I beg to move amendment 76, in clause 56, page 45, line 39, after “organisers” insert

“or by a regulated club”.

With this it will be convenient to discuss the following:

Amendment 77, in clause 56, page 46, line 4, after “organiser” insert

“or directly received by a regulated club”.

Amendment 78, in clause 56, page 46, line 17, after “organiser” insert “or a regulated club”.

Amendment 79, in clause 56, page 46, line 24, after “organisers” insert

“or by any club participating in a competition organised by one of those organisers”.

Amendment 80, in clause 57, page 47, line 9, after “organisers” insert

“or by a regulated club”.

Amendment 81, in clause 57, page 47, line 19, leave out from “revenue” to “in” in line 21 and insert

“received by one specified competition organiser or regulated club in or in respect of that season compared to the relevant revenue received by that specified competition organiser or regulated club”.

Amendment 82, in clause 57, page 47, line 29, after “organisers” insert

“, or by any regulated club participating in a competition organised by one of those organisers,”.

Clubs in the English football pyramid currently barter as a collective for funding from broadcasters, but it is not hard to imagine a future in which Liverpool, Manchester City, Arsenal, Chelsea—the hon. Member for Spelthorne has now gone so I can say that—or other big clubs decide that they are going to barter alone. That has happened in other European countries. In fact, Spain had to legislate to stop Barcelona and Real Madrid cashing in on their massive marketable machine that massively distorted the Spanish game.

These amendments are fairly simple. They build in a future failsafe to stop the threat of that happening. If it does happen, the revenue gained by those clubs will be taken into account in the redistribution of funds in the game. It seems like a logical failsafe to introduce to the Bill, which we hope will be accepted.

I thank the hon. Member for his amendments. We understand the intent behind them but believe that the drafting of the Bill sufficiently captures the current primary sources of revenue in the game. We will discuss clause 56 more fully during the clause stand part debate, but to summarise briefly, among other things, it defines which revenue streams are in scope of the backstop process. Revenue in scope is called “relevant revenue” and is limited in the Bill to revenue received by a league for broadcast rights to league matches.

Broadcast revenue is undisputedly the main source of revenue in English football, but we acknowledge that that may not always be the case. Football’s financial landscape is dynamic and its economic model may not remain static. That is why the Bill already allows for the definition of “relevant revenue” to be amended if necessary. The Secretary of State can amend the definition by making regulations, but only after consultation with the leagues, the regulator and the FA. That flexibility future-proofs the definition of “relevant revenue” against potential changes in the structure of the industry while ensuring that the definition remains firmly rooted in the current reality.

We expect that, throughout the distributions process, the leagues will effectively represent the interests of their constituent clubs. However, the backstop process, including the final proposal stage, is ultimately about resolving distributions between the leagues. It is about how money earned by the leagues flows from one league to another, not between individual clubs. It is therefore right that, given how finances currently flow, it is revenue received by the leagues as a whole, not individual clubs, that should be considered. I am therefore unable to accept the amendments.

We recognise the numbers—although we Liberal Democrats now outnumber the official Opposition—so we will not press this to a vote. However, it is worth considering that, in future, we might end up in a situation where some of our bigger clubs start to try to negotiate on their own for their broadcast revenue. The Minister did not reassure me that that could not happen. As I understand it, we do not have legislation that would stop that. There is nothing in the game to stop that apart from Arsenal, Manchester United, Chelsea and Manchester City deciding to play together nicely.

Although we are not reassured, there is no point in forcing this to a vote. But we hope that the comments may be taken forward and taken into account by the regulator in future, and perhaps we will have this discussion again as and when those big clubs decide that they are going to kick up a stink and try to ruin the rest of football for everyone else. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 124, in clause 56, page 46, line 3, 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.”

Clause 56 introduces the framework for the resolution process, which is a formal mechanism through which the Government’s new regulator may intervene to help to resolve disputes between football authorities, competitions and clubs in certain prescribed areas. The clause is important because it sets the boundaries of when and how the Government’s new regulator may be invited, or, in some cases, compelled to step into the room on issues that until now have been managed internally within the football pyramid.

We understand the intention behind this process. It reflects years of unresolved tensions in the game between different tiers of the pyramid, between governing bodies, and, most notably, between the Premier League and the EFL. Clause 56 and the following clauses in part 6 provide the bones of a system for dispute resolution, in the hope of reaching consensus where negotiation has failed. In principle, that has merit. However, we believe that the clause as drafted risks crossing a line—not into oversight, but into interventionism. It risks turning the regulator from a referee into a participant, and that risk becomes very real when we consider what types of decisions might fall within that process.

That is why I have tabled amendment 124, which would exclude parachute payments to the regulated clubs from the scope of the resolution process, as was the case in the Bill that the Minister supported during the previous Parliament. Clause 56 is not procedural, but foundational. It defines who can apply to trigger the resolution process, namely certain governing bodies and competition organisers, and what is meant by the term “relevant revenue”. In subsection (2), this 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, or…from any other source specified, or of a description specified, in regulations made by the Secretary of State.”

In essence, the provisions allow disputes over financial redistribution to be brought before the Government’s new regulator, which may then facilitate a resolution or, in some cases, take further steps to impose one. The specific issue we have with the clause, which was introduced by the Government, relates to the parachute payments of financial support offered by the Premier League to clubs that are relegated to the EFL to help them adjust to the significant drop in broadcasting and commercial income. This is obviously an important point, given the wage bills and so on when clubs go down, but it is never far from being controversial. Some see the payments as being necessary to ensure financial continuity and competition in the Premier League on the way up, while others argue that they distort competition in the Championship on the way down, solidifying clubs as so-called yo-yo clubs that go up and down regularly.

Bringing parachute payments within the scope of the regulator’s resolution process, as clause 56 does, takes a significant step towards Government involvement in revenue redistribution among private members of the competition. That is not regulation; it is reallocation. In our view, it is an inappropriate function for a state-backed regulator.

The amendment does not oppose the resolution process in principle; it supports it, and in fact returns the Bill to what the Minister previously supported. Can she tell us what has changed, and why she felt the need to make the change when she previously had no issue with this part of the Bill? My amendment seeks to make sure that the Government’s regulator does not intervene in areas that are already managed by mutual agreement between competitions.

Parachute payments are, by their nature, a Premier League solution to what is often a Premier League problem. They are not imposed on the EFL or funded by it, and although their knock-on effects may be debated—I have my own views on that—they should not be subject to arbitration by a third party.

If we allow the Government’s regulator to adjudicate disputes over parachute payments, we risk setting a precedent that any form of commercial agreement, no matter how internal, can be referred for outside resolution. We believe that that would be a mistake, and would likely undermine the willingness of top-flight clubs to continue sharing revenue in any form at all. If the Minister starts this process off on the wrong foot with clubs and this is not done in the right way, we fear that resentment would set in from day one. With the top flight already questioning—

Will the shadow Minister give way?

Yes, I will.

Does the shadow Minister agree that parachute payments are a very important financial factor in the EFL? From my experience as a Derby County fan—many things go back to this—I know that we ended up in administration because we chased and tried to compete with clubs that had parachute payments, and ultimately could not stay within the financial fair play regime. How does the shadow Minister see that being tackled? It is a fundamental flaw and it is driving clubs much closer to administration, and to the wall, in many cases.

I recognise the hon. Gentleman’s experience with Derby, and I understand his point. That is why I said there are a number of opinions, and this a very controversial subject. I have engaged with EFL clubs as part of this process, and we get a variety of opinions, even before we get to asking the Premier League clubs for their opinion, so I absolutely understand his point. This amendment is about trying to exclude parachute payments from this part of the Bill, rather than trying to take a decision on what parachute payment levels should be in any shape or form. That is the distinction we seek to make with the amendment, and I commend it to the Committee.

I thank the shadow Minister for the amendment, as it gives me the opportunity to speak to one of the key changes made in the new version of the Bill that this Government introduced. The amendment would take parachute payments out of the scope of the backstop, as they were in the previous Government’s Bill. The regulator needs to be able to consider all relevant revenue sources as part of the backstop process to get an accurate picture of any proposal’s impact on financial sustainability. That is why it was right to amend the definition of “relevant revenue” to ensure parachute payments could be considered as part of the backstop if necessary.

The shadow Minister pointed out that I supported the Bill when in Opposition, but I draw his attention to an amendment I put down then to this effect. We have had a clear and consistent view on this issue throughout the passage of both Bills through Parliament. We believe that allowing the regulator to make more informed decisions, rather than restricting what it can consider, will help to achieve the best possible outcome for the future of the game.

It is important to say that parachute payments will be reviewed only as part of the process if a number of steps are met. First, the backstop must be triggered. That can only happen in limited circumstances, most likely that there are five years since an agreement was reached between parties. We will discuss those tests in more detail when we debate clause 59. The regulator must consider that it cannot deliver its objectives unless it triggers the backstop. It must then also have clear evidence that parachute payments are causing sustainability issues to the wider pyramid—for example, they are identified in the state of the game report—and it will now have the ability to address that. If those steps are met, the regulator must have the ability to act. There was clearly a serious potential gap in the previous version of the legislation, which has now been rectified.

The other effect of the amendment is to remove the ability of the Secretary of State to change the definition of “relevant revenue” by making regulations. Football is a fast-paced industry and the definition of “relevant revenue” might need to change as the industry changes in future, as we have discussed. If broadcast revenue ceases to be the primary source of revenue stream in the game, the definition will need to be amended to ensure that the backstop process remains a viable regulatory intervention.

There are already significant safeguards in place to ensure that this power is not used incorrectly. Consultation with the regulator, the FA and specified competition organisers is required before the power can be utilised, and any regulations will be scrutinised by Parliament under the affirmative procedure. On that basis, I do not accept the amendment, and I hope the shadow Minister will withdraw it.

This amendment would drive a coach and horses through the whole part of the Bill that deals with the proper distribution of football revenues. The shadow Minister is saying that it is quite reasonable that 80% of the money that the Premier League gives to other clubs should go to the handful of clubs who get parachute payments. It completely destroys competition in the Championship, and means that the clubs coming down often end up with multiples of the solidarity payments that the clubs who do not get parachute payments received. It is against the whole purpose and spirit of the legislation and the clause.

I know the previous Government would not listen to the idea of parachute payments being included; I thank my hon. Friend the Minister for listening to the concerns that have been raised by the majority of clubs, particularly in the EFL, and I hope that she resists any attempt to undermine the stand she has taken.

Question put, That the amendment be made.

The Committee divided: Ayes 2, Noes 10.

Question accordingly negatived.

I beg to move amendment 27, in clause 56, page 46, line 27, leave out

“means an order under section 62(1) or (3)” and insert

“has the meaning given by section (Distribution orders)(6)”.

This amendment is consequential on the insertion of NC4.

The amendment is consequential on Government new clause 4, which we will debate later. Although it depends on that later change, the amendment would change clause 56, which is why we are discussing it now. We will also discuss clause 56 in more detail later, but one of the things it does is set out key definitions of key terms used throughout the backstop provisions. One of those defined terms is “distribution order”, which is the order made by the regulator at the end of the backstop process. It is designed to resolve the questions for resolution if the leagues have not managed to do so during mediation. Currently, the Bill’s definition of “distribution order” refers to clause 62, but we propose to remove clause 62 and replace it with new clause 4. New clause 4 completely changes the final stage of the backstop process. I met the shadow Minister and the Liberal Democrat spokesperson, the hon. Member for Cheltenham, to discuss this ahead of the Bill Committee. It moves the backstop away from a binary, winner-takes-all model, and allows the regulator discretion to design a solution to distribution issues.

We will have a chance to debate that fully when we debate clause 62, so I will withhold some of my comments until we get to that point. This simple amendment just updates the definition of “distribution order”, so that it appropriately refers to new clause 4 instead of clause 62. It is vital that we make these sorts of consequential changes, to ensure that the legislation remains coherent. Therefore I hope that Members will support this amendment.

As the Minister said, we will come on to debate these issues later, but again, I just want to place it on the record that she has been really listening to concerns that have been raised about the pendulum nature of the previous backstop. This is a much better process, which we will come on to discuss in more detail. Thanks to the Minister, we will discuss it further, but it is a much better framework that we will now be putting in place for the regulator to decide on any disputes or failures to agree between the leagues.

Amendment 27 agreed to.

I beg to move amendment 28, in clause 56, page 46, line 42, leave out subsection (7).

This amendment removes the definition of “the question or questions for resolution” which is now superfluous.

With this it will be convenient to discuss Government amendments 29 to 51.

I begin by acknowledging the comments from my hon. Friend the Member for Sheffield South East. I appreciate him putting that on the record. Of course, we will have a fuller debate on the broader change later, so as I said, I will reserve my wider comments till we get to that point.

The backstop aims to ensure that where the industry cannot resolve the issue, revenue is distributed between the leagues in a sustainable way that furthers the regulator’s objectives. As I will set out in more detail when we debate clauses 57 and 58, it allows the leagues to apply to the regulator to intervene and help them to resolve specific issues that are in dispute between them. The issues that need resolving are referred to in the Bill as the “questions for resolution”. We will further discuss the process for triggering the backstop when we come on to debate clauses 57 to 59.

Put briefly, the triggering process requires a league applying to the regulator, showing that certain conditions listed in clause 57 are met, and putting forward a set of proposed “questions for resolution”. The other relevant league has a chance to respond to that proposal. The regulator will then consider the application and the response, and will decide whether to trigger the process. If it decides to trigger, it also decides exactly which questions must be taken forward and resolved through the backstop process. Therefore, the questions for resolution are set out at the very beginning and carry through, determining the scope of the whole process. They are the questions that the leagues discuss in mediation, as we will see when we debate clause 60, and they limit the scope of any regulator distribution order—something that we will discuss further when we come on to debate Government new clauses 3 and 4—to issues of financial sustainability.

Setting the questions for resolution is therefore a very important step that demands a clear statutory process and a rigorous approach by the regulator. That is even more important in the light of the proposed changes that Government new clauses 3 and 4 will make. Those new clauses propose a new model for the backstop—a staged regulator determination. They move away from the binary, winner-takes-all, final-offer model and increase the regulator’s discretion to devise its own solution for distributions. Because of that increase in discretion for the regulator, it is important that the scope of the distributions process is well defined from the outset, so that all parties are clear about what the regulator will and will not rule on if the leagues ultimately cannot agree to an industry solution themselves.

These amendments therefore strengthen and clarify the process for—[Interruption.]

You’ve lost the room!

I have indeed—clearly.

These amendments therefore strengthen and clarify the process for setting the questions for resolution. They highlight the importance of a league proposing specific questions for resolution when it applies to the regulator. They emphasise that if the regulator agrees to trigger the backstop, it will not take a sweeping approach and try to rule on every possible aspect of distributions. It must set out specific questions that it will resolve, and its powers are then restricted to resolving those questions.

These amendments make it clear that questions must meet certain tests in order to be resolved through the backstop. Those tests are twofold. First, the regulator must consider that leaving the questions unresolved presents an apparent threat to the regulator’s objectives. Then they must consider that the questions could not be resolved within a reasonable time by the regulator exercising any of its other functions.

The amendments clarify that the regulator need not take forward all the questions proposed and that the regulator can modify the proposed questions. They will also require the regulator to take into account representations from the other league that accompany the application. That will give the regulator the flexibility to pick out which questions it is appropriate and within its remit to address, without forcing it to either accept every element of an application or reject the whole application outright.

The amendments also set out procedural requirements. They require the regulator to consult the FA before setting the questions for resolution, ensuring that the national governing body has a chance to raise any views about the scope of the backstop process. They will also ensure that the regulator transparently sets out what questions it has chosen and how it made that decision. The questions for resolution will then be taken forward into the mediation phase. That will ensure that all parties understand the specific aims of the mediation stage.

The Minister is setting out how important it is to get the distribution arrangements right. This is the part of the Bill that may be the most critical in ensuring that the pyramid is sustainable, which is the objective. It is great that the Government are working hard to get the backstop arrangements right, as she said. Does she agree that, once the regulator is in place, it will be important to have the state of the game report already in place—with an analysis of what is going wrong in the financial distribution and how it could be put right—before a distribution agreement is made and the backstop powers are used to bring that about?

My hon. Friend is absolutely right, and he touches on something we will discuss later. It is important that the state of the game report takes place swiftly. That is an important part of the Bill. Of course, it is a backstop, and we are keen that a football-led solution is the priority and that people get round the table. I often quote Dame Tracey Crouch, who was one of my predecessors as sport Minister, and obviously we know how involved she was in the Bill. In the previous Bill Committee, she made a short but very focused speech, which I encourage hon. Members to read, on how the backstop should be a backstop. I often quote that speech.

For the reasons I have set out, the amendments are vital for supporting our new backstop model, and I hope that they will be accepted. I commend them to the Committee.

Amendment 28 agreed to.

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

Clause 56 is the first clause of part 6, which relates to financial distributions and the backstop mechanism in its totality. I understand the desire on both sides to apply appropriate scrutiny to a part of the Bill that could significantly impact the future financial landscape of football, and I hope through this debate to demonstrate that the approach taken in part 6 is the most proportionate and effective one.

These backstop powers have been introduced to help ensure that an agreement can be reached between the leagues on the distribution of revenue from the selling of TV broadcast rights. If the leagues cannot agree a deal, it will allow the regulator to step in as a last resort and impose one. A solution to this issue is vital to ensure the future financial sustainability of the football pyramid. The process has been designed to encourage an industry solution while providing the assurance that, should one not be reached, the regulator can ensure that one is put in place.

The Government have listened to industry, to members of both this Committee and its equivalent in the last Parliament, and to concerns raised in the other place. We have taken on board the points raised regarding the original distribution model in the Bill, and we have therefore tabled targeted amendments to improve the mechanism. As I have said more than once, I will set out the detail in a later group. We are confident that the regulator will have the powers necessary to ensure a timely, satisfactory distribution order, while not unduly inhibiting the ability of industry to resolve the issue itself.

Clause 56 sets out an overview of the backstop powers and outlines some key definitions that are important for clearly setting out the scope of these powers, including “relevant revenue”, which I will come on to in just a moment. Importantly, this clause also makes clear right at the outset in subsection (1) that the regulator can impose a distribution order only if the leagues are unable to reach an agreement during the backstop process. In other words, even after the process has been triggered, a regulator-imposed solution remains a last resort, only to be used if industry fails to strike a deal.

One of the key terms defined in this clause is “relevant revenue”. It expressly includes broadcast revenue because this is the predominant source of revenue for the relevant leagues, and this is the revenue that underpins the financial flows between the leagues. This clause also allows the Secretary of State to specify other kinds of revenue to be included as “relevant revenue”. This is simply to future-proof the policy; for instance, if broadcast revenue is no longer the main source of income for the leagues. However, there are safeguards on the use of this power. The Secretary of State must consult the regulator, the FA and the relevant leagues, and can use this power only when there has been a material change of circumstances. Any use of the power will be subject to the affirmative procedure in Parliament.

The previous Government’s version of the Bill explicitly excluded parachute payments from the definition of “relevant revenue”. Our version of the Bill no longer makes this distinction, allowing the inclusion of parachute payments where appropriate. This change was made to ensure that the regulator can consider all relevant aspects of revenue distribution as it makes a financial assessment of the game. Parachute payments can be included in the backstop only if the regulator considers that issues relating to parachute payments present an apparent threat to its objectives, such as the sustainability of the pyramid.

Another important definition in this clause is the “qualifying football season”. This determines which seasons can be in scope of the backstop. In effect, it limits the regulator’s power to only the next six football seasons, which prevents excessively long regulator orders or premature applications for seasons far in the future.

Question put and agreed to.

Clause 56, as amended, accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Vicky Foxcroft.)

Adjourned till Tuesday 17 June at twenty-five minutes past Nine o’clock.