Lord Markham:

Moved by Lord Markham

57: Clause 56, page 45, line 32, leave out subsection (2) and insert—“(2) In this Part, revenue received by a specified competition organiser is “relevant revenue” if—(a) it is revenue received as a result of the sale or acquisition of rights to exploit the broadcasting of football matches included in a competition organised by the specified competition organiser, and(b) it is not revenue that the specified competition organiser distributes to a club by virtue of a team operated by the club being relegated from a competition organised by the specified competition organiser.”Member’s explanatory statementThis Amendment, and the other amendments to clause 62 in the name of Lord Parkinson of Whitley Bay, prohibit parachute payments from being included in the distributions of revenue resolution procedure.

My Lords, Amendment 57 is in my name and that of my noble friend Lord Parkinson, and I will speak also to Amendment 70. In Committee, we talked at some length about the importance of parachute payments, with my noble friend Lady Brady really bringing home how important they are to clubs. For promoted clubs that know that there is a big threat of being relegated for the next season, they give them the confidence to invest in new players and build the strength of the club. They are able to make that financial commitment only because they have the security of parachute payments behind them. Likewise, any clubs in the bottom half of the table, when we get to this stage of the year, are looking over their shoulders: were it not for parachute payments they would not be looking to make investments in the January window but thinking more about selling rather than recruiting players.

As mentioned on previous occasions, the fundamental reason that the Premier League is the most popular and richest league in the world is because every game is competitive. If we look at other leagues, whether it be in Italy, Spain, Germany or France, we tend to find two or three good teams and a lot of other teams which are, if it is not too unkind to say so, also-rans. A lot of games, as a result of that, are just not competitive in the same way, whereas we know that in the Premier League, every single game is competitive and capable of a surprise. That is because the bottom clubs invest in players to make it competitive, knowing that they have that safety net there. It is that that ultimately brings in the big bucks, in terms of the rights bids that fund the whole game: broadcasters around the world want to know that they will have good games week in, week out, and that is what parachute payments allow.

It is probably put best by Paul Barber, the well-respected Brighton & Hove CEO and deputy chairman: the relative comfort that parachute payments provide to Premier League clubs, especially those newly promoted, means that owners are more willing to commit funds, knowing that if the worst happens and relegation occurs, clubs have support to adjust to a very different reality.

I am aware that the Bill does not require the regulator to consider parachute payments. I know the Minister has made this point before, and we understand it, but the fact does not negate the risks. That is not to say that the current system of parachute payments is not without faults—no one is saying it is perfect—but it is true that every major league club has a similar parachute-type mechanism in some shape or form. That is why we feel the need to ensure that parachute payments are not part of the regulator’s remit, as in the original Bill put forward by the Conservative Government. It is very important.

On the tiny chance that the Minister does not accept Amendment 57, I have also tabled Amendment 70 as a compromise. Amendment 70 states that if the regulator does include parachute payments within the scope of revenue distribution, a final proposal cannot abolish them entirely. The intent is to give a greater degree of certainty that parachute payments will not be disregarded in their entirety. It acknowledges the regulator’s right to consider them if it believes it is necessary, while also ensuring some level of security.

Competition organisers would be able to propose a reduction in parachute payments if they so wish, but could not do away with them altogether. This is fundamentally important to clubs, which often invest with three-, four- or five-year business plans. That is of course exactly what we would want reputable, well-run clubs to do. We want them to invest on the back of a certain set of circumstances and economic conditions and not expect some major parts of that—namely, the parachute payments—to be potentially withdrawn mid-way through.

I believe that this is in keeping with the Government’s stated intentions and I know the Minister does not envisage parachute payments to be abolished. If that is the intent, why not give us greater guarantee of the fact by putting it in the Bill? Although I would prefer parachute payments not to be considered at all, I am under no illusions as to the parliamentary arithmetic. Therefore, in the likely event that they are to be included in the Bill, we have tabled Amendment 70 as a sensible and measured compromise that does not deviate from the Government’s stated policy.

On the small chance that the Minister does not accept my Amendment 57, I hope that she will find herself able to accept the compromise that we have put forward in Amendment 70. I strongly urge her to look favourably on such an amendment in the spirit of consensus, which I know noble Lords in this House respect. If she is able to accept Amendment 70 or give an undertaking for Third Reading, I will not divide the House on Amendment 57 but, unfortunately, if she does not accept what we think is a very sensible compromise, we will have no option but to divide. I beg to move.

My Lords, it might be convenient to give our opinion on this matter, which is very straightforward. Parachute payments are a system that is in place for today and not set in stone. This is an ongoing process, and the situation will change with the Bill. There is the suggestion that parachute payments are a great drop down and land with a heavy thump. Hopefully, we will raise the ground up a bit or have some cushioning in place. Having one system built in for ever goes against the purpose of the Bill.

My Lords, I refer the House to my interests, as declared in the register. I support my noble friend’s amendments, which would remove parachute payments from the backstop.

I hope it will assist the House if I explain why I am so concerned about the inclusion of parachute payments within the definition of relevant revenue. It is not because I believe that the parachute system is perfect—I really do not. It is not because I believe that the precise level or design of parachutes should be fixed forever or protected from scrutiny—I do not. Nor is it because Premier League clubs are insensitive to the aspirations of clubs throughout the pyramid—we are not. We all share the same common goal: a thriving, dynamic, sustainable football ecosystem from top to bottom. It is because the backstop mechanism as it has been designed is so fundamentally unsuited to addressing the issues of parachutes.

The previous Government’s backstop was badly flawed, enabling a binary choice between two proposals, one of which must be selected in its entirety. That was highly unusual and posed significant risks. However, that mechanism could have just about been tolerable because, by isolating solidarity or voluntary payments as the sole issue for resolution, the backstop at least delivered a binary choice between two numbers. That is a judgment the regulator could reasonably make. I remind noble Lords that the levels of solidarity are explicitly linked to parachute payments in the existing distribution agreement between the Premier League and the EFL. One can be used to smooth the potential rough edges of the other, which is what the previous Bill correctly recognised.

However, the expansion of the Bill’s scope to include parachute payments transforms the backstop entirely. It is no longer about determining quantum, but now forces a judgment on the wholesale redesign of football’s financial architecture. It has become a choice, not between two numbers but two fundamentally different systems and it is substantially more legally and financially risky as a result.

The crucial thing to appreciate is the connection between the now systemic nature of the backstop and the position of the EFL. The EFL’s chair has called parachute payments

“an evil that needs to be eradicated”

—not reformed or adjusted, but eradicated. When we combine that system, a binary process, with the open agenda of one of the two parties, we create an absolutely intolerable risk. The backstop offers no capacity for careful calibration or fine tuning, which I would be wholly supportive of.

There is no part of this Bill that allows the regulator to make a reasoned, balanced judgment. It creates a binary, “winner takes all” approach, with no room for nuance but plenty of room for poison pills and final damage. It enables a proposal from the EFL that would level down the bottom half of the Premier League, rather than genuinely elevate the entire football pyramid. Surely, we want a mechanism that delivers both a strong Premier League and a strong EFL, rather than a zero-sum game.

The Government have made their political choice on the backstop, but I believe that they did so without the full understanding of its implications for the delicate ecosystem that sustains football at all levels. If we are to avoid serious, legal and economic consequences for football over the next few years, the Government would be well advised to now address the serious problem they have created. If they are not prepared to revisit the decision on parachutes, my amendments on how the IFR should make its final decision offer a constructive path forward that would benefit the entire pyramid. The proposal from the noble Lord, Lord Birt, offers an alternative. There can be no doubt that change is needed.

We all want the same thing—financial sustainability throughout English football—but the starting point must surely be a shared recognition that we cannot achieve this by dismantling the very mechanisms that have made English football, from the Premier League to the National League and beyond, the world’s most successful ecosystem.

My Lords, I start by reminding the House that the Bill will not abolish parachute payments or change the architecture in the way that has just been suggested. When the noble Lord, Lord Markham, talked about the need to have confidence, so that clubs can invest in new players and have confidence in the strong club structure and financial position, he mentioned only the Premier League. He did not refer at all to the rest of the football pyramid. The Bill needs to make sure that we have sustainability, not just of those clubs in the Premier League, but of the whole English football pyramid. It is important to bear that in mind because, while parachute payments may have a place—as most people have acknowledged, certainly at the moment—there is no doubt that the level of parachute payments is such that it distorts competition in the Championship. I asked the noble Baroness, Lady Brady, when we were in Committee, whether she would acknowledge that, and she declined to comment.

If we look at the actual figures involved, there is no doubt that the current arrangements distort competition. At the moment, clubs that are relegated receive, in year one, £48.9 million. Other clubs receive £5.3 million. The redistribution that is often talked about from the Premier League to the EFL does not help all the clubs in the EFL equally. It distorts competition, which is something we should bear in mind when we are talking about parachute payments. Although they may help a few, they do not help the sustainability of the whole pyramid, as they could—and should—if we had a fairer system of distribution.

I support the noble Baroness, Lady Taylor of Bolton, especially after Saturday’s result between Bolton and Stockport County—thereby hangs a tale.

I was following the thread from the noble Lord, Lord Markham, really well until he mentioned that every game is competitive. Ipswich Town supporters would not agree with that this season. The evidence suggests that is not the case. If we look at leagues across Europe, they have jeopardy. There are last games of the season where relegation and promotion come to the edge. It is not the be-all and end-all.

It is right that you need a fairer distribution than this endless three up, two down, three down, and that money needs to go further down the pyramid to encourage further clubs to be able to compete. It looks as if the three that came up this season are going to go down. If that continues to happen, it will have a detrimental effect on the Premier League—it must have. It gets more and more difficult every year to sustain. The Brightons and the Bournemouths have burst through, as have other teams, and they are managed really well. But there are unintended consequences if we do not look at these things in totality and just isolate them. If we say, “Leave the parachute payments alone—everything is all right with it”, that is not making progress, and we need to make progress. That is why we need to look at this within the bigger picture. It is not in the Bill but it needs looking at.

My Lords, I will add just a couple of comments to those from my noble friend Lady Taylor. The issue for me is the distortion of competition. In each of the last seven seasons, two of the three clubs promoted from the Championship have been in receipt of parachute payments. This year it could easily be three: Burnley, Sheffield United and Leeds.

Its meaning in the longer term is that the Premier League becomes a closed shop. Clearly, parachute payments are having an impact, because this process has been going on for a long time and it has got worse. I am not saying we should get rid of parachute payments —far from it—and neither does the legislation. Nobody on our Benches wants to see that. But, clearly, the “state of the game” report will have things to say about the impact of parachute payments.

Any sort of fair and reasonable assessment of where parachute payments have been made in the last decade and more would suggest that competition is being badly distorted. The noble Lord, Lord Goddard, is right: they are affecting the shape of our game, and that means that the Brightons and Bournemouths of this world will find it harder to break through the glass ceiling that is there at the moment. For that reason, we should continue to include parachute payments within the remit of the independent football regulator.

My Lords, let me make one final point to the noble Lord, Lord Bassam—

Noble Lords:

The noble Baroness cannot speak again on Report.

I thank the noble Lords, Lord Parkinson of Whitley Bay and Lord Markham, for tabling these amendments, and the noble Lord, Lord Markham, for speaking to them.

As discussed in Committee, the Government fully acknowledge that parachute payments are a significant part of football’s financial landscape. As the noble Lord, Lord Addington, made clear, this is part of the current landscape. However, it is precisely because of this importance that the regulator must be able to consider them as relevant revenue for the purposes of the backstop, especially if they are proven to be destabilising. How else could the regulator possibly make a fully informed and effective decision without a complete picture of football’s finances?

Amendments 57, 75, 76 and 84 all attempt to remove parachute payments from consideration under the backstop. They also remove the power for the Secretary of State to amend the definition of relevant revenue, preventing them ever being included in the definition of relevant revenue in the future.

In our view, these amendments are fundamentally short-sighted. I hear the concerns from the noble Baroness, Lady Brady, but we heard a very different alternative view from my noble friends Lady Taylor of Bolton and Lord Bassam of Brighton and the noble Lord, Lord Goddard of Stockport. Clearly, it is disputed within your Lordships’ House. If the effects of parachute payments are risking the sustainability of the wider pyramid, the regulator must have a lever to address the issue.

These amendments make the definition of relevant revenue less flexible, less able to address the changing landscape of football’s finances and, overall, less effective. The current power in the Bill allowing the Secretary of State to amend the definition of relevant revenue is balanced, requiring substantial consultation with the relevant leagues. Removing this instead leaves us with a static definition that is likely to become outdated over time. For the reasons I have set out, I ask the noble Lords not to press these amendments.

I thank the Minister and all noble Lords for their comments. It has become clear in this heavily truncated debate, but taking on the major points that we spoke about in Committee, that all noble Lords care passionately about what we are trying to do here, and that between us we are all trying to find what we think will be the best solution for football overall.

My concern and the concern of my noble friends and many others is that if you damage the competitiveness of a lot of those Premier League games, it will result in less money being paid in media rights to the Premier League, which will mean less money to all the clubs in the pyramid. That is the real danger that we are talking about here.

To directly address the points made by the noble Lord, Lord Bassam, around the closed-shop nature of the Premier League, only five clubs have been in the Premier League for the whole of its existence, so that is not a closed shop, and 55% of all the clubs have been in the Premier League at some point.

Although the Minister’s comments were not unexpected, I believe that the previous version of the Bill that was presented by the then Conservative Government was better than the one before us today, and one of the major reasons for that is the changes around parachute payments.

I regret that, although the Minister understands the importance of all the amendments, she is not minded to accept our Amendment 70 as a genuine attempt to reach compromise and consensus on this issue. That means that the regulator can still, if it considers it correct, abolish those parachute payments in their entirety, which I truly believe would have a significant impact on the game and damage all 92 clubs. As a result, I am afraid that I am not satisfied by Minister’s response and, as I indicated earlier, I would like to test the opinion of the House on Amendment 57.

Ayes 183, Noes 234.

Amendment 57 disagreed.

Clause 57: Applications for resolution process to be triggered