[Mr Dai Havard in the Chair] — Football Governance

Part of the debate – in Westminster Hall at 2:30 pm on 9 February 2012.

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Photo of John Whittingdale John Whittingdale Chair, Culture, Media and Sport Committee, Chair, Privacy and Injunctions (Joint Committee), Vice-Chair, Conservative 1922 Committee, Chair, Privacy and Injunctions (Joint Committee) 2:30, 9 February 2012

The hon. Gentleman—he is really a friend on the Committee—encapsulates the report in a couple of sentences very well. I am almost tempted to say that he has done my job for me and finished my speech. Yes, there is no question but that we felt that at the heart of the reforms that were necessary was the game’s governance structure: ultimately, the FA. I will go on to talk about that in more detail. I did not intend to talk at great length about the management of the England football team, although that is obviously a matter of great interest and debate today. I heard the Minister’s remarks during Culture, Media and Sport questions a few hours ago, and I entirely agreed with him. I am sure that the matter will crop up again during the debate.

Before I move to the report’s main recommendations, I want to pay tribute to three people. The first two were our expert advisers: Christine Oughton and Rick Parry, who provided enormously helpful experience and wise advice to the Committee. We relied a lot on their input throughout our inquiry.

The third person to whom I should pay tribute, particularly in a debate on football governance, is our late colleague on the Committee, Alan Keen. [Hon. Members: “Hear, hear.”] Alan was the senior member of the Committee. He was a member of it before I became Chairman. Football was his passion. He chaired the all-party group on football. He was very—I am tempted to say keen—eager that we should embark on this inquiry. It was a great sadness to us that, because of his illness, he was not able to play as great a part in the inquiry as he would have liked. He is certainly greatly missed. It is only right in a debate on football that we pay tribute to him.

Some people asked why the Committee was looking at football at all, because it is a huge success in many respects. The Premier League is probably the most successful in the world. It has an average attendance of 350,000 people each weekend and about 92% occupancy. The second league—the Football League—gets average attendances of 375,000. Some £2 billion of revenue comes into the Premier League. There is no question but that the top English clubs are watched not just throughout this country, but in almost every country in the world. It is hard to go into a bar in any country and not see a screen in the corner showing the premier league. To that extent, it is hugely successful. There were those who said, “In that case, why are you bothering to spend this time looking at it? Why don’t you go off and look at other things?” But we found that there was widespread concern about the underlying state of the game. That was felt right across football and among followers of football.

Despite the huge revenues that come in, very few clubs trade profitably. The main reason for that is the extraordinary amount of money paid out on players’ salaries. The consequence is that debt has become an enormous problem throughout the game. Debt kept coming up as one of the principal issues causing concern. More than half of Football League clubs have gone into administration at some stage since 1992, and all operate on very narrow margins. The net debt of the Premier League clubs is £2.6 billion. Some people would say that that in itself may not be a problem. Indeed, there will be clubs that operate with quite significant debt, but as long as they can service that debt and trade, it is not necessarily something that need be addressed immediately. However, there is no question but that the debt is a major issue. We were told by the chairman of the Football League, for instance, that it was the issue that kept him awake at night.

There is also concern about ownership, which is not wholly dissociated from the question of debt. That, too, was something that we considered. As Paul Farrelly suggested, we decided that if we were to address the problem, the most important thing that needed to be tackled was governance. Therefore, we wanted to establish, right from the start—this may seem self-evident, but it was not necessarily self-evident—that the FA is the ruling body of football. The FA therefore needs to be reformed if we are to get this right.

Some years ago, Lord Burns produced an extremely good report, which made a number of recommendations for reform. When we heard from him, some of his recommendations had been accepted. They included the incorporation of the FA chairman and chief executive on to the FA board, but they were still waiting to bring on the two independent non-executive directors. Progress, I believe, has been made since then.

Terry Burns told us that, if anything, he felt that he had been too timid and that he would have liked to have gone further in involving non-executive directors. Indeed, we heard from one former chief executive of the FA that he wanted an entirely independent, non-executive

FA board. We felt that that was not wholly realistic. We were also clear that, as in most corporate structures, the board needed to be relatively streamlined to be effective.

After some debate, we decided to recommend that the right size for the FA board was 10, and that it should include the chairman and chief executive of the FA, the two non-executives and two more of the FA executive directors—in particular, the director of football development. Alongside them, we decided that there should be two representatives of the professional game—presumably one from the Premier League and one from the Football League—and two representatives of the national game. Although we understood the reasons why others, such as supporters, players and managers, wanted representations, we felt that that could make the board unwieldy. Therefore, we felt that we had come up with the right composition.

At the same time, we also felt that there needed to be reform of the FA council, which is an extraordinary and enormous body. It dates back many years to include representatives from Oxford and Cambridge, the three separate services and the public schools, but very few representatives of players and people who actually watch football. We therefore felt that that was something that needed to be addressed. We were also slightly concerned that the meetings started at 11 o’clock and finished at lunchtime and that some of the members of the FA council seemed to have been there for 50 years or more. We felt that there was a need to address the composition of the council, the tenure of its membership and the form of its meetings. We felt very strongly that the council should be a parliament and not an executive decision-making body.

Once those governance reforms are in place, we will be able to move forward to tackle some of the underlying difficulties affecting the game. I have talked about debt, so the next is financial management. We welcomed the introduction of UEFA’s new financial fair play rules, which will affect those clubs that have ambitions to play in European matches. We felt that the principles underlying the financial fair play rules were absolutely right; they commanded a lot of support and should be applied throughout football.

One aspect of the financial management of clubs that caused considerable concern to the Committee was the football creditors’ rule. I have absolutely no doubt that my hon. Friend Damian Collins may talk about that a little more, because he particularly pursued that issue during our discussions. Although we could see the reasons why that rule was in place, we felt that it was unfair on creditors, as they were often small firms in local communities that had supported the local team. If that team gets into difficulty and goes into administration, they have to go to the back of the queue after all the football creditors before having their debts paid. We felt that that was unfair, and I am sure that my hon. Friend will say more about that.

One aspect that I have taken a long-standing interest in and that still creates significant potential difficulties is the ruling of the European Court on broadcasting rights and territorial sales, the full implications of which we are still waiting to see. It could have a very damaging effect and it is of concern not just to certain broadcasters but to a large number of people involved in football.

As for how we enforce the financial fair play rules and the other necessary changes, we were impressed by what we saw in Germany. Germany has a licensing model and we saw the way in which it was used to ensure that the clubs do not trade beyond their means for long periods. We saw how they were required to follow certain rules specified by the Bundesliga. We decided that if we were to achieve our changes, we needed a national licensing scheme. The best body to administer that is clearly the FA. Therefore, the other main thrust of our recommendations was that we should move to a licensing scheme under the FA, which should address issues such as the financial management of the game, the sale of stadiums, investment in youth development and all the other areas where, understandably, concerns have been raised. It could also address ownership.

Foreign ownership in the game is not necessarily a bad thing. After we saw what Sheikh Mansour had done in Manchester City, we could understand why the fans had great banners up saying, “Long live Sheikh Mansour.” However, there are other who are less committed to the development of clubs. We also felt that the fit and proper person test, which is necessary, had not always been as effective as it might have been. Indeed, we debated long and hard about what someone had to do to fail the fit and proper person test in English football.