. It is also stated that the FA is responsible for “developing and regulating the game at all levels...”. Again this is clear in meaning but does not define specific objectives or depict any ideal end state against which the FA’s efforts can be evaluated. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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So how do we know if the FA’s litany of responsibilities listed on their web site are the right ones? Which are most important? Which are a waste of time? We don’t know unless a powerfully incisive vision has first been created that describes in crystal clear terms the “perfect result” we are aiming for in English football, eg a professional game refocused on social and cultural objectives as opposed to purely commercial goals, a resurgent national football team, and integration of football into a broad spectrum of community development activities and programs. Once this vision has been developed only then can the primary purpose and reason for existence of the governing body—its mission statement—actually be defined. In the case of the FA a mission flowing from a vision as described above could potentially revolve around a need to manage with a firmer regulatory hand the over-commercialism of the game, to place increased focus on youth development, and to increase the degree to which clubs actively work to develop and improve the communities of which they are part. So how does the FA go about developing the “correct” vision for English football upon which to base its mission and ultimately its key roles and responsibilities? Well, I would argue that the most compelling and relevant vision for English football will result by polling the opinion of that constituency for whom the first football clubs were originally created—the community. By engaging with community stakeholders at the club level (those with a vested interest in how policy decisions will impact their local team), at the national level (those with a stake in how the England National Team will be affected) and the broader community level (social, cultural, infrastructure, health and education for example) the governing body will ensure it is structuring a vision, mission and related set of roles and responsibilities that genuinely reflect the needs and wants of those people for whom the game of football was by definition created. If a compelling and relevant vision is developed from the ground up for English football then we are certainly on the right path to creating a governance model capable of bringing the commercial and community aspects of the game back into balance. This on its own its own will not be enough however. To successfully evolve even the most powerfully motivational vision into reality we must also grapple with the fundamental structures and relationships of the bodies that govern football in this country. This will be the subject of tomorrow’s post.

2.2 Reason 2: Effective leadership and governance of English football is impossible with the current structure and make-up of the FA Board of Directors Let us assume for one moment that the FA has taken the advice in my previous post and reached out to a broad spectrum of community stakeholders to develop a vision for English football and a corresponding mission and set of responsibilities for itself in implementing this vision. Let us also assume that that the community- centric approach has resulted in a vision and mission that are elegantly “balanced” along the dimensions of commercialism, social objectives, and community values. As a last suspension of disbelief let us imagine that the FA management team develop a set of policies and regulations based on this mission that if implemented would result in a near-seismic shift in the landscape of football in this country. Examples could include re- instituting revenue redistribution (eg sharing EPL TV money among all Football League clubs), repealing the holding company loophole that sidestepped the FA’s Rule 34, or restricting foreign ownership of English clubs to below 50%. These are particularly draconian examples (certainly from the view of the EPL) but they are just to illustrate a point. With the current FA governance structure such a set of policies and regulations would be dead on arrival in the FA boardroom. Why? Because half of the current FA board of directors responsible for approving policy represent either EPL or the Football League (the other half are from the FA). Clearly any new proposed policies or regulations that are not in the interest of the EPL or Football League will never be implemented (typically these would be any proposals that attempt to reign in commercialism and revenue generation), just as any proposals not in the FA’s interest would be blocked by the FA’s own board members. So in fact the current FA governance model is permanently gridlocked with the professional league representatives and the FA representatives each protecting their turf. The current situation is complicated further by the absence of an FA Chief Executive (equivalent to a corporation’s CEO) since Ian Watmore left last year. Theoretically a strong FA Chief Executive could lend some additional weight behind FA-recommended policies that might not be palatable to the professional game representatives. One commonly proposed solution to the gridlock of the FA board is to introduce independent directors who are not affiliated with the FA or either of the professional leagues. The idea is that the independent directors provide a balanced view free of conflict of interest while the non-independents directors provide the necessary input (but not steamrollering input) from parties with a stake in the outcome. The new recently elected FA Chairman David Bernstein is “quasi-independent” in my view. Formerly Chairman of Wembley Stadium, an FA subsidiary, Bernstein was actually proposed to the board by Phil Gartside, one of the Premier League representatives on the FA board. You figure that one out. If you believe that Chairman-Elect Bernstein is genuinely independent (which I don’t) even then we have a ratio of only one independent board member to eleven non-independent board members. Such a board structure would make it nigh impossible for any truly transformative policies and regulations to see the light of day since by definition transformative policies have a habit of upsetting at least one stakeholder group. So, until such a time that we have more independence on the FA board it’s going to be very tough to “rebuild the English game from the ground up”. What to do then? Well, if we accept the premise that the ultimate stakeholder for both the FA and the professional leagues should be communities then the structure and make-up of the FA board should be such cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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that there must never arise a situation where policy proposals with a community benefit are automatically shot down arbitrarily by a negatively impacted party. To guard against this eventuality there must enough independent representation on the board to allow proposals to be evaluated impartially without conflicts of interest perpetually leading to gridlock. To avoid the possibility of “across the aisle” secret deals between non- independent board members from the FA and the professional leagues this means that the total number of independent directors on the board must exceed the total number of non-independent board members by at least one. This goes further than the Burns report which, although recommending an increase in the number of independent board members relative to the board make-up today, allowed the total number of non-independent board members (including executive directors) to outnumber the number of independent directors. This still leaves open the possibility of secret deals and the shutting off of any new strategies or policies that work against the interest of FA and/or professional league stakeholders. So, there we have it. It’s a lot easier said than done but nevertheless the task is clear if the organization responsible for governing English football is to lead us all towards a new dawn. If we are to kill gridlock and neutralize conflict of interest. We need our own Independence Day.

2.3 Reason 3: Those responsible for football governance today at the club, league and FA levels regularly act in their own interests and not in the interest of the broader stakeholder community At the heart of my third reason why the governing bodies of football in this country are not fit for purpose is the Principal-Agent Problem. The Principal-Agent problem refers to when a Principal delegates authority to an Agent to carry out a task in the Principal’s interest but the Agent decides instead to use its assigned authority to act in its own interest. A common example in the business world occurs when shareholders hire a board of directors to govern their business and the board of directors, once installed, pursues policy that works counter to the objectives of the shareholders rather than for them. Reasons why Agents will act in their own interest include a lack of transparency into the Agent’s actions, misaligned incentives between the Principal and the Agent, the absence of any perceived threat of punitive action being taken against the Agent by the Principal, and in some cases a genuine de facto power through the board themselves owning the majority of the shares. Among the strategies that some shareholder groups will take to avoid the Principal-Agent problem are mandatory reporting requirements, performance incentives to encourage board members to act in shareholders’ interests, and a clearly communicated threat to remove board members whose actions work counter to shareholder objectives. In the world of football governance the Principal-Agent problem is observable at the club and governing body level. At the football club level the fan community is analogous to the shareholder community in the business example in that the community acts as a Principal who has assigned authority to an Agent (the club owner or major shareholders) to operate the football club in its best interests. Whether the club’s fans are actually shareholders of the club or not (some may be) is irrelevant. Each fan is a stakeholder in the club through his or her emotional and financial investment and as such those responsible for governing the club should be answerable to them. Can a Principal-Agent problem arise in this situation? Sure it can! Take the very recent example of Tottenham Hotspur. The major shareholder of Spurs is an investment company ENIC International. ENIC wants to move the club from its North London home to the in the East End after the completion of the 2012 Games. Not surprisingly a significant majority of the Spurs fan community want the club to stay put at . Even though the fans are the Principal in this case, they are unfortunately at the whim of the Agent (ENIC) when it comes to deciding the future of the club. Unfortunately there are far too many other Agent-wagging-the-Principal stories like Spurs around today and not just in the top flight. In the House of Commons Debate on Football Governance on 16 December 2010, Labor MP John Mann described brilliantly the case of Worksop Town and Mansfield Town playing their FA Trophy tie on the ground of a recently liquidated neighboring club because both clubs’ owners had locked them out of their grounds. A desire to wrest back some control from owners has led supporters of some clubs to form supporter’s trusts, not-for-profit organizations of fans who raise financing to secure significant share ownership and potentially seats on club boards. Today over half of Premier League and Football League clubs have supporters trusts although for only a small number of these clubs does the trust have a meaningful influence over club governance. Most of the latter situations are for smaller clubs where supporters stepped in to save the club from bankruptcy (or resurrected the club altogether after bankruptcy had already happened). Where successes have occurred the achievements of those supporters involved must certainly be applauded. For example, the supporters’ trusts at Brentford and Exeter City both have outright ownership of their clubs. For the larger Premier League and Championship clubs, however, it is much more difficult for a supporters’ trust to attain significant influence over owners and boards. When we look broadly across the game the truth is that unless a completely new club governance model can be found that facilitates genuine community influence over major policy decisions effecting the club then there will be little hope of achieving balance between commercial and social considerations. The Principal-Agent concept can be applied just as relevantly at the governing body level. Surely it cannot be a stretch to say that the FA together with the Football league and the Premier League exist to develop and implement a policy for football in this country that serves the interests of all of those communities having a cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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stake in the game? Whether the community in question is Manchester, Scunthorpe, Worksop Town, or the England National side? Or women’s football? Or the disabled? Or inner city kids? Is it not the case then that we—all we communities—have in effect hired the management teams of these three organizations to work together in support of our individual and collective objectives related to the game? We are again a Principal, this time assigning responsibility to an Agent in the form of the FA and the two professional leagues, effectively the FA Board from a decision-making point of view (since the FA Board is made up of representatives from all three organizations). To act in our interest this particular Agent needs to accomplish a greater number of things across a far broader spectrum than in the previous case where the individual football club was the Agent. In the case of the FA Board we as a collective community will require more rigorous due diligence of potential buyers of clubs, control over rising ticket prices, bringing financial stability back to football, improving consistency of refereeing decisions, improving supporter representation, and building an England national side capable of winning a World Cup.

It is as clear as day that just as a Principal-Agent problem exists at the club level it is also present with the governing bodies of English football. Why? Well, for many of the same reasons as we see everywhere else. In the case of the professional leagues—particularly the Premier League—it is about misaligned incentives. The game is TOO successful right now from a financial point of view for the leagues to take a breath and worry about, oh, those social and cultural objectives. And the England team? Just an annoying distraction. With the FA it’s about an absence of any perceived threat of action. A complete lack of accountability. The public and the government may moan and groan about us but it’s just sticks and stones, see. My bones are fine.

In my remaining responses to the Select Committee questions over the next few days I will begin to frame a solution for tackling the Principal-Agent problem in football. For rooting out the misaligned incentives and hammering them back into alignment again. For instilling some long-needed accountability into a performance- free zone. For giving us a voice again. The solution I’m talking about won’t be popular with everyone, but then being popular is not the point. Bringing football back to us is the point. Bringing it back to our communities. Where it belongs.

3. Is There Too Much Debt in the Professional Game?

Back in the seventies my father operated a very successful bakery shop in St. Albans, just outside of London. One day he decided he wanted to expand the business and buy a second shop in Harpenden, about five miles away. My father went down to the High Street to see his bank manager about getting a loan for the second shop. Before the bank manager would give my father, or tell him how much of a loan he could have, he wanted the answers to the following four questions: 1. What is the operating profit of your business today? 2. What interest payments are you making on debt do you already have, if any? 3. What additional sales will the second shop bring in? 4. What additional operating expenses will the second shop incur?

The bank manager asked the above questions because he wanted to assess whether my father would be able to cover the loan payments with the operating profits from the business. The first question about the profitability of the business today was to see whether my father was capable of running a fundamentally sound operation that made money in the first place. The second question was intended to reveal how much of his profits were already allocated to servicing existing debt and the third and the fourth questions were to confirm that the second shop—the new asset that would be financed by the loan—would generate positive incremental profits that, together with the profits my father’s original shop, would successfully service the loan charges. With the answers my father provided the bank manager determined that the total profits from the two shops would indeed cover the loan charges and my father got his loan.

How does the above story help us answer whether there is too much debt in football? Well, it doesn’t so much answer the question as tell us that we are asking the wrong question. The right question should be is the debt in football good debt or bad debt? To know this we need to ask the following: 1. Are English football clubs running fundamentally sound businesses today that are generating sufficient cash from operations to service the debt they have today? Any debt for which the interest payments cannot be covered by profits from current operations is bad debt. For example, if a club has £100 million in total debt and £50 million of it cannot be serviced from operations then the £50 million is bad debt. 2. Are English football clubs that take on additional debt doing it for the right reasons? Any debt that is taken on to pay expenses as opposed to investment in assets is also bad debt. For example if a club invests £10 million in stadium improvements and another £15 million in player’s wages then the £10 million is good debt whereas the £15 million is bad debt.

Notice by the way that it is possible for debt to be covered by cash from operations (which would seem to make it good debt) but that if is it subsequently used to pay expenses it is still bad debt. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Now let’s look at Premier League and Football League clubs and determine whether, on average, their debt is good and bad. The numbers below are approximate only and are based on financial data presented in the highlights of Deloitte’s Annual Review of Football Finance 2010 (for the 2008–09 season). Premier League Clubs Total Revenue £1.981 billion. Total expenses £1.902 billion (£1.327 billion wage costs + £582 million non-wage costs). Operating profit £79 million. Interest charges £184 million. Debt Liability £3.3 billion of which about £1.4 billion is “soft” interest-free debt from owners.

Football League Clubs Total Revenue £550 million. Total expenses £625 million (£475 million wage costs + £150 million non-wage costs). Operating loss £75 million. Interest charges Over £50 million. Debt liability Over £500 million From the above it can be seen that there is a significant amount of bad debt in English football. Based on the 2008–09 season, £105 million of the Premier League’s total interest charges of £184 million cannot be met by the combined operational profits of the 20 clubs. Who is paying the £105 million then? Benefactor owners and directors through so-called “soft loans” that generally require no interest payments today but which can be called in at any time should the benefactor eventually tire of his or her return-free investment. Calling in of soft loans is one of the most common triggers for sending a club into administration. The Football league is far worse—the 72 Football League clubs make a combined loss of £75 million before any interest payments are made. So all of the Football League’s debt is, by definition, bad debt. By far the single biggest problem in the Football League is the fact that players’ wages represent an unmanageably high percentage of revenues (86% in 2008–09). With non-wage costs (rent, utilities, maintenance, food, players’ kit & equipment, general supplies, etc) usually representing around 15–25% of revenues this means that it is fundamentally impossible to run a profitable club in the Football League. This is why insolvencies and administrations have been all too commonplace in the lower leagues for some time now and will continue until a sustainable financial model is adopted that is capable of consistently generating positive cash flow from operations. In summary then, the question of whether there is “too much debt in football” is at best moot and at worst irrelevant until the fundamental operational model of English football is addressed. This means finding a way for Premier League and Football League clubs—particularly the latter—to bring their cost structures more into line with their revenue models. Managing the wage bill is part of this but so is managing revenue in terms of estimating it better, diversifying revenues sources and being generally more conservative about revenue before aligning costs against it. Only when you are running a business that is consistently putting “more money in the till” than is being paid out should it make any sense for you to be asking for a loan. It should make even less sense for someone to actually lend it to you. And perhaps that’s the main point—all debt is bad debt if you shouldn’t have it in the first place. That’s what my Dad would have said!

4. What are the pros and cons of the Supporters’ Trust share holding model? The Supporters’ Trust model was a noble effort to counter the tide of commercialism in football by providing opportunities for fans to own blocks of shares in their clubs and thereby—theoretically—to increase their influence over board decisions. In essence the Supporters’ Trust model attempts to mitigate the impact of the Principal-Agent problem discussed in one of my earlier responses whereby club owners and boards will generally make decisions in their own interest rather than those of the broader stakeholder community at large. The ultimate goal of any Supporters’ Trust is to achieve an adequate level of share ownership such that the Trust is able to secure its own seat on the board and indeed a number of Trusts have succeeded in this. Some Trusts have even taken ownership of their clubs but this has usually been in situations where the club faced extinction (or had actually been made extinct already). There are even cases where Supporters’ Trusts have started up new clubs in direct opposition to an existing club’s owners as with FC United, born as a result of supporter dissatisfaction with the Glazer regime at Manchester United. The primary drawback to the Supporters’ Trust model is the difficulty and the cost involved in securing an adequate number of shares to achieve meaningful influence over the decisions of the board, particularly for the larger clubs. Even with the help of money from the UK government’s Supporter Direct initiative it requires a ludicrously large amount of cash to buy a seat on the board of a Premier League club. It is obviously easier with smaller Football League clubs but then the issue here is that the Trusts in these cases are often taking over after the previous owners have driven the club into the ground. Clearly for the supporters of these clubs the Trusts have saved something worth saving but should we really be satisfied with the ultimately evolved role of Supporters Trusts being to clean up the mess of asset stripping former owners? Again I draw attention cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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to the very current case of Tottenham Hotspur’s owners wanting to take over the 2012 Olympic Stadium after the Games. A model that gave Spurs fans more influence over board decisions than their Supporters Trust currently does would have given the club’s North London-based supporters more of a voice in the outcome. The Tottenham example illustrates what I believe will be a continuing dilemma for those fans of larger Premier League clubs who still associate their club with the local community. As top flight football becomes ever more global in its reach it is only natural that club owners, if allowed to drive their decisions based on purely commercial criteria, will continue to de-emphasize the needs of a club’s “indigenous” fan base. The current Supporters’ Trust model will have less ability to influence this trend than a rafter in white water can avoid going over the falls with only spoons in his hands for paddles. In my final two posts tomorrow and Wednesday I will introduce a governance model that, in my opinion, strives for identical objectives as the Supporters’ Trust model but without the Trust’s limitations. It is a model that would support the governance and operation of competitive and financially healthy football communities at the highest levels of both the domestic and the international game. It would not be possible to implement this model without resistance from some quarters but then my understanding is that this Inquiry is not about making friends. My understanding is that it’s about doing what it takes to get our game back. Agents beware, the Principals are re-taking the asylum!

5. Is Government Intervention Justified and Can Lessons Be Learnt from Other Governance Models? In my previous responses to the Select Committee Call for Evidence questions I have discussed many of the underlying reasons why the governing bodies of football in our country are not fit for purpose. I have addressed the issue of rampant over-commercialism that has relegated the social and cultural aspects of football to an afterthought and brought the game to near financial meltdown. I have also talked about the misaligned incentives and conflicts of interest that plague the FA board and the inability of the FA to implement effective policy through its lack of vision, leadership and accountability. Apart from the above, all is well. No, seriously action is required and not the type of action that involves further root and branch reviews, a fat report and a promise that action will be taken. The type of action needed is the type that will produce measurable results. Results such as local communities being able to keep their football clubs (whether the football club in question is Worksop Town or Tottenham), clubs only being owned by persons with the club and community’s best interests at heart, and a successful England national side. What these results all have in common are communities. Each result, when it happens, is in the best interest of a community whether the community in question is that of a non-league club, a Premier League club, or the whole country for the national side. So the litmus test of any proposed action plan resulting from the Select Committee Inquiry must, in my opinion, be “will this action plan with 100% certainty benefit all football communities?” The challenge with plans intended to benefit communities is that communities generally wield little power. Particularly football communities. It’s been said that football clubs possess greater brand loyalty than, well, anything. How many times have you said after your team has played like drains again “that’s it! I’m done with this lot!” only to return loyally the following week. Football clubs have monopoly power in their communities so fans themselves have next to no leverage when it comes to unscrupulous owners taking advantage of their beloved club. What this all means is that we will need help from a higher power to make any changes in football governance that primarily benefit supporter communities. And yes, this means regulation. But it doesn’t have to be heavy handed regulation that places all kinds of draconian restrictions and reporting requirements on the entities in question. All it has to be is low-touch regulation that protects the interest of the stakeholder groups least able to protect themselves—fans and the broader communities within which clubs are situated. This regulation specifically needs to make sure that the assets and profits of the club are retained primarily for the benefit of the football club and its community as opposed to profiteers with little real interest in the game. The regulation still needs to allow investors in the club to make at least a conservative return though, and it should still be possible to pay the salaries required to hire the players, coaches and management staff required to produce a competitive team. And there should be no barrier to the club generating handsome revenues and making attractive profits provided again that the majority of these profits are reinvested in the club. Well guess what...I just happen to have just such a low touch regulated governance model handy. It’s called a Community Interest Company. Community Interest Companies (CICs) are limited companies created specifically for the use of people who want to conduct a business or other activity for community benefit, and not purely for commercial gain. CICs operate to all intents and purposes like normal commercial enterprises with the exception that certain built-in safeguards exist to ensure that the majority of profits are reinvested in the community. The ability to form CICs has only been around since 2005 when the UK government introduced them under the Companies (Audit, Investigations and Community Enterprise) Act 2004. A surprisingly readable online CIC Fact Pack providing a detailed description of the CICs business form and how to form a CIC has been published by the government’s CIC Regulator. The benefits and advantages of the CIC business form over can also be found online here. There are currently 4,491 CICs registered (including 10 football clubs) and a list of all CICs can be found on the Community Interest Companies web site. Although no Football League sides have yet adopted the CIC form there is absolutely no reason why any English cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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professional club or for that matter any football governing body could not operate under the CIC model. To all intents and purposes the clubs and the FA could operate like any other private business meaning they could: Generate as much revenues and make as much profit as they want. — Hire the best people (whether players, coaches, management, marketing, finance or other job types needed at football clubs and governing bodies) at whatever salaries the job market demand that they be paid. — Raise capital by selling shares and access the debt market for loans and bonds. Are there catches? Yes, two. But both catches are designed to protect the community stakeholders for which the CIC is designed. The first is an asset lock which basically ensures that the CICs assets cannot be transferred out of the community (for example to a holding company, the loophole that killed the FA’s Rule 34) and the second is a cap on dividend distribution. To encourage investment (but not profiteers) the dividend cap is 35% of distributable profits, not actually that restrictive. For investors who care about football but still like the idea of an attractive return this isn’t a bad deal. An example of how CICs could work in English football is shown in Figure 1 below with all 92 clubs in the Premier league and Football league operating as CICs together with the England National team. The idea is that the professional league clubs and the England side would still operate as profit generating businesses but with the controls that would ensure both that the profits flowed back into the respective communities and that community stakeholders had a strong say in the direction of the club. Again, these controls would apply for the Arsenal and Walsalls of the world as much as they would for England. The other key element of the suggested organization structure in Figure 1 is the reporting relationship between the professional leagues and the FA. In the structure shown the Premier League and the Football League report into a FA Corporate entity that is responsible for setting the vision, mission, strategy and policy of the English game. This model is similar to the German Football Association which has succeeded in maintaining control of the German professional league the Bundesliga. The benefit of this for German football is that no conflict exists between the Bundesliga and the German national team. When the German national side suffered a temporary dip in form in the late 1990s/early 2000s the German Football Association (with the involvement of former Germany world cup player Jurgen Klinsmann) worked closely with the teams in the Bundesliga to implement a new playing style that would be suitable for the German national side. This resulted in a resurgence of form for Germany and an excellent run to the semi-finals of the 2006 World Cup. The failure of the FA to prevent the breakaway of the Premier League from the Football league in 1992 has resulted in the Premier League having too much influence over the direction of English football. The strategy pursued by the German Football Association and Jurgen Klinsmann would not be possible today in England because the Premier league would not allow it. The absurdity of the current football governance model in this country is highlighted by the fact that Sir Dave Richards is both Chairman of The Premier league and of Club England. It is absolutely essential that the Premier League has no role in matters concerning the national side if the problems surrounding England’s performance at international level are to be resolved. In summary the combination of the CIC business model and the bringing of the professional leagues under a FA Corporate entity will address both the over-commercialism of English football and the misaligned incentives and conflict of interest at the root of the problem with football governance in England today. Such a transformation will undoubtedly meet much resistance from certain quarters but this must not blunt the resolve of those powers possessing the authority to implement such change. Anything less than a complete overhaul of today’s football governance model will be guaranteed to result in business as usual. The heritage of our beautiful game and the legacies of the proud footballing communities that have gone before us deserve far more. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Figure 1

SUGGESTED ORGANIZATION STRUCTURE FOR FOOTBALL GOVERNANCE IN ENGLAND • Vision and mission FA Corporate • Policy •FIFA/UEFA relations

Professional FA Player Administration Leagues Operations Development

Premier Club England Academy League Marketing (CIC)* Liaison - 20 CIC Clubs

Football England U21, League FA Cup U19, U17, U16 Finance - 72 CIC Clubs

National Audit & League System * Community Interest Compliance - All CIC Clubs Companies

Womens Football

Written evidence submitted by Hamburger SV Supporters’ Club

Submission sent by Hamburger SV Supporters’ Club, established 28 March 1993 and now a central figure in the governance structure of Hamburger Sport-Verein e.V.. As of November 2010, we have 54,416 members, including 500 volunteers who aid the day-to-day running of the football club in various capacities. A history and details about what we do are both provided below.

Hamburger Sport-Verein e.V., a multi-sport club based in Hamburg, and its football department is the oldest club in Germany. Since 1887 the club has been an ever-present in the various incarnations of German football— currently it is known as the Bundesliga. Before describing Hamburg Supporters’ Club and the work which they do, some general facts about the Bundesliga and the 2. Bundesliga—specifically the way in which they regulate member clubs—may be of use.(1)

The ultimate governing body in German football is the Deutscher Fußball-Bund (DFB), formed in 1900 as a registered members’ association (e.V.). The top two divisions (Bundesliga and 2. Bundesliga) are controlled by the Bundesliga, and all 36 teams are members of the Ligaverband e.V., or League Association. This is an independent member of the DFB, but is also a registered members’ association. It is therefore governed by the same statutes and regulations. For the purposes of this submission, two forms of regulation are particularly relevant, namely the rules governing ownership structure and the licensing system. Clubs can be structured in the following four ways: (1) Eingetragener Verein or e.V.: These registered members’ associations were the only way which clubs were allowed to structure themselves prior to reforms made in 1998 (which, as a response to the increasing commercialisation of European football, allowed the professional football divisions of clubs to be run as external limited companies). They are not-for-profit organisations, owned by their members and managed under a strict principle of transparency by democratically elected representatives. All revenues generated must be reinvested in the club. Examples: Hamburger SV, VfB Stuttgart, Schalke 04. (2) Aktiengesellschaft (AG): A public limited company that is often, but not always, listed on the stock exchange. Examples: FC Bayern, Eintracht Frankfurt. (3) Gesellschaft mit beschraenkter Haftung (GmbH): A private limited liability company with a more corporate structure. This feature is balanced by a stipulation that the football club owns 100% of the shares. Examples: Bayer Leverkusen, TSG Hoffenheim 1899. cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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(4) Combination of a limited company with a Kommanditgesellschaft (KG) (limited partnership) or a Kommanditgesellschaft auf Aktien (aA) (stock company) (GmbH & Co KG aA/GmbH & Co KG): A new legal form of private partnership limited by shares with a limited liability company as a general partner, sometimes with the addition of elements from a joint stock company. This has become popular amongst football clubs, examples include Borussia Dortmund and Werder Bremen.(2) Whilst all four options have unique characteristics, they are all strictly monitored, and a central part of the scrutiny process is the “50 + 1” rule. This stipulates that the capital companies which run professional clubs can sell up to and including 49% of their shares, but that a 50% plus one share majority must always be owned by the parent club—ie the members’ association. This ensures that private interests (such as those of creditors, banks, or potential takeovers) are always subordinate to those of the members—ie the supporters. It also ensures that supporters are able to have a voice at every level of administration, and cannot be marginalised simply for asking inconvenient questions.(3) Sitting alongside the regulation of ownership is the licensing system that all clubs competing in the Bundesliga and 2. Bundesliga are required to go through on a seasonal basis. Endorsed by all members and developed on a collaborative basis by the various governing bodies, it has ensured universal solvency, without exception, amongst German clubs over the last 40 years. Each club applies for a licence first to the DFL, then the League Association, by submitting audited economic data for scrutiny. If a club is refused a licence and all avenues of appeal are exhausted, then the club is prohibited from competing in the forthcoming season. For a club to be awarded a licence they must demonstrate a) that they are solvent, and b) possess positive liquidity. These two requirements are assessed using a wide range of data, relating to incoming payments, payments-out, and financial projections for the forthcoming season. The resulting liquidity forecast centres around three conditions, without which a licence cannot be awarded: (1) That all payment obligations can be met at all times. (2) That regular match operations can be guaranteed at all times. (3) There are plans in place to counter any financial problems that may arise. There are four possible outcomes from the licence application process, which range from a full award, to an award with certain conditions, to a refusal. As previously mentioned, clubs are free to utilise a regulated appeals process. In addition to the pre-season application, clubs are also required to submit accounts during the season, to ensure that positive liquidity is maintained throughout the campaign. Any discrepancies can result in sanctions: fines, deductions of points, a transfer embargo, etc. As well as drawing up contingency plans for financial trouble, clubs also have to hand over a security deposit to the DFL, which will be used to pay its members of staff. All of the regulations relating to ownership and licensing are recognition that football clubs must act as responsible entities, and that reckless spending cannot be a substitute for a long-term business strategy geared towards stability, not merely short-term success.(4) Having outlined the limitations which German football clubs operate under, we can now narrow our focus to Hamburger SV. Formed in 1887 when Der Hohenfelder Sportclub and Wandsbek-Marienthaler Sportclub merged, the club was initially known as Sportclub Germania zu Hamburg. The current name did not emerge until after World War One, when Sportclub Germania zu Hamburg merged with two other teams of the city, Hamburger FC (which in 1914 changed its name to Hamburger Sport-Verein von 88) and FC Falke 06. Upon the foundation of Germany’s first professional league in 1963, Hamburger SV were one of sixteen clubs invited to participate in the first season, and have competed in the top flight ever since. The club’s golden age took place between 1976–87, during which time they won three Bundesliga titles and reached two European Cup finals, winning one in 1983.(5) However, by the late 1980’s the club had stagnated, and the low point came in the 1991–92 season, finishing on 11th place. HSV Supporters’ Club was founded on 28 March 1993, with four initial aims: to raise the level of influence wielded by the fans, to participate in club activities, to mould club policy for the good of its members and supporters, and to maintain the comradeship amongst HSV supporters. From the formation with 36 initial members, to its current membership of over 54,000, these core aims have always been used as reference points in the development of the HSV Supporters’ Club philosophy, which is as follows: (1) We want success, but not at any price: Sport must be more important than profit. We earn money in order to play football, we don’t play football in order to earn money! Tickets must be affordable for everybody. (2) We want to be in control of our own destiny: 100% member-owned. No billionaires. No companies. No separation of the professional football team from the rest of the club. (3) We want and support a strong membership: Members’ rights must always be guaranteed. Democratic structures. Active members. (4) We are proud to be a multi-sport club, not just a football club. (5) We stand behind tradition, fan culture and fan activities.(6) This philosophy, combined with Hamburg’s status as a members’ association (e.V.), has ensured that the supporters are fully integrated in both the formal governance structure and the more informal procedures that are used to run the club on a day-to-day basis. As mentioned above, members’ associations are not-for-profit organisations, owned by their members, and managed by representatives elected by their members. The cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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centrality of members’ involvement is demonstrated by the following bodies, all of which have important responsibilities in the governance of HSV: (1) General Meeting of Members. This is the highest decision-making body within the club. Only members aged 18 or older are allowed to vote—younger members can be represented by delegates. (2) Supervisory Board (SB). This consists of twelve members, eight of whom are elected at the General Meeting of Members and four of whom are delegates selected by the Supporters’ Club, Amateurs, Seniors and HSV Ochsenzoll (which manages the club’s training and youth facilities) respectively. A term on the SB runs for four years. The SB selects the board of directors and (if necessary) can remove them from office. The SB is also responsible for approving the budget presented by the board of directors, and controls the way in which the Board of Directors do their jobs, assigning responsibility for day-to-day operations, and regularly monitoring the management process. (3) Board of Directors (BoD). This consists of the Chairman, the Vice-Chairman, and up to three additional members, selected on three-year paid contracts by the SB. One member will be appointed Director of Membership Affairs, this is the only paid position which is elected by the members. The BoD oversees the day-to-day affairs of the club. (4) Department of Supporting Members/Supporters’ Club. An annual meeting is used to elect a board of five volunteers, for three-year terms. (5) Members. To join the HSV Supporters’ Club, fans are required to join HSV, reflecting the shared purpose of the two entities. The current membership fee is€48 per year—this is split between the club and the Supporters’ Club. All members have the right to vote, the right to apply for all board positions, the right to put forward petitions at members’ meetings, the right to use club property, and the right to participate in club activities. (6) The Honorary Board. This consists of seven club members over the age of 35, having been members for at least 10 years, they are elected directly at the General Meeting of Members. They act as a go- between in disputes and hold the chair at some elections. (7) The Board of Seniors. This leads the HSV “Community of Seniors”, which consists of anyone who has been a member for more than five years and is at least 35 years of age or older. Their main brief is to maintain tradition and unity within the club. (8) The Amateurs Board. This is elected at the annual meeting of all non-professional sports departments. In the most recent General Meeting of Members (which took place on 9 January 2011), four positions on the Supervisory Board were filled. The four elected candidates were drawn from different walks of life (one was an actor, another an economist) but they shared one common characteristic: they are members of the Supporters’ Club, and thus were eligible for election onto this crucial organ of HSV. This codified system of accountability, which extends to the highest echelons of the club, is a demonstration of how effective the e.V. structure is in safeguarding against excessive individual power; and also the level of integration into the club that is guaranteed to members.(7) As well as allowing for a more transparent form of governance, the e.V. structure has also allowed HSV to maintain and develop its financial health. The club is currently 11th in the latest Deloitte Football Money League, which ranks clubs by revenue generated from football operations—a method generally considered to provide the best comparative assessment of financial strength. With revenue of€146.7 million, HSV is the second-highest ranked German club, only behind traditional giant FC Bayern. It sits comfortably ahead of Schalke 04 (€124.5 million), Werder Bremen (€114.7 million) and Borussia Dortmund (€103.5 million), the other three German clubs ranked in the top 20. Of these three, both Bremen and Dortmund are structured as GmbH & Co KG aA’s, yet on the evidence from Deloitte, it could conceivably be argued that the e.V. provides not only a more accountable structure, but one which generates greater revenue.(8) HSV Supporters’ Club is led by a board of five volunteers, supported by a full-time manager and fifteen additional employees, with accounts available for examination at each AGM. However, the main body of its work is carried about by the hundreds of volunteer members, who are drawn from the general membership scattered around Germany. The Supporters’ Club has contacts in every major German city. The Supporters’ Club meets with the Board of Directors on a regular basis to discuss the issues affecting both the club and its supporters. Through a history of sensible, constructive dialogue, the Supporters’ Club has ensured that no fan- related decisions will be taken without their input and consultation. Since their foundation, the Supporters’ Club have spearheaded many changes and/or adaptations that have been of benefit to both, the club and the supporters. The first of these came in the late 1990’s, when the club began construction on a new stadium. The Supporters’ Club lobbied hard for the inclusion of standing areas in both the North and the South Stands, as well as cut-price seating across the ground. The Supporters’ Club also take a prominent role in consulting with the club over season ticket prices—a permanent reduction for members has resulted. The club’s various Ultra groups are also included in the dialogue, with large-scale choreography displays encouraged and funded by members.(9) As well as working alongside the club on an administrative level, the Supporters’ Club strives to ensure that members are integrated with the club beyond simply attending matches every other weekend. A centralised system for attending away fixtures has been implemented, with members able to purchase tickets, means of cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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transport, etc. through the Supporters’ Club. This has had major implications for wider issues surrounding fan safety in Germany, with the HSV Supporters’ Club part of an ongoing consultation process between the football authorities and fan groups. The development of the club’s museum was initiated by the Supporters’ Club, who remain amongst the main sponsors. In terms of the wider community, some amateur divisions of HSV (which include boxing, rugby and baseball) are funded by Supporters’ Club members, and integration projects are developed on a regular basis. The supporters also represent the club whenever the city hosts a major event— parades, marches, the 2006 World Cup, etc. The vast majority of these activities are detailed on the exhaustive website (www.hsv-sc.de) which is increasingly becoming a portal for HSV supporters worldwide, and not just in the city itself. There is also a quarterly fanzine, supporters news, which is made up entirely of fan contributions, debating issues affecting HSV and football in general.(10) This exhaustive documentation of the activities that the HSV Supporters’ Club has been engaged in since 1993 hopefully reflects the all-encompassing nature of the group. As well as providing a collective voice for supporters of the club on traditional “fan” issues such as ticket prices and safe standing, they have become indispensable in the day-to-day running of Hamburger SV. They are an institution with the interests of its members and their community at its heart, providing a legal, political and social framework which has facilitated positive development in terms of financial stability and on-pitch success.(11) February 2011

Written evidence submitted by Christian Müller Submission to the parliamentary committee looking into the governance of football (DCMS) sent by Christian Müller, from 2001 until 2010 Chief Financial Officer of the DFL (German Football League), from 2007 until 2010 Member of the Managing Board of the League Association (Ligaverband) and Member of the Board of the DFB (German Football Association). Since 2002 he is member of UEFA’s club licensing committee and since 2007 member of EPFL’s Professional Football Finance Committee. His duties included the administration of the accounts at the League Association, the DFL and its subsidiaries, and of the licensing procedure for the 36 clubs and joint-stock companies belonging to the Bundesliga and Bundesliga 2. Christian has overseen an ongoing process of development and adaptation of the licensing procedure, which itself is held in high esteem throughout Europe, and is outlined below. The fundamental aim of the licensing procedure is to ensure greater economic stability and promote the integrity of the professional game. Christian is now working as an advisor to the Board of the DFL and representing the league in several international organizations, ie UEFA (Club Licensing Committee) and EPFL (Standing Committee on Professional Football Finance)

Executive Summary — The Bundesliga and the Bundesliga 2 are governed by a trio of members’ associations, which take an active role in maintaining the stability and integrity of the game. — This manifests itself in two main policy areas: the regulation of ownership structures, and the licensing system. — Clubs are required to regularly prove their solvency and positive liquidity, otherwise they will be refused a licence to compete. — This has created widespread financial health, diversified and growing profit, an entertaining product, and extensive community integration. The German Football Association (or DFB, formed in 1900 as a registered members’ association) is responsible for overall governance of the game in Germany, whilst the League Association (Ligaverband e.V.) and its 100% subsidiary DFL Deutsche Fußball Liga GmbH control the top two divisions (the Bundesliga and Bundesliga 2), with each division containing 18 professional teams. These 36 teams are all members of the League Association, likewise a registered members’ association that is an independent member of the DFB— and is therefore governed by its statutes. German sports policy has traditionally been defined by the socio- political importance of sport itself. The government in principle follows a non-interventionist sports legislation model, however the governing bodies in football are actively involved in the legislation and regulation of their members. This regulation takes the form of two key areas: the ownership structure of clubs, and the licensing procedure.(1) Firstly, the regulated ownership structure, which applies to all clubs competing in the Bundesliga and Bundesliga 2. Prior to 1998, all 36 clubs from the top two divisions were structured as registered members’ associations (eingetragener Verein or e.V.). Under no circumstances were clubs allowed to be run as privately owned companies or corporations, a practice common in the Premier League and Football League. These members’ associations were and are not-for-profit organisations, owned by their members who delegate decision rights to an elected board of representatives. These representatives may act as the executives of the association or as the body which engages the executives. Starting in the eighties, clubs have begun to hire high profile professionals as club executives. The original volunteer organisation in German professional football cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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transmuted into a business environment with a skilled and well remunerated staff. But still any revenue generated by a club in the legal form of an association must be funnelled back into the club. These two requirements ensure both accountability and stability. In 1998, the opportunity for clubs to convert their professional football sections into external limited companies (separate from their parent association) has been made available. This decision was taken by the General Assembly of the DFB in response to the increasing commercialisation of football across Europe and satisfying the increasing demand for more professionalisation from the biggest clubs like FC Bayern. This means that there are now three additional forms of limited company which football clubs can be run as, accompanied by the traditional e.V.. still the legal form of big clubs like Schalke 04, VfB Stuttgart and Hamburger SV).(2) Firstly an AG, a public limited company which outside the football industry is often, but not always, listed on the stock exchange. Examples of clubs that use this structure are FC Bayern and Eintracht Frankfurt, but their shares are not quoted on stock exchange. Sport supplier Adidas and car manufacturer Audi each hold almost 10% of the shares of Bayern, the remaining 80% belonging to the parent club FC Bayern e.V. Secondly, there is the GmbH, a private limited company. Examples for clubs operating in this legal form are Borussia Mönchengladbach and TSG Hoffenheim 1899. The GmbH allows scope for a more corporate form of governance whilst limiting the liability of the shareholders. Thirdly, there is () the GmbH & Co. KG aA (a legal form of a private partnership limited by shares with a limited liability company as a general partner with the addition of elements of a joint stock company). The latter in particular has proven popular amongst professional football clubs, although to date only one (Borussia Dortmund GmbH & Co. KG aA) has been listed on the stock exchange. Whilst these are quite different in terms of legal structure from the traditional e.V, the process of transition and the subsequent day-to-day running of the company are strictly monitored, in both legal and practical terms.(3) A clause known informally as “50 + 1” holds that the parent club (ie the members’ association) must hold a majority voting bloc in the affiliated corporation—hence the “50 + 1” moniker. This regulation is not relevant for the by definition democratic structure of associations (one man one vote principle) and thus applies only to affiliated corporations of parent clubs. The clause has two main intentions. Firstly, to safeguard the influence of the parent club on the affiliated company, and to avoid the promotion of external influences (creditors, lenders, minority shareholders and individual takeovers) over those of the members. Secondly, to ensure that the sporting competition of the national championship is not distorted. The clause is applicable to all three forms of private ownership structure, with the central principle of member/supporter ownership enshrined regardless of whether the club is an AG, GmbH or GmbH & Co. KG aA. In practical terms, the clause ensures that the dialogue between the club’s management structure and members of the parent club (always in the legal form of an association) remains fluid and travels in both directions, unlike in England, where supporters often find themselves talking without ever being acknowledged.(4) The second element of regulation that operates in the Bundesliga and Bundesliga 2 is the licensing system, developed on a co-operative basis by the German game’s governing bodies. The licensing system is arguably the main reason that Bundesliga clubs have, without exception, remained solvent entities throughout the past forty-seven years. Perhaps the most impressive feature of the system which applies also to clubs in the amateur divisions is that it is endorsed by all clubs and the public generally. . In essence, the licensing procedure requires clubs to submit economic data for scrutiny by the football authorities, thereby ensuring an openness and transparency to the business aspect of the game that is without parallel across Europe. The back bone of the system is to force clubs to reduce overspending by implementing specified planning procedures and seasonal application for a license. Clubs apply first to the DFL, in case of problems to prove enough liquidity to meet all obligations at any time the licensing committee as the appeal body plays a part. It is the League Association which then issues the license. Should a club be refused a license, they can appeal to the licensing committee, and if the appeal is unsuccessful the Court of Arbitration for German Professional Football. Should their appeal be successful there the application is returned to the licensing committee and, formally, the League Association, to grant the license. If, after all these avenues are exhausted a club has still not received a license, they are banned from competing in the forthcoming season.(5) For a club to receive a license, they must be solvent, and be able to demonstrate enough liquidity. This is assessed checking the following items: — Assets. — Receivables. — Cash and bank balances. — Liabilities/provisions. — Current overdraft account facilities. — Loan commitments. — Projected profit and loss statements including planned income from ticket sales, advertising and transfers and planned payroll costs for match operations. — Cash inflows/outflows from investing and financing activities.(6) Additionally, net equity must be present at the end of each season or sanctions will follow. The forecast of liquidity centres around three main requirements: that all payment obligations can be met at all times, that cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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regular match operations can be guaranteed at all times, and that any financial problems can be countered. There have been a number of recent instances in English football where clubs have been unable to fulfil one or all of those requirements, yet the same cannot be said for the Bundesliga. This is due to the strict criteria listed above, as well as the liquidity forecast undertaken by the DFL, using figures provided by each club and commented by the clubs’ auditors. This begins with the audited club accounts as of the previous 31 December, and incorporates the budgeted figures for the following 18 months. Submission of accounts is a heavily legislated area, and clubs are prevented from including anything that cannot be backed up with a written contract. This seems particularly sensible given the recent trend in England for clubs to base accounts on uncontrollable variables such as promotion or season ticket sales. The licensor has full discretion not only when deciding which figures to take into account when compiling the liquidity forecast but also when reducing projected income or increasing projected expenditures. This cannot be done without well founded reasons, but it often applies to budgeted income from ticket sale or intended cost cutting for player salaries. All of which leads to one of the following four outcomes: 1. Positive liquidity at the end of the season to be licensed is proved: The financial criteria have been fulfilled—the license is granted without any conditions or obligations. 2. Positive liquidity at the end of the season to be licensed could only be proved after meeting some conditions: The financial criteria have been fulfilled—the license is granted with obligations valid in the respective season 3. Positive liquidity at the end of the season to be licensed is proved but the balance sheet as of 31 December t-1 discloses a net debt (negative equity): The financial criteria have been fulfilled—the license is granted with the obligation to improve equity in the balance sheet as of 31 December t by a certain percentage 4. Conditions which were imposed to prove positive liquidity were not met—the financial criteria have not been fulfilled—no license is granted.(7) As well as the pre-season examinations, the licensing procedure also includes an in-season confirmation of economic capability. This is a newly devised method which allows the authorities to monitor clubs on a more regular and closer basis. All clubs must submit revised and audited accounts as of 30 June, a revised budget for the upcoming season, and an auditor’s report until 31 October. Should a gap in liquidity emerge, clubs are given four weeks to establish new income streams, and are barred from operating in the January transfer window without the approval of the licensor. Clubs are fined for late submission of the documents, and also face points deductions should they fail to meet the requirements to present fresh money. Again, the evaluation of the clubs’s liquidity is at the discretion of the licensor.(8) As mentioned above, the licensing system also safeguards against any financial problems that may arise. Accepting the license from the League Association, all clubs agree upon a contingent funding of financially suffering competitors out of the income generated by the central marketing of media rights. This means that well run clubs would receive less TV money than they are entitled to just to generate financial aid for poor run rivals. But this potential support is limited to the amount of a two month pay roll and will inevitably lead to a point deduction for the delinquent. In practise, no club asked for that support since its inception in 2004. Crucially, this instrument is founded on the ubiquitous understanding and acceptance that financial difficulties of only one club can negatively impact the lives and businesses of other people and institutions. In essence, the licensing system is intended to safeguard the integrity of the game and the league, as well as providing a seal of good governance, a quality assurance for the clubs and, as a side-effect, a benchmark from which both clubs and external observers (such as UEFA) can measure against. The benefits of implementing such a system are arguably self-evident, in commercial, social and political terms. An examination of UEFA’s latest Benchmarking Report (published in January 2011) only furthers the notion that the Bundesliga can provide a solution for many of the issues that football across Europe (and the UK in particular) is currently wrestling with. Germany’s top division gathered the largest average attendance of any league in Europe (42,500, over 8,000 more than the Premier League), as well as the largest estimated total attendance (13,005,000, again ahead of the Premier League). Given that there are two fewer clubs contributing attendances to the Bundesliga calculation, this is a telling statistic. Furthermore, of the so-called “big five” European leagues (the Bundesliga, the Premier League, Serie A, and ), the Bundesliga had the highest number of different champions between 2000–01 and 2009–10, with five. This competitive parity is a direct result of the level playing field created by the regulations regarding ownership and the licensing system.(10) Bundesliga and Bundesliga 2 clubs continue to combine financial stability with a keen eye for development and maintenance of diversified revenue, which rose above€2 billion according to Bundesliga figures. Transfers (8%), media rights (29%), gate receipts (21%), sponsorships (28%) and merchandising etc. (14%) are near- equal partners in the average turnover of the two divisions. In the UEFA Benchmarking report, figures for Advertising and Sponsorship revenue increased by over 10% during the 2009 financial year, whilst overall revenue and operating profit also increased by 10%; which given the current economic state of Europe, is no mean feat. This increase in profit was not spent on wages however, with German clubs spending 52% of their reported revenue on employee costs. These profits were also achieved without pricing fans out of the stadiums: the Bundesliga had the cheapest average ticket price out of the “big five” European leagues, at€21, compared to€43 in the Premier League. In terms of overall losses, the Bundesliga was one of just four European divisions to break even in 2009, another indicator of its commitment to financial stability.(11) cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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All of these successes are direct results of the stringent licensing and ownership structure rules which govern clubs competing in the Bundesliga and Bundesliga 2. In addition to this, the tradition of members’ associations in German footballing culture ensures that all clubs, regardless of size, are deeply rooted in their local communities. This can be seen in many different features of the game in Germany, from the social activism of clubs such as St. Pauli, to Borussia Dortmund’s Westfalenstadion, which houses the Südtribüne, Europe’s largest still-existing terrace, and the resulting spectacular atmosphere. In wider terms, members’ associations have traditionally held an important place in German society, and as such are well-placed to positively impact on the communities from which they draw their membership. Werder Bremen and Schalke 04 and others have taken a leading role in terms of community integration, with both clubs committing to large-scale improvement projects intended to enhance public life in their communities.(12) January 2011

Written evidence submitted by Substance Summary — Football clubs are different from other commercial organisations due to its sporting nature, the relationship of fans (consumers) to clubs (companies) and the organisation of competition (leagues, cups). — Football has demonstrated that it has been unable to reform its own governance adequately due to the competition between leagues and the FA and the dominance of major club interests. — English football is inherently financially unstable, as evidenced by the chronic instances of insolvencies. Levels of debt create an uneven playing field giving advantage to private companies over community owned companies and which limits wider social benefit. — There are distinct business and wider social advantages for mutual, community and supporter ownership models. — Government action is both justified and long overdue and there are a number of different forms it can take.

About Substance Substance (www.substance.coop) is an experienced social research cooperative whose staff have backgrounds in leading university research institutes, that works in the sport, youth and activities sector. We undertake major national research projects, including a two year study for Supporters Direct on the Social and Community Value of Football (three reports attached), and the Football and its Communities research for the Football Foundation (2006: attached). Substance also works with a majority of professional football clubs to deliver the evaluation of their community schemes including those managed by the Football League Trust, Kickz and the Home Office Positive Futures programme. Dr. Adam Brown was a leading member of the Government Football Task Force from 1997–2000 and co- authored the FTF Majority Report; has published widely on the governance of football and the relationships of fans to their clubs; and has previously presented evidence to the Monopolies and Mergers Commission inquiry into BSkyB’s Manchester United takeover (1999) and the All Party Parliamentary Football Group inquiry on football governance (2009).

Q1: Should football clubs be treated differently to other commercial organisations? 1. Football clubs differ from “normal” commercial organisations in two key ways. 2. Firstly, the organisation of competition in the football industry is unlike normal commercial competition. Clubs/companies are organised into leagues, competition is focused around set fixtures and success or failure is determined by sporting endeavour rather than the sale of goods and achievement of market share. This was recognised by the MMC’s BSkyB/Manchester United inquiry in 1999 as well as European Commission Competition Directorate inquiry into the collective selling of TV rights by the FA Premier League (in which the league was regarded as a “cartel”, although ultimately given exemption from action). 3. Secondly, the relationship of supporters to their clubs is radically different from the normal relationship of consumers to suppliers. The emotional and usually life-long attachment of supporters to their clubs means that normal relationships of supply, demand and value for money do not apply to the same extent. Although a club’s attendances may drop when the team performs badly, support—or custom—is rarely transferred to another supplier—or club. The existence of, and continued support for, 92 professional league clubs, and significantly more in the non-league pyramid—many of whom will never achieve on-field “success”—is testimony to this. 4. Substance’s research for Supporters Direct into the Social and Community Value of Football included surveys of supporters of four clubs,43 two supporter-owned and two private limited companies. In this we asked supporters to submit three “keywords” that exemplified the value of the clubs to them. The results were 43 Brown, A (2010) The Social and Community Value of Football, Supporters Direct: 32 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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notable in their similarity and in that the key benefits fans received from their association were social in nature: a sense of locality, a source of friendship, being part of a “community”, and something that bound both family and friendship relationships. There were no references at all to the success (on-field or financial) of their clubs, suggesting that the value fans get from their “consumption” of their clubs was specifically social in nature. 5. In our three-year research for the Football Foundation, Football and its Communities, we also found that football clubs are the site for the formation of communities amongst fans which outstrip and outlast the desire for success and which suggest radically different relationships than those associated with more typical consumer-company relations. Being a football supporter is a regular, structuring part of their lives which enables them to experience a real sense of belonging in an otherwise uncertain world. As such, for many supporters, being part of a fan “community” is far more substantial than merely an escapist form of momentary bonding.44 6. Whilst football clubs are undoubtedly partly commercial in nature, the evidence form these research projects supports the view that football clubs must be regarded as different to other commercial organisations.

Q2: Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? 7. The governance of English football has been in dispute for well over 100 years. For most of this time, that dispute was due to the unique situation in English football in which there has been a governing body— the Football Association (FA)—and a club based organisation—the Football League (FL).45 The historic failure to reconcile these and the subsequent FA sanctioned formation of the Premier League (PL) as a break- away from the FL has resulted in a three-way “competition” for control of the game. 8. The emergence of PL dominance within the governing structures of the FA has further clouded and undermined the ability of the FA to govern the game independently. The failure to implement the limited recommendations of the Burns Review, the chronic instability in the executive of the FA and the undermining of attempts to reform how football is governed in a way independent of club interests amount to a structure that is not fit for purpose. 9. The examples of Leeds United (who went into administration and whose real ownership is still unknown), Portsmouth (who had four owners in a year followed by administration), Liverpool and Manchester United (both of whom were the subject of heavily leveraged buy-outs) in recent years exemplify the problems that a governance structure dominated by major clubs can result in.

Q3: Is there too much debt in the professional game? 10. The financial model of professional English football is clearly inherently unstable. Since 1992, the year the Premier League was formed and the distribution of wealth in the game was radically changed, there have been 61 insolvencies in a professional league structure of 92 clubs—or two thirds of all clubs. 11. In our Social Value research we surveyed 10 chief executives of clubs ranging from the Premier League to Step 7 of the national game and we also interviewed executives of the four case study clubs. In all but three cases in the preceding ten years, the club had either gone out of business and been reformed, or been in administration, or been the subject of destabilising ownership changes. In every case bar one the executive made reference to the financial pressures and problems they faced in the current model. 12. The ability of clubs to spend more than they earn, the levels of debt allowed and the demands of increasing player wages were barriers identified by both supporter-owned and non-supporter-owned clubs in both our survey and our case studies. Furthermore, executives of all clubs suggested that meeting these financial challenges restricted their ability to deliver wider social value to local communities. 13. In particular, community-owned clubs complained that the debt that privately owned clubs could take on created an “unlevel playing field” which restricted their ability to progress and to compete as the following quote illustrated. “The madness that exists—unsustainable wages and all the rest—has to stop in order for clubs like us to be proper clubs. We can keep plugging along and doing our best, but ultimately something needs to happen structurally so that the game comes towards us rather than us just getting submerged beneath this mass of debt that nobody can sustain. It’s all right the Football League legislating to punish failure but they are not legislating to prevent failure.” (CEO, Club C, supporter owned)46 14. As such, the levels of debt allowed in football is unfair on and a deterrent to other forms of ownership, it creates endemically unsustainable and unstable finances, and it creates public harm by limiting the potential social value of the game. 44 Brown, Crabbe and Mellor (2006) Football and its Communities, Football Foundation: 55 45 Tomlinson, A (1991) “North and South: the rivalry of the Football league and the Football Association”, in Williams, J and Wagg, S eds. British Football and Social Change, Leicester University Press: pp25–47. 46 Brown (2010) op cit: 26 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Q4: What are the pros and cons of the Supporter Trust share-holding model? 15. Our research for Supporters Direct reviewed existing literature about the advantages and disadvantages of mutual ownership and this informed our primary research into football.

Advantages of mutual and community ownership in general 16. In our Interim Report47 for the Social Value research we cited numerous studies that argue that mutual and community forms of ownership offer some distinct advantages. 17. Post et al48 say that there is evidence of the benefits of involving stakeholders in businesses more generally. Wheeler and Sillanpaa49 argue that available evidence suggests that companies that are run with a view to the long term interests of their key stakeholders rather than a short term interest in their shareholders are more likely to prosper. 18. Hutton (2007) has argued that a better and more direct route to gearing the business to its stakeholder interests is by making stakeholder groups owners. 19. The advantages of mutual ownership suggested by the Building Societies Organisation research50 included: — Profit is invested back into the business. — An absence of external investors focused on increasing returns means businesses can be aimed at sustainable medium-term growth. — Being perceived as more trustworthy. — Tending to have more focus on corporate social responsibility. — Tending to have greater commitment to assisting community initiatives. — Increased accountability associated with member ownership. — Being more personal. — Run in the interests of its customers or users. 20. Research by Mills51 suggested further advantages of mutual ownership: — Community ownership encourages decision making on interest and livelihoods of those that will be affected. — Increased democracy encourages local participation. — Encouraging citizenship and transparency. — Encouraging employee participation. — Long-term thinking. 21. Finally, Bruque et al.52 argue that democratic ownership and control (of which supporter trusts are one form) results in motivations for long term and sustainable return on investment and the satisfaction of common socioeconomic goals—arguably far more appropriate for the kind of sport-commercial-social form of business in football.

Advantages of mutual and community ownership in football (the supporter-trust shareholding model) 22. A key aim of the brief we were given by Supporters Direct was to identify advantages and disadvantages of different ownership structures in terms of the social and community value that football clubs can generate, as well as identifying some of the business advantages of supporter ownership. This primary research involved a survey of 10 CEOs of clubs at all levels and in depth case studies of four clubs. 23. These are summarised in our Final Report53 and include distinct advantages of supporter trust models for football, its fans and its communities, notably: — A recognition that concerns for and impacts on local communities can be generated by all activities of the club—including its core operational aspects such as ticketing, purchasing, employment, and environmental policies. — The horizontal integration of wider community interests across club operations and its core business (as opposed to a “ghetto-ising” of community concerns in community departments). 47 Brown, A (2009) The Social Value of Football Research Project for Supporters Direct: Interim Report—Literature and Methodological Review, Manchester: Substance 48 Post, J, Preston, L, Sauter-Sachs, S (1999) Redfining the Corporation Stakeholder Management and Organizational Wealth, Stanford University Press, Stanford, CA 49 Wheeler and Sillanpaa (1997) The Stakeholder Corporation: A Blueprint for maximizing stakeholder value Pitman: London 50 Building Societies Organisation (2008) Building societies and other types of organisation The Times 100 http:// www.thetimes100.co.uk/downloads/bsa/bsa_13_full.pdf 51 Mills, C (2001). Ownership Matters, New Mutual Business Matters, 52 Bruque et al. (2003) “Ownership structure, technological endowment and competitive advantage: Do Democracy and Business Fit?” Technology Analysis & Strategic Management 15 53 Brown, A (2010) op cit: 53 cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Better relationships with local authorities and a closer alignment of public interest aims. — A more long term approach to club development and one which is less dependent on satisfying shareholder/investor interests. — Increased transparency of club administration and accounts. — The democratic involvement of supporters as owners, resulting in greater buy-in of supporters and increased commitments to the club, such as levels of volunteering. — A greater sense of buy-in, engagement and inclusion of a wider cross section of local people than with privately owned clubs. — More in-depth relationships with local communities including informal, ad hoc and non- institutional relationships. — Distinct business advantages—such as preferential treatment by local authorities when developing new facilities. — Longer term partnerships delivering local community value. — Less ability to raise finance/debt against equity. 24. It should also be noted that those who we spoke to from non-fan owned clubs said that slower decision making and the ability to raise finance (and debt) against equity were the disadvantages of the supporter trust model.

Q5: Is Government intervention justified and, if so, what form should it take? 25. This Select Committee inquiry follows a number of previous government level inquiries into the governance of football: — In 1990 Lord Justice Taylor published his Final Report into the Hillsborough disaster in which he argued that the introduction of all-seater stadiums should not result in disproportionately increased ticket prices for supporters. No government action was taken to support this and by 1999 the average season ticket price had increased by 312% in a period where the cumulative RPI was 54.8%.54 — Following labour’s Charter for Football, which sought to unify football’s governance, between 1997 and 2000 the Football Task Force investigated how best to regulate the commercial aspects of football. The FTF Final Report55 was split between the football authorities on one side— promising voluntary codes of conduct to improve “customer relations”—and almost all other FTF members on the other. The majority recommended independent regulation of the football authorities’ governance performance, a “football ombudsman” and other sanctions to ensure reformed governance. The then government chose to side with the football authorities but promised that if governance had not significantly improved within two years it would act.56 No further action was taken despite the expression of ongoing concerns about the game’s governance. — In 2009 the All Party Parliamentary Group of MPs published English Football and its Governance, which recommended annual reports on governance performance from the PL and FL; annual FA reports on club governance performance; that debt and fitness of club business plans are considered part of Fit and Proper Person tests; and that the FA introduces club licensing for all clubs along the lines of UEFA’s system and that “a key element should be related to expenditure not exceeding revenue”.57 26. The point of highlighting these is to emphasise that although some minor improvements have been made, football has demonstrated itself to be largely incapable of reforming itself in terms of its governance and that government action to ensure the proper regulation of the national sport is therefore not only justifiable, it is very long overdue. 27. Although football authorities and others may argue that football should not be treated differently under the law to other sports (or indeed businesses), there is already ample precedent for government action including the Safety at Sports Grounds Act 1975, the Football Spectators Act 1989 and the Football (Offences) Act 1990. As James and Miettinen argued in their paper for the Social Value research: Despite claims to the contrary by both the government and the football authorities, Parliament can, and has on a number of occasions, passed football-specific Acts. The current lack of enthusiasm for legislation in this area is more a lack of political will than there being a constitutional barrier to action.58 54 Football Task Force (1999) Football: Commercial Issues—A submission by the Football Task Force to the Minister for Sport, London: DCMS: p31. 55 Football Task Force (1999) op cit. 56 Brown, A (2000) “Taken to Task: The Football Task Force, government and the regulation of the people’s game”, in Osborn, G and Greenfield, S (eds.) (2000) Law and Sport in Contemporary Society, London: Cass 57 All Party Parliamentary Football Group (2009) English Football and Its Governance: p9 58 James, M and Miettinen, S (2010) Social Value of Football: Working Paper 6: Are there any regulatory requirements for football clubs to report against social and environment impacts? cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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28. Having shown itself unable to reconcile the inherent conflicts of an essentially free market commercial approach to the governance of club football, the game is now in need of government action to ensure reform. This should be used to: — Regulate the regulators and ensure, with legislative backing, that all stakeholders and the public interests are met and that both debt and profiteering are restricted. — A re-introduction of rules (such as the FA Rule 34) to limit profit making from clubs. — Promote alternative models of club ownership that are inclusive, sustainable, democratic and participatory. — Introduce a regulatory regime for the proper reporting of social and community impacts of the actions of clubs and leagues as recommended in the Social Value of Football report. — Require football clubs to introduce company objects relating to their community obligations and for them to report against these objectives—especially where they are in receipt of public funds, or preferential treatment by public bodies. — Resolve the inherent financial instability in the game through root and branch reform. 29. Furthermore, the government should explore options in upcoming legislation to promote the benefits of community ownership. The Localism Bill currently passing through Parliament should be strengthened to ensure that: — Football supporters are able to require their local authorities to list clubs—including land, buildings and businesses—as “community assets”. — There is provision for a genuine right to buy—ie a first refusal—for fans when clubs are either being disposed of by existing owners or entering administration. — Provide an adequate moratorium on the transfer of the club to any other owner in order for communities to secure the necessary finance. 30. In addition, the government should: — Introduce measures in which fans and communities can more easily raise finance for the purchase of clubs or shareholder stakes within clubs—such as assistance in setting up community share schemes (as being developed by FC United of Manchester) and preferential regulation by the FSA. — Designate clubs owned by Community Benefit Societies in similar categories as charities to ensure business rate reductions. — Give preferential treatment of clubs owned by Community Benefit Societies by HMRC. — In insolvency cases, utilise HMRC recovery of deficit to encourage community purchase. — Utilise the Big Society Bank to encourage supporter and community ownership.

Q6: Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? 31. There are numerous examples of more equitable and sustainable models of regulation and of club ownership than those which dominate in English football. These are referred to in other submissions but include: — The German 50%+1 ownership rule ensuring member ownership of clubs.59 — The club licensing system implemented in Northern Ireland, which requires community development managers and reporting at all clubs. — Equitable revenue sharing amongst clubs in the North American Football League. — The new UEFA club licensing system to ensure clubs cannot spend what they do not earn, which should be extended to all clubs in England. January 2011

Written evidence submitted by the Isthmian Football League, known as the Ryman Football League Who Are We? The Isthmian Football League—founded 1905 for amateur players only: professionals were not allowed to play in the League until 1974 when The Football Association removed the amateur status. In this submission referred to as “the League”. In 1905 the League had six Clubs—in 2011 the League has 66 clubs. In 1973 the League was the first league in England with a major sponsorship—Rothmans of Pall Mall. 59 Further examples of alternative structures can be sourced in Hageman, A (2009) The Feasibility of a Supporters Direct Europe, Full Report, London: Supporters Direct cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Also in 1973 the League was the first in the country to adopt three points for a win and to adopt Goal Difference as opposed to Goal Average for deciding places in a division where clubs have equal points—both of which have become universally accepted. In 1989 the League was the first league outside the Football League to become a limited company. The League is positioned at levels 7 and 8 of the national structure—see Appendix 1. The League is positioned at Steps 3 and 4 of the National League System—see Appendix 2. Our clubs are allocated by The Football Association on a geographical basis and currently cover an area from Lowestoft in the East and across through Harlow, Harrow, round to Fleet in Hampshire, south to Bognor Regis and along the coast to Hastings and taking in the whole of Kent and Essex back up to Suffolk—see Appendix 3. Our highest placed Clubs are promoted to the Football Conference regional divisions (subject to compliance with ground requirements) and our lowest placed Clubs are relegated to the appropriate Senior Feeder League on a geographical basis and are replaced by clubs from those leagues. We are a limited company with nine directors of whom two are independent and seven are on the Boards or Management Committees of our member clubs. We also have the benefit of Lord Rosser as a Vice President of the League and he attends all Board Meetings. We have a full time Administrator. The present incumbent has been in the post for six years and has decided to retire. He will be succeeded in June by our first female League Secretary, Ms Kellie Discipline, who has an impressive CV in football administration. We also have a part-time administrator and pay honoraria to the Chairman and Company Secretary. We have over 3,500 players registered with the League of whom only 195 are contract players. Most of our Clubs do not have the financial resources to have players on contract and, with it, the commitment to continue to pay them as well as a replacement player if they suffer a long term injury. The downside of this is that a player not on a contract can be signed by another club without a transfer fee being paid. Many players from our Clubs move on to Clubs in the Premier League or the Football League. A recent prominent move was who was signed by Fulham from Maidstone in 2009 and has since been transferred for a significant sum to Manchester United. Our income in 2009 was £269,111 of which the principal contributions were £87,029 from sponsorship, £38,000 from an FA grant and £58,300 from Clubs by way of subscription. We spent £247,986 of which £73,148 was given by way of benefits to Clubs (eg paying for floodlight inspections, pitch maintenance, public liability insurance and the provision of free footballs) with £43,543 being paid by way of cash awards to Clubs and £46,219 on administrative salaries.

Questions to be Considered by the Committee Should football clubs in the UK be treated differently from other organisations? We say that football clubs are currently treated differently from other commercial organisations and we believe that they should continue to be so treated. Currently there is little adverse effect on a limited company outside football which suffers an insolvency event; however, within the football industry it is a very serious matter for a Club which can result in points being deducted and, in certain cases, relegation. Under present provisions, football creditors are protected and have to be paid in full if clubs want to retain the position they presently hold in the structure. We do not believe that this is correct and believe that all creditors should be treated the same whether they are former employees or local traders who have provided goods and services for the club. It is acknowledged that HMR&C lost its preferred creditor status when the Enterprise Act 2006 came into force and we believe that the preferred status of football creditors should now be removed. Our clubs are community clubs; in many cases they are a substantial focal point in the community. The vast majority of our clubs are non-profit making organisations; they are dependent on local volunteers for the administration of the club, for the staging of matches (stewards, programme sellers etc) and the running of sides below the first team. Incredibly our 66 member clubs provide 746 sides which include junior teams, women’s teams, veterans and disability sides. See Appendix 4. We are concerned there is not a consistent approach by local authorities to our clubs. Dartford FC were members of our league at the time when they received substantial local authority support and funding to enable them to re-establish themselves as a focal point in the community through the building of a new stadium. This assistance enabled the Club to progress from our Division 1 South to our Premier Division and Dartford FC are now playing in the Football Conference South. However, there are numerous other instances where local authorities will not give any support at all even to the extent of refusing to give business rate relief to clubs. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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The overwhelming majority of our clubs are not fully amateur and indeed could not survive at the levels we operate unless some payments were made to managers and players. The levels are such that a Premier Division side would pay on average wages in the region of £3,000 per week to its whole team and managers whereas a team in the regional divisions would pay, on average, less than a fifth of this. These figures are for the 40 weeks of the average football season rather than for all 52 weeks of the year. A number of clubs pay just expenses to players travelling to matches and a few clubs pay nothing at all and can truly be said to be amateur clubs. It can be seen therefore that it is right with the diverse nature of clubs that they be treated differently from other commercial organisations.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose? Of our current 66 clubs, 38 are limited companies and 28 are members clubs or other structures such as members clubs, community interest clubs and community amateur sports companies. Football Governance Rules are confusing; the overall body is The Football Association but every club in England must affiliate to its local county association and without that it cannot play football in this Country. Some clubs are full or associate members of the Football Association in addition to being members of their local county association. Membership of the Football Association is not seen to be relevant in this regard because the Governance Rules apply through the leagues irrespective of whether the individual clubs are full members of The Football Association. We believe that there should be clear and unambiguous lines of reporting and we do not comprehend, particularly with current technology why there needs to be more than one governing body and why a club should therefore have to pay more than one affiliation fee. This then leads on to the question as to whether the governing bodies are fit for purpose. County Football Associations are limited companies themselves but are, in effect, regional offices of The Football Association and we believe that the roles and responsibilities of those County Associations should come under the umbrella of The Football Association. In business parlance, and in terms of governance, the parent body would be the holding company and the County Associations would be wholly owned subsidiaries. This enables the question as to representation on Football Association Boards and Committees to be reviewed. We believe that there should be greater emphasis on leagues being represented with a number of independent appointees to give balance. Most clubs belong to several leagues (depending on the number of sides they run) as well as more than one Association and some clubs even affiliate to more than one county association. We believe that a club should be responsible to one overall governing body, namely The Football Association, and the league in which it plays. That way the governing body can set out the overall structure and the league, working in harness with the governing body can, if required, apply the Governance rules.

Is there too much debt in the professional game? In playing season 2009–10 we were unfortunate to have two clubs which suffered insolvency events. In the case of Folkestone Invicta FC they went into a Company Voluntary Arrangement and as result of that were deducted ten points. The club was still good enough to win enough points to qualify for the play offs in our regional division and by winning the play offs were promoted to our Premier Division; Harlow Town FC were in a similar situation and as a result of their CVA were deducted ten points and were placed in a relegation position as a result of this deduction. However, as a result of other clubs throughout the Country going into liquidation the club were reprieved from relegation and remain members of our regional division. In the current playing season we started with problems with Croydon Athletic FC which required very careful management and with great help from the League the club were able to continue in the Premier Division having gained promotion last season; the final example we can give is that this playing season we have Leyton FC who have suffered many financial problems as well as facing a Court case over the future of their ground and have been unable to pay monies due to the League. As a result they were expelled from the League, following a vote by the other 65 Clubs, at a general meeting held in February 2011. It could be said that one club in difficulty is one club too many; we certainly see far too many clubs in financial difficulties. We believe that there is too much debt in the game in general not just the full time professional game. We believe that what is needed are financial initiatives such as are currently being exercised by the Football League (in part) and the Football Conference. We believe that there are two ways of approaching this, one is to have a salary cap on Clubs and the other is to have restrictions on budgets. We tend to favour restrictions on budgets but this, in itself, creates a problem for a League such as ours because of the cost of the structure required to administer the enforcement of the requirements. In recent years the Football Regulatory Authority has been established and has a degree of autonomy and independence within the game and has recently shown that it can enforce financial regulations by the deduction of ten points from St Albans City FC. We believe that this is a positive but what we believe is that the cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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procedures must be transparent and must apply to all so that it is not a case of being “unlucky” to be caught out. It should apply across the whole game, at the higher levels as well as the lower levels. It does appear that there are different rules depending on whether a club is a limited company or not; for instance the Fit and Proper Persons Test only applies to directors in limited companies and as we have said earlier we have 28 clubs which are not limited companies and therefore there is no fit and proper persons test applied to those clubs. This, in our submission, is wrong and the fit and proper persons test should immediately be extended to all clubs down to Step 4.

What are the pros and cons of the supporter trust shareholding model We welcome the involvement of all community groups in our clubs which as we have already said are community clubs. We do not believe that any one such group should have either a power of veto or a majority vote over other interests on the Board or Committee. Where there is not a full compliance with the supporter trust shareholding model then the other community interests should be consultative since it would have a counter-productive effect on encouraging people to invest in clubs if they could be outvoted by those not investing their own monies.

Is government intervention justified and, if so, what form should it take? The Burns Report was a Government initiative and has not been fully implemented. We believe that the remainder of that report should be looked at and the parts which have not been applied should be further considered. In particular we support the introduction of independent non-executive directors. We believe that Government intervention should be limited to getting the structure right and then leaving the industry to run itself. In previous years Government funding was available for improvements in grounds but that has been withdrawn and the only funding now comes from the Premier League. Whilst the money is welcome, the fact that it is coming from the Premier league only strengthens the influence of that body to the exclusion of what we say should be the governing body, The Football Association. If Government wants to intervene then it should be prepared to go back to the time when it committed funds for ground improvements and for that money to be distributed through FA channels or FA approved channels.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports? It is difficult for us to give any considered response to this question as we only have experience of the existing Football Association model and can really only react to that. We believe from our level of the game that the problem is that we fall in between the Professional Game Board and the National Game Board because we are neither fulltime professionals nor basic grass roots football. As such we believe that there should be a much clearer and more specific place created for levels 5 to 8 or even levels 5 to 9 so that “grass roots” can truly be the grass roots levels of the game and we can then deal with matters which are truly applicable to our respective levels of the game. This league wishes to stress and emphasise to the Committee the point that there is a third level, that is not The Premier League nor The Football League nor “grass roots” football played in the parks and that any report on football and football governance should recognise and reflect that fact.

APPENDIX 1 THE NATIONAL STRUCTURE Level 1 The Premier Football League Level 2 The Football League Championship Level 3 The Football League League One Level 4 The Football League League Two Level 5 The Football Conference National Division Level 6 The Football Conference North & South Divisions Level 7 The Premier Divisions of the Isthmian, Northern Premier and Southern Football Leagues Level 8 The 6 Regional Divisions of the Isthmian, Northern Premier and Southern Football Leagues Level 9 The top divisions of the 14 feeder leagues cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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APPENDIX 2 THE NATIONAL LEAGURE SYSTEM Step 1 The Football Conference National Division Step 2 The Football Conference North & South Divisions Step 3 The Premier Divisions of the Isthmian, Northern Premier and Southern Football Leagues Step 4 The 6 Regional Divisions of the Isthmian, Northern Premier and Southern Football Leagues Step 5 The top divisions of the 14 feeder leagues Step 6 The second divisions of Step 5 leagues and other leagues—17 in total Step 7 42 divisions of various leagues

APPENDIX 3 MEMBER CLUBS OF THE ISTHMIAN FOOTBALL LEAGUE AUGUST 2010 Premier Division AFC Hornchurch Aveley Billericay Town Bury Town Carshalton Athletic Concord Rangers Cary Wanderers Croydon Athletic Folkestone Invicta Harrow Borough Hastings United Hendon Kingstonian Lowestoft Town

Division One North AFC Sudbury Brentwood Town Cheshunt East Thurrock United Enfield Town Grays Athletic Great Wakering Rovers Harlow Town Heybridge Swifts Ilford Leyton Maldon & Tiptree Needham Market Potters Bar Town Redbridge Romford Thamesmead Town Tilbury Waltham Abbey Waltham Forest Ware Wingate & Finchley

Division One South Bognor Regis Town Burgess Hill Town Chatham Town cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Chipstead Corinthian-Casuals Dulwich Hamlet Eastbourne Town Faversham Town Fleet Town Godalming Town Horsham YMCA Leatherhead Merstham Metropolitan police Ramsgate Sittingbourne Walton & Hersham Walton Casuals Town Whyteleafe

APPENDIX 4

THE BREAKDOWN OF 746 SIDES FROM 66 CLUBS Senior Youth Other Analysis of Club Teams— Mens Under Junior October 2010 Total 11 18/19 Football Womens Veterans Disability Totals 746 115 100 454 47 18 12

AFC Hornchurch 5 2 1 2 AFC Sudbury 18 3 14 1 Aveley 16 2 1 11 2 Billericay Town 7 2 1 2 2 Bognor Regis Town 10 1 8 1 Brentwood Town 4 2 1 1 Burgess Hill Town 3 1 1 1 Bury Town 23 1 3 14 1 1 3 Canvey Island 19 2 17 Carshalton Atheltic 16 2 2 10 2 Chatham Town 11 2 2 7 Cheshunt 13 3 1 9 Chipstead 15 3 1 11 Concord Rangers 6 1 1 3 1 Corinthian-Casuals 14 2 11 1 Cray Wanderers 13 2 1 10 Croydon Athletic 14 1 2 10 1 Dulwich Hamlet 4 1 2 1 East Thurrock United 17 1 1 13 2 Eastbourne Town 37 3 2 30 1 1 Enfield Town 19 2 6 11 Faversham Town 4 2 1 1 Fleet Town 3 2 1 Folkestone Invicta 13 2 1 9 1 Godalming Town 3 1 1 1 Grays Athletic 11 1 2 7 1 Great Wakering Rovers 5 2 3 Harlow Town 1 1 Harrow Borough 3 2 1 Hastings United 15 1 2 12 Hendon 4 1 2 1 Heybridge Swifts 4 2 2 Horsham 6 1 1 4 Horsham YMCA 2 1 1 Ilford 6 1 1 4 Kingstonian 24 1 2 14 6 1 Leatherhead 25 3 2 20 Leyton 7 1 1 4 1 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Senior Youth Other Analysis of Club Teams— Mens Under Junior October 2010 Total 11 18/19 Football Womens Veterans Disability Lowestoft Town 5 2 1 2 Maidstone United 31 3 2 15 4 1 6 Maldon Town 17 1 1 15 Margate 21 2 1 18 Merstham 20 5 1 12 2 Metropolitan Police 5 2 1 1 1 Needham Market 3 2 1 Potters Bar Town 7 2 1 1 1 1 1 Ramsgate 15 2 2 10 1 Redbridge 5 2 3 Romford 4 2 1 1 Sittingbourne 4 1 2 1 Sutton United 3 2 1 Thamesmead Town 11 2 1 6 1 1 0 Tilbury 7 1 2 4 Tonbridge Angels 13 2 2 9 Tooting & Mitcham 32 2 3 24 3 United Waltham Abbey 12 2 1 8 1 Waltham Forest 1 1 Walton & Hersham 4 2 1 1 Walton Casuals 17 1 15 1 Ware 4 1 2 1 Wealdstone 23 2 3 17 1 Whitstable Town 15 2 1 12 Whytehawk 24 2 3 18 1 Whyteleafe 12 1 1 9 1 Wingate & Finchley 9 1 3 5 Worthing 2 1 1

February 2011

Written evidence submitted by the Inclusion and Diversity Caucus Football continues to remain as the nation’s favourite sport, played and watched by millions of people each week across the whole of the country. However disappointingly, the game in many ways is not reflective of Britain’s diverse communities, particularly at management and governance levels. This submission sets out a number of concerns that have been put forward around this issue by the Inclusion and Diversity Caucus for consideration by the DCMS Select Committee. These cover four key areas of governance including representation, recruitment, leadership and lack of development opportunities.

1. Developing Policies and Procedures to Help Improve Under-Representation within The FA Structures Currently football is unrepresentative of modern British society across all aspects of the game. These figures are highlighted by the stark facts that there are currently no British born Asian players that play in the Premier League, there is only one black manager (April 2011—Chris Powell at Charlton Athletic) only 3% of registered referees nationally are female and there are no openly gay players, managers or match officials in professional football. These figures are also replicated across the structures of The FA, whereby the FA Council is overwhelmingly white and male, as is The FA board and the senior management team. There is also extremely limited representation from people with a disability or from the LGBT (Lesbian, gay, b-sexual and trans-gender) community. Other organisations and national football associations have taken a lead in addressing these issues and taken action to redress the imbalance. This includes Norway FA who introduced a system that meant that at least one woman had to be represented on their executive. Karen Espelund, who was appointed to this position, has since progressed to become the General Secretary of the Norwegian FA. UEFA have also recently made the decision to co-opt a female onto their executive committee. Positive action programmes introduced in other sports have led to an increase in the number of black and minority ethnic candidates being considered for top coaching and management roles. The NFL in America, for cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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example introduced the “Rooney Rule” to ensure that black coaches were at least interviewed for senior coaching and management jobs. Recent statistics illustrate that the overall percentage of African American coaches at NFL teams has jumped to 22%, up from 6% that were in place prior to the introduction of the Rooney Rule. No such policies or positive action practices have ever been considered by the English football authorities. This low level of representation is also replicated at the local level throughout the County FA structure at Chief Executive and council level. Despite the fact that policies and pathways exist to allow co-option of under- represented communities onto local FA council boards and committees, currently only one or two counties have adopted this practice (out of a total of 43 County FAs). The FA should be encouraged to develop and implement a national strategy that looks at addressing issues of under-representation containing real measurable targets and a comprehensive monitoring and evaluation system should be put in place.

2. Ensuring an Open and Transparent Recruitment Process To help increase representation within The FA it is important that open and transparent recruitment processes are established and followed by all departments for all positions. Unfortunately, there is a lack of confidence around these processes, particularly from the black and Asian community. This situation is exacerbated by the recent appointment at The FA of a new position of Head of Elite Development. The post was created and filled without any formal recruitment process undertaken, including any internal or external advertising, shortlisting or interview process. This selection was endorsed by The FA board although they were initially unaware that the post had been created and filled in this manner. The FA should make a formal and public commitment that all jobs are openly and fairly advertised, with proper transparent recruitment processes followed and maintained.

3. Providing Strong Leadership for the Game It is important that The FA is seen to provide strong corporate ownership and leadership for football. Issues around equality and leadership are seen to be given a high priority by The FA, however, in reality this is not driven from the top of the organisation which essentially means that it is treated as a low priority. Whilst such a scenario is replicated across other public institutions and corporate organisations, it is clearly not accepted as good practice to achieve equality outcomes. The FA has to be an exemplary model of good practice in order to influence others in the game, such as the professional leagues, to follow-suit in order to meet the acceptable standard of policy and practice to achieve equality outcomes that are beneficial for the game of football. This position is reinforced by The FA who has not carried out any profiling or monitoring of their own workforce within the last five years. The FA should commit to carrying out annual monitoring of their staff by all areas of diversity and by grade and should encourage strong equality measures to be implemented by both the Premier League and Football League and all 92 professional clubs.

4. Lack of Development Opportunities from Under-Represented Communities The lack of Asian professional footballers and the low levels of black managers in the professional game continue to remain a cause for concern. Currently little it being done by the football authorities to address these issues. This is despite the fact that in a discussion paper published by The FA (Developing world-class coaches and players—A Discussion Document for Coaching 2008–2012) there was a commitment by The FA to establish a support programme to enable coaches from currently under-represented groups to develop and progress. There was also a commitment to support coaches to achieve higher levels of qualification through specific mentoring programmes. There has also been a consistent failure within The FA to look at developing player pathways to identify and develop talent from within the Asian community. The FA should be encouraged to consult with under-represented communities to set up specific programmes to address issues such as these. April 2011 cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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Written evidence submitted by Bates Wells & Braithwaite London LLP 1. BWB is a commercial law firm servicing a wide range of commercial, statutory, charity and social enterprises (and their owners and managers) and is recognised as a leader in the field of charities and social enterprises. BWB acts for a number of sports governing bodies and sports charities and social enterprises, advising on regulatory, governance and commercial matters. It also acts for, and has set up, a number of football clubs. 2. BWB has been at the forefront of developing new structures for charities and social enterprises. We were heavily involved in the inception of the community amateur sports club and the community interest company (CIC). 3. We limit our submission to provide the Select Committee with our observations on governance models that are appropriate for football clubs, in particular on the advantages of the CIC as a legal structure for football clubs. 4. As has been identified in a number of the submissions already made to the Committee the current legal architecture of most football clubs is not fit for purpose. A company limited by shares, which is the structure most football clubs have adopted, is designed to maximise profits to the shareholders. However, the vast majority of football clubs are run to maximise achievement on the field and to promote football in the local community. We believe that there is a viable alternative already in existence—the CIC. 5. CICs are a relatively new legal form created for non-charitable social enterprises. They provide clubs with a legal form which makes clear and protects their public interest aims but does not require them to give up their business to a voluntary board as charitable status would. 6. Fundamentally CICs are normal companies and can be formed either as companies limited by guarantee (CLG) or companies limited by shares (CLS). However, CICs have some unique and important additional features to safeguard their social mission. Each CIC must: — Pass the “community interest” test by demonstrating to the CIC Regulator that it is established to achieve a benefit for the community. It is generally fairly straightforward to show that a football club benefits the local community, although clubs with players paid considerably more than the market rate may have difficulties in registering as a CIC. — Submit an annual report to the registrar of companies containing, in particular, a fair and accurate description of the manner in which the CIC’s activities during the financial year have benefited the community. For football clubs this requirement provides ongoing transparency of the club’s affairs to its members and the general public. — Have a constitution that conforms to the statutory requirements; in particular it must have an “asset lock” that means the wealth of the company can never be distributed to its members/shareholders, subject to limited rights to pay dividends. 7. The key feature of the CIC is that it has an asset lock. This means that all assets must be permanently retained within the CIC and used for the community purpose or, if they are sold, open market value must be obtained for them and the proceeds used for the community purpose. In addition, if the CIC is wound up, its assets must be transferred to another, similarly asset-locked body. This makes the CIC an attractive model for a club and its supporters as it reduces the opportunity for private gains and provides some protection for the club’s assets. 8. Individuals and corporate entities can invest in a CIC, but there are certain rules that regulate this. In particular: — A CIC can be financed by loans or bonds. However, there are limits on the amount of interest that can be paid if the CIC agrees to pay interest at a rate linked to the CIC’s financial performance. — A CIC that is a CLS or CLG with a share capital can issue shares, but the law requires that only the capital paid for the shares can be repaid pound for pound with no uplift; all capital gains will belong to the CIC and not to shareholders or members. In addition, payments of dividends are limited to a rate of 20% of the paid up ratio of the share. There is also a ceiling on the amount of a CIC’s profit that can be distributed by way of dividends, currently 35%. Investors may be put off by the limited return available from a CIC, although as already identified above investors in football clubs are generally not expecting to receive a large return. 9. However, conversion of a club to CIC can be difficult to achieve as it requires agreement from the members—at least 75% of the members must agree to the transition by passing a special resolution. The asset lock can be a discouragement to potential shareholders. Existing shareholders may not wish to relinquish the potential value of their shares by converting the company to a CIC and thereby reducing the value of their shares to their face value. It is, therefore, a more realistic option when setting up a new club or for taking over the activities of an existing club that is in administration. 10. Whilst we believe that CICs are an appropriate legal form for clubs at all levels of the game, there are other structures which may be more appropriate, particularly for smaller clubs. For example, clubs could: cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Set up a new CIC to hold some of the club’s assets, such as the stadium whilst retaining the existing structure for organising the activities of the club. This less radical option provides greater protection for the assets but leaves the existing club (and shareholder) structure intact. — Set up a structure whereby the community activities of the club are run through a separate charitable company, perhaps even with the charity owning the club’s stadium. Tax reliefs would be available to the charity such as relief from corporation tax, rates relief and gift aid. Under this model the existing CLS becomes the subsidiary of the charity and the shareholders gift their shares to the charity. Obviously, this requires shareholders being brought on board to agree to surrender their shares. Such a structure would also need agreements in place between the different entities governing their working relationship to ensure the charity was not subsidising the club’s activities.

Conclusion 11. The CIC provides an interesting model for protecting the assets of a club for the benefit of the community. The governance options are flexible as for a normal company and can allow anything from community ownership to ownership by a philanthropic individual. The key is that the assets of the club can be protected by the asset lock. April 2011

Written evidence submitted by Chris Vasper, ex Chair, TEAM Mansfield Supporters Trust 1. Until August 2009 I was the chairman of Stags Fans United (formerly Team Mansfield) which is the Supporters Trust of Mansfield Town FC. TEAM Mansfield was formed in 1999. I had held the position of Chairman for about three years though I had been actively involved with the trust as its spokesperson for about 3 years prior to that. I was approached by the Trust in 2004 to raise the profile of the Trust locally and nationally, specifically addressing the difficulties the club was having with its owner Keith Haslam. Mansfield Town has in the view of its supporters been let down by the footballing authorities, both the FA and the Football League, and those in authority who should have stepped in when it was clear there were real misgivings about the conduct of Mr Haslam in the running of Mansfield Town. 2. Its this well documented evidence of poor governance the FA and FL should had acted upon and because they didn’t address clear breaches of company law by Mr Haslam it allowed him to eventually remove the stadium from the clubs ownership and we are now fighting for its very existence. It is important to document the road to the situation we find ourselves in. 3. On 4 June 1993, Abacus sold their majority shareholding in MTFC Ltd to Wakeco (64) Ltd for £1. Wakeco (64) Ltd was a new “off the shelf” company owned by Keith Haslam and his wife, Meena. Initially, Meena Haslam owned 99 out of the 100 issued shares in Wakeco (64) Ltd. Keith Haslam is the son of former Luton Town and Sheffield United manager, Harry Haslam. It was reported that he had business involvements with property and sports marketing in Sheffield. 4. The terms of the deal reached between Abacus and Keith Haslam were as follows: — Abacus sold their majority shareholding in MTFC Ltd to Keith Haslam for £1. — Field Mill was transferred to Abacus to pay off the debt of £1.63 million owed by MTFC Ltd to Abacus. — Abacus paid off the money owed by MTFC Ltd to Barclays Bank which amounted to £499,199.09 plus interest and charges of £10,806.58. It was agreed that MTFC Ltd would repay this money to Abacus from any monies received by MTFC Ltd in respect of . (MTFC Ltd eventually received around £575,000 for Colin Calderwood so most of this money would have been used to repay the debt owed to Abacus). — Abacus agreed to lend MTFC Ltd £32,000 to enable MTFC Ltd to repay their creditors as at 4th June 1993. This loan was to be repaid when MTFC Ltd sold any players in the future. MTFC Ltd agreed to use 50% of any transfer monies received to repay this debt to Abacus. — Abacus agreed to give a ten year lease to MTFC Ltd to use Field Mill with the first two years being rent free. The annual rent would then be £50,000 per annum subject to review in 1998. — Abacus gave MTFC Ltd an option to buy back Field Mill for £1.63 million provided that this option was exercised in the first five years of the lease. Therefore, Keith Haslam started off with a clean slate when it came to debts and liabilities, although the football club no longer owned its main asset, Field Mill. 5. In November 1993, a dispute developed between Abacus and Keith Haslam regarding the money received by MTFC Ltd for Colin Calderwood. However, this matter appeared to be resolved in February 1994 when a shareholders’ meeting was held to retrospectively approve the sale of MTFC Ltd to Keith Haslam. Furthermore, this meeting also approved the adoption of new articles of association for MTFC Ltd. One of the main changes made to the articles was that full time working directors of the football club could be paid a salary provided cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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that the terms of their appointment were notified to and approved by The Football Association and The Football League 6. Mr Haslam was the subject of an Individual Voluntary Arrangement in November 1995 (Sheffield Reference No: VA28021-Court Reference Number No 220 of 1995) 7. In September 1996, Keith Haslam had to fend off angry questions from shareholders at the football club’s first annual general meeting for three years. No annual general meetings had been held in 1994 and 1995 as required by company law for which Keith Haslam said the club had “no excuses”. He promised such a delay would not happen again. However, no annual general meeting was held the following year. 8. The accounts for the years ended 30 June 1994 and 30 June 1995 showed that Mansfield Town had made a net profit of £167,166 in 1994 and £196,546 in 1995. Net transfer fees receivable amounted to £282,612 in 1994 and £178,500 in 1995. 9. Keith Haslam confirmed that his wife and himself were .the only directors of the company and that they received no remuneration from the football club or its holding company, Wakeco (64) Limited. However, a letter published in the CHAD on 11 September 1986 alleged that Keith Haslam was being paid “a substantial salary”, and when the accounts were eventually published for the year ended 30 June 1996 in August 1998, they revealed that Keith Haslam had received a salary of £30,000 from the football club during this period. 10. However, Keith Haslam still had one strong supporter in the form of Alan Meale, Labour MP for Mansfield who said in March 1997 “Keith Haslam has done more for the club in the last few years than anyone.” Mr Meale would rise to Mr Haslams defence on numerous occasions throughout the following years in spite of all the evidence that there was clear breaches by Mr Haslam in his duties as a director. 11. The financial position of the club went downhill during the 1997–98 season and fans were shocked in March 1998 when they learnt that the club had been forced to borrow money from the PFA to pay the players wages with the result that a transfer embargo was placed on the club until this loan had been repaid. Keith Haslam stated that “[Transfer] Embargoes are a common thing. Basically, if you have to borrow money from the PFA, the Football League obviously stops you spending any until it is paid back. Supporters are well aware that things are quite tight here financially. The manager has been well aware of the embargo and our financial position for a couple of months now. But it’s not a major difficulty and hopefully it will be lifted within a month”. 12. In May 1998, a proposal was put forward by Douglas Craig, the then Chairman of York City, demanding the resignation of Keith Haslam from the Football’s League board of directors for “obvious reasons”. 13. In July 1998, Keith Haslam appeared in Sheffield Crown Court to answer charges that he had obtained a cheque for £29,900 from Cornhill Insurance by deception. The case involved Keith Haslam’s BMW 328I Cabriolet car which had been stolen from outside his house in April 1997. The car belonged to the football club but was used by Keith Haslam and his wife. The car was found by the police at Taggs garage in Sutton- in-Ashfield, Nottinghamshire and the prosecution alleged that Keith Haslam had asked Stags coach driver, Andrew Moran, to store the car as a favour. The defence countered that Andrew Moran had stolen the car and intended to sell it on or break it up for parts. The case eventually ended by Judge Peter Hunt directing the jury to find Keith Haslam not guilty because of inconsistencies in the evidence given by prosecution witnesses, and because it was unfair that a verdict in the court should be based in any degree on speculation. 14. Yet again Mr Meale leapt to Haslams defence, writing to then Director of Public Prosecutions, Barbara Mills, requesting they drop all charges against Haslam. Meale failed to disclose two material facts to the Police that he was actually a close friend of Haslams and that he would be providing the main alibi in the case. The lead investigating officer at the time DC Malcolm Moss Ward wrote to the Speaker to make a complaint about Meales actions. (Source : Sunday Times Insight Article) 15. Also during 1998 during the clubs AGM (again Haslam failed to hold the 1997 AGM) Haslam refused to answer any questions about the clubs finances. Another major concern was that the accounts revealed that Keith Haslam had borrowed money from the company. They showed that he owed £45,998 in June 1996 and this had increased to £77,484 by June 1997. The maximum loan allowed by a company to a director under company law is £5,000. 16. The financial problems continued to mount up. Winding up proceedings had been issued against the club earlier in the season by the Mayer Brown Partnership, a firm of highway traffic consultants based in Woking, in respect of an unpaid debt of around £10–12,000, and now it was reported that the Inland Revenue had also issued winding up proceedings in respect of unpaid tax. 17. In July 1999 a group of fans decided to form a company to try and raise money to help buy out Keith Haslam. This group called themselves “Team Mansfield”. They held a public meeting at Mansfield Civic Centre on Monday 2nd August which was attended by 600 fans. They initially set up a company called Team Mansfield Limited. They then later joined the growing Supporters Trust movement to set up an industrial and provident society called “Team Mansfield Supporters Society Limited”. 18. The accounts for the year ended 30 June 1998 were eventually sent out late to shareholders in October 1999. They showed that Mansfield Town had made a loss of £208,704 for the year ended June 1998, and that cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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its liabilities exceeded its assets by £232,805. The total amount owed to creditors was £776,174. Transfer fees receivable were stated to be £155,063 in 1997 and £129,875 in 1998. 19. The accounts also revealed that the amount Keith Haslam had borrowed from the football club had increased from £74,747 to £108,077 on top of his salary of £37,986. 20. The accounts also confirmed that Mansfield Town had exercised its option to buy back Field Mill from Abacus for £1.63 million, and that the funds for this had been provided by a property development company, Peveril Securities Limited, a subsidiary company of Bowmer & Kirkland Limited. The accounts stated that Field Mill had subsequently been revalued at £345,000 and this value had been included in the accounts. However, it was pointed out that there was a potential tax liability of £379,938 plus interest if the Inland Revenue did not accept the revaluation. It’s important to note that Peveril Securities provided the funds as part of its ambitions to develop land adjacent to Field Mill so that an out of town development of stores could be built. 21. Keith Haslam responded to criticism from shareholders at the AGM in October 1999 by promising to pay the money he owed to the club. He stated “I will have paid back all I owe the club over the next three months. I felt at the time it was better to borrow the money I needed off the club than taking it out in salary as it would then have not been repayable. I’ve only taken a salary the last three years and it is a salary I can very easily justify. I am definitely the lowest paid Chief Executive in the Football League. I admit it doesn’t look too healthy having a director’s loan account”. 22. The accounts also showed that Barclays Bank demanded immediate repayment of a £207,723 overdraft. Haslam said “The bank got very nervy. I don’t know if it was with Mansfield Town or with football in general. We were asked to clear our overdraft which obviously caused us problems”. 23. MTFC Ltd had been perpetually behind with accounts and annual general meetings since Keith Haslam had taken over. There had been no AGM in 1994, 1995 and 1997. Mr Haslam promised to improve the situation. 24. In July 2000, it was announced that Keith Haslam had agreed to TEAM Mansfield purchasing a small shareholding in Mansfield Town. A deal was being brokered by Trevor Watkins, the chairman of AFC Bournemouth and would be discussed at a public meeting in September. The deal with Haslam was finalised a meeting with supporters in November 2000. The agreement has been held up as a template for other Trusts to follow. 25. Key to the agreement was a pledge by Haslam to repay all the outstanding loans owed to the club at the earliest opportunity. To ensure no further loans were taken out by him and to appoint a supporter director onto the board at the club. It’s important to note that in the 8 years since Haslam took over the club, it did not have a properly constituted board and in fact Haslam was in reality its sole director . Team Mansfield purchased £33,000 Community shares in the club (a 3.3% stake). 26. On a positive note. The new stadium built on monies given to the club by the Football Stadium Improvement fund and Peveril securities opened. It was a 3 sided stadium but it was new and Mansfield also announced ambitious plans for an exciting £7 million Centre of Excellence between Beck Lane and Mansfield Lane at Skegby, Sutton-in-Ashfield, Notts. (February 2001). 27. However the joy was short-lived as it was revealed on 22 August 2001 that Ellenby Construction Ltd had issued legal proceedings against the football club for £309,000. Keith Haslam said that the matter would not get as far as the High Court and that the club would be settling the matter. He said the payment wrangle was because the club was not happy with Ellenby’s delays in completing the new stadium. He said that monies “were quite rightly withheld from Ellenby under the contract. Work was delayed for 11 weeks which affected us at times when we should have opened the stands”. 28. However, an independent adjudicator appointed to resolve the matter found in favour of Ellenby Construction in July. Ellenby director, Paul Brett said “The club just don’t want to pay us. We’ve been through a very drawn out adjudication process with the club which deals with the delays and disruption and we have a legal ruling in our favour”. 29. The accounts for the years ended 30 June 2000 and 2001 were presented at the AGM in August 2002 They showed a retained profit for the year ended June 2000 of £231,743 and £525,270 for the year ended June 2001. Mansfield MP Alan Meale told the meeting: “I think we should thank the director, staff, accountants and associate directors. This club has come through a traumatic period of its history, when it very nearly closed down, and has turned it round. Now we have a new stadium, a successful team that has moved up to a higher division, and closer links with the local community. It has been a sterling effort by all those involved.” 30. Shareholders were not impressed with this statement by Mr Meale as the accounts showed Mr Haslams loans had risen to over £350,000. Mr Haslam said that under his new agreement with fans’ organisation TEAM Mansfield: “Within 12 months of signing this agreement he will make a significant reduction to the value of his loan from Mansfield Town, and that no further loans for personal use will be taken from the football club.” 31. There was concern over a further £487,305 loaned to Stags Ltd, the club’s parent company which is controlled by Mr Haslam who owns 74 per cent of its issued share capital. 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for the development of the Centre of Excellence and training facilities in Sutton. “The academy development is a very exciting project and to me is as important as getting promotion,” said Mr Haslam. The Academy has never been built. 32. In December 2002 at a fans forum Keith Haslam was reminded that as a director of MTFC Ltd he had a duty to act in good faith in the best interests of the company/football club. He was then asked how he could justify using the football club’s money to make an interest free loan of £487,305 to his company Stags Ltd to enable it to buy land at Skegby that would be used for the proposed training ground and youth academy. Keith Haslam could not answer this question. His only answer was that he “had just decided to do it this way”. 33. In early 2003, Mansfield were suspended for three years from receiving grants from the Football Stadia Improvement Fund. Concerns had been raise about grant applications made by the club for construction work and the estimates supplied for the work to be completed. The FSIF requested original documentation of the estimates but Mr Haslam failed to supply them. 34. In December 2004 was suspended as the clubs manager for alleged bullying. This was after an initial “independent” investigation by Mr Meale who returned to Mansfield from London within hours so that he might assist the club. Curle would eventually go on, after a lengthy legal process to win substantial damages from the club after the judge at the hearing(Judge Fields) branded the disciplinary process at the club a “sham” and that the club asked Mr Meale to take part to give the proceedings a “cloak of authenticity”. 35. It was revealed at the club’s annual general meeting in September 2005 that MTFC Ltd had made a profit of £402,193 in the year ending June 2004. In the previous year ending June 2003 the club had made a loss of over £65,000. But 2003/04 proved a much more lucrative season for the Stags, helped greatly by a trip to the Play-Off final at Cardiff’s . 36. Chairman Keith Haslam also told the meeting that he was planning a “restructuring” of the club in the next three months by which time he intended to pay back all outstanding loans he had borrowed from the club. The chairman wrote off personal loans to himself of £239,297 the previous year which sparked heavy criticism from supporters. The June 2003 accounts revealed he owed another £345,845 in personal loans which are interest free and repayable on demand. Also, £582,433 was due from Stags Limited, the football club’s controlling company of which Mr Haslam owns 74 per cent of the issued share capital. Mr Haslam told the meeting: “I am in discussions with my advisors and I hope within the next two to three months I will be in a position to repay the loans in full. Then I will be looking to call an EGM to discuss the restructuring of the football club and will have proposals to put before the members at that time for their approval. My aim is to clear the loans and put the football club on a sound footing at that time.” 37. In December 2005 David Conn of the Guardian wrote the following article about the problems at the club entitled “The Man who owes Mansfield over a million”: http://www.guardian.co.uk/football/2005/dec/07/mansfield 38. This article led Keith Haslam to go onto our local radio station and in a 30 minute interview he admitted he had broken the law and apologised to supporters. Yet again he promised to pay off the loans “shortly.” Still the FA failed to act. 39. This galvanised the fans further and there began an active campaign to bring the plight of the club to the wider public. This proved highly successful and it culminated in a march through Mansfield by over 750 supporters. It was at this point concerns were raised about The Stags Community Trust. 40. David Conn wrote a second article highlighting issues about Haslams governance and The Stags Community Trust entitled “Mansfield face new questions of trust” in September 2006: http://www.guardian.co.uk/football/2006/sep/20/newsstory.mansfield 41. In 2007–08, Keith Haslams final year as the clubs sole director and owner and after three years successive years of £250,000 loses Keith Haslam gifted to the SCT £77,000 from the football club. His reasoning when challenged by myself at an the AGM was that the SCT would have gone bankrupt had the gift not been made. The SCT is dormant and has applied for the second time to be Struck Off.. There was an investigation into the SCT by the Charities Commission which highlighted issues regarding transparency and the need for trustees not connected with the club, but took no further action. 42. Keith Haslam stood down as the clubs Chairman in December 2007 and appointed Stephen Booth as Chairman with the task of selling the club. Keith Haslam paid himself a severance package of over £30,000. As there was no board of directors at the club there was no-one in authority to challenge this payment except TEAM Mansfield. The protracted sale saw many potential suitors, including an Australian consortium, a consortium led by James Derry and most alarming of all a potential bid by Mr John Batchelor who admitted to asset stripping his companies (he mentioned this many times on local radio) He had already led York City to near oblivion and he said once he had gained control of Mansfield Town he would change the name of the club to Harchester after a Sky One drama about a fictional football club. We notified the FA of Batchelors involvement and plans but could not or would not step in. 43. In 2008 Keith Haslam sold Mansfield Town to a consortium of local businessmen. The details of the deal were: cobber Pack: U PL: CWE1 [O] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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— Haslam transfers the ownership of the stadium to Stags Limited using a dividend of £2.3 million. — To enable this to happen the stadium is re-valued at £1.9m from its previous valuation of £395,000. — Haslams holding company Stags Limited retained the ownership of the land purchased in Skegby for the purpose of building an academy. The £500,000 of Mansfield Towns money used to purchase this land is in effect written off. The land remains untouched and the planning application has lapsed. — The rental on the ground, payable to Haslam is £90,000 increasing by 10% per annum (rental was approx £110,000 before the agreement was terminated). — The rent was to increase to over £200,000 should Mansfield Town be promoted into the Football League. — When Haslam ultimately sold the club on 9 December 2008, the day the £2.4m dividend was declared, the accounts say Stags Limited’s “overdrawn loan account” stood at £757,494. Haslam paid it off with £436,663 from the dividend the club paid to him, and a further £300,000 in cash. Haslam personally owed £78,709 to the club, which Stags Limited repaid. The accounts record £51,643 paid to Stags Limited during 2008–09, for “rental of the ground and car parks”. (source :Guardian: 17 November 2010). 44. The club, now in the Conference having been relegated the previous season , had Keith Haslam as its landlord having separated the club from its ground of 97 years by the use of a dividend which is now being challenged in the courts. A paragraph in the clubs accounts for 2009 states: “A dividend was voted on 9 December 2008 of £2,442,488. In the directors’ view, the dividend was illegal, as at the time the company had insufficient net assets. The directors are considering legal action to pursue this amount”. 45. In December 2010 Keith Haslam locked Mansfield Town out of Field Mill only letting the club back in after 16 days. Keith Haslam then reneged on the verbal agreement with the owner John Radford, the club having lodged £95,000 in rent with Haslams solicitors only to be paid on a signed agreement. However, Keith Haslam had inserted a demand into the agreement that the club will not pursue him in the courts for the dividend, illegal loans, gifts to the SCT, and severance pay when Haslam stepped down as Chairman. The club quite rightly have refused. David Conn wrote a further article about the dividend in November 2010 entitled: “Mansfield Town, Keith Haslam and that controversial dividend”: http://www.guardian.co.uk/sport/david-conn-inside-sport-blog/2010/nov/17/mansfield-town-dividend- keith-haslam 46. That’s as brief as I can make the story of Mansfield Town since 1993 when Haslam purchased the club for the now infamous £1. There is much more I can go into, personalities. legal cases etc. 47. My point here is that Team Mansfield was alerting the authorities to the problems at Mansfield Town for far too many years and no one at the FA or the Football League was brave enough to really take the club to task so Haslam , being the only director at the club could continue to do as he wished. 48. The alarm bells have been ringing for far too long and yet the FA have persistently failed to act. I personally spoke to the Compliance Unit at the FA almost every week in the height of the troubles. We alerted them to illegal loans, missed AGM’s, failure to supply accounts. Still the alarm bells failed to ring. Grants given to the club were misused, improperly spent and protestations of innocence from Mr Haslam were met with nothing more than a slap on the wrist. 49. I distinctly remember a call to the Compliance Unit by myself to the problems and the response I got was “we have an open file on Mansfield Town and action will be taken” 3 months later Keith Haslam loaned himself another £105,000. 50. What happened to TEAM Mansfield? We encouraged the other supporters groups to come under one umbrella, the Stags Fans United Supporters Trust. We purchased some more shares from the owners and we got our Supporter Director, Colin Dobell, who as it would turn out, was pivotal in advising the owners to sell in 2010 when the club was heading into administration. When the club was sold to John Radford in late 2010 we were able to purchase the final tranche of shares to take our final holding up to 10%. Darren Shaw the SFU secretary and a qualified lawyer became the Trusts director on the board at Mansfield Town and now is a key advisor in the clubs legal battle with Mr Haslam. 52. Without TEAM Mansfield taking the lead and standing up to the club’s owner in the face of threats and intimidation by individuals who should have known better. Mr Haslam would have continued to abuse his position. To this day none of the clubs supporters know why Mr Haslam found it necessary to lend himself so many monies. Though explanations have been requested none have ever been forthcoming. To our knowledge the FA never once questioned Mr Haslam either. We would like to know why? cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 11:51] Job: 011147 Unit: PG01

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53. Your committee is looking at governance of football clubs and the role of supporters. If there is ever and example of a club being led to almost ruination because of the lack of scrutiny by the authorities its Mansfield Town. Supporters have made a real difference at this club and the strength of a clubs supporters trust has prevailed thus far, though I fear the Football Conference are about to do what the FA did and stand by as we fight our battle for Field Mill alone …. Is the FA fit for purpose? , many supporters from the lower leagues would say not. The FA really do need to change the way it listens to supporters and it needs to, in my view: — Ensure directors and owners are not allowed to loan themselves more than is allowed in law, and enforce it. — Ensure every football club has a properly constituted board at allow at least one supporter director on that board. — The fit and proper persons test should do what it says; every director should be subject to the test, at the moment it’s not working. Further every owner/director need to submit to regular checks. It’s all well and good having a test when they take over the club, but who’s checking on them afterwards? — Directors are paid a fair income for a fair days work, Mr Haslam clearly neglected his duties to the club and I would go so far as to say he has profiteered from it. He failed as a custodian and regulation needs to be brought forward to ensure Directors are not just held accountable to the Supporters but to the FA. — In the 15 years Mr Haslam ran Mansfield Town the accounts were produced on time in only seven of those years. AGMs were not held in six to seven of those years. The FA need to ensure sanctions are place on owners and directors who fail to abide with corporate law. — The FA need a proper body to investigate concerns raised by supporters and directors. I’m not talking about a compliance unit, but a body with powers to fully investigate any director or owner who breaches not only FA rules but Corporate law on a regular basis. — The FA must ensure that a football clubs main asset, its stadium can never be removed from the ownership of the club. 54. Mansfield Town is now in effect being punished by the FA and the Conference due to mistakes made by those very organisations, because of failures to challenge and question an owner who had shown a long track record of poor corporate duty towards the club. Time constraints are being placed on the club to obtain a 10 year lease otherwise the club will not be allowed to take part in the Play-Offs come May. On the 17 February 2011 the club started its legal battle with Mr Haslam in the courts, winning the right to remain at Field Mill until the matter is resolved. 55. Should you require any further information or documentation relating to the evidence I have submitted I would be delighted to provide it, as it is available from various sources including; The Sunday Times, Mansfield 103.2 Radio archive, Guardian Newspaper, BBC Radio Nottingham. CHAD Newspaper, Notts Evening Post, The Haslam Years on the TEAM Mansfield website www.teammansfield.co.uk, Chris Vaspe (ex Chairman TEAM Mansfield)

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