House of Commons Culture, Media and Sport Committee Football Governance Seventh Report of Session 2010–12 Volume II Oral and written evidence Additional written evidence is contained in Volume III, available on the Committee website at www.parliament.uk/cmscom Ordered by the House of Commons to be printed 19 July 2011 HC 792-II Published on 29 July 2011 by authority of the House of Commons London: The Stationery Office Limited £24.50 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] Witnesses Tuesday 8 February 2011 Patrick Collins, Mail on Sunday, Sean Hamil, Birkbeck Sport Business Centre, University of London, and Professor Stefan Szymanski, CASS Business School Lord Burns, Graham Kelly, former Chief Executive of the Football Association, and Lord Triesman, former Chairman of the Football Association Page Ev 1 Ev 11 Tuesday 15 February 2011 Greg Clarke, Chairman, the Football League and Andy Williamson, Chief Operating Officer, the Football League Ev 21 Gordon Taylor, Chief Executive, Professional Footballers Association, and Paul Elliott, former Chelsea Captain and Professional Footballers Association Trustee Ev 32 Tuesday 8 March 2011 David Gill, Chief Executive, Manchester United Football Club, Peter Coates, Chairman, Stoke City Football Club, Tony Scholes, Director, Stoke City Football Club and Niall Quinn, Chairman, Sunderland Football Club Ev 43 Lord Mawhinney, Former Chairman of the Football League, and Henry McLeish, author of recent review of Scottish Football Ev 58 Tuesday 15 March 2011 Shaun Harvey, Chief Executive, Leeds United Football Club, John Bowler, Chairman, Crewe Alexandra Football Club, Barry Kilby, Chairman, Burnley Football Club, Julian Tagg, Vice Chairman and Sporting Director, Exeter City Football Club Ev 67 Dave Boyle, Chief Executive, Supporters Direct, Malcolm Clarke, Chair, Football Supporters Federation and member of the FA Council, and Steven Powell, Director of Policy and Campaigns, Football Supporters Federation Ev 80 Tuesday 22 March 2011 Ian Watmore, former Chief Executive, Football Association Ev 88 Richard Bevan, Chief Executive, League Managers Association, Steve Coppell, Former Manager of Reading Football Club, and Martin O’Neill OBE, Former Manager of Aston Villa Football Club Ev 98 Tuesday 29 March 2011 David Bernstein, Chairman, the Football Association, and Alex Horne, General Secretary, the Football Association Ev 110 Roger Burden, Chairman, National Game Board, the Football Association, and Kelly Simmons, Head of National Game, the Football Association Ev 122 Stewart Regan, Chief Executive, the Scottish Football Association Ev 131 Tuesday 5 April 2011 Sir Dave Richards, Chairman, the Premier League, and Richard Scudamore, Chief Executive, the Premier League Ev 138 Brian Lee, Chairman, the Football Conference, and Dennis Strudwick, General Manager, the Football Conference Ev 156 Tuesday 26 April 2011 William Gaillard, Adviser to the President, UEFA Ev 161 Hugh Robertson MP, Minister for Sport, Department for Culture, Media and Sport, and Henry Burgess, Head of Professional and International Sport, Department for Culture, Media and Sport Ev 169 List of printed written evidence 1 Exeter City AFC Supporters Society Ltd Ev 179 2 Dr. Malcolm Clarke, FRSA, supporter representative on the FA Council Ev 183 3 Gordon Taylor, Chief Executive, Professional Footballers Association Ev 186 4 Football Association (The FA) 5 Premier League 6 Supporters Direct 7 Football Supporters’ Federation Ev 223 8 League Managers Association Ev 227 9 Department for Culture, Media and Sport Ev 230 10 Football League Ev 232 11 Dave Boyle Ev 237 12 Professor Stefan Szymanski Ev 241 13 Mr Sean Hamil & Dr Geoff Walters, Birkbeck Sport Business Centre, Ev 188; 278 Ev 207; 276; 279; 281 Ev 218; 279 Birkbeck College, University of London Ev 247 14 The Football Conference Ev 252 15 Lord Triesman Ev 257 16 UEFA Ev 270 17 Ian Watmore Ev 274 List of additional written evidence (published in Volume III on the Committee’s website www.parliament.uk/cmscom) 18 Mrs Linsey Wraith Ev w1 19 Carlos Diaz-Sanchez Ev w1 20 Steve Lawrence Ev w2 21 Peter Hodge Ev w8 22 Jay Cochrane, The International Football Development Academy (iFDA) Ev w12 23 Saints Trust Consumer Cooperative Action Committee Ev w13 24 Runcorn Linnets Football Club Ev w14 25 Gary Pettit Ev w17 26 Rob Bradley and Roy Noble, Lincoln City Supporters Trust Ev w20 27 Commission on the Future of Women’s Sport Ev w21 28 Cardiff City Supporters Trust Ev w21 29 Andy Green Ev w23 30 Cambridge Fans United (CFU) Ev w26 31 James Wheeler Ev w29 32 Paul Norris Ev w32 33 Manchester United Supporter Trust (MUST) Ev w36 34 Football Foundation Ev w38 35 Liverpool Supporters’ Union – Spirit of Shankly Ev w39 36 Steve Beck, York City Supporters Trust Ev w42 37 Keith Blagbrough Ev w43 38 Clarets Trust Ev w47 39 Merthyr Town FC Ev w49 40 Arsenal Supporters’ Trust and Arsenal Fanshare Ev w52 41 Wimbledon Football Club Supporters Society Limited on behalf of AFC Wimbledon Ev w56 42 Professor Richard Giulianotti Ev w59 43 Bristol City Supporters Trust Ev w63 44 Bees United, the Brentford FC Supporters Trust Ev w66 45 Independent Manchester United Supporters’ Association (IMUSA) Ev w70 46 Newcastle United Supporters Trust Ev w72 47 Fulham Supporters’ Trust Ev w74 48 Board of Reading Football Supporters’ Society Limited T/A “STAR” (Supporters’ Trust at Reading) Ev w77 49 Blake Welton, Editor, First e11even Ev w79 50 Southend United Supporters’ Club Trust t/as The Shrimpers Trust Ev w85 51 David Hodges Ev w89 52 Bradford City Supporters’ Trust (BCST) Ev w91 53 Phil Gregory 54 Wrexham Supporters Trust Ev w101 55 Blue and Gold Trust (King’s Lynn FC Supporters Trust) Ev w105 56 Foxes Trust (Leicester City Supporters Society Limited) Ev w107 57 AFC Telford United Ev w108 58 Daniel York and Ben Westmancott on behalf of the board of Fisher FC Ev w112 59 Adam Franks FCA CFA Ev w115 60 Schwery Consulting Ev w119 61 FC United of Manchester Ev w122 62 Wimbledon Independent Supporters Association (WISA) Ev w124 63 Olswang Ev w127 64 National Association of Disabled Supporters (NADS) Ev w132 Ev w94 65 Paul Baggaley, Chairman, Newark Town FC Ev w136 66 Chester Football Club Ev w137 67 Stephen Temple Ev w141 68 Centre for the Study of Law, Society and Popular Culture, University of Westminster Ev w144 69 Scarborough Athletic Football Club Ev w147 70 Yorkshire Division of the Football Supporters’ Federation Ev w149 71 Professional Players Federation Ev w153 72 Darlington Supporters Trust Ev w154 73 Jonathan Keen Ev w157 74 Dr John Beech, Head of Sport & Tourism, Applied Research Centre for Sustainable Regeneration, Coventry University Ev w161 75 Lawn Tennis Association (LTA) Ev w165 76 John Bentley Ev w169 77 Rick Duniec Ev w170 78 Pompey Supporters’ Trust Ev w172 79 Football Licensing Authority Ev w176 80 Swansea City Supporters Trust Ev w178 81 Co-operatives UK Ev w180 82 Vince Cullen Ev w183 83 Cambridge City Supporters Trust Ev w186 84 Hendon Football Club Supporters Trust Ev w188 85 Mark Usher Ev w190 86 Hamburger SV Supporters' Club Ev w198 87 Christian Müller Ev w201 88 Substance Ev w204 89 The Isthmian Football League, known as the Ryman Football League Ev w208 90 Inclusion and Diversity Caucus Ev w214 91 Bates Wells and Braithwaite London LLP Ev w216 92 Chris Vasper Ev w217 cobber Pack: U PL: COE1 [SO] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 1 Oral evidence Taken before the Culture, Media and Sport Committee on Tuesday 8 February 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe David Cairns Dr Thérèse Coffey Damian Collins Philip Davies Paul Farrelly Alan Keen Mr Adrian Sanders Jim Sheridan ________________ Examination of Witnesses Witnesses: Patrick Collins, Mail on Sunday, Sean Hamil, Birkbeck Sport Business Centre, University of London, and Professor Stefan Szymanski, CASS Business School, gave evidence. Chair: This is the first hearing of the Select Committee’s inquiry into football governance. I welcome our first three witnesses: Patrick Collins of the Mail on Sunday, Sean Hamil of the Birkbeck Sport Business Centre and Professor Szymanski from CASS Business School. Q1 Ms Bagshawe: Could we start with a brief overview of things as you see them? How robust do you think the English model of football is? Professor Szymanski: Partly I think the question is what do you mean by the English model of football? Are you talking about professional football? Are you talking about football in the top leagues—the Premier League, the Football League? Are you talking about the national team game? Are you talking about grassroots? Are you talking about local club football? Are you talking about, indeed, mass participation in football on an informal scale? Part of the problem is which bit we are talking about. If we talk about the professional game, my view is that the professional game is extremely robust and very successful. We have the most successful football league in the world in the Premier League. We have the most popular lower tiers of football anywhere in the world: the English Championship is by far the most popular second league in the world, the third tier and fourth tier are very strong. They have very high levels of attendance and of income. Although on the face of it people say, “It looks like they have lots of individual problems”, taking the system as a whole, it is very robust. If you think about the national team, obviously people talk about issues with that, but that is a very special problem. If you think about the grassroots, in terms of participation, people participate very strongly in football in this country. There are lots of facilities and I would say overall I think it is fairly strong and robust. Sean Hamil: It has a lot of strengths, but there are problems, and I think that is the reason why this Committee is conducting this investigation. The professional leagues are strong in the sense that they generate a lot of turnover, a lot of people want to watch it and English teams perform comparatively well in European competition, but if you focus on one key financial indicator, there have been 53 incidences of financial administration in English football since 1992. There has not been a single year since the foundation of the Premiership that the clubs collectively have made a pre-tax profit. Football is different but turnover is vanity, profit is sanity. I have got a copy of the Portsmouth administration document here. It is sorry reading, and one of the problems is that essentially what you have in administration is that, because of the football creditors rule, the key football creditors all get paid 100%, which means that the tax authorities get proportionately less and all the small creditors, such as St John Ambulance, do not get paid. Even looking at that as an isolated episode, that should be intolerable. I recommend that everybody read this document, because it is available on the Portsmouth website, and all the administrations follow the same pattern. It should not be acceptable in any industry that says it is a private business but has a loss-making financial model. Essentially, it receives a de facto subsidy from the public purse through the non-payment of taxes. To be fair to the football authorities, they have recognised this fact and we now have early warning for tax payments, but there has been a long history of nonpayment of taxes at football clubs, and you have to ask why is it only now that it is being addressed? The reason, in my opinion, is because the tax authorities have finally said, “Well, we’re going to get serious here”. The other fundamental problem with a loss-making model is that it is about the quality of the owner that you get. If you have a scenario where someone of the quality of Delia Smith, a successful entrepreneur or Sir John Madejski, successful entrepreneur and local boy who tried to build a sort of major sporting institution in his hometown, decide it is not worth it and that they would like to get out, I think that that is a problem. Similarly, if you look at the Liverpool situation recently, in the nick of time, there was some very effective work by the interim chairman and his team to deal with failed owners who basically bought the club with borrowed money It’s all very well to say cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 2 Culture, Media and Sport Committee: Evidence 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski that money invested by new owners is money being brought into the game but where you have a leveraged buyout, money is going out of the game. In our written submission from Birkbeck, we acknowledge all the many strengths of English football. It is very important to do that if you want to have a balanced discussion, but there has to be a realistic assessment of this particular issue. If you are losing money year after year after year, I’m sorry, that is a problem. Secondly, we have the recent example of the lack of financial regulation in the credit crisis. I make no bones about this: there is a role for effective regulation. That is the lesson of the financial crisis. The only question is what form it should take. Patrick Collins: Essentially, I agree with very much of what Sean has just said. If it were sufficiently robust, we would not be having this Committee at all. I also think that the game tends to get judged on the success or failure or otherwise of the Premier League, which is a mistake. The Premier League has great weaknesses, which spring possibly from its foundation. I think it was conceived in the spirit of greed and over the years it has probably got a good deal greedier. This is one of the central problems of the game: judging everything by how much money it can make rather than what sort of contribution it can make. The solution is obviously far broader than this, but the notion of having two independent directors of the FA is an excellent one, because one of the central things that is going wrong with the game is the ongoing conflict between the Premier League and the FA. That has to be resolved. Once that has been resolved, we can look at the game much more calmly. I have some hopes of this Committee because it has been long, long overdue that Parliament has taken a proper look at it. I have urged for years that there should have been an inquiry of this sort and I am very pleased that you have decided to have one. Q2 Ms Bagshawe: Thank you very much. That leads me neatly on to my follow-up question. If we think of the structure of English football as a pyramid, from the Premier League down to League One, League Two, Conference, semi-professional football, has overall the introduction of the Premier League, would you say, strengthened or weakened the English football pyramid as a whole? Mr Hamil, what do you think? Sean Hamil: I think any high-level competitive league where people want to watch it is a good thing, so I don’t think the Premier League is a bad thing. It would show a lack of focus on the part of the Committee if the way that it proceeded was that there is a problem with the Premier League. I don’t think that is the problem. The issue, as you allude to, is the relationship between the Premier League and the rest of football. It is well recognised in all sports models that there is a pyramid, because the grassroots provide the players, even in an international marketplace, but they also provide the fans and the whole participation culture creates the interest. It is well recognised that there should be solidarity from the top to the bottom. The critical issue is how that solidarity relationship is organised. My own view, it won’t surprise you to hear, is I think there should be greater solidarity between the Premier League and the grassroots, either through the Football Foundation, through payments down to non-league football or through partnership with the FA. But the Premier League itself is not the problem. The problem is that the relationship has got out of kilter, and you can see that, as Patrick alluded to, most obviously on the board of the FA where, instead of having a unitary board that tries to serve the interest of the wider game, you have two sectional interests who are not quite sure how to relate to each other. Professor Szymanski: I agree with Sean about this not being just about the Premier League. One thing you need to take into account is the context of English football around the time the Premier League was formed. The history here is that in the post-war era, up until 1985, attendances were continuously in decline at English football. We all know the history of what the problems were in English football: neglect of investment, poor facilities, poor crowd control, hooliganism, a sense of danger and it not being a safe place to be. If you look in my written submission, I show a chart of the actual movement of attendance in English football; that reverses in 1985 and since 1985 it has gone continuously in the opposite direction. In terms of people going to football, we have just got back to where we were in 1960, and one of the things this Committee should think about is what brought about those changes. Why has English football become so much more popular? The Premier League is part of that in the sense that the Premier League was motivated by the advent of satellite broadcasting, which was again motivated by partly or largely by deregulation of broadcasting in Europe, which created competition to own broadcast rights, which created competition to be able to show things like English football. That competition bid up the value of the rights, which brought money into the game and that money has been used to buy players and make the game more attractive. That is that part of the story. Of course another part, as Sean would probably draw your attention to, is the improvement in football stadiums, which was motivated partly out of Government intervention following the Hillsborough tragedy and the Taylor report that followed on from that. But I would also point to another big change, which was an internal change that happened in English football in the early 1980s, which was that following the recession of 1980–81, the Football League authorities looked at football again and said that one of the problems in English football was that it was not commercial enough. You could not pay directors, you could not pay dividends and, essentially, the Football League’s own investigation concluded that it needed to adopt a more commercial approach. That is what, I think, underlies all the changes that have gone on in the last 20 or 30 years. Football has become more commercial. Of course this has caused a lot of outrage because ticket prices have gone up, and there is new merchandising and new ways of selling football. Certainly people of my generation or older look back and say, “Oh well, things must have been better in the past.” cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 3 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski But in reality you have to look at the level of national and international popularity of the game and say, “Well, it has really been very, very successful.” Sure, there are issues you can talk about and problems that you might focus on, but the overall background picture should be one of this is one of Britain’s most successful export industries right now and, before you think about interventions that the Government might make or the state might introduce, you should ask yourself, “Could we jeopardise any of that success and popularity in the future?” Q3 Ms Bagshawe: Mr Collins, have you anything to add, particularly in relation to how the Premier League affects the other strata of English football? Patrick Collins: I think, and it is going way, way back to roughly the time Stefan was talking about, some people have a certain yearning for the kind of equality which prevailed before 1983, when each club took their home gates and paid the away team 20% of that gate. The result was a rough equality among the 92 clubs. In fact, going right back to 1965, the first television contract for the season was £5,000 when the 92 clubs received around £50 each. I would not recommend that, but after that in 1985 when it started to change—the first division took 50% of the revenue from television, the second division 25% and the third and fourth 25% each—it produced a game that I agree had many of the problems that Stefan spoke about but it was also an age in which clubs succeeded by virtue of their ability. Derby won a league title and Nottingham Forest won two European cups, not because they were richer than the rest but because they found a manager who was better than the rest. The game seemed to be then centred on sport rather than money. It is absolutely inconceivable that you could have a Derby or a Nottingham Forest, totally inconceivable. They couldn’t approach the feats that they did. I find some regret in the way that the Premier League came and corralled the huge percentage of the money and made a much more unequal game. So you now have people coming into the game with huge spending power, you have a sheikh here, another guy up there, who can determine the course of the season by the power of their purchasing. Sport lost a great deal when it lost the kind of equality that used to prevail. Q4 Mr Sanders: As we are going to be dealing with supporters trusts in this inquiry, I have to declare I am a member of the Torquay United Supporters Trust. That leads me nicely to my question: is there sufficient redistribution of income down the pyramid to sustain football’s structure in the longer term? Professor Szymanski: That is a very good question. I guess again it comes down to what one would mean by “sufficient” in this context. In a sense, you don’t need any money to trickle down the pyramid in order for there to be people interested in playing football and people to want to play. For example, if you cut off all solidarity mechanisms now from the Premier League to the lower levels, the lower levels would all continue, people would still go to watch. If you went to a school and asked how many kids would like to play Premier League football, if you cut off all the solidarity mechanisms, that number of kids would not go down. Ultimately, football is a game played by people and the key incentive is, “Do you want to play this game?” and that is not going to change, regardless of the solidarity mechanisms. That does not mean to say there is no justification for money trickling down, and it is perfectly reasonable to say that money should come from the top levels in order to help provide facilities and provide investment and maybe improve the quality of the game. That is no doubt true, but again one of the things we should perhaps ask ourselves is: where do we want our footballers to come from? A lot of people are very concerned that there are not enough young footballers coming from this country and too many footballers coming from abroad. In other words, Premier League money is being used to track down talent globally rather than nationally. Is that a bad thing? Should we think that it is more important that we have more English footballers or more Welsh or Scottish footballers, rather than having more African footballers? We have not had any major stars in the Premier League from India, for example, but no doubt that will come at some point, and more Chinese players and so on. Is it bad that they spend their money on that? In a sense, when you talk about the trickle down and is there enough money being redistributed, ultimately all the money that gets spent in football goes on footballers in one way or another, and the teams at the top are looking to find the best players that they can. I do not see any particular reason to say that there is not enough money currently going down to the lower levels. Sean Hamil: Your question brings us back to the problem of loss-making. On the current system, there is a famous academic paper by Peter Sloane that says what sports club owners do is they maximise utility not profit. They want sporting success, therefore they always overspend. Alan Sugar used the rather crude expression “the prune juice effect” about Tottenham: money goes in one end and out the other end to players. What happens in that scenario is that unless you are able to deal with this fundamental challenge about how you can stop clubs spending more than they earn on salaries, you will always have chronic financial instability. To go back to the trust example, I was an elected director of Supporters Direct. It is well known I am a passionate supporter and continue to be, but one of the problems we faced at Supporters Direct, post-ITV Digital, was that 17 clubs went into administration because of a collapsed TV deal. At one point I think there were seven league clubs in fan ownership, basically because there was an investor strike, because no one would buy a league club in that brief period of 18 months, so it was like a financial accident and emergency. The volunteers took over, they cleaned up the balance sheets through voluntary labour, fans’ investment, and at the end of the period when the situation stabilised of course the fans said, “We can’t compete because our rivals have got a sugar daddy.”. So what happened? They were reluctantly forced to sell back to private owners. In other words, financial virtue did not have its own reward. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 4 Culture, Media and Sport Committee: Evidence 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski That is why the principles of UEFA financial fair play are absolutely critical. The fact they happen to come from Europe is neither here nor there. They should be applied in every league in Europe independently because what happens is that if you are overspending on players you are not spending on disabled facilities for local fans, you are not spending money on that family facility, you are not spending money on that outreach into the community. Stefan, who is one of the most pre-eminent sports economists in Britain, throughout Europe, has written extensively about this whole business of somebody has to pay somewhere along the line. Q5 Mr Sanders: Where do you regulate and who regulates? Sean Hamil: It is absolutely clear who should regulate. The regulators should be the football authorities but the Government has a role in nudging them in the right direction. If you take the Taylor report, football could not reform itself at that point; Government had to intervene and say, “We’re sorry, but you’re going to have to modernise your stadia.” I think we’re at a similar turning point. From 1992, four factors came together to create a perfect storm for football. First of all, stadia were being modernised with a 25% subsidy over 1992 to 1997 from a levy on the pools betting duty. English teams had just re-entered European football in 1990. The pay TV revolution had just started, and we had just started 15 years of uninterrupted economic growth through to 2007 and, as we all know, as growth rises, a disproportionate amount is spent on leisure. That ended in 2007. We are in a paradigm shift now and it is important that the football authorities focus on that. Things have changed. European money is now a necessity not a bonus. The TV money domestically has plateaued. They have to pay for their own stadia money now and we are in a financial downturn. That is an appropriate time for reflection. But to come back to your fundamental point, something has to be done about loss making because loss making basically means spending everything you have on players and not building the club as a viable institution, which not only benefits its shareholders but also the wider community. Q6 Mr Sanders: You mentioned the football authorities. A lot of people give that answer, “The football authorities should do something”. Who are the football authorities? Sean Hamil: The FA should be the lead body because the FA is the governing body of football, and on the board of the FA are representatives of the Football League and the Premier League. When people attack the FA, they are actually attacking the Premier League and the Football League as well. It is the governing body. If you read the submissions from the Premier League, they acknowledge the relationship and so on. There is no need to reinvent the wheel. What is necessary is to recalibrate the relationship between the two leagues and the FA and, in my opinion, to allow the FA to get on with its historic role of governing the game in the wider interest. The job of the leagues is to run two successful leagues. It is not to govern football. Q7 Mr Sanders: Can I come back to my original question about the pyramid? The pyramid is not just about an agreement of income going down; in the past a lot of transfer money also went down the pyramid that now tends to go overseas. Would Patrick want to say something on that? There also used to be more redistribution within by sharing of gate receipts, which went out of the window, which clearly benefits the bigger club against the smaller club. Patrick Collins: The transfer money point you make is very relevant. In the last transfer window, I believe I am right in saying that the leagues outside the Premier League benefited by about £12 million, which is obviously peanuts given that about £200 million was spent. So this doesn’t happen. We hear about this trickle-down effect. One of the great dangers of the so-called trickle-down effect is that when a monstrous fee is paid, for instance like the one that has just been paid for Fernando Torres, it sets the bar at a different level. People who have other players to sell say, “Well, if he is worth that, mine must be worth that.” It is not just the fee but of course the ancillaries that go with it, the salary even more so than the fee. I do not know what Chelsea are paying Torres but it would be enormous. The next agent will know what Torres is being paid and he will negotiate on that basis. The idea of this wonderful pot of money going down and doing good all over the place seems to me to be a misnomer. I take Stefan’s point that the Premier League has fulfilled many of its aims and ambitions, but I remind you that one of the central reasons it was brought into being, one of the reasons under Graham Kelly, who I believe is speaking to you later, under the blueprint for football he devised, which effectively brought the Premier League into existence, was that the Premier League would make for a successful England team: because of the extra time players would have to prepare because of fewer games and so on, we would have a successful England side. As we all well know, every two years we have inquests and eruptions when first England fails at the World Cup and then it goes out at the European Championships. The Premier League does a good job of preparing the world’s players to perform at major tournaments, but since there are fewer and fewer English players playing in the league it does less well with England players. Q8 Jim Sheridan: Stefan, if I picked you up right, you said that the money generated in football tends to stay in football. Can I therefore ask you about the role of football agents, because from where I am sitting the agents take money out of the game. That money doesn’t go back into the game; that money goes out of the game. There is a self-interest in agents moving players around clubs in order that they get their commissions fee and so on. Given the fact that there is only one source of income for football, and that is the paying fan who buys the merchandise, the televisions, the tickets, they’re the only people that put the money into football, is there an argument to regulate agents so that they do not move players or encourage players to move around clubs and get these extortionate, ridiculous sums of money? That is cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 5 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski money that is leaving football; it doesn’t come back in again. Professor Szymanski: Before answering that, can I just briefly go back to a point that you were raising. Your comment about the trickle-down effect is, I think, completely wrong. If you go back historically, there never has been a trickle-down effect. If you go back to the very first Government report, the Department of Education and Science’s report in 1968 by Sir Norman Chester, it showed that, in fact, teams in the third and fourth divisions were paying net money to the top division. The trickle-down effect is a myth and that is part of the problem with the whole approach when people talk about it. They do not base the arguments on researched facts. I am sorry, that is not a particular criticism of you, but in general there is a reluctance to look at the data about what we know and more interest in talking about emotions. To come to your question now, from the day that agents came into the game, it was clear that the clubs and the football authorities hated them and would like to get rid of them. Why is that? It is because football agents drive up the wages of their clients, and of course they have been unbelievably successful in the last 20 or 30 years in doing that, so you will get a lot of calls for regulation of football agents because of the damage that they allegedly do. If you think about the situation we had before we had football agents, we had the retain and transfer system in football, which effectively tied players to the clubs for their lifetime. Up until 1960, we had a maximum wage rule that said that players could only be paid up to £20 a week maximum. Effectively, all the money that came into football was kept within the clubs, within the organisations that run the clubs, and the players got nothing. There are two points one could make about that. One could make an ethical case and say, “Is it fair that the people who create the performance on the pitch get a tiny fraction of what is paid?” We could argue about the ethics of that. Most of these people would play for nothing. Any of us would love the chance to play at the top level and so maybe they do not need to be paid that money. But the other question to ask is, when the money did stay with the clubs and the organisations that ran football, was it well used? Was it invested for the future? Was it invested in developing the game? Arguably, that coincides with the period of dramatic decline in English football. It is so easy now, 25 years on, to forget the scale of the crisis in English football that was continuing and persistent over a quarter of a century. The game really was on its knees. Allegedly, Margaret Thatcher talked about shutting down football in this country. It is unimaginable. Q9 Jim Sheridan: Football has changed in 25 years. We have come a long way in 25 years. I am not suggesting for a minute that the clubs keep the money and do not pay the players appropriately, but the bottom line is it is the supporters that are paying £50 million for players. That is supporters’ money. Professor Szymanski: Absolutely, but the supporters willingly part with the money because they go to watch the football and they watch the football. Nobody is forced to go to watch football. Again, if you are talking about any high-quality product, people pay a high price to get that high-quality product. We would not be having a committee here about any other high-quality service that is being provided. We wouldn’t be talking about Gucci shoes or luxury cars and saying, “People are paying large sums of money for this. Why is that money not being used for the right purposes?” The point about this is that the agents negotiate on behalf of their players to get them a reward for their services. This is true not just here in English football, it is true worldwide. If you look at the United States, for example, very much the same situation prevailed up until the 1960s: the players got nothing and the teams took all the money. Then players got freedom of contract, agents came into the game, and the players’ wages went up dramatically. The clubs told everybody and you can look at congressional hearings where the clubs and the franchises all say, “Oh, you’re destroying our game and it’s ruining the game” but the fact is that there, again, attendance has grown, people have become more interested and the coverage has increased. Regardless of the ethical question, in terms of does it damage the health of the game, I think not. Partly the reason is that the agents have the incentive to go and find new players. What they have done is the quality of football has gone up, I would argue, because there has been this persistent search globally to find the best possible players. Patrick Collins: I butt in because you do not often hear defences of agents. I think they are a scar and a stain on the game. The money the agents have taken out—we cannot be sure because all the figures are not available. Everyone has terrible stories about football agents because so many regard them, not as Stefan seems to, but as leeches and parasites. There was one 12-month spell around 2009 when Premier League clubs paid them a total of £70.7 million. That is money the game will never see again, and for what? It is money that is just lost to the game and I think that is quite scandalous. A couple of examples. When Wayne Bridge moved from Chelsea to Manchester City, the agent, Pini Zahavi, was paid £900,000. Now, Bridge wanted to go to Manchester City, Chelsea wanted to sell him and City wanted to buy him. Both clubs had chief executives who could have picked up a telephone and done the deal in about five minutes, I would guess, yet Zahavi took £900,000 from this deal and nobody thought that was appalling. Years ago, in 2004, Manchester United paid an agent named Rodger Linse £1.3 million for renegotiating the contract of Ruud van Nistelrooy—not negotiating a contract but renegotiating it, and he got £1.3 million for it. Yet there is something called the Association of Football Agents whose chairman is somebody called Mel Stein, and he wants them to have a seat on the FA Council, because he says, and I quote, “Agents perform a valuable role and should be acknowledged as stakeholders in the game.” Those arguments, at the moment, go unchallenged by the football authorities. We need people there who will take on this nonsense and we do not have them at the moment. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 6 Culture, Media and Sport Committee: Evidence 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski Sean Hamil: May I just make a very brief observation? The thing about agents is that it is legitimate. I have done a bit of active trade unionism myself. It is legitimate that you have a representative, but the problem with agents is that there has been so many abusers taking money from both sides and so on, but there is also potential for corruption. At the heart of the Calciopoli scandal in Italy in 2006, agents had players who they effectively controlled on both sides in a game. The role of agents in sport is much more complex than it is say, for example, in movies, and for a whole lot of different reasons it needs to be very aggressively regulated. Q10 David Cairns: It struck me in reflecting on what has just been said that there is a connection, which is that when all this money goes on wage inflation and to agents, it is the people who make Gucci handbags and Lamborghinis who benefit from this. Maybe we should get them in as part of it. We are going to talk about debt financing and leveraged buyouts later, but just a couple of specific questions before we do. Picking up Adrian’s point about redistribution, although this is an inquiry primarily focusing on England, there are clearly implications for Scotland and Wales and all the rest of it in terms of fit and proper persons, leveraged buyouts and foreign ownership, so we will bear that in mind. One of the things that rankles in Scotland is that the clubs that get relegated from the premiership get 30 times more money than the team that wins the SPL. Isn’t this parachute payment—it is a form of redistribution and I understand the logic of it—just a big fat reward for failure? You come last, so you get extra money for it. It is a Fred Goodwin model of rewarding people. Worse than that, doesn’t it import into the championship wage inflation that would otherwise not be there, because of this grotesque distortion? Professor Szymanski: The point you make about rewarding failure is a very important one, because the Committee will think a little about the American model and why something like the NFL—we just had the Superbowl—is so incredibly successful. One of the points people make about that is that it is a system that rewards failure as well. The traditional football model we have in Britain, Europe and most of the world is a model that punishes failure through relegation, and that is one of the things that drives the clubs to live financially on the edge. They live financially on the edge in order to avoid relegation and to get promoted up the system, so we have a hypercompetitive system. This is true not just of this country; it is true everywhere in football. It has always been true, because of the nature of the incentive system. The NFL is the most profitable football sports league in the world by a country mile. The 32 owners are incredibly wealthy and they get incredibly wealthy out of American football, and they do this by being, as they describe themselves, 32 socialists who vote Republican, because what they do is they share everything in common: 40% of the gate money goes to the visiting team. They share all the broadcasting money absolutely equally, they share all the merchandising income equally. Imagine Manchester United sharing its shirt income with Stoke. That is what goes on in the NFL: every team shares equally. They also have a salary cap, which limits the amount that they can pay players, and they have a draft system, which rewards the worst performing team with the first pick in the draft, which in addition gives them exclusive negotiating rights, which helps to keep the wages down. They have designed a system that keeps wages down. Q11 David Cairns: What is the salary cap? Professor Szymanski: I cannot remember the latest. It has changed. They are just about to have a big strike probably because the collective bargaining agreement—they have a union and an unionised— David Cairns: It is socialism then. Professor Szymanski: It is socialism. Again, in America all the players are represented by strong unions. The old agreement I think was 58% of revenues. I think it was 58% but I would have to check the figure. But they have these arrangements, which mean that things are held in common. One interpretation of the parachute payments, to come to your question, is that in fact the Premier League is setting about doing the same thing. One implication of the parachute payments is that teams that benefit from these payments are very likely to get promoted again. They have just extended the parachute payments, so in other words they are reducing the size of the club that can participate in the Premier League. One way of thinking about what they would ultimately like to do to run it, to be successful and to avoid all the financial problems that they have, is to become a closed league like the NFL, get rid of promotion and relegation entirely. In many ways, when you think about the mechanisms that you might think about to bring financial security to the Premier League, you might be helping to move it towards an NFL style organisation in the future. I think that is something you should bear in mind in your discussions. Patrick Collins: I would agree with Stefan’s analysis, though perhaps I would not share his sympathies. One of the principal reasons for sport is winning and losing. You win, you succeed; you lose, you suffer the consequences. But I do agree that the Premier League, deep down, wants to be a closed shop. Phil Gartside, the chairman of Bolton, has tried once or twice to bring in this idea of no relegation, keep the whole thing, so you won’t have to worry about losing vast sums when you go down. It was a rather subtle way of doing it. In order to bring this about, the parachute payments, which I think are a really important subject with regard to this inquiry, have now grown to enormous size. They are £18 million for the first two years and more over the next two. This seems a lot anyway, but when you realise that, from television alone, every old-time second division club gets £1 million whereas every Premier League club gets £45 million, the gap is horrendous. The parachute payments involve going down with £18 million in your pocket when everyone else has got £1 million cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 7 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski and so the likelihood is, as Stefan says, they will come straight back. The idea of at least a two-division Premier League is still lurking there. In that sense, again it is what I was saying earlier, the whole thing has become who can wave the biggest cheque, and I don’t think sport should be like that. It should be more than a battle between billionaires, and the public rightly expects more of it than that, but that is the way it is going at the moment. Sean Hamil: Stefan is correct when he says that an obvious solution to the loss-making is to have a closed league and the increase in the parachute payment looks very like a de facto attempt at that. But you can deal with that within the European system of promotion and relegation, and the way you deal with it is to say through some version of financial fair play it is written into your membership of the league that if you get relegated you have to renegotiate your salaries. I am not a fan of the football creditors rule, I don’t think it is sustainable in the current environment, but the leagues have enormous power because they control ownership. If you want to play in the league, you have to get the league’s permission, and if the league is really serious, it can say when you get relegated, particularly if you have the financial principle that you cannot spend more than you earn, then written into every player contract is renegotiation of salaries. It can be done. There has to be radical thinking about this. The key thing about sport is that it is a joint product. The reason why the Republicans vote socialist is because they recognise the peculiar characteristics of sport. Even the children in the schoolyard know “I pick one, you pick one” if you want to have a competitive product. Only in sport do you want a strong competitor, and it is not for any political, ideological reasons that you need to regulate. You need to regulate because of the peculiar nature of sports competitions, and this particular conundrum is just one more example. You just need to be a little bit imaginative. We can still have all the good things of promotion and relegation. Hopefully AFC Wimbledon are going to embody that by getting back in the Premier League soon from starting again in 2002. The problem with a closed league is you get rid of that romance and that magic, which is at the heart of the economic power of English football. I just want to add one thing. Salomon Brothers in 1997 brought out a report on how you value a football club. It was a very insightful piece of work by a group of hard-headed analysts. They said fans’ emotional attachment to their clubs—fan equity—you can put an economic value on it, because they won’t substitute. You know if you get relegated and you’re Leeds United you will still have 28,000 supporters and you can borrow against that. They did borrow against that and it was a disaster, but that is not the point. The point is that you can put economic values on these factors. They understood the peculiar nature of fans’ relationships, and because they were clever and imaginative, they were able to define it in financial terms. That is the challenge here. Let us try to understand the peculiar nature of this industry and to come up with regulatory measures, like the renegotiation of players’ salaries when you get relegated, which are a moderate response to that problem, unlike the radical response that would be a closed league. Q12 David Cairns: As a Merton councillor at the time that the local community was stabbed in the back by Wimbledon FC, I entirely agree with you about AFC Wimbledon. May I change the subject and ask a question about supporters who are, after all, at the heart of all this? At the risk of coming over all jumpers for goalposts, I remember as a boy hanging around outside Cappielow asking random strangers for a punt over the turnstiles. Obviously that does not happen any more and I do not encourage children to ask random adults for that, but is there any cause for concern that according to the Daily Mirror, an outstanding organ, the average age of a Premier League football fan is 43? Speaking as a 44-year-old, that is still young, but it cannot be good that the average age of a football fan is 43. The corollary of that as well is, maybe not outside London but certainly inside London, it is becoming increasingly a middle-aged middle-class pastime, and our future players are not coming from the ranks of the middle-aged middle-classes. It may be sustainable at the minute but long term is there not a problem if you get an ageing middle-class fan base? Sean Hamil: Yes, there would be. Professor Szymanski: I think you will get the pattern here. No, it is not a problem: think of the Premier League as a luxury car. Who has luxury cars? Typically, middle-aged wealthy men, no kids. Are Porsche saying, “Crikey, the average age of our owners is 43. Have we got a long-term problem that people won’t buy our cars?” Of course they are not, because people know that that is something you only get to have if you have a high enough income. If you cannot afford a Porsche—I cannot afford a Porsche— you go down the ranks. We have tiers of football as well that people can go to. It is noticeable that, while the Premier League’s attendance has grown by only 70% in the last 25 years, against a background when prices have increased more than seven or eightfold in real terms. What has happened in the Championship is attendance there has risen by 180%. That is partly because prices have not risen by so much. Back in 1985, you could go to a Premier League game or a top division game for £2.80, that was the average price of a ticket, which in today’s money is about £6.60. Imagine if that was still the price today. The stadiums would have lines outside of them going for miles round the corner because you just could not fit all the people who would want to go and watch. It is so popular. Of course that overflow has gone down into the lower leagues and it reflects the overall popularity of the game. You might say, “Is it terrible that it has become gentrified?” Q13 Mr Sanders: It is interesting that overflow has gone into the lower league. The fact is the lower league attendances are lower today than they were before the Premier League, if you go back 30 or 40 years. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 8 Culture, Media and Sport Committee: Evidence 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski Professor Szymanski: No, no. That is completely wrong. Mr Sanders: My club’s attendances are significantly less than 40 years ago. Chair: Adrian, we are going to have to move on, we are very short of time. Q14 David Cairns: I understand that as a model. I do not accept it; I understand it. If I can’t afford a Lamborghini, I buy a Ford Sierra, fine. If I’m a young kind growing up in Tottenham and I can’t afford to get into White Hart Lane, I am not going to go to Torquay to get into it, so I think, the analogy is faulty. But the question isn’t about whether or not it works as a business model today but whether there are any implications for the long-term health of the game if young working-class kids are not getting access into the grounds to see these things and inspire them? Maybe this is tied up to our inability as Scotland and England to produce decent players that can win tournaments. Patrick Collins: I think it absolutely is. I think too that Premier League clubs recognise this increasing problem. At the moment, the Premier League charges the most for tickets in all of Europe; it is the dearest ticket in Europe. The average price is difficult but in London it is perhaps between £40 and £50. There are family deals and concessions until the age of 16 and then comes the gap. It used to be one of the rites of passage that you went to football on your own, usually when you were younger than 16, but certainly from 16 you went on your own. Now they cannot afford it because they have to pay full price and they cannot do it. So between the age of, say, 16 and 30 they are priced out of the game. They still watch football, they go down to the pub and watch it on television. They watch the Sky broadcasts in the pub. Those are the people who are most likely to be lost to the game because you then take the risk that after all these years of watching football relatively cheaply down the pub, they are going to go off and buy a season ticket at Highbury or somewhere and it probably won’t happen. It is a real cause for concern that one. Q15 Alan Keen: I want to give you the chance to talk about debt, but first can I ask you a very basic question. Who are we doing this inquiry for? When I say “we”, I mean everybody. All the people here have a great interest in football. I was brought up in a nonpolitical family. The first time I was offended by something, which I didn’t know was political until years later, was when I went to buy tickets at the old Ayresome Park, Middlesbrough’s ground, came back and asked my mother why it said Middlesbrough Football and Athletic Company Limited on the doors. I was shocked to find that there were shareholders. I thought I owned it in the same way as I owned the recreation ground equally. I mention it because of the current debate. The other thing that offended me around about the same time was finding that Imperial Chemical Industries, that saved Teesside economically, owned the Cleveland hills at the beginning of the Yorkshire moors and that offended me, and it is particularly pertinent with the forestry debate that is going on. Are we doing this because we care about the football supporters? If they are offended, of course it will affect the money people afterwards, and you have just been touching on that. Why are we doing the inquiry? What do you think we should be recommending at the end? Sean Hamil: You are doing it because football is not just a business but it is a very significant national cultural institution. I absolutely acknowledge the tremendous success of the Premier League and the Football League, and Stefan is right about this. Crowds are up significantly and that is down to good management, good marketing and improved stadiums, and a lot of private investment as well as public investment, but it is obvious that there are problems. I make no bones about it: I do not think that you can leave everything to the market because you end up with negative equity and a lot of other nasty, unpleasant things. There is a role for Government intervention. Always remember that the Taylor report was the catalyst for the reform of English football. There is disquiet at the moment about what is happening on a number of fronts. People are not rejecting the genuine successes. I think it is legitimate that the elected representatives of the people should take an interest in a subject that is close to people’s hearts. Professor Szymanski: I have a very specific answer, which again is in my written evidence, but I think you should be guided by the Treasury Green Book when you think about this, which recommends the basis on which there is action justifying public intervention. It has to be either some kind of market failure, and specific types of market failure are listed in the Green Book, or some need to redistribute income because for some social basis it is not justified. My paper explains that there is not a market failure that I can see very obviously, and it does not fit the normal characteristics. If you argue there is an income redistribution element, I come back to my luxury cars point. There is an income redistribution point in the same way that poor people do not have access to luxury cars. Patrick Collins: I think you are doing it because it matters. These things matter because football is the game that the nation plays and it is the game that the nation loves. As we have already said, it holds a place in the history and in the affection of the country. You can see it when the World Cup comes around and for some people football is an expression of the nationhood in a sense, and the disappointment is always crushing when it happens. The game has lots of things going for it: a large passionate fan base, wonderful stadia, wonderful players. People know that and it is frustrating because we know we can do better. I heard the Minister for Sport talking about football being the worst run sport in the country, and it might well be. I do not know how he measures that. That is not good enough. If overnight the television money dried up—the Murdoch money dried up and Sky walked away—and all we had done in that time was create a lot of wealthy young men and rich agents and a few very wealthy directors, it would not only be a sporting tragedy but something of a national tragedy. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 9 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski Q16 Alan Keen: On the debt, because we are short of time, I will restrict it to one question. The fair play rules meaning that clubs will not be able to compete in UEFA competitions from 2013, what effect will that have? Will that solve the debt problem? In a way it has got to, the clubs have got to solve that problem. But we would love to hear what you have to say about it. Sean Hamil: We will not know until it is implemented, but my view is that, for all the reasons I have outlined, I just do not believe that you can run an industry long term loss-making without problems. I think that UEFA, for its own reasons, has realised that. The European Club Association, which represents the major clubs in Europe, supports them 100%. The proof of the pudding is will it be able to force it through. If it is able to do it, if it is able to establish the basic principle that you should not be able to spend more than you earn and that money on youth development, stadia development is exempted, then everybody will benefit because what will happen is the Delia Smiths and the Sir John Madejskis of the world will say, “I don’t have to sell” and you will get a step change in the quality of the owner, and things will improve. The problem at the moment is that there are too many people with an unhealthy appetite for financial risk. I am sorry to keep emphasising this point, but sooner or later that ends in tears. The Portsmouth example, they said there would never be an administration in the Premier League. Well, there it is, read it. It is a sad read. What went on at Manchester City with Thaksin Shinawatra was absolute skin of the teeth escape from a financial disaster. The same thing up at Liverpool. Now, how long do you have to continue to be lucky? The central point is English clubs will not be disadvantaged because everybody in Europe, if it is implemented correctly, will be subject to the same rules. What is necessary is for the English football authorities to now engage in active partnership with UEFA. I am not saying they are not active partners at the moment but just that maybe they could be more active partners, because what English football has to say is important for the future of European football. Patrick Collins: I very much agree with that. It is risking everything to speak about debt with two economists here, but we are constantly told that debt is no bad thing, that everybody has debt, that sustainability is the thing. Then we see Manchester United, a club that never owed a penny, suddenly saddled with £750 million worth of debt and Liverpool, run by the much loved Hicks and Gillett, amassing debts of £351 million. Those are extraordinary figures and the public thinks that is wrong, and I think the public are right to think that. But there was one thing I noticed. One of your next witnesses, Lord Triesman, in 2008 said, and I quote, “I don’t think anybody who is rational can look around this environment we are in and think they are immune. Football is obviously carrying a pretty large volume of debt. People will be making business judgements about whether it is sustainable or not but it is carrying quite a large volume of debt. We now have a position where it is very hard to track things. It’s not transparent enough and we don’t know, if we are able to track it, if the debt is held by people who are financially secure or not.” Triesman was roundly condemned for that but I think he had it absolutely right and I think he is still right. Q17 Paul Farrelly: The St John Ambulance situation was mentioned earlier by Sean. If I am running a business that is going bust and I do a special deal with some creditors, that is illegal because it is called preferential treatment. If I am a new owner of any usual business, I do not pay off the previous creditors unless it is worth my while, yet in football I am forced to do so, setting up a post facto preferential treatment of particular creditors. Is that wrong and should it be made illegal? Sean Hamil: There is an argument in sport, because of its peculiar economics, for special arrangements. You could have made an argument for the football creditors rule in the past by saying that there is a need to protect clubs who manage their businesses reasonably effectively from the odd exceptional reckless behaviour. But the trouble is the recklessness now is absolutely endemic and therefore a direct answer to your question: I personally do not believe the football creditors rule is sustainable. I think the football authorities, all three of them, have sort of recognised that in their more assertive approach to demanding that their clubs demonstrate they are paying their tax debt they are sort of halfway there. It is in their own interests to drop it now. Who knows what is going to happen with the court case. The point about the football creditors rule is that it is totemic, because what they are basically saying is, “If you’re in the club we are going to look after you. If you’re outside the club…” I don’t think it’s sustainable. Professor Szymanski: For once, I completely agree. I think it is a crazy rule and it should be eliminated. Once you start to treat football as a special case, once you start to say, “Oh well, it has got this special significance in our society”, that is when you go down this route of having crazy rules that do not work. The same thing is going to happen with financial fair play. It is 80 pages long at the moment. In five years, it will be 800 pages long. The lawyers are going to crawl over it and money, a lot more money, won’t be going to agents, it will be going to lawyers, but once you start to regulate these things, it mushrooms and you get into inconsistencies and regrettable situations. Patrick Collins: I agree totally with my colleagues here. It is very difficult to make the case for being a force for good in society when you attempt to enforce such an antisocial rule. The idea that football must look after itself first and that everything else comes in a distant second is offensive. Q18 Paul Farrelly: There is a bigger question on the financial fair play rules, which have been welcomed, as to whether they will bite, because they seem to me to be terribly open-ended and subjective at the end of the day. That is something for the future to resolve. But currently, for good or ill, across all sectors of business, leveraged buyouts happen. As long as they are conducted legally, it is very hard to stop them, but they certainly make business more risky. Is it time for the football authorities to act and put in greater cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 10 Culture, Media and Sport Committee: Evidence 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski disincentives? In particular, is the nine points deduction rule sufficiently strict or should clubs that go bust be made to start right at the bottom again? Professor Szymanski: I do not think that leverage has a huge amount to do with the reason that clubs go bust. The fundamental reason is ambition, the ambition to be successful or the desire to avoid relegation. It is inherent within the system that clubs will take every risk available to them. It is perfectly reasonable to say the football authorities can invoke rules and regulations, and probably quite sensible if they do, to try and limit some of those financial risks, and maybe this Committee can encourage them to develop those rules. But right now, of all the 53 administrations that Sean referred to, where are the victims? Okay, the teams get relegated and the fans are disappointed. Are the fans disappointed that the club lost money and went into financial administration or are they just upset that the club got relegated? I think it is the latter. I do not think anybody, apart from the owners, cares about the money. What is important is the level at which the team plays. But the point about that is nobody wants to abolish promotion and relegation. We want teams to fail. In other words, you could get rid of all the financial problems of debt and so forth, and the fans are not going to be any happier on average because they will still be losing out when their team gets relegated. Sean Hamil: In 1999, in answer to the minority report of the Football Task Force, the football authorities said, “We don’t need any regulation”. Post ITV Digital, they introduced points penalties because they recognised the insolvency process was being abused, notably by Leicester. Since that time, they have produced a whole series of reactive measures, which fundamentally come back to this problem of financial instability. They already know there is a problem with the insolvency situation, otherwise we would not have the points penalty. They already know all this. UEFA already knows it, because it is a problem all over Europe. What UEFA has done—John Henry, the American guy who bought Liverpool, acknowledged it. He said that it has recognised there is a need for action a little ahead of everybody else. What Henry said, one of the reasons he bought Liverpool was he thought that financial fair play might create an environment where at least he would not lose his money. I think the football authorities privately already know that they are at a place now where something needs to be done; it is just the form of it. That is the part of the role of this Committee. Fundamentally, it comes back to quite a simple problem at the heart of all this, and the football creditors rule and all these other things are just the same: it is the question of how you can get these clubs to at least break even, because ultimately debtfinanced success is financial doping. That is what it is. It is an attempt to rig the competition by spending more money than you generate. Therefore it goes against the entire sporting ethic, never mind financial common sense. Q19 Paul Farrelly: Patrick, should the penalties be harsher? Patrick Collins: Do you know, I think it touches on the fit and proper person test. If you had fit and proper people running football clubs, there would be fewer bankruptcies and administrations. The one that is always picked out is Portsmouth, of course. They had four different owners last year. This is one of the great stories of modern football. One was a fantasist who made lots of promises that were quite baseless. Another, much more intriguingly, it was reported, did not actually exist. People doubted the existence of this man. He was said to be a figment of somebody’s imagination. I do not know how true that is, but that is how bizarre things became and yet everybody was deemed fit and healthy according to the Premier League. I find that bizarre, and I think much flows from that. Q20 Paul Farrelly: One was the son of an arms dealer, as I recall. Patrick Collins: It is reported, yes. Q21 Damian Collins: Following on from the fit and proper person test, should there be sanctions against directors involved in a club that goes into administration? Without wishing to sort of pick on anyone in particular should, say, someone like Peter Ridsdale have been banned from football? Sean Hamil: If you get a club into administration twice, you are banned now. I think one of the exdirectors of Rotherham was in that situation. That is something for the football authorities to decide. There is a wider issue about who should own the clubs and their competence to mange, but the fit and proper person test is certainly something that should be looked at. I don’t think Thaksin Shinawatra was a fit and proper person. He obviously bought that club for purely political reasons. He spent all the money off a three-year TV deal in the first year. Potentially, he could have destabilised the whole competition. If they had gone bust halfway through the season when they could not pay their wages what would have happened? A team in the Belgium league last year dropped out halfway through and then there was 15 teams instead of 16 teams. There is an issue of sporting integrity there as well. Professor Szymanski: You can impose all sorts of regulations but you will not change the fact about owning these clubs—these are honey pots, these are some of the most attractive assets in the world. Powerful people everywhere want to own them, and it is true in every country. Whatever regulations you impose, that is going to continue to be true. If a powerful person cannot get ownership directly, they will find proxies, or whatever way they can, to seize control of these assets, and there is going to be huge competition. My view is that it is better to have open competition and be able to see what is going on rather than have some of the rather less transparent systems. I emphasise that we have one of the most transparent systems of anywhere in the world. The finances of English football clubs are far more transparent, for example, than the finances of German football clubs, which I know everybody admires as the great model right now. I think that is crazy. Most of the German football club finances you cannot find anything out cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 11 8 February 2011 Patrick Collins, Sean Hamil and Professor Stefan Szymanski about, going back five years. French football, that is admired but it is not very transparent. The Americans have very stable systems but no transparency, so you cannot see what is going on. So I think it is more to do with rather than putting on more and more tests and regulations, it is creating transparency so that people know what is going on. never have been allowed and it is only in the last 18 months that that problem has been got to grips with and only because HMRC has said enough is enough. You might want to look at the Leeds case three years ago where there was a spectacular attempt to use the insolvency process in a way that personally I do not think was terribly edifying. Q22 Damian Collins: We had a submission to the Committee from a law firm that does quite a lot of work with football clubs and they touched on points to do with tax, which Sean mentioned at the beginning of the session. I wonder whether this makes it a legitimate area for Government to look at because there were financial consequences for the Treasury. They talked about the level of tight financing and indebtedness of clubs that they said: “Had led to a practice of using cash set aside for Revenue & Customs 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.” What are your comments on that? Sean Hamil: What can I say? They are right. It should not have been allowed and it was allowed because football has the power to emotionally—I need to choose my words, but the non-payment of taxes as an unofficial overdraft was custom and practice and was tolerated within the industry, and HMRC didn’t challenge it. Now, you could argue that it should have done, but in reality football should never have allowed that to come about because that was a sign of a club, or many clubs, out of their depth financially. It should Q23 Damian Collins: From what you have said, it sounds like we could consider not necessarily special rules and regulations and extra burdens for footballs clubs but simply applying some of the normal business practices that everyone else has to work to? Professor Szymanski: Absolutely. The more we treat these organisations as special cases, the more exemptions and loopholes we are going to create for them. So I would say, yes, as far as we can, accepting there is something special about the way sport is organised, but as far as possible let us treat them as ordinary business organisations to the extent that they are businesses. Sean Hamil: A very clear area where sport is treated differently is in the collective selling of broadcasting rights. Anywhere else that would be an illegal cartel but it is recognised by everybody now, after two inquiries, that it is legitimate. There is a balance to be struck between what is appropriate, the specific regulation for the sector, and where it goes too far. I think the tax payment, everybody can see that that was not acceptable. Chair: We have to move to our next session, but I thank the three of you very much for your evidence this morning. Examination of Witnesses Witnesses: Lord Burns, Graham Kelly, former Chief Executive of the Football Association, and Lord Triesman, former Chairman of the Football Association, gave evidence. Chair: I welcome our second panel of witnesses this morning, in particular Lord Burns who chaired the FA Structural Review in 2004, Graham Kelly, the former Secretary of the Football League and Chief Executive of the Football Association, and Lord Triesman, the former Chairman of the FA. Q24 Mr Sanders: Mr Kelly, is the Premier League today the Premier League you envisaged during negotiations for its establishment? Graham Kelly: No, Mr Sanders, it is considerably different. If you were to read the Blueprint for the Future of Football you would struggle to reconcile that with the animal that exists today in the form of the FA Premier League. I do not know if the coalition that runs the country at the moment is the coalition that emerged from the negotiations back in May but it seems it is rather different. The football that existed in the middle of the 1980s has already been referred to this morning. It was thundered during the middle of the 1980s by one eminent leader writer that football is a slum sport played in slum stadiums followed by slum supporters and we had to break out from that situation. After the Taylor report, the Government report into the Hillsborough disaster of 1989, I commissioned the FA blueprint on the instructions of the FA executive committee. The FA executive committee was 12 leading members of the FA Council; there were no directors of the Football Association at that time. The FA Council comprised 92 members of the FA. The board members of the FA were those 92 members of the FA Council. The FA did not have a board whatsoever at that time and one of my first duties upon taking office as FA chief executive was to attempt to institute some reform of the FA but we were unable to effect any significant change. Upon taking office we tried to effect some reform. Be that as it may, the Hillsborough disaster sadly occurred and the Taylor report was the outcome. A lot of things happened in the 1980s, as you have heard already this morning. The Taylor report came about, the blueprint happened and the FA Premier League was formed in 1991–92. The model for the FA Premier League was the French league, the French football federation or the German football federation, both of which entail vertical integration. The league in both those two countries is an integral part of the Football Association and the key members of the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 12 Culture, Media and Sport Committee: Evidence 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman league were intended to have key roles within the Football Association Council. Nine members of the Premier League were intended to have seats on the FA Council, but because of challenges to the blueprint and because of various litigation and recriminations, the original plan for the blueprint was not implemented. Q25 Mr Sanders: With hindsight, should the FA have secured more commitments from the Premier League with regard to supporting the national team and the lower leagues? Graham Kelly: I think probably it should. As Mr Collins said this morning, one of the prime aims of the FA Premier League was to improve the conditions of success of the England team. At the time, the number of teams in the top division was 22 clubs; that was reduced. There was to be a phased reduction from 22 to 18 and that was one of the aims of the Premier League, to come down to 18. That came down over four years from 1992 to 1996 and I think probably the commitment should have been or could have been stronger. There was, as I say, a lot of recrimination between— Q26 Mr Sanders: Do you mean stronger in the sense it should have gone down to fewer clubs or do you mean stronger in other ways? Graham Kelly: Not necessarily fewer. There perhaps should have been a stronger commitment from the Premier League to the success of the England team perhaps in the initial stages maybe, but I don’t know. Q27 Mr Sanders: Lord Burns, how happy were you with the FA’s reaction to your review? Lord Burns: A certain amount of the recommendations that we put forward have been implemented and some have not been implemented. There has been, undoubtedly, progress since I did that report. We have had the introduction of an independent chairman, and the chief executive is now a member of the board. The process by which the rules and regulation are implemented has improved since that time. Some of the proposals we made about the national game were partly followed: having a separate board and a funding rule that means it gets a proportion of the revenues from the FA. It has been left to manage them itself, and that has worked pretty well. I think that whole national game board side has worked pretty well. The main recommendation, of course, which was not followed was with regard to the board. I recommended that there should be at least two independent directors and if the chairman was an independent director then there probably should be another two as well. The pattern whereby the board, which essentially I think now consists of a chairman, a chief executive and five members from the national game and five members from the professional game is really not a sensible basis for going forward. I do not want to put too much emphasis on this because England’s performance in the World Cup has very little to do with governance. The fact that we did not get the World Cup here in 2018, I am not sure has an enormous amount to do with it. But I listened to the conversation this morning in terms of how the game is being taken forward and how the FA really needs to become an effective regulatory body. If we are to have regulation of football, which I assume we do want, and as we implement the rules that have now been developed in UEFA, then it needs a board that is constituted differently from that which it is now. The present board, is as if with the Financial Services Authority we had a controlling interest by the banks whom they are regulating. I do not think anybody would regard that as really being a satisfactory state of affairs. So a lot depends on what you think the purpose of the FA is. Is it to run the England team? Is it to be an effective governing body and regulatory body of football? The more you want it to play the second role, the more that it has to have some people on the board who do not have vested interests in the regulation that is taking place. Q28 Mr Sanders: Lord Triesman, when the former Government engaged with football bodies on football governance, your response to the then Secretary of State was to refer him to the responses submitted by the Premier League and by the Football League. Why did the FA not submit its own? Lord Triesman: The former Secretary of State asked the three organisations to prepare a joint response to his questions, and I thought that was absolutely right. It would be very good if it was possible to come to some amicable agreement about how to carry forward the regulation of the game. The Football League was completely willing to engage in that with the Football Association; Lord Mawhinney was completely willing to do so; the Premier League was not. After some period of trying to persuade everybody to come together to do it, the Premier League produced—I think we have probably all read it—its own response to Andy Burnham. The Football League then produced a response to Andy Burnham and the FA, which had been doing very considerable amounts of work on football regulation for some time past and discussing it with all the partners, produced a document that was submitted to the FA board, having been discussed with a number of other people. The professional game representatives on the FA board took perhaps a maximum of two minutes to say that the document should not be submitted and to issue a board instruction that a response should be made simply referring the Secretary of State to the wisdom of the professional league, and in particular the Premier League. I thought that was a grave disappointment and, Mr Chairman, just in case it is helpful, I have brought the response that we would have made. Q29 Mr Sanders: I was going to ask were there any substantive proposals that you would have liked to have submitted but were unable to do so? Lord Triesman: There were a significant number of substantive proposals, some of them were to do with tightening the overall arc of financial regulation, because it was very apparent that we were in extremely choppy waters financially and that you could see very great football clubs with very long histories in severe trouble. It was by no means clear cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 13 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman that they would all pull out of that severe trouble. We could see a whole range of difficulties in the fit and proper persons area. I heard earlier the example of Manchester City being mentioned. Quite aside from the financial thing, as a former Foreign Office Minister, I thought that there were other very, very grave doubts about the person who had taken over Manchester City and, indeed, had been sent by the Foreign Office to encourage him not to dispose of his political opponents in quite as ruthless a manner. But none the less, he was able to take over that club. I believed that it was entirely possible to have one set of regulations for finance. It might, rather like our company law, have a different requirement for plcs to limited companies. Of course you could have something that graded the level of difficulty so that you would not be asking a very small club to perform as though it were a massive club, but none the less one set of regulations, preferably coherent with the emerging UEFA regulations. It would be possible to have one set of regulations about fit and proper persons and so on, right through the regulatory system. I answer the question in that way because one of the things I have found, not least with colleagues in the media, is trying to describe how the bodies all have completely different approaches and how things fall through the gaps between the different approaches is very difficult. When you try and describe that to football supporters, it becomes almost impossible. It is a thoroughly unsatisfactory system with the key consequence that the FA itself, in my judgment, having been its first independent chairman, has, apart from on-field discipline—red and yellow cards and the like—has backed out of regulating altogether. associated with that individual. While there are rules about who is and is not a fit and proper person, it is extremely unlikely that somebody at that stage, a head of state or immediate past head of state, is going to fall foul of the courts in that country. That is not what is going to happen. Consequently, you know that these are issues, that they have not been tested in law, but the body of public knowledge about the individual is quite large enough to say, “Is this an appropriate way?” I can answer the question a little more by saying that were this to happen in a plc, I have no doubt whatsoever that the board of a plc would say, “We’re not going to do that”. Q30 Chair: Lord Triesman, we are extremely grateful to you for bringing a copy this morning of the submission that was not put forward by the board. Are you providing that to the Committee? Lord Triesman: I am, Chairman, because I think that the response of the FA must have been all but unintelligible to the rest of the world. It was to me. But I thought it best that people should see the body of work, and very kindly a former colleague at the FA last week sent me a copy and I have brought it. Chair: Thank you. We will read it with considerable interest. Q32 Damian Collins: I would like to pick up on the fit and proper person test, just to follow up on the question I asked in the previous session. Do you think there should be greater powers for redress against the directors of football clubs who preside over their club going into administration—clubs like Leeds and Portsmouth are particularly strong examples—to act as a disincentive for people to engage in bad practice and as a message to say that if people have done that in the past, “We don’t want you in this game”? Lord Triesman: I think there is a very strong case for that. The principal reason that I say that is because most of the clubs that have got themselves into that position—and this would not be 100% of all clubs that have got themselves into that position—have got into that position by spending money, as I think was described in the last session, related to their ambition rather than to their business model. They want to beat other clubs; they spend what they believe is necessary to do that. The model falls apart—Leeds is a very strong example of that—and they are left with a huge financial crisis on their hands. People in other clubs reflect not only on the amounts that were spent but on the unfairness to the competitive regime that it creates. I know people think that “financial doping” is a rather dramatic term but it is a pretty accurate term for what is described. From my own experience, this is not a matter of an outside observer believing that that is the case. Most of the people I spoke to who ran football clubs were among the people who were fiercest about it, fiercest about the points deductions, argued often for greater points deductions or for other kinds of sanctions. People want it to be a fair competition on a level playing ground, and they are right. Q31 Dr Coffey: I have to declare an interest. I am undertaking a sports parliamentary fellowship with the Football Association. I have done one day. You specifically mentioned the former owner of Manchester City. Is it your view then that the Foreign Office, either proactively or reactively, said this person does not pass the fit and proper test? I am trying to understand what you just said, because you were saying as a former Foreign Office Minister there is no way he would have passed the smell test, but are you sure that the Foreign Office said that, either proactively or reactively? Lord Triesman: I do not know, because I had left the Foreign Office by that stage. All I can reflect on is that there were severe difficulties, which you can find in the human rights annual report, which were Q33 Damian Collins: Lord Triesman, following your comments earlier, you talked about the fact that the FA, other than regulating the rules of the game, does not get that involved any more in the regulation of football more broadly and I just wanted to ask a couple of questions about that. Do you think there is scope on certain issues that are linked to the way clubs are run where the FA should have more of a voice? David Cairns mentioned Wimbledon in the previous session. Should we have clearer rules that say you cannot pick up football clubs from one part of the country and move them somewhere else? Should the FA have a voice on whether it is desirable for Tottenham to move their club from north London to east London? Should those be the sorts of the things where the FA speaks for football? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 14 Culture, Media and Sport Committee: Evidence 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman Lord Triesman: That is a very sensitive question to ask me. The FA has a large book of rules, much as the Premier League and the Football League do. The question is whether it applies any of those rules in any systematic way. My view is that it should do so: it should do so systematically, it should do so transparently and everybody should know the reasons for a decision, including on-field decisions incidentally. I see no reason why those should not be publicly disclosed; not just the penalty but the reasoning. One of the key reasons for doing so is that under FIFA’s statutes, the FA is supposed to fulfil that role. That is one of the things of the independent football associations of each of the countries that are members of FIFA are supposed to do. Subcontracting it is obviously a model that does not fit with the international regulation of the game. I have no doubt that in the course of hearing evidence you will hear people who will say “The FA does do all of those things and it is not realistic to say that they don’t, and here is the book that sets out all the regulations.” I am just saying at first-hand experience that it has subcontracted and does not question the subcontractor in those key roles. Q34 Damian Collins: Do you think the way in which the game is run drives this incentive for clubs to take financial risks and spend more than they can earn? Does the way the game is structured encourages that? I am thinking particularly of the transfer windows. We have just seen the very large expenditure at the end of the January transfer window. Do you think that acts as an incentive to clubs to pay higher signing fees and salaries, because they know they have literally a rapidly closing window of opportunity and that can be exploited by other clubs and agents to drive up prices in a sort of shotgun transfer? Lord Triesman: It does do so. It certainly does for clubs fearful of relegation, although I do not think they were the main people spending money in this last transfer window. It does it for clubs who are fearful of not getting a European slot at the end of the season, because that is the key to the door of very, very much larger sums of money. The answer to it, I am very confident in my own mind, lies in the arrangements that Michel Platini has advocated. Sadly, because he is French or because it was not made here, he also was attacked very roundly and very frequently. But saying to a business that over a period of time it really ought to wash its own face, that it should not drift further and further into debt as an attempt to buy that kind of success, seems to me to be absolutely right. Believe me, I am no mad advocate of massive regulation. I would like to think of myself, particularly when I was in Government, as a deregulator rather than a mad regulator. But with a little further adjustment in, for example, debt ratios—excluding the building of new grounds and improving facilities, which is a different sort of borrowing usually secured against the asset—you could probably get fair competition across Europe and without the excessive risk. Lord Burns: Can I just comment how it seemed to me from an historical perspective? The FA grew up in much the way that many of the governing bodies of sports did whereby there was a Council of people who came up through the national game- effectively, through the county football associations— and they had a whole series of committees. The tasks that they set themselves were basically to do with running the England team, running the FA Cup, the on-field rules, regulations and discipline. They really spent relatively little of their time in these other matters that we have been talking about with regard to regulation. Then we had the emergence of the Premier League and the huge amounts of money that have come from television, including the FA Cup, the European competitions and the vast amounts of money that are involved in these. The game became a very different game. The role of the FA in principle then, of course, became much wider as far as regulation is concerned and they also set up a board of the FA that initially had the job of trying to simply deal with the financial aspects of the Football Association. I would not like the idea to emerge that somehow historically the FA had played a very important role in off-field regulation of football or of the structure of football and it has retreated from that area. It seems to me what has happened is that the game has changed and the requirement and the interest in some of these off-field aspects of regulation has become much bigger, because the sums of money involved are much greater. It has become a much more international business, both in terms of the matches that are played, in terms of the ownership of clubs, in terms of the interest worldwide in watching the games on television and therefore the value of the rights. That has set up a different set of issues. My perspective on this is that the FA has struggled to come to terms with the extent of the change in the game and therefore the burdens and the requirements that have been placed upon it. It has operated a sort of subsidiary model as far as the management of the leagues is concerned. We now have the slightly strange situation where the lead has been taken by UEFA in terms of the fair play rules and they are beginning to carve out an approach to it. Our FA, I have to say, looks to me to be being dragged along behind that rather than, as one might have expected given the historical position of the FA, having been more in the lead on these issues. Q35 Damian Collins: Do you think UEFA can create an equitable system for the European leagues? There has always been a lot of competition between the European leagues and one thing we might credit the Premier League for is that there is a lot more money in the English game and a lot more of our players play here. I looked up that when England played Germany in 1990 in the World Cup, seven of the starting 11 had either or did go on to play football in European leagues. In the last World Cup when we played Germany, none of the England starting 11 had. Now, you can draw your own conclusions as to whether it is a good or bad thing for players to play abroad but it used to be a big factor that we supplied the European leagues with players and now they come to us. We cannot turn the clock back and we must be concerned that we might hamper the Premier League in that regard. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 15 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman Lord Burns: First of all my perspective on the way that UEFA has approached this. It has not been that its seeking to regulate our leagues or our games but it is seeking to regulate fair play among its own competitions. Therefore, it all comes down to the licensing of the clubs who might be eligible for the UEFA competitions. The rest, I am afraid, is a matter of judgement. My observation would be that the huge amount of money in England for football has meant that this has become the real marketplace where everyone is competing to be—much the same, say, as with financial services. The result has been, of course, that it has become more and more difficult for our players to get into the Premier League teams. Also the people who are very good, the outstanding players, can make a very good living here by comparison with going abroad, whereas once upon a time some of the more successful teams were overseas. So there has been a shift in the balance. Graham Kelly: The shift has been over here because the majority of the money is here. The Sky money, the satellite money, is here and it has attracted more of the players here. Lord Burns: And kept our good players here. Graham Kelly: Our clubs are more able to retain the best players and to attract the best players here. Q36 Damian Collins: The Minister for Sport, Hugh Robertson, said that he thought football was the worst governed sport in the country. I know Patrick Collins was asked this question on the radio this morning, and he said that, with all due respect to the Lawn Tennis Association, it was. Do you think that is a fair assessment by the Minister for Sport on the governance of football in this country? Lord Burns: I do not want to answer that directly. But if we were looking at this in terms of outcomes I find it very difficult to imagine that that was the case because we do have the most successful football in the world. It is taking place in the UK on our television screens, that a huge amount of people can watch. We have wonderful stadiums and we have wonderful playing surfaces. I compare this to the kind of football that I watched when I was much younger, and it is completely different, looked at in terms of what is it that is being produced. It is really quite remarkable what has taken place over this period in terms of the quality of the football that is now played in this country and that you can turn up and see at the stadiums in this country. You cannot say that that has been a result of brilliant governance or management by the football authorities. It has been a combination of events, as has already been mentioned. But in the light of that, it becomes quite tricky, and I would say quite difficult, to substantiate the charge that this is the worst managed sporting organisation in the country. I would not like to have to justify that. David may have a different view. Lord Triesman: I think in terms of outcomes we obviously have fantastic success in the Premier League and that is to be applauded. It is an amazing competition; last weekend was an amazing example of that competition. If we look at outcomes for England as a country playing international football, the outcomes are very poor and I do not think they are satisfactory to England football fans. I count myself as a straightforward England football fan in that sense and I think that we have done very poorly. As a system, if the Minister was thinking about whether we have a good system, we have systemic failure. The board is heavily conflicted. By the way, Terry—if you do not mind, Chairman—I ought to say that after a small while I learned that I should never use your name in FA headquarters. I could talk about the reforms but if I wanted some sort of means of frightening the children I would quote you. We are deeply conflicted. Terry was saying would you have a banking regulatory system. The model that always went through my head was would you have Ofcom exclusively made up of Sky, ITN, the BBC and possibly ESPN now. The answer is you would never ever construct something that way, which is why the original recommendations on independent members is such an important proposition. The reality is we have now seen some extremely good and extremely sophisticated people coming into the management of parts of the football business: Ivan Gazidis at the Arsenal, not my club, as many people here will know. There are people of great quality who have come in, but generally speaking as you go round, is this broadly a successful group of people running such an incredibly important institution as well as business in our society? Other sports have changed in those last areas, in their systems and in the people. They have become diverse; we did not. They have not the same conflicts of interest in the way in which they govern; we do. Hugh Robertson has made a point that should not be dismissed. Cut into the layers of it, it is a serious point and should be taken seriously. Graham Kelly: I’m sure, Mr Chairman, the FA fully accept that they must take on board the concept of independent directors. They know they have to go for independent directors. They know, the Premier League know that there must be independent directors at the FA. I’m sure they will welcome that recommendation. They have to be committed to that now. They have to go for that now. Chair: They didn’t welcome it before. Lord Burns: It was very interesting because the people who are on the FA board from the national game see this as the pinnacle of their life in football. This enables them to be on the various committees, go down and shake the hands of the England football team, go down when the FA Cup final is taking place, nice seats to watch the games, and they are highly respected by their colleagues. They see that they have worked for years and years and years through the county associations and therefore this is an honour and it is the peak of their ambitions in football. To then say to them as I tried to, “Well, I’m sorry, you can’t have five or six people from the national game on the board of the FA, it should be reduced to three” and all of a sudden there is panic as to, “Which three of us are going to have to leave and over which period and what does it mean?” The professional game was not so concerned about the number. They would have reduced their numbers, but of course it wanted equality with the national game. You cannot have a system whereby you simply increase the total numbers cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 16 Culture, Media and Sport Committee: Evidence 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman of people on the board otherwise it would have become unmanageable. So, whereas most of them would agree about the principle of independence they had two problems. One was, “What does it mean for me and therefore what does it mean for my colleagues and for the number of people who will be able to be on the board?” The second, which was put to me more than once, is they would say, “What is the point of having independent directors because independent directors clearly don’t know anything about football and what is the point of having people here who don’t know anything about football?” Whereas the idea was, in principle, acknowledged—I’m sure Graham is right that many people would like to see it—there is an awful lot of built-in resistance to this. I am not holding my breath about a big change in this area unless there is some real push from someone. Q37 Chair: Do you stand by the recommendations in your original report? Lord Burns: Yes. Everything that has happened subsequently confirms that this is the direction of travel. Indeed the only slight regret I have is that maybe I should have been more ambitious about it. I was hoping to have a set of recommendations that went in the right direction, that went far enough to make a real difference but which had a reasonable chance of being accepted, because I knew the whole problem about turkeys voting for Christmas. It may be that instead of saying there should be two or three independent directors, if I was looking at this now I would be looking for a larger number of independent directors. Graham Kelly: I wouldn’t want there to be any misunderstanding about this. I am very, very proud of the Premier League for a lot of reasons. Last year, £36 million was distributed by the FA and the Premier League via the Football Foundation. You talked to the previous witnesses who talked about the trickle-down effect: £36 million trickled down and was distributed by the FA and the Premier League throughout football through the Football Foundation. That goes down throughout football to all levels: to stadiums, to grassroots, new pitches, new small sided pitches. It isn’t the Premier League that was originally envisaged, I know that, I’m not stupid, but before it came into effect, ITV had a cartel. Patrick Collins talked about Derby winning the first division championship, and they did because they had a brilliant manager and they had a good team, brilliant team, but by and large Liverpool had pre-eminence over a lot of years in the 1980s. There was the big five and in 1988 to 1992, ITV signed a secret agreement with five clubs. Nobody knew about that in 1988 and the money—only a small number of clubs were guaranteed exposure under the television contract in those four years. So until that was broken, there was not the spread of television matches like we saw last week with West Brom versus Wigan midweek. So there wasn’t the spread of matches like there is at the moment, so there isn’t the concentration of power in the Premier League like there was in the old first division. So, football isn’t quite so romantic as sometimes we like to think it was. Q38 Chair: Lord Triesman, Lord Burns suggested that he might have been even more ambitious had he been able to. Going on your experience when you were chairing the FA, do you think the Burns recommendations would have done a lot to make the FA a more effective organisation and would you like to go further, as he is now suggesting that he would? Lord Triesman: We would have been more effective if we had adopted all the recommendations and it would have been good to go further. The reality is that what counts in this country as being an insider in football or somebody who comes in who is independent is probably a rather blurry line. I do not know whether I would have counted—I was independent, I was the first independent chairman, but I had played football right the way through to my mid30s, got to the bottom ranks of the senior categories of referees and had my coaching awards. Apart from occasionally going and earning a living, I always felt that I was deeply embedded in the sport and probably people who would have come in as independent directors would have also had that love and engagement in the sport. Lord Burns is completely right, also to say, as people used to say to me, that there was no appetite for changing the personnel at any level. That was not because members of the council had not made a great contribution around the counties. I can think of one or two of them: Ray Kiddell from Norfolk who had been one of the great driving forces in women’s football, for example, and should get great credit for that, and David Elleray in refereeing. But if you try to raise the question of, “Why is it that this room is entirely made up of men, bar two, that there are two black faces, one of whom came in partly because of the report, Lord Ouseley, why is it that hardly anybody here has played professional football or has been a coach in professional football?” the answer, of course, is you do need those voices and you need that knowledge and that experience in any professional and amateur sport but they weren’t there and no one was going to change it. I understand that people see it as the summit of a great deal of very valuable work. Of course that is true, but other sports have managed to change and other sports reflect what Britain is like today in ways that have not damaged those sports. Q39 Paul Farrelly: Thank you, Lord Triesman, for providing us with the FA’s proposed response. It is has helped save the FA time, effort and expense in complying with a polite request from this Committee to provide it, so hopefully it will go on our website as soon as possible for the world to read. The title of this inquiry is football governance and I wanted really just to probe further into how the board of the FA operates. Lord Triesman, you have given me the perfect example when you cited the case of the representatives of the professional game taking just two minutes to look at your document and then it was decided not to submit it. By my arithmetic, the board is made up of 12 people, five from the professional game, and that leaves seven others. What happened? The numbers were with you. Lord Triesman: Just so you get the sequence right, the professional game board meets usually the day cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 17 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman before the FA board and it comes to a conclusion. It is led by the most powerful force in professional football because the most powerful force in professional football controls such a high proportion of the money that flows through. At that stage, there were 11 because we were between CEOs; there were 11 people rather than 12. When you get into the room the point was made, as it happens, by the chairman of the Premier League, that this should be disregarded from that point on and we should simply acknowledge the work that had been done by the Premier League principally, but by the professional game, and reminding the members of the national game, the amateur representatives there, where their money came from. Q40 Paul Farrelly: So in good Leninist style, the representatives had had a pre-meeting—we encountered this in the Labour Party not too long ago—but still there were six. So are you saying that the representatives of the national game are all too easily cowed into not standing their ground? Lord Triesman: On issues which are regarded as absolutely critical to the professional game, they may not vote with them but they will not vote against them. Q41 Paul Farrelly: You mentioned the chairman of the Premier League, Sir David Richards. Can you just give us a flavour of how, following these pre-meetings where the line is decided, he conducts himself at FA board meetings when issues of vital interest such as this come up? Lord Triesman: Let me preface this by saying that I believe the problem is systemic rather than the personalities. It is to do with the balances and the interests and the conflicts of interest. My experience is that he will put his point politely in a board meeting but discussions outside, across football generally but certainly with some people, are extremely aggressive discussions, really aggressive discussions. The points are made in a very colourful way. Q42 Paul Farrelly: How colourful? Lord Triesman: Very colourful. I would not— Dr Coffey: So it would be unparliamentary language, would it? Lord Triesman: I wouldn’t use that language. Q43 Paul Farrelly: One of the things that we hear from time to time is that the premiership represented by its chairman occasionally might threaten to withdraw its clubs if the FA did not toe the line. Can I quote from The Beautiful Game by David Conn, who is a Guardian journalist, “I have it from three members of the FA’s main board that Dave Richards was constantly threatening to withdraw the premiership clubs from the FA Cup, or saying the clubs would withdraw if he didn’t get his way on an issue, usually over money. The sources complained that they could not debate with Richards in any detail. He would fly off, be dismissive or issue a threat.” On the following page, 365, the book also quotes Dave Richards’ response to that as, “Bollocks”. Do you recognise that sort of behaviour? Lord Triesman: That has a terrible ring of authenticity. Q44 Paul Farrelly: Is it right that the chairman of the Premier League, who does not represent a Premier League club, although I think he was involved in Sheffield Wednesday many years ago—and we wish Sheffield Wednesday the best of success in the future—should be on the FA board, and certainly after 10 or more years should still be on the FA board? Lord Triesman: I think there is a good principle in trying to get a circulation of people on the boards of any enterprise. It is inevitable, and I am not making this as a comment about anybody in particular, that you get a little stale if you are doing the same thing year after year after year. Of course you bring growing experience but you do not necessarily bring new ideas. So circulation would be a good thing. The structure of the FA board puts the chairman of the Premier League on the FA board. That is a structural decision; whoever it was would be there. The reason I am so supportive of Lord Burns’ view is that we could have done with probably even more independents than appeared in his report is because it is extremely hard for anybody who comes in representing the Premier League to do other than represent the Premier League. It is not the FA that is being represented at that stage. There will be a great deal of courtesy about its history and why it is so important, but that is not what is being represented and that is the problem. Q45 Paul Farrelly: Is it the case that if you have been around for a long time and you have a certain way of behaving and a certain track record in getting your way, you might lack some of the self-awareness where other people independently might say that you don’t recognise that your behaviour might be a problem and also for the reputation of the Premier League itself as well? Lord Triesman: The reality is this is a very, very macho sport and I think some people have cultivated what they think is the language of the dressing room as being appropriate everywhere. Q46 Paul Farrelly: After a decade or more, do you think it is right for the Premier League to question who it has as chairman and who it chooses to represent it on the FA board and whether, indeed, Sir Dave Richards, with that description of authenticity about the behaviour—some bullying behaviour as many people would categorise it as—has really had his day? Lord Triesman: Whoever the Premier League decides it wants as its chairman or therefore wants on the FA board under its current arrangements must be a matter for the Premier League. It has a board of two people with, I think, a third person attending. I think that is right. It may be three but I think it is just two with one other person attending. It comes to its decisions and it must be for the shareholders in, I suppose I should give it its proper title, the FA Premier League. It is still its actual title. We held a golden share; I could never find out to use it. But the decisions are taken by that board of two people and I guess with the support of the clubs. I’m not trying to avoid your cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 18 Culture, Media and Sport Committee: Evidence 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman question. I do think, though, that bodies that are constituted properly in their own right need to take those decisions. I would like to think that they looked at things afresh from time to time, because it is in the interest of the sport to do so. Q47 Paul Farrelly: I would like to put a couple of questions to the other panel members but, Lord Triesman, you mentioned you have heard also that the board of the FA and perhaps the FA itself—you tell us—could be categorised as white, middle-aged and male. I do not have a bone of political correctness in my body, but you said that there were certain interests that should potentially be more widely represented throughout the FA. Did you try yourself, when you were the chairman, to bring more people through and, if so, what was the response at the board? Lord Triesman: There was no appetite for change. I think that sums it up pretty much. When Ian Watmore was the CEO—in my view, an exceptionally talented person—and stayed for just nine months, he also made real efforts to see if change could be achieved. You may well be seeing him and you can ask him the questions for yourselves, but he did not believe that change was going to be achieved. He had, as an alternative, come up with a proposition, which I supported because I thought it might at least make some progress, to get a group of people in who would be advisers who were drawn from the game, who were more diverse, both in ethnic and gender senses. That idea was dismissed. I do not know that it took much more than the two minutes either. That idea was dismissed on the grounds that the talent that was needed was in the room and so there were a small but very significant number of people who, in my judgment, would have been very valuable advisors to us, but that was not possible either. Q48 Paul Farrelly: I hope we will get a chance to ask him. What do you understand was the straw that broke Ian Watmore’s back? Lord Triesman: I think you need to ask him that. He was managing director of Accenture. That is a post I believe you get by being elected by your partners. It is probably not the easiest job to win in the world. He had vast experience in business way before he came into senior positions in the civil service. If I were on your Committee, I would ask him whether he believed, based on all of his experience, he thought that he could contribute to getting any change at all. Q49 Paul Farrelly: Lord Burns and Graham Kelly, can I finish my questions by asking two linked questions? Who would be responsible for appointing independent directors so that they are not creatures of one constituency or another? In appointing an independent chairman and independent directors, what is the problem that we are trying to fix? Lord Burns: The problem that we are trying to fix, and we have been through in some detail already, is the fact that the board is dominated by people whose main interests lie on one side of the game or the other. If the board is going to carry out a regulatory role then it needs some rebalancing, and for the reasons also that Lord Triesman has explained, independent directors do bring a different perspective on life. They are usually working elsewhere, they are seeing how other boards work, they see standards and practices and the way that things are done, and they are able to help in terms of the whole culture of the way in which a board operates. I have spent the last 13 or 14 years on a whole variety of company boards and the independent directors really do bring a very different perspective. They ask the questions that very often are not being asked by the executive team or the people who are not independent. Indeed, following my report, I notice that there has been an introduction of independent directors on to the national game board. I think there have been independent people brought on to the regulatory body that has now been established. So the principle does not seem to be lacking in the FA. It is just that when it comes to the FA board itself, the vested interests of the people who are on that board are making it very difficult to get any real breakthrough on this. Having one person who is independent—and all credit to Lord Triesman for seeking to carry out that role—it’s an enormously lonely role to be the only independent director. Frankly to be chairman and the only independent director I think is even more lonely. Q50 Paul Farrelly: Who should do the appointing to make sure they are truly independent? Lord Burns: In the end that has to be a process of nominations by the board itself, but the council then should have a role in terms of approving them. The council are effectively the shareholders or, in a sense, the parliament of football. I think they are the people who are best placed to do that. I can’t quite see what other body would do it. I do not think there would be any great shortage of candidates. I think there would be a lot of really very good people, as we see from lots of regulatory bodies, who are able to do those jobs. I should also say that there has been some shift, too, since my report,in the make-up of the council itself. Some of the bodies that Lord Triesman mentioned are being represented: the referees, the professional footballers themselves and various minority groups, women’s football and so on. So there has been a bit of opening up of that but it is still very much dominated by the same groups and the same methods of working their way through the national game. It is a structure that makes change enormously difficult to bring about because of the positions. There are one or two people who were on the council, who were representing positions, which it is very difficult to see how in this day and age they should have been representated. I will not name any but you just have to go down the list to see some of the anomalous positions that are there. They came to me and protested about the suggestion that some of them should no longer have seats on the council. It was clear to me that one of the overriding concerns they had was that they would be seen as the last person who had been a representative of this particular organisation and they would go down in history as the person who had lost their seat on the FA Council. This was something that they were not quite prepared to live with. So you have these enormous forces for no change that are built into it all. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Culture, Media and Sport Committee: Evidence Ev 19 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman Graham Kelly: No, I can’t add to that, Mr Farrelly, It’s just too entrenched. The structure of the council at the moment is just too entrenched. It needs opening up to support the independent chairman. I do not know how Mr Bernstein is going to approach it. They have made the appointment of a different independent chairman now, but he needs the support to make progress. Q51 Jim Sheridan: The turkeys at the Scottish Football Association have some difficulty in agreeing with Christmas as well because they want to cut the numbers but see it as somebody else’s job that they want to cut. On this bullying, harassment and threats of the Premier League, if I was a supporter of a lower league club hearing that this sort of behaviour is going on and that the FA, the body that is supposedly looking after my interests, is being bullied and threatened, that would give me some concern. I would be looking for the current board of the FA, or if necessary the Government, to take some sort of action to stop this behaviour. What help or advice could you give the current board to stop this? Lord Burns: I believe that the board has to be the agent of change for itself and it then has to carry on the process of changing the constitution of the council itself in terms of opening it up to other groups. I fear that I share a view that I heard expressed in the earlier session today: it is not easy to see where Government has any real purchase on this. I think you have to ask the question whether there are any built-in advantages that football has, which in a sense have been provided by Government, either in relation to tax or the way that it deals with administration or whatever. To simply have Government march in and try to exercise a role would be quite difficult. I think it has been mentioned again earlier that one of the requirements of FIFA and of the international bodies is that the Football Association should be independent of Government. So Government has to be very careful about how it sets about this. I worked with John Major back in 1991 in terms of putting together the proposals that eventually led to the all-seater stadiums. If I remember, we channelled some of the pools betting duty into the Football Trust to support the all-seater stadiums on the basis that the clubs were themselves going to also put in money. This provided Government with a certain amount of leverage because it was doing something itself. But without that leverage, and without something that Government is putting in or has some role or where there are some special privileges that football is having as a result of Government action, I think Government has to tread very, very carefully. Q52 Jim Sheridan: The status quo is not an option, is it, if you are a supporter of a lower league club? Lord Burns: There is one route that is proving to be quite important in bringing about change. As I mentioned earlier, that is coming, through UEFA which has done a lot of work on fair play, particularly with regard to financial matters. It has its leverage because it has to agree that the teams that may be in the Champions League, or the other competitions, are licensed to do so. It then passes on the job of doing that licensing, I think, to the FA. That in turns gives the FA a certain amount of power. The process has to be one of persuasion. I think that Government simply stepping into this area and seeking to impose solutions will run up against considerable obstacles. Lord Triesman: Obviously, I have thought about that issue at some length. It seems to me that there are three ways in which you can potentially get people to change what they do. The first is that you persuade them and if there is a process of persuasion and authority that is fine, that will always be the best, but I think that is pretty hard. UEFA will help in that, I suspect, but it would not necessarily have an impact on the clubs going right the way down though the system. The second is finance and finance has been used for leverage purposes. I do not mean debt leverage but leverage on the FA. For example, there was a lot of reluctance to accept the new anti-doping regulations of WADA and we were put under considerable pressure to do that. The paradox, of course, was that we would lose Government money if we didn’t do it but the money we lost was essentially money that was going to the amateur game; the issue about doping testing was in the professional game. There was a mismatch and it was very hard to make that work. I hope that it now potentially can work. The third is, and I think this is an interesting debate to be had, is that it is certainly true that FIFA does not want the intervention of Government in football but there are a number of countries that have a basic sports law. It covers all sorts of things like mounting Olympics and world cups and so on, so you can then do with secondary legislation what we trawl our way through dealing with primary legislation. You can use it for all sorts of purposes but it can also, and it does in some countries, allocate the key responsibility for the regulation of sport to the sports governing bodies so that they must do it and they must be accountable for it. After that the Government stands back. I have not known FIFA withdraw its authority or threaten to exclude any one of those countries from its full role in running the sport. It would be a great pity to have to consider legislation as a means of doing it but it would not be right to rule it out. It certainly would not be right to rule it out on the ground that FIFA would automatically object to it if the consequence was that that sports governing body—in this case the FA or the SFA—had the absolute clear responsibility for the regulation of the sport. Q53 Alan Keen: If I could make three quick points. First of all, did we not get a timely reminder last week of leverage being available with the woman who was buying TV coverage of football from Greece? I went to Brussels as part of a small team of people to lobby the European Union when there were threats to the ability to negotiate the Premier League games as a total rather than let it go to individual clubs. That is a very big issue if European law was brought to bear. I think Damian was a little bit unfair on Peter Ridsdale; he was sort of saying he is a bad man. I think there is no comparison between Peter Ridsdale who did what the Leeds supporters wanted him to do—it was bad financial and technical football decisions that he made cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:48] Job: 011145 Unit: PG01 Source: /MILES/PKU/INPUT/011145/011145_o001_michelle_HC 792-i corrected.xml Ev 20 Culture, Media and Sport Committee: Evidence 8 February 2011 Lord Burns, Graham Kelly and Lord Triesman and it failed—but you contrast that with the Glazers who have no interest in Manchester United or their supporters. There is no comparison. I think we did Peter a disservice. Secondly, David, you gave Michel Platini the credit for the fair play rules. The all-party parliamentary group plan in 2009 recommended that. My sparring partner and friend, Richard Scudamore, straightaway said it was impossible to define. It was not impossible to do because they have found ways to define it, so it is going to happen. I wanted to ask about FIFA. Is it true that the FA has not really over the years made proper efforts to engage with the international game through FIFA? We complained when we did not get the 2018 bid—I was as disappointed as anybody—but really we, as part of the international game, should be looking to spread the World Cup around the world. Maybe one time it should be a well-established nation like us and the next four years it should be a developing nation. But the main question is has the FA failed to engage with FIFA. Going right back in history, we felt so important that we didn’t even join. Is that right? Lord Triesman: Over a long period, apart from the process of bidding for the 2018 World Cup, the only real link with FIFA has been Geoff Thompson who is one of the vice-presidents. Aside from that and efforts made in special circumstances, I don’t think there has been any real engagement at all. There is one area in which we do engage, along with the Scottish, Welsh and Northern Ireland FAs, and that is in the International Football Association Board where those four FAs and FIFA are responsible for the on-the-field laws of the game. That is a fantastically nice piece of history to still have in place. But it is certainly true that to have a great sense of the internal councils of FIFA you have to have vastly more engagement than we have had. Sometimes we have backed out and had none. Q54 Chair: Lord Triesman, I can’t resist: Alan mentioned FIFA and the World Cup bid. Do you have any observations on the outcome? Lord Triesman: Very, very acute disappointment. I think there will be a time, Mr Chairman, when the contacts that I and others had with members of the FIFA executive should be described in detail, because some of the processes I don’t think really stand up to proper scrutiny. Q55 Chair: When should that time be? Lord Triesman: I think it would be a long part of a session here. I am not averse to doing that, but it would probably be rather longer than you intend for this morning’s session, given where we are at this moment in time. When we set off on the bid, there was a huge amount of encouragement from FIFA who said that they weren’t certain about how the finances of South Africa would work out or how the finances of Brazil would work out. There were risks. Their risk registers on whether these tournaments would return a substantial income to FIFA were very high. There was, for those reasons, a lot of encouragement for England to go for it, because we could do it, we could produce tremendous returns, we can organise events of that kind and complexity and handle security and all the other things that you have to do. Had they said at the time that the aim was to break into new territories, I would have advised the FA board not to start in the first place. We started on what turned out to be a completely false prospectus. Chair: Tempting though it is to go on for some time, I think we should probably draw a line there. I thank the three of you very much. cobber Pack: U PL: COE1 [SO] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 21 Tuesday 15 February 2011 Members present: Mr John Whittingdale (Chair) Dr Thérèse Coffey Damian Collins Paul Farrelly Alan Keen Mr Adrian Sanders Jim Sheridan Mr Tom Watson ________________ Examination of Witnesses Witnesses: Greg Clarke, Chairman, the Football League, and Andy Williamson, Chief Operating Officer, the Football League, gave evidence. Chair: This is the second session of the Select Committee’s inquiry into football governance. I welcome for the first part of this morning’s session, Greg Clarke, the Chairman of the Football League, and Andy Williamson, the Chief Operating Officer. Q56 Mr Sanders:. On balance, has the introduction of the Premier League weakened or strengthened the football pyramid? Greg Clarke: On balance, and this is a personal opinion, it has strengthened it. I think we have some of the best club football in the world. We have some of the most valuable media rights in the world on the back of that. I have worked all over the world, working for large corporations and running large corporations, and everywhere you go you can see English football on the television. That is a big strength, but with every big strength there are some downsides too. Q57 Mr Sanders: And what are the downsides? Greg Clarke: There is the usual sort of club versus country conflict. If you have teams largely full of the best players in the world, not all of them are going to be English. That means on occasion that English players get into first teams later than they could have done, but that is a classic club versus country issue that many countries have. Q58 Mr Sanders: That is not an issue of the pyramid, is it? That is a separate issue. Greg Clarke: You could say that. I am only bringing it up because the pyramid, when you don’t get English players at the top of that pyramid they don’t get into the national teams quickly. Andy Williamson: We have had to rise to the challenge that has been set, effectively. I was there before the creation of the Premier League so I know what those days were like. Indeed, at the point that the Premier League was formed in 1992 there was a lot of uncertainty. At that time, we lost two clubs, in Aldershot and Maidstone United, but it is fair to say that we have risen to that challenge within the Football League and we have seen the popularity of the game get back to the days of the immediate postwar period. Q59 Mr Sanders: When Aldershot went, effectively, bust and Maidstone went bust, Aldershot have come back, but remind me, did they drop down into a lower division or did they just go out altogether and start again at the bottom? Andy Williamson: They went out of business altogether as Aldershot FC. Q60 Mr Sanders: My next question is about parachute payments, which exist from the Premier League to the Championship. They also exist, very helpfully, for some clubs who drop out of the Football League into the Blue Square league. But is there a danger that those parachute payments distort competition, both in the Championship and in the Blue Square? Greg Clarke: That is one of the most contentious issues that the Football League has debated, the extent to which parachute payments distort competition. Currently, the Premier League gives its relegated clubs £16.5 million in the first season and in order to equalise the playing field somewhat they give £2.2 million to the other Championship clubs. If we get a situation where the clubs that are relegated are automatically promoted, that is not in the interests of a fair competition because you just cannot win unless you have access to Premier League funding. Interestingly, the trend is changing. This season, because of the large debts some Premier League clubs have, they spend quite a lot of that parachute payment servicing and paying down their debt. If you look at the current three relegated clubs, and one that was relegated a couple of years ago but still gets parachute payments, none of them is in the automatic promotion slots or the play-off slots. Most of them are mid-table; some of them are down towards the bottom. Andy Williamson: Just to put the parachute payments at the bottom of the Football League into perspective, the amounts paid to the clubs relegated from the Football League is considerably less, of the nature of £170,000, so it does not create, in our experience, any significant difficulty at that level. Q61 Mr Sanders: But isn’t that just a reflection of the distribution of the funding from the top to the bottom that the payments are so small and yet for those small teams they can make a big difference, even though they are tiny payments? Andy Williamson: Certainly they reflect the distribution of wealth, if you like, within the professional game. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 22 Culture, Media and Sport Committee: Evidence 15 February 2011 Greg Clarke and Andy Williamson Q62 Mr Sanders: If you are a small league two team, possibly with a turnover of a couple of million, then £175,000 is a significant amount of money. Greg Clarke: I do not think we are here trying to convince you £170,000 is not a lot of money. What we are trying to do is convince you it is not as good as £16.5 million. Q63 Mr Sanders: I think what some of us are thinking is that £175,000 is not enough for the small teams and more should trickle down. Is the redistribution of income from individual Premier League clubs to Football League clubs, for instance through transfer payments and compensation for youth development, fair and equitable? Greg Clarke: I think it has become accepted that clubs under the current scheme can get fair value for their players. If a small club spends money on player development, brings in youth talent and develops that talent, the current system means that the tribunal usually gets fair value about right. The club selling will think it is not enough, the club buying thinks it is too much, so arguably it is probably about right. We have serious concerns about youth development. Should we be forced on to the FIFA model, which is designed in a completely different way, the amount smaller clubs will get could decrease markedly, which could once again seriously prejudice the finances of smaller football clubs and potentially force many of them out of youth development. Currently, only two of our 72 clubs have no youth development facilities. Should they become less and less profitable, because many of them make a bit of money selling players to big clubs, they will not be able to afford youth development. Some of them, for example Crewe, make about £1 million a year from youth development because they have a real investment in both people and facilities. If that is undermined by the new proposals it will change the business model for a lot of small clubs. Andy Williamson: In terms of the transfer system, I was aware that comments were made about the lack of redistribution of wealth that the transfer system once did. It is fair to say, however, that there is still profitability for Football League clubs, which in the main are selling clubs in that area. For example, on the domestic market the profit that is made collectively by the 72 Football League clubs in their trading with 20 Premier League clubs is still £62 million for the last complete contractual year ending 30 June 2010. It is still considerable, but it is perhaps not as good as it should be. Given the amount of money that there is in the game and the redistribution mechanism that it once represented, it is not as effective as it once was. Obviously the Bosman ruling had an effect on player registrations, and more recently, of course, the introduction of transfer windows had a similar effect. We comment in our submission to this Committee that that is one area where we would seek the support of your inquiry, Chairman, to try to inject new life into the domestic transfer market. Q64 Mr Sanders: Why was the transfer window brought in? Andy Williamson: That is a very good question. Going back to the intervention from the European Commission which was looking at the validity of the transfer system around the turn of the millennium, ultimately an agreement or accommodation was reached, it is fair to say, following political intervention, between the Commission and FIFA. That involved the creation of a number of changes in the universal transfer system that applies across the world and is governed by FIFA rules. But at the same time, FIFA chose, I think with the encouragement of UEFA, to introduce transfer window restrictions, and we have received confirmation in writing from the then Culture Commissioner at the European Commission, Viviane Reding, that that was not at the insistence of the Commission, it was a football invention. So it was FIFA and UEFA who chose to include transfer windows as part of the package that came out of those negotiations. Q65 Mr Sanders: Do you subscribe to the view that perhaps the transfer window has weakened the position of League clubs in the transfer market and that they have not benefited as greatly as they might have done had there not been a restricted period for transfers? Greg Clarke: I do. I think that when there is an economic imbalance between buyers and sellers, the pressure to get a deal done within a limited period of time can favour the buyer, usually in the larger club, usually the Premier League club. Q66 Mr Sanders: The £62 million you mentioned earlier is of course not evenly distributed, is it? It is terribly unevenly distributed. I think there is a great danger in this inquiry that we get given a lot of statistics that show a fairly rosy picture, but when you start to unpick it, there is an enormous amount of difference between a small group of clubs and the vast majority. Andy Williamson: Those are the receipts from transfer sales of professional players, effectively, and that is the profit from the dealings between the 72 members of the Football League as against their counterparts in the Premier League. The total turnover when transfer fees are spent and re-spent within that domestic market is in the order of £350 million. If you add in the amount that is spent abroad, I think the figure for the year ending 31 January this year, the closure of the transfer window, was something in the order of £600 million. So, it is a significant amount of money that is being spent by football clubs on transfers, either at home or abroad. That might produce a mechanism, for instance, for funding future youth development and perhaps a levy on transfer fees overall could provide the funding going forward. Q67 Mr Sanders: That was going to be my final question: what can be done to help fund these developments outside of the premiership? Greg Clarke: The levy that Andy has talked about, which could potentially be a levy on transfer fees, would allow reinvestment in the game because the Football League spends in excess of £40 million a year developing talent, and if the new system cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 23 15 February 2011 Greg Clarke and Andy Williamson envisaged by the Premier League reduces that number markedly, many of our clubs will not be able to do that. Mr Sanders: Will that be a percentage on the gross transfer fee? Greg Clarke: We believe that would be a good idea to fund youth development throughout the game. Q68 Dr Coffey: Is that not the role of the FA though? Greg Clarke: We are not claiming credit for it. I met with the new chairman of the FA, David Bernstein, and said, “Look, we want a constructive fraternal relationship with you. We want to work together and support you in getting change into the game.” So we are happy to support initiative from the FA on that. Andy Williamson: There is already a levy on transfer fees to fund the players’ pension scheme. Strangely enough, it has just been reduced from 5% to 4% because 4% takes care of the premium that is required for that purpose. But that single 1% with a £600 million turnover would produce £6 million on its own. Q69 Damian Collins: Mr Clarke, you were critical about the elite player performance plan in reports in today’s newspapers. Would you like to say more about that to the Committee? Greg Clarke: Of course. I fundamentally buy into the proposition that we need to do more to develop our youth talent, but I am a businessman. I have spent 30 years working for and running large public companies, so I try to start from where do we need to be in five years and what do we need to do to get there and examine the parameters of the problem, because I am always frightened of unintended consequences of action. If, for example, we attract all the best talent to the Premier League clubs and cut off youth development inadvertently, because I do not think the Premier League are trying to put the small clubs out of business, I just think they have not thought through the economic consequences. Some clubs are good at developing talent. Middlesbrough are good at it, Southampton, Charlton, Crewe. If the economics of that proposition goes away so they can no longer afford to do it, you are forced into a model where a few clubs will develop our top talent. I believe it is better for the game that all clubs embedded in the community develop their talent. Of course the top clubs will have an advantage, I accept that, but I would not want to see them create that advantage, then abuse it by undermining the economics of the smaller clubs, because I think that would be bad for English football. Q70 Damian Collins: What do you think is best for the development of young players? Greg Clarke: The first thing we need to be cognisant of is the well-being of the young lads being trained for football. It is all right looking at this as productivity, economics, games, returns, net present values, cash flows and all the other rubbish we talk about, these are human beings, most of whom end up on the football scrapheap and never become a paid professional footballer. We work very hard, for example, with the PFA, with League Football Education, to try and keep them in education, to try and make sure they have qualifications outside the game. I would like to see a real emphasis on making sure we develop wellrounded, successful human beings who, great, if they make it as a professional footballer but their life is not over if they do not. Q71 Damian Collins: But the current rules would mean that David Beckham would not have been able to sign for Manchester United’s youth team, for example. Greg Clarke: Yes, and I am not necessarily against scrapping the geographic limit. For example, we have lots of clubs who are good at youth development in London and they are just around the corner from Arsenal or Tottenham or West Ham. If you are going to take a young child out of their community and send them a couple of hundred miles away to a boarding school where they are educated with the objective that they are going to be a professional footballer, what happens if they do not shape up or if they break their leg? Do you just dump them back where they have got no friends and no network? I would just like to see all the welfare issues around children factored into this in case we become too economically grounded in our analysis. Q72 Damian Collins: But presumably these are decisions that are taken by the children themselves and their families and so the bleak picture you paint— I think you referred to kids being dumped back on their council estate at 16 with no friends or future— seems a bit dramatic. Greg Clarke: Well, as a guy who grew up on a council estate, I have got some form in that area and I know what it is liked to be dumped on a council estate, and I know what it is like to kind of be beaten up on the way back from the chip shop. What I was trying to say is, once you come out of that and you lose your friends and your network—let’s not put kids in the position where their only value is football. That is the only point I am making. I am not saying I am against the geographic idea; I am saying the first issue on my agenda is the welfare of the kids. Q73 Damian Collins: Around the discussion of the elite player performance plan, the idea of establishing a programme of 10,000 contact hours with the young players, do you think the investment that is required to run programmes like that inevitably means that it will be only the big clubs that can afford that type of investment? Greg Clarke: That is the paradigm that I am concerned about. If it is only the big clubs that can afford to develop talent, we are fundamentally changing our game. I return to my remark about unintended consequences: are we sure about what that will do for small and medium-sized professional football clubs in the communities? Do we want to lose them as a consequence of that or can we protect what is good in the Premier League proposals but not undermine the economics of the clubs, smaller clubs, and the welfare of the kids? Q74 Damian Collins: I think you are right to focus on unintended consequences. I am sure it is not the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 24 Culture, Media and Sport Committee: Evidence 15 February 2011 Greg Clarke and Andy Williamson intention of the Premier League that it has a financial consequence there. But another question might be put to the Football League that are you seeking to influence the way these rules are established for the financial benefit of the Football League clubs primarily and the development of the players is a secondary issue? Greg Clarke: Don’t get me wrong, we are absolutely trying to look after the financial welfare of the Football League clubs. I am happy to talk about that in detail, but there is nothing like—I am a Leicester City fan, we’ve had our ups and downs. Nothing excites the crowd like having a lad that grew up in the city and came up through the youth team making it into the first team. I can still remember Emile Heskey, Gary Lineker; having one of your own you have seen in the bus queue actually playing for your local football club is a great feeling and I don’t want to lose that. Andy Williamson: We need to emphasise that all we are looking for in terms of compensation for schoolboy players is fair compensation that continues to incentivise clubs, those same clubs, to continue to develop. If there is no incentive then they may as well give up, but what we have presently is a very broadbased scheme that has the benefit of uncovering the best talent. You see in the present England setup some of the players who have been either developed partly or wholly by Football League clubs, and that we want to preserve. The participation of as many Football League clubs in this process as possible is what we want to encourage, but at the same time we need to ensure that they are adequately compensated if clubs higher up the ladder come in for some of their younger players. Going back to the distance rules, many Football League clubs are already close to Premier League clubs in their own region and suffer that effect in any event. Clubs in London have to compete with Tottenham, Arsenal and Chelsea, for example; clubs in the north west compete with Manchester United, Manchester City, Liverpool, Everton. Q75 Damian Collins: It is a two-way street though, isn’t it? There are plenty of players that have been developed by the Premier League clubs who end up playing in the Football League. Andy Williamson: There are, and one of the keys here is to ensure that there is adequate provision for players who are developed to graduate into first team football. That is one of the critical areas and we can provide the solution to that dilemma, both in terms of clubs in the Football League producing their own players and getting them into their first teams that much earlier, which is the experience. Debuts in the Football League very often are at the age of 17 or 18. So they are getting into Football League teams that much earlier and being introduced into competitive football that much sooner so their development is enhanced. The danger with development football is that players are not prepared, even in their late teens, to move back into competitive men’s football because they have never been exposed to it. That is one of the problems that we can help resolve. Q76 Jim Sheridan: Still on the question of youth development, could I ask specifically about these compensation payments for youth players? The reason I am asking is parliamentary colleagues in Scotland are asking the same question: kids as young as eight years of age are entering into contracts, and indeed the Children’s Commissioner in Scotland has already expressed concern about people as young as this entering into contracts. Certainly when the footballing authorities in Scotland were asked the question about compensation payments for youngsters, they accepted there was some concern but they did say that the problem was even worse in England in terms of the payments that these children get paid. Could you give us a flavour of the criteria for these contracts or how much money do the kids get paid and when do they get paid? Andy Williamson: Under the rules of the FA, the Premier League and ourselves, schoolchildren and their parents are not allowed to be offered incentives. Those are the very firm regulations that are long standing. In terms of the compensation that we were referring to earlier, we are talking about compensation paid for the time spent in training a youngster by one club if and when that player moves on to another club, and that is the fair compensation that I was referring to. But in terms of payments to individuals, that is strictly against the rules. Q77 Jim Sheridan: So no kid or their family gets any direct payments? Andy Williamson: Only travel expenses for attending coaching. Jim Sheridan: That seems to contradict what the footballing authorities in Scotland are saying. Q78 Chair: Obviously one of the major sources of revenue into the game is the sale of broadcasting rights. Now, the Football League has had a slightly chequered history in terms of its income from broadcasting rights, but can I just ask your reaction to the opinion of the Advocate General about the legality of using foreign broadcasters’ decoder cards in this country? Do you think that has implications for you? Greg Clarke: It certainly does. It has multiple implications. Our main issue is that if you imagine a small football club, Macclesfield or Chesterfield Town or Notts County, who are trying to get 2,000, 3,000, 4,000, 5,000, 6,000, 7,000 people to turn up to their game on a Saturday and pubs around the corner are showing Manchester United versus Liverpool live on the telly using a foreign decoder, it strikes me that that is making life more difficult than it needs to be. The agreements we have with the broadcasters at the moment are that Premier League football, like Manchester United versus Liverpool, is shown either early or late so it doesn’t coincide with the kick-off. One of our major concerns is that people might find it so easy to watch top-quality Premier League action at the same time as League 1 and League 2 are kicking off that it is just easier to stay in the pub, have a pint and watch the game, and that will undermine our football. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 25 15 February 2011 Greg Clarke and Andy Williamson Q79 Chair: So you regard the 3 pm blackout as absolutely critical? Greg Clarke: We do, absolutely. Q80 Paul Farrelly: I want to come on to debt but, while we cannot stray too widely on this Committee, part of the issue is how fairly money is shared out and we were talking about young players and player development. To what extent is it right to ask whether money is shared out as well as it could be to support academies, to support your league clubs, even sponsoring schools as academies to develop young players? Is that a relevant question to ask about the purpose to which money is put in the game and is shared out? Greg Clarke: I think the question of fairness in football, in its economic sense, is an interesting question. I have given this a lot of thought since I joined because I come from, as I say, a business background. Paul Farrelly: But on the specific worthwhile point. Greg Clarke: Yes, the specific worthwhile issue. Each Football League club makes a decision on how seriously it is going to take youth development. Some we have talked about, like Crewe, Charlton or Southampton, spend a lot of money and they have a lot of well-qualified staff working with a lot of kids, artificial pitches, indoor facilities, so they can train and get the best out of the kids. Some of them, such as Hereford or Morecambe, do not have youth teams at all. They have decided that they just cannot afford to be in that business; the business model is too tight. There are funding allocations from within the game that help those clubs stay in the youth development business and they are vital because it gives smaller professional clubs within the Football League a leg up so they can afford to develop their local talent. We see that as vital to maintaining fairness in the game. Q81 Paul Farrelly: On debt, is the inability to service debt through cash flow a problem in the game and to what extent? Greg Clarke: I think it is the problem in the game. If I had to list the 10 issues that keep me awake at night about The Football League it would be debt, one to 10. Let us take Deloitte’s, which—you have all seen it—is quite a good analysis, and just take its figures, because then we do not have to argue about where they came from, we can just all talk about the same figures. It talks about debt in the Football League this year in excess of a third of a billion pounds. That for a football league that, if you aggregate across all the clubs, makes no profit. You are trying to service a third of a billion pounds worth of debt with no positive cash flow and no profit. If we were a commercial organisation, we would be out of business. As a board and as an executive within the Football League, we’re saying, “Okay, where will we be in five years?” Just extrapolate trends forward, “What if we do this?” and then we can do a what-if analysis. If we can cap the wage budgets, what would that do? If we adopt UEFA fair play rules, what would that do? If we can find new sources of commercial revenue, what would that do? It gives us the ability to do a what-if analysis. The board are taking the results of that to our chairmen’s conference, where we get all the chairmen together in June, because we are only part way through, which will say in five years this is where we will be if we don’t tackle the problem. The thing that I would encourage you to focus on is that there is a real misperception in football, which is that football clubs go out of business. Actually they do not, largely. It is owners that go out of business. When owners go out of business, you then get into, “We better get a fit and proper persons test” because sometimes bad people turn up trying to own football clubs but they always turn up trying to own distressed football clubs that are desperate for the owners. You end up talking to fans and they say, “Why are you trying to stop us save the football club? Why can’t we just have Fred or Bill or Mary owning the club?” We’re saying, “Well, actually, they’re not the sort of person we think should own a football club.” But then there is a tirade of, “Well, if it’s either a bad owner or no football club, we’ll take the bad owner”, because we are putting the fans in an awful situation. If we do not tackle the fundamental economic problems of our game, all the issues about not being able to pay debts, insolvencies, bad owners, all that sort of thing will get worse and worse. The one thing we have learnt from the global financial crisis, whether it is countries or corporations or households, is that people who have too much debt end up in a lot of trouble. It is a good proxy for risk. The level of debt within the Football League is absolutely unsustainable, and we have got three working parties, one for each division, working really hard on how we bring our level of debt down. Q82 Paul Farrelly: Would you like to see your rules incorporate provisions that would mean that anybody involved in insolvencies previously, either personal or corporate, subject to rights of appeal, should not be appointed as directors of football clubs or be able, either themselves or through proxies, to take significant stakes in football clubs? Greg Clarke: We have some quite good rules in place. We innovated back in 2003, because what we try to do in the Football League is get ahead of the game. Andy will talk you through how the fit and proper persons test morphed into the owners and directors test to make sure that we get a hard look at who is going to take over our clubs. Andy Williamson: Indeed. We do have, coming to your question, a two strikes and you’re out policy in relation to previous football insolvency events, not looking at the wider business record, because there are people obviously involved in businesses that rescue companies for a living and have been involved in various insolvency events previously that clearly wouldn’t be appropriate to exclude. But we have a policy in relation to people who have a record in the game and also if they have a poor record in other sports, and so those are a couple of examples of the disqualifying conditions that are embraced into our what was fit and proper persons test and is now called owners and directors test. Greg Clarke: May I just add a subsidiary point, which may be useful? I have done business in Pakistan, Colombia, Saudi Arabia, Australia, all over the world. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 26 Culture, Media and Sport Committee: Evidence 15 February 2011 Greg Clarke and Andy Williamson I have just come back from running an Australian multinational for seven years. I used to run Cable and Wireless. When we used to do business with people, if we were setting up a joint venture in Russia or in Saudi Arabia or doing a major development in one part of the world, the first thing you do is absolute complete due diligence on your partners because you cannot afford to undermine the ethical foundation of your business. If people do business in a different way to you, you will have a problem at some point in the future. We used to use agencies like Control Risks and Pinkertons and the main accounting firms to go and say: who are they, where did they get their money from, are they ethical people, do they have a good track record, do they treat their employees right, they don’t pay bribes, could they sign the Foreign Corrupt Practices Act? The average project that we did cost between £300,000 to £500,000 to get those answers. Now, if you’re doing projects on average in the £1 billion to £5 billion range as we did, that was just a sensible thing to do. Trying to get Football League clubs to come up with sums like that to back up the owners and directors test is just never going to happen. So, largely our process is self-certification by owners. If we find out they have lied or misled us we kick them out, but we have to take their word on a lot of issues because largely we can’t afford to go to a country and dig into their background. Q83 Paul Farrelly: I have been involved in the due diligence business all my life. I just want to come on to a couple of things that you have mentioned, very briefly. But firstly, you agree rules, you agree protocols, but what about deterrents? Do you think strengthening the nine points deduction—even to the extent of you go bust, you start at the bottom—would be a deterrent, or would it be a penalty for supporters because of bad ownership? Greg Clarke: Well, the Premier League deduct nine points, we deduct 10. There is a slight difference there, but your point is absolutely valid. We had a very lively debate at our last chairmen’s conference. I had been in the job about four weeks last May when we had the conference, and there was a motion from the floor from a very respected chairman of a Football League club. He has been a long time, high quality owner who said, “I’m sick of bad owners going out of business and besmirching the game and what we should do is automatically relegate by two divisions anybody who can’t pay their debts and is insolvent”. There is a lot of sympathy for punishing people who don’t pay their debts, but the vote did not pass, and if I can try and give you a thematic approach to why it didn’t pass rather than quote lots of different people who had nuanced arguments. It was because you aren’t actually punishing the people who screwed up the club. You are punishing the football club and the fans and the community, because the guys who have gone out of business have gone, largely. We were in a situation of how much do we want to hammer a local community and football club who largely have been mismanaged by a bunch of people who have moved on and left the club in a mess. There are a new bunch of owners, so they are trying to raise money to refinance a football club, which may be impossible if you relegate them into the Conference. Largely we felt that the 10 point deduction was the best solution to not penalising the club and the fans. Q84 Paul Farrelly: Let’s take a specific example, just to give us an idea of how you can or do get your hands dirty. Let’s take Crystal Palace. Crystal Palace does a sale and leaseback of its ground to a property financier whose company subsequently goes bust. The terms of that sale and leaseback are so onerous in terms of rent that Crystal Palace goes into administration because it can’t pay it. Then the property owner goes into administration as well. To what extent do you look at those sorts of deals and get involved, or can’t you? Greg Clarke: Philosophically there are two issues here: there is the practice of what we do, which Andy will talk about in a minute, and then there is the practicality. When I hear of a financial restructuring of a football club, which involves the ground going one way and the football club going another way, all my hairs stand up on the back of my neck and the alarm bells start ringing, because when a football club loses its football ground usually bad things happen. It can happen for many reasons. It can happen because, actually, this isn’t someone trying to buy a football club, it is a property play and if they can shed the football club at some point in the future and end up with a nice property development, they are very happy. That is not in the best interests of the club, the community and the fans. But sometimes you sit down with owners. I sat down with one the other week. I have been to 60 clubs in 10 months, because I am trying to do 72 in the first season. I am going to Torquay tonight. When you talk to them they are all under phenomenal pressure, and sometimes the last thing they can do is take a mortgage on their ground to release cash flow to keep the club going. I go to a lot of clubs, the majority of clubs where good, decent local people are putting a significant amount of their net worth to keep their club alive, and they are in situations where they just can’t do any more. They haven’t got any more. What they have to do then is give someone—they take a loan from somebody who takes a security over their ground. Sometimes I can’t think of a better idea for them to keep them out of administration. The practicalities are, for every time we come across a slightly dodgy owner there are another 20 doing their best to keep their club alive in the community and sometimes they have to mortgage their ground. Q85 Paul Farrelly: Internationally, what lessons do you think you can learn from the German licensing model on insolvency, and also with respect to UEFA? Do you think you might move towards adopting financial fair play rules yourselves in the Football League? Greg Clarke: I am hopeful that financial fair play will be a way of managing our businesses into a cash flow breakeven. The good thing you can say about a cash flow breakeven model is your debt stops growing at that point, providing you’re sensible. If we can stop the debt growing we are halfway to getting a cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 27 15 February 2011 Greg Clarke and Andy Williamson sustainable business. If we can start paying the debt down we can maybe have businesses that can stand on their own feet and be less distressed. The UEFA financial fair play model is quite interesting because I believe it offers a template potentially for the Championship to adopt, to say if we have to break even on a three-year period that is just a soft way of introducing a wage bill cap because that is your biggest amount of disposable cash, what you spend on your wage bill. But just to be clear, I am not advocating a wage cap of individual players. I think we had that battle 50 years ago, and you can’t tell people what they should and shouldn’t earn. What you have to say is how much can a club afford to spend in total on its wages, and not just on players but highly paid executives, for example. Let’s make sure we treat everybody fairly. How much can we afford? If they have to break even over a three-year period there is a reasonable chance that the biggest lever they have to achieve that is to drive their wage bill down. I believe we should do that. I was at an airport watching one of the financial channels, I can’t remember whether it was Bloombergs or one of the others, and they were interviewing a New York banker about the new Basel III regulations for banking. He said, “We’ll have to find a way to work around—I mean, with these rules.” We all laughed in the departure lounge thinking, “Here we go again,” It is the same. There will be smart people trying to figure their way around whatever set of rules are in place. So our job is not just to put a way in place of driving this business on to a sustainable economic model; it is making sure we have the sanctions in place to get the people who cheat. Q86 Paul Farrelly: My final question: you have gone some way in League 2 on salary protocols. Can you give us a flavour of how that has worked and tell us how many clubs have gone into administration in League 2 since that has been introduced? More broadly, as you try to encourage it further up the pyramid, having secured, hopefully, the base, under what circumstances do salary caps work? Greg Clarke: Do you want to do the details? Andy Williamson: Certainly, yes. We introduced the 60% ceiling based on turnover in League 2 as long ago as six years now, so it is well embedded. I think it is fair to say the salary increases in League 2 are much lower than they are elsewhere, so there is evidence that it has worked in terms of ensuring that clubs are sustainable. In terms of the clubs that have still suffered financial difficulty, because at 60% you can still lose money, and Darlington were one club, in fact the only club, that were a resident League 2 club that got into difficulty during that period. Other clubs that had been relegated from League 1 and came down with the problem may have also caused us problems along the same lines, but only one resident League 2 club has fallen into difficulty since the introduction of that salary cap. So it does work. Now we are seeking to shadow those processes in League 1 and, as Greg mentioned earlier, we have working groups looking at cost controls across each division on an ongoing basis. But it is also fair to say probably there isn’t a single solution to this problem. We do have to look at different solutions because there are different circumstances at play in the different divisions. We have already mentioned, for example, the parachute payments that come down with relegated clubs from the Premier League in the Championship, so that creates a different dynamic at that level. So we have to look, perhaps, at a different way of approaching financial viability and, more importantly, sustainability of clubs at Championship level. There isn’t likely to be one single solution, one panacea that could be applied across the whole of football. Greg Clarke: The psychology of football is quite interesting because in business, and many of us have worked in business, you are taught that you have to be better every day, the culture of continuous improvement, otherwise your competition is going to eat your lunch if you get lazy. We can all think of great corporations of 30 or 40 years ago that don’t exist any more. Imperial Chemical Industries: where did they go? But football can be a bit backward looking and when you engage senior people from within the game there is a penchant not to change, and when you talk about the problems of debt and the problems that we need to deal with, whether it is salary costs, management protocols or financial fair play, it is, “Yes, but we’ve always had these problems, life goes on”. You get them in a room and they will say, “Yes, we must do something about this” but they never do. One of the reasons we are spending so much time generating our five-year plan with numbers and with a vision is to show them where you will end up if you don’t do something and say, “This is not an intellectual exercise and it has always been like this so don’t worry about it, the problems will go away. We are heading for the precipice.” We will get there sooner than people think and we will hope to catalyse change when we validate that, share it with our chairmen and say, “This is where you are going unless we change now.” Paul Farrelly: I hope we can have a look at a draft before we finalise our report. Q87 Damian Collins: With regards to the salary cap operating in League 2, are all the clubs in the division complying with that protocol? Andy Williamson: They are indeed. If a club reaches the 60% limit then they are immediately registration embargoed, so they can’t increase that exposure. There is no facility for them to exceed it because those—it is a self-reporting process but we obviously now have the experience over six years of understanding individual club turnovers and we have a plethora of information to validate the projections that are submitted. We keep a tight rein on the amount that is spent on the player budgets and I am pleased to report that there aren’t any that have reached the 60% currently. Q88 Damian Collins: The fit and proper persons test has been in place since 2003; how many people have failed that test? Andy Williamson: I don’t have the figure. Certainly some have. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 28 Culture, Media and Sport Committee: Evidence 15 February 2011 Greg Clarke and Andy Williamson Q89 Damian Collins: Would it be 10, more than 10? Andy Williamson: No, it will be single figures, but I think what we will never know, of course, is how many people have been deterred by that test, who have been frightened away because of the rigours of that test. I am not saying it is the be all and end all, but it certainly has created a different approach to people coming into the game and they are aware. We now have a pre-approval process as well. If ownership of a club changes they have to seek our approval. In fairness, that is a procedure that we copied from the Premier League so maybe they have inherited some of our ideas and likewise we have inherited some of theirs. Greg Clarke: I can give you an example of that. Last week a chairman and chief executive of a reasonably large Football League club asked to see me at short notice. I said, “Sure, come on in.” They said, “We were approached by this group of people to do some attractive financial deal and we know they have approached another two clubs in the London area and the guy leading it is on his third alias and has a conviction for fraud”. So we just put the word out, all the clubs were phoned up and said, “Watch out for this lot”, because they sound compelling and there are a lot of clubs who would like to hear an easy story to get their hands on some more revenue and they’re a bunch of crooks. So we do try to deter at an early stage Our biggest problem isn’t necessarily people in the UK, because you can phone around in the UK and you can get a reasonable off the record view of most people. What if someone pops up from—let me pick a country at random where we haven’t had anyone from, so they can’t say, “Hey you’re talking about him”—the Philippines. How do you find out about someone who has made some money in the Philippines? You can phone up the embassy and they’ll say “Oh well, don’t know much about him.” intent and having the resources to dig into every person who wants to be part of a consortium to buy a football club just provide practical barriers. They are no excuse for lack of performance and we are trying to do better all the time. Q90 Damian Collins: We had evidence submitted by Steve Beck on behalf of York City Supporters Trust. He is a former chairman of York City, and he said, “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 and proper persons test after almost bankrupting my club.” Quite a serious charge about the test. Do you think the test is stringent enough? Do you have enough power to enforce this, given the bleak picture you have painted about clubs going into administration and some of the business practices that put these clubs right on the edge? Greg Clarke: Let me say that I am hoping that over time all of our tests and our penalties get stricter, because I believe in a well-regulated business environment that we have here, with real duties to the stakeholders, like the fans and the communities and so on. But the issue is we also have to protect natural justice. If we have any evidence we will act. I mean, for example, if someone comes into a nearly bankrupt football club in good faith and tries to save it and it still goes over the edge does he become a bad person because he has got an insolvency to his name? The nuances here of real hard evidence and looking at Q92 Damian Collins: Sorry to hurry you but I know there are lots of people who have questions. The last thing I want to ask about is the football creditors rule. If that rule went, for example if you were a football club and the football creditors rule did not exist, would you be less likely to sell a player to another club that you thought was in financial difficulties because you might know that you might not get that money? Greg Clarke: Let me just tell you a slightly expanded answer to your question. I came in here from a corporate background thinking the football creditors rule was an outrage. I came in thinking the sooner we see the back of that shoddy practice the better off we will be. When you talk to club owners and you would say it they would say, “Okay, we are a private members club. We play each other in league, we play football together. Would you be a member of a club who didn’t pay its bills? Would you support their ongoing membership?” I said, “No, probably not”. They said, “What happens is, if they don’t pay their fellow football clubs we will kick them out of the Football League. They will cease to exist. We won’t have them.” Q91 Damian Collins: In our previous session, there are some business practices people have been critical of. Olswang, the law firm who worked with a number of football clubs, raised one of these, which is the use of VAT money basically as working capital on behalf of football clubs. They said, “In any other industry, this is an incredibly serious event that leads quickly to a winding-up petition and personal consequences for those involved, but this seems to be not just one or two clubs involved in these sorts of business practices but a big problem.” Do you think that is something that you, as the League, should take a position on? Greg Clarke: I think we should, yes. We at the League and the clubs that drive the League—because the Football League doesn’t run the clubs, the clubs run the Football League; we are a democracy; there are 72 votes and they all count the same—are vehemently supportive of HMRC. We sat down and came up with a set of measures about people start using the taxpayer’s money as a bank—because, to be frank, without declaring any form of political opinion, the Government has got better things to spend its money on than football clubs at the minute. If people don’t pay their tax bills, for example HMRC say they haven’t paid their PAYE, what we should do is immediately put a transfer embargo on them so they can’t sell players. That is a big stick in The Football League. If you ask me would I support extending that to VAT, yes, absolutely I would. We need to improve our sanctions all the time to stamp out bad business practices. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 29 15 February 2011 Greg Clarke and Andy Williamson Q93 Damian Collins: Gordon Taylor, who is coming in next, said in his evidence, “The football creditors rule protects the integrity of the game and ensures that the club cannot achieve success beyond their financial means.” But that is what they are doing. They might be protecting each other in the way they do that, but that is what they are doing. Greg Clarke: What I am trying to say is, we are searching—I mean, for example, there is a lot of debate within the Football League and the Football League board, for example, the Football League policy is to support the football creditors rule for the reason that the default position is if the club doesn’t pay its other football clubs they will kick it out of the League and it is gone forever. It can maybe start up round the corner on a park and rebuild itself. Q94 Damian Collins: Sorry to interrupt, but if the football creditors rule didn’t exist, would it help the clubs to police each other? They would be more aware when dealing with each other that if I’m buying a player from another club and they are in financial difficulties or are selling to another club, I might not get my money, and therefore they are helping to regulate each other, but at the moment there is no such incentive at all because they can take each other’s money. They know the transactions are protected and that if the club goes into administration they won’t be the ones that will lose out; it will be a local business that supplied that football club. Greg Clarke: Let me answer specifically your question, because it is a fair question. Some of the biggest organisations in the world mispriced counterparty risk over the last three years. They lent to organisations that could not pay them back. Expecting half of our football clubs to quantify counterparty risks—the football clubs—where they don’t know what their finances are, what assets they pledged, what securitisations they have got in place; what that will do is stop them selling to each other because they don’t have the resources or the information to make a well-informed decision on counterparty risk. Q95 Damian Collins: My original question was if the football creditors rule didn’t exist would clubs be more careful about buying and selling players to each other. Would they? Greg Clarke: Absolutely. I think there would be a lot less buying and selling. Q96 Damian Collins: Given one of the pressures in the game seems to be inflationary pressure on player salaries and on player signing fees, that might be quite a good thing. It might be a helpful way of helping clubs be more sensible about how they do business with each other. Greg Clarke: Andy will say a few words in a minute. I would be loath to leap to that position without a thorough analysis because the unintended consequences could be horrific. But they might be good, and let’s work our way through it because we are looking for a better way. Q97 Damian Collins: Would you lead an analysis like that from the Football League? Would you say, “This is something we should do”, because a lot of people are questioning why this rule exists? Greg Clarke: One of the scenarios we are generating as part of our five-year plan is what happens if we move away from the football creditors rule. What does it do to the game? What we are trying to do is have a way of testing ideas and finding out where we end up if we adopt them rather than just saying, “Let’s give it a go and see.” Q98 Damian Collins: The final question on this—I have probably taken up quite a lot of the Committee’s time—is that you have spoken a lot about something I think we all agree with: football clubs, particularly Football League clubs, are a key part of their local community. People are right to ask the question of why is it that if that club goes into administration, its debts to other Football League clubs and other parts of the country are taken as a priority, while its debts to local suppliers that it probably deals with are not. It is the local businesses in the community that football club serves that are more likely to suffer if a club goes into administration than a football club 500 miles away. Greg Clarke: I cannot construct an argument that allows me to defend the morality of football creditors and we are working hard to find a more palatable substitute. Q99 Paul Farrelly: Just on this very briefly, you say in your evidence if the football creditors rule is removed, there is a greater risk of clubs ceasing to exist. I would say, “Up to a point, Lord Copper.” It is post facto preferential treatment of creditors, and it is simply an extra obligation and condition that a buyer has to take on, and therefore it will reduce the price they are willing to pay for the club and therefore the surplus is available to other creditors. Is that not the case? Greg Clarke: In any normal business that statement would be true. If you go through the last restructurings that Football League clubs went through, and there are plenty you can get on the public record, the price paid for a club, largely, people pay you to take it off their hands. If I had sat next to just one chairman who said, “If I could find a good owner who would give me a quid for this place I’d take it tomorrow.” The banks take a haircut, the creditors take a haircut. It is a situation of it is not a compelling asset to own. Largely good owners see it as, “I’ve made some money and I’m going to pay it back into my community and I am going to try and keep the local football club going”. Q100 Jim Sheridan: The last question I asked about compensation for young players; what kind of money does change hands for compensation for young players? Andy Williamson: That varies enormously. Under the present system, clubs are left to mutually agree the level of compensation. If they can’t agree, it would go to a compensation tribunal. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 30 Culture, Media and Sport Committee: Evidence 15 February 2011 Greg Clarke and Andy Williamson Q101 Jim Sheridan: What kind of figure is that: £1,000, £10,000? Andy Williamson: It could range from £1,000 to several hundred thousand. I think in recent times there have been figures as high as £500,000 or £600,000, but I was on one of these tribunals as long ago as maybe 10 or 11 years for a player called Jermain Defoe. He moved from Charlton Athletic as a 15-yearold, and that tribunal set a base figure of £400,000 as long ago as that with build-up payments. In fairness, I think he is testimony to a pretty accurate decision. Q102 Dr Coffey: Very interesting about debt but we must turn to governance. Perhaps I will make a controversial statement. Lord Triesman last week sometimes had the tone of a jilted lover having had a lover’s tiff, but the Football League has brought in two independent directors, including a new chairman, and six people involved formally in football. What benefit has that brought to your governance and do you think the FA and the Premier League could benefit from adopting your board model? Greg Clarke: I have been sitting on public company boards for large corporations for the last 16 years. I was on the board of Cable and Wireless, I was on the board of BUPA, I was on the board of Lend Lease Corporation, in Australia, and the independents are there to see fair play. They are there to balance, because there are always conflicts of interest. For example, if the chief executive wants to be paid more money, you have to balance the good of the chief executive versus the good of the shareholders: what is the right balance? The committees that make those decisions are largely composed of independent directors. The Football League took the decision well before my time that they would have a senior non-executive director and an independent chairman who were independent of football, who had been football fans, had maybe worked in football a long time ago, knew what football was all about, but came without any vested interest to any divisions or any clubs and could balance the needs, because we do have differences of opinion between League 2 and League 1 and the Championship. I spend a lot of my time trying to find common ground, along with Ian Ritchie who runs Wimbledon, the All England Lawn Tennis and Croquet Club, I think it is called. We spend a lot of time trying to broker agreements so we can move forward, because when you have a number of stakeholders in a decision-making forum it is really easy to default to nothing ever happens because nothing can be agreed. You end up with anodyne statements that we are all going to work together to solve the common problems of X, Y and Z, and nothing happens. That is why you need independent directors, and we have been very forceful in our opinion with the FA that they need not just independent directors but if independent directors see bad things happening on that board, they can stand up, make a fuss and be noticed, and if they resign that is a big issue, not, “Oh, we’ll just get another one.” We made that point in our submission and I have sat down with the new chairman of the FA and encouraged his desire to get independent directors and pledged the support of Football League to that initiative. Q103 Dr Coffey: You have two seats on the FA board, I believe. Greg Clarke: We do indeed. Dr Coffey: In the recent change where David Bernstein came in, were you opposed to that, because he still had formal links in a way with football? Greg Clarke: I was not consulted, and rightly so. Let me tell you what happened. One of the problems you get in football is everybody wants to know what is going on all the time, and the FA board were exceptionally good at keeping their deliberations to themselves so there weren’t leaks about Fred, Mary or Bill is going to get this one. That was on the basis that each member of the decision-making forum, of which we had one, was sworn to absolutely secrecy and Tony Kleanthous, who is chairman of Barnet, who is on the FA board, was our nomination. Tony came to me and said, “Greg, these are the conditions. Are you happy with those?” I said, “Tony, you have my support in keeping absolutely quiet but when you make a decision just let me know.” He phoned up straight after the board meeting, when it had been announced, and said, “It’s David”. I said, “Oh great”. So, I support the process. It is a tough job running the FA, don’t get me wrong, and the best person, a really, really good person is going to find that job tough. I looked into David’s background and he is a tough guy. He has worked in real businesses. He has managed fractious boards and shareholders. He has been around the block and he will have our support, but it’s not going to be easy. Q104 Dr Coffey: What about those structural reforms that you have introduced in your governance arrangements, that without question the FA are not doing today, that you think could make a visible difference into the future running of the FA, whether that is the development of grassroots sport or whether it is the success of the England team? Greg Clarke: I met Lord Triesman. I think we overlapped by a couple of weeks. I was there a week and the CEO left, I was there another couple of weeks and the chairman left. I thought, “Crumbs, I better not start planning my pension in this job.” I sat down with him and I asked him what he thought his role was and he told me. I said, “Look, I’m here to try and build a constructive working relationship to get things done, so why don’t we all sit round a table and just say what are three or four important things and let’s get them done.” Go through a confidence building exercise and say, “Hey, we can get things done” and move on to even harder things. I invited him, because he didn’t come to any Football League games, and I said, “You’ve got to build—” because one thing I know about football is you have to build a support base. I have done 60 clubs, not because I like spending five days a week travelling. I am going to Torquay tonight; I was at Rotherham the other week; I was at Bradford. I do five games a week because I need to understand what is important to football and I need to build a support base. I said to him, “You don’t come to any of our games. You’ve cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 31 15 February 2011 Greg Clarke and Andy Williamson got to get out there. You’ve got to build a network. You can’t be seen as a remote figure.” I didn’t see him as a bad man; he just lacked the common touch of getting out there and moving people his way. What I have told David is he will have our support. We will try and drive things forward. We are willing to attack the contentious issues together in good faith. We are not going to brief against him; we are not going to undermine him. We are going to be a proper partner and if we have an issue with what he is doing we will sit down in private and hammer it out with him. Q105 Dr Coffey: I think you said the new chairman has a desire to bring independent directors on the board. So that is stated? Greg Clarke: Before he took the job he was one of the people saying we need that. I would be amazed if he doesn’t drive hard for independent directors. I am not here to speak for him, but he comes from a background where it is normal to have independent directors. We are not talking about, “Shall we go into genetic engineering of humans” or something beyond the pale. We are talking about something that the civilised world has accepted as a normal way of running these sorts of organisations. Why wouldn’t we do it? Q106 Mr Watson: The former League club Kidderminster Harriers nearly went into administration last week. Do you think there is more you could do to work with supporters’ trusts to help lower League clubs or former League clubs improve their governance model? Greg Clarke: I am a big fan of supporters’ trusts. I am not one of these people who just says, “Oh, they’re great but we don’t want anything to do with them.” Let me give you an example. When we were rescuing Leicester City we did that in partnership with the Leicester City Trust, and the supporters’ trust put £100,000 into the rescue and nominated a director who sat on the board. I sat down personally with the management committee of the Trust and said, “Look, I’m not being patronising but you have to understand there are duties on a director of a company and if you breach those duties there are sanctions that will be applied by the DTI. You have to understand the Companies Act, not in detail but broadly what you are supposed to do and what you are not supposed to do. We encourage you to put forward somebody who can understand how to be an effective director and understand what he can and what he can’t tell the membership at the trust meetings.” They appointed one of the senior partners of one of the biggest law firms in Leicestershire. He was a cracking director but he got in all sorts of trouble with the trust; not nasty but they would say, “Well, who are we going to buy then in the transfer?” and he would say, “Well, I can’t tell you”. They would say “What good are you doing if you can’t tell us what is going on?” It is a tough job to have because the person who can discharge those responsibilities has to say no to a lot of questions from the people who put him in the job. Q107 Mr Watson: Let me just ask you two practical points. Do you think there is more you could do to enable these kinds of trusts, whatever model they take, to take a stake in their clubs? Presumably, given the comment you have just made, you wouldn’t agree with some rules around transparency so that supporters’ trusts could see the accounts of the club, for example? Greg Clarke: I think every business should publish its accounts and be transparent. For example, if I am going to sell my club pies I would like to know that they have some working capital next year. If I was going to put supporters’ trust money into a club I would like to make sure that club has plans to remain solvent before I put my money in, otherwise I would be breaching my duty of care to the people I was looking after in the trust. So on transparency of football clubs: the more we get the better off we will be. Q108 Mr Watson: Is there a role the Government could play in making that happen? Greg Clarke: I am not temperamentally inclined to heavy duty regulation in football but we may come to a point where, if football does not make enough progress to get its house in order, we will need to go down that road. Q109 Mr Watson: Presumably if we can help you find some practical ways the trusts can take stakes and improve transparency, do you think the trusts themselves might need to be governed at some point? Greg Clarke: Once you are dealing with sums that run into hundreds of thousands of pounds—for example, I was with a club that was in all sorts of financial difficulty and I was talking to the person who was trying to help them out about two weeks ago. He said, “I’m talking to the trust. They’ve got £300,000 in the bank.” I said, “Let me get this straight. You are £4 million short of staying in business. Are you taking their £300,000 unconditionally or part of a £4 million package?” He said, “I’m just taking the £300,000.” I said, “I wouldn’t do that if I was you, because if that keeps you in business for another 10 days and they lose all their money I will be really unhappy about that.” I had no power to enforce that but at the time he didn’t do it. We will need ways of protecting wellmeaning supporters from losing all their money in a fragile football environment. Once we get football on to a sound footing, if football trusts want to invest in steady state businesses that can stay in business that is great, but at the minute I am not sure all the trusts have the expertise in place to diligently understand what they are getting into. Chair: I think that is all the questions we have for you. Thank you very much. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Ev 32 Culture, Media and Sport Committee: Evidence Witnesses: Gordon Taylor, Chief Executive, Professional Footballers Association, and Paul Elliott, former Chelsea captain and Professional Footballers Association Trustee, gave evidence. Gordon Taylor: Brede Hangeland has been ill throughout the night and he has had to apologise for his non-appearance today. I hope you will understand. Chair: Thank you for that. In which case, may I welcome to the second part of the session this morning, representing the Professional Footballers Association, Gordon Taylor, the Chief Executive, and Paul Elliott, who is a PFA Trustee. We send our best wishes to Mr Hangeland and hope he recovers soon. Q110 Mr Sanders: A similar question to the last session: how robust do you think the English Premier League and Football League pyramid structures are? Gordon Taylor: By robust, do you mean how can they protect the existence of the clubs, bearing in mind what we have talked about with the debt? Mr Sanders: Is there a danger of fragmentation? Are they secure? Gordon Taylor: Considering, I suppose, they started with 12 clubs in 1888 and it never ceases to amaze me—bearing in mind the economic difficulties we have had in the last few years—how many full-time clubs we have in this country. It is unique in the whole world to have 92 full-time clubs and, in addition, in the Conference as well, over half those clubs are full time. We have the highest aggregate attendances, we have the highest number of full-time players, so it would be a little perverse of me to say it was not robust. But, of course, we have probably never had a time like this—I have been involved as a player and administrator through very difficult times. The 1980s were terrible times, both for health and safety reasons, principally when the Government got heavily involved, and since that time, of course, with the advent of satellite television and the back-up sponsorship, the game has never had more income. On the other hand, it has never had more debt and so we have that dichotomy. But I like to think when the PFA puts what assets it has at risk when we try to help clubs through financial difficulties—probably two-thirds out of the 92 clubs have had financial difficulties over the last few decades. I never thought we would see clubs in the premiership have problems but, in actual fact, you can name just on the fingers of one hand the number of clubs who did go out of existence and then, of course, even some of them have restructured, got back, and we have seen the likes of Accrington Stanley and Aldershot come back. We should not underestimate the great strength of football in this country and these islands, which is quite unique, and how much a part of our social fabric they are. So if you said, “How robust are they?” I would have to say they have met some big challenges. Those challenges in the 1980s were met with the help of politicians and the legislators, together with police and local authorities. Those tragedies convinced me that sometimes football—if you remember, I think the Prime Minister at the time blamed football and football blamed the Prime Minister but the answer to those problems came about by excellent co-operation between everybody involved in the game and then also supporters that got themselves properly organised, Government, police. There was no interaction between the different police forces. I couldn’t believe it. At the time, they wouldn’t give information, and since that time there now is a national information network. When people said, “You will never defeat the bad behaviour or the hooliganism at football, you will never defeat the racism at football”, I have seen football come together with help from people like yourselves and do precisely that. So there are times when, it has not just been robust, it has been quite positive with regard to social life in this country, not least of which, of course, is its social responsibility programme that is bought into by both clubs and players. Q111 Mr Sanders: You mentioned debt. How serious a problem is debt in the English game? Gordon Taylor: Debt is a serious problem for all of us in the world and nobody is more aware than you are of the debt we have got ourselves into. I think part of the problem is I have noticed it has been so much easier—I get involved in the local citizens advice bureau at Blackburn and Darwen and I have seen the massive increases in debt, the way that we have allowed people to run up credit cards, to run up debt. On a bigger scale that has been done by the banks as well so it was almost inevitable. Football is not an oasis from what is going on out there in society. It reflects it. So if there is debt out there, there is going to be debt in football. In dealing with it, you have covered the football creditors rule and you seem to think that is particularly special to football, as though we are looking for some actual special vested interest. It was done with the purpose of trying to keep a club in existence and its importance to a community and to try and make sure that the supporters, who didn’t run the club, weren’t discriminated against and that the players who had signed in good faith suddenly didn’t find their contracts not worth the paper they were written on, and to try and make sure that a club could not win a cup competition or a league on the back of players whom they couldn’t afford to buy or pay. We never had any objection, of course, because we are all taxpayers, to the Inland Revenue being a preferential creditor. I think it is just since they have not been allowed to be that, because of European legislation I believe, that that particular rule has come under attack. Q112 Mr Sanders: Has the number of clubs where the PFA is helping to meet players’ wages increased or is it roughly the same number that there has been over the last 10 years? Gordon Taylor: Of course, we did have Portsmouth and we have had a number of clubs just of late. It has definitely helped since both the Football League and the Premier League implemented a better relationship with the Revenue and tighter controls from the centre, which is what was needed. Q113 Mr Sanders: Has the number of clubs you are helping gone down or has the number of clubs you are helping gone up? Gordon Taylor: It has gone down, albeit Portsmouth was a massive amount of money compared with some cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 33 15 February 2011 Gordon Taylor and Paul Elliott of the lower Football League clubs. It is all proportionate. Sometimes £50,000 or £100,000 could cause a Football League club to really struggle, whereas with Portsmouth in the Premier League you were talking millions, as we were with Leeds when they were in the Premier League. What we do in such a situation is ask the players to hold together, not to walk out of the club. If they don’t get their wages they would normally be totally free agents to walk out. We asked the players, as we did with Bristol City 30 years ago, to try and hold together and agree to defer their monies until the club got out of its financial problems. Having said that, there were many in the league at the time, before the Premier League was formed, who said, “Let them wither on the vine. It’s natural evolution.” I didn’t think so, because I am a great believer in the history and tradition of the game and many great clubs now in the lower divisions have an illustrious history and vice versa, and that is the nature of sport. Q114 Mr Sanders: I think most football fans would be very supportive of that view. But as a professional body, at what point do you take a decision, “We can’t keep paying these players’ wages”? Do you have a formula that says, “We can do this for four weeks and if X doesn’t happen that’s it”, or do you just make up your mind with each individual case that comes before you? Gordon Taylor: It’s not a cavalier approach. We have lawyers, we have accountants who will go to the club and look through the books and see whether it is possible to save it and try and work with them to look at what measures we can use to save it. We don’t have infinite reserves with the PFA. In fact, the majority of our funds are charitable funds for hardship, accident and education, so we need to be quite careful on that. We are a lender of last resort. We try to encourage the players to defer some of their monies for a period of time during which we hope the club can get out of trouble, and I have to say for the most part that has worked. Q115 Mr Sanders: Are you currently lending to any League club at the moment? Gordon Taylor: At the moment there are one or two. Q116 Mr Sanders: Have Plymouth Argyle approached you? Gordon Taylor: Yes, Plymouth have approached us and Plymouth is a club we are looking to help at the moment and working with the players to try and do our best to keep that alive, because we don’t have too many clubs in the south west and, goodness knows, we need to keep them alive. You go down on your holidays and the youngsters there, they like the Manchester Uniteds and Arsenals but they also relate to the local club. I think it is important that we do all we can to keep Plymouth alive; and you think it was Michael Foot’s team, wasn’t it? Mr Sanders: Indeed. Q117 Dr Coffey: On debt, you made a submission about gearing being required in all industries. Is there an element here that leveraged buyouts are a poor way of trying to own a football club or is it simply that the tax incentives on a leveraged buyout are perhaps better for financing a club than the all upfront cost of putting in equity? Gordon Taylor: Are you referring to my reference to America? We have had certain problems in this country where there has been big leveraged buyouts of some of our major clubs— Dr Coffey: Yes. Gordon Taylor: That situation would not be allowed to happen in the USA where, as you know, they have different franchises and at times they even move cities and towns. That doesn’t happen in this country; maybe just once. Q118 Dr Coffey: You have made some very interesting comments about liquidity. Gordon Taylor: I mentioned a limit of 20%, where they talk about a limit of 20% of leveraged debt, yes. Without being so specifically involved, I am aware Manchester United need to keep being successful because there is a big amount of debt and likewise Liverpool found it hard to service their debt. Q119 Dr Coffey: I have a personal perspective about limiting gearing as well, which would be sympathetic to your general perspective, but you talk here to some extent about one of the things to follow from Germany may be about the liquidity. As a former accountant, the one thing you can guarantee is a forecast is always wrong. How do you feel that is working? Gordon Taylor: None of us can see into the future but I think we do, at times, need to pay respect to Germany, and not just because they keep beating us at times in international matches. They did have a time when they didn’t achieve the international success that they wanted to and they had a root and branch approach, to youth development. There is good co-operation between their national association and the Bundesliga and they set standards for trying to make sure that a club could, as we have heard before, at least say they had a balance sheet that could keep them in existence, to see them through the season and the next season. They have tried different approaches. They have emphasised the priority, which is good, of having full stadiums. They have managed to lower ticket prices and not affect them badly financially and have full stadiums. You can never just transplant a culture. Germany is different. Holland, for a small country, does tremendously well internationally. You can look at best examples of other countries. Not too long ago, France was the best example for youth development and bringing it through. Now that has moved to Spain and then you see the predominance of Barcelona and Madrid, which is not necessarily healthy, bearing in mind they do monopolise success in that country because those two clubs have their own individual television agreements, which we don’t have that in this country. It has needed support from Parliament at times to have a collective deal on condition that the Premier League does give a very significant amount of money to grassroots and, of course, also to the Football League, albeit in the Football League we have almost cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 34 Culture, Media and Sport Committee: Evidence 15 February 2011 Gordon Taylor and Paul Elliott replicated the problem with the Premier League. There was a time when one club probably had more money from television than all the clubs of the Football League and now the Championship is almost becoming a Premier League division 2. So we are finding the way they split their money—80% to the Championship, 12% division 1, 8% division 2—is almost now making it hard for division 1 and 2 clubs to stay in the same ballpark. Q120 Mr Watson: Could I ask you about the role of agents? Currently players’ agents are paid by players and clubs. Do you think clubs should be allowed to pay players’ agents? Gordon Taylor: What has become quite apparent once we had Lord Mawhinney with us was that to be transparent with regard to what clubs paid agents, for the Football League initially and then to some extent in the premiership, is the massive amounts of money. When you think of the battles the PFA had to get any share of television rights for its members who people paid to see and sit down and watch at home, and that that money goes into charitable causes and community programmes and anti-racism programmes and help for old players, the PFA’s share of that is a drop in the ocean compared to what has been paid to agents. They have become very much a part of the game used by clubs. This isn’t for me to beat them on the head. FIFA tried to regulate them and could not; it was put in the hands of the national associations. We thought we were making some progress with transparency and the full knowledge for the player and the club of what offers had been received and what monies had been received. Now it looks as though it is going to be open house again. I am just reminded, the more you try and look into agents, there was an inquiry into American sport as to whether they should be governed by national law, state law or by the sport itself. One of the classic quotes was that they found quite a number of agents had first class degrees from Harvard and Yale but there was quite a significant number who had just had the third degree from the local police. They are in a world that is very difficult to control. They are attracted by the money in the game, like they were involved in the film industry and the pop world. I thought we were making some progress with that transparency and regulation and exams and monitoring by the FA but it looks as though it is going to be open house if we’re not careful. If you are talking about financial propriety in the game, the transfer system can be a vehicle for abuse because of the vast amounts of money and the money that goes on what is called magic roundabouts. Unless you get transparency with all the people involved in a transfer, and these days of third party ownership of registration, some players have about five or six agents involved— so it’s no use me saying it is a clear transparent world. It is a murky world and the game and FIFA needs to keep a grip on that and, of course, FIFA needs to keep a grip on a few other things of that direction. But it is not a time for letting go of a compliance hold on agents. It is a time to be probably tighter than ever. Q121 Mr Watson: So if FIFA and the national bodies have failed in their obligations to regulate agents, do you think the Government would need to step in? Gordon Taylor: It is like I was saying about the Government stepping in: you probably have enough on your plate with legislating on criminal law and everything else without football agents. Far be it for me to say, but sometimes it is as a result of Inland Revenue inquiries and our national media. They can do a job sometimes if there has been corruption. I think they are either in the game or they are out of the game. If they are in the game then they need to be under some form of control. I referred you to the problems of the 1980s when everybody was passing the buck and it was only those problems of safety and violence and other problems were addressed by a combined approach. That approach needed legislation from this House and, of course, closed circuit television was massive, but many other areas were brought into play that were a good sign of how football could work together with Government. Q122 Mr Watson: I am going to put a question to you that I am sure you have heard many times before. It has been said that players’ high wage demands are responsible for the level of debt that clubs carry. Would you like to address that assertion? Gordon Taylor: Last Friday afternoon I was answering questions, because the former Archbishop of Canterbury—I think it was George Carey—said it is up to the bankers and Liverpool players to help Liverpool. I always find myself on the back foot. The game is about players. It is the players whom people pay to watch. I don’t think anybody goes to see a film and complains about Brad Pitt’s wages, or perhaps I should talk about a new potential Oscar winner’s wages, and the same if you go to an Elton John concert or a Take That concert. I have never heard a fan yet say, “It’s terrible the money they get.” It is a question of they either pay it or they don’t. I am amazed at the money that television pays football but, on the other hand, football has been good for television. The price is higher than what you would necessarily want to make sure people who are unemployed could go there but they seem to keep people coming. It is a very short career; an average eight-year career. We lose 50 players a year with permanent injury. People seem to forget that they pay over half their money, in spite of the fact—and a limited number of players have image rights and because they have an image in their own right, particularly the Beckhams, of course, and maybe the Wayne Rooneys, but that’s a very small percentage. The vast majority are on a pay-as-you-earn system and will be paying more than half the money back to the Treasury. It is not for me to say but when you talk about bankers getting bonuses, people seem to forget if they get the bonuses over half of that is going to come back to the Treasury. It is the same with footballers. I just think every labourer is worth his hire. They don’t hold a gun to clubs’ heads; they never have done. When in the past out of about 70 clubs where there has been financial problems and there were no wages on time cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 35 15 February 2011 Gordon Taylor and Paul Elliott and those players could have walked out for free and got another club, they held together for the sake of the club. At times they don’t get acknowledged for their loyalty. When everybody says they were loyal in the old days, I’m not having a go at the players before the maximum wage was removed. They were loyal because there was no incentive to move, because if you moved to another club you were on the same wage. It is only since the likes of Bosman has happened that there has been a greater mobility—an average probably three years at a club now. Q123 Chair: Paul, you had a very distinguished playing career; what is your view on that? Paul Elliott: I think football is like a lot of other businesses insofar as always the top half or the top 1% always earn the big money. Whether you are playing basketball, baseball, or tennis, it is all relative. Footballers are getting commensurate to their values and what they bring, because ultimately they drive the values. Everybody fills stadiums, whether it is 75,000 at Manchester United every week down to 60,000 at Arsenal and so on, to watch the best people and the entertainers. Football is a global sport and I have to endorse what Gordon was saying. I myself as a player, having played at the various highest levels, was one of those players who came out of the game through injury. The PFA has been very instrumental in that because we talk about the 1% but are we talking about the 95% of kids that come into the game at 16; at 18 they don’t even get a professional contract. Less than 5% of those are still in the game at the age of 21. So we are talking about the ones who are at the outstanding level and the risk of injury is extremely high and their average lifespan within football is from eight to 10 years. As a former footballer, I suppose every now and then I have a thought at the back of my head, “Maybe I should have sued my mother and father because the timing wasn’t quite right.” But realistically, as a professional footballer, I wish footballers all the best because I have heard of stories where things have gone wrong for many of them and they have been bullied out of football clubs. They have not had the support that they would have liked to have had, for young players. I think it is so important. There are so many intangibles—that is the point I am trying to make—at all levels of the game, so those that get to the very top and stay there, they are very dedicated, they are very focused, they make a colossal contribution back into the community. They set up their own foundations and they have a tremendous consciousness about what is going on in this country. I think that is exemplified if you look at the PFA and the 4,000 existing members that they have but also about 50,000 that they serve outside of the game and over the last two years over 25,000 community visits all over the country in a number of areas: crime, drugs, anti-racism. So, everyone wants to talk about the salaries, and I understand that, but equally, as well, you have to look at the other areas where they make a commensurate positive contribution, too. Gordon Taylor: The PFA doesn’t work just for what is good for players and see a club go out of existence. We are one body that has been determined to try and keep clubs alive. We are obviously conscious that they not only employ our members but many other people as well. Everybody talks about salary caps and it is about wages of the players. The game is about the players, but a club like Manchester United manages to attract some of the finest players in the world and yet, of course, keeps its salary levels to below some 50% to 55% , I believe, and manages to manage perfectly adequately. Q124 Mr Watson: Can I ask about the governance arrangements to provide new protections for the pressures that modern players find themselves under? They are not just on the back pages for what they do on the football pitch. They are on the front pages for their private lives. They are in the financial pages for their financial arrangements. Do you think the current governance arrangements in football adequately protect players and is there more that can be done to give them support? Gordon Taylor: What we are finding in this day and age is probably young men who are a little bit cocooned. You have heard about youth development and a club can approach a youngster virtually in the cradle now, from eight and nine and all the way up to 16 before they can join a club full time. That worries me a great deal because there are so many things that can happen with growing up even before they have reached adolescence. As Paul said, all I know is that of the 600 who join at age 16 we will lose 500 by the time they are 21. Those youngsters are disillusioned, their parents are disillusioned; they need picking up, they need looking for alternative careers. We provide that but if there is going to be a lot more emphasis and money spent on these nine, 10 and 11-year-olds and the 16-year-olds, we want to see a better success rate, otherwise there has to be a much better exit route, that these youngsters are guaranteed a career outside of football as well, otherwise there is going to be a big wastage and a great deal of disillusionment. In cocooning them, every youngster they get is told he is going to be the next John Terry, David Beckham, Wayne Rooney. Their parents are convinced and, of course, life does not work like that. It is a good thing but the PFA has taken on the responsibility of educating them, together with the Football League and the Premier League. Life skills—the more money these youngsters have, they can have problems, addictive problems. So, it is life skills. It is preparing them psychologically. There is a lot more effort given to psychological care of these youngsters and the pressure on them. I am not saying they would swap it, it is a great life. But exactly what you say, it needs a lifestyle programme and clubs need to accept that if they are going to spend thousands of hours on trying to make them footballers, you can’t succeed with every one and there has to be a great deal of time and effort on trying to keep them as human beings and contributing, because football is such a short career even if they make the grade. Q125 Mr Watson: How many of your members have told you they thought they had their phone hacked? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 36 Culture, Media and Sport Committee: Evidence 15 February 2011 Gordon Taylor and Paul Elliott Gordon Taylor: Right, that is a bit of a switch. I’m not sure what that has to do with the governance of football but the fact of it is that the media, as you know full well, this Committee, is interested in all the lives of footballers because they are the new celebrities. I mentioned film stars and pop stars, but probably footballers and the likes of David Beckham and his wife get on the front page as much as the back page. Let’s just say I am aware of very intensive media scrutiny of them, as you will see when people are encouraged to tell tales about footballers and are offered payment for it. It is part of that life skills programme that we try and give to our youngsters to make them aware of what is happening away from the pitch on a 24-hour basis, to be very mindful and to be careful. Q126 Mr Watson: So the responsibility to protect privacy or for players to conduct themselves and take extra precautions to protect their privacy would lie with the PFA or with the— Gordon Taylor: No, the PFA can’t be responsible for everything. Every individual is responsible for himself to some extent. But there are parents there, there is family there, there is his club there. The club and the manager are a big influence because they are at that club every day, and a lot of clubs do. Some people say footballers don’t associate with the supporters like they used to and it is perhaps not surprising because they feel quite exposed and vulnerable because of that stronger world from the media and the stronger pressure. Q127 Mr Watson: Have you given guidance to members on how to guard against phone hacking, or would that be a club responsibility? Gordon Taylor: Well, both really. It’s both. It is a responsibility of the club and the individual, any advisers he has in lawyers, and also from the PFA as well, yes. Q128 Mr Watson: Did David Beckham have his phone hacked? Gordon Taylor: You have to ask David Beckham that. Mr Watson: Has he told you that? Chair: I think we are going to move on. This is not an inquiry about phone hacking Mr Watson: No, it is about governance of football and that we need to protect the privacy of footballers. Gordon Taylor: Certainly when he was so-called “kidnapped” the cameras were there, weren’t they, so— Mr Watson: So it is possible? Gordon Taylor: Everything is possible these days with the technology we have, isn’t it? Q129 Jim Sheridan: I apologise because I will have to leave soon as I am meeting the Speaker. Gordon, you referred in your opening comments to the question of racism in the game in the 1980s and 1990s. I would like to put on record my recognition for what Paul did in Scottish football in trying to address the question of racism in football. It is not perfect but a million times better than where we were before Paul came. Perhaps this is a naive question, Gordon, but millions of workers depend on trade unions recognising or negotiating on their behalf. What is the difference between footballers simply because of the money they earn? Just finally, I know that you said that the major grounds are full and no one is twisting their arms to go in there but I would argue that there are an awful lot of people at a lower income level that are excluded from the game, particularly the top game, because of the prices. Gordon Taylor: I agree with you and I get very worried at the priority of professional sport. We need supporters and we need them live and if our grounds are not full there is nothing worse coming over on television. When Italy had a situation where it had individual clubs doing individual TV deals and they showed so many live games virtually of every club, that then affected the attendances and to see big empty spaces, suddenly television is not quite as interested, neither is the armchair supporter. The atmosphere is not there. That is the one of the areas with our community programmes that we have tried to make sure they look to accommodate the unemployed, particularly those less fortunate members of a local community—it is not just a business but within that business concept and knowing they have to break even—to try and make sure the stadiums are full and make sure we educate a generation of youngsters, if they are not playing the game, to at least be watching the game in the future, otherwise we have no divine right to be the major spectator sport or participant sport. So I do agree with that. Jim Sheridan: I think at a previous session we were told that the— Gordon Taylor: Sorry, a lot of clubs are mindful as well, to be fair, and will give special reduced prices for different graded games. Q130 Jim Sheridan: We were informed that not many young people come through the gates—I think the average age was 45 years or something. Gordon Taylor: I think part of the price of television is the fact that everybody could rely on a 3 o’clock kick-off on a Saturday afternoon or perhaps one midweek game and that has gone. So it is a lot more difficult. Q131 Jim Sheridan: Why can’t trade unions do what the agents already do and so keep the money in football? Gordon Taylor: I am all in favour of that. The only thing is sometimes when we have been asked by parents—and we have handled many top-quality stars of today when they were youngsters—they get doorstepped and they get offered things that the PFA couldn’t do because it would not be within the rules, which is a bit in line with what you were saying with your experiences in Scotland, I think. Q132 Paul Farrelly: I just have a couple of questions going back to agents and who makes what out of player transfers is as important for the reputation of the game from the infamous quote, “Cloughy likes a bung”. Paul, as a player, do you feel uncomfortable that agents can, without disclosing it, take a cut from both sides of the deal? Would you, as a player, feel cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 37 15 February 2011 Gordon Taylor and Paul Elliott that they are necessarily acting in your best interests or their own in that situation? Paul Elliott: It is an interesting question. I think you can either look to yourself personally, because during my own career I always negotiated my own transfers because I made it my business to get myself educated and understand about the business. Therefore, I was always confident enough to represent myself. So, in that scenario, from my perspective it is hypothetical. Q133 Chair: Is that still done or would all Premier League players now essentially use agents? Paul Elliott: I think there are a lot of players who obviously have agents and I think there are a lot of very good agents there that serve their clients very well indeed. Equally, I think it is reasonable to say that there are players there that don’t necessarily need an agent but would have an accountant or a lawyer, because obviously they are very intrinsic skills that are very important. Possibly a player would not understand the legality of a situation but certainly when it comes to understanding their own values and what they are worth, I think most players are very comfortable to articulate that and don’t necessarily need a third party to do that. Q134 Paul Farrelly: Are there any requirements at the moment for an agent to disclose to a player what, if anything, he is getting from the other side? Gordon Taylor: Yes, there were. That is what I was referring to. We have made some progress and it was that they needed to give full information of the different offers they had had from different clubs: the offers made, the wages along with the transfer fee. That is when we felt we were making some progress, but now it has gone back a little bit. Having said that, in this country we felt we were making progress, so whether we could do that on our own remains to be seen. If we do it on our own and other countries don’t do it then it will be said to be impossible because of the nature of international transfers. But the points you make are very valid, how you can properly act for both the club and the player in the same transaction, but, of course, that has happened and agents have been paid by both parties. Q135 Paul Farrelly: I am asking because this is about governance and governance is all to do with reputation in the game. In the City of London it is frowned on but not necessarily unusual for people to take fees from both sides, but the Takeover Code, for instance, will enforce disclosure. The Guy Hands case with EMI in court recently, most of the controversy was about taking a cut from both sides. But do you think disclosure is enough? Gordon Taylor: I think transparency and disclosure is enough, and from that point of view that is the case with most things in business. Q136 Paul Farrelly: What about penalties then to make it worthwhile people being truthful in their disclosures? Gordon Taylor: That needs a good compliance unit. Everybody said, “Why don’t you monitor it at the PFA” and this and that, but it is such a world. It involves almost a fulltime squad. The banks obviously got in big trouble, didn’t they? There was supposed to be the Financial Services Authority. They were fulltime. So you definitely need a fulltime unit looking at the activities of agents. But, as I say, it is mainly at times of re-signing contracts or a transfer from a club. Part of the problem that FIFA has not grasped the nettle of is there was a great uncertainty over the validity of transfer fees. This was part of the discussions. We were involved with the Worldwide Players Organisation, FIFPro when Andy Williamson referred to the European Commission and FIFA and transfer fees and the fact that it is quite unusual for a player to go for more than the value of his contract, and that happened. So, as a result there is a great opportunity for corruption with transfer fees and that is probably the time when there should be the most transparency, particularly with the registration of a player at a club in certain countries in South America, for example, whereby the value of a player, his registration, is owned by a third party who is prepared to put some money into the club on a short-term basis. But, of course, when the player’s value increases, that value is all down to this third party. In that instance, in the Tevez and Mascherano case, it looked bad from the start and it never got any better. I think that is one area where the game needs to be properly governed because, you are quite right, the transfer system is one that needs to be transparent and illuminated because the opportunities for corruption with the amounts of money involved are very big. Q137 Alan Keen: I just want to make a point. I think we were in danger before of people comparing footballers with bankers. It is not the players who decide how much money they are paid; it is the club who have their contracts. The bankers are using, in many cases, our money to pay themselves. So there is no comparison to players. Gordon Taylor: Well, especially now we own quite a few of them, don’t we? Alan Keen: Yes, but we are still not making decisions, the players are not making decisions— Gordon Taylor: No, exactly; that is what I said. They don’t hold a gun to the club’s head and if they did, if they don’t have the money they shouldn’t be paying it. Alan Keen: But the bankers are paying themselves. They are making the decisions. Gordon Taylor: Yes. Q138 Alan Keen: It is difficult enough for a committee like this to talk about regulation even within this country, so it is even more difficult to talk about the international game as a whole. While we have the opportunity to have you in front of us, I just wondered how you feel. You say you feel a great responsibility to players throughout the world. We are told all the time how proud we should be, and we are, of the Premier League but how much damage are we doing to the game of football internationally by attracting the very best players here? When FIFA made the decision to place the World Cup in Russia they obviously are trying to do that, and set aside any dubious reasons they may have, because they want to cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 38 Culture, Media and Sport Committee: Evidence 15 February 2011 Gordon Taylor and Paul Elliott extend the game internationally. What concerns do you have, both of you, as looking after players in this country, about the gravitation of the wealth that affects the international game? Gordon Taylor: Yes, I understand. I think it would have been better if FIFA had come out and said. They would have saved us a lot of money if they had said, “The purpose of holding a World Cup is to try and take it to countries that have never had it”, albeit I think we’ve done enough since 1966 to justify holding it when you look at the efforts we have made with our stadiums, our safety, our diversity programmes. Having been president of FIFPro, the international players’ association, sometimes the feelings and the perception of the culture and characteristics from different countries—as you will be aware on your international visits—is quite true and I think the fact is there is a great deal of envy and perhaps jealousy at the success of the Premier League, as was witnessed when you saw the backlash with wanting to take the 39th game to the rest of the world. FIFA gets its money from international games, it needs a healthy World Cup and it will say a lot of things but one of them is, “We have far too many games” and then organises its own World Club Cup competition because that is what they have never been able to match, that is why they are very much involved in international football. It is natural for FIFA to want that, in any sport it is natural to want it, and as an administrator it is not good for there to be a monopoly on success by fewer and fewer clubs and fewer and fewer countries. So the very fact that some of these countries are losing their players to here makes it very cosmopolitan here and with foreign owners as well it means they are not necessarily going to work for what is best for English international football because their first priority is their clubs. That is one of the problems with the Football Association because, while it took us 100 years to get a seat on the council of the FA, it is run by the amateur game and the professional game and there is no accommodation whatsoever on its main board for either the PFA, the LMA—the League managers with their experience—or the supporters’ organisation and that, I find, is quite offensive when you think of the initiatives we have brought into the game that I have talked about and that you are well aware of. The fact is that every other country in the world of football actively encourages its former players who are prepared to stay in the administration of the game. You look at France, Spain, Germany; they have been very actively involved and they have been a force for good. From our point of view that has not happened and that is one area where we can learn a great deal from the rest of the world. The world perhaps has been looking at us and seeing how cosmopolitan we are. We have more players for World Cups in our league than any other country in the world. That is really going to be hard and what I find is every sport has a duty to encourage its youngsters to aspire to become that next generation of top class footballers but the squad of players available for England has been getting smaller and smaller. In the same way that the Premier League now are saying the more hours spent on learning how to become a footballer, you’ll become a better footballer, the same as you would a musician or what have you, we are having more and more youngsters and players from abroad and less and less players qualified for England. It must impact on the success of our international team. That has been one of the disappointments of my life in football because I love England to do well. I think there is no reason why you can’t have a healthy club competition, as we do, and have success for England as well and much more proportionate, considering we are the wealthiest football country in the world. Q139 Alan Keen: One final question. You mentioned the LMA and you have made great strides towards trying to create a career structure in the game for former players. We all understand a new manager wanting to bring in his right-hand man, that is the coach, when he gets a new job and push the others out, and sometimes they bring in a team of six or seven when they come in. Can you say more about how along with the LMA you are trying to do that and the attitudes? Gordon Taylor: I feel it is sad when suddenly a club’s results mean that staff depend week to week on those results. I was hoping that with a good youth development programme all the staff could stay in place but the fact is, of course, they move the manager out along with his staff these days and I think that is unfortunate for consistency. Another area is, no matter how much we talk of investment in youth development and academies and centres of excellence, the fact is between 18 and 21 there is a glass ceiling that they can’t break through and they won’t break through unless there is some security of tenure by managers because their career depends on one week’s results sometimes. So they never have the courage or the necessary patience, which is understandable, to put a youngster in, because a youngster needs to play for a couple of games, take him out, bring him back in for more, take him out, when they are getting inundated with agents—this is one of the good things of the transfer windows—to buy a ready-made international player from wherever in the world. These are big issues for clubs and managers. Clubs don’t always respect management as it should be respected, albeit the LMA have tried to get qualifications being necessary for the job. Compensation, it becomes very unseemly when suddenly a chap is thrust out of work just because— you have seen what has happened at West Brom and a good young manager who has brought that club up and suddenly hit a bad spell and there is suddenly no faith and they’re out. That is not just West Brom of course; you name a club, that has been the situation, but there needs to be a recognition of football management as a proper skill and a profession. Alex Ferguson wouldn’t have been as successful as he has been if his board at the time had been as shortsighted as some of the other clubs. I can remember Howard Kendall, he was on the brink as well and then they had some faith in him and he won the League. You just find those managers, given the cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 39 15 February 2011 Gordon Taylor and Paul Elliott chance, will inevitably produce, and it is like that with youngsters. We’re getting into a world where everybody wants instant success and it is just not possible. Success needs time and football is as good an example of that as anywhere else. Q140 Dr Coffey: On players’ wages and the financing of clubs, in a different industry actors are starting to take a stake in a film and, if you like, have a lower salary and benefit in the financial success. You were talking earlier about loyalty. Players are perceived to be sometimes disloyal; they can be a hero one week, a Judas the following week. Is there a role for perhaps part of a player’s remuneration to be related to the financial success of a club and having shares? Gordon Taylor: Very much so. Paul made the point that it is not just players who seem to want to go. Often they are encouraged to want to go by other clubs and often they are encouraged to want to go by the manager who suddenly doesn’t pick them. I had one youngster who has not had a game for 12 months with a premiership club—the squad is that big and they’re not getting games—and that is just not easy. What you are talking about is there, of course but, on the other hand, that is why the bookies are rich, you can’t predict sport and you don’t know whether you’re going to win or whether you’re going to lose. But, on the other hand, it is a full-time commitment and giving it a full-time commitment that needs time, that needs energy. They are encouraged to marry young; they have mortgages; they need a basic wage and they need to plan for the future. But, in answer to your question, they get extra money for winning things and if they get relegated we are not averse—and we believe it should happen and now it is probably not as bad because of the parachute payments, but when the gap was so big between the Premier League and the rest we felt it had to be the case that that contract had to be reduced because of the club’s income being reduced. Now the same situation will arise if a club gets relegated from the Championship to division 1; the drop in its income from solidarity payments and television will be considerable. But really that is up to the clubs; it is up to anybody. I don’t think anybody minds paying out if money is coming in; what is hard is paying out more money if you’ve failed. It is just like Mr Micawber and Charles Dickens: if your income is comfortably matching your expenditure, okay, and if not you know there is a problem. I know maybe some people would say debt is okay, you wouldn’t get debt if you weren’t in a strong position, and football does survive sort of on a wing and a prayer because the very nature of sport is it is speculative. As an administrator you want everybody in every league to feel they have a chance of winning it but sometimes clubs do need to be controlled for their own good because they do get carried away. A bit like Toad of Toad Hall, they think they’re going to win and they spend and suddenly they’re in big trouble. That is why it needs a strong Football League and a strong Premier League to say, “Your spending is getting out of line; you are not allowed to take on any more players”. In the temporary absence of the Chairman, Mr Tom Watson was called to the Chair for the remainder of the meeting. Q141 Dr Coffey: I was going to ask Mr Elliott from a player’s perspective—you just said the role of the PFA—would that be attractive or would it be risky? Paul Elliott: I think if you look at the current ratio generally across the board of turnover a large proportion of it is obviously made up in salaries and I think there is a genuine, legitimate case for performance-related structures. Obviously a player has to have a basic wage but I think, obviously subject to negotiation, there are grounds to have a more rounded, inclusive, performance-related structure that supplements that income and runs alongside that. However, I think you have to balance that against the player, the stature of the player, because ultimately I think you have to understand when we are talking about contracts and we are talking about transfer fees, signing-on fees, football is a supply and demand business and you have to accept that clubs are saying if they want the best player they have to pay the best salaries. I think as an ex-player, if I was discussing a potential contract with a club, I know my own worth and I’m doing my optimum and my level best to optimise my value, that is my right. Obviously looking at it now, everybody wants to be part of football at all levels. I am involved in a game at a number of levels from grassroots to the very top level and you have got young parents sitting around all wanting them to be the best but the reality is over 95%, 96% don’t even make the grade. I think it is very important to highlight that point so I certainly would be favouring it. If I could slightly backtrack to a point that Alan made, particularly about the World Cup and to reaffirm a point that Gordon made. I was very fortunate to sit on the board of the World Cup bid as a non-executive director, and that was predominantly because of Gordon and the influence that Gordon had in pushing and promoting myself as a former player who has served the game at various levels from grassroots to the top of the tree. It is important to note in this country that we spent a considerable amount of money on that, the best part of, for argument’s sake, £18.5 million if my maths is correct. What was clearly evident, there was a number of reasons why we didn’t host the World Cup, politically and otherwise, but I think also as well the process, there wasn’t enough transparency in the whole process from the outset, and if we are clear on that then obviously we can make a conscious decision as a board: do we invest in that money or do we say, “No, we’re not going to have a real genuine legitimate opportunity. We invest that money back into grassroots, back into CSR, back into women and girls’ football, back into the disabled, back into this country in terms of growing our own and our facilities, assisting Trevor Brooking and his age-appropriate coaching”? I’d be happier to have spent the money doing that but it obviously wasn’t the case; we weren’t aware of that. I think thereafter we always said we would always be FIFA’s potentially best commercial partner because of the stakeholders cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 40 Culture, Media and Sport Committee: Evidence 15 February 2011 Gordon Taylor and Paul Elliott in this game and the Premier League with the FA were very intrinsic to that. I think that with the foreign players, one of the fantastic things that they provide in this country is for young people to emulate their skills, to see them as role models, to go into stadiums, because of the emphasis that they have on young people. As an explayer, one of the things that I’m very passionate about has always been about players. One of the main reasons, I think, why we were unsuccessful in the World Cup was because there weren’t enough footballing people being part of that process. Michel Platini is a great, great footballing man and on more than one occasion he said, “I want to talk football with footballing people.” I think it is very important to highlight that point where players are very, very, very influential. The players within the PFA have a significant role to play within the structure of professional football to move professional football forward. We have a very intangible balance at the moment between serving the national team; we have looked at where the national team is on the global level, we have looked now where we are post-2018 and there is a lot of rebuilding work to be done among all the stakeholders in this country, because one of the unique factors is the individual stakeholders, there are so many. What we need to adopt is a more collaborative process between all of the stakeholders to ensure that we can challenge and deal with these issues and, very important, reinstate our reputation, not just nationally, which we need to do, but I think internationally with FIFA and with UEFA because there are clearly fractured historical relationships. I think the structure here that we are talking about—the reform of the governance and the structure in the game—is a gilt-edged opportunity to look at ourselves as individually as stakeholders within the Government, within the PFA, within the Premier League, within the FA. I think we have a very good chairman in David Bernstein who has come in and he has shown tremendous leadership very early on. He is a believer in equality, he is a believer in diversity, and I think equality and diversity has got to be glaringly intrinsic to the future of this football, in this game, in this structure within the FA, because if you look at the game every Saturday, close to 24% to 25% of the players in the game are all from the BME, black and minority ethnic. But where is that visibility in the boardrooms? Where is that in senior management? Where is that in football administration? Where is that at academy levels? Where are the women and the girls? Where are the people that sit in stadiums week in and week out: the disabled, women and girls, footballers, the people who are big contributors into football? Where is their presence on the boards, the councils and the committees? They are the defining issues. I think it is very important for the FA to modernise and be fit for purpose for the 21st century. The game has got to be far more inclusive, far more diverse and far more welcoming, because these are the key stakeholders and there is room for everybody. I think it is important that we recognise that and have what I call real leadership, collective leadership, by all the stakeholders to ensure that we are fit for purpose for the 21st century, inclusive of all the parties that I’ve just mentioned. Q142 Paul Farrelly: Gordon, last week we had a picture painted for us of Dave Richards, Sir David Richards— Gordon Taylor: Yes, Paul, just for one second could I quickly say that with reference to Alan and yourself, one of the areas where with regard to youngsters getting a chance and regarding what is sometimes envy of our Premier League, with regard to the youngsters coming through and giving them opportunities, sometimes we need rules. Sometimes they will be challenged by Europe, but one good new rule has been the home-grown player rule, irrespective of nationality, to have at least eight out of 25 in your squad. I think that needs to go further and we should have at least three starting on the pitch and if that rule is applied throughout Europe it gives a chance to our next generation to have a chance. I think that is an important rule that we need your support on. Paul Farrelly: On governance at the top and the FA, the picture was painted of the day before an FA board meeting Sir David Richards and the Football League rep, they all meet to agree the line. Come the FA board meeting, the representatives of the amateur game won’t vote against them if they disagree because they know where their bread is buttered, and that leaves the chairman and chief executive, if they disagree, without a paddle between them. Hence, there has been the recommendation, which the Football League in its evidence has supported, of two independent directors coming in on the FA board. That begs the question of how are they appointed and who are they appointed by and what role organisations such as your own might have in that appointment. But you have advanced a different model. You have talked about at least representation from sectional interests on the FA board and you have mentioned at least three: the LMA, the PFA and the supporters’ trusts. What would you like to see happen? Gordon Taylor: I feel very strongly about that because the Football Association is supposed to represent all sectors in the game. The game of football, if nothing else, the players have to be part of that game, it is about playing the game, and from that point of view I believe also the record of the PFA in introducing initiatives. In 1994 we didn’t qualify for the World Cup; we found we had just not been getting enough coaches to coach the next generation. We developed our own department of coaches. Our department at the PFA of coach educators is higher than the FA’s. In the 1980s, we developed the initiative of saying to clubs, “You can’t just be somewhere where people will come if you’re winning and won’t come as much if you’re losing. You need to be a focal point of community activities.” We developed about the behaviour, about the anti-racism. We have had good ideas that other bodies have taken on board. We’re probably a strong association because we have been kept out of it but it doesn’t make it right, if you know what I mean. So I say, yes. The FA is very big insomuch as amateur and professional, I suppose it is like having your local post cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Culture, Media and Sport Committee: Evidence Ev 41 15 February 2011 Gordon Taylor and Paul Elliott office bank with Barclays Global, but the key factor in there are the players and the mangers. We have managers who are not mad, they are very dedicated and they have a lot to offer the game. The football supporters I talked about in the 1980s got themselves organised. As you will know from the background, they have combined together. They are trying to have a voice. They are not lunatics who are going to go to a boardroom and say, “We demand this, we demand that”; they just care about the clubs. But if the FA can’t accommodate—quite seriously, after 100 years, they gave the PFA a position on the council. I go because I respect that but I might as well be, to be fair, a little bit of a nodding dog in the back of the car because there’s an executive committee and there’s a professional game board and we’re not on it. If you think we must have an independent person, well, that would be good if that independent person were somebody like Paul or the trustees we have, your Chris Powells, your Garth Crooks, loads of lads. But I think at least bearing in mind the amateur game is there, the Football League is there and the Premier League is there, well, where is the PFA, where is the LMA and where are the supporters? It is so glaringly obvious it hits you in the eye. We are so archaic in this country, not just in football but in other sports, and I said to you sometimes we think we’re the best in the world and hopefully sometimes we will be, but when you wonder what happened in FIFA you look at every other body. I go to Wembley because I support every game. Their chairman inevitably gets up to say, “Thank you for having us” and he’s inevitably a former player who has wanted to stay involved in the game. Everywhere I go it is a former player involved in administration because they care about the game and care about the future. I’m not saying the volunteers don’t but I’m saying at least let somebody who has put their life and soul and body on the line for the game be involved in the administration. We are blatantly ignored. From that point of view it is so obvious, if you look for an independent person who won’t have a fraction of some of the experience of the people sat behind me. Q143 Paul Farrelly: Okay, Gordon, it is very good of you to mention an old Stoke City legend, Garth Crooks, but just to use an analogy, yes or no. To use an analogy, is your position on the future governance akin to saying that the unions are on the supervisory boards of German companies, why shouldn’t the unions be on the supervisory board of the Football Association, of the football game in the UK? Gordon Taylor: We’ll still work for the good of the game but I can’t believe why we are not inside there, as we are with the League and the Premier League, working for what is good with the Football Association. It’s just so obvious. They need the players for their cup competition and for England, and it’s just so obvious, it’s so self-evident, to worry about which independent people they should have when they could have people from those sectors of the game and for once claim to be at least all inclusive. By the way, all those bodies then would have a collective responsibility to make the decisions work but those decisions would be better decisions because they would encapsulate a lot more knowledge in making those decisions. Q144 Damian Collins: I just want to touch on the football creditor rule which, as you know, we covered in the last session, and ask first Paul Elliott, as someone who has negotiated your own transfers, if the football creditor rule didn’t exist and therefore the club went into administration, players might have a greater financial risk because they might lose salaries and monies that are owed to them. Do you think players would be much more careful about the clubs that they sign for and whether the wage offers that are made, attractive though they may be, are realistic and affordable by their club? Paul Elliott: I think there would be general consideration financially but I think first and foremost, as I speak as a former player, I would look at the club, I would look at the people inside that club, I would look at the aspirational levels of the club, whether that is consistent with my own aspiration, and then thereafter obviously you look at the financial consideration to the club because I have a family, I have other people, I have dependants that I have to look after. But that wouldn’t be uppermost in my thinking because first and foremost I’m a professional footballer, I have very big aspirational levels. You want to play in the best stadium, you want to optimise and maximise your skills with the best players in the best stadiums, playing around the country, nationally and internationally. I personally would certainly look at it from a very professional-minded aspect first. Thereafter, obviously I’d give consideration to the financial but ultimately there is a legislation. You have got to think in terms of business, what is the fallout. If you’re not going to get paid, then there is legislation that protects the players where the players can go on a free transfer. That is your worst situation but I have never, fortunately, had to think like that or be associated with a club that has obviously been mismanaged in an inappropriate manner. But first and foremost I would certainly look at it from a professional perspective. Q145 Damian Collins: Yes, because the football creditor rule is there to protect the interests of players and other football clubs in that regard and a lot of what we have talked about today—the higher ticket prices at the grounds, the difficult financial situation of lots of football clubs, the role of television in the game—all of that is linked to money and most of that money is going to players. The machinery of football has created huge amounts of cash and that cash is being used to pay players. Paul Elliott: Yes, and ultimately, if it wasn’t for players there wouldn’t be spectators inside the ground, that is the bottom line, and the players are the highest form of entertainers and we are in a supply and demand business. If I’m a player and a club is offering me something that I think is commensurate to my value—whether it be £100,000 or £50,000, whatever the case is—I wouldn’t say no to that. If you were a player you would not say no to the same. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG02 Source: /MILES/PKU/INPUT/011145/011145_o002_michelle_HC 792-ii corrected.xml Ev 42 Culture, Media and Sport Committee: Evidence 15 February 2011 Gordon Taylor and Paul Elliott Q146 Damian Collins: I think it would be wrong if football was being run for the benefit of the directors of football clubs. Gordon Taylor: May I just say, Damian, I remember there was a time when there was a limit on players’ wages, up to 1961 since about 1888. There was massive crowds, multi-millions, 20, 30, 40 million; we didn’t see any great investment in stadiums or wonder where the money went then, from that point of view. Q147 Damian Collins: The purpose of the question is not to say we should go back to that at all. The question is, to what extent do footballers themselves share the risks that other people in the game do when they are the beneficiaries of the way the wage system works? Gordon Taylor: Footballers would have to share that risk if you decided there couldn’t be a football creditor rule, but what we would do, there would be no player would ever go to that club again. If it reconstructed, it would be at the bottom. The supporters would be absolutely aghast. There would be a terrible loss. Most of those players at that club would walk out and get another club the next day but those supporters wouldn’t have a club to support and all the contingent work that is created by that club, with the caterers, if I go through it all it’s almost like match funding, if you like. There would be a massive loss and it isn’t such a bad rule. Reference has been made to the St John Ambulance not getting paid. That I can’t believe because you see these days they employ their own people. If St John Ambulance needed funding I can assure you there is enough millions going from the PFA and Government and from the Premier League to charities that any local St John Ambulance Brigade need not worry about its future. Mr Watson: Thank you. Gentlemen, on behalf of all the Committee members can I thank you for a very entertaining session. Gordon, you shared great insight. Paul, can I also say on behalf of the constituents of mine in the north-east part of my constituency in West Bromwich, particularly a Mr Adam Smith, I have to tell you you are a living legend and I have to say hello to you. So, thank you very much. cobber Pack: U PL: COE1 [SO] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 43 Tuesday 8 March 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe Dr Thérèse Coffey Damian Collins David Cairns Paul Farrelly Jim Sheridan Mr Adrian Sanders Mr Tom Watson ________________ Examination of Witnesses Witnesses: David Gill, Chief Executive, Manchester United, Peter Coates, Chairman, Stoke City, Tony Scholes, Director, Stoke City and Niall Quinn, Chairman, Sunderland, gave evidence. Q148 Chair: Good morning, everybody. This is a further session of the Culture, Media and Sport Select Committee inquiry into football governance. I would like to welcome this morning David Gill, the Chief Executive of Manchester United; Peter Coates and Tony Scholes, the Chairman and Chief Executive of Stoke City; and Niall Quinn, the Chairman of Sunderland FC. Dr Coffey: Mr Coates, why did you decide to become a football club owner and what encourages you to keep pumping money into your club? Peter Coates: I am a Stoke boy, I have supported the club since I was a boy and I have had two comings at Stoke—an early one in 1985, after which I sold the club to an Icelandic consortium and then bought it back again in about five years ago this summer. I bought it back again against my better judgment, in some ways, and my family’s, who all thought I was daft to do it. The club was in a mess at the time and I thought I could help it and do things for it, and I was a bit disappointed with my previous time, a there was little bit of unfinished business about it and all that sort of thing. But I thought it would be important for the area if the football club were doing well. Stoke was having a difficult time. It has lost the pot banks and the mining industry. I thought that if Stoke could get in the Premier League it would give the place a lift and would be good for it. I think that that has happened, I am pleased to say. Q149 Dr Coffey: Would you say it is a kind of philanthropy that you do as opposed to, say, putting money into the Potteries Museum or— Peter Coates: There is an element of that, because I don’t expect to make any money out of it. I do not think you can make money out of football at Stoke’s level. I think you can at a certain level, but not at the level of a club of our size. I think it is almost impossible, but obviously I enjoy it as well. Obviously football is important to me and I enjoy it when we win, yes. Q150 Dr Coffey: Let me come across to Mr Quinn. What inspired you to get that consortium together to form Sunderland? Niall Quinn: I suppose that the potential of the club had not been reached. Having been a player there and having seen the journey going really well and then having come to a shuddering stop, I felt something. “Unfinished business” is probably not the correct term, but I felt at the time of my departure that things were not done properly. I bore that for a couple of years in my mind. I worked as a journalist and in TV, and the opportunity came to go back and—Peter said the same thing—to make the place go and reach its potential and work, and therefore the spin-off was the region would benefit. My belief was that the football club that I was involved with, which had won one trophy since the war, was managing to have 47,000 people at matches when it was about to be relegated. How good could that be if we got it up? Could we become a much bigger force? That is what drives me, and it still drives me today. That is the reason I came, although I also came because I had had such a good time as a player there. I had played for big clubs— Arsenal, Manchester City—but I never had the same feeling of potential and collectiveness between fan and club as I did at Sunderland, so I am trying to push that on. Q151 Dr Coffey: So for Stoke or Sunderland, what are your aspirations or targets as owner and chairman? Peter Coates: To stay up. Dr Coffey: To stay in the Premier League? Peter Coates: That is it, yes. We want to move on from there, obviously, but the truth is for us staying up is a considerable achievement and that is what we have to do year in, year out. It is immensely difficult. It is hugely competitive and in every game we play, we do not know whether we are going to win at all. Every game is difficult and is a battle, but that is what we are there for. Q152 Chair: Can I just follow that up? To what extent does it matter to you that your two clubs— we will leave Manchester United for the moment— realistically do not stand any chance of winning? Niall Quinn: If I went to a fan’s forum and said that, I would be chased out of Sunderland. We have to believe that we will make progress. We started the Premiership journey a couple of years before Stoke and we are now beginning to feel, with the investment and the policy that we have and the way the club is run, that we can look at playing European football at the Stadium of Light. That has to be the next realistic target for us now. I would like a few more points on the board this year. We are not mathematically safe at this moment in time, but we are up in eighth place in the Premiership. We are looking to a consistent run of top 10 finishes which allows us to join the Evertons cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 44 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn and Aston Villas—Tottenham and Man City seem to have moved on a level lately. I am of the opinion that there is a top half of the league. Initially, there was the top four, who everybody thought was impregnable, and City and Spurs seem to be doing something about that. Everton and Aston Villa were the next clubs and we would like Sunderland to be part of that group. That is a realistic target for us and if a cup competition came along— Q153 Chair: That is not winning. It is playing in Europe, which is an aspiration. You say that your fans want to believe, but do they actually believe that one day Sunderland could win the Premier League? Niall Quinn: Win the Premier League? I guess they do not. I guess they don’t, but what they expect of me and expect of everything that is drilled down to our club is that when Manchester United come to town, that we give them a game, and we have done this year, and when Arsenal have come to town we have given them a game. That is what keeps us going. There is only one winner every year, but there are three people who burn, and lots of disgruntled fans. We love this Premier League so much. The world loves it. Sunderland itself loves it. It is vital to be in it, and in itself that is good success. Q154 Chair: Is that the same in Stoke? Peter Coates: We try to get better every year. We think that the longer we stay in, the better we will get, because knowledge and infrastructure will be improved. Also I think that there is some evidence that the longer someone stays in, the better chance they have of staying in. We want to get better every year and I suppose the first thing would be to become a solid Premier League club—one that does not have to worry quite as much about relegation. The truth is that probably 12 or 14 clubs have that concern at the start of the season. If the number is 12, say, there will be a 25% chance of being relegated. Those are quite high percentages, but equally we play some of the best clubs in the world. We play Manchester United, and we play Arsenal and Chelsea and other such clubs. They are world-class clubs. That is good for Stoke City and it is great to have them in the city. Playing with them is great, and we like to give them a game— and usually we do. We do not play them thinking we are going to lose. We play them hoping that we are going to beat them and certainly give them a good game. I think that means a lot to the supporters. Q155 Chair: But realistically that is the height of your aspiration, to stay up in the Premier League and to regularly play against Arsenal and Manchester United? Peter Coates: No. We have a big game on Sunday; we play West Ham and we could get into the semifinals of the FA Cup. It will be great if we do that. That is further progress. We have not done that for 40 years, so it would be excellent. There are things for us to go for, and the higher up the better. One day we might have a terrific season and play in Europe. You do not know, but we are trying to get better all the time. Niall Quinn: It is possibly worth noting that when we play Championship football, our fans are not as invigorated and as in love with their club as they are when we are in the Premiership. When you make the comparison you sound as if it is deflatory to not be able to win, but on being in the Championship or Premiership, ask our fans. There is only one place to be. Q156 David Cairns: Mr Gill, I have a general question. What do you think are the biggest challenges facing you as the Chief Executive of Manchester United? David Gill: If you look at the level of the club, you will see that we have always had the team as our focus. Everything we have done has been about how successful the team has been. The challenge for us is making sure that we have the best team on the pitch. We have to make sure we have the best manager. Obviously, Alex Ferguson will retire in due course. The replacement for that is clearly a key business decision— David Cairns: Feel free to tell us who it will be now if you like. David Gill: Those are the key things, but obviously we want to make sure that we play a role in the development of football generally. We need to have competitive games against Stoke and Sunderland, for example. We need to ensure that it is a competitive game. We need to make sure that the English game develops and continues to be as successful as it has been so that we can benefit from that. We play within a game. We cannot go and buy five other clubs so that there are only 15 in the Premier League every year. It starts with 20 teams. We start in the third round of the FA Cup, the opening stages in Europe and so on. The biggest challenge is to ensure that the team remains successful, and our goal is to be the best team in the world, both on and off the pitch—things which are clearly interrelated. Q157 David Cairns: As Chief Executive, on a dayto-day level, how large does the debt loom in your management of the club as a business? David Gill: It doesn’t. The debt level that we have is £500 million in gross terms. There is roughly £130 million in cash in the bank at the moment, so there is a net debt of £370 million. We have gross interest costs per annum in the order of £45 million, and our cash profits are around about £100 million. So we have more than two times interest cover. The bonds that we have in place are covenant light—in other words, we do not have quarterly reporting in terms of covenants and so on—and we are very comfortable with that. We have seen great growth in the last five years in terms of our turnover. Also it is a profitable business if you get it right and that has generated cash profits. From my perspective, we know that the debt is there but it doesn’t impact on what we do. We look at trying to grow our revenues and invest in the business to make sure that we can continue to expand and be successful. Q158 David Cairns: We are going to talk about debt financing in more general terms a bit later on. It does cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 45 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn not impact on what you do, but surely servicing that debt, and interest payments and fees and all the rest of it, are money that is not being spent on players or improvements of the facilities or whatever? David Gill: No; let us look at improvements to facilities. We have spent a lot on Old Trafford in the last few years. We have just had approved a £13 million improvement to our training ground, which has been open 10 years, upgrading it to reflect what has happened in football in the last decade. There has been no impact in terms of our transfers. Q159 David Cairns: But you would rather you did not have this debt, presumably? David Gill: Well, not having the debt is one thing, but the other point to note is what the owners have brought in terms of growth in certain aspects. For example, when they bought the club they saw lots of opportunities on the commercial side. Our commercial revenues in 2006, the first year after ownership, were £40 million. Last year, to June 2010, the amount was £80 million; this year it will be over £100 million. So they have grown that. We have invested in people. We had 460 employees then and we have 600 now. Yes, in answer to your question, simply the amount is £45 million. If that was not there it would be better in some respects, but at the same time it is not hampered us in developing the club. The net spend on players since the owner has taken over is greater than in the five or six years before that.1 Q160 David Cairns: I am sure that that is true, but there can’t be any ambivalence about this. Obviously it would be much better if Man United was not carrying those levels of debt and servicing them, surely? David Gill: In isolation, yes, but there is no issue in terms of asking whether Manchester United has been hampered in terms of what we have had to do as a club in respect of investing, as you quite rightly say, in facilities, players or player contracts. I personally believe that there has been no impact in that respect. Q161 David Cairns: What kind of communication do the owners make with you in terms of setting out their strategy and so on? How do they communicate that to you? How do they set out their vision for the club on a year-to-year basis? David Gill: We have both annual budgets and fiveyear plans, and we have constant dialogue in board meetings, in calls and so on. That speed of decision has been very positive, and I think that they have taken a view on longer-term investment which perhaps we would not have undertaken if we had been a quoted company. Who is to say? But that is the view, so I think they are intricately involved. As I said to you earlier, they clearly saw the commercial opportunities for Manchester United. They liked how the Premier League was run. They thought it was a very well-run league in comparison, say, with some aspects of the NFL. They felt that they could use the strength of the Premier League, but also the strength 1 Witness correction following the evidence session: Excluding the sale of Cristiano Ronaldo to Real Madrid CF for £80m in 2009. of Manchester United, to push the club forward. I think that they have demonstrated they can do that. Q162 David Cairns: Would you prefer it if they were able to demonstrate that to the fans? There is clearly a breakdown in communication somewhere. The fans say that the Glazers do not talk to them, and they are not getting the positive message that you are getting. David Gill: The owners have delegated to me—to the team that we have, and to Alex Ferguson and so on— the task of doing that. That is a model that other owners have copied within the Premier League. I can give you other examples where owners have not spoken directly to the fans. The sheer size and nature of Manchester United perhaps means that we get more coverage on such matters, but as an executive team, on behalf of ourselves and the club, and so on, we have extensive communications with our fans. Yes, we do not communicate with certain fan groups, but they have an avowed aim to change the ownership. It would be slightly strange to enter into dialogue with those groups who have that intention or that objective. I am not sure where it is going to lead. We have to take all those elements of fan communication very seriously. Q163 David Cairns: Why do you think so many of the fans just simply loathe the Glazers? David Gill: You say “so many.” They are well organised. They are very domestic. We have done studies which show that we have 333 million followers around the world. Our mailbags are large. We get thousands of e-mails; we had 36,000 phone calls last month. Not everyone hates the owners. The success that we have delivered on the pitch in the last five years is significant. There have been seven trophies since they have taken over. A lot of the fans want to ensure that there is money to spend on the team. They want to come to a safe modern stadium and see exciting, attractive football—and I think we have delivered on those counts. But that has always been the case. Looking at Manchester United pre the Glazers, when we first went public in 1991, a lot of fans did not like the club at that time. We couldn’t understand why it was. The share price dropped. They didn’t buy the shares, then it went back up. They loathed the Edwards family. There are a lot of examples, not only around this table but across the Premier League, of fans who do not like the owners or management. That is one of the strengths of football. It creates opinion. Q164 David Cairns: The situation of Man United in relation to the Glazers is no different to any other club? David Gill: I am not saying it is no different. The size of Manchester United and the coverage means that perhaps it is magnified, but without doubt, there are issues at other clubs. You just have to read the papers or watch the television to understand that. Q165 David Cairns: Mr Scholes, I have a similar question for you. What are the biggest challenges facing you in your job? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 46 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Tony Scholes: The No. 1 challenge, as Peter has just said, is putting a team out on the pitch that is good enough and competitive enough to stay in the Premier League—to stay in the best league in the world. Bearing in mind that we were out of the top league for 23 years, when we got promoted in 2008 we were some distance behind everyone else. By keeping the team in the Premier League we were able to build the club up, to build the support base and to pick up on those lost generations, if I can put it that way, derived from our being out of the top league for 23 years. Being in the Premier League gives us the opportunity to do that. The No. 1 objective is to stay in the Premier League, and doing that enables us to fulfil our objectives, which are to build a support base and the infrastructure of the club, and ultimately to build a sustainable Premier League club. Q166 David Cairns: In day-to-day terms, what would you characterise as the main difference between being in charge of a football club in the Championship and being in charge of one in the Premier League? Tony Scholes: I guess that running a football club is the same as running any company in many respects. You have to know what your objectives are, and you have to have good management to achieve those objectives. That is the same in the Championship and the Premier League. The differences, of course, come from the fact that we are playing in the biggest and best league in the world and the money that that brings with it. Obviously our income level went up substantially. That makes some things a lot easier, but it also brings some new challenges. Perhaps one of the key challenges is always managing the downside as well, so that if things do go wrong, we are strong enough to come back. Q167 Ms Bagshawe: What do you think makes Premier League clubs so attractive to foreign investors? Could we start with you, Mr Gill? David Gill: You are quite right; it is admired around the world. The way the league is structured is a factor, and it has clear objectives. The collective selling of the television rights has clearly been a success and it has made things more competitive.With regard to how the league is organised, there is light-touch regulation from the centre of the league but also an understanding what the commercial parameters are. The clubs get on very well. We all support the collective selling. We understand that strength behind that. Within that we have seen a sport that is growing. The sheer interest of this Committee shows that, and what is happening in football around the world, whether in the World Cup, the Euro or the Champions League. We are the most admired league in the world. We travel a lot with the club. Our following in Asia, and also in North America, is fantastic. If you ask all those people what their favourite league is, it is the Premier League, because the Premier League is one of the best leagues in terms of selling those rights on a collective nature in those markets. You can pick up all the teams, all the games and it is a very positive thing. So I think the time was right with the advent of satellite television. The league plays exciting football and it has attracted a good mix of foreign players— top, top players. All those factors coming together in a growing industry has meant it has become attractive. Q168 Ms Bagshawe: Mr Coates, you took a club back out of foreign ownership. What do you think made something like Stoke so attractive in the first place to foreign investors? Peter Coates: What? Ms Bagshawe: You took a club out of foreign ownership by buying it back. Peter Coates: They wanted to go because they had lost their money and that happens a lot in football. Ms Bagshawe: Whether they decided to sell it or they didn’t, but what do you think they— Peter Coates: They were desperate to go. Ms Bagshawe: What do you think attracted them to it in the first place? Peter Coates: They thought they could make it work. They thought they could take Stoke into the Premier League. That was their objective. They thought they had a manager, an Icelandic manager, who could do it. They were confident. Iceland, if you remember, was doing rather well and growing and taking over the world and one of the first things they took over was Stoke City. They found it was much more difficult than they thought. Foreign owners come in and it is immensely difficult. It is the best league in the world and it is the most international league and that is why it attracts foreign owners, because of its international dimension. It attracted even small Iceland, which is a population less than Stoke. They thought they could make it work and do well. I remember it very well. They had a bit of money to spend; they thought they would have a bit of fun, enjoy it and make some money, because they thought they were going to get into the Premier League. Of course, they discovered how difficult it was. It is an immensely difficult industry to work in. You have immense pressure from the media, immense pressure from your supporters and it is a tough business. Q169 Ms Bagshawe: Mr Quinn, what do you think? Niall Quinn: I suppose the example of Sunderland would be, again, one where the owner has bought into the potential. One of the first things I asked him to do was understand the emotion of our football club, and I think that is the area where foreign owners, through the lack of PR or whatever, sometimes have an issue where people do not understand where they sit in terms of their love and affection for the club. I would say one of the issues—it is not my issue but Manchester United’s—is the people do not really know how the Glazers feel deep down in their hearts about when a referee makes a bad decision. Do they go home really fed up after a game like we all do or are they taking the call from the golf course wondering how the team got on today? I think that is the thing that is out there. I know that is not true, of course, and in our case it is especially not true. One of the great things about our owner, which is appreciated by our fans, is he has more than bought into the emotion of it. He has bought into it financially, but also in terms of his week being a bad week, no matter what he is doing, if the cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 47 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn club has not done well. I think that is a measure of his involvement at the club. The other good thing is he lets football people run the football side of it. There is trust in the air, and it is to get the fans in Sunderland to believe that, which makes our team—which is fans, work force, players, and of course our owner, and our board—know that we are all pulling in one way. That is a tough ask and nobody is more aware than me of how foreign ownership is mistrusted. In our case it is not; it is welcomed with open arms. In selling the club to Mr Short and selling the idea of the club, for somebody in that bracket as he was at the time it seemed a great story, a great adventure to go on. These people are winners. They like to see can they improve it. If I can marry that in with the fans’ approval, then we have a good formula. David Gill: I can assure this Committee that our owners have had a very bad week. Q170 Ms Bagshawe: In terms of restoring some of that trust with the public and foreign ownership and in terms of governance, do you as a panel think that the Premier League is making sufficient inquiries of foreign investors before they purchase a club? Do you think there is enough due diligence going on? Mr Quinn, we will start with you on that one. Niall Quinn: It is interesting. I can think of one or two cases in the past where there was a media outcry on people who were involved with clubs. It involved fit and proper persons, as they were called, and the issues came into the public forum. Basically what I can say is that in the period over the last few years— post Portsmouth’s demise, post other things that have happened—that has really tightened up now. I think we are confident and we know that the Premier League have tightened that up and shifted that to a point. Without going too deeply into it, there is now an international company that covertly will find out everything they need to know about somebody coming into the game. Ms Bagshawe: Associates, is it? Niall Quinn: We can’t tell anybody who it is. That needs to be understood on the basis that if we were to turn around and stop somebody who can invest in other business in the country from investing in our business, could they sue us? Tony Scholes: One of the things that is worth saying, I think, is that in football most things get into the media immediately. There is very little we do that does not get reported on the following day. This is an area that doesn’t. There have been a number of people who have wanted to take over football clubs but have been prevented from doing so because of the Premier League’s rules that never get into public exposure. Q171 Ms Bagshawe: Are you prepared to name one of them? Tony Scholes: To be honest with you, I don’t know them either. That is the Premier League’s job. We are aware that there are a number but that is their job to do that; to have a look at them and to vet people who want to take over clubs. Q172 Mr Watson: Were the Glazers vetted? David Gill: Were they vetted? They went through the process. Not to the extent that both Niall and Tony have said. I think there are two things here: one is that the Premier League has learnt from certain situations. We learnt from the Portsmouth situation and we, as a group of clubs, all supported wholeheartedly the recommendations from the Executive to improve the rules in terms of financial information and so on going forward. As Niall and Tony have said, in terms of the vetting of owners, that has been improved. I think it is important for industry and for sport to learn from past issues and to look them. I do not think that, regarding the attractiveness of English football versus other football and English business perhaps versus British business and other business, passport is an issue. You can have very bad British owners or very bad English owners. It is the ability of the people coming in, their aspirations for the club and the objectives of the club that matter. So I think we should shy away from saying it is a passport issue and saying that you can only be English in order to be a proper owner of a football club, because I don’t think that is true. It is much more about the right owners than about their passport. Q173 Mr Watson: Am I right in saying that Manchester United, the actual company that is Manchester United, is now resident in Delaware in the United States? David Gill: That is one for the owners. Manchester United Limited, is clearly a UK company. The football club is a UK subsidiary of that. As to the ultimate owners, that might be the case. Where is the ultimate owner of Chelsea Football Club or— Mr Watson: I don’t know, where are they? David Gill: It doesn’t matter, because my job as the Chief Executive of Manchester United is to run the club according to our own financial structures, to ensure we continue to compete at the highest level of the game. The ultimate ownership up there is something for the owners. But what I would say is they have confirmed—and the Premier League checks this—the ultimate owners of Manchester United, 100%, are the Glazer family. Q174 Mr Watson: My point is, though, that don’t you think there should be some national embarrassment that a great English club like Manchester United is owned in Delaware? David Gill: Not at all. Manchester United Limited publishes its accounts every quarter of every year. I am not quite sure why they would be an embarrassment as long as the company is operating properly within a great competition. I think Manchester United should be a source of pride for England, in terms of what it does and has done within the Premier League, and in terms of its performance and importance to the economy. We understand football is very important to the economy of the United Kingdom, and to the social fabric, and we act responsibly within that. So I don’t think it is an embarrassment in any way, shape or form. Q175 Mr Watson: I am sorry to make this about Manchester United, but just on the point about the due cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 48 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn diligence, the secret organisation that vets potential buyers— Niall Quinn: It is a law firm. Mr Watson: Yes, law firm. Can I just ask, would you be confident that the Glazers would pass that new test today were they buying the club? David Gill: Without a doubt. Mr Watson: Without a doubt. Okay, thank you. Q176 Jim Sheridan: Just on this point, do you think it is fair to your supporters that there is some sort of secret organisation that vets— Niall Quinn: It’s not a secret organisation. It is a law firm; sorry, I beg your pardon. Jim Sheridan: We are getting closer; it is now a law firm. Peter Coates: I think it is a specialist in that sector. It is something I wanted them to do because I felt if we were to improve the fit and proper person test, you want to make sure it is properly vetted and I thought a specialist company would be the best way to do it. Q177 Jim Sheridan: Did you not think it would be helpful to share that experience, that information, with your supporters? Niall Quinn: Just on that point again— Jim Sheridan: Aren’t they entitled to know what kind of person is owning the club? Niall Quinn: Yes. Where there are certain people that this firm did not want involved, we couldn’t make that public, because those people could maybe have come along and tried to sue us. Q178 Jim Sheridan: Are you aware of any other industry discipline that behaves like this? Niall Quinn: In terms of trying to get to the best possible result for the fans? Jim Sheridan: People don’t know what kind of person owns the business. Niall Quinn: I think they do. We obviously pass. David Gill: The point here is that ultimately it becomes clear what this process is. There might be five people bidding for a club, and I think what the Premier League has done is institute quite proper procedures to look at various things regarding the appropriateness of that takeover, whether it relates to the actual person in terms of his past business dealings or past issues, or to their business plans, which will involve asking whether they have the finances and objectives to take the club forward. That will mean looking prospectively from a financial perspective. So out of that five—they vet five—three might pass the test, and for them it then becomes a bidding situation in terms of who gets the club. The other two might be failed and we as clubs and supporters don’t need to know who the Premier League has turned down. I think it is more appropriate for the organisation controlling the league to do that. Tony Scholes: It is a very positive thing because the league in football has been criticised in the past for allowing people to take ownership of clubs which are very important institutions, allowing the wrong people to do so. So they have implemented what started as the fit and proper persons test and it has been strengthened as a result of learning from some incidents that happened in the past. They have got an independent firm in. Recognising they didn’t necessarily have skills to do that themselves, they got an independent firm in to vet those people. So the people who end up owning clubs are those people who have passed. The Premier League and everyone in football knows that they will be appropriate stewards and good custodians of the football club; so it is a very positive thing. I would not see it as a bad thing at all. Q179 Jim Sheridan: The point I am trying to make, perhaps rather badly, is that if you do not have that open transparency in sharing that information, you are then left with the conspiracy theories—the speculation about whether people owning clubs have an interest in laundering money, for example. That is the kind of speculation and conspiracy that opens up when you seem to be hiding or not sharing information that should be there. Niall Quinn: I don’t think there is any hiding there. I think what we are saying to you is as a group this Premier League— Jim Sheridan: But you won’t even tell us who this organisation is, this law firm. Niall Quinn: That could change. Maybe I sounded a bit too covert there. It is a law firm, a specialist law firm. It is up to the Premier League in a meeting to agree whether to make that public. I can’t make that public on their behalf. What I would say to you is the issue that you want is the issue we want, and we want to make sure that fans have a say about that. Do they need to be told about somebody who probably chanced their arm and came along and we saw coming early? I think it only creates a little bit of instability where people think that we even would speak to those kind of people. We have to do the thing right, Jim, to get the right kind of owner. Q180 Jim Sheridan: It just doesn’t sit well with me. Niall Quinn: I am happy to bring that back to the Premier League and say, “Should we make it clear because people have a doubt about this?” Jim Sheridan: In terms of the fans, it is a need-toknow basis. Niall Quinn: I am here to take that on board and I will bring it back and we will look at that on your behalf. Peter Coates: But the UK does have open borders with business, and football is partially a business as well as a sport, and we have lots of foreign ownership of many of our companies around the UK. It is a fairly normal thing in that regard. They do not necessarily tell you who the people are who might have wanted to buy a company and who did not buy it for whatever reason. They only focus on the people who have taken it. Q181 Chair: It has been suggested in the past that, given some of the people who have ended up owning football clubs, it is difficult to see what you have to do to fail the test. Are you saying to us there are people who have been told they are inappropriate to own a football club? Niall Quinn: Yes. Chair: Do we have any idea of how many? cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 49 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Peter Coates: We don’t know the numbers but we do understand that there are people who wanted to buy and failed to buy because they did not pass the test. That is our information from the executive of the Premier League, but we have no numbers for you. Chair: We will pursue it with the Premier League. Q182 Mr Sanders: What role, if any, should supporters’ trusts play in the governance of your clubs? Niall Quinn: When it comes to fans and their love for the club, I could just tell you about Sunderland and what we do with groups of supporters. We have a meeting every four weeks with our supporters’ liaison group. We have a meeting every six weeks with the branches. We have senior management attend those meetings. We take into account their fears and requests, and their desire for the club to do better— their side of the story. We bring it in and that reaches board level and we look at ways of comforting them that their club is being run properly. I think that is probably the issue. Just last night, for instance, I had a forum of 400 fans; I have another one tonight with 500 fans. Every so often we do this; we go out and we give them a state of union address. We hear their fears from the floor and not through the media, which is a much better way of getting to the problem. Look, there are problems out there. The Premier League is the most incredible thing. The world loves us, but in our own back garden everything isn’t so perfect and we are not here today saying it is. But what we have to be able to do is to listen to people and hear what they have to say, and feel that we can behave appropriately and give them the comfort that we run the clubs properly. In terms of fan representations and stuff like that, I am the fan. I am their person in there. Q183 Mr Sanders: I think there is a certain difference in north-east football being just that much more passionate and maybe even that much more local compared to Manchester United, whose fan base is perhaps not just located in the Manchester area. How does Manchester United communicate with its fans, given that its manager will not even communicate with the world at the moment? David Gill: We communicate with our fans on an extensive basis. We have invested in our fan relations team heavily over the last few years to improve that area. As I said earlier, we had 36,000 phone calls last month. We have thousands of letters and e-mails, which we respond to appropriately. In terms of formal processes, we have a fans’ forum that I sit on with four other senior executives where we meet a representative group of fans to discuss issues. Q184 Mr Sanders: How often does that happen? David Gill: We meet a minimum of three times a year, sometimes four. We have an extensive branch network, both in this country and overseas, and again there is regular dialogue between the branches and the team responsible for managing those relationships throughout. Then I went to a meeting just before our City game and answered questions in an open forum with other members of the team. So we communicate all the time. We understand it, but as Niall says, on our board we have Bobby Charlton. He is a big fan. We are all fans on the board. We understand it and we work with them, but I think we do communicate appropriately and sensibly with our fan groups. Q185 Mr Sanders: But somewhere communication must have broken down for something like FC United to have been created. Have you tried to improve your communication with fans since the creation of FC United? David Gill: There are two groups: FC United and MUST. As I said earlier, MUST’s objective is to change the ownership. So I think it would be rather strange, unless they change their objective, to open a dialogue with those fans. But there is nothing to stop a member of MUST or a member of IMUSA or a member of FC United sitting in the Fans’ Forum if they choose to apply. There are elections every year— half changes one year, half the next—to our fans forum. They can apply if they are a season ticket holder or a junior member and so on. They can apply to go on and appear through that. We are happy for them to be on those forums. Clearly, at the same time, we are not going to engage in structured dialogue with organisations like that. I do not think it is appropriate or sensible. Q186 Mr Sanders: I am just bemused because Niall Quinn has perhaps given a model on how you would communicate with supporters—individual meetings involving lots of people on a regular basis. No disrespect to Sunderland but they have not won the league or the cup or been European champions, and here you are, a premier Premier League team, and yet you have all these supporters’ groups you will not even talk to because they are at war with you. What is going on? David Gill: They are at war with us? They are at war with the owners. There is a group there, we understand that. But I am not going to sit here and say that we are going to suddenly open the dialogue. We understand the importance, like any business and any sport, of the fans and we do have those regular dialogues with them. We have many, many communications, as I have outlined. We take those on board when we are making decisions, whether on ticket pricing, concourse catering or the shape of the programme. Digital media is a great feature that we’re using, the internet. Particularly we have a number of sponsors overseas and we are developing products for them; for example, in Saudi Arabia for our fans there through Manchester United content. So we understand the importance of communication and we don’t take it lightly. We discuss at our management meetings, at board level, what we are doing with that. If we are going to be castigated for not speaking with one or two groups who have particular very clear agendas then so be it, we will take the castigation. We are very comfortable with our method of communication and we would be naive and stupid if we did not understand what the fans think and what they want, and reflect that in our business policies. We are comfortable that we do that. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 50 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Q187 Mr Sanders: But don’t you see a pattern here that when you disagree with somebody you stop talking to them? David Gill: No. Okay, I will ask you a question. Their intention is to change the owners. Do you think it is sensible to sit down and change the owners? This body came out of Shareholders United Against Murdoch, which was formed in 1998 when Sky tried to take us over. They have evolved since that. They want to have a situation where they have other owners, or they can own the club or whatever. So unless they change their situation I do not see a reason to sit down and talk to them. Q188 Ms Bagshawe: Let us just go back for one second to the last question on the issue of foreign ownership. Fully half the clubs in the Premier League are now foreign-owned and there is quite a lot of concern out there that that was going to affect the decision-making capabilities of the Premier League, particularly in ways that relate to support for the national team and for training young players up to be England players in the national team. Do you have any concerns at all that vast swathes of the Premier League being under foreign ownership may have a knock-on effect on our national team and our national game? Peter Coates: I think that improvements have been made on that. There has been an argument, and it may be a good argument, that perhaps the balance had gone too far; there were perhaps too many foreign players. But the introduction of the new 25-man squad has changed things. Every club does want to produce indigenous players, obviously. There is nothing like your own players. We would love to have at Stoke— and I am sure Sunderland and Manchester are the same—boys who come up through the system and are local to the area. That is a very important thing. We pour millions of pounds into development. One of the arguments against the Premier League is that they perhaps don’t get enough opportunity, but with the difference in squad size, I think that is a positive thing and has improved the opportunity for young players to come through. Q189 Ms Bagshawe: Of course you are a British owner that took the club back out of foreign ownership, and I suppose the concern that fans have is that foreign owners are looking at the club as a successful investment, something where they want to make a bit of money. They have no skin in the game whatsoever if the England team does well or does poorly, and that is a concern for some fans. Mr Gill, how do you address that? David Gill: No, I disagree with that. As I said earlier, the whole strength of football works in a pyramid system and I think if the national team does well there is certainly a knock-on impact to the Premier League, and to the attractiveness of it. We have seen what is happening in Spain at the moment with their team doing very, very well and I think that trickles down. So I don’t agree with that. As Peter said, we are very interested in developing our own talent. We put millions in and there is a big review going on now in terms of youth development, which is a tripartite process, involving the FA, the Premier League and the Football League to see what has happened. The academies have been in existence now for 13 or 14 years. We are now looking to see what changes and improvements need to be made. We are putting a lot of money in and perhaps the players are not coming out, so how do we improve that? Around the Premier League table, there is great support for the national team in making sure England does well. There are issues to be worked on, for example the match calendar, but it has never entered any discussion I have either had with the owners or around the Premier League table that there is lack of support for the English team, because I personally think it does benefit the game. Q190 Ms Bagshawe: What about you, Mr Quinn? Niall Quinn: I suppose one of the proudest moments we had both as Sunderland fans, as the owner, as myself and the board and our manager, was when Jordan Henderson, who was at our academy since he was eight years of age, made his England international debut this year. I think to us that justified everything we have tried to do in the last few years about bringing our home players through. It is funny how things go. When I came back to the club five years ago even local kids in Sunderland didn’t want to come to Sunderland. We were losing them to Middlesbrough and Newcastle because our academy was not working. With the owner’s help we have been able to put more funds into that academy and, as I say, Jordan is the picture postcard this year. But the great thing is that on Saturday we were at the Emirates in a game that went all around the world—a fantastic game against Arsenal—and four of the players stripped out of our players and subs had come through our academy. We think that should augur well for English football in the future. Q191 Dr Coffey: Debt has come up several times in this conversation and although my colleague Mr Collins is coming on the aspect of financial fair play— and it is interesting to hear your comments, Mr Coates—I wanted to ask Mr Gill, in terms of the financing choice for Manchester United, how much was driven by tax aspects, such as interest relief offset against tax and similar? How is it used potentially as a loss making vehicle to offset other tax? Is that the main driver for the reason why you financed that way? David Gill: That is an owner issue really. It is true to say that interest expense for any UK corporate is a tax deductible item and they have used that. But I think if you step forward, we still pay significant amounts of tax. Our tax payments to the Exchequer last year totalled about £75 million; over the last five years it has been £370 million. Q192 Dr Coffey: Is that corporation tax? David Gill: No, it is various elements. There is VAT; PAYE is a big one, clearly; national insurance and corporation tax. So, yes, our corporation tax charge has clearly gone down as a result of that interest expense, but as to whether it makes sense to use that cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 51 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn in terms of the overall planning of their finances, it is for them to answer. Q193 Dr Coffey: I recognise that, but if you go across the other side of Manchester, Sheikh Mansour came in and made an equity investment. Do you think we should be changing the financing laws to encourage that rather than allow debt finance to leverage? David Gill: I think if you are going to change it—and it goes back to Peter’s point, sport is a business but it is also a sport—you are going to have to change it for all UK corporates. I think companies should operate within UK corporate law, company tax and so on. If the Government do not want to operate that way, fine; but I do not think it will change for football’s purposes. Q194 Dr Coffey: I do not want to steal Mr Collins’ question so I will try not to, but with the forthcoming regulation is there not a case for you already making changes to how you operate financially in order to cope with what is coming? David Gill: No, we are very comfortable with financial fair play, if you are talking about that, and how it operates and we understand the impact. Our interest expense is an operational cost to the business and it will be, quite rightly, included under financial fair play. It should not be excluded. We are very comfortable with that and we will operate within it. Peter Coates: I think there is nothing wrong with debt so long as it is sustainable debt and affordable debt. I think that that is the critical matter. Quite clearly, Manchester United can afford their debt. Debt is wrong when you cannot afford it and you are irresponsible. As for the tax aspect, there is an argument which I know is doing the rounds, and it is for UK legislators to decide whether interest should be allowed or not. But that is a matter for parliamentarians, not for football clubs. Q195 Dr Coffey: Could you clarify, Mr Quinn: are you debt financed or are you equity owned? Niall Quinn: Five years ago when we took over the club we inherited a quite sizeable debt. A group of Irish investors came in and invested themselves in the club, maintaining the level of debt. Ellis Short then came in and took all the shareholding and we have worked consistently over the last three or four years, since Ellis has come in, on the club’s progress. While we have made progress, we have also reduced that debt by about 25% and other money that he has put into the club he has capitalised. So he has been a model owner. Q196 Damian Collins: Following on the questions about financial fair play, do you have any concerns about the structure of the UEFA fair play rules? Mr Gill, does that pose any problems for Manchester United? For the representatives of the other clubs, could you live within those rules if you qualified for European competition next year? David Gill: We were involved through the European Club Association, as were other clubs, such as Chelsea, for example, who were on the working group to develop those proposals with UEFA and make sure that what was being put in place was workable, made sense and was for the benefit of football; whether it be the benefit in terms of making sure, on Peter’s point, that clubs could operate within their own resources, in terms of ensuring, potentially, a limiting effect on player cost, or in terms of transfers and wages, so there are benefits coming out of it. We are comfortable with it. The critical issue will be around implementation and the sanctions around that, and making sure that it is appropriately applied. But I do not think anyone can criticise the objective of ensuring that clubs operate within their own resources, personally. Peter Coates: I think it would be a good thing for football. My only concern will be its implementation and I want it to apply to Italy and Spain just as rigorously. We will play by the rules, as we should and as we would want to, and we have to be confident that UEFA will see that other clubs in other countries do the same. Even in the Bundesleague, it is not quite clear where everybody fits. They have lots of problems, lots of debts, and they have the kind of issues that we have been discussing today. Niall Quinn: I suppose, from our point of view, at the very start when this first came into being a couple of years ago, when it was first heard of, we wondered was it an attempt to bring the Premier League back to the other leagues. I think there was a little bit of that at the very start, but we have worked our way through it now. It has been quite extensive in terms of the research and where we are all trying to get. A lot of people have put a lot of effort into this and I would back up exactly what everybody is saying. We are very comfortable. We think it will be very good for the game. I think the important thing is that fans feel like that and they feel that it is a good thing coming in, too. But can I also point out that I put petrol in my car yesterday and a fan told me to get my bloody chequebook out and sign Danny Welbeck from Manchester United? So while we talk this game we are under severe pressure to keep doing what the fans want. Hopefully, if they learn that FIFA fair play is a good thing too, then we can all make progress. Q197 Damian Collins: I suppose Welbeck might have cost about the same as the cost to fill up your car as well? Niall Quinn: A little bit more. Tony Scholes: Spiralling wage costs at one club affect the rest of us, so financial fair play is an important thing to bring in. In its first guise, though, it would have been damaging to us. A club like Stoke City would have fallen foul of financial fair play because there was no latitude at all. But with the latitude that has now been negotiated into it, which does allow a limited amount of losses each year or a limited amount of owner investment, then I think we as a club are happy with it and as a league we are happy with it. Peter’s point is the crucial one. This country, our Premier League, our FA, will apply it rigorously. Our concern and our request is that every other country throughout Europe does the same. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 52 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Q198 Damian Collins: Given the positive response to it from you all, why shouldn’t we ask the Premier League to adopt this as a form of standard practice so that any club competing in the Premier League would be eligible to compete in European competition if they qualified? Niall Quinn: That is a journey we hope to go on and we would welcome being brought into that if everybody else was. I think some people would turn around and say, “But, Niall, you have had a couple of years of investment and you have had a leg up to get to a point now where you want to narrow the rules”, and I have to accept that. But again, for the general good and the greater good of the game, I think it would be a better idea if all of us came under that. Yes, I would agree with that. Tony Scholes: Many clubs in the Premier League at the moment adopt the UEFA licensing process. We do as a club. We have done since we have gone into the Premier League. You could argue quite reasonably that our chances of qualifying for Europe in the first couple of years were very slim, but as a club we thought it was the right thing to do. We are in the company of the vast majority of clubs in the League to do that. David Gill: I think, if you look at it over time, as we understand how it operates, I think you can see that happening. We referred to an earlier example. The Premier League voluntarily agreed last year to introduce squad sizes, put the 25 in with the homegrown limit within it. As Tony said, a lot of clubs who apply for licences—they are operating anyway— would operate, if they got into Europe, within that. I think you move over time and I can see that happening. Q199 Damian Collins: You could see that? David Gill: Yes, over time I think that would be the case; as people understand it, how they operate. As Niall said, people get into shape for it and prepare for it. I think you will see that happening. Damian Collins: Mr Chairman, I want to move on to my next question on the football creditor rule, but I think Mr Farrelly is going to come in. Q200 Paul Farrelly: Clearly, I think that experience across sport shows something about the issue of salary caps: they only work when you have a community of interest—for instance, as in rugby—and there is arguably not a community of interest between the Manchester Uniteds and the Chelseas and the Arsenals and everybody else who just wants to stay up in the league. I am sure, David, that many clubs operate an individual cap, even if it is not formalised, because everybody will want something else, if somebody gets another 10 grand a week, and then there will be no doubt in the interests of running a club an overall wage bill. But then you come along and you pay an outrageous amount to Wayne Rooney and you must have them all tearing their hair out, and any parent or teacher because you are also rewarding bad behaviour. How can you justify that if you have any feeling for your wider responsibilities to the game? David Gill: We do have feelings for the wider responsibilities of the game. You said it is outrageous; that is your view. I do not think it is particularly outrageous and we have acted very sensibly in Manchester United. I agree with you 100% that a wage cap will not work. You use an example; yes, that is English Premier rugby but a lot of the players go to France where there is not a cap. These sort of things happen. Personally, I think a salary cap will not work but I think financial fair play will help within that. In Manchester United we have our own self-imposed cap. Ever since I have been there, we have imposed a cap whereby 50% of our turnover can be used on total salaries. A lot of that is players, clearly, and staff, but we have done that. Within that, we believe that we can both retain the best players and attract the top players, and compete against other teams both domestically and Europeanwide, but at the same time retain money to invest back into the club, whether it be the training ground I mentioned earlier or revamping our boxes and so on. So we think that is the best way to do it and we are very comfortable with that. I think we look at it in the round. We are very careful in terms of what we pay our players; we make sure we do it and understand it. As I said in response to the first question, the business policy and business objectives of Manchester United depend on what happens on the pitch. We have to be out there playing attractive football, competing and making sure that we can do that, and we will do that by paying players appropriately. Q201 Paul Farrelly: Just a brief supplementary, Chairman. Tony from Stoke commented on the knockon effects of rising settlements. With Wayne Rooney, one could take the view that from a business perspective you have simply protected the value of an asset in what you have done; so fair play to you. But at the same time you have given a message, haven’t you, that bad behaviour pays off? Players making statements against the club will have agents encouraging them to carry on, because they will just say, “Look what we did in the Wayne Rooney case.” David Gill: Wayne Rooney is a great player both for this country and for Manchester United. They are role models, players, and there are examples of behaviour that is inappropriate; I would not disagree with that. But at the same time he is there, we want to keep him and I think it has not had a knock-on effect. We have done certain deals with other players, which we have announced recently, and the impact of what we paid Wayne—not that they know that—never came up. It was about what they believed they should be getting for playing for the club and we have acted accordingly. I do not think we should hone in on Wayne Rooney in this particular situation. He is a great player for the club and country and will continue to be so. Q202 Damian Collins: There has been some discussion in our previous hearings about the football creditor rule, and I think concern has been expressed in the written evidence we have received as a Committee that this is an outdated practice and that it is unfair for football clubs to give each other preferential treatment while other creditors, be they the taxpayer, the taxman or even St. John Ambulance, cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 53 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn potentially lose out. I would just like to ask your comments as people running clubs as to whether you think it would be good for football if we moved on from the football creditor rule. Mr Gill first, please. David Gill: I can understand why it was in there in the first place. We have not formally adopted a board policy on it, but I think the general view of Manchester United is that it is a rule that has had its time. I think we have had to address it in certain instances in the Premier League whereby we now put in quarterly reporting—I believe the Football League does as well—to certificate that we are not in arrears in respect of HMRC debts in any way, shape or form, which I think is a positive thing. But I agree with you: I think the whole issue of fairness in administration or liquidation or whatever is that everyone should be treated the same. One argument for it has been that it ensures that a club that has overtraded does not then get back into the League, albeit with a points deduction, or perhaps into a lower league, having gambled without its having come off, to the detriment of another club in that league. I can understand that argument. The positive benefit would be that clubs would not get into that situation. Their due diligence in terms of their dealings with another club, whether it be on transfers or whatever, would be perhaps more rigorous and, therefore, they should not find themselves in that situation. If it does occur, it is rare. On balance, we would favour its being withdrawn. Q203 Damian Collins: When you talk about the dealings between clubs being more rigorous, are you saying that if a club was selling a player to another club they would be much more cautious about reaching that agreement until they were convinced the club had the money to pay them? David Gill: I think so. I think you have seen in the last few years that there has been a trend for transfer fees to be paid over a long period. Previously, the rule was you had to pay within the year, which again I think is a better discipline. I think it could lead to that rule being scrapped, personally. Q204 Damian Collins: Just to pick up on one thing; in terms of the transfer payments, are you saying that you think because transfer payments are spread in instalments that has an inflationary pressure on transfers and encourages clubs to make commitments they may never have to fulfil? David Gill: Well, I am not sure they will never have to fulfil because I do not think anyone would enter a legal agreement knowing they do not have to fulfil it. But there may be an opportunity to use other clubs as a funding mechanism as opposed to if you have to go to a bank or a third party institution to make that purchase; then perhaps they would look at it from a different perspective. That is what I am saying. I do not know; it could do, it may not do. But I think that is— Peter Coates: I am ambivalent about it. I am not sure which way I want to go on this. I understand fully David’s arguments. We have improved and tightened the rules, both for the Premier League and the Football League, whereby clubs have to report if they have not paid the Inland Revenue. So we have made an improvement there. I am very surprised the Inland Revenue allow it to happen. That has always surprised me. It is a difficult argument. It may help clubs lower down the leagues maintaining it and retaining it, so there is an argument both ways. Q205 Damian Collins: But as Chairman of Stoke City—heaven forbid that Stoke should ever be in a situation like this—how would you justify it to the community that you might have to pay a football debt to a club, say like Ipswich, before paying a local supplier in Stoke? Peter Coates: I would find it very difficult but I have been in business all my life; I have never not paid Inland Revenue. You pay your bills, it is normal. I just do not do things like that and never have. I would not dream of not paying bills that I know are due and have to be paid. It is not in my mindset to do it. I would not store up debt in that way, it is wrong. The clubs should not do it and businesses should not do it. Tony Scholes: I think that the main issue with the football creditor rule has been with HMRC over the last few years. The Premier League has taken action in that regard, as David and Peter have already said, in making sure that clubs cannot get into arrears with HMRC. I think it is also fair to say that we have debated this around the table many times and I do not think anyone feels comfortable with the fact that another football club may get paid but a small local supplier in that community does not get paid. No one feels comfortable with that. There is another side that needs to be weighed in when considering the football creditor rule and that is that it does help to maintain sporting integrity. When a team is playing another team, team A may have sold a player to team B and not been paid for that player and as a result of that may have been unable to go and strengthen their own team. If they then play in a game there is an imbalance in the sporting competition. The source of the football creditor rule is to do with sporting integrity, but I think it is fair to say that where we are now there is probably an appetite for having a fresh look at it. Q206 Damian Collins: I just have a question on that. I am not sure where the integrity is there, because if a club is competing at a level beyond that which it can reasonably financially sustain simply because other clubs are prepared to sell players to them knowing that their risk is protected, how is that good for the integrity of the game? Tony Scholes: It is the club who have sold the player and not been paid and would reasonably have assumed they would have got the money to go out and strengthen their team as well as a result of paying that player. This is the original argument for the football creditor rule. If they cannot rely on those payments coming to them, then that club has been weakened as a result of it. Q207 Damian Collins: But wouldn’t it be better to have a system where the transfer was not made in the first place if it was clear the club couldn’t make the payment? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 54 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Tony Scholes: That is David’s point. If the football creditor rule was changed it would put the onus on clubs to do more due diligence over the creditworthiness of the clubs buying players. Niall Quinn: Yes, and I suppose there are 17 other chairmen around the country who I am conscious will want to have a view on this before we put this rule in the dustbin. From our point of view, the fan in the street meets the guy who printed the programmes who did not get paid and he sees the player driving out in the big car who was paid. I think that is damaging and we have to look at stuff like that and say, “Yes, tidy this up and give that guy who printed the programmes as much skin in the game as the big players.” Q208 Damian Collins: Can I ask just one final question, Mr Chairman? You heard what David Gill said about transfer payments. Sunderland and Stoke, would you concur that there should be tighter guidelines on the period of time over which transfer payments can be made? Niall Quinn: Not all payments are Premiership club to Premiership club; so there is an outside force there when you are buying foreign players and that becomes a minefield, too. But certainly with club to club in the Premiership I think we are all of the opinion that there is enough money in the Premiership kitty to hold back to protect anybody and then punish somebody who did it the wrong way. I think we could handle that inhouse ourselves. Q209 Jim Sheridan: Could I perhaps ask about the role of players’ agents in the game today? The evidence that we have taken so far seems to suggest that there is a general consensus that players’ agents are a necessary evil, that there is no alternative. Is that an accurate assessment? Niall Quinn: I would think from our experience, yes. It sounds about right. I never had an agent. I came back into the game and I had this great idea that at Sunderland we would not allow agents at the training ground, we would never engage with them, and then all of a sudden you realise to make progress these guys were getting their players to go somewhere else and were laughing at us because they had power. The big power came with the Bosman ruling and the way European law supports them; then you throw in the transfer system that allows a window of time. It was manna from heaven for the agents who squeezed us and who continued to squeeze us in all those periods. The game is heavily stacked in their favour. One of the big problems that that causes is that while, okay, they are getting too much money because they are squeezing us all and we all want to stay in this brilliant league, the man in the street, the football fan, feels ever more distanced from it when you talk about the wages. Let me say what I would like if there was anything that could be changed in our set-up. We have our media, we have the Premier League, we have our football club, we have our fans here and we have our players here. If there is anything I could change it would be that any improvement we could make would go directly here and satisfy that and repair the gap. I think we should all look for something that says, “How can we help this group of people out to still stay in love with the game?” If we send the matches abroad with empty stadiums, it is over; the Premier League is over and these are the lifeblood of the game. So how do we protect these? Every revenue that comes in, the agents have the upper hand to squeeze it out of us. That is the case; I think you would agree with that. How can we stop that? How can we find a better way of these people to love the game? Now, these are the same people who tell us, “Get your chequebook out, I want us to be top six.” They are also saying now, “You are paying too much money; this is wrong”, and at the same time saying, “Can we go to the matches a bit cheaper?” The big thing we are getting from the forums is about ticket prices; for the guy who wants to go and bring his two or three children, it is impossible. In the old days it was possible; it is not possible now. Obviously, incomes have changed and the economic situation is as it is. But what I would love from any group, whether it is this group or any group of significance that really cares about the game, is consideration of how we can bring them into the stadium cheaper without the agents cranking it all up again and causing a big problem for the club. I think we would all agree here; if we stayed with the same net amount of money each year on the basis that we were giving them a discount on tickets and we did not lose it somewhere else, we would all go for that, welcome it with open arms and fill the stadium out. I think we can talk about a lot of the fan issues, and the federations and the sports trusts will bring up hundreds of things, but the big thing is they want to come into the grounds cheaper and I think we should look at ways of accommodating that. The players are big winners here in this; the players and the agents are big winners. Inland Revenue is a big winner in this. The Inland Revenue takes a big take of all this, too. Is there some way that we can get those two— and I am not saying they are together in this; I think that that is coming—not to all go in their way as it does now? Could we give something back here without affecting our business going forward? It would be suicidal for us to let them in half price now. The agents will still press the crank on, the Revenue still take their take, but could there be a way, if we tilted it back this way, that would benefit them? I think that is something we should all aim for. Peter Coates: I think agents are a fact of life and I think I should be free to do what I want in terms of what I pay them. It is up to us to negotiate sensible business with them. One of the things you could do that might improve it is transparency; in other words we have to say what we have done in terms of agents. You can’t divulge a player’s contract—obviously that would be completely wrong—but you could have transparency in agents’ payments. We all want to drive agents’ payments down. On the other hand, it is a marketplace and we should be free to deal in that market. It is up to us to be smart enough to make sure we do not pay too much, and that when we pay a higher fee, we are seeing whether there is possibly some reason for it. Tony Scholes: It is fair to say, though, that some agents perform a very valuable role. They are part of cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 55 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn the industry now and they do perform a valuable role. But agents are paid a disproportionately high amount of money for any deal that they are involved in. That is a fact and I think we would all accept that. Q210 Jim Sheridan: They can also be used as scapegoats as well. When a club wants to transfer someone they can then blame the agent. But putting that aside, everyone we have spoken to in football during this inquiry, when we talk about agents, more or less says the same thing as yourselves, which suggests to me that there could be a role for FIFA if they act collectively. It seems to me that FIFA have abdicated any responsibility whatsoever to try and regulate this part of the game. At the end of the day, whether it be in England or anywhere else in Europe or the world, agents take money out of the game. It is not going back in again; it has gone out of the game and it is never seen again. Why is FIFA or UEFA not taking a firmer role? David Gill: It is interesting to talk about taking it out of the game. I am always interested by that statement because accountants take money out of the game, and it does not go back in. Lawyers take money out of the game, and it does not go back in. Q211 Jim Sheridan: They are a necessary evil. David Gill: But agents are. I think agents do have a specific role. It is like any walk of life; the actual term “agent” has a bad connotation, but there are good agents and bad agents. But the players do need them for services and I think we should understand that. When we look at what we are going to pay a player, whether it be renewal of a contract or a player transfer, we look at the overall investment. Like any sensible business, we look at the player wages, the agent’s fee, and we determine whether that is appropriate for our business, and we do that on the transfer fee. I am not saying there is no issue, but I agree with you in terms of FIFA. FIFA have been looking at the matter. I think that there are a number of cases with respect to agents in which they are looking to see whether the term should be changed to intermediaries. That certainly has many more syllables, but we will still call them agents, and they will still be there. They are looking to do something whereby they put the onus on the clubs and the players to have responsibility. I think Peter makes a very good point in terms of transparency and understanding. As long as in any particular transaction if a player is aware what his agent has received from the club or from himself and everyone is aware of it, I do not see a particular issue in it. It is another way of using the club’s resources and making sure we are responsible for how we discharge those club resources. I think it is a very interesting issue; it has been there for many years, and we cannot change it domestically. The Premier League tried a few years ago to make the players responsible for paying their agents. It failed miserably. We had to change the rules back again. Q212 Jim Sheridan: That was my last question. How did that fail, though? Effectively the fans are paying twice now, are they not? They are paying their player and they are also paying the agent. David Gill: I do not think you can separate them out. I do not think the agents’ fees are necessarily incremental. It is part of the overall investment. So I do not think it is true to say, “That is it, you can just pay the player X and forget about the agent.”. One of the reasons it failed was the tax implications. Under UK tax rules, if the payment that the club paid on behalf of a player was not a tax-deductible expense, he had to gross it up. That was a key point, and we became uncompetitive versus what was happening in Spain, in Italy and in Germany. Again, we operate in a worldwide market for talent. As part of this earlier discussion, it is not just about players developed in England; it is a worldwide market. So we have to operate against that if we want to attract those players in with what the regime is in other countries. Your point is exactly right; FIFA has to take the lead as a world governing body to make sure it is managed and appropriately controlled. Q213 Jim Sheridan: Just finally—still with you, Niall—do you think it makes you a better player if you are paid £1 million or £10 million? Niall Quinn: No, I do not. I can’t stand here and defend where wages have gone. It is the greatest show on earth, the Premier League, and we want it so badly and the agents have manoeuvred themselves to manipulate that whole situation brilliantly. To be a little bit fair to them and to ourselves as to why we tolerate it at times, we would at times as a football club be carrying wages on a player who is of no use to us; he is sitting on a long contract, it is really tough and we get a phone call from an agent who says, “I can get him to wherever”, some part of the world. For us the big thing is that, “Okay, we might be exposed to £1.5 million wages for the next year, what do we do? We can get him out there. The agent wants £250,000 for one day’s work, you know something, we are £1.5 million better off, let us do it”. That is the pressure we are under sometimes as football clubs and they manipulate it and market themselves brilliantly. It is a necessary evil, going back to the very start. Q214 Paul Farrelly: I wanted to come on to the Football Association, but first can I just ask a couple of questions about your own house, the Premier League? Is there merit in the Premier League shaking up its structure and having more independent directors? Is the board too small? Should the Premier League’s governance structure be more representative of the different shades of opinion and the different ambitions of different segments of the league? Peter Coates: I suppose you have to say, and it is only our third year, the Premier League is very well managed. It has, I think, probably a quite outstanding Chief Executive who has done a great job for the Premier League. As a model it has worked very well and it has been a big, big success. You do have shareholders; you have 20 shareholders all with a vote who you meet four times a year and, therefore, you are able to have your input. I can understand you thinking it is perhaps Richard Scudamore and Dave Richards, but it does not quite work like that because all the shareholders have a vote, you meet four times a year and you are able to have your views represented. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 56 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn David Gill: I agree. I think if you look at it, the actual Premier League is a success story without any question. You are just adding people because of a need to add them. I think the remit of the Premier League is relatively narrow. It runs the actual game, the competition. It is responsible, quite rightly, for the selling of the television rights and other commercial aspects of it, whether it be the ball sponsorship, the title sponsorship and so on. I think it is well run and I think the way that it works, the voting structure with 14 votes required to pass a resolution, means the objective and discussions and debates and issues are taking place in the forum of the shareholder meeting. In adding an independent or another non-executive person, I think you are just doing it just to say you have ticked the governance box as opposed to adding value to what is a very well-run league, very well respected around the world. Niall Quinn: Yes, I feel the same. This is our fourth year. What I found interesting was that every Saturday you have 20 clubs who want to beat each other up and then we go to a room to find ways of making it all as one. It was unusual and I sat back and I watched and listened for quite a long time before I got involved and felt that the good work it is doing is not publicised as well as it might be. It is an extraordinary success story, the Premier League, in theory. I am not saying it is perfect in our back garden, but we do have the forum there to alter things as they occur. Q215 Paul Farrelly: Can I move on to the FA? We had a very strong picture of the FA painted to us by Lords Triesman and Burns in the opening session. I am sure you have read the reports. The FA is pictured as operating with the chairman and the chief executive; with representatives of the professional game meeting the day before, agreeing, in good old Marxist/Leninist/Trotskyist fashion, the line. When they say no they mean no. The representatives of the amateur game do not always agree with them but they never vote against them and if the chairman and chief executive have some interesting ideas, they are left up a creek without a paddle if the professional game simply says no. We have seen the Triesman report, which was going to be a submission to questions by a former Secretary of State as why the FA did not put their own submission in. Was that position adopted by the FA and the professional league and the premier representative reflective of all shades of opinion across different clubs in the Premier League or are there clubs in the Premier League that would be more progressive in accepting reform? Peter Coates: I think that it has a recent very bad record, the FA, with lots of own goals and lots of things that have gone wrong, which were frankly very bad and reflect very bad on the game, and I think it does need reforming. The Burns Report is not a bad marker for that. I am strongly in favour of two nonexecutive directors. I think we have made an appointment of a good chairman. Like any good organisation, I think you need a good chairman and a good chief executive, and he will get the people around him. But he does have to be able to do his job and you referred to some of the more dysfunctional problems that he faces. I think two non-executive directors— and he should have some influence as to who they are, they should not be foisted on him—would be very good for the governance of the game. I think along with that you would need to reduce the size of the board. It would become too big. I think the chairman needs help and I think two non-executive directors of the right calibre would be an enormous benefit to him; so that is something I would like to see. We have not had support for that in the FA. I am hoping perhaps that is going to change and there will be a move in the direction of that and some of the other things that I have just referred to. Q216 Paul Farrelly: Niall, was the “just say no” brigade reflective of the position and opinion of Sunderland? Niall Quinn: I do not think so. First and foremost, we are in a tough place in Sunderland and it is a hard job. Concentrating on your own world 16 hours a day sometimes does not give you the space in your mind to map out a perfect road plan for your thoughts on the FA and where it goes. What you try and do is to see the big picture and hope that you can contribute and that we would not block things; just blocking for the sake of blocking something. David sits on the board. I think David would be in a better position to speak clearly on this, but we would take the view, each of our shareholders of the club, we take the Premier League’s view on everything that comes up about the FA. I thought it was really good in my time that the FA had representation at our meetings, that there seemed to be something happening between it. Now, obviously that came to a shuddering halt and it needs to get going again. Instead of looking back, I would be all for finding a way that is transparent, that we all feel we are doing our best for the game, because without the kids playing football in their respective amateur clubs, without this great love for the game, the Premier League will be at a loss, too. There has to be a collective buy-in there. David Gill: As Niall says, I am on the board. In terms of where it is going I would support it wholeheartedly and I want to reiterate what Peter said because I think he articulated why independent executive directors would be helpful. That needs to be done in conjunction with trimming the board. I think that the FA has a very broad remit from grass roots through to coaching, through to the England team, through to the FA Cup through to the professional game and so on, and then goes on to discipline. Another area I would look at seriously, which Burns sort of advocated, was separating out the disciplinary side and making that semi-autonomous under the rules and regulations stipulated by the FA, but then with the actual body dispensing that discipline being separate. I think that would assist the FA because a lot of bad press comes out through the FA not acting on a particular issue because of this, that and the other. I think that would help. Before I went on the board I thought on the national game and the professional game we would be at loggerheads. I do not see that. I think the debate and discussions at the board have basically been about moving in the same direction for football. If it is cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 57 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn particularly just a national game issue, then we would support what they are recommending; they are experts in that area. That also works the other way around. It makes eminent sense to me. Without doubt the FA is not completely broken, but there are issues and the turnover of staff at the top, whether it be at the chairman, chief executive or general secretary level, cannot help. It cannot help any organisation for that to happen, and I think we have to bed it down, have some stability. In order to do that we also need to give the new chairman some support and some assistance at that level, and that makes eminent sense to me. Q217 Paul Farrelly: Which representatives, which sectional interests, should be trimmed or cut back? David Gill: At the moment that would take it up to 14—five national game, five professional game, the general secretary, chairman and two non-execs—so I think you can do it pro rata. I do not think anyone is that desperate necessarily to be on it. I think what we want to do is have a proper body there because that will determine the strategy of the organisation, monitor the implementation of that strategy, the dayto-day running of the FA, so whatever is best for the FA. I do not think people should just hang on because they have been there for ever. It is what is best for the organisation. Q218 Paul Farrelly: The German FA has adopted a different approach. It has what you might call sectional interests on the board, which has evolved. It has representatives of women’s football, which is very big here as well as in Germany, and the director of football for the national team, because they feel the national side should have an input. Is that a route that we should be considering as well? Tony Scholes: I think you probably need to be a bit careful. David is talking about reducing the size of the FA board, and if they are going to be effective they need to be small enough to be able to make good and clear decisions. If you start adding on sectional interests it makes it more difficult. But there is a structure below the board, of course, where such interests could and should be represented. Peter Coates: We have two boards below the board; we have a national game board and a professional game board. There is no reason why the structure cannot accommodate the right balance and I think it is very important that the chairman and the chief executive are allowed to get on and run the business and are not stopped by the board from carrying out their role. Going back to earlier, I think two non-execs would be a very big improvement. Q219 Paul Farrelly: You have been quite outspoken in our local press and for anyone who wants to listen, really, about the failings of the FA on a much broader front, from the turnover of chief executives, which has been mentioned, the way Wembley was handled and, indeed, the World Cup bid. What do you think the FA needs to do to improve its international standing overseas and its reputation here? Are there any organisational weaknesses that contributed to our dismal failure to get more than two votes in the World Cup bid? Peter Coates: Well, it was pretty shocking, really, wasn’t it, whichever way you look at it? Now, who is responsible for that? Well, I am surprised that we did not know more. We have guys out there, we have a representative on FIFA and we had no idea all we were going to get was one vote. There is something wrong if we cannot do better than that. We should have known, for example, and maybe this is a criticism of FIFA and the chairman—if he has an agenda that he wants to spread football around the world that is a perfectly reasonable agenda in my view. If he wants to go to Russia, there is nothing wrong with going to Russia if he wants to spread the gospel, or the Middle East for that matter so long as we can play it in the summer. But things like that ought to be known and we say, “We are out of it, we have no chance”. It surprises me that we are not smart enough to get a feel and get a flavour for what is going on and end up with egg on our face with one vote. So, yes, I was very upset about it. I wanted the World Cup in England obviously and I thought we had a chance from all that people were saying, but we seemed to have no chance. Q220 Paul Farrelly: Niall, you have seen a few ructions in your time between the blazers and the players in Ireland. What is your perspective? Niall Quinn: Well, I was heavily involved and I led the campaign in Sunderland. We got a great camaraderie going not just in Sunderland but the region. We called it a regional bid. We were thrilled to be called out first as the first city that was going to be hosting a game if it did come our way. We got very excited. But looking back now that it is all done and dusted and where it went, what I would say is if we were back again there was a lot of good stuff, but a lot of that good stuff got drowned in arrogance. I really believe that. We did not hear anything from Russia in those 18 months. People heard from us all the time. I am not saying that that would have annoyed or upset the people, but it did really take away from a lot of the real gilt-edged stuff that we had done. The next person who would dare venture to take on something like this in the future, I would plead with them to keep your good stories and keep your successes wrapped up and roll them all out in the last couple of days. Q221 Paul Farrelly: David, in Germany we heard from a very senior, respected and reliable source that Sir Bobby Charlton was told a year prior to the failure that England had no chance because the numbers, were not there. Are you aware of that? Has that passed through? Does the game share this conviction? David Gill: I am not aware of that situation. Q222 Mr Watson: My interest in the governance of football is about how you protect players. As chairman, can you tell me if you know of any current or past players who may have had their privacy invaded through phone hacking? David Gill: I am not aware of anyone at Manchester United, no. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 58 Culture, Media and Sport Committee: Evidence 8 March 2011 David Gill, Peter Coates, Tony Scholes and Niall Quinn Q223 Mr Watson: Niall, you played against Sol Campbell a few times. Were you aware when you played against him that his phone was being hacked? Niall Quinn: No, I did not. Thankfully, nobody has any suspicions around the club. We do not feel threatened at all. Q224 Mr Watson: You do not know whether Alex Ferguson’s phone was hacked? David Gill: He has not mentioned to me, no. Chair: Right, I think that is it. Can I thank the four of you very much? Examination of Witnesses Witnesses: Lord Mawhinney, Former Chairman of the Football League, and Henry McLeish, author of recent review of Scottish Football, gave evidence. Q225 Chair: First of all, I thank Lord Mawhinney and Henry McLeish for having sat patiently through the first part of this morning’s proceedings. I welcome Lord Mawhinney, a former Chairman of the Football League, and Henry McLeish, obviously a former First Minister but also the author of a recent review of Scottish Football. Could I start by asking Lord Mawhinney whether he thinks the introduction of the Premier League weakened or strengthened what is known as the football pyramid? Lord Mawhinney: It strengthened it, but I will come on to the present in a moment. It is a phenomenal success. I have sat in Beijing and watched Premier League games. I have sat in Boston and watched Premier League games. The future income of the Premier League is more and more shifting towards overseas media rights and whenever they launch their own television channel that will have another additional effect. It is a great success. I think the difficulty is that it has created a problem about the handling and distribution of money. It has generated so much money that it has skewed, or is in danger of skewing, the system. The Premier League is one of the country’s great advocates for a free market and I pay tribute to it. The problem is that the Premier League is not a free market; it operates in a closed market. What happens at the Premier League affects the finances of not just other Premier League clubs but clubs right down through the Football League, and what happens in the Football League affects what happens in the Conference. Going back to the earlier questioning, every time Mr Rooney or Mr Torres gets a salary settlement, that cranks up the whole system. Agents note it and they add a little bit to the value of their player. Other clubs note it. Whether that is good for the medium-term football pyramid I think is very debatable. Q226 David Cairns: Henry McLeish, you have written this football review. It is a big review; it has 89 pages and makes lots of recommendations. Can you just encapsulate what you think are the key one or two recommendations that you would really like to see implemented from this review? Henry McLeish: The position in Scotland is in some respects very, very different, especially in terms of scale and the financing of the Premier League in Scotland, and in terms the fact that we have 5 million people rather than 60 million. In that sense, I would, first of all, say that the context is very different. That said, as someone who has a passion for the game and who has played the game, I found that the football authorities in Scotland were really not fit for purpose—and I will be as sweeping as that at the start—because in a sense in both England and Scotland we are looking at two of the oldest associations. We are talking about history and about legacy, about a preciousness and exceptionalism that I think you only find in football, and about an insularity that is safeguarded in some respects from the outside world. In that sense, they were not fit for purpose—this is the SFA. Then you take the Scottish Premier League and the Scottish Football League, as the two other institutions. I could find no good reason, for example, why they had been separated, because our SPL operates at a very modest level compared with England. That said, we had a fragmented game, there was lack of trust; there was a whole series of problems that had clearly accumulated over decades without anyone from the outside suggesting that things should be changed and without any momentum from the inside suggesting things should be changed. After the review, and after speaking to an enormous number of people, the first thing I wanted to do was to improve significantly the governance of the game as exhibited by the Scottish Football Association. This involved a major overhaul of its committee structure, which was fine for the start of the last century, but not fine for the start of this century. They had too many people on the boards and a whole breakdown and fragmentation of their approach. Of course, there was also a severe lack of confidence in their ability to oversee the game and regulate the game. I suspect that, in terms of the FA in England, part of this is going on. What I recommended was, first, sweeping changes to the structure, composition and modus operandi of the Scottish Football Association; secondly, the reintegration of the Scottish Premier League and the Scottish Football League, in no way stepping on the toes of either but bringing them together to collectively take the game forward; and then, thirdly, an acknowledgement—I think this is one of the issues that I think is interesting in England—that the game is bigger than the Premier League. Now, we can say that in Scotland because I think it is a more modest Premier League. That said, it was to talk about the fact that, in terms of the gap between national aspiration and national achievement, the gap was enormous. We were asked: should we reduce our national aspiration? Now, in Scotland that would have been heresy because we are a passionate country, although not always successful. We wanted to keep cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 59 8 March 2011 Lord Mawhinney and Henry McLeish the aspiration alive, so what we had to do was to raise the expectation. What I think has now come forward is a growing embrace of change and a growing of confidence that the game needs to move forward together, which means that football as a sport has to be resurrected as a game. Therefore, the whole emphasis should not be on the Premier League in Scotland and what it wishes to do. That can be accommodated and, of course, within our Premier League structure we have two clubs—maybe they do not need to be mentioned today—which are certainly the subject of much debate in Scotland in terms of dominating the Premier League. All in all, there was a recognition that the game is enormous and that the SPL has a part to play. As in England, however, you may have the best Premier League in the world, as we have heard this morning, but your national side does not reflect that in any particular way. Our effort in Scotland was to look at this in a more integrated way from the very grassroots talent elite development right through to make sure that we have the best Premier League that we can muster at the present time. Q227 David Cairns: Talking of Celtic and Rangers, then, isn’t the problem that we are trying to organise a league in Scotland that has two great behemoths, two massive world cups, a few teams in the middle that are perfectly respectable, well-run clubs that have intermittently done quite well in Europe, and then this very long tail of amateur clubs or part-time clubs that we do not see in England, but we are still trying to keep the whole panoply of a structure as though we were in the same scale as England? This is not one of your recommendations, but wouldn’t it just be better for everyone—and it is not going to happen—if the Old Firm were playing in the English Premier League? You would have a much more rational structure than Scotland and the Old Firm wouldn’t be as constrained as they feel they are by the pitiful amounts of TV revenue that they are getting compared to what is happening in England. Henry McLeish: I suppose the simple answer is no, and that is why it was not a recommendation. The realities are that Rangers and Celtic will continue to play in the Scottish Premier League. I think you are right to suggest that we have great difficulty now supporting the four divisions involving 42 clubs. That said, part of the recommendation was to acknowledge that, in terms of the community interest and community development, some of our clubs would be looking more at that than they would be in terms of a normal business model for development. Secondly, within the structure of the SPL with the 12 clubs, which may go to 10, Rangers and Celtic are accommodated, although they are huge. 65% of all the attendances over the last 10 years in Scotland have come from Rangers and Celtic. We are aware of that, but on the other hand, even if you wanted to think that Rangers and Celtic could be involved down south, I think you are up against UEFA rules because it would allow you, for example, as a separate association to have the people from the German Bundesleague or others seeking to join your Premier League as well. I think it is impractical. The politics and the possibilities are certainly to see Rangers and Celtic as a major asset in Scottish football but to ensure that some of the excesses we have seen recently are curbed. But that said, we have a very particular set of problems that in some respects, Chairman, do not really reflect what is happening down south. Q228 David Cairns: Your key recommendation, then, is to merge the SPL and the Scottish Football League and to tackle the labyrinthine committee structure of the SFA and the blazer brigade there. How have these recommendations been received and how confident are you that they will be taken forward? Henry McLeish: They are being taken forward and the board of the SFA has accepted most of the recommendations and, in fact, they have been approved by the board. One of the problems is trying to make sure that change does take place in other areas of the game. For example, we are keen to make sure that we work with other sports; with a bit of modesty acknowledge that while it may be the top game in Scotland we have a lot to learn from others. I was interested by the submission the FA made to you that because of their uniqueness it was very difficult for them to learn from others. That is flatly not the position because one of the problems your FA has compared with the Scottish FA is that you have very, very similar problems, which are a product of legacy, a product of history and a product of being inward looking. Change and specific recommendations, I think, are going forward. But what we are up against in Scotland is a huge financial problem; not some of the issues that were raised earlier in the evidence session, but in terms of broadcasting, fan base and sponsorship. These are the three key issues in which we are trying to keep involved to generate more cash. Q229 Dr Coffey: Just to each of you, how important are the solidarity payments coming from the top division down to the lower divisions, Premier League to Football League in a particular case, and, in particular in England, how important are the parachute payments and do they end up distorting competition in the Championship? Lord Mawhinney: The help that the Premier League gives in a variety of ways to the Football League is significant and, up until recently at least, has been much appreciated. The parachute payments were instigated because the salary levels in Premier League clubs were so much greater than in Championship clubs that, without some transitional funding, Premier League clubs that got relegated would simply just head straight into administration or just tumble down the Football League and that did not seem to be fair. There was an agreement, which we supported, that a certain amount of money should be made available by the Premier League to Premier League clubs that were going to be relegated. Chairman, can I just, if you will forgive me, make it clear that Mr Clarke and Mr Williamson spoke on behalf of the Football League? I am expressing my own view, albeit as Honorary President of the league. In my view, the present level of parachute payments cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 60 Culture, Media and Sport Committee: Evidence 8 March 2011 Lord Mawhinney and Henry McLeish are going to undermine the integrity of competition in the Football League. They are going to do that because the amount of money—£16 million, £16 million, £8 million and £8 million over four years— bears very little relationship to the salary issue that was the original case. I tried to persuade the Premier League at one point to link the parachute payments to the specific salaries of players that came down and as that player got sold or moved on, so that bit of the money could drop out. That seemed to me to be coherent with the original philosophy. That was totally rejected. We now have a set of circumstances where the Premier League will tell you that they are being very generous to the Football League and at one level they are being very generous, but the strings attached and the effect on the integrity of competition are both issues that cause me concern. Q230 Dr Coffey: Roughly how much does the Football League now get from the Premier League? Lord Mawhinney: Well, that is really quite a complicated question, if you do not mind me saying so. Q231 Dr Coffey: Ballpark figure, is it £50 million? Lord Mawhinney: We get solidarity payments. If the Premier League were here they would include all of the parachute payments that go to their clubs— Dr Coffey: Just the solidarity— Lord Mawhinney: No, I am trying to be helpful. The figures here are very easily misunderstood because the Premier League, up until the time I left, were saying they gave about £120 million a year to the Football League; but two thirds of that were parachute payments to their own clubs, they were not to us. About £25 million is what is sort of estimated comes to the Football League through the involvement of Premier League clubs in the Carling Cup, for which we are enormously grateful. There is some generation of money to Football League clubs from Premier League clubs in the context of transfers, though that has dropped off as the Premier League has shifted its gaze more toward Europe and the rest of the world than to the league below it. It is really quite hard to answer that question and I do not want to mislead you. You might want to ask each of the two leagues, add it together and work out an average. Q232 Dr Coffey: The only reason I ask is that surely the Football League had come to its own arrangement by not including the parachute clubs in certain other redistribution of income within the League. I understand Middlesbrough is about to restructure because it has come to the end of its parachute, but is there an ongoing implication for viability of clubs leaving the Football League? Lord Mawhinney: Dr Coffey, that is exactly the point that I was making about integrity of competition. If, in the Championship, you have two clubs each season going in with £16 million extra against the amount of money that goes partly from solidarity payments from the Premier League of about £2 million and the Football League allocation to a Championship club, which is about £2 million, you have two clubs with £16 million and the rest with £4 million. Next season there will be four with £16 million and 20 with £2 million and, if you believe what you have been hearing, money is what makes a football club successful. Personally, I think fans want sustainability as well as success but there is no doubt that the football industry mentality links money with success and that raises questions about integrity of competition. Q233 Ms Bagshawe: This is a question that applies both to England and Scotland respectively. On the distribution among the individual Premier League clubs, and down to clubs below them, do you think that the situation is fair and equitable in terms of transfer payments and youth development payments? Do you think those individual payments have been handled properly, respectively? Henry McLeish: On the last question, there are problems with parachute payments, as they are not sufficient. There is a different scale of costs, a different series of financial problems, so in Scotland the current reconstruction proposals are about creating an SPL2 or a kind of Championship type of league. That is going to involve more money coming from the SPL into that. Also they are seriously looking at a significant increase in parachute payments. Overall, because of the lack of broadcasting income and the difficulties of sponsorship, we are dealing with more meagre budgets. So in that sense there isn’t really a dispute between the Scottish Football League and the Scottish Premier League about distributional aspects. It is more a joint league or a joint effort to try and get more money coming into the game overall. But what we have done in my recent report is make some suggestions about the elite talent/youth development side, because in many senses we do not have the young players coming through. It is quite clear that within the SPL and within the SFL, the SPL in particular, the investment of young people is not bearing fruit to the extent it should. What we are looking at then is a wider pooling of both responsibility and resource across all the authorities, including the SFA, to try and tackle that particular problem. In that area, we are also seeking further investment from the Government as one of the leverage points, the very few leverage points they have, to do something for elite, talented young people, which would be in the national interests as a justification for involvement as well as to the benefit of the clubs. Lord Mawhinney: As far as England is concerned, frankly you pay your money and you take your choice. The Premier League have a ladder system but their clubs voted for it. So I guess those who are toward the bottom end of the league don’t feel that the differential is so big as to create a problem. In the Football League there is equality of distribution within the division. Within the Premier League the effect of money generated through playing in the Champions League has a significantly more distorting effect in the context of your question than the ladder arrangement. Q234 Mr Sanders: On these parachute payments, given the sort of scale that you have set out, the number of clubs that would be in the Championship cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 61 8 March 2011 Lord Mawhinney and Henry McLeish with that financial backing, it occurs to me that if you are a League 1 club and you get promoted you are automatically at a disadvantage within that new league that you have entered and that there is then an incentive to overreach yourself if you are in the Championship, having come up rather than having come down. I am wondering if there isn’t a direct link between those parachute payments and the situation of Plymouth Argyle, at the moment in administration, who possibly overreached themselves, having gone up into the Championship and unable to compete with clubs that have those parachute payments. Lord Mawhinney: You will forgive me if I don’t comment about a specific club. There are probably management and governance issues and all sorts of other things, so forgive me if I don’t do that. But as to the core question that you raise, it is a good one but, Mr Sanders, it is not just when a League 1 club goes up to the Championship. As part of the latest what is called solidarity package, I told you about the parachute payments and the just over £2 million a year to the Championship clubs, the other part of that package is that the League 1 clubs get £300,000 and the League 2 clubs get £200,000, give or take a few bob. The very solidarity packet enhances the differential even before you get into the position of what happens to the promoted clubs. It is a real problem. If I had to identify one thing that I learned about football, I would talk about two things: I learned it was sometimes quite tricky to get all 72 chairmen pointing in the same direction at the same time, but the main lesson I learned was that if the Football League doesn’t defend the integrity of competition, absolutely nobody else will. The integrity of competition is, for me, easily the most important issue. It relates to sustainable debt; it relates to the behaviour of agents; it refers to transfer windows. There is a whole range of things that fall under the broad heading of “integrity of competition” and I very much hope, Chairman, that this is an issue that will commend itself to the Committee in fairly robust terms when you produce your report. Henry McLeish: Can I just add a postscript? I think Lord Mawhinney is right in describing it as a closed market. You can take the clubs that occupy the Premier League in Scotland and say they are businesses, they are in a marketplace, but the operation of the League is not in a marketplace. I think that whether you call it solidarity or protectionism then you do find that there is a lot of problems peculiar to football that have developed over decades into the situation we have got. I don’t think, certainly in Scotland, they are anti-competitive in that regard. On the other hand, the precarious nature of relegation and promotion is such that there is no great outcry in Scotland about some of the excesses or perceived excesses of that process. As I said, more of a concern that if we can generate more cash from a better product on the pitch that would be the biggest objective to be pursued. Q235 Mr Sanders: Can I ask you for a quick answer to this? You mentioned Celtic and Rangers, and that one of the reasons for not coming into the Premiership was the impact on the Scottish international position. But how does that work when you have Welsh teams playing in English leagues—possibly one of them going into the Premiership this year—and yet there is still a Welsh professional, semi-professional league, and a Welsh national team? Henry McLeish: We have Berwick Rangers playing in the Scottish leagues as well, so we are quite friendly with our English colleagues on that. I raised it in reply to David Cairns’ point merely by saying that if two clubs of sufficient stature were to seek to move between international associations then I think it might ruffle a few feathers and, quite frankly you don’t have to do a great deal to ruffle the feathers of either UEFA and, in this case, it would be FIFA. I think there is a more serious point, which is that while David Cairns has quite rightly outlined the issue for Rangers and Celtic in a small league where attendances are not good, their competition is not sharpened every week. This is just the historical reality we find ourselves in. In terms of not agonising in a report or in discussions and dialogue about where Rangers and Celtic are going, they are part of Scottish football and I think that is how we want to deal with the problem. Q236 Mr Sanders: Lord Mawhinney, can I ask about the Football League and whether it ought to be doing more to support and reward youth development programmes run by Conference clubs? Lord Mawhinney: I have to be honest and say I don’t understand what the basis of the question would be. Most of the clubs that I had the privilege to represent think that they have a major task getting their own youth development programmes up and effective and defending, as is now commonly and widely reported in the media, the increasingly good youth development programme in the Football League against the sort of comments that you heard from the representatives of the Premier League who gave evidence earlier. On the whole, I think it would be reasonable to say that most of the Football League chairmen think that those two things constitute enough of a challenge on youth development without taking on the job of trying to handle youth development for the Conference. Q237 Mr Sanders: So you think it ought to just be something for the league clubs to do? I mean league clubs have, as you hint, a difficult enough job maintaining a youth development programme. It is the first thing they tend to cut back when they are in money trouble. But shouldn’t it be something that League ought to look at right throughout the pyramid, that every club that is professional or semiprofessional ought to be encouraged to have some form of youth development? Lord Mawhinney: The answer to that question is undoubtedly yes. Thirteen of the England team who played recently against Denmark received most of their youth training in the Football League. We have, as Mr Clark and Mr Williamson, particularly, told you, a good and burgeoning system in the Football League for youth development. It is now under challenge by the Premier League—that will be a matter for the two cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 62 Culture, Media and Sport Committee: Evidence 8 March 2011 Lord Mawhinney and Henry McLeish leagues to sort out among themselves—but I am proud of the strides that have been made over the last seven years as far as youth development is concerned and that is not a bad English statistic. Q238 Paul Farrelly: I want to just come on briefly to finances, but just on that strand on youth development. One of the things that has struck when I went to Germany was not so much the 50 plus one rule, because that can obviously be negotiated around, but it was a sense that they had an ethos in Germany that seems to be missing here, particularly vis-à-vis, the Premier League and the FA and the Football League. They said that when they lost very badly in Euro 2000 they decided collectively to do something about it and, in particular, youth development was strong. They put a strong emphasis on youth development. You have seen the results now with the young German team and their performance in the World Cup. Is there any sense that we can learn from Germany in youth development and developing that ethos, sharing some money in the game but making it in the national interest as well as the game’s interest and home-grown players? Is this a fruitful line of inquiry for us? Lord Mawhinney: Yes, I think it probably is; perhaps in the context of whatever you may choose to say about the future of the FA. It is a matter of record that Trevor Brooking and I didn’t see eye to eye over youth development for years and we didn’t see eye to eye because our clubs were putting £40 million into youth development, the FA was putting in a minimal amount and they simply wanted us to hand over our £40 million and our young players and they would decide what to do with them. That never struck me as an attractive option but, in an attempt to be helpful, a few years ago I had Sir Trevor here for lunch and I invited him to take a clean piece of paper and write down what he would like from the Football League and I would do my very best to persuade the Board to deliver. I am guessing that was three years ago, maybe four years ago, and I was promised a reply within a week and it still hasn’t come. Paul Farrelly: Maybe we can follow that up. Henry McLeish: Can I just make a postscript, because I think this is one of the most important issues facing certainly Scotland and I have no reason to doubt that within the FA structures it is the same problem in England. We had listened to the SPL talking about youth development. We were clearly talking a good game but the delivery element was missing. What I think we had to rationalise there was that if we’re looking for young Scots to be nurtured, the talent they have, so they can appear with the clubs or internationally or with the Scottish team, we virtually had to remodel what we were doing. One of the things that we tried to do in this report was ask, if you look at everyone concerned in the game, what is the purpose of football in 2011? What is the national mission? Why should a Committee of the House of Commons want to be involved? I think that the Chairman said when he launched this inquiry that he wanted some strategic involvement and to strengthen self-regulation, and essentially I thought that he was talking about the FA. If there is one broad area where there should be a growing consensus it is that we are not doing enough. If you look at some of the figures on coaching, and qualifications for coaching in either country, and then look at Portugal or Spain, you can see why at international level we are not doing well. At least you guys qualify; we rarely qualify these days. But, on the other hand, as to youth development, Germany is the classic example; they took it upon themselves to say this mustn’t happen again. So, therefore, in terms of procedures, finance, co-ordination and an integrated approach to youth and talent development, that is where we are now heading in Scotland, and it seems to me that that argument might be applicable here. Lord Mawhinney: Our young people should go into proper training at a far younger age and the FA should shift away from making them play on full-size pitches and make them play on much smaller pitches, so that they can develop their skill base. Q239 Jim Sheridan: Can I just ask a supplementary about youth development, particularly in Scotland? You did say earlier that the youth development programme has more or less failed. We are no longer producing the Billy Bremners of this world. There may be a simple or significant reason for that, I don’t know. One of the issues I have picked up, which is probably applicable to England as well, is that when youth clubs play the Old Firm in Scotland and a young boy shines, the Old Firm then take them away. While such a boy might shine in a moderate club, in among the Old Firm—with “superstars” as we call them—he might not shine, so he loses the game, the game loses him, and he just fades away. I wonder if there is anything that can be done to stop big clubs in England and, indeed, Scotland, from poaching these young players away. Henry McLeish: I am sure the simple answer to Jim Sheridan’s comment would be no. On the other hand, however, what we have looked at again in Scotland under the duty of care issue is that—again looking to strengthen the capacity of the FA down here—we want to strengthen the capacity of the Scottish FA to have a duty of care. Therefore, we understand the competitive nature and if the youngster is excited by the prospect of going to Rangers or Celtic or Man United, parents often get involved and it is difficult to stop the process. On the other hand, the great wastage rate is approximately 95% of young people at the age that Jim Sheridan is talking about will go to a club and will never make it. The tragedy about that is you could argue that people are not picking talent properly but a lot of these young people, children, youths, are lost to the game. Also, if they had been dealt with differently and more effectively at the local levels they may have sustained, developed later and still had a good career in football. We, again, as a part of the package of the recommendations on the duty of care issues, want the SPL, the SFL, the SFA to get together with also the wider youth development to make sure that opportunities are still available for children and families but—“constrained” is not the right word— they are conditioned by a better framework, which means there is more success and less wastage. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 63 8 March 2011 Lord Mawhinney and Henry McLeish Lord Mawhinney: As far as England is concerned, the danger is if it is going in the opposite direction. If the new youth development proposals are enacted there will be four categories. The biggest clubs in the Premier League will be in the top category and they will be allowed to set up training arrangements in towns and cities all around the country, sometimes in competition with Premier League or, more likely, Football League clubs in the same town. So the direction of travel is being promoted as a new elite structure for developing kids but the danger is that it is going to go in exactly the opposite direction, Mr Sheridan, to what you have suggested. Q240 Paul Farrelly: Let me just cover finance briefly. The figures are stark. In the last 18 years over half of Football League clubs have been subject to some form of insolvency and, Lord Mawhinney, under your tutelage, division 2 introduced some restrictions on wages. Do you think those have been successful and, if so, is there any prospect with such differing agendas that these or similar forms of financial control can be implemented up the pyramid in English football? Lord Mawhinney: The problem with football is not lack of money. It is lack of cost control. You heard the Premier League chairmen talking about agents in the Football League a few years ago initiated the publishing of how much money each of our clubs gives every six months to agents. That has had an effect. We did the first ever deal, the only deal so far, with HMRC to ensure that we could work with HMRC and insist that our clubs pay their National Insurance and PAYE on time each month and stop using the Treasury as an unofficial bank. You were given some evidence earlier that I suspect is not totally right. It was right inasmuch as I think it was Mr Scholes who said the Premier League have a similar arrangement. They don’t. The clubs have to tell the Premier League but my understanding is the Premier League have not followed our lead in terms of coming to an arrangement with HMRC itself. That was hugely important but there are other cost control issues. One of them, I guess, would be football creditors. I hate to say, Chairman, that I inherited a football league policy very supportive of the football creditor rule and when I left the football league policy was still very strongly in favour of the football creditors rule. We did debate it a number of times and I got outvoted every time in the Board, but my personal view is that it is not defensible. Mr Collins pursued my successor on this issue. If you will forgive me, I think you are absolutely right. I do not know how you defend the local community where local businesses that you are supposed to be the football club of don’t get paid for services rendered while a football club hundreds of miles away gets protected. There is no doubt that the football creditor rule cranks up expenditure and you are right again to say that it would make far better due diligence if it didn’t exist and you persuaded my successor, while defending the football creditor rule, to say that he could see no moral basis for it. I share that view. I don’t think there is any moral basis for it. It may be of interest, Chairman, for the Committee to know that just before I left the chairmanship of the Football League made a charity donation to St John Ambulance of more than £40,000, purely as a charity donation, which covered all of the administration losses that the St John Ambulance had on its books that were outstanding as a result of clubs going into administration. Henry McLeish: In Scotland the creditor rule applies, but it is not a major issue because there have been no particular problems with it at this stage. Q241 David Cairns: Just on this issue in relation to Scotland you have a situation where one of the Old Firm clubs is essentially now controlled by the bank, not owned by the bank, and found itself in a situation where, in the transfer window, they had to sell their best player—possibly scuppering their chances of winning the league; of course, let’s hope they’re still in it—essentially because the bank told them to. If this isn’t a sign that there is a fundamental problem in how we are structuring the game then it’s hard to think of a bigger sign where the oldest, biggest, most successful club in Scotland is having to sell its best players because the bank is telling them to do so. If this isn’t making a case for fundamental change, what is? Jim Sheridan: How bad is the indebtedness in Scotland? Henry McLeish: The problem of indebtedness is significant, but let me put into context both points. The creditor rule is separate, in a way, because it’s an issue that is more closely linked between HMRC and the Scottish Premier League, in particular, and to how we deal with things. There has been a much closer coming together in dealing with financial issues and SPL itself under its new chairman has been very active in trying to make much more sense of the finance. But I have made no effort to try and disguise the fact today that the financial condition of Scottish football is not a good thing. In that sense, there are many, many examples that I could put forward. But what I think I would draw the Committee’s attention to as a piece of evidence is the PricewaterhouseCoopers’ annual report of financing of the Scottish Premier League, which is published every year, and 2010 was particularly interesting because I think it celebrated the 21st anniversary of that publication. So there is a lot of data going back over the period and reinforcing some of the concerns that have been expressed on both sides of the Committee room this morning. Q242 Damien Collins: Lord Mawhinney, you have anticipated the question I was going to ask about the football creditor rule, so I won’t go to that ground; your answer to the Committee is very clear. I just wanted to pick up on what you said earlier about the integrity of competition with regard to the financial standing of the clubs. Do you think the Football League requires greater scrutiny of its member clubs, their financial performance, and maybe even moving to a scheme similar to what you see in Germany where clubs have to have their books effectively audited by the League to make sure that they can meet their obligations for the season ahead? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 64 Culture, Media and Sport Committee: Evidence 8 March 2011 Lord Mawhinney and Henry McLeish Lord Mawhinney: Mr Collins, the first thing we did was to recognise that when a club goes into administration, which the law of the land permits, it wipes out a whole bunch of debt and that gives it a competitive advantage over the other clubs in the division because, while they are having to use their resources to pay interest, the club that has gone into administration doesn’t. That is an integrity of competition issue and we addressed that by introducing the sporting sanctions and 10 point penalty, which the Premier League subsequently followed by nine points and the Conference followed as well. There is always a debate as to whether 10 points is the right amount or whether it would be better just to relegate a club; that is an ongoing debate, but we took serious action. We have also, over the years, strengthened the financial reporting requirements of our clubs to the centre, and that is of some significance; as long as you bear in mind that the Football League, of which I can speak with some authority, is a trade association. We don’t run the clubs. It is the clubs that decide what the regulations will be and they have so far responded to providing more financial information, I guess. There may be a point at which they baulk and say we are going too far, but that hasn’t been reached yet. Henry McLeish: I think reporting arrangements have been hugely improved in Scotland over the last three or four years. There was a period 2007/2008—and this is in the PricewaterhouseCoopers report—where some of the ratios, for example, of wages to turnover were just simply remarkable. A lot of effort has gone into trying to reign that back in. Reporting arrangements are much, much better and both the Scottish Football League and the Scottish Premier League have taken a much more hands-on approach to the individual clubs, especially if they are facing jeopardy or if there is a suspicion that there are concerns. The other interesting point in Scotland is that there is a better rapport between HMRC and the clubs than there has ever been. Slowly there is a realisation that a number of the issues that have been raised by yourselves today have been taken seriously because it is a protected market; but, on the other hand, you still have to have rules and regulations and parameters and all of the clubs now have acknowledged that has to happen. Q243 Damien Collins: Lord Mawhinney, we have heard from other people, people in the Premier League, who concur with your observation that the problem with football is not lack of income but too great a level of expenditure. Most of that clearly goes on players’ salaries and transfer payments. Has the Football League ever discussed internally the structure of the competition and whether it would be better in terms of the financial viability for smaller clubs to go back to the old structure of a north and south bottom two divisions? Lord Mawhinney: Yes, from time to time; but I have to say that there is no positive strength of feeling within the Football League to go back to that. I think partly because that would be perceived to be diminishing the status of the clubs. That is how the clubs would see it. So I don’t think that is going to happen. Q244 Damien Collins: I just wanted to ask a final question relating to the structure of the FA and, within that, I would like to touch on the youth development questions that were raised earlier. Lord Mawhinney, I would be interested in your views on the structural reforms you think the FA should consider undertaking to make it a more effective governing body. With regard to youth development, there is the ongoing debate about the role of youth development. But some people would see that there was, I think, 2007 the Lewis report on youth development, which produced a lot of interest in it and it sort of went nowhere. Was that a failure of the structure of the FA to take that forward or was it the wrong report? Lord Mawhinney: It was a failure of the structure of the FA. On the broader question, I think I was the first person in the management hierarchy of football in this country to say on the public record that I thought the FA was dysfunctional and that remains my view; though I want to put a caveat in by saying that I welcome the appointment of David Bernstein. I think he has the potential to initiate change across a wider front and I have made it clear to him that, although I am not actively involved anymore, if I can help him in any way I would be happy to do so. But for the last few years the record of the FA is pretty terrible, to be honest. I know that the new chairman— there was an element of common ground in the earlier testimony, although there was a good deal of hedging going on—would like to have two non-executive directors appointed to the Board and I would support that if it was to happen. If Lord Burns had taken the advice of some of us before he produced his report we wouldn’t be here today, we would be having a different conversation; but he didn’t and he has now told you that he regrets he didn’t. I regret he didn’t, but he didn’t. The big problem is that people should not assume that appointing two non-executive directors to the FA Board is going to solve the problems of the FA. The FA’s problems are much, much deeper and more radical than that. Lord Triesman was right; there is a poor relationship—and I use my diplomatic language because I am testifying before Parliament—between the FA and the Premier League. The council is among the more conservative bodies with which it has been my privilege to work in the last 30 years. There needs to be change in both of those areas and the FA needs to reassert its authority as FIFA’s representative in this country. It hasn’t for years, and I hope it will, but none of those three issues are going to be resolved by adding a couple of non-executive directors and making the board 14 instead of 12. Henry McLeish: Just on the structure, some of the points I made earlier. Again I concur with Lord Mawhinney about the structural change but I think what we also do—and this was the Chairman’s initial context about improving self-regulation—you have to give the confidence and the capacity to the FA to do that. They have to win it back, in my regard. It is a similar problem in Scotland because the real question within the SFA was, “Well, what is our role?” A Premier League that is kind of there and doing a reasonably good job; an SFL, all the youth. I think cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Culture, Media and Sport Committee: Evidence Ev 65 8 March 2011 Lord Mawhinney and Henry McLeish they have grown in capacity, grown in confidence, they want to move forward. The other issue is that it is from top to bottom. In Scotland what we have suggested, and hopefully you will read the report in detail, is to take things from the very council, on which I agree with the comments made, right through the Board structure, and we are talking about 12 to seven; we are talking about nine committees to two. In a sense, that is the structural issue; that is the armaments that they can use to deploy what they want to do. But the other thing is just changing the ethos and to me the confidence issue is absolutely sound because in Scotland now it is club, it is community and country. For far too long it seems to be the emphasis has been club, understandably. That is where the big players are, this is where the issues are. But in Scotland I think we are trying to say, “Okay, but there is a country issue,” which is the thing we have talked about in terms of youth, and also to acknowledge that there is a community issue about getting some of our clubs on to different business models and different ideas of where we can go. Again, as Brian Mawhinney says, in relation to geography, they still want to be part of the heart of football. Therefore any suggestion of becoming a community club diminishes that; it is something they frown upon. You have got be careful in that. Q245 Jim Sheridan: A major part of this inquiry is about the relationship between the support roles, the authorities, clubs, and so on, and you would have heard the Premier League’s response to the question about club ownership and should the fans know or not know who owns a club. I’d ask if you concur with that. Secondly, still on the question of supporters, if I can ask Henry, in particular, I know that the footballing authorities in Scotland are doing their best to try and improve the game, improve the product. But the popular press obviously the move to attain a team in a league is not very popular, so I wonder how the authorities in Scotland will square that circle if they are to genuinely listen to the fans? Henry McLeish: On the latter point, there is this ongoing battle between what would be the best league structure financially. I mean in the report that I prepared I said that 10 made sense if you looked at the financial context, because what that means is 12 goes to 10, 10 take on board what 12 were getting and it is all about the broadcasting; it is all about the fans tripping down the league. On the other hand the fans instinctively want bigger leagues because they are sick and tired of other clubs playing each other too many times. I am not sure how it is going to work out in Scotland because the SPL are still debating that particular issue, but I suspect they will probably end up with the 10. It still begs the question of what is the best model for Scottish football. Clearly, in the financial context, I think that may be the right one but it certainly doesn’t solve the fans’ problem. Can I just say before Lord Mawhinney comes in, on the wider issue of fan base, I think things have improved in Scotland but for a lot of clubs the fans are welcome because they come through the turnstiles and they pay and they watch, and that is the fan base. But there has been a bit of a reluctance to involve the fans in a much more dramatic way. There are problems with that, especially if it is about fan takeover in terms of ownership of the Board. What I see in Scotland is that the Scottish Football League clubs, the 30 of them, will move to different models, as some of them are doing with community interest companies and so on. So there will be a bigger involvement of the fan base. They will be part and parcel of developing the club and, if they have access to resources, that might help that out. On the other hand, the clubs are desperate for resources anyway. So I see there are prospects there, but currently not a lot of progress has been made. Lord Mawhinney: Football, in one respect, is quite bizarre. It is very difficult to keep a secret. I have had business appear on the media while the board meeting at which it was being discussed is still going. Jim Sheridan: You’ve not a PLP as well? Lord Mawhinney: Listen, tell me about it. Some of the most skilled exponents of that in the media are taking an interest in these proceedings. At one level it is very hard to keep a secret and yet there is, running through football, a huge secrecy non-transparent core. I remember, Mr Sheridan, when I went to see Geoff Thompson, then chairman of the FA, to tell him that the Football League was going to introduce a fit and proper person test, he told me I couldn’t do it because a fit and proper person was the remit of the FA and it wasn’t a league issue, and so I couldn’t do it. We had, what I guess is known even in here, a full and frank exchange of views and we did it. Then the Premier League followed us and then the FA did something. But the instinct is not to be open. For Members of Parliament that is harder to grasp but it is a reality. You weren’t given the name, it is a law firm I believe. The Football League doesn’t use it because it can’t afford to, it doesn’t have the money. I was surprised that you weren’t simply told, “We are not going to publicise it because if we do we would have to publicise the rejections and that would open everybody to legal challenge and law suits and all the rest of it”. That is a serious issue in the world of football. But we have been moving to transparency; publishing agents’ fees as I mentioned earlier was an example of transparency. My guess is that more will come over the years. I think this is unstoppable, but football is a very, very conservative—small “c”— industry and it moves slower than the average. Q246 Dr Coffey: Building on what Mr Sheridan said, Lord Mawhinney and Mr McLeish, it is about the supporter and community ownership of football clubs. There haven’t been that many examples of where it has led to great success in terms of moving up the divisions. Do you think that the sentence that went in the coalition agreement was just, “Why is it there?” It is an interesting one and we are trying to offer something for the Government to respond to, but did we all just jump on a bandwagon last March, Labour party included, when they said they were going to arrange for everybody to be able to buy a stake in their club? Lord Mawhinney: I can’t tell you why it is in the coalition agreement. I have no idea why they put it cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG03 Source: /MILES/PKU/INPUT/011145/011145_o003_michelle_HC 792-iii corrected.xml Ev 66 Culture, Media and Sport Committee: Evidence 8 March 2011 Lord Mawhinney and Henry McLeish there and they certainly didn’t consult at least some of us who might have had a constructive thought. Just as, if you will forgive me saying so, I don’t think your manifesto probably was the result of deep consultation with the members of your party who might have been able to make a contribution. I don’t know why it is there. York City was extremely important because the supporters trust in York City deserve an enormous amount of credit for saving that club from going out of business. I think that created an emotional environment and I think I am the first senior administrator in football who went and spoke at the supporters annual conference. But, given the present business model where so many clubs depend on the benevolence of rich people, supporters clubs are probably not the answer. But if and when football gets itself on a more sustainable basis without having to depend enormously on the beneficence of rich people or rich companies, then the supporters trust might become a more effective model—except that as Mr Williamson pointed out to you—and it has been our experience—supporters trusts pick a director, put him on the Board and then expect him to tell them or her to tell them what is going on at the club and, of course, fiduciary responsibilities stops that happening and it all ends in tears. Henry McLeish: From my point of view, I think I agree with the latter point about the degree of tokenism that goes on in a very secretive football arena. That said, if you take Scotland, it seems to me that big progress will be made with the Scottish Football League clubs. There are 30 of them and there is a lot of enterprise, a lot of initiative. There is actually quite a lot of investment by the chairman in some clubs. But the main thing is they are trying to take the clubs forward in the sporting context. I went to see the Sporting Club Lisbon just as a visit and what we are trying to get football to do, especially in those leagues, is to make sure they are interfacing with other sports as a community focus, as a community hub, as a sporting hub; again watching that they don’t feel they are being squeezed out of football, but at the end of the day, the different business model—and as I said, one of the business models is this Community Interest Company, the CIC, which allows, because of the structure and status of the organisation, for them to obtain finance and possibly obtain some grant funding that they wouldn’t have been able to get in their old classification as a public liability company. There is a lot on the move, but I think it needs encouragement. It is happening but it is going to happen very slowly. Chair: The Rt Hon Lord Mawhinney, the Rt Hon Henry McLeish, thank you very much indeed for your evidence. cobber Pack: U PL: COE1 [SO] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 67 Tuesday 15 March 2011 Members present: Mr John Whittingdale (Chair) Damian Collins Paul Farrelly Mr Adrian Sanders Mr Tom Watson ________________ Examination of Witnesses Witnesses: Shaun Harvey, Chief Executive, Leeds United Football Club, John Bowler, Chairman, Crewe Alexandra Football Club, Barry Kilby, Chairman, Burnley Football Club, Julian Tagg, Vice Chairman and Sporting Director, Exeter City Football Club, gave evidence. Q247 Chair: Good morning, everybody. This is a meeting of the Culture, Media and Sport Select Committee as part of our inquiry into football governance and I would like first of all to again thank Burnley Football Club for hosting us this morning and looking after us yesterday evening. I should also say that I have received apologies from the Chairman of Leeds, Ken Bates, who is unable to be with us since he is suffering from bronchitis, but I am grateful to Shaun Harvey, the Chief Executive of Leeds who has agreed to take his place on our panel, and I would also like to welcome on the panel Julian Tagg, the Vice Chairman of Exeter, Barry Kilby, the Chairman of Burnley, and John Bowler the Chairman of Crewe Alexandra, and I am going to invite Damian Collins to start. Q248 Damian Collins: Thank you. The first question to Barry Kilby; could you tell us why you got involved with Burnley Football Club and what is your motivation for being Chairman? Barry Kilby: It’s where I come from, it’s our club. My dad brought me here as a lifelong supporter I suppose is the correct answer, and also in a town like Burnley I think the football club really is one of the central pillars of the culture that I come from, so when I got the chance to take over and strengthen that and move it on that’s what I chose to do. It’s as a super supporter that I took over as Chairman. Q249 Damian Collins: Mr Harvey how did you become involved with Leeds United? Shaun Harvey: Leeds United is my third job in football, having previously worked at my profession at Scarborough and Bradford City, so every failed footballer’s dream. I was an amateur player at school, always loved football, so what better way of earning a living than actually being involved in the professional game. Q250 Damian Collins: How long have you been with Leeds United? Shaun Harvey: This is my seventh season. Q251 Damian Collins: Mr Bowler, how about you? John Bowler: I moved to Crewe from London on business, had a young family; what to do at weekends? So we thought we’d go and support the local football club. I probably then made the mistake of suggesting how they could run it a bit better and was invited to join the board and ultimately asked to take over as Chairman, so it started as a supporter and went on from there. Q252 Damian Collins: Mr Tagg? Julian Tagg: My involvement started as a coach in youth football at Exeter. I started off the Centre of Excellence from nothing and built that up. When the club got into trouble, as a born and bred Exeter person—and I’d seen the trust beginning to evolve into something that was credible—I saw the football club getting into such a terrible situation and condition, owing so much money. I’m not sure I knew the full details when I got involved, but the football club was very pressured. But it’s more important; it’s not just about football, it’s about providing something for the city, and that was probably my main motivation—whether that might have been the rugby club or the football club—providing something for the city alongside those people. I thought the trust were beginning to become organised and looking like something that could help us; that’s the primary reason I got involved. Q253 Damian Collins: Barry Kilby, you are the Chairman of Burnley Football Club. Could you tell us something about the ownership structure of the club? Barry Kilby: Yes, essentially there are four directors—five directors—on the club. Between us, we have about 85% of the share capital. I’m the largest shareholder with about 35% of the company, but we have over 200 shareholders, many holding one or two shares. Some have been held since 1936 and held in families, so we have a wide shareholder base and essentially the directors of the club control the company with the majority of shares. Q254 Damian Collins: The other directors, are they people like yourself, so local businessmen? Barry Kilby: Yes, certainly four were born here. Two have businesses down in London, but they still remember their Burnley roots and want to support it. Two others live up here, but all of us have been Burnley supporters since we were boys. Our fifth director came up here in the 80s and he has been a director for 25 years as well, so essentially we are local people who support the club. Q255 Damian Collins: Mr Harvey, could you tell us something about the ownership structure of Leeds United? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 68 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg Shaun Harvey: Leeds United Football Club is owned via a holding company. The majority shareholder is a company called FSF Limited who are based in Nevis and own 73% of the issue share capital. Q256 Damian Collins: Could you tell us something about the majority shareholding? Shaun Harvey: FSF Limited is owned by three discretionary trusts that are all managed by trustees out of Switzerland. There are two management shares issued that are held and it’s those people who are responsible for Leeds United Football Club. Q257 Damian Collins: Who are the individuals who are the major investors in those trusts? Shaun Harvey: The question is the discretionary trusts. The trustees have appointed two members to run the trust’s interest in Leeds United Football Club; Mr Patrick Murrin and Mr Peter Boatman, who asks Mr Ken Bates to chair the board and look after their interests in Leeds United Football Club. Q258 Damian Collins: So is Ken Bates answerable to those two trustees? Shaun Harvey: That’s correct. Q259 Damian Collins: So they would have the power to remove him as Chairman or put a new Chairman in? Shaun Harvey: They must have by definition. Q260 Damian Collins: Do you know that? Shaun Harvey: Well they must do. They are the shareholder or the trustees to the shareholder, so that must be a power that they have. Q261 Damian Collins: You know who the trustees are, but do not know who the shareholders are. Shaun Harvey: Correct. They are discretionary trusts. Q262 Damian Collins: So you cannot point to a named person and say those people are the owners of Leeds United? Shaun Harvey: No, and that’s why the ownership statements that have been made are made in the way that they are because they are a true and accurate reflection of the ownership structure behind Leeds United Football Club. Q263 Damian Collins: Do you know personally who they are? Shaun Harvey: Do I know personally who the trustees are? Q264 Damian Collins: No, do you know who the trustees act on behalf of? Do you know the people who are the owners? Shaun Harvey: No, I don’t. Q265 Damian Collins: You do not. As Chief Executive, you do not know who the major investors in that trust are. Shaun Harvey: I don’t know who the beneficiaries of the discretionary trust are, no. Damian Collins: Okay. Q266 Damian Collins: You have worked at other football clubs, so do you not find that slightly strange? Shaun Harvey: Not particularly. If I was the Chief Executive of a football club that was quoted on the stock market I wouldn’t expect to know every single shareholder. Q267 Damian Collins: Does Ken Bates know? Shaun Harvey: Not to my knowledge. Q268 Damian Collins: Right, well he obviously has not told you. Do you have any relationship with the trust other than through the trustees? Shaun Harvey: No, my responsibility is to deal with the trustees who represent the trusts. Q269 Damian Collins: But is that something people in Leeds are concerned about? Shaun Harvey: It depends on your definition of “concerned about”. At the moment, we’re fifth in the Championship, everybody seems to be relatively comfortable with how the club’s proceeding. We’ve gone from a very low point and are ascending the ladder of success. That’s not to be translated as we’ve achieved anything yet, because there’s still nine games to go this season, but the reality is, it’s the Board of Directors that are responsible for running the football club, not the shareholders. Q270 Damian Collins: But so long as the team are doing well the fans don’t care. Shaun Harvey: I wouldn’t be quite as bold as to make that statement, but if things are going well and there are positive results, then that’s what a Board of Directors are there to try and ensure, within its powers. Q271 Damian Collins: But is there any sense of commitment for the trust for their investment in Leeds United? Could they withdraw it at any time? Are they committed for a number of years? Shaun Harvey: The football club has got no debt, so they hold the shares and, yes, they are committed. There’s no indication that they have any desire to move away from their investment. Q272 Damian Collins: Given the financial problems Leeds United have had, do you think there is a legitimate concern about the transparency of the financial organisation of the club and its ownership? Shaun Harvey: It depends how far you want to go back in time. If we go back to the year 2000–01 when the club was owned by a plc and competing in the Champions League European semi-finals, then there was a vast array of owners of the club run by its directors. Yes, the club got into trouble under the plc board first and foremost, and sold through a group of local businessmen, which is the model that you’ve heard Barry Kilby explain to a certain extent as to how Burnley’s arranged. Without speaking for John Bowler I think, Crewe was the same basically, but he’s capable of confirming that himself. That got into trouble very quickly. They bought it from the administrator of a plc, so it was in trouble very, very quickly, because they didn’t have sufficient cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 69 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg funds to run the business. So, yes, there has been a potted history and a concern, but I’m convinced now that the light of the Elland Road tunnel is in fact the way out, rather than a train coming in the other direction. Q273 Damian Collins: Yes, I understand that, I think there will be a concern with the nature of the football club. In the case of Burnley, it is very simple to understand where the money comes from, who the investors and directors are, and with a club like Leeds United the majority shareholding is owned by a sort of mysterious trust and we don’t know who the investors are, and I think that’s a legitimate concern for a football club. Shaun Harvey: You’re entitled to draw that conclusion. Q274 Paul Farrelly: Just one question, because we are looking at the application of fit and proper rules and I don’t want this to be dominated by the controversy of the Leeds mysterious shareholders, but does the Football League know who the beneficiaries are? Shaun Harvey: The Football League have exactly the same information that has been made public, and the statement that has been made complies with every single part of the Football League’s regulations, as indeed every single football league club has to do. Q275 Paul Farrelly: Just one follow-up. If you are fortunate enough to get promoted to the Premier League, do you expect the Premier League to ask you the same question about the beneficiaries? Shaun Harvey: We expect to be able to comply with the terms of the Premier League’s rules at the time and the statement that we’d be making is no different from the statements made public now, because it is a true and accurate record of the ownership structure of Leeds United. Q276 Chair: True, accurate and also rather uninformative. Shaun Harvey: Well, you can’t answer a question that’s not got a direct answer; there is no individual. That’s the nature of discretionary trusts, which are a perfectly legal and a much used ownership structure in many different industries, not just football. Q277 Mr Watson: I’ll allow Mr Harvey time to take breath. If I could go on to John and Julian; how far up the English football pyramid do you think your clubs can realistically go? John Bowler: We would hope to certainly play regularly in League One, and we would hope to be able to challenge to get a place in the Championship. To stay there is difficult because of the financial pressures that come along with running a Championship club. Julian Tagg: Our journey started in the Conference, and we got ourselves to League One, which was our target, in five years. In ten years, our target now is to establish ourselves in that league, which in our second year seems exactly what we’ve done—we avoided relegation on the last game last season. This season, we’ve probably already established that, so we’ve made that progress. Our target will be to get in the Championship and do the same. I think that’s the compelling thing about football; it’s always possible with the right kind of management, with the right kind of—I mean Crewe particularly and ourselves—with the right kind of youth policies behind us, it is possible, I believe it is. If I didn’t think it was possible, I don’t think I’d be sat here, unless there’s some purpose. If we got to the point where anybody in our club said that, you know, we’re happy where we are, that’s the time I think my involvement would—I would always support the youth side—but I would probably stop unless there’s some target. That target is the Championship, the next stage then will be, as everybody here knows—pardon the vernacular—it’s bums on seats that count. If our ground gets to the point where that stops us going any further, say in five or ten years’ time, that is where we look again for the next step. I believe our city is big enough to take a club that will go even higher. Blackpool have done it, and as I say, football is compelling in that sense. So, yes, I think it’s possible. It may take a little bit longer to get there and I would be looking once we did to take the next steps. Q278 Mr Watson: Okay, Barry and Shaun could I ask you, is the measure of success for Burnley and Leeds a Premiership place? Staying in the Premiership? Barry Kilby: Yes, we’ve tasted it once. I think we want to go back there again, to be in the top tier of English football. So I think our supporters’ aspirations are that we should see Blackburn, Bolton as clubs we’re on a par with. So I think it is realistic for us, if we could just set ourselves right, to think we could compete in the Premier League. How far we could climb up that ladder is open to question, but certainly I think it’s realistic that we could on that level perform in the Premier League, and that’s our aim. Shaun Harvey: Yes, Leeds United’s objective on the field is relatively simple—it is to get promoted as quickly as is practically possible. Q279 Mr Watson: Shaun, I don’t want to revisit the mysterious trust question, but your Chairman is quite a remarkable character in the sense that he took Chelsea from the Third Division to second in the Premiership on a sustainable budget and appears to be doing that with Leeds, whatever the financial arrangements. Do you know what the secret of that is? Shaun Harvey: Hard work, dedication and experience, I suspect. There’s no magic formula. If there’s a magic formula of how to make a football club successful, there’d be a lot less clubs who have suffered financial problems and there’d be a lot more success around. It’s about maximising every possible element of income and hopefully surrounding yourself with a manager and coaching staff who have got the ability to maximise a return from players. Q280 Mr Watson: You said earlier that you are a sort of professional Chief Executive in football. Would you like to outline what the difference is cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 70 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg between working for the Chairman of Bradford and the current Chairman of Leeds? Shaun Harvey: I actually said it was my profession. Others are probably better placed to judge whether it’s professional or not. The answer is the Chairman of Bradford City and the Chairman of Leeds had some similar traits. They had very small boards with the ability to make answers quickly. The one thing for certain is the quicker you’re able to make decisions— and effective decisions—in the knowledge of the full circumstances that surround the issues you’re dealing with the easier it is to be effective. Q281 Mr Watson: So would you say a strong agile board structure is vital to the success of a club? Shaun Harvey: I would say so, yes. Mr Watson: That’s interesting. Q282 Mr Sanders: Why have so many football league clubs gone into administration in recent years? Who would like to have a stab at that? Julian Tagg: I can only talk from personal experience—and I would imagine it’s the same elsewhere—it’s all anecdotal across the board, because every situation is so different. I believe our club was in quite considerable difficulty and the people in control at that point then wanted anybody to take it from them, and they passed it to some people who put it into a ridiculous state of problems and debt, and that’s part of the danger. When a football club does get into trouble the people who are responsible at that time are very keen to, as you can imagine, offload that responsibility to anybody. The fit and proper person is very, very sensible from personal experience. Hopefully that’s beginning to solve that problem to a degree. It’s usually, in terms of Shaun’s point about managers, about wages in the end. Getting the success with a wage bill that you can’t maintain means you go down a league, get lower numbers, and so the whole thing escalates. Usually underpinning it is a wage problem. Certainly in our situation, we were paying wages in the Conference because of the football creditors rule that you wouldn’t even considered having to pay—it was probably commensurate with two leagues above—and I think there are a number of clubs that are in a similar position. They suddenly drop out from the Championship for instance into League One and that is a big gap. Same all the way down. If you’re paying players from the division above or perhaps even the top wages for players who could play in the division above that and then suddenly you find yourself two leagues down but with a contract in place you’re pinned to that. There’s probably more experience at the other end of the table, but that’s what we are so very, very careful of avoiding; that’s where we think the major pitfall is. Barry Kilby: I think they are different, but there are the more spectacular ones. Last season, Portsmouth, a Premier League team with their revenues coming in well over £50 million, still went into administration. The reason to me was that it was saddled with debt, but it was irresponsible debt—the debt on the club. I think there is a danger sometimes with the foreign owner who can walk away if it doesn’t work out. Really, it didn’t cost them that much—it was the club that suffered and there was no responsibility. There are other examples, and I believe that when Leeds went to administration that all stemmed back to an extremely ambitious set up that was all geared towards being in the Champions League and at the top of the Premier League. When that kicked in, there were problems there. So really it is clubs getting into trouble and being saddled with debt that they can’t get out of. Shaun Harvey: There is a combination of two things. There are two common denominators—relegation or failure to reach the levels at which you’re budgeting; and players’ wages. If the incomes you’re expecting from your success on the field aren’t realised, the players’ wages have to be reduced accordingly, otherwise those are the factors that get football clubs into trouble. Julian Tagg: There’s one other factor which is probably in capital investment. Often, people will stretch to build a stand. The capital aspect is sometimes something that stretches people too far, and when you’re trying to do both things, you’re trying to maintain the pitch or gain success on the pitch and you’re trying to reinvest capital, then certainly from experience I believe that was another indicator of why they got into trouble. Q283 Mr Sanders: So what lessons have you learned from the Exeter experience? Julian Tagg: Don’t build another stand for the moment. That’s what we’re trying to work out; the way forward without taking those risks. Everybody has a different background in terms of their ownership, and our model and how we raise the capital that goes with it is the one that’s taxing us at the moment. But at the same time, it’s about having a manager who understands the nature and ethos of the club, which he does very well, and has good control of what is actually happening, not necessarily just on a one-year basis but perhaps on a two or three-year basis. You need a budget if this happens and a budget if it goes in the other direction, and that’s how we tend to plan. We try and plan in the middle by being pro-active rather than retro-active and it’s when you get into that retro-active situation it sometimes becomes a spiral that you can’t get out of, so as Shaun was saying, it’s about planning and hard work. Q284 Mr Sanders: Have you passed any of this advice down the A38 to Plymouth? Julian Tagg: We have an excellent relationship with Plymouth. We’re always there. We will specifically be helping them to try and raise money, so even though they’re our major rival we’ll help them. I personally haven’t been asked but certainly members of our trust have been down there to help their trust to try and form something. So yes, we have helped wherever we can and we’ll continue to do so even though they are a bitter rival. Q285 Mr Sanders: What’s been learned from the administration that Leeds went into in 2007? Shaun Harvey: The 2007 administration fortunately is traced back, as I spoke about earlier, to the time of cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 71 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg the plc board, who raised circa £60 million by the securitisation of ticket seats. The 2007 administration was the final action of a board trying to resolve the financial issues with which it was left, but the source goes back to those days. The answer is we always stated from the start that we believe Leeds United could trade profitably if it wasn’t saddled with the financial burdens of the past and the trading since 2007 is proof of that. John Bowler: The other issue is that—and this has been referred to—we have to recognise that running a football club as a business is not a difficult task in comparison with other businesses. One of the big issues I think that a lot of football clubs face is this demand for success, and the demand for going forward and getting results. We live in a very resultsoriented environment today. It’s not a long time ago when a manager of a Premier League club said to me, “John, you do realise that coming third in the Premier League is failure”, and it’s this balance between running a tight ship and yet trying to satisfy the demands and the wishes of the supporters to take the club forward, be ambitious, try to get up to that next rung up the ladder. The problem is if you do outstretch yourself then it’s very difficult and you’ve got a rough period if you come back down again. Q286 Mr Sanders: Is financial prudence rewarded in the football league? Should it be rewarded in the football league? Is the emphasis too much on places or positions in tables and trophies in cabinets? Should there not be some reward for being a well-run club? John Bowler: I don’t think that that really is the issue. I think the football league is working hard, as all football league clubs are working hard. They recognise that with the various salary capping mechanisms, the reporting that we do is encouraging that well-run football club, and I think that is the way to approach it. That won’t in any way offset what I’m talking about and that is the demands and the encouragement that supporters give to their football club to go on and to be even more ambitious and that’s when the trouble starts. Q287 Mr Watson: Just a supplementary; sorry to come back to you, Shaun, but you talked about the plc days. When Mr Ridsdale was living the dream at the turn of the century is it your contention that the club failed because of the plc structure itself, or because of poor financial management, or both? Shaun Harvey: I think it was poor financial management. The gamble was too big in essence and it’s that that saddled the club ever since, until the administration in 2007. Q288 Mr Watson: So you wouldn’t actually argue against a plc structure per se. Shaun Harvey: Not at all, it’s the management inside it that’s actually the key issue. Mr Watson: Okay, thank you. Q289 Chair: Can I just ask Barry; you’ve tasted Premier League success, but you’ve also kept your feet firmly on the ground and you didn’t go out and spend huge amounts of money on players. You said to me that you did invest in a pitch, but did you come in for criticism for not doing so? Did your fans suggest to you that actually if you’d gone out and bought a couple of really star players you might stop in the Premier League? Barry Kilby: Yes, that’s always there. The word “ambition” always crops up—lack of ambition is one of the usual ones you get in the phone-in programmes. You’ve just got to be careful you don’t bet the ranch on this and I think it is easier in the Premier League. It was easier if somebody came up with a Championship team, so you could improve the wages, and it was still very manageable. If you get to a second year that’s when you start swimming in the waters of established players in that league, and the costs do tend to start to rise. Fans want you to win matches. We all should have prizes for good government—we don’t, and that’s what sets the theme and the pressure is enormous. When we got up, it was a bit easier at first. We were new, we hadn’t been in the Premier League for 30odd years, so perhaps it was easier to keep the fans’ expectations; we are being sensible, we’re clearing our debts, if we do go back down we’ll be able to handle it. I think they did understand, but I’ve a feeling if we had been in another year or so the pressures would have built to spend more. We’ve just lost five-nil to Liverpool at home, Match of the Day says you’re a load of clowns and jokers, and that’s the sort of pressures you come under. The big problem is that players’ contracts don’t just last the season you buy them. You have a three-year commitment, and there’s a big difference between the two divisions. So we did opt for prudence and I think the fans more or less did realise that, being our first season in there, but I know the pressures would have built up as time went by. Q290 Chair: You are a very successful businessman with a good business brain, and ultimately you have the final say. Other clubs would have been less prudent. Essentially would you say that their problems stem from poor management? Barry Kilby: Yes, poor management or a reluctance to look ahead; maybe not face facts and thinking it’ll be all right on the night. I think that subtle bit is pushed into the future—“We’ll deal with that when it comes round”. Unfortunately it does sometimes come around and you’ve got to keep a weather eye. Essentially it’s your players’ wage bill, it’s 80% of your costs or whatever you want to make it, but it can get as high as that and you’re committed to that. It’s just knowing to keep a weather eye on where we might be in two years’ time. Q291 Damian Collins: Just a follow on from that question; if you wanted to keep a club like Burnley in the Premier League, become a kind of Wigan or Stoke or a club like that that’s broken through and stayed there, how much money on top of what you get from gate receipts, prize money, TV money, do you think the directors would have to put in every year to a club like this so you could compete? Barry Kilby: In the Premier League you’re now starting to get into really big money, £40 to £50 cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 72 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg million on top, and even that doesn’t make a big impact. So I think with a Championship Club it is directors’ loans and so on. Once you get into the Premier League it is getting exceptionally rich people who can put their own personal money in so you try and work it within the revenues that are there normally and commercially. Q292 Damian Collins: So for a club of Burnley’s sort of size, and there are other clubs that are similar, unless you’ve got benefactors putting tens of millions of pounds every year on top of the income the club can earn, you can’t sustain being in the Premier League. Barry Kilby: Certainly most clubs do have quite big debts. Clubs of our size in the league now have benefactors who are owed quite a lot of money. I think you can keep within that. It’s more the problem if you come down. You can afford a wage bill of £45 million to £50 million, the way the Premier League is set up with the TV money and the normal trading of the club. The big problem is if you come back down—how to deal with it; that’s the real thing. It is difficult, because essentially in the Premier League you’re competing sometimes against people who don’t care. They don’t even care about the economics of the thing. If I’m Joe’s Corner Shop, and Marks & Spencer’s is next door to me, at least we both have to make do and make sure our income’s in front of our expenditure. In the Premier League, you come up against people who don’t care, so that’s really difficult to rationalise in a way, and how do you compete with that. Q293 Damian Collins: In one of our previous evidence sessions, the Chairman of the Football League said that he could find no moral argument in favour of sustaining the football creditors rule. Do you think he’s right? Barry Kilby: It does seem unfair on the face of it that some people are protected within the industry and some people aren’t, but it is a difficult one. It is almost like the rules of a private members club, and certainly I know if there had been no protection—the football creditors rule—clubs would have disappeared because they could only survive with the league members. I think it’s quite fair to say, “Look, if you want to play in our league you’ve got to pay your dues”. So nobody’s comfortable with some people being protected and others not, but there’s a proper reason for it in the football family. You know players need to be paid, transfers paid. If that went, I think the competition would be in great jeopardy and everybody would shrink into their shell and it wouldn’t happen. Q294 Damian Collins: Heaven forbid that Burnley would be in this position, but what would you say to your local suppliers—you know, the caterers, printers and their staff; local businesses that would not be covered by the football creditors rule—if the club went into administration, and you are paying the football debt say to Charlton Athletic. However, a firm in Burnley won’t get paid or will only get pennies in the pound. What would you say to a local business like that? Barry Kilby: I don’t think you’d be comfortable, but for creditors to get anything we need to remember that that club would be worth nothing if it couldn’t play in the leagues. It needs to have credibility and to be able to play, for anybody else to come across and have a CVA. Maybe they might get some more money down the line if it’s worked properly. I think if you’ve got to pay everybody, then it would just disappear. Julian Tagg: Damian, can I make one comment? There are lots of those and we’ve had that situation where a lot of people weren’t paid—a lot of those people are within our business now and major parts of that business. They realise what it brings to the city and they would rather have 10p in the pound, and have the money that’s come over the last 10 years and the trade that they’re able to do because the football club is still there. So there is that side to it. The second side is that if it weren’t there probably some clubs wouldn’t exist in the end. I can’t justify it. You’re quite right, I’m not going to sit and justify it; I’m just going to say that there are reasons. The point is that lots of those companies that you’re talking about are major sponsors of ours and are still involved as suppliers, whereas if that club weren’t there they wouldn’t be supplying. So nobody can sit and say that that’s right; not paying anybody is wrong. I think the rules as they’ve tightened are closing in on that, but those companies that have been stung, for want of a better word, or have not been paid, are still integrated in the football club. We’ve gone a long way to make sure that they were looked after at that point for those very reasons. Q295 Damian Collins: But in that case football clubs are effectively using local businesses like a bank and using that money to artificially sustain their level within the league to the detriment of the clubs they play against. Julian Tagg: Bad ones are; you’re correct—I’m not arguing against that. Q296 Damian Collins: Mr Harvey, if you would like to comment on that I would be grateful for your views. I just want to ask, as you’ve been at Leeds for a number of years, Brian Mawhinney told us that he tried on a number of occasions to accept or ask for league clubs to end the football creditors rule and continually failed. I would be grateful for any insight you can give on that. Shaun Harvey: Just to deal with the issue of football creditors to start with. Football creditors exist in football and don’t just crystallize in the period of insolvency. The football creditors principle runs through every club throughout its membership. So if, for example—and using people round the table— Leeds United owed Crewe some money on a transfer fee and didn’t pay it, then Crewe have the right to collect that money from money that would otherwise be sent essentially to Leeds United Football Club. I understand the rationale for why to focus on the end— i.e. the insolvency situation and why it appears that one set of creditors are being treated preferentially— but the football creditors principle is of football clubs that are working day in, day out, allowing each other to sell tickets, which is massively important. If Leeds cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 73 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg defaulted in this example on a payment to Crewe, which meant Crewe had to sell their players to keep in business, that cannot be a fair and rational position for Crewe to be put into, particularly when it’s a closed industry. The only people we can trade with on a football level are a professional football club. Nobody else can buy or sell a registration of a player. Normal businesses if they get into trouble would sell an asset. The only people a football club can sell their asset to is another football club, so that’s why I think the principle of the football creditors is massively important. I will come back to the comments and the report you’ve made reference to from the former Chairman. I think coming from an area from outside football, looking in, I can say that the Crown lost its preferential status with the advent of the 2002 Enterprise Act. There was preference as well as football creditors, so it’s only recently with the change in law that this has become an issue, and the law says that businesses do go insolvent and the Enterprise Act is there to bring them back. Why do I think he would have been unsuccessful in bringing the matters forward? Because the integrity of the competition and not gaining an unfair advantage over the clubs that you are competing with on the field on a Saturday afternoon was of paramount importance to all those clubs. Q297 Damian Collins: But do you not think the rule does help artificially to sustain competition for clubs, because they can be involved in transactions with other football clubs and those clubs have got the security of knowledge that they will get paid even if other people won’t? Shaun Harvey: Well, they’ll get paid in an insolvency provision when the club re-enters the football league, which is usually via a new company. So it means that they can’t gain an advantage over the other clubs, and the justification is difficult. St. John Ambulance are often quoted as the party that has been affected, and that case is usually cited because, whilst it’s still very significant, the amount is usually small in comparison to the overall debt. When Leeds went into administration, 49% of the debt at the time was to the investors. Q298 Damian Collins: When the Premier League Chairman and Chief Executive gave evidence to us last week, their view was that without the football creditors rule, clubs would be more responsible about buying and selling players to each other; they would take a greater interest in the balance sheet of other football clubs because they’ve got more commercial risk, and in terms of business practice that sounds like a sensible thing. Shaun Harvey: Yes, and I think that’s borne out of a position of looking down on everybody else from a lofty height. The ability to say that also comes from the fact that the majority of the transactions are for player transfers; it’s not just player transfers, there is day to day trading between football clubs as well which often gets glossed over—a lot of that’s going overseas. If you sell a player to an overseas club, you take your life in your hands sometimes in relation to getting paid and certainly getting paid on time. John Bowler: Yes, I was just going to say the other important issue is that transfer fees very often are a means of, if you like, trickling funds down to smaller clubs. To use Shaun’s example, we sell a player to Leeds, but if we’ve bought that player from another club there is often a sell-on clause for the other club, and so the transfer fee mechanism does in actual fact feed other clubs rightly with money and with funds available to them. My belief is that if that creditors rule was not allowed, then there could be a number of occasions where a football club might go into bankruptcy, but it would also take probably two or three other clubs with them because of the fact that the transfer money that ought to have come down to those other clubs hasn’t come. Q299 Damian Collins: We are going over the same ground, but in a world without it, clubs might be more cautious about entering agreements where they’re taking payments from another football club if they’re not certain whether that football club can afford to honour them or not and that might help spread best practice. John Bowler: I accept that point, but on the other hand, I think that the information available to a club when it’s selling a player to another club makes it difficult to decide whether in fact the club that you’re selling to is as financially sound as it might be. Q300 Damian Collins: Perhaps getting rid of the rule would create an incentive for clubs to be much more up front about their money, and where it comes from. John Bowler: I don’t think it would. I think in actual fact the information there is often not available for you to assess just how financially sound the club is that the player is being bought from. Don’t forget some of this trickling down of funds could go on for a number of years. Players move on from one club to another. All I’m saying is don’t underestimate the value that the creditor rule does provide as a means of feeding funds down through the football pyramid. Julian Tagg: Really the rules that the Football League are putting in place—they have done it with League Two and are attempting to do with League One—are about that due diligence that you talk about. The Football League are trying to do it on our behalf to strengthen those clubs up for that reason, which, if you were expecting clubs to do that every time you did business you’d spend a lot of time doing that due diligence. It seems to me that that’s what the football league clubs themselves are signing up to. Certainly League Two have done it and I think League One has an appetite to do the same. Q301 Paul Farrelly: Not to get hung up on this, but surely the football creditors rule rewards poor financial management. If you are not a member of the club, it discriminates against Nantwich Town or Stafford Rangers does it not? John Bowler: Why? Q302 Paul Farrelly: Because they find it far harder to get into the club. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 74 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg John Bowler: I wouldn’t have thought so. I think the other thing that the football creditors rule does in terms of the fact that those football debts have got to be paid off is that the people probably coming in to take over a club that’s gone into administration do their due diligence, and in fact recognise the rightful debts that they’ve got to face before they come in, rather than taking it out on the cheap. Julian Tagg: I think one of the things—and it’s a very difficult one—is the risk of what you might lose. As we said, a company might lose the opportunity to trade, whether or not they are one of the ones that have been defaulted against. You also leave a large hole in the community, and I think that’s huge. What football clubs do across the country for that community; that’s the risk of what you may lose. If that club does disappear for that reason because they’re no longer allowed in the family, as Shaun has explained, that is the risk. I see those two things certainly from a personal point of view and from personal practice as hugely, massively important. I would be worried about supporting what you’re suggesting because of the risk, whether it be my club or whether it be Leeds or anywhere else. Knowing as I do what happens, what those clubs mean to and do for the community, it would be a big risk to start to lose some of those. Q303 Damian Collins: I hear what you say. On that basis, any kind of rule, any kind of practice that all clubs employ which people might question can be justified on the basis that while the club might go into administration the community might lose their club. Therefore let us do almost anything we can to avoid that no matter how “morally dubious”—to use the Chairman of the Football League’s words—that might be. Julian Tagg: But certainly from a personal situation, it is the people who came in from outside who were wilful in what they did and how they did it, and that was nothing to do with any supporter, nothing to do with anybody in that city, and it’s perfectly feasible that it could happen again. So a couple of individuals could do something to a football club, rip it out of the middle of that community and the rule would no longer be there to protect that community. So I absolutely take your point and I don’t feel good about it at all, but in terms of the balance between the two that would be something I would hate to see somebody else lose, knowing how important it is. Barry Kilby: If a club went out of existence there is no football creditors rule—we all lose the club; if it disappeared, that’s it. It’s surely right for us to say to the new club coming back in, which wants to get back into the league and play alongside us again, “Listen, you’ve got to make sure that you honour those contracts if you want to come back and play in our league”. That’s the real reason there. I mean certainly if it disappears, if Burnley Football Club is owed a million quid if that club goes, that’s it, full stop. It’s only when the new club that’s coming back in its place wants to take its place in the league that we can say, “Well if you want to come back into the league it’s only right that you make sure your players were paid and you were dealing with your debts before we allow you to come back in”. Q304 Damian Collins: I think we’d all agreed with that, it’s just a question of whether it should be at the expense of other creditors. Shaun Harvey: Chair, I sense you’re keen to move on and I think one or two over here are happy for you to move on as well, but I think the biggest element of football creditors that is carried forward to a new company is actually the players’ wages. It’s the players’ contractual obligations. They’re employees. Employees are preferential creditors certainly for arrears, usually to, I think, about an £800 limit. But that’s the biggest liability that is taken on by a new company. If players don’t have that level of security of contract, then I suggest the asset value of their registration and the arrangements that are in place with the PFA could well be put into question. It’s a bigger question for you to take up with others but it’s just worthy of leaving you with. Chair: Right, thank you. Paul. Q305 Paul Farrelly: John, a question for you. Crewe are legendary. I think Dario Gradi took over from the late and great Tony Waddington as the longest serving manager in football history and he’s renowned for spotting players and youth development. Do you think there’s a lesson that we can learn in football development from the likes of Crewe that the Germans have learned and the French have learned that might involve the bigger clubs sharing a bit more money out for what might be at the end of the day in the national interest? John Bowler: Yes, but I think every football club has got to decide how it’s going to run its business. When I first got involved with Crewe 30-odd years ago, we had a record that we’d applied for re-election more than any other football club in this country and therefore we were still in existence but only just, and we took a long hard look at, as a business, what the future held for us. We don’t have a large catchment area. We have a lot of very well known clubs around us that attract traditional family support outside of Crewe and therefore despite whatever we could think of, one thing became apparent and that was we couldn’t generate the commercial revenue and the support that would sustain us going forward anywhere other than in the bottom league. You’re quite right, Dario joined us at that time and his passion was youth development, and therefore our business strategy was simple. It was, look, the only way we’re going to kick on here, the only new revenue that we can find is to concentrate on youth development and developing young players; firstly to populate our own team and secondly for those who were going to play at a much higher level than we could play at, then hopefully that would generate commercial income. Through his success we’ve been successful there. Over those 30 years that he’s been with us, he’s been responsible for generating transfer income that redeveloped our stadium. That built our academy and has got Crewe to where it is today. There was always going to be some calculated risk, but we were prepared to support a budget loss situation on cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 75 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg the basis that we would have sales coming through to offset that and that’s how we balanced the books. We have been grateful for the support that we have received from money handed down to us from the Football League, the FA and so forth. It is a struggle today and I think that if we want to have the kind of community clubs Exeter is talking about, and if we want to sustain community clubs and smaller clubs, then there is no doubt that against the competition that we have, yes, we would welcome more central funding being provided to us and through whatever mechanism there is. It doesn’t tend to feed its way down as efficiently today as it used to do. Q306 Paul Farrelly: Is there anything we can learn from other countries—perhaps the legalities of being able to contract young people, which would mean that smaller clubs got a fairer crack of the whip or is that too esoteric a question? Julian Tagg: I think the system actually as it stands at the moment, like anything, can do with improvement. Everything can be improved, everything can be bettered, but I think the system is there and across the board, pretty much every club is involved in it and what I see from first hand is a lot of people striving constantly to improve and to do that, and I think the system is very much in place. I think the focus at a national level often is the England team and why isn’t the England team winning everything. I think if you look at the under-17s, under-19s, under-21s, you’ll see that a lot of the boys who have been developed, not only in the League but also in the Conference, and that’s where players have come from. There’s a lot of very, very good work going on, which again I do understand can be improved, but the systems that are there I believe are working quite well. They can be improved upon, but I don’t think there’s a massive amount that needs to be fixed. Perhaps the coaching and the levels and ability of those coaches can be worked on, and certainly the focus that there has been recently on the number of hours and so on, without going the whole way of what is being suggested, I think there’s mileage in that too. Q307 Paul Farrelly: How does it look from Yorkshire? Shaun Harvey: Youth development policies are different at every single club, and again there’s no one magical formula that says do this, this and this and you generate a professional footballer at the end of it. For me, the system only breaks down when clubs lose the opportunity to develop the players in their academy to the full potential, and that means where another club’s come and taken them out of your academy at a young age to place them in their own. If that happens, by definition what you’re actually losing are the best players, because a Premier League club would not come and scout a player from another club’s academy or centre of excellence unless they believed they are going to better the players that they’ve already got in their systems, who are supposed to be the best anyway. So I think the biggest challenge that we all face is ensuring that there’s an adequate compensation system in place that actually protects the interests of the clubs that are developing players from the youngest age. Statistics prove that each club can bring through one player per season who becomes a regular first team player—and this is defined as being 25 first team appearances by the age of 21—but because there’s no magic measure, if new systems are put in place for compensation that doesn’t accurately reward the investment that’s made in the whole system by that club, many clubs will stop their youth development policy because it is no longer economically viable for them to have one. John described the model at Crewe, and a lot of clubs have lived on running the senior team by the proceeds of income generated from the sale of younger players, and there is absolutely nothing wrong with that. There are two measures; getting players to play in your first team and producing players to sell to move on for a transfer fee. Both are equally valid arguments, and if we aren’t careful and that particular mechanism is affected negatively, what we will see is a lot of clubs stopping youth development, running community-based schemes and then picking up players who have been cast aside by bigger clubs and Premier League clubs at the end. The sort of social effect that has on the players that are released is anybody’s guess, so we are playing with dynamite at this moment in time. Julian Tagg: There is a deeper effect as well when you develop your players and you have three or four in your team, you know by definition as they’ve come through, their wages are lower. That’s been the focus a lot of the time about the wages, so if you have developed two, three or four players that have come through, if you were a club that wasn’t developing and you’re bringing in players from outside they would cost you probably three or four times as much. When you have one that’s a significant saving but if you get two or three into your first team, never mind whether they’re sold or not, which of course hopefully they are, that’s a significant saving which would make life much more difficult for the lower end clubs. Q308 Paul Farrelly: Barry, maybe you can help me on this, without being naïve and taking everything that we’re told at face value, we did get a sense in Germany that there was more of a collective ethos about their game that’s perhaps not evident here, in that there was a very strong statement from lots of people we talked to that the German performance in Euro 2000 was absolutely rubbish and was a national disgrace and they needed to do something about it, and they did it with youth development. We’ve seen that with the young German team that ran England ragged but got caught out with the maestros from Spain, but still they are where they are. Bayern in particular said, “Okay, we can’t just not pinch players because otherwise Arsenal will come calling and nick all the best talent”, but there’s a gentleman’s agreement to not be aggressive about it. Where are we failing in our game? Barry Kilby: What we’re talking about is the success of the national team, and I think on the whole the Football League does very well in nurturing its talent and coming through. One of the problems for the England team as opposed to Germany is that the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 76 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg Premier League hoovers up the very best talent. The big problem the Premier League has is that once they get to 19, 20, those real vital years of football development, there are so many foreign players in here—and it’s even imported foreign young players— that players are not getting that chance to develop as they would do in Germany, where they would have a much easier chance. Those are really vital years where you get match intelligence and a strong mentality. I don’t think it matters that much if we spend even more hours on trying to trap a ball or whatever—it’s those vital years that are being missed in the national team. I don’t think you can go back and say the youth system’s failing. I think the players are there, it’s that vital competition that they’re missing now. The famous Manchester United—Beckham, Giggs, the Nevilles; the famous one when Alex Ferguson in the early 90s put those lads in and they came through to be top players for twenty years—wouldn’t happen now. It’s so foreign dominated. We can’t say we might have one season where we will finish tenth and then we’ll pick up again; success has to be there and the best way is to import ready-made talent. I think that’s more on the national team than what you start doing by messing around with what the clubs are doing in the football league, which I think is an excellent job. Julian Tagg: I think I mentioned before, you’re doing exceptionally well at under-17, under-19 and under21 from a European perspective, so something’s not going terribly awry. I’m worrying whether some of what’s suggested is going to exacerbate what Barry just describes; players getting to the top end and getting frustrated with no situation or no opportunity to play in real football. It would seem that the clubs at the very top are actually bringing them back down into our divisions—the Championship and One and Two—to, whether you call it blood them or educate them. They’re going to take them away, yet they want to bring them back, so unless there’s another opportunity where they can get that kind of experience I think what’s being suggested, that’s going to be its flaw. As I say, you get the 17s, 19s and 21s. The other comment you made about was that there seems more unity, and of course even with the process that’s going on here—and I’ve been part of the Youth Working Party—the Premier League are driving it quite rightly, because they’re trying to improve and I applaud that, but that’s not been done with the FA and the Football League and the Premier League all sat around the table. All those people have interest and so it becomes—you’re quite right, Paul—disparate rather than a unified group of people trying to achieve something. It may have been a faster process and a more effective one were that not the case. John Bowler: I think my own personal perspective too is that, yes, we are concerned about the growth of foreign ownership in the Premier League, and will that foreign ownership have as much interest in the future of the national game and all that goes into this wonderful sport that we’ve got, which is our national game, and the wellbeing and development of it. I think we’re in a changed process, with new ownership and foreign ownership coming in to the Premier League. The Premier League have been very supportive of us so far but I think a number of us have got concerns about how will this relationship nurture itself and develop in the future, so I think the concern that you raise is a fair concern. We’ve got to be sure that we want the finest Premier League in the world. We want to be sure we’ve got a very strong and successful national game, but we have to try to ensure that we don’t lose the family of football, because the family of football really does depend on making sure that the grass roots are taken care of, so we must make sure that as many of the local communities nationally spread throughout this country have their own football team and hopefully their own league football team. That’s what we need to ensure. Julian Tagg: Many of those England footballers are coming from Conference Two, One, all the way up. I can’t quote them specifically but that broad base, which is what’s happening in the footballing communities, is hundreds and hundreds of children starting off. They go into development centres, advanced development centres, into the centres of excellence. There’s a massive amount of work that goes on before these children get to 12 years old, and the depth and breadth of that is hugely important. Some of the proposals might close that off and the pyramid at the bottom wouldn’t be so stable, and, if that wasn’t there and those children weren’t doing that, they would be doing something else. Hopefully they’d become a great rugby player or a swimmer or something else, but if we’re concerned about football, it is that base—and keeping that base strong—of football in the community that raises all the way through with the football clubs’ involvement, and will ultimately be the strength of the England team end, because that, if you pardon the pun, is the grass roots. That’s where they’re coming from. John Bowler: And to support what Barry was saying, in our experience of developing young players, the most successful players or the players who have had the most success that we’ve developed have actually left us during their first two years as professionals after playing in our first team, rather than those who have left us during their academy years. That is an important issue that we mustn’t lose sight of. Q309 Chair: We need to move on because we are lagging behind. Can I ask you a quick question? It appears likely that the sale of exclusive broadcasting rights on a territorial basis within the EU may be declared illegal. That’s obviously going to have a huge impact on the money coming into the game but it also may mean that the existing three o’clock blackout can no longer be maintained. How serious would it be for your clubs if that blackout at three o’clock no longer applied? Julian Tagg: Just from seeing what happens on a Tuesday night when Manchester United or Arsenal are playing, we feel that direct effect on our gates. Every time we lose a Saturday game and it comes back as a Tuesday one, we know that’s quite a considerable drop in income, because nine times out of ten there’s a football match on the TV that people would want to watch, and I don’t blame them in a way. If that were to happen on Saturdays it would have serious cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 77 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg ramifications from a financial point of view to every football club. Shaun Harvey: It’s the floating fans. A Crewe fan will always be a Crewe fan, a Leeds fan will always be a Leeds fan and they are going to hopefully go and be able to turn up and watch their team play live at the stadium of choice. The floating fans are the problem, those who want to go and watch football and pick and choose a game. Why pay to go and watch a game through any stadium turnstiles if you can watch arguably a higher profile, greater quality, higher division game on TV? So I think three o’clock on a Saturday afternoon has to be tried to be kept sacrosanct for the purpose of getting people through the turnstiles at their local clubs. From a financial point of view and the value of the loss of exclusivity to the TV companies, whether we like it or not, Sky effectively acts as paymaster general to the world of football as it stands. The TV rights are where income is mainly generated and anything that fundamentally affects that will have a bearing on every single club. As I said earlier, what causes clubs financial problems is loss of income, usually created by relegation in the examples that we’re talking about, but with a significant loss of centrally distributed income without sufficient time to adjust, we will see problems. ITV Digital proved that when it went bust, at football clubs. With a loss of income that clubs had been told realistically they could expect and plan for, you saw a spate of administrations. It was also an excuse in some circumstances but it is a real fear that fundamentally it could affect the very fabric of football. John Bowler: And don’t forget that really the drive that a lot of clubs are making now, particularly smaller clubs, is to encourage the new supporters, encourage families. As Shaun is saying, for the die-hard Crewe fan, he’ll come and it doesn’t matter what’s on television, but we’re really interested in encouraging schoolchildren to be coming, families to be coming, and to have that competition when we’re playing could not only have a serious impact today but it can have a serious impact for the future. Q310 Mr Sanders: You’re familiar with the idea of limiting clubs’ spending on player wages to 60% of turnover, which is now the practice in League Two. Do you think a similar rule should be brought in to other divisions? Julian Tagg: I’ll give you a quick answer; yes. We experienced it in the Conference, experienced it in League Two and not in League One, but, yes, I would invite it and there’s already a lot of discussion, a lot of work and analysis that’s going on with financial committees within the football league to achieve that and I hope they do and will be voting for it. Q311 Mr Sanders: The quick answer was yes. Shaun Harvey: I’ll give you as quick an answer as I can but with an example; 60% of our turnover would mean we could spend approximately £16 million a year on wages. We spend nothing like that. John Bowler: I was originally against it, because I felt that football clubs have really got to take responsibility for running their own businesses and running them prudently and profitably. I’ve changed my position on it because I think it’s just part of a package of things that the football league is looking at to try to ensure that we do have good financial governance and to encourage best practice, and therefore I accept that that is one of a number of measures with which the football league is putting its house in order to ensure the wellbeing of the sport overall. Barry Kilby: I’m slightly wary of it somehow—just that little bit of straightjacket coming from above that you must do this and do that. The season we went up, when we were getting close, we increased our spending a bit and that was directors’ loans. We knew what we were doing and how we’d cover if it didn’t come off, so there’s a little bit of flexibility there. It just seems very rigid to me for somebody to say, “Whatever your circumstances you cannot do X”. I’m a little bit worried by that. It’s very sensible, 60%, I think it’s a decent percentage of your wage bill that the club can handle, but everything by diktat, I’m just a bit uneasy with. Q312 Mr Sanders: Do you think it’s more complicated between Championship and Premiership than perhaps between Leagues One and Two? Barry Kilby: There has always been that thing where some benefactor might come in and give a club a boost. It’s a bit rigid. Leeds—that’s £13 million, but for us it would be a lot less, and that would be forever. Whereas sometimes you might get a son of the city or the place who decides to give money, and that’s gone on in football since time began, with somebody funding the new centre forward and so on. I’m just a bit wary of it being in all circumstances a straightjacket and it’s imposed from above. It would tend to reinforce the status quo. Q313 Mr Sanders: It’s interesting that two members of the panel who have experienced this are in favour of it but the two who have not fear it, and of the two who’ve experienced it one of them said he feared it before it came in. Shaun Harvey: Yes, I think just to support what Barry is saying, it’s not how much you’re paying that’s the issue, it’s your ability to meet that debt, and as long as you’ve got the ability to do it and the football club isn’t in a worse position as a result of it, then that should be the measure. That is more along the lines, shall we say, of a financial fair play model that UEFA have got than a fixed salary cap. If you can fund it, if you can manage it, if you’re prepared to spend it then you should be allowed to do so as long as the patient at the end of the day is not the football club. Q314 Mr Sanders: It’s been suggested to us in this inquiry that the Premier League’s parachute payments for relegated clubs distort competition in the Championship. Do you think parachute payments should be reduced or even abolished? They are at the end of the day a reward for failure. Shaun Harvey: You can either view them as a reward for failure or a mechanism to try and self-adjust you back into normal life. We talked earlier about the players’ wages, which I think we’ve all identified are cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 78 Culture, Media and Sport Committee: Evidence 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg probably the single biggest issue that you have to manage, and coming down from the Premier League it takes time to adjust with those players. Q315 Mr Sanders: Well, why don’t you have contracts that say, “In the event of us being relegated I’m afraid you’re going be paid less”? Shaun Harvey: In principle, there’s nothing wrong with that statement, but I’d challenge anybody to sit in front of an agent and a player and say to them, “We want to sign you for three years. We’re a Premier League club. We’re going all out to stay at this division. However, if we fail we want to reduce your wages by half”. To which the player and his agent say, “Well you’re not really that confident that you’re going to stay in the Premier League then are you?” “Well, yes, we’re going to give it every go.” “But that’s contradictory to what you’re asking my client to sign up to, and Club B down the road will do this, this and this”, because it’s a competitive market. Now the model is fine. I understand it and it’s something we all try to do. In practice, it isn’t as simple as that and those players do get injured periodically. Barry Kilby: I think it does distort the market, but the answer is that the gap is massive, and as I said before average teams now in the Premier League have a wage bill of £50 million. How do they handle that when you come down? I’ll back up what Shaun says there; it’s competition, isn’t it? They say, “Well, we want you to halve your wage if we come down”. If somebody else is in the market for a player, they might drop that, and they don’t operate that clause. It’s terribly, terribly difficult in the market place to force that through. Q316 Mr Sanders: But isn’t this actually all linked back to this creditors rule that the reason they do this is because they’re on a no-lose situation? Barry Kilby: Again, I just come back to the Premier League, and sometimes you’re competing against people who don’t care. They’ve got billionaires who are prepared to lose £600 million about that. You’re competing in those circumstances. They won’t care about the relegation clause—it’s very difficult. Last season, we came up from the Championship and the players got an increase. It’s easy to say, “Well, if we go back down it comes back down.” That follows a logic that is easy to enforce. If you’re trying to get an established Premiership player, it’s very difficult to say, “You do know if we go down we halve your wages”. That’s not an easy one to pull off. But I agree, I think it does distort the competition somewhat, but I would say it’s not always guaranteed that the ones that come down with the parachute payments with that advantage are able to go back because invariably they’re shedding players, still with the parachute payment, and they’ve got to try and get their house in order and get back on an even keel. Shaun Harvey: If you get relegated from the Premier League or any league, the only players other clubs want to take off your hands or your books are those they believe represent better value for them. By definition, you end up with the players in your squad that nobody else wants to take off your hands and they’re not arguably the ones who are best equipped to get you back out of the division that you’re in. Q317 Mr Sanders: So it didn’t pay offering them contract in the first place did it? Shaun Harvey: It didn’t, and if we all had hindsight we would be a lot better off. Q318 Mr Watson: Just to wrap up—and I will take you last on this, Julian—I will get to fan involvement. Could you tell me what role if any should supporters’ trusts play in the governance of their clubs? Shaun Harvey: You heard me say earlier that I think the best model is a small dynamic board that’s able to make decisions quickly and on that basis, that’s the view that I would support. Consultation’s fine but when it comes to the decision-making process, for me it needs to be left in the structure that I described earlier. Q319 Mr Watson: So no fan on a small agile board. Shaun Harvey: Not for me, no. Q320 Mr Watson: Okay, John? John Bowler: I take a different view, but that probably relates to the difference in size of clubs. I think that smaller clubs like ourselves that are hopefully making a major contribution to the local community and have a big community involvement would like to see a Supporters Trust with about 25% of the shares with a seat on the board. I have to say, because it’s me who’s been leading it rather than the supporters, it’s not been easy to put into place. We have regular meetings with our Supporters Association and we have good relationships with them, so I started with them, but we couldn’t find a group of people who wanted to take it forward, because it’s no mean task setting up an efficient Supporters Trust and there are a lot of bodies in the cemetery already where it hasn’t worked. So my recent approach has been to try to get a group of local business people and the local professional people to work with supporters to see if that’s a way of putting it together, on the basis that we think it will have a good chance of success and getting established. So the answer is yes for us, but we’ve got to be sure that we do set it up properly and it runs properly rather than paying lip service to it. Barry Kilby: We have fans on the board—that’s our directors with their own money, quite a lot of it—and we have the Clarets Trust. If you buy enough shares in the club you can have a seat on there. I do agree with Shaun, but I must come back when you say, “a fan on the board”. There are some tough decisions to be made that most fans wouldn’t like, so where do we stand on that one? If we do any guarantees for a financial deal, is the fan going to put his house on the line and say, “Yes I’ll join in that one”. I think there’s nothing better than people having a big financial stake in it. We do have the Clarets Trust, we have meetings with them, quite often very interesting and they make good points, but also we must remember the wide shareholders thing—we’ve got over 200 shareholders. We are responsible to them and they do criticise, but we are talking about an actual somebody imposed on cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 79 15 March 2011 Shaun Harvey, John Bowler, Barry Kilby and Julian Tagg the board who’s not there on the same footing, which is essentially the shareholding in the club, and him putting his money in there. If he’s a representative of the Trust, who is he and what’s he like and does he want to tell everybody what the team is the next day, do we sack the manager, do we all go back and have a vote on that? There have to be quick decisions made, and with the responsibility of money there’s nothing better that makes that decision. Q321 Mr Watson: Julian, Shaun takes a slightly different view from you on this, I suspect. He’s happy for the fans to be shareholders in a mystery trust running out of Switzerland—I’m joking Shaun, I’m joking—but you’ve got a slightly different model. You’ve heard criticism from Shaun and Barry that essentially if the wrong kind of fan ends up on a board they can reduce the ambition of a club. Would you share that view? Julian Tagg: I submit that it’s very possible from personal experience that the advantages and disadvantages are at the other end of what Shaun’s actually described. Of course the disadvantage is the slow decision-making and taking everybody’s opinion—with the bigger decisions, sometimes that makes things very, very slow. You need to evolve as a football club as you improve what you’re doing; you evolve on the pitch all the time. The analogy is a good one that is understood, and beginning to be understood better by the fans, and it is that we need better people—more experienced, with the right kind of skills—as the football club progresses and the board needs to evolve. Certainly the club board and the board of trustees as we call them, which is where the ownership of the club stands, are also important. The other thing that becomes a disadvantage is the constant need for information. If you give some information then it means there’s another question for some more information and so it goes on, so that’s something that we do our best to handle. We have financial groups that meet, we have trust groups that meet, so those three things are the upside of it. It gives us particularly long term security, and I think one of the things that attracted me in the beginning was that it’s not going to come along later on, something’s going to go wrong and it’s going to fall into different hands. All that work and effort of the community, with lots of volunteers involved, gives us an ethos which is a very useful one to have—a lot of people want to be involved. I think there is a culture in football that we talk about all the time; the fans want you to improve, they want the best centre forward, but they want the prices at the gate reduced, and it is about trying to find the balance. Our model in our club is changing the culture a little bit in the sense, as the fans sing proudly “We own our football club”, and there are fans who literally can come off of the terraces and can go into that board. Ultimately, if they’re the right ones, they can come on to our board, and there are two of them. That’s the way the flow goes, and the closer they get to the responsibility of it going wrong, the more realism there is. There’s still a long way to go; there are still the fans’ forums saying “We want to do this immediately”, and are vociferous about it, but the majority and the wider change in the culture of what we’re actually beginning to achieve, it would seem, is that you can lose a game and it’s not the end of the world and we don’t want to sack the manager, and that we need to be prudent financially rather than gambling money that we don’t have in the hope of moving up the league. So there’s still the same thing that runs underneath it but I believe the nature of the club is beginning to change. Q322 Mr Watson: So you’re describing a situation where you have to explain your decisions more thoroughly to fans but it doesn’t seem to me slowing you up in making tough decisions when you need to. Does that characterise your argument? Julian Tagg: It has slowed us up and there are a number of things that we’ve tried to change. It’s been really difficult to make those changes—something that becomes very obvious because you’re in a boardroom. These things need to be changed and you have to go back via the trust board—we’ve got a large board of 16—and convince them, so we’re far from perfect, I think everybody realises that. There’s no blueprint for this. We’ve made it work. Sometimes those two boards come to a head and they clash. We have a mechanism which we call the Joint Boards. We have four from each side if you like—I never used to call it sides but I do now—we have a group of four and there are no minutes to that and we try and thrash out what the club really requires. At that point, if you can get some kind of agreement that we need to change a certain aspect, whether it be the Chairmanship or whether it be who sits on the boards or whether that be the club board, then that’s where you really make the real progress. Then of course the rest cascades out in the normal day-to-day business, but a lot of the time, I’m taking a lot more care to make sure people know what’s going on in advance, as opposed to the decisionmaking. They want to know that it’s happening before it happens rather than necessarily, “Why didn’t I know about that? Why don’t I know?” That’s probably the most difficult thing because they’re keen fans and it’s a good job that they do care that much about it. Chair: I think that probably leads us neatly on to our second question session, so can I thank the four of you very much? cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Ev 80 Culture, Media and Sport Committee: Evidence Examination of Witnesses Witnesses: Dave Boyle, Chief Executive, Supporters Direct, Malcolm Clarke, Chair, Football Supporters Federation and member of the FA Council, and Steven Powell, Director of Policy and Campaigns, Football Supporters Federation, gave evidence. Chair: Right, let’s continue. Can I welcome Dave Boyle, the Chief Executive of Supporters Direct, Malcolm Clarke, the Chair of Football Supporters Federation, and Steven Powell, the Director of Policy at the Football Supporters Federation? Tom Watson is going to continue on his theme from the previous session. Q323 Mr Watson: Perhaps if I just open this up to you, Malcolm, to start with, and then the other two want, if they want to take it. Is it your view that English clubs communicate enough with their fans? Malcolm Clarke: Thank you very much, Chairman, for the invitation first of all. Could I just explain at the start that my colleague, Steven, has got a bit of a hearing problem at the moment, so if I have to brief him on a question that will explain that. I think the answer to your question is a mixed one; some clubs communicate better than others. I noticed that in the Football Association evidence it says that the majority of Premier League clubs and Football League clubs are exemplary in the way that they communicate with their fans. I’m afraid that I beg to differ with that as a generalisation. It’s a relevant question, because today we have published a league table of our assessment of club charters, which all clubs signed up to right back to the days of the Football Task Force and we scored them on seven characteristics, and that league table doesn’t really bear out the proposition that they are exemplary. Only one Premier League club scores more than 24 out of 35—we scored them seven characteristics up to five. So I think it varies, but of course the other issue is it’s not just a question of communication. You can communicate to a supporter very clearly that ticket prices are going up way beyond the rate of inflation, that’s good communication, but it doesn’t necessarily mean that it’s good practice in terms of the way that they are responding to their customers. Q324 Mr Watson: Good, I’m glad you’ve published that, I haven’t had time to read it yet. Can you tell me which clubs are good and why and which clubs are bad and why? Malcolm Clarke: The club that comes top out of the Premier League is Tottenham Hotspur, which is the only one that gets what you call a really top score. The club that comes bottom is Everton, who got a score of nil because nobody could find their customer charter. The club that comes second bottom is Manchester United with a score of eight, and I thought that was interesting after hearing your evidence session with David Gill last week when he actually said that there are certain groups of supporters who they simply refused to speak to. When I attended the Carling Cup Final last year and saw Wembley awash with green and yellow as opposed to red and white, it didn’t exactly come with the image of a club which is communicating terribly well with its supporters. The other thing to say of course is that that is scoring the paper charters, and the next thing we’re going to do is talk to their supporters and see what their assessment of the communication or the customer service is to see how it tallies with the charter, because you can have it written very well on paper or on the internet but the performance may not be as good. Q325 Mr Watson: So will you have that evidence by the time we finish our inquiry? Is that due soon? Malcolm Clarke: I’m not sure what timescale you’re working to. Whether we’ll have the supporter response by then I’m not sure. The actual league table is released today, so we can certainly let you have a copy of it and submit it formally to the committee. Q326 Mr Watson: One thing David Gill alluded to in his evidence was that it was difficult—maybe I’m being a little unfair to him—to characterise which supporter groups were truly representative of the fans. Is there a way that you can identify the kind of basis of support that each of the groups carry? Do you help interpret that to the clubs? Malcolm Clarke: Supporters groups are democratic organisations and obviously the greater success they have in involving members the greater credibility they have—certainly at Manchester United both the Trust and other organisations have been very successful with very large memberships. I think it’s a bit of an excuse from Mr Gill, to be honest, to try and pretend that some of those big groups are not representative of very significant strands of opinion. Q327 Mr Watson: If you could score supporters groups in the way you score clubs, which would be the good ones and which would be the bad ones? Malcolm Clarke: I think any supporters group, whether it’s a supporters club or the trust that Dave’s organisation develops, if it succeeds in getting a widespread involvement and if it operates in, which they nearly all do, in a democratic way with its processes, then that’s a good one. I wouldn’t like to sit here and give my judgment now as to who’s top of that league. Q328 Mr Watson: Well don’t you think it would be useful if you’re trying to build a better involvement of supporters groups that you could actually vet these groups on behalf of clubs so they can get a sort of a health check from you guys rather than the clubs having to do that in an arbitrary way? Malcolm Clarke: For any supporters organisation to be affiliated to the Football Supporters Federation they have to meet certain standards; be a democratic organisation, be committed to not supporting any kind of violence, be committed to an anti-discrimination policy, and similarly with trusts. Dave can speak with more authority on this, but the whole approval process of supporters trusts is quite rigorous in terms of the standards that it expects in order to meet the test of becoming a trust, and I’m sure Dave can elaborate on that. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 81 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell Q329 Mr Watson: Okay, final question: when we heard from the Chief Executive of Leeds earlier he seemed to say the only real issue that matters for the fans was winning games or at least if clubs are winning games the other issues fell down the agenda. Is that your view or what do you think is the issue of fans today? Malcolm Clarke: Obviously, all fans want their teams to win every game, that’s just in the nature of it, but I think it’s patronising and inaccurate to characterise fans and supporters groups as only being concerned about the winning of the next game and not about the long-term sustainability of their clubs. If you look at the evidence which has been submitted not only to this inquiry but to the various other inquiries that have been held by the All Party Football Group, by the Task Force and so on, you will see that it is the supporters groups that have been promoting responsible good financial governance. Obviously with any club there will always be fans who are saying, “Get the chequebook out, Mr Chairman” and so on, but there are tens of millions of fans and they don’t all think exactly the same. I think there’s a certain patronising caricature of fans, some of which we heard in the previous session, “Oh they might want to pick the team, they can’t be trusted to keep confidential information, they don’t understand”, and the evidence—and again Dave can speak with great authority on this—is that the supporters trusts that have taken a direct role in their clubs have shown is that among the supporter base you get a huge range of skills and experience, you get very senior people with wide ranges of professional skills, in financial managements and governance and so on. One of the things that I’ve personally found annoying in football, is the sort of caricature that says, “Well they’re just a load of raggy-arsed fans”, pardon my language, “that don’t really understand how things work”. If you look at the football industry and you look at the number of clubs that have been in insolvency events in the recent years and you look at the amount of money which is owed by the football industry to the public purse, I don’t think the people who are running the industry at the moment are in a terribly strong position to say that supporters organisations haven’t got the skills and experience to involve themselves more fully in the running the of the industry. Q330 Chair: Mr Boyle, do you want to add to that? Dave Boyle: Yes. I was just chatting with Malcolm earlier. The relationship that a lot of clubs seem to have with their fans to me is more redolent of perhaps an Edwardian marriage where the wife would be never told the salary of her husband because these matters were not for her, and there is this idea that fans don’t want to understand, nor could they understand if this were ever shared, but as some of the evidence you heard this morning said, fans do want to know a lot of information, but that’s the nature of the game. The reason why fans want to know is also the reason why this club has been here since 1882 when very few other businesses have survived that long. The depth of loyalty which is the bedrock financially of the game’s success has another side to the coin; the relationship between the fan and the club is not a consumptive one, it’s an emotional one, and that emotional relationship compels a desire to know more information about the club because it matters passionately to them and to their family and to their identity, and it seems to me the best way to deal with this is not to ignore it or pretend it doesn’t exist or to wish it away, but to manage it through dialogue. Speaking to a lot of people in clubs you get a sense that, a bit like when you speak to people who staff helplines, they have a rather jaundiced view of human nature because they see a greater proportion of people who are not perhaps the most constructive, which is why we’d always say there’s been a trend within football to look at fans as customers and deal with them as customer services and that kind of relationship on a one-to-one level, whereas the beauty of relating to a democratically constituted supporters group is that you get a balanced view of what the supporter base is thinking. You get a means of communicating with people who are going to get rid of the issues off the table which really are purely operational matters which shouldn’t really be up for discussion. You mention about vetting supporters trusts and supporters groups. As Malcolm said we do vet them, we make sure that they’re democratic, we make sure that they produce annual accounts, which are audited independently, and we’d love to work with clubs. I have to say my phone has never rung particularly hot with clubs wishing us to perform that service, and what I would say is where there are a lot of supporters trusts where they haven’t been as successful as others and haven’t made as much of a breakthrough. That is partly because sometimes the way the club deals with the supporters trust makes it very clear that this is just a waste of time. When you set up a group, and a club says we’re just not interested in talking to you, then it takes a peculiar mindset to say, “I’m going to turn it round and we’re going to win over the club.” A lot of people would just say that this is going nowhere. If the club actually opened the door and said we’d welcome this—if you can get to this stage—I think you would see a transformation. Q331 Mr Sanders: The traditional model of the English club is for the benevolent owner who runs the club on commercial lines and that’s given us arguably the most successful league structure in the world, so why play around with this state? Why not leave it as it is? Dave Boyle: I think there’s a complete flaw in your question; they’re not run on commercial lines. The fact that they spend £50 million more than what they have brought in—that’s not a commercial relationship. Most of them do have benefactors and I think increasingly we have to say the benefactor model is more ruinous than contributory to the health of the game. I’m struggling to know, without knowing who an individual is, how you can gauge their intentions for the club’s long-term future. They may have good intentions, but what if you don’t even know who they are and what their circumstances are? Benefactors are often quite good in the short-term. The medium-term record is very poor, and I think one of the biggest cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 82 Culture, Media and Sport Committee: Evidence 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell contributory factors to football’s economic poor health is the very short time horizon. They think in seasons rather than longer-term, which is again what most businesses would be doing. One of the advantages of the supporters trust model is that it brings a more corporate structure to the club, because there is no subsidy. I mean benefactoring; you can call it benefactor or you can call it subsidy for failure, because the club is unable to generate the resources to cover its ambitions. If you have to do that, I think you become more innovative, you become more expansive, you draw on a bigger range of talents, whereas I get a sense that a lot of clubs have got incredibly high revenues, but in their commercial activities are not as advanced as they would have you believe, because at the end of the day it doesn’t really matter, a cheque’s going to get written by an extremely wealthy individual to get you out of the hole that your failure to generate revenue has left you in. You see it with very good public services. What’s the reward for innovation, because the cheque from Whitehall makes good all failure? The other thing to add is on the record of insolvency; it might be a very successful football system, it might be a very popular round the world financial system; it’s not a particularly good financial system in this country with 81 insolvencies. assets. Stockport County, for example, had been quite happy to see the shepherding of an asset for football into another sport. When you get the train up from Manchester you go past Edgeley Park, and it says it’s the home of Sale Sharks, which will surprise anybody from Stockport who’s watched Stockport County there since about 1900, so that was the problem the supporters trust had inherited, and in some cases they’ve been able to get past it. Exeter City have made a fantastic success of running the club there, and one of the things which was a massive help was when Tony Cascarino drew their number out of the hat and picked them against Manchester United, because the return they got from that cleared the legacy debts which would have hampered them most probably in the way that they’ve hampered Notts County, Stockport County, Chesterfield and York City. I would never say that supporters trusts have an unblemished record, but by the same token I think that it’s an unfair fight. If these problems with supporters trusts cause doubt for the model, then are we going to say the investor-owned model has some serious flaws with 81 solvencies since 1986? An equivalent sort of comparison never seems to be made that what problems there are would seem to be systemic and structural within football rather than being something which is peculiar to the supporters trust form of ownership. Q332 Mr Sanders: Okay, but we do have more professional football clubs than any other country in Europe. Dave Boyle: We do, and we have more professional football clubs, as the Chairman of the Football League said, hanging off a precipice. Malcolm makes the point I’ve heard him make in the past, so I won’t plagiarise that, but it’s ironic that at a time when English football has never had as much money as it has now, it’s also never had as much instability and financial problems for its clubs. There is an awful lot of money in English football but there’s a lot left to be desired, and the distribution of that between leagues and between clubs does create its own problems. Q334 Paul Farrelly: There’s a world of difference between compulsion, forcing a model onto every club, and just encouraging supporters trusts if clubs want them. Where would you draw the line? Dave Boyle: You heard from John Bowler, who’s been trying to create a trust. We’ve been speaking with John and if there isn’t the willingness amongst the fan base at any particular moment then it goes no further, so clearly it will be wrong to compel anybody to do this. What I would say is that there’s a difference between compulsion at one end of the spectrum, and a bit more encouragement would actually be helpful. Mentioning what was said by the Burnley Chairman, where’s the fans skin in the game? Well the skin in the game is every week they turn up. The season ticket revenues which form a key basis of the club’s revenues are paid over by supporters. Supporters are already contributing in that sense and I think the nature of a club is that it isn’t really to be run on commercial lines in the same way as an ordinary business, because you have these investors who want to be considered as investors, but they’re not able to be able to be part of the shareholder base in the same way. A lot of clubs make it very difficult for supporters trusts to come on board because they are no shares available in them. There are only five clubs in the English professional league which are quoted on stock markets where you can actually go and buy shares and become part of the ownership base, so actually making shares available as a matter of course it would be a good start. I think clubs could also encourage fans by saying, “We’d like you to come and be part of a dialogue. You can have a dialogue every three months with the Chief Executive”. A lot of clubs don’t get that far. Q333 Chair: The alternative which you would advocate with supporters trusts shows there have been some success stories, but equally there have been failures. Is there any evidence that the supporters trust model is any better? Dave Boyle: Yes, I note that what one would consider failure is where, say, a supporters trust has become the majority owner of a football club and then has had to relinquish that. In every one of those cases I can point to astonishing legacy problems. In York City’s case, the previous Chairman sold the ground to a housing developer and they had to take on a £10 million loan to buy it back.1 No supporter’s trust has ever really inherited a club which was going well. They’ve been investors of last resort, the people who rescue it because the alternative is to let it die and that’s just not an option, and because of that, they have incredible problems with debt, with loss of 1 Witness correction following the evidence session: The figure is in fact £1m as I understand it. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 83 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell Q335 Paul Farrelly: Malcolm, Steve then back to Dave. We’re here in this fantastic club with its rich history because the Government in their wisdom said they wanted to encourage more supporter involvement in clubs, but having decided that they knew what to do with the NHS and universities, they then had a collective scratching of heads and didn’t know what the hell it meant actually, so over to us guys. Give us a few concrete things that we should pursue that are practical and feasible to achieve that end but don’t restrict a club’s ability to develop. Steven Powell: My colleague Dave is much better qualified on the technical points of this, but I can give you my own perspective as somebody who’s been active in the supporters trust and I perhaps should just for complete transparency here declare a couple of non-pecuniary interests: I am a founding life member of Arsenal Supporters Trust and a former member of the board of the Supporters Trust but I’m also an elected director of Supporters Direct; neither position gives reward. Q336 Paul Farrelly: We will hold neither of those against you. Go on. Steven Powell: I think that first of all we’re trying to fit a square peg into a round hole with, for instance, the Arsenal fan share scheme, which I know you’ve been to look at with members of the supporters trust and the Arsenal Chief Executive. There are regulations I think need changing. Clearly there has to be security for anybody who is investing money in the scheme, but the hurdles we had to jump were designed for a different sort of financial product. I’m a member of the trust, and I invested my money every month. I’m not looking at that to help me in my retirement, I’m looking at that as an investment in my football club and I’ve left my units in my will to the supporters trust when I go, and I think if you survey the vast majority of the 1,700 members of the Arsenal Supporters Trust they’d all say the same thing. They’re not looking at it for a commercial return they’re looking at it as the investment in their football club, so I think that’s one thing that they can do. I also think that perhaps on the other side, as we suggested in our evidence, we could look at a sports law providing some carrots if you like rather than sticks, to look at the form of registration. If I give you one example in Australia, almost all the clubs in the Australian Football League playing under Australian rules are set up as not for profit. One club that did convert to ownership by shares is converting back and the reason it’s doing it is the Australian taxation office is now challenging their tactics, their status because they don’t think there’s sufficient community benefits, because the structure there is very different. The Australian rules clubs support the amateur game in their community, and that’s part of the reason that the Government invested in sport in that way. They invested in the clubs who then invested in the community playing of the game in their area, so I think that’s one area we could perhaps profitably look at here as part of the sports law. I know that when Hugh Robertson addressed the Supporters Direct conference a couple of years ago, he was interested in the concept of a sports law for a number of reasons, and that’s perhaps something we could profitably look at and we’d be very happy to provide further details, not to go into the whole ins and outs today, if you would like us to. Malcolm Clarke: Can I just add that ourselves and Supporters Direct have submitted evidence on that. I would just like to answer one point that repeatedly comes up in some of the football authorises’ evidence; this is caricatured as being Governments trying to run football which would be not allowed by FIFA. Now what FIFA are concerned about have been cases where Governments have tried to directly run football, but this is not what we’re talking about. We’re talking about a legal framework for the regulation of the game, analogous in Dave’s evidence to charity law or the way that corporate laws has developed, so it’s setting a legal framework which would give certain exemptions and certain responsibilities to sports governing bodies to operate in a certain way, but it’s nothing to do with the Government running football, so I think we need to nail that misrepresentation of the issue fairly firmly on the head. Dave Boyle: There’s a couple of things really; you’ve got the localism White Paper making its way through the House at the moment which gives a right to bid to community groups for community assets, but the drafting at present is unclear as to whether you might consider a football stadium to be such an asset which you could place on a register. Because football clubs are incredibly public institutions, the danger is less of a private sale in the dead of night, it’s more that you don’t have the access to capital to undertake a purchase or greater involvement. There’s a case in Wrexham at the moment where whoever can come up with £2 million worth of cash gets a football club and the difficulty is that where liquidity and speed are what is required that’s not necessarily the best qualification for a community-minded owner of the club. That’s what’s affected that club in the past, and the supporters trust have got £300,000 to deploy, but they could do with somebody lending to them, so the idea of a big society bank perhaps providing liquidity to such groups would be very, very helpful, because at the moment it’s that speed of access to cash which is often paramount, specifically where a lot of football clubs have transferred ownership under crisis terms where there needs to be an immediate injection to cover losses. Some other things which could be done are stopping subsidising bad owners of football clubs by letting them write off the losses against corporation tax, profits in other parts of their business. It’s much easier to undertake, shall we say, a speculative investment into a football club knowing that if the other parts of your business are profitable you can use this to write off against the corporation tax liabilities you might take on. We’d love to get to the bottom of how much of a subsidy from the state it is, but the nature of opaque ownership leading to beneficial trusts makes it quite hard to find the actual transaction where this takes place, where the debt is for tax reasons. However, we do know it goes on and it’s something which I think has negative consequences; in order to qualify, you have to have a dominant owner who owns 75% plus one for it to be considered part of a group, cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 84 Culture, Media and Sport Committee: Evidence 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell which immediately moves you away from, shall we say, a balanced board like Arsenal Football Club might have, whether it’s on discussion or strategy, and more to a club which does what the owner says it will do. Now that can be dynamic, but it can also be incredible ruinous, which is why we prefer a democracy to autocratic rule, because if the owner goes off the reservation, as we’re finding in Libya to say the least, then you’ve got no way round it. So this tax system incentive not only promotes that form of ownership it also subsidises the cost base rising beyond the revenue base, which again supporters trusts are not able to live with. They don’t have a parent company, because they’re owned by the community so they can’t access that so it’s not a level playing field. The cost base which rises is harder for them to keep up because the worst position in an insane market is sanity, which is where most supporters trusts owned clubs are. On the issue of levelling the playing field, just to endorse Steve’s point, there is an issue with section 21 of the Financial Services and Markets Act 2000, which essentially treats supporters wanting to raise funds to invest in a club as the investment business, so you incur an awful lot of regulatory cost. At the end of the day, whilst the Arsenal Supporters Trust are blessed with an extremely professional and skilled membership, they’re volunteers trying to do this in their spare time, juggling it against their other work and family commitments. I’d also argue that if you are going to seriously get behind this you look at what happened with the community share issue at FC United at Manchester, where that attracted for peculiar reasons which are not replicable enterprise investment scheme allowance. That made a massive difference to the take-up and the flow of funds into that investment, so some form of incentive through the taxation system like that which could be written off against an individual’s personal tax liability would be very, very helpful. And the other idea we’ve talked about is there is an awful lot more. Football sets aside some of this money for good causes through the Football Foundation and grass roots investment. You could argue that it would not be remiss to set aside some of this to enable fans like those at Wrexham to say, “Here’s a loan we can get from an organisation which has got a big fund for investment, and we will pay it back over a few years”. The beauty of that is by getting people involved who have to pay it back you’re instilling the business discipline which is sadly lacking at a lot of these clubs. I think there are lots of small steps you can make but I would also endorse the point that Steve and Malcolm make that at some stage you end up with a square peg in a round hole. It is very true that we have a legal and regulatory framework which I don’t think is fit for purpose in the 21st century, and certainly not if you want this idea of community engagement involved in it as well. Q337 Paul Farrelly: I’m going to take my life into my hands now and comment on a live situation; in my area—and I’ll ask you a question about it— encouraging good stewardship is more important than necessarily foisting a particular ownership model on a club. The second team in Stoke is Port Vale. Port Vale is now under assault by a man called Mo Chaudry who has got a documented interest in property and financial services but no record in football. He’s being helped, quite frankly, by a local press that’s not sufficiently investigative and critical beyond just reporting who said what and when for easy stories. Bill Bratt is a Chairman who’s got a long track record of running the club as a decent man, but he’s got an ownership structure through previous restructures that limits shareholders to 25%, and you can see from the outside that might make it more difficult to restructure the club again. The loss of that ownership structure might not necessarily be a bad thing if the good stewardship of the club is encouraged. So where do you stand on that question? Dave Boyle: I would agree with you that stewardship is exactly the kind of modus operandi you want at a club, somebody who respects where the club has come from and where it needs to be passed on to. What I would say is that the regulatory framework of English football is entirely agnostic about stewardship because it promotes a model of financial operation which says that doesn’t really matter. What do you want from your owner? Do you want stewardship? No, you want support for negative cash flow because the finances are insane, and as long as what you need as a club is to consistently subsidise the fact that you don’t earn enough to cover your costs then all talk of what you might like in an owner beyond their liquidity is ultimately parlour room talk—it’s not really going to be germane. The issue at Port Vale I would say is that you’ve got people like Bill Bratt. Why does Bill Bratt have financial difficulties? Why shouldn’t Port Vale be able to be a sustainable operation to end in a small surplus each year maybe for reinvestment? The fact that he can’t do that with all the good intentions they have says an awful lot to me about the financial environment of English football, and most of the issues you’ve spoken about in the earlier session seem to me to be about a failure to get to grips with that fundamental tension. You’ve got all these clubs who will say it’s an impossible environment and yet nothing gets done about it with the speed and urgency you would suspect it would be. You know the football creditors rule is essentially a sticking plaster for a game which knows that a systemic risk is that you will be insolvent at some point in the near future. If you weren’t in a position where you took that as a very strong likelihood you wouldn’t need it because you wouldn’t be in that position. Going back to the Port Vale situation, first, why does Bill Bratt need to move it on because of this insane situation? The second aspect is that should there be a supporters trust at Port Vale, and which wanted to be part of it, it would struggle because they’ve not got the thing the club needs right now, which is ready cash to support the loss-making enterprise, which the rules of football and the structure of football almost compels them to do. Q338 Paul Farrelly: Malcolm you were nodding. Malcolm Clarke: In agreement with Dave, yes. Q339 Damian Collins: Dave Boyle, in the Supporters Direct evidence to the Committee you cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 85 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell recommended a licensing system for English football clubs similar to the one that applies in Germany. Now would you like to take the German licensing model and bring it here? Dave Boyle: I start from the perspective that in 47 years they’ve had no insolvencies and we’ve had 81 since ’86, so they’re doing something better than us in that respect. How likely it is to actually just transplant it? I think it will be wrong and foolish policymaking to just transplant; you would look at what are the rudiments of a successful model, and the main thing it seems to me it shares with the UEFA licensing system is that it looks at the key matrix you want to ensure clubs take account of, and then assess them against it. Julian Tagg mentioned the due diligence issue. A licensing system is just taking the lead on the transaction costs of doing due diligence on behalf of everybody at the start of the season. It’s an incredibly sensible thing to do, so you have to ask yourself why on earth haven’t we had it. You got a hint of that with the evidence from Leeds and Burnley—there’s a feeling that it might stop us doing something, even though there is an understanding that the current state of affairs is not optimal, shall we say. With the failure to bring in a licensing system, we must ask whether the governing apparatus of English football is fit for purpose. The fact that it has not been able to introduce something like a costs control mechanism when all the evidence says it’s screaming out for it, says to me that that’s the fundamental error. Steven Powell: If I could just add briefly on licensing, there are a number of models that you can use to look at. I know you’ve been across to Germany, so I won’t detain you with that, but I also think the model as used in France, whilst it’s far from perfect is also worth a look. It’s essentially a board with a Chinese wall within the French professional league—the equivalent of the Premier League of the Football League here— which has autonomy to go into clubs and to basically implement special measures. It’s not perfect—there are some financial problems in the game in France at the moment—but it does show that you can create within the governing or the competition-organising body in France something which has sufficient autonomy to exercise real financial control, because the sporting pressures are always there to spend more money. That’s the constant plea and what you have to do is find measures of curbing that, and there are a number of models. I don’t think a salary cap is going to work, because the sports that use them tend to be restricted to one, two, three maybe four countries, but I think there are measures that can be looked at. Germany is the obvious one but there are also various models that are used in North America and Australian sports. In terms of the conditions which are placed on clubs and transparency, sanctions are applied in the Australian Rugby League. The Melbourne Storm, which won the championship, had a massive penalty imposed on them for keeping two sets of books, which shows that you can have financial regulations with real teeth, and the club is still suffering in competition as a result of that penalty, which was imposed by the national rugby league. Q340 Damian Collins: In practice, looking at the German licensing regime, today is the day for submission of cases. The reason no one’s ever lost their licence is because the licence is reasonably liberally applied and is really just a basic liquidity test for the coming season. Dave Boyle: It might be, but then I come back with the fact that in 47 years they’ve had no insolvencies, so even though it might not be the hardest test you could possibly conceive of, it does appear to instil the discipline which is the ultimate aim of the process, which is to ensure that clubs are able to meet their commitments through the course of a season. The single problem you have in English football is that all of the regulations are reactive rather than proactive as Julian Tagg has mentioned. They’re all about dealing with insolvency after the event, and not as much as stopping it before it happens. Now that’s slowly changing. The Premier League’s tests, which they’ve brought in this year, are a welcome step forward; they could still go further, but the major argument against these kinds of regulatory impositions or interventions was always that the Premier League’s big end clubs compete on a European playing field so we couldn’t tie their hands for domestic purposes, which would weaken their ability to compete at European level. Now UEFA have taken that off the table there is no reason why it can’t cascade down. The clubs submit forms at the start of every season to do with the players, to do with the ground they’re going to play in, and I don’t really see why they can’t be submitting what their financial plan is for the next twelve months and then you can assess them after the fact that if they get it wrong, because then you’re into the issue of either somebody’s not very good at sticking to an operating budget or there was some degree of misinformation, both of which in different ways are things a league can start to tackle. Q341 Damian Collins: Do you think rather than an absolute licensing system, there should be a greater role for the governing bodies of the game to have an ongoing dialogue with clubs over their financial status, because with the one in Germany, one of the points that came out is that it sometimes can be difficult at one point in the year—or in Germany, it is two points in the year—to say exactly what the income is going to be. You know this will depend greatly on performance, particularly whether or not they qualified for European competition, and German clubs filing for their licence today won’t know whether they’ll be playing in the UEFA league next season, and that will have a huge impact on their finances. Dave Boyle: Absolutely. I think the issue is how you would implement it in detail on a day-to-day seasonto-season level, and where you would want to liaise with the leagues, because they’re the ones who’ve got a lot of the data anyway, and they’re the ones who have the primary relationship with the clubs. There’s a curious contradiction. On one level, when you asked some of the previous witnesses do you think you need something like this, they were saying it should really be done by the clubs themselves, they should be disciplined, and then with the very next question, the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Ev 86 Culture, Media and Sport Committee: Evidence 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell clubs said we find it almost impossible to cut our costs because the players and their agents make it very difficult. To me, that says that it’s crying out for somebody other than the clubs to help them instil the discipline which has been lacking for so long. You could call it licensing, you could call it monitoring, you could just have more active engagement with the clubs, but it should be something which says to the clubs we will set the framework which constrains your field of operation. That’s the absolutely essential thing, because it’s all very well saying you want to leave it to the discipline of the club to manage its own risk, but the record says that English football clubs collectively are pretty appalling judges of risk. Q342 Damian Collins: Do you think there is an absence of leadership in the FA, a while issue of monitoring the financial performance of clubs and managing risk? Dave Boyle: I was greatly enthused when I saw Lord Triesman’s original submission to the former Secretary of State’s seven questions, which clearly calls for something like a licensing regime. I just find it saddening that in their submission to you this time, the FA seemed to have moved further away from that approach. I think the FA are often unfairly criticised, but until Lord Triesman came along and that process led to them saying this is what we’d like to do, it is fair to say that there had been an absence. Partly, as you know, when you speak to people who work at the FA, it’s not the case that there’s no activity going on behind the scenes. For example, with the fit and proper person test or agent’s regulations, the FA were taking a very strong lead, but I think as Malcolm can probably speak about that more accurately me. The way the governance of the FA works makes it not a particularly well-suited body to this particular task. I just did a small calibration of the evidence you’ve received, and only three out of the 85 submissions say the FA and the league structures are fit for purpose, 80% of them say not, which is pretty overwhelming to me and I think that’s something which is borne out by the evidence of their own eyes. Q343 Damian Collins: And finally, can I assume from what you said earlier that you would support the ending of the football creditors rule? Dave Boyle: I think the football creditors rule is totemic of football basically trying to—it’s a second order solution to a first order problem. A simple problem is that football clubs are inherently unstable financially and the football creditors rule is a sticking plaster to deal with that and the immorality that comes with it. It’s a sticking plaster which underwrites the risks taken by clubs, with the community they are surrounded, which says— Q344 Damian Collins: Is that a yes? Dave Boyle: That’s a yes. Q345 Mr Sanders: To you Malcolm, in your written evidence to the committee you advocate wide-ranging reforms to the FA board and the FA council. What reforms would you most like to see and why? Malcolm Clarke: I shall preface my remarks by saying, as I did in my evidence, that there are, and as Dave has just said, are a lot of very talented people working very hard at the FA on a lot of these problems, and I wouldn’t want to gainsay that at all, neither would I want to gainsay the contribution that many of my fellow members of the FA council have made to the development of football in this country over a long period of time. It’s not about people, essentially it’s about structure. I don’t actually agree with all of the report by Lord Burns. I know that some people are saying we want the full implementation of Burns. I think as he said to you himself, he sort of stopped short of some things. I think that if you look at the Council, the role that he envisages is, firstly, that it should hold the board to account, and secondly, that it should act as the parliament of football in order to debate the key issues. The reality is that it’s not able to do either of those. I have here the last Council agenda. There are 121 pages of council committee minutes which have to be worked through, some of them well before the council meeting, and it’s virtually impossible in a body of 118 people to have a critical challenge to the board about what it’s doing, partly because the decisions are long since passed and partly because of the sheer format of a body of that size. If I just give you a few examples. The first one would be the FA’s evidence to this Committee. That hasn’t been anywhere near the members of the council including myself, and in fact there are what I call the football family six: the representatives of the players, the managers, the supporters, the referees and the equality and disability advisory groups who are not represented on the board. We can’t stand for the board, we can’t vote for anybody on the board, we’ve got nobody on the board who represents us, so we have no input at all into the evidence that the FA itself has given you. We were never told why Ian Watmore resigned. We didn’t have a proper debate about the failure of the England team in the World Cup; I raised that on a minute and there were two contributions and then the debate was closed down. Now admittedly there was then an away day which I wasn’t involved in to look at some of those issues. It was left to me to ask a question at the last council meeting about the failure of the World Cup bid because there was one sentence in the General Secretary’s report that said the board have looked at this and learned the lessons. It didn’t even say what the lessons were—this was an £18 million investment, and it now appears we never stood a chance in the first place. Peter Coates made this point to you and Niall Quinn said it was covered in arrogance or whatever. So if the council can’t address an issue like that then there’s something wrong with it, and in terms of the board, I’ve already made the point that some people aren’t represented. You had evidence from the former Chairman about the way in which it operates, as if people are delegates. They have their meetings beforehand and you’ve got these two groups, so there’s a desperate need for a different way for the whole process to operate. There has been a lot of discussion about the two independent directors, which I’ve tried to promote for the extraordinary general meeting in the Autumn but cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG04 Source: /MILES/PKU/INPUT/011145/011145_o004_michelle_HC 792-iv corrected.xml Culture, Media and Sport Committee: Evidence Ev 87 15 March 2011 Dave Boyle, Malcolm Clarke and Steven Powell only managed to get 1% of shareholders to sign up to it, instead of the 5% you need even to get it on to the agenda, but it now looks as though the new Chairman is taking that agenda forward. But one of the things that worries me is that it shouldn’t be seen as the end, it’s the first step not the major or the last step that is needed, so I think we need to have another look and I welcome the fact it says that the FA are carrying out a review of governance. I’m not sure who’s doing that or what the involvement of stakeholders is going to be, but it is still very much needed. I know there’s a lot of journalistic caricatures of blazers and things like this, which I think is not helpful, but there’s a lot of good people there with a lot to contribute on both the executive and on the council. The problem is the structure and the way in which the whole power lies with the Board, but the Board itself consists of people with vested interests, and other witnesses have given you the sort of analogy about banks running the regulatory body, and I think that’s probably a fair analogy. Sorry I’ve spoken at rather great length. Chair: I think we’re probably going to have to draw it to a close anyway since it’s now 1.10 pm. We will be hearing from Mr Watmore later, and also having a look at the bid so we may be able to illuminate some of these areas that you have so far failed to. Can I thank the three of you very much for your appearance this morning? cobber Pack: U PL: COE1 [SE] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 88 Culture, Media and Sport Committee: Evidence Tuesday 22 March 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe Dr Thérèse Coffey Damian Collins Philip Davies Paul Farrelly Alan Keen Mr Adrian Sanders Jim Sheridan ________________ Examination of Witness Witness: Ian Watmore, former Chief Executive, Football Association, gave evidence. Chair: Good morning. This is a further session of the Select Committee’s inquiry into football governance and I would like to welcome, as our first witness this morning, Ian Watmore, the former Chief Executive of the Football Association. Can I invite Louise to ask the first question? Q346 Ms Bagshawe: Why did you resign as Chairman of the FA? Ian Watmore: I didn’t resign as Chairman, I resigned as Chief Executive. Ms Bagshawe: Chief Executive, I am sorry. Ian Watmore: That’s okay. I think the words I used at the time were, “Well there was nothing chief or executive about the job”, and that is why I left. I was frustrated about a number of things that you just couldn’t do and in my experience the Chief Executive of any organisation would have been able to have just got on and done some stuff and most of what I was trying to do either hit the buffer of treacly governance or just wasn’t possible to do at all because we didn’t have control of our money and our resources. Q347 Ms Bagshawe: Can you elaborate on some of those things that you found impossible to enact? Ian Watmore: Yes, first of all I sent a note to the Committee in which I argued that the board of the FA should be independent of all its vested interests and the reason I argued that is because I think an organisation like the FA is seen to be the governing body of football in this particular case and yet it has got people on its board who have a severe conflict of interest. They may be very good people, they may have a lot of knowledge and experience and so on but they are conflicted and I think the usual analogy that I use is you wouldn’t want to be running Ofcom with Sky, BT and the BBC on your board, it is that kind of sense. The governance was a problem; the staff were not a problem and a lot of people write about the dysfunctionality of the organisation and I think one thing I would like to put on record is that the staff that I worked with at the FA were absolutely fantastic and they are so not the image that they get portrayed with. They are very knowledgeable, they are very energetic, they achieve an awful lot behind the scenes that you know nothing about and they were great to work with, so that wasn’t a problem. One of the other problems I found was that the organisation’s money wasn’t under control of the executive team so we raised whatever money we raised—usually about £200 million a year, through TV deals and sponsorship deals—and then once we had spent our core costs for running the actual association at Wembley the rest was distributed 50–50 to the professional game and the national game. Apart from the fact I begrudged giving FA money back to the professional game—because I didn’t think they needed it and the national game did and I thought it would have been much better to have channelled the money in that direction—the sheer fact was that we didn’t have responsibility for how that money was spent. A number of the programmes and projects that you would want to do just weren’t possible to do because you didn’t have control. Q348 Dr Coffey: Can I ask specifically about the independent board? You have used the analogy of Ofcom, where the Government appoints a regulator to manage private competition. What it suggests to me, your suggestion, is more the civil service utopia perhaps, of having a Government with no Ministers because they are pretty inconvenient, because they speak to constituents and make policies, whereas if the civil service ran it all it would be fine and so that independence would have a tickety-boo gain. I am not sure that is really true. Ian Watmore: I am not sure that would be the civil service utopia anyway, and I am certainly not going to say it even if I thought it. The reality is that I think when you are in one of those leadership jobs in an organisation like the FA, to use the analogy, you are as much like a Minister as you are the civil servant; you are the person on public display, you are the person that the public thinks and expects to make the key decisions and I think both my Chairman at the time, Lord Triesman, and I felt that we were seen to be responsible for a lot of things but not with the ability to make the decisions and actually carry them through. Q349 Ms Bagshawe: You are hardly the first Chief Executive of the FA to resign recently, given there has been such an enormous turnover of FA Chief Executives since Graham Kelly left the job. Would you say it has become an impossible job for the reasons that you state; there is no actual decisionmaking power in the job? Ian Watmore: I felt it was impossible for me and that is because I was used to, both in the private sector and in Government, a different form of governance that supported what you were trying to do and so I cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 89 22 March 2011 Ian Watmore didn’t feel I could carry on. I think it would be for others. I wouldn’t want to say it was impossible for anybody to do what they wanted to do in the job but for me it wasn’t right. Q350 Ms Bagshawe: Do you feel that the resignation of past Chief Executives was motivated by the same concerns though that you have just expressed? Ian Watmore: Interestingly I went to see them all when I got the job; I went back as far as Adam Crozier. I didn’t meet Graham, I probably should have done but I didn’t. Anyway, I met the others and of course everybody has a different perspective on why they went and different reasons but I think the common theme is that around the board table, you have got all of the people from the counties in the professional game and they all have different interests in what they are trying to achieve and there is no independence and clarity that emerges from that and that gets very frustrating as the Chief Exec, whether you’re picking a new manager or trying to spend a relatively small amount of money on something quite unimportant in the big scale of things; all these issues blow into one when you’re sitting in the middle of it all. Q351 Ms Bagshawe: How would you characterise the relationship between the FA and the Premier League? Ian Watmore: One of the interesting questions; who, for this purpose, is the Premier League? When I met with the key club members, the sort of people who run and manage the clubs, the relationship was very good. All of these clubs belong to the FA as much as they belong to the Premier League but they have been, over many years, grouped in a sort of pack around the league that they play in, so individual clubs, no problems at all. When we got the collective things it depended on what the issue was. Some things we had real strong agreement with, for example, goal line technology where our common enemy, if you like, was FIFA who wouldn’t sanction that; we joined up very well on that. On other issues we might be miles apart or have a disagreement over whose responsibility it was. I think that my Chairman at the time mentioned in his evidence that football regulation, in the sort of financial regulation sense, was deemed by the leagues not to be something for the FA, it was deemed to be something for them and Lord Triesman disagreed with that and that is where the tension first emerged between them. I think it is issue by issue. On a personal level Richard Scudamore—who is possibly one of the best operators and runners of anything in football—and I got on, I think, pretty well. We had our sort of Roy Keane-Patrick Vieira moments and things but afterwards there was kind of sort of mutual respect I think and that wasn’t an issue. Ms Bagshawe: Okay, thank you. Q352 Chair: You say you got on fine with Richard Scudamore. You will have heard the evidence of Lord Triesman that he had rather greater difficulty getting on with the Chairman of the Premier League whom he found to be aggressive, was that your experience as well? Ian Watmore: I kind of take the view that David said what he said then and I think that is probably the most evidence you need. I think there is a football saying, isn’t there, what goes on in the dressing room stays in the dressing room and I think probably I would rather stick there. Q353 Paul Farrelly: So you wouldn’t contradict it? Ian Watmore: I wouldn’t contradict it. Q354 Jim Sheridan: Can you just explain what you mean by these people who have conflicts of interest. Who they are? Give us a flavour for what these conflicts of interest were and perhaps give us a tangible example of what that means? Ian Watmore: Okay. As you probably know the current FA board—or the one that has been in existence for the last few years—has five members of the professional game through from the Premier League, two from the Football League and five from the counties and then an independent Chair and Chief Exec. You might get an issue. Let’s take the one that we talked about which is the financial and debt position. It is very hard to have a sensible discussion around a boardroom discussion when the Chief Exec of Man United is one of those board members and his house is being daubed back at home green and gold by the fans who oppose the Glazer ownership. He is a great guy, David, I have lots of time for him but on a topic like that he is conflicted. If we talk about where the international game might benefit from perhaps the FA being tougher about calling up younger players so that they always played for the England teams rather than went off on club tours and so on, then the club people are, by definition, conflicted on that. It is great when they do have a really successful international player but they are juggling different interests whereas we, as an FA, are thinking purely and simply about how to develop the national team. On the other side of the fence the county people who do wonderful work on the ground, and I can’t speak more highly of them about what they do, they give up their time year after year after year and make all sorts of things happen in communities where football is really socially cohesive and it really binds people together. But they are worried about losing out by picking a fight, being seen to pick a fight with the big guys from the Premier League or the Football League or whatever. There is this kind of tension that really exists between them and the consequences that unless it is a common enemy type of topic, like goal line technology—where everybody can get round the table and agree on it— you find everybody is coming at it from a slightly conflicted position, which is why I think you either go to the German model where kind of everybody is in one entity and it is all part of one entity but I suspect we are a long way from that, or else you go for independence and that is what I would like to see. Q355 Jim Sheridan: Are you suggesting then that the FA would be far more effectively run if we didn’t cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 90 Culture, Media and Sport Committee: Evidence 22 March 2011 Ian Watmore have big clubs like Manchester United represented on the board? Ian Watmore: On the board, yes. I think very strongly that we can have all the dialogue with the big clubs that we need. If I wanted to pick up the phone and talk to any one of any of the clubs in this country or go and visit them or see them on a Saturday or whatever, it was no problem at all. You get access to everybody when you need it and I think we could involve them and get their opinions and understand what they wanted and all the rest of it, as we do with other people who aren’t on the board. We go and talk to Gordon Taylor at the PFA or Richard and his colleagues at the LMA and a whole variety of other places; you can get inputs from a variety of sources. But when it comes to making hard decisions I believe the best board is one that is made up of the exec teams of the organisation and independent non-execs and that is what I would recommend. Q356 Dr Coffey: What was your vision for the FA? Ian Watmore: I ended up just encapsulating the vision. I called it football first and the reason I did that was because I remember somebody earlier on said to me, “I quite often go to meetings in the FA and the word ‘football’ never crops up and it is always about money or something else and the essence was not to put the football first”. A really good concrete example of that was Stuart Pearce who, running the under-21 team, came to me and he said—they usually play the under-21 games in one of the clubs around the country, grounds around the country—“I would really like to play at Wembley. I think these guys would benefit from playing at Wembley so that when they come up into the first team and play at Wembley—”. The crowd size at Wembley is likely to be much too small for the thing to even break even, let alone be profitable so it is going to cost us money to put on the game and in the past I think that would have been blocked for that reason whereas I said, “Yes” because it seemed to me it was more about the football and less about the money; this was about trying to grow the talent, so putting football at the heart of everything. I was very strong on the Wembley pitch, for example, and I thought the history of Wembley has been dogged with controversy—and I don’t want to go back over that—but the stadium itself physically is great but at the time the pitch was terrible and it seemed to me that people were more worried about the business case of Wembley than they were about the quality of the football in it and I happily—well not happily for me as an Arsenal fan—went to the Carling Cup Final as an Arsenal fan to see my team humiliated in the last minute but the pitch was absolutely stunning because they have now done exactly what I think they did at the Emirates and other places with this new pitch technology. I was trying to just inject in every decision and every thinking about what the FA stands for, to put the football at the heart of it and then let the other things take care of itself. That then cascades right across the game from international football at the highest level to kids playing on a Sunday morning, and I could talk for hours about where we go with that but that was the essence of it. Q357 Dr Coffey: Just to refer to the stadium or aspects of the stadium as your first two responses to the vision of football and how you use that, the stadium has been criticised as being a debtheavyweight around the neck of the FA. What changes would you perhaps like to see to that? Is it a conflict of interest that David Bernstein is both Chairman of the FA now and of WNSL? Ian Watmore: Wembley is kind of a subsidiary of the FA so I don’t think there is a conflict and David is one of the people who helped save the Wembley project when it was going in a very bad direction. I think he has got huge experience and he was also very successful at his club in his business career so I think he is a good choice of Chairman, not that it is for me to comment but I do happen to think he is. The stadium does drag financially and the FA is short of money so it is a concern but we are where we are; it was built on a debt model—I forget the exact figure that is still in the books that’s overdue but it is something in the hundreds of millions that still has to be paid back—and every year that is a financial drag on the FA, which it would be great if it wasn’t but it is what it is. Q358 Dr Coffey: Coming back to your idea of football first, do you think the FA still has that as a priority? Is it implementing those tasks effectively? Ian Watmore: I can’t tell really from the outside. My sense is everybody agreed with it on the surface but, as you know, probably in Government it is quite easy to agree in principle but not in practice and we see a lot of that going on, so I couldn’t tell on the ground. But when we come back to why do people criticise the FA, they criticise it because they perceive it not to be making sensible decisions in the regulator in governance space and they criticise it for seemingly to always get it wrong, vis-à-vis the England senior team, those are the two things that dominate whenever you ask the public about the FA. Until we crack both of those and have a clear programme that builds to a long term success of the England team and get a sort of regulatory discipline environment that people trust then I think they will continue to be dubbed in that way. Q359 Dr Coffey: What do you think was the worst decision that was made at the FA when you were Chief Executive and can you explain a bit about the governance process and why it went so wrong? Ian Watmore: The worst decision, that’s interesting. Dr Coffey: I will ask you in a moment what your best was but I would like to hear— Ian Watmore: No, that is a good challenge. I think probably the one that frustrated me most was the pitch at Wembley just because it was something we could control in our own backyard and it wasn’t about intergalactic football and all the interrelations of everybody else and it was really frustrating. When Michael Owen ripped his hamstring or whatever in the Carling Cup Final with Manchester United and he, to this day, believes it was the pitch that did it. You could just foresee that happening to a whole bunch of England players just before the World Cup—and as it turned out it probably wouldn’t have mattered—but at cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 91 22 March 2011 Ian Watmore the time we thought we had real high hopes at the World Cup. That one was definitely a frustration. But I think the real strategic issues that we weren’t grappling with were the areas of what role does the FA have in regard to governance of the game. The answer was quite a weak role and weakening every year and yet people perceived it to have so much more power than it actually had, and I think that was the biggest source of concern to the Chairman and I. You could look at what I said about the financials of football clubs. I was frustrated that the women’s game was the first casualty when Setanta went bust, everybody just said, “We won’t do the Women’s Super League” then I had to fight very hard to bring that back in. We had a lot of issues around the staff and I had to take some very tough action with the staff, the sort of thing that is going on in Government at the moment; pay freezes, we have ended the final salary pension scheme. These are people who don’t earn a lot of money, who have given their lives to the game and what was really annoying at the end of it all was that 50% of every pound we saved there went back to the professional football game and that didn’t seem right either, that was a hard sell to people. So there was a combination of things. Q360 Dr Coffey: To give you the other side, what was your best decision? It might be the pitch. Q361 Ian Watmore: No, because that came after I went, they made what I thought was the right decision later on. I hope the best decision will turn out to be two things: one was to reignite the National Football Centre project. We had bought the plot of land in 1999 I think and it was still 2009 at the time and nothing was there really, realistically. Working with David Sheepshanks and others I think we breathed a lot of life into that project and I think that is now off and running. I think we made some pretty sensible decisions around the money side because when Setanta went bust the finances of the FA were in freefall; it was the equivalent to a Lehman’s Bank moment for us, we’d lost 15% to 20% of income overnight and then the market for what was left was deflated. So knowing next time round we put a lot of financial stability in, and I am sure there is still more to go, in that area. We started the web-based TV channel, FATV, which I think in the long run will be very important as people move towards the internet for their football consumption. The final thing I did do was sign the press release that made the Women’s Super League a reality because I was very passionate about trying to do something for the women’s game and had some of my best actual moments I think on tour with the women’s team in Finland the previous summer when they got to the final of the European Championships. I really hoped to see that that combination of them playing well and the start of the Super League would get the women’s game off to a future. Q362 Dr Coffey: What I am trying to tease out is that you were able to make good decisions and also decisions you were less proud of as the FA, what was different in the governance process, if you like, that allowed you to achieve some success? I suppose I am trying to come from the fact that sometimes as Chief Executive, you will get what you want all the time and other times you don’t take everybody with you, so what changes to the governance of an independent board would make that different? Ian Watmore: I think the fundamental thing when you are a Chief Exec of any organisation is you want the board to challenge you but you want the board to think of themselves, first and foremost, as part of the organisation. People from various sectors of the game would sit in meetings of the FA and talk about the FA as though it was a third party. They were not driving the best decisions for the organisation, which is the FA; they were driving the best decisions for whichever area they came from. Sometimes they coincided and sometimes they didn’t. I believe you need a board that is single-purpose and focused on the organisation and I didn’t think it was. I also found it very regrettable that the board leaked like a sieve, if that is not being unkind to sieves. It sort of started on the day I was interviewed for the job. The headhunter said to me, “We won’t send the papers out on the Friday night because it will all be all over the Sundays, we will do it Monday night and the interview is on Tuesday and you’ve got a chance of staying silent” but it was in the papers on Tuesday morning and it went on throughout the period and I felt that was a problem too. Again, that’s another thing that I think is sacrosanct about boards. Boards should be trusted by everybody on it that what is said and done in it, is confidential to that board and it clearly wasn’t. Q363 Damian Collins: When you were the Chief Executive how much time would the FA board spend on certain things like internationals? Ian Watmore: I would say in the board meetings I attended, quite limited amounts of time. Damian Collins: Once or twice? Ian Watmore: Yes, and of course in the era I was in everybody thought we were on a roll and Fabio was coach of the year on the BBC’s Sports Personality; we all thought we were going to do something special in South Africa. It wasn’t the crisis point that it can be periodically but in the FA board as a whole it wasn’t a major topic of discussion when I was there. Q364 Damian Collins: There seems to be disconnect between what England fans, the football writers talk about and what the FA board talks about and the ongoing concerns about the fact that our players have probably never played in a league consistently at such a high level in domestic football and lots of them play abroad, there is never more money in the game and yet the national team grows weaker and weaker. It is the debate probably football fans have more than any other debate and it is one that doesn’t particularly seem to grip the FA board. Ian Watmore: One of the things I think is, again, I’ve said that the board should be independent. I also think it should be half-executive, half-non-executive and the reason I say that is I would like to see people like Sir Trevor Brooking in his current role as football director cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 92 Culture, Media and Sport Committee: Evidence 22 March 2011 Ian Watmore and probably Hope Powell as the leader of the women’s game, on the board of the FA talking about football; people who have played it, people who are responsible for developing it in the men’s and women’s game, people who have a pipeline of knowledge about who is coming through the system and what is right and what is wrong. I would like to see the board have more people of that ilk on it from within the FA so that these topics would be discussed, they would be driven out and the consequences and conclusions of that would be arrived at sensibly. Q365 Damian Collins: How would you characterise the failure of the FA board? Is it that there is no great desire for reform or change, there is plenty of discussion about it, reports written, views expressed? Does the board either not share those views or can it just not agree amongst itself what to do? Ian Watmore: I think there is a very small conservative nature to it all so change is not a welcome word in that sense; people want to evolve slowly rather than radically. But you do have quite different interests around the table from the five that come from the professional side and the five that come from the counties. Half of the money goes to each of them, as I have said; one half works out how to spend this lot and the other half works out how to spend the other. So the actual board meetings, they could be tetchy on certain issues but they tended to be one group of people talking about a subject, everybody else staying quiet or vice versa and I think it was just a sort of unholy alliance between the two groups not to tread on each other’s patch and I don’t think that is the way the board of the FA should be. Q366 Damian Collins: Just finally, do you think if the board was reformed in the way that you have discussed—an independent board of experienced football people—that the FA would be, if you like, more realistic in the way it uses its resources and you could question the way the FA has spent money in the past on Soho offices, salaries or how managers are paid, even the company contract Capello was given before the World Cup? Do you think a reformed board would be more practical about the way it uses its money? Ian Watmore: I do. I think particularly if you had some good genuine independent non-execs of the type who are used to challenging company Chief Execs and executive teams on how they are investing shareholder money. I don’t particularly name names but people like Terry Leahy, he was a fantastic supporter of ours when he was at Tesco through the Tesco Skills Programme. You just know that people of that calibre would drive better spending decisions. Q367 Alan Keen: Ian, you seem to be saying that— and I agree with you because I know virtually everybody involved in football administration—there are some excellent people doing excellent jobs. If we take Richard Scudamore, who I agree with you is one of the top people and a proper football supporter; he supports Bristol City— Ian Watmore: He does. Q368 Alan Keen: He understands how supporters feel as well as everything else but Richard’s boss is the 20 club owners. Their interest is not in the future of English football or the future of football at all. It is, in almost every case, the ability of the club that they own to make money. They may have come into it not being worried too much about making money but I think ego comes into it as well. But certainly the main thing is that their interest is not the same interest as the future of football involving youngsters’ development and everything else and supporters of all the clubs around the country, whatever level the club that they support is at. It is the structure, isn’t it, that is wrong and Richard does a great job representing those people. But if he or you were the managing director of football as a whole then self-interest would work, with a right in there. Do you think it needs Government legislation to set out a structure for football? It is obviously a shambles, isn’t it? What do you think about legislation to set up a structure that is for the benefit for the whole of football, like there is in other European nations? Ian Watmore: I think I agree with a lot of what you say, except the concept of Richard having a boss is an interesting one. Sorry, just joking. I agree heavily with the fact that, as you say, the running of the Premier League and making it the global success that it has been today, which Richard and others are primary movers of, has been a stunning success story and one that we all enjoy if we like watching that sort of football, which I do. They would argue that money trickles down through the leagues to the other clubs. I don’t know whether that is better or worse than in another situation. But what it does do is it becomes a single objective, which is to make that league a huge success, whereas I think what you have said is there are more objectives than that. We want that but we also want a strong England team and we want a growing national game in communities around the country and we want more women’s football, and so on. So these are things that I think we need to line up and say, “Here’s a series of objectives for football as a whole”. That is what I argue in my note to the Committee, which you may not have but you can read afterwards and see if it is more coherent than my verbal ramblings here. You should set out what the strategic objectives for football as a whole are and then what role the FA has within that and then how the FA might have a governance structure to determine that. I don’t think it will come about through natural causes. It will only come about through an external impetus that is either your Committee or the Government through a Bill or something, because I don’t think it will happen on its own merits. It took something like the Lord Justice Taylor report to change football once before and maybe this is the time to do something equally significant for the game in the long run. Q369 Alan Keen: You mentioned Terry Leahy. An analogy with Tescos, if one part of Tescos is doing exceptionally well, whatever that part of Tescos makes, if it doesn’t fit in with the overall aim of Tescos internationally then Tescos will do something about it from the top downwards, whereas football is cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 93 22 March 2011 Ian Watmore run completely separately. It is all run by good people with the best intentions and if you are being paid, as Richard is, by those 20 owners then he does a fantastic job and it is his duty to do that, even though he understands very well that the thing is out of balance. Ian Watmore: I think it is possible to square the circle of competing objectives. In a world where the best global talent is playing in the Premier League, which is what people want to succeed, it ought to be possible to use the money that comes from that to develop the best local talent to be as good as that. It is cheaper to make, not buy, if you do it over a long period of time and there are various clubs around who do that very well. We can see some of those clubs beginning to churn out really top talented English players who aren’t just the best in England, they are actually making it with the best players in the world. Whether there are enough of them is highly debatable and whether the system that is producing them is producing them more by accident than design I think is definitely worth questioning. I would think one of the key objectives that we should set for the whole of football is to grow that pipeline of talent systemically, using the wealth that is here because of the Premier League. Q370 Chair: Can I just clarify: is it your view that for the FA to have the powers you believe necessary to impose a greater governance on the game that would necessitate some kind of Sports Act being passed by Parliament? Ian Watmore: I don’t think it needs to be because it is obviously something that people could agree to do, but I don’t think they will agree to do it so it is going to be an external intervention that causes them to change. You may not agree with what I am saying but if you did agree with it I don’t think it will come about through just the natural process. I think it will require something different. Whether that is an Act or a strongly worded demand from Government, I don’t know, but I think it won’t happen otherwise. Q371 Chair: There is no particular reason to believe that a strongly worded demand from Government is going to produce a response either. Ian Watmore: Sorry? Chair: It doesn’t necessary follow that a strongly worded demand from Government is going to produce a response either. Ian Watmore: No. I think in the end you have to look at the restructuring. If you need to do restructuring it needs to be forced, or at least to be threatened there so that people might change themselves if they know it is in the background. Q372 Chair: Does all your experience suggest that is going to have to happen? Ian Watmore: If you agree with the line of direction that I am recommending, yes. Q373 Dr Coffey: Is the risk of legislation that it will open up the FA to judicial review on a regular basis? Would that be helpful? Ian Watmore: There is a lot wrong with legislating. Parliament has some big things to worry about and using parliamentary time on this is one thing. FIFA statutes don’t like government interference. It is more aimed at different governments than ours but nevertheless I am sure it will be used. People will argue that it is threatening their livelihood and so on. So it is not without risk. It would be much better if people just said, “Look, in order to give this a fair crack of the whip let’s have an independent structure, run it for five years and let’s see where we go from there”. Q374 Chair: We have received evidence, not from FIFA but from UEFA, recommending that we adopt some kind of Sports Act. Ian Watmore: okay, that is more a party role then. Q375 Jim Sheridan: Can I clarify: external intervention; by that you mean Government, or is there another external intervention? Ian Watmore: No. I think in this case it is Government. The analogy I had with the Lord Justice Taylor report, I don’t know whether that was a Royal Commission or something but it was something similar. Maybe a Royal Commission could recommend such things. Q376 Jim Sheridan: But there is no other intervention? Ian Watmore: Not that I can think of, not unless it was a commercial proposition that dwarfed everything that there is today and I can’t see that. Q377 Mr Sanders: From what you are saying, do you think the FA should have a more leading role, actually take the leading role in regulating the financial activities of professional football clubs? Ian Watmore: I think the answer to that is at the strategic level, yes. In other words, I think the FA should set the financial regulatory environment in which professional football operates but I think it should then be for the leagues and the clubs to implement that, usually through their competition rules, which is the most effective way of doing it. A lot is talked about UEFA’s Financial Fair Play scheme and I think there is a sort of assumption that UEFA is like a European governing body, somewhere between us and FIFA. In fact that is not true. UEFA is a confederation of associations, owned by the national associations. What UEFA is doing is using its Champions League competition, and to a lesser extent its Europa League competition, to say, “If you want to play in our Champions League competition then you have to comply with these rules”. So it could be that the British clubs all said, “No, we’re not doing that”, but of course they won’t because they are desperate to play in the top club football in the world, so they will eventually comply. UEFA use a competition as a means of achieving a piece of regulation that they think will benefit the game. I think we should set the environment at an FA level and then let the individual competitions, in this case the leagues, determine precisely how to implement that, their own roles within the rules that they impose upon the clubs that play in the league. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 94 Culture, Media and Sport Committee: Evidence 22 March 2011 Ian Watmore Q378 Mr Sanders: But the FA could set some parameters by which your membership of the FA is determined. If you don’t meet them you can’t be a member. Ian Watmore: That is the kind of thing, yes. Q379 Mr Sanders: Do you think the FA is fit for that purpose, though, under its current constitution? Ian Watmore: No, for the reasons I have said. Whether it has the staff in there to do some of that stuff—I think some of the people I had in that area were absolutely brilliant. One of them has gone off to run Portsmouth, which I think shows how good he is. Q380 Mr Sanders: The football club or the city? Ian Watmore: I think the city is easy by comparison to the football club. The football club was, of course, the disaster club of a couple of seasons ago. I think you would need to ensure that the capability was there in the organisation to really understand, but I think that is a soluble problem. Q381 Damian Collins: You joined the FA just after Lord Triesman presented his response to the then Secretary of State for Culture’s questions on football, and that covered some of the ground you are talking about. He talked about whether there should be a financial governance system based on the UEFA fair play rules. When you joined, what was your view on those plans and what happened that led to the collapse and rejection of those ideas? Ian Watmore: It was, as you said, just before my time but my understanding was that David and the staff from the FA produced a version of a response to I think it was Andy Burnham at the time, and the board members told him that was not the submission he was going to put in, that he was going to put in a different one, which in paraphrase said, “See the submission made by the Premier League and Football League and that is the FA’s position on these topics”. I think that was right at the start of the problems between him and the professional game. I think he had also made a speech that they didn’t like about debt in football, and the combination of those two things meant it was very tense on that subject whenever it came up in any meeting. Q382 Damian Collins: Were these ideas pursued? They were in Lord Triesman’s report but from your time as Chief Executive was this something you felt that, “This should be an agenda item, this is something we should be taking up on a regular basis”? Ian Watmore: It was one we would have liked to have done but it was made clear that the situation was not changing, that these were matters for the leagues and not the FA. That was kind of the line and so that was what prevailed. Q383 Damian Collins: Given what you said about the FA, you can probably see why the Premier League might not have very much confidence in the FA to take on that role? Ian Watmore: You can argue every one of these things. My argument would be that if you regard the FA as essentially an assembly of the people from the counties who may or may not have the sort of experience and know how to deal with this sort of big business type of thing then, yes, you would have no confidence, I’m sure, if you were in the professional game. But if the body concerned was properly resourced, staffed with the right sort of calibre people and had the right sort of board structure then you should have confidence. You might not like what they decide but you should have confidence and that is why I think a different sort of FA is required for these purposes, one that is independent of both its heritages. Q384 Damian Collins: When we took evidence a couple of weeks ago from David Gill, Niall Quinn and the Chairman and Chief Executive of Stoke City they all agreed that the UEFA Financial Fair Play rules will be a good model for enforcement through the Premier League. Do you agree with them? Ian Watmore: Each one of these sort of regulations tends to tackle a different problem and the problem that Michel Platini and co were trying to solve was the combination of billionaires coming in and just buying any player they want and paying whatever wage they want out of the petty change of their wealth, or alleged places where the local cities were putting local money into the clubs. He felt it was unfair that clubs of the Chelsea-Manchester City type, or perhaps the Barcelona-Real Madrid models, were bound to be strategically much more successful because they had all this money being poured into them and he felt that by doing the Financial Fair Play rules that would cap that possibility and it would mean that clubs would then have to survive on the resources that they naturally developed. So that is what is now coming in. I don’t think it inherently deals with the sort of leveraged debt takeover of a club, which you might feel is something else that isn’t an attractive thing to do. When Manchester United or Liverpool or any of these other clubs find themselves in the position they are in, or were in in Liverpool’s case, I would have thought you should at least consider whether there was a regulatory environment that said that sort of thing shouldn’t be allowed from the outset. You have some sort of capital ratio or something in the way that the club is owned. That won’t come up, I don’t think, with Financial Fair Play. You would have to do something else, but Financial Fair Play will probably eventually cap the billionaire, “I’ll have that one” approach to football. Q385 Damian Collins: On the Manchester City and Chelsea stories, is their high profile something of a distraction? When we took evidence last week in Burnley, the Chairman of Burnley said that if you want to sustain a smaller club in the Premier League, on top of what you get from gate receipts, on top of what you get from TV money, you basically need someone who is going to put in £50 million a year in cash every year just to hold you in the Premier League. That has to be unsustainable. Ian Watmore: I would argue that it is, although they do seem to keep finding people who are prepared to do it. People do argue that it is smaller sums but it has always been that way in English football a bit. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 95 22 March 2011 Ian Watmore But I do believe the sustainability of that should be questioned. I do believe that if you apply Financial Fair Play at the highest level it should force its way right through the system. Was it Burnley you said you took evidence from? One of the reasons that the Burnleys of this world get to that level is because the Chelseas and Manchester Cities of this world have stretched it so much up here that just to get ordinary players they now have to pay twice the wages that they used to have to pay and so on, and the television money hasn’t kept up with it. So, I think having a dampening effect at the top will eventually filter through to the rest of the system. I think what UEFA are doing is promising on that front, although we’ll see if people find ways round it. Q386 Damian Collins: In your time at the FA did you ever look at licensing models that operate in other countries? The licensing model in Germany is one that is talked up a lot. It seems to be a fairly flexible system but nevertheless it does at least guarantee a level of oversight from the governing body of the financial performance of the clubs and whether they compete on a fair level, a fair level being that they can pay their bills without going into administration during the season. Is that something that you looked at? Ian Watmore: The German model is a good one on a whole range of fronts. It is integrated to start with. The DFB looks at leagues and the national association is one integrated whole. It has all the strengths that you say and we have seen for more years than we care to remember how good they are at churning out international teams of all types: men’s and women’s, all ages and so on. The only counter to that argument would be that the Bundesliga is not the Premier League. It doesn’t have the global pulling power; it isn’t the exciting league that the Premier League is. It doesn’t reach consistently the last stages of the European Champions League with three or four clubs. I think if you were to look at the Premier League on its own you would say it has been more successful than the Bundesliga. On the other hand, if there was some global downturn in football finances the Bundesliga is more likely to come through as a sort of HSBC bank and the Premier League would be more difficult to pull through in that. But nevertheless I think, for the period that we are looking at, the Premier League has a long way to go before it runs out of opportunity. It is only really tapping into the early reaches of the global audience. Q387 Damian Collins: I suppose, to stretch an analogy, the question would be whether English football clubs are becoming too big to fail and the relative price of failure here is small. Leeds United will be back in the Premier League, if not next season within a couple of years, as probably one day will Portsmouth. The Germans have the ultimate sanction, which they don’t use or haven’t used yet, but there is potentially a case where they might. Ian Watmore: I would like to see a system that didn’t weaken the Premier League but did strengthen the FA. I love the Premier League as a spectator and so on. It has transformed football in this country from where it was in the late 1980s. I have nothing against the success of the Premier League as a league competition and it is well run. It has its issues, that I would like to talk about in a sort of technocratic way some time, but right now it is in a good place. The FA is not in a good place at the strategic level. I would hope that we can elevate it to have a much stronger role in football and then we can have a strong FA and a strong Premier League, not a strong FA or a strong Premier League, and that I think is the fundamental thing. Q388 Damian Collins: Finally, with regard to financial oversight, we discussed last week with Leeds United the fact their Chief Executive doesn’t know who owns the club. Do you think that is wrong? Is that the sort of thing that the FA, even if not having actual power over, should take a sort of moral leadership on and say on some of these practices, “There might be nothing wrong with what is going on but it is questionable and not transparent and not the way we do things”? Ian Watmore: I think one of the good principles of governance in any organisation is transparency, and I would apply that to football. Q389 Paul Farrelly: Ian, I just wanted to return, as we wrap up this session, to a few specifics about the FA. First of all, I wanted to take a few of the points that Damian was exploring on finances and talk about something that did happen on your watch. We know what happened to Lord Triesman’s paper but I have been passed a paper—not by you or anyone associated with you—called Football Finances that you prepared, I understand, in February 2010 and which was for discussion among a joint management group, including yourself and the Chief Executives of the Football League and the Premier League. That was prepared just a month before you resigned. Could I ask you what was the reaction to that paper that you prepared? Ian Watmore: I think it was more of the same as we have been talking about, which is this is not a matter for the FA really. I think there was an initial worry that we were trying some sort of takeover or some political stunt or something, which I wasn’t. I was just trying to write down the issues as I saw them and try and put them in a sort of consultative way that would get us talking. It was made reasonably clear that that wasn’t the direction that people wanted to go in. They gave us comments on it but I think it was just one of many things where I realised I was just butting up against the governance ceiling and it was time to stop wasting my time and go and do something else. Q390 Paul Farrelly: Was that the straw that broke the camel’s back? Ian Watmore: Not especially. It was one of them. There was a month of quite a lot of things happening. One of the ones I found hardest to deal with, although it is probably never spoken about, was I think David Gill rather sensibly recommended that the decisionmaking bit around who gets what suspensions and did they really punch somebody in the face or not, the sort of compliance unit thing, should be outside of the core FA and in some way with some unimpeachable cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 96 Culture, Media and Sport Committee: Evidence 22 March 2011 Ian Watmore figure running it. I have quite a lot of sympathy with that. The flip of that is that the Football Regulatory Authority, which is the bit that sets all the regulations and so on in the first place, would come back inside the FA. At the moment it is in an arm’s length status. I think it is analogous to a Government Department setting a regulation but running the operation within, which is 100% the wrong way round. The problem I had when I was reviewing that was if I brought the FRA back inside it would go immediately under this conflicted board and then it wouldn’t be able to make the decisions that it needed to make. So I got into a place where on almost everything that I was moving on I saw cul-de-sacs and I decided I would just go and do something else. Q391 Paul Farrelly: You have just covered one question I was going to ask, probably the last question. Your paper, was it ever discussed at the FA board at all? Ian Watmore: No. Paul Farrelly: It just remained among this management group? Ian Watmore: Yes. We tabled it over time but— Q392 Paul Farrelly: When you said that they thought it wasn’t for the FA, who in particular thought it wasn’t for the FA? Ian Watmore: I don’t want to go into particular individuals, conversations that are private, but I think the generality of the position that David had when he first tabled his approach remained, which is that for these matters the leagues were the people to do it and they should do it themselves and we should just butt out. Q393 Paul Farrelly: The danger here is that there are so many papers lying around, so many recommendations, that someone will always find a reason to disagree with something because somebody else has said something different. That is something we have to wade through. You make some interesting comments that at present the game is applying the so-called fit and proper rule in a sort of not legally disqualifiable way, which is taking a different judgement. You have mentioned capital ratios previously but you argue that perhaps the game might adopt a fit and proper business case approach as well. You argue in particular about a ban on securitising future revenues and player securitisation so that we don’t get the West Ham-Sheffield situation. You even go on to the football family taking such a collective responsibility that, like the Government with schools, it puts clubs into special measures. All of these suggestions were batted away, were they? Ian Watmore: In effect. The topics in there, the intention of that paper—as you say, it has never seen the light, I think it was leaked by somebody to somebody else and it has probably moved around— was to say there is no right answer, there is no silver bullet, but we do have some issues. We have our two most famous clubs in these debt problems, in Liverpool and Manchester United; we have the club that has produced more England players of high quality than ever, in West Ham, in the hands of creditors to an Icelandic bank that has failed; we have one of our oldest and most famous clubs, in Portsmouth, being the laughing stock of the Premier League, as it was at that point. We ought to be at least discussing the sorts of things I put in that note in deciding are any of these things really the answer or should we just let free market reign? As somebody once put it, debt is the slavery of the free and I think debt is the slavery of the free market if you take it to an extreme. There is obviously good debt, there are reasons to go into debt to build a stadium or something like the approach that Arsenal have taken to building Emirates and then selling off their old ground and gradually getting back into financial balance, but debt for the sake of it is troublesome over the long term. I think we should be looking at ideas for how to control that without stifling the inherent success of the underlying leagues, which I am proud of. Q394 Paul Farrelly: I have a couple more questions about the FA. I think we are quite clear on what you would like to see. It is going way beyond Burns and having an independent FA. What would be the best model in professional sport or professional football, possibly from overseas, that you would compare your ideas with? Ian Watmore: I don’t think there is a particular sports model where I would go, “Yes, that’s the one to follow”. Each of them has their flaws. The German football one is a great one but it could be challenged on the strength of its primary league. The Spanish produce great clubs but one of the reasons they do that is they skew all their television money towards Barcelona and Real Madrid and not through the rest of the league, while the Premier League is very good at flattening its distribution of cash from top to bottom. We all know that most of the other sports, England cricket, English rugby and so on, have had some of the same problems. It has emerged from one place into another. I think the thing that makes football in this country different is the global success of the Premier League makes it such a disproportionately big event. To some football fans now club football is what they watch in preference to international football and in almost all the other sports it is the other way round. Even today club rugby hasn’t reached the point where it dominates national rugby. So I don’t think there is an obvious one. I looked at the States models and talked to Ivan Gazidis who came out of major league soccer in the States. There are some things there but it is a closed system there and I don’t think we have that. So I think we have to fall back on the fact we have the model we have with strong leagues and a national association. If you put governance around the national association, like you would a top PLC company, which is half executive, half non-exec, where the non-execs are chosen for their independence and their skills, I think you have a real chance that the national association could thrive without killing off the other two things. Q395 Paul Farrelly: Under the governance arrangements, would you like to place the FA Council cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 97 22 March 2011 Ian Watmore in the position of a supporters’ trust with a club where it may be consulted but it doesn’t necessarily have any— Ian Watmore: I think I argue that it needs to cede more powers to this independent board and not be the ultimate parliament of football, but I wouldn’t do that without the independence, because at the moment it’s a check and balance thing that is there to stop ridiculous things happening. But I do like the people on the FA Council, not just because I like them individually but they do have a real breadth and wealth of experience and I think we should tap into it. Q396 Paul Farrelly: My final question is that the coalition agreement talks about supporting the cooperative ownership of football by supporters. My party’s manifesto, for whatever reason, talks about mutualism at the heart of football as well. What is so special about football that we, as a committee, should be making any recommendations about the future direction of the FA at all? Ian Watmore: That is perhaps a question for you, but I think the difference between football and other sports in this country is it does occupy a greater importance to people up and down the land en masse, whether it is playing or refereeing or watching or talking about it in the pub or helping your kids through or finding a way if you’re disabled into participative sport. It is just massively impactful on British life, and it is British life not just English life. I think it is therefore appropriate that the Parliament of the day should have a view on whether something that important to the people is in a healthy state. If it is not it should certainly ask questions and then it should decide whether it goes further than that and make recommendations and even laws. Q397 Dr Coffey: You were quite glowing about the German game earlier and the German FA. They do not have any independent directors on their board, so is it about structure or is it about personality and people? Ian Watmore: I think the lack of independence in Germany is because they have bundled everything together. It is one integrated organisation where they look at the whole. We have separated. We might as well recognise that, and that the Premier League is a self-standing entity under its own right. It is technically called the FA Premier League, but to everybody in the world it is the EPL or the PL. The Football League has reinvented itself massively successfully after the ITV digital fiasco, and we have the national association, that is the oldest one in the game. It annoys people around the world that it’s not called the England FA, it is the FA, a bit like the Open Golf Challenge, it is not the British Open. It is the oldest; it is 150 years old in 2013. I don’t think we should be trying to push all of those organisations back together à la Germany. You might take a different view. I think we can achieve the success of the Premier League and the success of the FA by giving it strength and teeth, and I think that comes from independence, but you may form a different view. Chair: Thank you, that has been very helpful. Q398 Jim Sheridan: You spoke earlier about a vested interest in the FA. There is no one with more vested interest than the fans, is there, or should there be a structure that involves some sort of interaction with the fans and the FA? Ian Watmore: I think that is a great question. I argue very strongly yes, that whatever the FA is, it should be consulting with the fans and the players, the mass participation of the game as well; it is not just fans, it is players, Sunday morning kids and parents and that sort of thing. I think the FA needs a much better way of consulting with and engaging with those people. There are groups, as you know, like the Football Supporters’ Federation and those sorts of things where I think that there is a councillor slot on the FA Council for at least one of those groups. They have a role to play, but they are campaigning on particular issues and I think they tend to attract people who are passionate and fanatical about the way sport is run, so they have an interesting view to tap into, but I think the FA needs to find ways of engaging with the broad mass of the public. I would say a bit like in Government these days, people are looking increasingly to the social media as a way of tapping into people. I think football needs to do that much more broadly. Q399 Jim Sheridan: Secondly—hopefully a yes or no answer on this—after listening to what you have had to say today, would it be proper to assume or do you feel that at any time that you, and subsequently the FA, were bullied by the Premier League, or by individuals of the Premier League? Ian Watmore: Do I think that the FA— Jim Sheridan: Do you ever feel you were bullied? Ian Watmore: No, I am not a person who is easily bullied, so— Jim Sheridan: Were there attempts to bully you? Ian Watmore: I don’t recognise bullying. People have argued passionately the opposite case and people have become frustrated when I have made my point, but I didn’t personally ever regard I was bullied. Chair: Thank you very much. Ian Watmore: Thank you. cobber Pack: U PL: CWE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Ev 98 Culture, Media and Sport Committee: Evidence Examination of Witnesses Witnesses: Richard Bevan, Chief Executive, League Managers Association, Steve Coppell, Former Manager of Reading, and Martin O’Neill OBE, Former Manager of Aston Villa, gave evidence. Q400 Chair: For the second part of this morning’s session, can I welcome Richard Bevan, the Chief Executive of the League Managers Association, with Martin O’Neill and Steve Coppell? Your organisation represents managers from the Premier League and then goes all the way down to League 2. Can you just set out what you see as the main issues affecting them and to what extent they differ between the top and the bottom of the pyramid? Richard Bevan: Yes, on the main issues affecting the managers, the LMA’s history goes back to 1919. It used to be the League Secretaries and League Managers Association. The LMA was formally launched in 1992. I think probably the biggest change since 1992 will simply be employment issues. That is the key one. The average tenure of the job back in 1992 was about three and a half years. It is now sitting at 14, 15 months—I think I am about to lose a manager in the next five minutes as well. But also in the Football League last season, the average tenure of a sacked manager was around about 10 months. I think a very worrying stat for the game, which is reflective of the game and worrying for all the stakeholders, is that there are about 46 clubs at the moment that have a manager that has been in place for less than 11 months. If you take the manager being the most important person at the club, as the one that gets the sack most regularly when things go wrong, then you have to presume that is very bad news for the game. Certainly in a business corporate environment, politics and any other environment, that would be something that you would have to address fairly quickly at the top. Secondly, not particularly sexy issues but very important issues, many of our managers don’t get private healthcare, so in the LMA we recently set up a health trust. We now have 60 managers in that. If you can imagine getting the sack every 12 months and you are out of work for, on average, 16 months, you have to make sure that there is healthcare as well as other basic needs. So the LMA is very much a family from that perspective. Thirdly, I think very importantly, what we are trying to change is our ability to collectively take the views of our members and to lobby both at home and internationally across Europe. We have 91 managers in 30-odd countries. I think it is somewhat ironic that today in UEFA they are voting on new members of the UEFA executive. There are 13 nominees for seven places, and out of those 13 nominees, there are five ex-players that have been nominated by different countries around Europe by different FAs. The FA has never nominated any ex-player, nor to my knowledge has it ever had an ex-player on the board. Even Trevor Brooking isn’t on the board of the FA. I think what you need, like Mr Platini did representing France, you need to make sure that you have young, energetic people, not people, with all respect, in their 70s joining the UEFA executive. So over a period of 10 years, or 15 years, we can try to ensure that we get to a much better position, that we can help influence the game in a better way. Perhaps taking our stock at the moment, the Under-21 Championships, we went in for that alongside Wales, Bulgaria and a couple of other countries and it was recently awarded to Israel, so that probably reflects where we are at. Lastly, we are in regular communication now with coaches across Europe. We are setting up a number of meetings and think-tanks and we do intend to be proactive. In many ways, like it or not, with some stakeholders, the LMA, the players and perhaps the supporters as well are probably the best policemen in the game at the moment. Q401 Chair: Can I come back to the first point you made about the ever-diminishing average tenure of a football manager? To what do you attribute that and is there anything you can do about it? Richard Bevan: There are a number of things that I attribute it to, mainly the world we live in, the lack of managing expectations at a certain number of clubs, the 24/7, the pressure, the financial issues as well, the reward for getting into the Premier League are now reportedly in the region of £90 million. Equally, if you get relegation or even going out of the league, the pressures will be different, and they are exaggerated by the very nature that we are living in a 24/7 media world and the internet, Twitter and everything else. In terms of can we do anything about it, yes, we can, short, medium and long term. Short term we are pushing for standard contracts. We are encouraging our managers to have the objectives of the club very much written in writing, “What are we looking to achieve in three months, six months, 12 months?” and helping to manage those expectations, and very importantly, the LMA is very much moving into the role of developing training, coaching and management education. We are moving into the National Football Centre in July next year, and along with three business schools, we intend to build upon the leadership management. We have recently been working with companies, major plcs in the country such as Castrol, Barclays, Jaguar and a number of other companies, because we are looking to bring that leadership model in, because there are probably three aspects of being a football manager in what I have learnt in the last three years since I’ve joined: leadership, management and coaching. The FA are very much delivering the coaching and education and we are going to be delivering the management and the leadership training. The total spend in football is embarrassing for the game. Less than £750,000 is spent on the development of our technical staff—that includes referees—in terms of technical training. We did a recent report with the Warwick Business School on the film industry, the comparison between the film industry and football. Very similar, £3 billion turnover—the entertainers, if you like—and in the film industry, they spend around about 5%, 6% of their turnover on training of their technical staff, which is fantastic, because that is why our British technicians are wanted all around the world, and that is why we are winning Oscars. So hopefully if you were to look at the LMA in five cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 99 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE years’ time, you will see it is very much focused on the delivery of coaching and management. I think if we achieve anything like the goals we have set ourselves, then we will improve longevity, because we will prepare our managers better. Q402 Mr Sanders: Can I ask Steve and Martin your experience of management? Is it becoming harder for clubs to bridge the gap between the Championship and the Premier League? Steve Coppell: I would say most definitely without the input of a benevolent millionaire who would invest, as we spoke before, the massive sums of money. In my experience at my club with Sir John Madejski, at Reading in particular we tried to bridge that gulf, and even though he is a wealthy man, his ideal all along was the club should sustain itself, which it can do very successfully at one level, but when you get to the Premiership now, the Premiership is without doubt a power league. You can more or less forecast who is going to finish in what position at the start of any one season, based on the power reference of each club within that league. There are always one or two exceptions, but that cannot be sustained without the finances involved. So to answer your question, I would say most definitely it is very, very difficult to go beyond the one or possibly two seasons’ success without the input of substantial funds. Q403 Mr Sanders: Can I ask, Martin, is it possible to challenge for a Champions League place on a regular basis without a very significant financial outlay? Martin O’Neill: On a regular basis, I would probably very much doubt that. I think statistically it has been proved that only Everton and Tottenham Hotspur obviously have broken into that top four in the last seven or eight years. I think it is the dream and I think the dreams are always worth pursuing. I suppose from the country where I was born that is what we lived on most of the time. So, yes, I think it would be very, very difficult, as you mentioned, on a regular basis. However, Tottenham Hotspur are making a terrific effort at the moment. First of all, they have done it, and I think it has been a magnificent achievement, not only in getting there, but what they have done in their first season in the Champions League, now contesting the quarter-final. So for teams of that ilk, and I am talking about perhaps maybe tradition, history, crowd support, yes, I still believe—Tottenham have shown the way recently, Everton did it before that—that it is possible. But on a regular basis without that input, that financial input, it is difficult. Q404 Mr Sanders: Can we ask why you left Aston Villa? Martin O’Neill: You can, and I would not answer that, primarily because there is a tribunal coming up in the next month or two and I am not at liberty today to speak about that, but I appreciate you asking me the question and asking about my wellbeing. Q405 Mr Sanders: In general terms, is there a connection though to the difficulties and the competition for wanting to achieve a top four position and where you are today? Martin O’Neill: You make a very, very good point. I think that Richard touched on it. The managing of the expectation is—well, let me start by saying that the world in which we live in now seems to be—I only say seems to be—instancy. We are looking for instant success and because we have instant access to things, I think the other seems to want to follow, or people feel, if it is there for you, you are capable of doing it. What I am saying is that you set out with a number of ambitions, a number of goals, you try to achieve those and if you have a little bit of a success early on, then people are looking for more, they are looking for more. I think that that has been the difficulty in the game. I am not saying that it didn’t exist some years ago, of course it did, but with the financial situation being so, so strong now, the possibility of failure in the Premiership, the possibility of relegation, then the thoughts of getting into the Champions League, it has reached a zenith. In my 20 years of management, I have seen a lot of positive changes in the game. It is still a wonderful, wonderful game, and, for instance, if you look at the stadium improvements, if you look at the racism that we were trying eradicate, all great news. Then I often think to myself, “Well, has the game changed at all?” and I will bring you back to just a little story. About 31 years ago, I sat in a dressing room in the City Ground, Nottingham Forest, as a player, and we were part of a very, very successful team, the team was going very well indeed. In stomped a colourful megalomaniac, who had obviously had a bit of an issue that morning with something or someone. At that stage, he was the most successful manager in the country. He had just won the European Cup, and within a couple of months he was about to win another European Cup, and he stomped into the dressing room—now Brian Clough could stomp into any dressing room and he could be irked by anything, but obviously he was chuntering about his board. They had upset him that morning, I don’t know, perhaps because they hadn’t given him something that he had felt was his due, but he almost read the situation, because there was a number of us who were reaching that age where we were thinking about management, certainly thinking about coaching, and I think he had almost a telegnostic feel about it, because he said, “If any of you lads are thinking about management, don’t”. He said, “The only inevitability about this job is you’ll get the sack.” I wonder whether anything has changed over that 31year period. Certainly statistically, as Richard talks about, it wasn’t as severe, managers were getting longer in those days, although still getting sacked, but it has reached a level now where I think managing is still a terrific job but it has become exceptionally difficult. Q406 Mr Sanders: Is it more difficult to manage expectation than it is to manage a football team? I wonder whether, Richard, I could ask you, what support you give to managers in order to help them manage expectation. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 100 Culture, Media and Sport Committee: Evidence 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE Richard Bevan: That is a very good question. Managing downwards and managing upwards are of equal importance, and I think probably the traditional Chairman in football is going. Issues have arisen in negotiating over 100-odd compromise agreements in the last 12 months or so, because we also represent a lot of coaches, we have lost about 36 managers and about 48 coaches so far this season. One of the problems is who in the football club am I ultimately responsible to? There seems to be in a lot of clubs, particularly in the Football League, two or three directors that have investment in the club, they are having a say in the club, that want to play in a different way and so I think that is very hard for managers. In terms of what we are doing about it, particularly when managers are out of work, we have the Warwick Business School football management course. We are working on 16 three-day modules of leadership and management, and media training is in that. Also, we monitor media interviews of our managers and we help them, and some have a greater need than others and some have a bigger drive, but what I find working for these guys, is that there is a massive appetite for learning. There are 100,000 matches of experience between the members. That is a lot of knowledge, a lot of passion and I want to try and harness that. I think you talked earlier about Europe, and we looked at Europe, we looked at the way Holland works, we looked at the way Germany works and the one thing that is very clear—to me, anyway—about Europe is there are very few turf wars in those countries. They work together. Their strategy is more unified and I think proper governance, correct and successful governance, is all about participation of the stakeholders in making the right decisions, but getting them to embrace those decisions and that doesn’t happen, if at all. Q407 Paul Farrelly: We have heard from Steve about John Madejski at Reading, but Martin, can I just come back to Aston Villa? I can understand the difficulty of managing conflicting objectives, such as, “We expect the team to do this, but we are only going to do this and we are only going to give you this” and some people might want to take a stand and say, “I cannot fulfil that objective for you”. But if you are looking at the Premier League and below in the round, take the perspective of just up the M6 from Aston Villa, from my club, Stoke City, for the likes of Stokes City it is an absolutely good thing for people like Randy Lerner to pull the horns in and not join the splurge, just as it would be for John Madejski not to join the splurge. Because if it is unsustainable, the way all the decisions on transfers and paying people’s wages filter down, it affects the financial viability of all the clubs below, so isn’t it a good thing that the horns were pulled in in terms of not going on any more spending sprees? Richard Bevan: Can I answer that question, because there is a Premier League managers arbitration and if Martin answers that question he could conflict himself out for what is going to be an important tribunal? So I don’t think you can ask questions that relate to Aston Villa because— Q408 Paul Farrelly: Let me phrase it generally: is it generally a good thing that unsustainable spending sprees do not happen? Martin O’Neill: I think that Mr Watmore touched on this, and he talked about the top clubs in the Premiership, where they have been on massive spending sprees, and therefore other teams, to attempt to catch up, proportionately they have to spend some money. Now, I accept your point entirely. I believe that football clubs—was it Deloitte that mentioned something about the 65% wages to turnover? I think that is something that clubs should aim for and attempt to go for, and I do agree in principle that you can only deal with what you are able to bring in, and if you cannot compete against Manchester United and you cannot compete against Chelsea, it doesn’t stop you attempting to do so, but then I think then that you have to get some sort of—for want of a better word— reality check. But that doesn’t exist in the Premiership, and you have just mentioned Stoke City. Tony has done a wonderful job there, absolutely wonderful job. The day that they made it into the Premiership was a fantastic day for Stoke, but Stoke believe that they belong there, even though they hadn’t been there for quite some time, and now, last year, when they finished I think about 10th in the league, it was terrific. This year, would 11th be good enough for Stoke City this year? I wonder. I will throw it back to you. Paul Farrelly: We might come on to that in a moment. Steve Coppell: Can I just add a little bit there? You cannot compete with the big clubs financially, so you try and compete at a different level, which is the nurturing and development of talent. Now, again, the big clubs can spend more money, but you can provide a more caring atmosphere with a route through to progress. I think that is the attraction of the clubs who are trying to compete against the mega-giants. It is the only way you can sustain it and perhaps, in the future, if we have more home-grown players demanding to be in the squads, which I think is a fine development for English football and would protect our national team to some extent in the future, I think that is the way forward. Richard Bevan: Certainly in the Football League, I think there is only one club that has just posted a profit, which is Swansea. There are 653 clubs in 53 leagues across Europe and over 50% are losing money. So certainly, whether it is under a licence or whether it is a different type of UEFA financial play rule that is reflected down the leagues, we would very much like to see the ability of clubs managing cost controls to a greater extent. Q409 Alan Keen: Just a small question about the LMA. I am mindful of what the FA are trying to achieve, and that is to professionalise, not just at the club managers’ level but coaching and further down so that we can bring people up through the game. But there is one problem, sometimes it is managers who sack coaches. A new manager goes into the club and they quickly get rid of three or four coaches and take it further down to bring in people that he works well with. I can understand that. Martin is known to have cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 101 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE worked with a team of coaches, but how has the LMA approached it to sort of deal with that? Are you trying to aim at getting a level within a club where they would be looked upon as permanent coaches, say with the under-17s and others, so that a new manager coming in is free to bring his own coaches in at the level for the first team coaching and other assistant coaching, maybe for the reserve sides, so that that coherence of tactics and everything else is okay, but at least the other people in the club below that level are fairly safe to pursue their career for five or six years or indefinitely, as it were? Richard Bevan: Certainly in 1992, when Graham Taylor, Howard Wilkinson, Lawrie McMenemy and a couple of others formed the LMA, it was very much because there were issues between coach and manager, whereas in recent years, it has gone the other way. We are representing and have represented— employment issues in particular—over 40-odd coaches so far this season, and those coaches have been represented because of the request of the manager. Certainly there are some cases where managers will take their coaches with them. In terms of managing the conflict, I think there is conflict in every walk of life and it is how you embrace it, so if we were dealing with a manager and a coach in the same club, where there was a breach—I have not had to do that in three years—we would use separate legal advisors, as with the PGA, if they were dealing with golfer on golfer. Steve Coppell: I think you would find as well most clubs within their academy system have fairly stable environments. I think they were designed to not be affected by the incomings of a new manager, so the development of young players is very much insulated from who is managing the club. It is not a separate entity, but it does have a special consideration. Q410 Alan Keen: At what level would you go to? Academy would be the obvious level that you want to perpetuate for years. In my own team, Middlesbrough, they set a— Steve Coppell: Yes, development, you’d go to development level, I think. It is the prerogative of any owner or manager to employ his inner sanctum staff: people, like any relationship, you have to trust, and that trust is usually developed over time. Q411 Alan Keen: Even with physio, would the new manager want to bring his own physio in, for instance? Martin O’Neill: That is possible. I take your point, in principle as much as anything else. Any new manager who is stepping into a football team and will concern himself immediately with what the youth team is doing is deluding himself. He should take himself off to the nearest insanity place, because he is not. He is dealing with football. He is dealing with football first team issues. That is what his job consists of. It consists of that immediately. If he gets the time, if he gets, as they have often talked about, these five-year plans—I have never seen one myself—where someone steps in and has time to look and see what is happening at youth team level, he might get an opportunity to have a look at the youth team within six or seven weeks of coming into the football club and then it is up to him to take as much interest or as little interest as possible. Steve has made the point that they are usually almost separate entities and chairmen like them to be separate entities, because the chances are if the manager is going, it would be because of first team results, obviously. Yes, a manager will take in some of his staff, but surely that is something that the club must be thinking about when they are about to sack the manager in the first place. Q412 Dr Coffey: Mr Coppell and Mr O’Neill, you have both been exceptionally distinguished players and successful managers, are you concerned that the influx of foreign managers is restricting the opportunities for English or UK managers? Steve Coppell: Personally, I am. As an English coach, I feel to a certain extent offended that we don’t have an English manager of the national team. Dr Coffey: That was going to be my next question. Steve Coppell: As you know, I think the LMA at the moment are working with initiatives to try and educate our coaches and managers to be better at their craft so that in the future that won’t be an attractive option. The same with our players; to have so few of our players playing every week, every Saturday in the Premier League I think is something that we should be concerned about as regards the overall picture of the success of the national team. I just think it is wrong. We should have more protection within our game for talented people. The responsibility is with the clubs to produce the best home-grown players they can. It is their responsibility, without doubt, not to cherry-pick around the world and invite those players to come and take advantage of the finance that has been generated within our game. Similarly, with the managers and coaches, there should be a more defined route of progress, educational process, which again the LMA are taking a lead on, so that when an owner of a club, whether he be English or foreign, looks at the contenders out there to run his club, he will say, “Well, the English system is the best system, they give the best education and time has shown they produce the best results”. Richard Bevan: Can I give two important facts before I pass it on to Martin? One, there’s only nine overseas managers in the 92 clubs. It is a misconception there is a lot, but obviously in the same way that the best players in the world want to come and play in the Premier League, so do the best coaches and the best managers. In terms of having an Englishman as our English manager, there are about 60 Englishmen managing in the 92 clubs, and I come back to the training point I made earlier: what are the FA doing in terms of vision and strategy for four, five, 10 years ahead, and are they saying, “Are we identifying the talent? What are we doing to help train those individuals to improve, so we end up with a dozen or so candidates to become the next England manager?” Martin O’Neill: My view was concurring with Steve’s, but having listened now to Richard and those statistics, I think I will keep quiet. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 102 Culture, Media and Sport Committee: Evidence 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE Q413 Dr Coffey: I was going to ask, do you think the FA should restrict the manager to being a UK national, but I think there seems be consent that that is true. Steve Coppell: I think the qualification rules for the national team now should apply to the manager as well, which doesn’t restrict foreign managers but it makes it more difficult. Richard Bevan: We have about 10 managers, who are managers of other national teams as well, Finland, Panama, Uganda, India. Dr Coffey: Tony Adams, Azerbaijan. Richard Bevan: Yes, Thailand, and 90-odd guys working abroad, so as we train and develop our young coaches, they will go abroad to get experience. Q414 Dr Coffey: From what I have taken from what you have suggested, the LMA is taking the leading role in educating managers, but should there be more mandatory levels of UEFA licensing, not just in the Premier League, but up and down our leagues? Richard Bevan: If you look at the number of UEFA qualified coaches in this country, it is around about 2,700. If you compare that to Germany, it is 32,000, to Spain it is 29,000 and Italy is about 27,000. But I think what the National Football Centre will bring is a focus on quality, not quantity, and as well as the AB and the pro licences. We have about 140, 150 coaches with the pro licence; the figure in other countries in Europe is over 1,000. I think the key for a coach, a young coach, and a manager is that there needs to be a clear pathway. If you go to Holland and you want to become a coach or a manager, there is a very clear pathway of how you go up the ladder. If you have not played the game or if you come out of the game early and you want to become a coach, there hasn’t been that clear pathway. Although we are leading the way, we are not trying to take control of coach and education management, what we are trying to do is to work in partnership with FA learning in order to ensure that the people we represent get a broader cross-section of training. In League 2, for example, it is my opinion that you need to probably understand the commerciality of the club if you want to survive longer than 12 months. You need to understand what the ambitions of the Chairman are, you need to understand the budgets and the cash flows and maybe even read a balance sheet. Q415 Ms Bagshawe: I just want to come in on a little supplementary to Mr Coppell’s answer there. You said that it is the responsibility of the clubs to develop players for the national team and that it is a great shame that we have so few English players playing in the Premier League. Would you support some kind of quota for English players per team in the league? Steve Coppell: Yes, I would. I would, to protect our own talent and to put more emphasis on clubs to produce the talent that will play for England in the future. Again, it is a pathway, as Richard was saying there. If you sign for a big club now, you know that the big club, unless you are the top of the tree, are going to buy somebody from somewhere around the world, and that makes our league game more attractive. If you go anywhere in the world, they will be watching Premier League on the television in the afternoon, so it is that dilemma. But as somebody who played for his country and loves the England team, I want the England team to almost run parallel with the success of the leagues. Is it possible? I don’t know, but I think we can just move a little bit more the balance away from the league itself towards a national team. Q416 Ms Bagshawe: What about you other two gentlemen, quickly? Martin O’Neill: I think it would improve Mr Capello’s choice of a game on a Saturday afternoon anyway, if he is getting to see more English players playing in the Premiership. Richard Bevan: Personally, I am less about quotas, less about restrictions. I am more about better governance, better people leading our game, a more unified approach, an agreed strategy, and if we had those, we wouldn’t have to worry about quotas. Q417 Philip Davies: Just pursuing this theme, shouldn’t it be the free market and it all be done on merit, and presumably given that it is such a resultsorientated business, if the best players are English, they will get in the team; if they are not, they will not get in the team? Do you not think that if you had this kind of—laudable though it is—aim to force clubs to develop more English talent, would that not in itself damage the Premier League in the sense that one of the reasons presumably why there is so much money in the Premier League is because of all these stars come from around the world to play in it? That is the thing that gives it the kudos, why it is so important. Would it not damage the league itself to do that? Richard Bevan: I think on that particular point, you only have to go to the top of the tree in the FA, and what you need is you have to first of all identify players, identify the talent. Secondly, you have to make sure they have enough hours to be trained. Thirdly, you have to make sure that the coaches that are coaching them are the best in Europe, and the point where you do need assistance, which is why I am sure the Premier League have gone for their 25man squad rule, and the use of a minimum of eight players locally, I think that has to do with making sure that the Premier League and the FA have the ability to—I have just forgotten the thread. The point I was making, the last point, is that you must create opportunities. I think the Premier League and the Football League, it is about opportunities for our domestic players, that is key. Steve Coppell: If the purpose of the English game was to provide the best and most exciting league throughout the world, I think you could say that we have been fairly successful, but if the purpose of the English game was also in combination to make a very competitive England team, which every two years would make us very happy, rather than making us reasonably unhappy, then we have been unsuccessful. We need to try and combine the two, and I don’t even know whether it is possible, but I think we can make a better fist of it than we are at the moment. Again, it is all down to that responsibility of clubs and the cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 103 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE Premier League to a certain extent to maybe shift a little bit of power towards the national game. Q418 Philip Davies: Can I ask about the qualifications issue for football managers, because every so often it seems there is a controversy. The last one—Alan will know more about this than me—the one that springs to my mind, I think, was Gareth Southgate, who I think had been appointed as manager of Middlesbrough and he hadn’t gone through all of his coaching qualifications and all the rest of it. Where do you stand on that? Just because somebody does not have a particular qualification does not surely mean that they are not going to be any good at managing a football club, does it? Richard Bevan: I think if you are going to become a surgeon, you wouldn’t expect a surgeon not to have the right qualifications. Q419 Philip Davies: It is the same parallel? Richard Bevan: I think it is a good example, yes. If you take Europe, we are the only country in Europe that doesn’t have mandatory qualifications, although the Premier League do now, and the Football League have been moving very closely towards that. In Gareth Southgate’s case, it was also because Steve McClaren was taken by the FA to become the manager of England, and they wanted to promote him through. There have been four or five occasions. What the Premier League are doing is saying that as long as the manager is going through his qualifications, they do on occasions and have made about five or six exceptions. Q420 Philip Davies: My reading of the situation is that somebody like Martin O’Neill has been a tremendously successful football manager, not because of his coaching qualifications—if you do not mind me saying so—but because of your ability to inspire the people that play in the club, your man management skills. It always strikes me, as an observer, that the ability to manage people and to inspire them to play better and to fulfil their potential is a far more important asset in being a successful football manager than necessarily the coaching qualifications that you have. So surely somebody who is a great man manager, somebody who inspires people, who might not have all of the coaching qualifications, I put it to you would prove ultimately to be a more successful manager than somebody who cannot inspire the players in the same way but has all the coaching qualifications. Richard Bevan: I think the point you are making is a good one. At the same time though, being a successful manager is about leadership, management and coaching: can you teach leaders to be better leaders, can you teach managers to be better managers? Of course you can, and in business, if you were going to be looking at any of the plcs, do they train their senior team, their managers? Yes, they do. So you want to provide the opportunity for a coach to have as many qualifications, to have as much learning as possible to survive and be as successful as he can as an individual. Steve Coppell: You need to have qualifications. You can’t just say, “Open house, who do we want to be manager next week?” I think it is a requirement of the trade that you do have some basic knowledge of coaching techniques. As you say, it is all about man management. I am not sure whether Fergie has all his coaching badges, but you look at the success he has had down to man management. Gareth Southgate had spent 15 years in the industry as a player. It is a natural progression. He wasn’t a rookie by any means. He had been in many dressing rooms with many top managers and obviously learnt an awful lot from them. So I would say qualifications, yes, but it shouldn’t not allow people with man management abilities to be able to do the job. Richard Bevan: There is also a big appetite among our members. We recently had the Royal Marines working on a particular course with our guys, there were about 40 members. We run coaching clinics and, in my time, there have never been fewer than 70 managers and coaches turning up on one particular day. There is a big appetite for learning as well. Philip Davies: Martin, I prayed you in aid. Martin O’Neill: No, I am so pleased you mentioned that. I am beginning to agree with you. I have always been a bit sceptical about—Richard won’t like me for saying this—the licence, the procedure you go through. I do accept it. I accept because, again, you have to do something about it. It might be the worst analogy in the world, but it might be a bit like getting a driving licence, you have to pass the test at some stage or another. Will that be how you drive in the next two or three years? Well, if it is anything to do with my driving, it certainly wouldn’t be, but I think that there are certain things that you can learn during these courses. I must admit, I don’t have my licence myself at this minute, and hopefully it won’t debar me from going back into the Premiership. I will certainly do it, but I will do it because I want to do it. I want to do it, because there are things that I can learn from it. Now, I don’t for one minute suggest that when I take a coaching course just for the purpose of passing an exam—it will give me that experience, of course, but will that be any good to me in the heat of the moment when I am having to make a decision as to whether a game can be won? I am not so sure. Maybe that is just experience, but I do accept the point. I didn’t always think this, but I am coming round more to thinking that the licence is there for a purpose. As you say, I am not even sure that Alex Ferguson has this particular badge. It hasn’t prevented him from being one of the greatest managers of all time, and I am still debating the point. Richard Bevan: Well, 50% of first-time managers never get back into the game when they get the sack, and so— Q421 Philip Davies: I was going to move on to the respect bit, because as we have mentioned Alex Ferguson, it seemed a good point to ask just briefly— the FA tried to introduce a respect campaign to help the amateur game as well, parents not having a go at the referee and all this kind of thing. As we touched on Alex Ferguson, what is the League Managers Association doing to make sure that managers set the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 104 Culture, Media and Sport Committee: Evidence 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE best example of all to their players, which is not to challenge the referee’s decisions, that the players therefore do not challenge the referee’s decisions, because unless the managers and the players at the highest levels of football show some respect to the referee, there is no chance of anybody lower down the chain doing it. Richard Bevan: The Respect programme is a very important programme, and when the FA and Lord Triesman launched it, we were, and still are, very supportive. I was in a meeting yesterday, and am pleased to see that the results of the Respect programme have been working, that there has been turnaround in terms of the amount of referees, there were about 7,000 amateur referees leaving the game a year, that has been turned round. In terms of managing at the very top and the volcano—I think they call it, sitting on a volcano—at times there will always be moments of high emotion, but behind the scenes our guys are extremely hardworking. We have completed a document and we have meetings on a regular basis with the PGMOL, the body that works with the referees. We had 80 managers working over 500 hours, chaired by Greg Dyke, where we came up with a number of recommendations on how we could help referees, and that is on an ongoing basis. Steve Coppell: The only thing I would say, after a game that has been very intense and the be-all and end-all of your week, your preparation, your thinking, everything you do, 20 minutes after the game finishes, you have somebody asking you questions, it is very difficult to be even-tempered and conclusive about what happened. So I think it is just the passion of the moment. It is what makes our game, it is what all the supporters want to see, they want to see the management team show passion. Sometimes words don’t come out the way you would mean, but I don’t think it is a bad thing. I think there is an awful lot of respect emanating—certainly I call Sir Alex the don of managers. He is the don of managers. He does so much for the game that is positive and I think so many of the top managers are of that ilk, but just for 20 minutes sometimes you just don’t think straight. Richard Bevan: These guys do a fantastic amount of work, as I said earlier, behind the scenes, and something that people are not aware of is we have been debating for the last three, four weeks in terms of what happens in post-match interviews, in terms of not answering any questions regarding the referee. They tried that in Scotland recently and it didn’t hold together, but it is something that we are looking at. There was a case with one manager that said after the FA Cup match that he didn’t want to complete the interview, but he was told that he was legally contracted to do that, which wasn’t the case in the FA Cup, and, again, his emotions were very high. You look at the likes of Peter Jackson up at Bradford, he has three or four games to prove his worth up there and to hopefully get a full-time contract there running the club, not as a caretaker manager, and one decision could affect that. But it is an entertainment world. At the same time, our guys behind the scenes do very much care, they are very positive about it. As I said, we had a five, six-hour meeting on the subject yesterday. Q422 Damian Collins: There has been a lot of discussion about debt and profits in the game. How much pressure is there on football managers to spend more money? Steve Coppell: That is a good question. There is an awful lot of pressure on most managers not to spend money. There are very few occasions where a Chairman has said to me, “Well, why aren’t you spending the money that I’ve given you?” The reality is I think you know you have to compete. I think most managers, given the opportunity to spend money, would rather see that money running around on the pitch than sitting in a bank account gathering interest and looking after the financial security of their club in the future. You know you are managing in the instant and you have to get results. You are judged on results, so if you get the opportunity to spend money—but again, I have never known a Chairman who has allowed me to spend more than he has offered. Q423 Damian Collins: But you must know in your conversations with the chairmen of football clubs that if they have an ambition to reach a certain level, it is going to cost them money, and if a manager wants to stay in a job beyond the end of the season, he knows he is going to need money to do that. Steve Coppell: I very often say to people in football, “The success of football is easy. If you have the money, you buy the best players and then you have the best team. It’s easy”. But most clubs don’t have the freedom of the finances to be able to do that, so every judgement call you make then is just trying to get the best value for the money you spend, and that is the art of management. Q424 Damian Collins: Mr O’Neill, I think it was reported you spent £120 million in four years at Aston Villa, and that was not enough even to get into the Champions League, but to get within touching distance of it. I appreciate you cannot talk about Villa directly, but I would be interested in your views on this: are managers in a position where effectively they are driving debt within the game, because they have to be advocates for spending more money? Martin O’Neill: Well, one thing I will say, the figure was much, much less. What generally happens in a football club is they talk about the amount of money that is spent on players coming in. What they forget to do is that you have to attempt to balance some capacity by letting other players go, and in actual fact the figure that we are talking about was closer to £70 million net over four years. Yes, there is seemingly an outside pressure, there is a pressure from supporters who feel that when a club is taken over, the owner, the Chairman, has just carte blanche to put this into a different stratosphere when, in actual fact, most people would want to run football clubs as a business. As Steve has just mentioned, I am not so sure that there have been that many chairmen who would say, “Well, here’s a spare £50 million. Go out and see what you can do with it”. I think that prudence seems to be the key word these days. But, yes, it is a difficult one. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 105 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE You have to try and compete at some stage or another and if you feel that there is something out there, someone out there who can help, of course you will have these discussions. But the owner of the football club will have the ultimate sanction. Q425 Damian Collins: Do football clubs have a strategy beyond spending as much money as they can to try and sustain a league position? Some clubs are striving to either get into the Premier League or compete at a higher level within it. You have talked about youth football and other things within the club, and clubs have limited resources. It would strike me that a club would need a strategy to say, “We have a certain amount we can spend. There is a certain amount that has to come from internal development within the club, a certain amount we have to raise through a better commercial strategy”. Do clubs have serious strategies like that, and given the management might be there for a relatively short period of time, what role does the manager have in that? Richard Bevan: That will vary dramatically from one club to another, and there are some very good chairmen and boards out there. We spoke earlier about a model, Stoke City, Peter Coates, the Chairman there, is very experienced—it is his second time, I think, at Stoke—and the chairmen at Crewe and Doncaster Rovers and numerous chairmen and boards are very talented and have very successful models in that they can break even at the club and operate in a positive cash flow. I think it will depend upon the boards. I find that particularly on the employment tribunals and the legal issues we have. About a third of the clubs are probably struggling with some of the quality of the leaders of their clubs and the way that they operate their model. Q426 Damian Collins: Mr O’Neill, do you think we will ever again see a club like Nottingham Forest with a European Cup? Martin O’Neill: Funnily enough, I was thinking about that last night. Again, it is a dream. I think it is highly unlikely, highly unlikely, the way that football has gone in the last 20 years, and I think that would be a shame. It doesn’t mean that there couldn’t be a manager who could bring all of these things to pass. You could inherit a very, very good youth team in a couple of years who might come through, if they stick together, and I am talking about the Manchester United side of about 1994, 1995 time, but I suppose that was at Manchester United. Nottingham Forest are a provincial football club, steeped in the history now with two European Cups. I don’t think it is impossible, but I think it is highly unlikely, certainly in the 20 years. Richard Bevan: Perhaps the expectation has come away from winning the Champions League to getting into the Champions League, as Everton did in 2008, and getting to the last 16. That was obviously a major success. Q427 Damian Collins: I record for the record that Steve Coppell was giving a no to that. Steve Coppell: That was a massive no. Absolutely impossible without the massive support of a benefactor. If you are producing a team, if you have a great youth team then in the next transfer window you lose your three best players. It is the very nature of football now. Damian Collins: One final question, if I may, I know we are getting tight on time. Martin O’Neill: I wasn’t expecting him to be as strong as that. Q428 Damian Collins: I could see him vigorously shaking his head, so I thought I would give him the chance to put it on the record. One topic that we have talked about quite a lot in previous hearings is the football creditors rule, and when we discussed it with the Premiership chairmen and Chief Executives they expressed a view they thought the rule should go, and that without the football creditors rule clubs would, out of necessity, need to be more transparent in the way they deal with each other. Clubs would be more cautious about selling a player to a club if they didn’t know that that club had the money to pay for that player and that it would be fairer, because it seems unfair that a football club with smaller creditors from the community that they serve lose out when a football club the other end of the country is protected by it. As managers, I would be interested in your views on that. If the football creditors rule went, do you think it would make a difference to the way you do your jobs and do you think it would be good for the game? Richard Bevan: First of all, before I pass on to these guys the football creditors rule doesn’t apply to managers and coaches. It is obviously something that has had a lot of debate recently and probably still needs to have more debate, but I think that would come if the clubs could have a licence, in looking at how they would operate. But it does need a debate, and certainly the man in the street running the small printing business and not getting paid is an issue in today’s commercial society around football. Martin O’Neill: Are you referring perhaps to transparency? For instance, I have never understood this idea about a player being sold to another club and it was a non-disclosed fee. I have never been into that idea. Q429 Damian Collins: No, I think what I was referring to is if a player is sold to a club and that club might be in financial difficulties. The football club selling might not be as concerned that it might not get its money if the payment was being paid in instalments, because they are protected by the football creditors rule, but if that rule didn’t exist a club might want to know a lot more about how a club is going to pay for that player. Martin O’Neill: Obviously. In the temporary absence of the Chairman, Mr Adrian Sanders was called to the Chair for the remainder of the meeting. Q430 Mr Sanders: If the Chair were here, he would be calling on me to ask the next question, which is what impact has the increased level of overseas ownership had on standards of governance in the English game? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 106 Culture, Media and Sport Committee: Evidence 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE Richard Bevan: We have about 11 or 12 overseas owners in the Premier League. To be honest, whether the owner comes from America, Birmingham, Australia, Wales, wherever they come from, I think that they need to be operating within a much tighter environment. We would like to see a licence going from the FA to clubs, a framework where a new owner, wherever he came from, had to work within much closer guidelines, and that would protect the future of the club and also give more integrity. Certainly, there are the UEFA fair play rules, and there are still some issues around ownership and offshore ownership and transparency. But I think it is not so much about overseas owners, it is more about the quality and making sure the framework is correct. If you do have overseas owners coming on board, as we have recently, I think we have to—the leagues and the FA and the media—impart upon them the importance of the tradition, the philosophy, the supporters and the actual community, and I think if we do that—in many ways the Government are also a union for supporters. It is representing— Q431 Mr Sanders: Would you see this in place of the fit and proper test or is it in addition to the fit and proper persons? Richard Bevan: Do you mean the licence? Mr Sanders: Yes. Richard Bevan: The fit and proper persons test or the director test, I see that as part of a licence. Steve Coppell: I think good governance is all about protection. You have to protect the people within the game and I think the people who need to be protected on this particular point are the supporters, because that is the only loyalty in football, the supporter for his own club. Almost every other loyalty can be bought, but the supporter for his own club, when he is at the whim of bad governance then he is vulnerable and I think everybody within the game is going to be very mindful of that. Q432 Mr Sanders: Martin, can I ask you, because you are in a unique position. You will have experienced a club run as a committee at Nottingham Forest; you have experienced the traditional English club ownership model under, say, Doug Ellis; and you will have experienced foreign ownership at Aston Villa. How would you compare the differences between the three? Martin O’Neill: Yes, I joined Nottingham Forest way back in 1971 as a 19 year old player and they were the only team in the Football League who were run by a committee. That of course, changed in—you may say it might have changed about 1990-odd or whatever it was. It changed in January of 1975 when Brian Clough arrived, because it was no longer a committee, it was his decision. It was interesting for those couple of years to see how that committee was run. Of course, I was a young professional footballer at the time, more interested in trying to break into the first team, but I did not know the basic difference between that and the board. I felt that the committee at Nottingham Forest seemed to run itself reasonably well at that stage. It did not find itself in serious debt until 1979, when they decided to build the East Stand. They needed £2 million, would you believe, and I think they found a little bit of difficulty, and even winning the European Cup at that time did not cover the cost. So that was the first time that I realised that the committee could find itself in a bit of difficulty, of course there were shareholders and such things like that. I have been involved with football clubs where they have been run by boards. I have been in board meetings too; those are interesting in themselves. I get back to the point that Richard and Steve make. If you have good governance, I think that will transcend most things, and I think that is the best way for me to explain it. If the club is run exceptionally well, has transparency, obviously, and I suppose if the supporter believes in the way that club is being run and thinks that this club can have a future for a start and, secondly, can have some ambition, I believe then that that is the best way. If there is a comparison between the three, it would have to do with the governance of the club itself, not the way in which it was done. Q433 Jim Sheridan: Can I ask a question about the role of football players’ agents? We have the extreme example of Wayne Rooney, who made it known that he was not happy at Man United and then regained his enthusiasm when another couple of zeros were added to his contract. You guys depend in your job on getting the best out of players, they have to remain focused on what they are supposed to be doing in terms of playing football, but if players are being distracted by being promised extra money, or moving clubs, or to stop being players, that will impact on your job, I would imagine. I was trying to get a feel for what managers think of agents, and should there be a code of conduct between managers and agents. But also should the manager and the player have the same agent? Richard Bevan: That is a big question. I think the role of the agents is something again, a little bit like the governance issue, where there will be good and bad out there, and we probably experience both. There are 400 licensed agencies, I think, in the UK. Our biggest concern is that FIFA, I think in 2012, is going to be relinquishing their regulatory control over agents, and I think that is going to be a major problem. I think, probably because of legal issues, administration issues, if you have agents bringing young players from country to country, indeed from continent to continent, you are going to have a lot of issues. Certainly, from my experience, I have seen a lot of good agents working. Probably the biggest negative for me is the size of agency fees. I think that is something I have been extremely surprised at. Steve Coppell: From my experience again, as Richard said, there are good and bad. A good agent is a huge ally in dealing with some players, particularly difficult players. A bad agent needs to be regulated, and again, that is where you need guidance from your governing body, to make sure it is not just a code of conduct but actual regulations whereby bad agents are eliminated. Martin O’Neill: You would hope that when you sign a player that if he signs, for instance, a four year deal, that you would be hoping that you would have some control of this. I think that this might be a separate cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 107 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE issue, but the control has left the football clubs and gone to the players and therefore the agents. I think that is one of the major changes I have seen in the game. When I started out, the player had no control whatsoever, he was at the behest of the football club. Now it has gone full circle and I think the players are now in charge, which is a bit of a shame. Richard Bevan: Recently I heard it is a bit like the wild west out there, we can’t do anything about it, we are where we are, and I think that is an inappropriate approach to it. Q434 Jim Sheridan: I think the fundamental problem as I see it is that there is an incentive for agents to move players on, simply because of the commission they get, so it is in their interest to keep moving players on. The other factor is the fact that the agent also is paid by the club. Would it be fairer if the player pays the agent rather than the club? Richard Bevan: I think you probably need to look at other models around the world and pick up experiences. For instance, if you take America, in a number of sports the agents’ fees are paid centrally. I am not necessarily saying that is the right way to go, I am just saying there needs to be a focus on the framework and if there is not it will be chaos. Q435 Jim Sheridan: Steve, you say you think that agents should be regulated? Steve Coppell: I believe so, yes. Q436 Jim Sheridan: Would you agree with that, Martin? Martin O’Neill: Absolutely. Q437 Damian Collins: Do you think the Bosman ruling has had an inflationary impact on players’ wages? Martin O’Neill: Yes, I do. Interestingly, I think that you can trace an awful lot of these questions today back to Bosman. Bosman set out in the first place with right on his side, because he had been given a free transfer, his money for the following year was going to be less than the previous year. In English football he would have been given a free transfer and therefore he would have been free to negotiate another deal with someone else. But he was held back. He was held back by the club, who had freed him, and were not prepared to keep him but were looking for a fee. He took this to a higher authority and won his case, and I think quite rightly won his case. Had he been dealt with in England, it would have been perfectly all right. But suddenly, just from that, the fallout from that was extensive, so much so that we were possibly debating the idea that football itself could have its own rules, and I think there is certainly a case for that. Because the minute that there was a possibility of a player having a bit of a difficulty with his contract, suddenly he could go to European law, and find a loophole there, and sort things out. Clubs were finding out loopholes as they were going along. For instance, a player with two years left of his contract was in the position, by some sort of law—made way back, I think, during King John’s time—that he could actually get out of his contract, and certainly in his last year, could buy himself out and agents were using these to manipulate situations. Bosman himself set out on the side of right, but a lot of fallout from that has happened. It has triggered a number of situations which I believe could have been resolved early on. Q438 Jim Sheridan: Can I just clarify the question I asked about, is it unhealthy or bad practice for the player and the manager to have the same agent? Steve Coppell: I would say it is bad practice, with the potential of being unhealthy. Martin O’Neill: Yes, absolutely. Conflict of interest would almost certainly take place there. Steve Coppell: With the Bosman thing, I think we can realistically say now, for most good players, a contract is probably at least 12 months short of the reality, because you know you have to protect that asset. Q439 Damian Collins: You have to renegotiate before you get to the last year? Steve Coppell: Yes, very much so. At least 12 months. And that, with the combination of increased TV income, has made it very inflationary, yes. Q440 Alan Keen: Because we are short on time, I am going to try and be brief. It is the main structure of the game in this country that needs changing. Do you agree that it should be the FA that is the body that is strengthened so it is superior in power to any other body in football? That would be with an LMA representative on there as well, of course. But it is the FA surely, that must be strengthened to be the regulating body above any other part of— Richard Bevan: I think, if there is one thing that can come from the select committee and the encouragement to the game to do various proactive things, one of them will be to work together to unify the family and absolutely a pyramid system in which the FA are on top. The FA are the representative of FIFA and UEFA. At the moment the FA just manage the business. Like Ian said earlier, I think a lot of the criticism of the executive is unfair. In my three years I have come across a lot of fantastic executives in the FA and in the Premier League as well, and their speed and their communication and the discussions we have are very good. Unfortunately, the framework in which they operate does not encourage them to be innovative, proactive and, most importantly, it does not encourage leaders. It is the framework that needs to be changed and if you do not change the framework then they will not develop. Q441 Alan Keen: Do you agree that the PFA also, along with the LMA, should have a representative on that? Richard Bevan: I think, if you wanted effective governance in the world we live in, whatever sport it was, if you do not embrace the players, the coaches, and certainly, in our case, the managers, then you will fail in delivering that participation. It is only when you get participation in decision making, if you achieve that then you will find people are on the same wavelength and we will deliver far greater success. A little bit like, I was talking earlier about Germany and cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Ev 108 Culture, Media and Sport Committee: Evidence 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE Holland, where you do not see the turf wars, for want of a better way of putting it. Martin O’Neill: Richard had said earlier that we do have the determination, we have the passion, and I think we have the knowledge, although that might not be universally accepted. But I do believe that we have an important role to play, simply because we are, or are supposed to be, the most important person at the football club. Richard Bevan: I think there has been a fair amount of talk as well, about whether there should be independent directors. If you had a very efficient structure in the way we have just been mentioning, then the need for independent directors would not come out. But you do need, as it stands at the moment, guys who will challenge, and the PFA and the LMA represent people across all of the leagues. I think that is very important. Q442 Alan Keen: Do you agree that the independent directors, the sort of people who would be appointed, would listen to you? At the moment you do not have that voice at the top. Richard Bevan: I think we have the voice, insomuch that the guys that are members of the LMA have got a powerful voice collectively. We try to use that very professionally, whether it is the professional way forward document; we have a current review with Southampton University going on in the technical area; we are looking at transfer windows; we are looking at a whole range of technical issues. But there is not a technical committee in the FA. The Technical Control Board they got rid of in 2006. Then you can look at the true governance, you have the Professional Game Board, which sits below the FA, and the Professional Game Board’s remit is the finances of the FA yet the Chief Executive and the Chairman of the FA do not have a vote on that, which is why I believe Adam Crozier resigned. Q443 Paul Farrelly: We have run over our time, I am sorry to detain you. I only have two questions on which I wanted to seek your views. Firstly, with regard to the game and the FA, we went to Germany, and without being naive and taking everything at face value, we got an impression of a more collective ethos, particularly when we were told the story of how they reacted to their disappointing performance in Euro 2000, to try and change their game. My specific question is about youth development. Do you think that the current proposals for youth development in the country—with all the different interests involved, including the Premier League—are right, or is there something better that we could be doing? Steve Coppell: To be honest, I do not know the answer to that. I know there is progress being made at the academy level at the moment, and changes are afoot. But in any walk of life you are judged on results and if we are not getting results, if we do not have the input of young, home-grown players coming through the way we would like, to give us a very competitive national team, then we must change, we must do something different. We must have a more innovative approach to how we are producing our players rather than just leaving the blinkers on and saying this is what we have done for so many years and we are all right. We have to be more open-minded and flexible, I think. Richard Bevan: Youth development is massively important. Our Chairman, Howard Wilkinson, who sadly could not be with us today, has a lot of good thoughts and views which he is imparting upon key people in the game. I think the responsibility for youth development essentially should be with the FA, but the Premier League are taking some key movements into their new academy system. I think what is important is that they embrace the Football League, which they are in negotiations with, and I am sure they will come out together. But what is important is the likes of Watford and Crewe and Southampton and Middlesbrough. Those clubs are doing fantastic work with youth development. They are still incentivised, they are still encouraged, and they still see that as an important role. If you look to Germany, they are spending £500 million on their youth development and their structure. But they are more or less one organisation and so they do work much closer together. But I absolutely believe that the Premier League are a very efficient organisation. If they were to work closer with the Football League and indeed with the FA, giving clear guidelines, then we would be in a better position. Q444 Paul Farrelly: I am just wondering, Martin, whether over this issue we can square the circle by persuading people to give away some of their own money and share it out a bit more, if not in their own interest, then in the national interest? Martin O’Neill: Yes. I did not realise until I read it a few days ago that each member of the German World Cup side, the 23 players, had actually come through a Bundesliga academy system. If you tell me that is a fallout from 2000, then that is very, very commendable, and there are parts that we could pick up from that. Like Steve, I am not really sure—I will only go from my personal experience at club level, I am all on for the youth academies. When I went to Aston Villa, I did not ask them to go and produce four or five players within a year. But I hope over time that we will get some very, very good players coming through the football club, and I think that is happening at the moment, and that is exceptionally good news. Steve also mentioned we are in the results business. To try and see that through, to see the end of that fiveyear plan that a manager and owner or Chairman seem to set out in the very first place, you have to be winning games at that first team level. And you are hoping by the end of that five-year period that you might have at least three or four of those young academy players playing regularly, consistently well in your team to hold down a place in a side that is doing very well. Richard Bevan: The investment in the National Football Centre is fantastic. 1999 was the year when the FA bought the land. They probably should have built the National Football Centre then, instead of building Wembley and wasting £92 million on legal fees around Wembley. That is probably a lack of strategy and vision. But the hardest thing I think for the Premier League and the Football League and the cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG05 Source: /MILES/PKU/INPUT/011145/011145_o005_michelle_HC 792-v corrected.xml Culture, Media and Sport Committee: Evidence Ev 109 22 March 2011 Richard Bevan, Steve Coppell and Martin O'Neill OBE FA, and indeed any of the other countries that invest time and money in youth development, is creating the opportunities, that is the hardest thing of all. You can find great coaches, you can invest in those sort of structures, but creating the opportunities for these guys to play is the hard part. Q445 Paul Farrelly: Burton, the brewing capital of Britain, in my county of Staffordshire, leads me neatly to my last question, which is about supporters, which is what this inquiry really picked up on in the first place, from what the Government and various political parties were saying in their manifestos. As you all know, a fortnight, particularly at this stage of the season, is a long time in football. With Stoke City, if you do not beat West Ham in the quarter-finals of the FA Cup to get to the semi, and then if you do not beat Newcastle United 4–0 to stave off the relegation battle, within a fortnight you can go like Tony Pulis and Peter Coates at Stoke, from walking on water to being dead men walking. You hear supposedly sane and rational supporters, who are not idiots, grumbling and you just want to tell them to get a life sometimes and get some perspective. So given that, my question is, you have been under these pressures, do you like supporters, and if the answer is yes, what role do you think they and their organisations have in the governance arrangements of clubs in the country? Steve Coppell: We exist to make the supporters happy. They are the people that need to be entertained to continue our industry, so they do have a massive voice. How that should be channelled, I do not know, because, as you mentioned with your own club, it gets almost so centred to their own team that you can’t see the bigger picture. But without doubt, we have to keep our customers happy, they are our number one bosses and they have a massive voice to say in the way football in this country is going to be developed in the future, whether it be paying through the turnstiles or paying for TV. Someone with a better footballing brain than I will determine how that can be done, but they have to have a say in the way our game is developed. Martin O’Neill: Are you concerned about the madness that Stoke City’s fans are showing at the moment? Q446 Paul Farrelly: I would not want to single out one club. I am sure it is across a lot of clubs in the second half of the division. But the question really is, Martin and Richard, should there be specific structures imposed, specific models imposed or, within the realms of involving supporters, should the clubs be allowed to evolve their own models? Richard Bevan: Supporters’ trusts operate successfully in a number of clubs, and absolutely they are key stakeholders. On the board behind you is the word “participation” all the way across. I think it is participation—they need to have their voice listened to, they are absolutely key to the game and the more that the Football Supporters Federation can get a seat at the right tables, then the better for the game. Martin O’Neill: Steve mentioned earlier, I think it was a good point, that the only loyalty in football is the supporter with his football club. I think that they always want the best for their football club. They want the very, very best. If they have a good manager in charge, they want a better manager in charge. I just think it is the modern day approach to the game and I listen to the occasional phone-in, the website, this instancy. You want to be better, you want to be better than the previous week, you want to be better than the previous day. That fortnight you talked about where the manager and Chairman can go from walking on water to being dead men walking, that exists at every single football club. When you have won a few trophies, as Sir Alex Ferguson has done, just a few, then I believe that you can transcend that. But we are mere mortals in this game and we have to live with that. I believe there is a touch of insanity about it, but I do not know how it is going to be eradicated. Supporters are the most important people because they will still be supporting the football club. How you involve them, I do not know. Would you be thinking about a renegade group joining the board, or something like that? I just really do not know at this minute, and I have not thought it through. Q447 Jim Sheridan: I think the sad reality is, everybody I have spoken to agrees that supporters should have some sort of tangible role in football, but there is always resistance. It is like the constituents who always want to play a part in community but they want it somewhere else. That is exactly what we find with football. Yes, there should be a role for supporters, but I am not going to give up my position to give it to a supporter. Martin O’Neill: I must admit, honestly, I really have not thought it through. Mr Sanders: I am sorry, gentlemen, I think we must wrap this up. You said earlier that you thought somebody was going to go imminently. It almost makes Martin’s point. I believe it is Ronnie Moore at Rotherham, who only a few weeks ago was in fifth position in League Two, and five poor results and it looks like he has been shown the door today. Can I say a very big thank you to Steve Coppell, Richard Bevan, Martin O’Neill, for giving evidence today. It has been a very good session, thank you. cobber Pack: U PL: COE1 [SE] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 110 Culture, Media and Sport Committee: Evidence Tuesday 29 March 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe Dr Thérèse Coffey Damian Collins Paul Farrelly Alan Keen Jim Sheridan ________________ Examination of Witnesses Witnesses: Mr David Bernstein, Chairman, the Football Association, Mr Alex Horne, General Secretary, the Football Association, gave evidence. Q448 Chair: Good morning, everybody. This is a further session of the Committee’s inquiry into football governance and I thank the FA for inviting us to Wembley to hold this morning’s session. I welcome, as part of our first panel, David Bernstein, the new chairman of the Football Association, and Alex Horne, the general secretary. Mr Bernstein, you are relatively new in post. Can you set out how you wish to see the FA develop in the coming months? David Bernstein: Yes indeed. First, may I say how pleased we are that we have been able to play this fixture at home? There is a great deal, clearly, that needs to be done in football and we believe that the FA should be a leader and seen to be the leader of the game in this country and should provide, in many ways, what might perhaps be dangerously described as moral leadership as well. We are taking this inquiry extremely seriously and obviously the recommendations that you come through with and the Government come through with we will listen to with the greatest of care. When I took this position, I knew that the status quo was not an option, that some change is necessary, but the change needs to be for the right reasons and at the right pace. I am confident that Alex, whom I have worked with in different capacities for a number of years, and I can deliver that change. There were five themes that I identified very quickly as part of the agenda that I want to pursue. The first deals with football in terms of Club England, that is, the international side of football, the first team and the other teams that we have, and youth development which clearly is vital; I am sure we will come to later on. Secondly is respect, because the respect side of the game is very important to me. There is a huge amount of what we have done at the bottom end but I think that those at the top end of the game that need addressing. Also I suppose respect for the FA because perhaps one of the reasons we are here today is that there are some questions about that. Thirdly, governance which is obviously one of the key matters for today. Fourthly, relationships, both in terms of overseas relationships and relationships within the UK. Finally, efficiency because I think in terms of running the organisation efficiently and prioritisation of resources, there is a great deal to be done there. Those are the five themes that I have come up with early on, and while only two months have gone, I feel they are reinforced by those two months and it revolves around those five issues. Q449 Chair: Alex Horne, you will have heard the evidence we have received from predecessors in your position, particularly Ian Watmore, who said he was neither a chief nor an executive. You changed your title to “general secretary”, I note. Do you have some sympathy with that comment? Do you agree that your job is nigh on impossible? Alex Horne: No, I do not agree that it is nigh on impossible. I understand some of the frustrations that Ian experienced, but in the year since Ian left we have achieved an awful lot as a team of executive. We have delivered against a stretching business plan across all the divisions in the organisation and, most notably, for the first time in the 11 years that we have been talking about it, we have moved forward with the development of our St George’s Park National Football Centre, our home for coaches nationwide, which will change fundamentally our approach to youth development in this country. We have delivered a 25-point plan for youth development with recommendations stretching right across the game, showing that the game can work together and, as it happens, we have delivered a Desso pitch here at Wembley and we have a very, very good playing surface. With a bit of patience, we have delivered a lot in the last year. Q450 Chair: But do you see scope for further changes? Alex Horne: As David has outlined, the status quo is not an option; we have already put forward recommendations for further independent directors on the board. What we have done as well is to put a number of independents into our structure at what I believe are the right places. For example, we have independent directors on the Wembley board. Operating an asset of this nature holding multiple events requires specific skill sets and we have looked for directors who have those skill sets. We have done the same thing with our St George’s Park development and also with our Football Regulatory Authority where the body responsible for setting the rules across the game has a balance of professional game, national game and independent members. We are not averse to change. We have independents in a number of places, but we should never be complacent about looking at that structure. Chair: Okay, we are going to come on to a number of those issues. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 111 29 March 2011 Mr David Bernstein and Mr Alex Horne Q451 Paul Farrelly: The reason we started this inquiry was that the coalition Government, following each party’s manifesto, put in a commitment to encourage more supporter involvement but it clearly did not have much of an idea as to how to do it, so we have stepped in to give it some thought. A question to both of you: what role, if any, does the FA consider is right for supporters in either the running or governance of football clubs? David Bernstein: As with many of these questions, it is a more complex question than perhaps first meets the eye. There are a number of different levels of supporter involvement. The first would be information; undoubtedly, supporters are entitled to full information from their clubs—a proper dialogue, whether it be financial or about ownership. They are absolutely key stakeholders and there should be a very free flow of information between clubs and supporters. I think anything less than that is unacceptable. Board representation varies greatly from club to club and I have already met some supporter organisations; I met with the Arsenal Fanshare people who run a very sophisticated supporters scheme. I was most impressed with them with what they are doing and of course also with Arsenal who are a very progressive club in these matters. They do not want board representation in that particular case; they are not looking for it. I think that board representation could be, in some cases in some clubs, highly desirable, in others it could be risky for supporters; there are some boards that they may better not be on. I don’t think there is one rule for all. I think in some cases board representation is a good thing. In others, I think it may be less desirable. The other key area of course is shareholder representation and one needs to distinguish between a controlling holding by supporters or minority supporter shareholdings. I think on the whole minority holdings, where possible, are quite desirable. As chairman of Manchester City, we were a public company. When I was chairman, we had 5,000 shareholders. We had an AGM where 800 shareholders turned up and I was very, very proud of that and I was very disappointed, in many ways, when the club was taken over and all the shareholders were removed to a single ownership. I think controlling shareholding, however, is a difficult one and it will depend very much on the club and the state of the club. I have already been round the country visiting quite a few clubs, one or two outside the League, and there is, we all know, a huge imbalance of finances within many clubs, both League clubs and non-League clubs. My concern would be that if supporters rush in to ownership they may find that they are involved in something that is rather more than they expected; the funds have to go in the beginning and then, maybe, depending on what happens in the financial areas—I am sure we will be talking about it later on—the funds need to be put in year after year and we all know that many owners are subsidising their clubs year on year. That is not a situation I suspect supporters would want. I think it is complex. Clearly, more involvement is better than less involvement, but I don’t think there’s one rule for all. Alex Horne: That was very comprehensive, but I can add that I think what we would seek to see are no barriers to entry to these models, if supporters go into them eyes wide open and they understand the risks that David referenced in terms of liquidity and ownership of clubs and the fiduciary responsibility as directors of clubs. I am intrigued by the notion of fiscal support or tax breaks, which I know has also been floated into the Committee. Q452 Paul Farrelly: We have just produced a report into the arts and heritage and we commented that the big hole at the centre of the Government’s so-called philanthropy strategy was that they propose nothing to encourage it. They must have read some minds because in the budget they did put forward a policy on inheritance tax and legacies. Do you think football is such a special case that it merits special incentives and tax treatment to encourage supporters to invest in clubs or not? Alex Horne: I certainly think, given the community nature of clubs, it’s something that is worth the Committee looking at further. David Bernstein: Yes, I think I would support that. I don’t have that much to add but, yes, given the sort of the complexities involved and maybe the financial scenario. I certainly thought of the Arsenal supporters people. They were very much pushing the need for some help in that respect. Q453 Dr Coffey: You are very familiar, Mr Bernstein, with the finances of Wembley stadium, To what extent is the requirement to pay for Wembley stadium, that constant top-up, constraining the ability of the FA to support the national game, the grassroots game? David Bernstein: Yes, I am familiar with our finances. By 2015, we will have paid £150 million of debt plus interest and by 2015 we are anticipating that Wembley will become cash-positive and will start pushing cash back into the game. There is a lot to be done between now and then. In this environment, as you will know from the many businesses in sport or entertainment, it is not an easy call but that’s our aim. Clearly, in the interim, Wembley has been using FA finance to balance its books, but I think given what we see, given the fact over this few weeks we are in now, we’ll have eight events attracting 700,000 people to the stadium, it’s a fantastic national asset. Yes, there has been a degree of restriction of funds going to the rest of the game, but it is short term and hopefully it will turn, as I say, by around about 2015. Q454 Dr Coffey: I recognise you have the national game strategy, which is trying to develop that. My understanding is that the amount of money going to the Football Foundation has been cut at certain points. David Bernstein: It has. Dr Coffey: It seems quite concerning trying to develop the grassroots instead of topping up the stadium. David Bernstein: Yes, obviously, no one wants to cut that sort of funding, but it is short term and, as I say, by 2015 we should start move into cash-positive cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 112 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne territory. We should have a double whammy positive effect for all those areas. Q455 Dr Coffey: We heard last week from Ian Watmore that he considered that the professional game got a 50:50 with the national game. He didn’t think that was the right thing to do. Given the straitened finance, is there a view to, in the future, giving more priority to the national grassroots game? Alex Horne: If I may, it was recommended by Lord Burns that we formally recognise a 50:50 split of surpluses to distribute to the professional game and the national game. It is now set in our articles of association. To change it would require, not only 75% shareholder vote, but also Premier League, Football League and the national game board approval. I have to say, I think it reflected the priorities at the time. I understand the model. However, I do think it is very restrictive. If the size of the surpluses change dramatically, it’s a very restrictive mechanism to have written into our articles and there may well be, five years on, a better way to invest our resources against that of strategic priorities. Q456 Alan Keen: I was reluctant to ask this question; I was reminded when Thérèse asked about the stadium. I’ve been on this Committee since 1997 and I remember at one stage the FA were given £20 million, providing they made sure there was an athletics track at Wembley or the facilities to build one and take it away again. Was that liability ever taken away from the FA or does it still exist and, if it does, should you pay it to West Ham? Alex Horne: I’m not sure I do know the answer fully, Alan. Can we take it away and can confirm to the Committee? Q457 Alan Keen: I will support you in not having to pay it back but I just wondered whether that was still— David Bernstein: Yes, I am sorry. It is something I am not conversant with it. We can come back to you on that, if we may. Alex Horne: I think our commitment to the IAAF remains in that if we were asked to we would have to convert the stadium into an athletic stadium but, on the basis of the Olympic Park development, I assume that liability has been expunged. Alan Keen: I am sure West Ham will— David Bernstein: I can say I was very involved with the City of Manchester Stadium and the whole move from Maine Road to that and certainly the view of our supporters—and I am sure supporters across the country—is English supporters do not like stadia with athletics tracks around them. I know there are ways that one can convert from one to the other. Certainly, at City of Manchester Stadium, we did make a quite sophisticated move from the Commonwealth Games to a football stadium which went extremely well. I think it was probably very much a very good example of how a stadium— Alan Keen: If I remember, I think it was Sport England who provided the financing. David Bernstein: They did, indeed. They did, indeed, but we complied absolutely with Sport England on the list of requirements. Q458 Dr Coffey: Could you remind us how many directors there are at WNSL because I can recall Melvin Benn, the music promoter, is an independent director? David Bernstein: On the board we have seven, I think.1 Q459 Dr Coffey: Seven and how many of them are independent? David Bernstein: There are two independent nonexecs; Melvin Benn and Ian Ritchie. I will be coming off as chairman, because it is clearly not proper that I am chairman of the FA and chairman of that; that will happen very quickly now. Alex is on the board and then we have two executive directors. It is a much more conventional board, as a board that would stand up to plc corporate governance. Q460 Chair: Can I come back to the FA’s investment in the national game? You also receive quite a substantial amount of public money—something like £25 million over four years to invest in the national game. While the target that the FA have set is to increase participation by 150,000 people over that period, recent figures show that participation has dropped by over 45,000 in the last four years, so it appears you are going in the wrong direction. Can you say what you are going to try and do to reverse that? Alex Horne: Yes, the national game strategy very much has in its heart increased participation and that is of players but also of the support infrastructure required for the players to deliver: quality coaches, referees, and so on. One of the issues that we’ve had with the Sport England measurement is that it’s global across all sorts of social football and our investment, historically, has been very much structured around 11a-side formal affiliated football. Over the last two or three years, we have worked very hard to make sure that we’re embracing all forms of the game and encouraging football to be played in many formats. The small-sided game is much more relevant to people now who are time-hungry, where resources allow for that flexible playing after work and so on. Very specifically though, to turbo-charge the move towards those targets, we have brought on board our sponsorship with Mars and absolutely targeted a very, very substantial investment from Mars in delivering adult social play. Towards the start of next season, we will be launching our Just Play initiative which will see 100 centres and 800 Just Play co-ordinators operating across the country, designed exactly to help deliver against those Sport England targets. Q461 Chair: Do you agree with the estimate that participation has fallen by that amount and, if so, what do you put it down to? Alex Horne: I could not challenge the statistics. I think one of the anomalies is that the numbers we are 1 Witness correction: There are 8 members of the WNSL Board (1 Independent Chairman, 2 Independent NonExecutive Directors) cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 113 29 March 2011 Mr David Bernstein and Mr Alex Horne measuring, which are around the number of registered teams, we are not seeing the same decline. We are seeing the number of teams, at least to hold static if not increase across the men’s game, the women’s game, 11-a-side and smaller forms of the game. We are probably scratching our heads a bit in terms of why the Sport England numbers have come down by so much. Q462 Chair: But even by your measure, holding the number of teams static when you are investing that kind of money in is not an enormous achievement. Alex Horne: No, no, I appreciate that and, as I said, we are absolutely targeting improvement in those statistics over the remaining two years of the fouryear whole sport plan funding. David Bernstein: There are social trends which one has to fight against with many young people moving away from active participation in sports generally. I am chairman of a tennis club and the same thing applies: there are fewer people playing generally so I think there is a hill to climb in that sense. Chair: Certainly, it is a challenge facing all sports but it is also perhaps the key objective for the legacy of the Olympic Games. David Bernstein: Absolutely, absolutely. Q463 Jim Sheridan: Could you expand on your answers to Mr Farrelly about the financial regulation of English clubs, particularly about ownership and indeed the scrutiny of the clubs? Do you think that the current financial regulations are robust enough or are there changes that you think should be made? David Bernstein: There is a lot happening and some of what is happening perhaps is a little piecemeal; we have Financial Fair Play coming in with quite a part of the Premier League. We have forward testing. We have a degree of wages control at the bottom level of the Football League. So there is quite a lot now coming together in a sort of a maybe slightly piecemeal basis. I think my view would be that, although one is comparing a very wide range of economic models between the Premier League and the Football League, nevertheless, there possibly should be more consistency across the field. I would like to see Financial Fair Play potentially extended across the whole of the Premier League and maybe moving in to the Football League as well, but I think progress is being made; it’s being taken very seriously, I know, by the Leagues. I think perhaps the question should lead on to as well is the FA’s role in this and a number of other areas that you may want to touch on. We believe that the FA’s supervisory role should be increased. I think perhaps we have allowed some of these things to drift away from us. The way the Leagues are run with self-regulation we think is absolutely right; we wouldn’t want to change that or try and pull that back but I think our supervision over the way that is done could be upgraded. Jim Sheridan: Do you have anything else to add, Alex? Alex Horne: No, I don’t think so. I think that covered everything. Q464 Jim Sheridan: David, I think you mentioned in an earlier question that supporters have a need for as much information as possible; we heard at a previous session when Niall Quinn was telling us there was some sort of clandestine organisation that looks at people trying to take over clubs or ownership of clubs, but he did not think it was important that the fans knew just exactly who was lurking in the background and who was taking over the clubs. What do you think? Is that right, given that what you’ve just said about supporters’ information? David Bernstein: I’m sorry, but I haven’t read what Niall Quinn said; I have great respect for him but, no, I disagree with that. I think that supporters should have very open access to ownership of their clubs. One comes down to this whole fit and proper person question. No, it is absolutely key that supporters know who runs their clubs and we have seen incidents over the years of perhaps ownership falling into hands that are not totally ideal. Q465 Jim Sheridan: Can I use two clubs as examples? There is the telling case of Leeds United where supporters do not know who owns their club; that has to be looked at. Secondly, look at Portsmouth last season who managed to get to the FA Cup without any sanctions whatsoever. Is that acceptable best practice? David Bernstein: That is a difficult one. The Leagues can and do put sanctions on clubs going into administration. Administration is not a cessation of trading; companies who go into administration continue to trade. Of course in the FA Cup it would be difficult to find a sanction other than throwing the side out of the competition—obviously you cannot deduct points—which would disrupt the competition and have all sorts of other effects. In one way one would say, yes, it would be great to do something for a club in that situation, to penalise them in the FA Cup, but it would cause difficulties. There is no halfway measure; you either let them stay in or you take them out. If you take them out, then you have to be able to have a walkover I presume and you would have all sorts of implications. Not ideal but I would have thought probably best dealt with as it was. Alex Horne: In the matter of Leeds, it is worth noting that the ownership structure is known to a limited number of executives in the League and in the FA. Our rules do not allow us to be transparent with that; I think it is time to look at the rules because I agree with David that fans should know who owns their clubs. Q466 Jim Sheridan: As part of this investigation, the Committee visited Germany. We have seen how the system works in Germany in terms of the licensing system; I take it you know the licensing system in Germany. Do you have any views? It seems to me that the president of the German FA had a far more effective role in terms of organising club football. Would you like to see that brought into the English FA? Alex Horne: I’m familiar with the licensing scheme; it is very similar to the UEFA licensing scheme that cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 114 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne exists in European football, which I’ve been involved with for six or seven years. I sat on the original UEFA licensing panel that wrote the licensing rules and then the latter rules around Financial Fair Play and the model was based on the German model and the French model where they license their clubs. The danger with an overly formal licensing scheme is it becomes bureaucracy for the sake of it. There are a number of good practice/best practice governance measures that come through that licensing scheme, most of which the Premier League today has adopted and put into its rules, most of which are now moved down into the Championship rules. I think English football adopts good practice where it’s appropriate, for example, around qualification of managers and so on. Turning to financial regulation, I think there is a decision moment for the game because I agree with David; I think it is time to look now at the gap and consider closing the gap between the salary cap that exists in League Two and the cost control measures, the Financial Fair Play measures, which now exist for clubs in Europe. There is a moment to reach across all four Leagues and look at appropriate cost control measures in all four Leagues and listening to the Chairman of the Football League’s evidence. I think that would chime with their position and their concerns regarding debt in their clubs. If we were going to go down a more formal hard financial regulatory model we would not need some form of overarching licensing system to make sure it was transparent, auditable and fair. Chair: But it is not the position of the FA but that is the direction you are going to move. Alex Horne: That is the direction that David and I would both seek to move in. One of the things I will add as well is that David, in his point about relationships, has called a meeting of the chairmen and chief executives of the Premier League, the Football League and the national game to make sure that we are sitting down and understanding some of these whole game issues and making sure that we are agreeing our approach: if you like, uncluttering some of the regulatory framework that exists, making sure our roles and responsibilities are clearly defined across each of those bodies and making sure that we’re adopting the right strategic approach when it comes to, for example, financial regulation of clubs or perhaps future youth development measures. That is something that David has already put in train. David Bernstein: This relationship area is incredibly important. There are natural tensions between the leagues and ourselves, that’s healthy but there’s also a huge area where we have mutual interest. I think we need to sort of embrace that, work with our colleagues in the leagues and the national game to work on the positives, although there are a lot of positives. Of course, the Premier League and the development of the Premier League, which gave rise to these tensions but is a fantastic success, arguably, is one of the great sporting successes of all time. Q467 Chair: Indeed, but do they agree that you should move towards a licensing system? David Bernstein: Well, we will see. No, I’m not saying they agree that at the moment and we have yet to begin to explore some of these things, but I’m hopeful. Q468 Chair: It appears to be your view that you should move in that direction but if you don’t have the support of the Premier League you will run into the same brick wall that all your predecessors have run into. David Bernstein: Understood, but it’s a journey that people have to take and the way we’ll be taking it quickly and we will work them, hopefully, to a positive conclusion. Q469 Jim Sheridan: Is it, therefore, the intention or the ambition of the FA to take over—or primarily take over—financial responsibility for the clubs? David Bernstein: No, sorry, definitely not. I just want to emphasise that is not the intention. I think the delegated authority that exists is absolutely right, I think it is absolutely right that the leagues have primary responsibility for that, but it is, I think, for us, as I said earlier, to ensure that our overview, our audit, if you like, of what is happening is more extensive than it has been. Q470 Ms Bagshawe: Just a quick summary: Mr Horne, you seem very uncomfortable with the issue of transparency, that the supporters of Leeds United have no idea who runs their clubs. Earlier, Mr Bernstein, you drew a distinction between transparency for supporters sitting on the boards of clubs and ownership models, where supporters own the clubs, but you said that in some cases, it might be dangerous for supporters to have representation on the board of some clubs, but not on the board of others. In what way would it be dangerous for supporters to be represented on the boards of clubs? David Bernstein: Well, dangerous perhaps is too strong a word, but yes, what I mean is that being part of a board has responsibilities and exposures, and it would be very important for anybody going on to a board to understand those. Given the imbalances in football at the moment and the situation in some clubs at the moment, I think there are some boards that supporters should be very wary about joining, for obvious corporate reasons. Q471 Ms Bagshawe: Fair enough, but assuming the supporters would delegate somebody who would be commensurate to fulfil those responsibilities, would you agree that it is a regrettable situation that in a major club like Leeds, their supporters do not know who owns it? David Bernstein: Absolutely. Sorry, I said earlier—I thought I was clear—I think the supporters should know who owns all and any club, absolutely. I do not think there should be any exceptions. Q472 Damian Collins: I just go back to Leeds United. Mr Horne, you said that executives within the game know who owns Leeds. By that, do you mean they know who the investors are in the trust, the cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 115 29 March 2011 Mr David Bernstein and Mr Alex Horne Swiss-based trust that owns the majority shareholding in Leeds United? Alex Horne: Yes. Damian Collins: There are, so have you—? Alex Horne: It is my understanding, yes, Damian. Q473 Damian Collins: Who told you that? Alex Horne: The director of governance at the Football Association, so— Damian Collins: So he knows? Alex Horne: Yes. Q474 Damian Collins: Who else? Alex Horne: Well, as I say, I think there are two or three executives within his team who know. The requirement to submit that information is a requirement to become an affiliated club under Football Association regulations, so in order to grant them that access, which they need to be a voting member of our shareholding and to play in the FA Cup, we had to understand that information and then we were able to grant that access. Damian Collins: So presumably, there are issues like dual interest, which you have oversight over? Alex Horne: Correct. Q475 Damian Collins: So would that mean you would need to know whether a major investor in that trust also had a stake in another football club? Alex Horne: Correct, which is why we know, but as I said earlier, our rules do not then allow us to openly expose that shareholding, for want of a better word. Q476 Damian Collins: But is it required that you are told the names of those people so that you can assess whether their club passes the test, even though their names as individuals are not even known by the chief executive of the Football Club? Alex Horne: Or indeed, the general secretary of the FA. Q477 Damian Collins: Would the FA would have dealt directly with the trustees to understand those points? Alex Horne: Yes. Q478 Damian Collins: With regards to what I might call the FA’s licensing system proposal, is that similar to the recommendations that Lord Triesman made in his report that he submitted to the Committee in response to the questions by the previous Secretary of State? He recommended that independently audited club accounts were lodged with the FA, that the FA would have oversight over that. Are you working from his report, his recommendations? Is the FA continuing in that vein of thinking? Alex Horne: Just to reiterate, we are working on the premise that the UEFA licensing model which exists works, and it works in co-operation with FA executives and league executives. The work is done by a combination of those executives. The decision is made by a committee of FA members, on behalf of the FA board, but much of the work is delegated to the league executives, supported by FA executives. So it is a hybrid model, if you like, of co-operation, which I think is the model we should be looking at. Q479 Damian Collins: You say the UEFA Financial Fair Play regulation model works. Does that mean that you have had discussions with UEFA about enforcement of that? Does that mean that UEFA have made decisions about how they are going to enforce the regulations and work potentially with national governing bodies to help them do that? Alex Horne: UEFA absolutely enforce their regulations in their competition and they recognise the national associations in each of the countries as the body responsible for regulating and for licensing the clubs. So that is what happens right now. UEFA has no authority to extend that into domestic leagues, because they are only competition organisers, so they can only do this on the basis that those clubs want to participate in their competition. Q480 Damian Collins: Lord Triesman floated these ideas nearly two years ago. Has the FA been in constant dialogue with the Premier League about moving to a licensing model or a model at least where the FA has or other bodies have scrutiny of clubs’ accounts, the ability to call them in, or even sort of what was suggested to us last week, you know, put clubs in special measures that they think have financial problems? Are these issues that you have been actively discussing with the Premier League? Alex Horne: Yes, and they are issues that the two leagues currently enact. There are already special measures put in place where clubs are submitting financial information for a season, forward-looking information, and where leagues have concerns, particularly in the Football League, they are embargoing them from, for example, entering into the transfer window. So sanctions do exist, the work is happening and it is happening at League level in consultation with ourselves. Damian Collins: But you are talking about something much more substantial. What I am trying to get at is, if we take Lord Triesman’s word for it, it sounded like Sir Dave Richards and the Premier League were not particularly interested in the FA’s view on this subject. Are you making more headway? Alex Horne: I am not necessarily talking about anything more substantial. As David said earlier, I think this can work with the delegated authority to the Leagues. What I think we need to do is to agree with the Leagues that it is time to do this. We need to set the rules very clearly so they work across the spectrum of the four senior professional Leagues in particular to make sure there then aren’t any gaps or unintended consequences, for example, for conference clubs. As regards headway, I think that is where stability of leadership with David and myself comes into play and David’s meeting that he has called to try and move some of these agenda items on. Damian Collins: In terms of stability of leadership, I suppose only time will tell. Alex Horne: Yes, sure. Q481 Damian Collins: An issue that we have discussed quite a lot with clubs and other individuals cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 116 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne who have come before the Committee is the football creditors rule. What is the view of the FA on the football creditors rule? David Bernstein: I can understand the rule being the subject of some criticism, because there is clearly a perceived—and probably actual—lack of equity in some respects. However, I think from my point of view, the FA’s point of view, we would, on balance, remain supportive of it. Why? Because the integrity of the competitions is protected by it, and without it, there could well be a snowball effect if a particular club hits the buffers. I think I’m more confident in saying that in the context of the additional financial regulation and control that we’re talking about; that, with Financial Fair Play, with forward testing, with creditors being paid more promptly—I mean, there has been all sorts of issues of course with Inland Revenue liabilities. Well, that is going to be much reduced now. They have to be paid more promptly. As part of that, I think if Alex and I had our say, we would like to go back to the days of football transfers, of money between clubs being payable within one year and getting away from extended terms, which have their dangers. So I think, on balance, not an easy call. We would want to maintain that, but with much stronger controls around to avoid the exposures that have arisen. Q482 Damian Collins: The chairman of the Football League told us he could not find a moral argument for keeping the football creditors rule. Do you think he is wrong? Can you find one? David Bernstein: As I said, I can see there is a moral argument, but I think on balance, I respect his view. My view would be that, with these other measures, the exposures could be greatly reduced and integrity and protection of the league is very, very important, and very important for supporters. Q483 Damian Collins: Lord Mawhinney said he takes a completely different view about integrity of competition, and that clubs going into administration and clubs being allowed to over-extend themselves, safe in the knowledge they may not have to pay all their non-football creditors damages the integrity of the competition, and certainly damages, I think, the moral authority of the game in terms of its standing. Alex Horne: It is a difficult one, this, on the basis that it is a closed league, the participants have to interact with each other for the duration of a season, they have to play matches against each other and they will trade with each other in terms of players. So the rule seeks to make sure there is no advantage or unnecessary advantage to a club in entering some form of insolvency, particularly on the other members of the League. So it is quite a selfish sort of members’ club rule, but I think very necessarily it is a selfish members’ club rule, because I think if you were to allow a club to fail owing large sums of money to other clubs, there’d be a real call for that club to be extinguished from the League. Q484 Damian Collins: I agree with you. I think it is a selfish club rule that allows businesses that support a local club within its community to lose out and potentially face financial hardships themselves, whereas a football club at the other end of the country is completely protected by the integrity of these rules, and other people in the game have spoken out about this. In fact, David Gill said when he came before us that he thought that we could get rid of the football creditors rule, and that if we did, clubs would be more responsible in their financial transactions with each other, because they will have a vested interest in ensuring that the clubs they are dealing with can truly afford to pay their bills. Do you think David Gill is wrong? Alex Horne: No, I understand both sides of the argument, and I think it is a difficult one. Corporately, we’ve defended this hard over years, and I understand why we defend it. If now is the time to re-debate it, then it is another topic for our discussions. David Bernstein: You see, if the forward look test works and football liabilities were perhaps more confined, in other words, long-term credit was not given so easily, I think you may achieve, in a sense, what we want without doing away with this rule. Q485 Damian Collins: That may be, but I must say, in your opening remarks, Mr Bernstein, you said that thought the FA could give moral leadership for football, and I’m not seeing much moral leadership on this issue, I’m afraid. David Bernstein: I hear you. I think we have a number of roles. One of them is to maintain the integrity of the leagues and ensure this whole thing continues to work properly. I repeat, it is a view which goes along with the controls which I think is so important, which would change the whole look over a period of time, of football clubs’ balance sheets, which we all agree is desperately needed. Q486 Alan Keen: We are talking about finances: could I come on to what I believe is the crux of the whole thing? I am a great supporter of the private enterprise system. I spent all my working life, 38 years before I came into Parliament, most of that time as a company director in a national company as well as having my own business for a spell. I am a great supporter of that, but there are restrictions on the free enterprise system. In fact, I even felt sorry for Sky when they had taken such a wonderful initiative and took a gamble as well when they started to pour money into football in order to increase their intake from subscriptions, and it has been vastly successful. I felt sorry for them in a way that that initiative that they took and the gamble had to be penalised; Europe wanted more competition. Now, coming on to the football itself, the vast amount of money in the game is put in by supporters, either through subscriptions through Sky and through to the Premier League, the sale of merchandise and entrance fees. It is supporters who put the mass of the money in. If I was a Premier League club owner, whether I was one who had bought the club by using the club’s assets to borrow the money and my intention was to take as much money as I could out in as short a time as possible, by either selling the club or taking it out in management fees, or whether I was somebody like Abramovich, who I think is a genuine football cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 117 29 March 2011 Mr David Bernstein and Mr Alex Horne supporter, there is still a vast amount of money in football and we are scraping to fund grassroots football. So the balance is not right. I understand the ownership of clubs. You cannot just go and take it away from people and it would damage the game, but would you agree with me that this is whole crux of the problem that we are facing? I mean, it is connected with the ownership of clubs and supporters’ rights. It is a long question, this. If, for instance, the next television agreement doubled the amount of income for the Premier League clubs, would you not agree with me that all that money should not go to Premier League clubs and there should be some sort of regulation? Football should be able to demand much larger chunk of that money to fund grassroots football. It is how we do that that really is the crux of the whole thing. Do you agree with me on the case I am putting forward? Alex Horne: I think the thing I would point out is that, while there is an awful lot of money going into the Premier League, there are very few clubs making a profit. Q487 Alan Keen: But if the TV deal was doubled next time, as it almost was last time, would that still be spent on salaries to players? It is not going anywhere else, apart from some club owners whose intention is to take money out of the game. Whatever it is, it is supporters putting the money in, and they care about grassroots as well, and there are at least three of us on this Committee still playing football at our advanced age now, because we care about the game at every possible level. Do you not agree with me? That is the crux of the problem that we are facing, that the vast amount of money in the game is going out in players’ wages and we would only have to take a relatively small amount more than we are taking now, but it is not easy to take that money out from the Premier League. I am a great supporter of the Premier League. Its achievements have been absolutely fantastic and we are very proud of it, but there is an imbalance, and it is an injustice as well, when we are struggling to finance grassroots football. I know that a lot of money goes from the Premier League now to fund grassroots football, but that balance cannot be right. I am asking you, do you agree with me that balance is wrong? Alex Horne: I am not sure I do. I think that the Premier League, as a separate commercial entity returning circa 10% of its revenue to the rest of football, is not an inappropriate number. I’m sure you could have a different number, but it’s a very generous number for a commercial organisation. More importantly for me is the second part of the question around the overall cost control measures. I think that’s an example where the clubs may well be prepared to. It may be time to embrace overall cost control measures, because the fact is that income coming into the League does pass straight through the League. The European nature of it, the competitive nature of it says that the performers on the pitch deserve to be remunerated for entertaining us all. The supporters pay to see the football being played, so players deserve to be paid commensurately with the income into the game, but not necessarily significantly over and above the income into the game. David Bernstein: If a Premier League club subject to Financial Fair Play, i.e. balancing its books—let’s assume that for the moment—and over a period of time, its income, let’s say, goes up from £300 million to £500 million, and it is able to increase its wages to players still at 50% of turnover, but to 50% of £500 million, is that a proper thing to do? Well, it is the wages that attract the players. It is the players that make the league. The Premier League is a success, in a sense, because of the amount of money going to players, and if the club is in balance and if these other areas that we are talking about are dealt with, then I think that is really, whatever one’s moral view on the subject, a matter for the club as a self-standing organisation to trade as it will, if the club is complying with the financial regulations we’ve been talking about. Q488 Alan Keen: The question I am really leading on to is: football is different from the rest of private enterprise. Should we not be entitled to make sure that the FA, when it started the pyramid—it is not quite at the top of the pyramid, not within this country— should be able to make sure that more money goes to grassroots? If the TV income doubled again, the extra wages to players would continue, as you have just agreed. You could add another 50% on the players’ wages. Maybe Messi and a few of his colleagues would come and we would impoverish the rest of Europe. We would get them all here, which would be bad again for the development of English footballers. You know, that must be true. I know it is extremely difficult for you two to agree with what I am saying, and I am sure you do not disagree with me. We can talk about the rights of the free enterprise system, of clubs holding on to that money, but football is different. I mean, this is what we really have to face. We have the media sitting in the back. The media needs to bring these issues forward and highlight them for the rest of the football family to discuss. I know it is difficult. I did not expect you to give any answer other than you have given. David Bernstein: We have to be clear. Alex’s and my agenda is to try and perhaps take the high ground again on behalf of the FA and to reclaim some of the areas and functions that perhaps have been allowed to slip. Nevertheless, there are areas which are really beyond and should be, I think, beyond the FA’s remit. The actual mechanics of how a club operates, of how it manages its wages policy, as long as it’s complying—I keep saying the same thing, complying—with the financial regulations that are and maybe should be more extensively put in place, and some of these things are, I believe, on the edge or beyond our remit. There is a limit to what I think the FA can be expected to tangibly do. Q489 Alan Keen: What about quotas then for League clubs? That would be one way of us not going further and further so that clubs have no English players left playing for them on a Saturday or something. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 118 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne David Bernstein: Yes, of course. Alan Keen: You know, there are regulations that can be brought in that can address this without having to go completely against private enterprise, normal company law, European law. Alex Horne: If we are going to get into youth development—looking at the Chair, I’m not sure long we have—but if I try and give a succinct answer to cover a couple of your points, one of the exciting things about the Premier League proposals for elite player development is that it will necessarily be diverting and requiring investment into young homegrown playing talent. What we’re striving to achieve around that turbo-charged academy system is a much broader, deeper talent pool of young players coming through the system from five years old. You may have seen in the press recently that we are rewriting how the game is played across the country. We are seeking to play more developmental football later on different sizes of pitches, so that the game is much more about learning to play, being comfortable on the ball than it is about necessarily points or winning or tables. We are working very hard to fuel the pipeline, if you like. The Premier League and the Football League are working very hard to increase the output of their academies, and that then benefits our international team structure. So we’re then working very hard at the other end of that spectrum to make sure that we’re working with the best young English players coming through the academy system and converting them into teams who can win at all levels. Our under-17s are current European champions, our under-21s, although they unfortunately lost last night, are number one in the world and go to Denmark in the summer with the prospect of doing very, very well.2 A number of our development teams are performing well, but we need to keep working on that and make sure we have a pipeline of international players and international teams who can succeed in future tournaments. All of that is underpinned by another central FA attribute, and that is the development of coaches. We are setting about professionalising the coaching industry, licensing coaches, continuous professional development for coaches, more better-qualified coaches with age-appropriate skills being available to the game at all levels across the grassroots and into the academies, and that’s our investment into the structure. Just to turn full circle, that’s the clubs’ and league’s investment into the structure, which is so important to long-term development of better home-grown, and selfishly, better English players. I would rather see that work, if I’m honest, than force a quota system. The whole game is aligned behind that approach, and that’s what we’re going to focus our time and energy on. Alan Keen: The Chair will not let me get further into the argument, otherwise I would come back at you straight away. Chair: We need to move on. 2 Witness correction: England U-21s are number 1 in Europe. There are no official world rankings. Q490 Jim Sheridan: I am not asking you to comment on this particular question, but just before on what Alan was saying about money leaving football, throughout this inquiry we have heard of genuine concerns about the role of footballers’ agents in the game and the money they take out of the game. It is just to put on record that there are genuine concerns about the role of football agents. David Bernstein: Absolutely, understood. Q491 Paul Farrelly: I want to move on to your internal review. In your written evidence, you said you would keep us updated with progress. Your written evidence also said that David was due to receive that review on 1 February. So will you tell us what it recommended? David Bernstein: Yes. May I precede that by quoting something to you? I addressed the FA Council last week on the question of independent directors, which is a focal point for the moment on the internal review. I would like to read a couple of paragraphs of what I said, because I think it sort of sets the scene. I said, “There was a widely held thesis that the FA is gradually losing authority and that this is not just a factor of a rapidly changing football landscape, but of a corporate governance structure that has not adjusted to take account of these changes. Independent directors are not the only governance issue we should be discussing, but nevertheless a very important first step”. I just wanted to make it clear that that has been put to the council. It was accepted, I think, by the Council, and I think we are on the first stage of a journey with this. The actual results of the review, what they focused on—and it may not sound particularly exciting to the Committee—were basic governance issues. I do have a list of them here: draft formal schedule of matters reserved for the board; enhanced corporate governance; sections of the annual report; performance appraisal of the chairman— unfortunately—to be introduced; annual report to include a summary of the roll and membership of the nomination committee; director development to be considered, to include the appraisal of individual directors as part of an overall performance. It is certainly not for now, but you are most welcome to it, that is a detailed paper that has been produced. Now, what has not been addressed at this moment, because I did not want to get ahead of ourselves, are some of the other perhaps more fundamental questions I know have been raised in other evidence and that we are aware of. I think it is very important to try and get the first steps through successfully, i.e. the independent directors, both because I think it is a really crucial issue and also in a way it tests the system, and ours is quite a complicated system. I mean, in order to get this adopted, I’ve had to put the matter already to two board meetings in February and March. It went to the Council for discussion in March. I then have to do a road tour around shareholders around the country. It then comes back to Council in May and then it goes to the shareholders, I think in May. So it is quite an extended process to get this done, and I do not really want to get too involved in cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 119 29 March 2011 Mr David Bernstein and Mr Alex Horne other basic issues at the moment until we have this hopefully put to bed. Q492 Paul Farrelly: So are you hoping that after the FA Cup final, before people go off for the summer break, that you will get this proposal through? David Bernstein: I will do everything I can to get it done, yes. Paul Farrelly: You said it did not sound terribly exciting. David Bernstein: Not those particular items, no. Q493 Paul Farrelly: I think that is probably an understatement. I mean, to what extent is your internal review anything more than what you might call in the rag trade a two new suits policy or a suits assessing suits policy? What else is in there? David Bernstein: As far as the governance review is concerned, there is a lot of compliance type detail, things that a major public corporation would do, and the sort of thing I am used to from the commercial world, proper compliance stuff; other areas concerning the board and other related matters, structural matters within the FA, how the committees are organised, the role of the FRA and so on have not been fully concluded yet. Frankly, I’m happy that they haven’t. I think we need a bit more time and I’d like to get this independent directors situation out of the way first. I think there is a little bit of a danger here that as a new chairman, all full of enthusiasm and so on to get certain things done, I do not get too far ahead of my own constituency. If we are going to get things done effectively, I think we need to ensure that I’m working with my colleagues and the board and Council, and so on and keep them on board, clearly. Q494 Paul Farrelly: I understand that, but I think what people are looking for perhaps is a firm smack of leadership. Let me just ask one question which has been left in the air: regarding fans, you think fans should know who owns their football clubs. Some people within the FA know who is behind allegedly the trusts at Leeds, but you have not said what you are going to do to make your wishes and ambitions a reality. Does your review address this particular point? Alex Horne: The first step is David’s meeting with the other chairmen of the other bodies and the chief executives of the other bodies with myself, to sit down and reset the architecture. Once we know who is responsible for what, in my view, we should understand our role within the overall hierarchy before we go back and look at our corporate governance again. Corporate governance is a constant thing on the agenda. As David said, very rightly, the immediate recommendation is around incremental independent non-executives. I think we want to run that through in parallel with our conversations around how we think the overall architecture should be reset and then come back to that. Once we have agreed our role and our role in oversight and/or delegation, that will enable us to look again at the right corporate structure for the FA. Q495 Paul Farrelly: That was not the question. My question was what, if anything, in your internal review is there to say, “This is what we want to do”? For example, take the issue of transparency amongst the constituent members of the Football Association what is there saying, “and this is what we are recommending to make it a reality”? Alex Horne: Forgive me, Paul. I am not sure I understand the question. The transparency of directors— Q496 Paul Farrelly: No, transparency of ownership. David, do you perhaps understand better? David Bernstein: Yes, I understand the question. I think the slight difficulty here is I have been in position for two months. I have made, I think, a lot of progress in a very short period, and maybe my length of period here and what you’d like to hear is not an ideal mix. I am into the Club England chairmanship, which I think was extremely important for a number of reasons you might want to touch on. We have the independent director thing moving and a lot of other initiatives going, but we haven’t yet come to a conclusion on some of these things. In a way, I’m almost pleased that we haven’t. It would be premature for me to come up with answers, with a wide range of answers, so quickly. So on some of the things you would probably like to hear from me, I’m not quite there yet, and nor do I want to be, because I think it would damage the first very important step of independent directors. I do not want to make independent directors sound like the beall and end-all, but I think it is important, I think it is symbolically important for the FA to get this done and I do not want to prejudice that. Q497 Paul Farrelly: Can I ask you, David, then in what sense do you think that to date the Football Association has not behaved like a respected governing body? David Bernstein: I think probably what has happened is that the FA is in some respects unfairly maligned. I mean, let me say—it has not been said yet—that I think the staff within the FA, a lot of the basic work being done within the FA are absolutely fantastic. I am new on the scene here. I am incredibly impressed with the quality of a wide range of work and personnel who are employed by the FA. The problem—and there has been a problem—has been at the top of the organisation. We have had too many changes: changes of chief executives, changes of chairmen. We have had clearly a poor performance in some major areas, such as the World Cup bid, the World Cup itself, the World Cup performance, and these are high-profile, very important areas. The FA perhaps lacks confidence because of those things. I think it’s my job, working with Alex, to get the FA on the front foot, to take the high ground in the way we’ve described already. I think there’s very important work to be done, but I think it’s building on what is a very, very strong organisation in many ways. I think because of the problems at the top end, some of the issues, many of the good things lower down in the organisation are not properly recognised. I have already been around the country quite extensively, to the Midlands, to Middlesbrough, looking at youth developments, cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 120 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne looking at sites where Football Foundation money has gone into. There is fantastic work being done. It’s very, very impressive, and a lot of that is lost because of some of these high-profile issues. Q498 Paul Farrelly: I just have one final question on your structures. The strong view that we have heard from many people who have been in and out of the FA’s doors is that the FA does not work because it is too riddled with entrenched, vested interests. The same might be said of the structure just below the FA board, the Professional Game Board. Can you tell us what the purpose of the professional game board is and has your internal review recommended that there are independent non-executives attached to that committee as well? Alex Horne: The Professional Game Board’s role, as outlined in the Burns recommendations, is to oversee matters relevant to the professional clubs, to the 92 professional clubs. Very specifically, that is where we’re debating the youth development proposals at the moment on behalf of the whole game. That is where they discuss the distribution of the moneys, the budget, the funding formula that we referenced earlier. So it is a tight remit around the 92 clubs. It is made up at the moment only of club representative directors. Again, you may not like the answer, Paul, but I think in our conversations with the leagues, as we agree who is going to be responsible for what, one of the answers will be, “What is the role of the Professional Game Board? What role should it play on behalf on football?” I have to say, sitting as an executive, there is a lot of duplication of my own time and of roles and responsibilities. There is a lot of overlap between the professional game board and other committees of the FA, the FA board, league boards and so on. One of the key things we can do is unclutter all of this, and be very transparent about the roles of each of these bodies. What role should the professional game board play in a reshaped architecture for football? Again, once we agree that, the membership will be clearer. Q499 Dr Coffey: One of the perhaps worse examples of lack of corporate governance seen in the FA in recent times was that one person unilaterally was able to renegotiate Fabio Capello’s contract just before the World Cup. How was that possible? Alex Horne: No one renegotiated his contract unilaterally. The issue around the private contract between an employee and the FA was that there was a contract through to 2012 for four years. Within that contract was a clause allowing either party to terminate for an amount of liquidated damages. We were coming under a lot of pressure in the run up to the World Cup for certainty over whether Fabio was staying or not. There was speculation about clubs coming in for Fabio, and it was agreed with a few individuals at the top of the organisation, the last chairman being at the heart of it, that we would delete mutually those two clauses. So effectively, we would remove our ability to terminate Fabio’s contract with liquidated damages and he would delete his ability to walk away from our contract with liquidated damages. So having qualified top of the group very comfortably, facing that uncertainty going into the tournament, it was exactly the right thing to do, and that decision was made in April or May 2010. Q500 Dr Coffey: I was under the impression it was just one person who made that decision, so how many people exactly were involved in that, because it seems a significant change to the liability of the FA? Alex Horne: Well, no. Dr Coffey: Especially given the performance of the team in the World Cup. Alex Horne: Forgive me, it was not a change to the liability of the FA on the basis that the liability existed. The contract existed in the first place, so there was no change to the liability of the FA. I’ll hold my hand up on behalf of David Triesman and say that I think, with hindsight, it was a whole board decision, and should have gone to the whole board, but it did not. Dr Coffey: So it did not go to the whole board. Alex Horne: It did not go through the whole board. Q501 Dr Coffey: Could that ever happen again, that same situation? David Bernstein: I think if I am Chairman, it will not happen again, no. Q502 Dr Coffey: So will it happen again? David Bernstein: Not while I am Chairman. Q503 Dr Coffey: Does that rely on you as a personality or does it rely on—? David Bernstein: No, I think it’s as a proper organisation. I think we have the remuneration committee. Any contract of any size, even much smaller than what we’re talking about here, or any changes of significance should go through the remuneration committee and then, if necessary, to the board. I would ensure that proper governance is in place for those things. Q504 Dr Coffey: Lord Triesman has gone, but is anybody else who was involved in making that decision still involved in governance within the FA today? Alex Horne: Forgive me, because I do not know who exactly was involved in it, so I am not sure I can be very specific, but there will be a couple of board members and a couple of executive members who knew about it, yes. Dr Coffey: I am confused, Alex, because you seem to be clear it was not just one person, it was a few people, and now you are not sure who did it, who made the decision, apart from Lord Triesman. Alex Horne: I am not comfortable sitting here and naming four or five people. I don’t think that is fair on those individuals, on the basis that the decision has been reviewed internally and we have held our hands up to a corporate governance mistake. I think the overlapping roles—David is not here to answer the question, and David was the senior member involved as chairman of the association, and clearly felt he had the authority to make that commitment. It was only after he left that the board questioned it. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 121 29 March 2011 Mr David Bernstein and Mr Alex Horne Dr Coffey: I accept you cannot answer on behalf of David Triesman. Q505 Damian Collins: Mr Bernstein, I appreciate you have not been in post that long and you clearly set out your task of trying to convince the FA Council of the need for change. David Bernstein: Yes. Q506 Damian Collins: When Ian Watmore was before us last week, he said that the FA will not change without some sort of external pressure. I am not going to ask you whether you agree with him or not, but do you think that the FA Council shares the sense that many people have shared with us through this inquiry—probably people outside the FA share— that the FA does need to change and that, within an environment where you are already regulating and controlling yourself, is the pace for change or the need for change really taken seriously? Is it seen as a kind of nice to have, something you could get around to? If there was the threat that if change did not come, change might be forced on the FA, do you think that it would make it more likely the FA Council would grip that? David Bernstein: Difficult question: you are asking me to sort of judge how a group of whatever it is, 110 people are going to react. I mean, may I say, just to put it on record, that the Council members individually are a fantastic group of people. They are often demeaned. This blazers thing comes into play. But I must have met with a quarter of them individually now. They have come to see me. They are people who have dedicated their lives to football, people who give tremendous service, have tremendous knowledge, and although I’m not 100% in agreement with the total structure of our committee system within the FA, nevertheless, the committees do a fantastic job of detailed review and investigation. So I think there is a lot of merit to the body; let me say that straight away. They are fairly conservative; the Council is a fairly conservative body, which one might understand from the make-up. We will have to see. I felt the reaction to my initial presentation, the one I just read, was quite positive. I am hoping we will get the majorities we need. The council works on a 51% majority and then the shareholders work, on many issues, on a 75% majority, so there are sort of two levels of approval required for these things. Q507 Damian Collins: When we look at other industries that self-regulate, where that works well, I think, is where there is almost a clear understanding that, if self-regulation failed, another sort of regulation will come in its place. David Bernstein: Yes, the Council does not respond well to threats. They are very competitive people. They come from a sporting background and so on, and so they need handling in a sensible, civilised sort of way, but again, I think with my football background, it does help a lot in football to have been involved in football. I think my football background, I hope, will be a positive influence, but we will see. Alex Horne: I think we have a number of examples where the structure has embraced independence. Our commissions all have independent members on them now, which was not the case years ago, two or three years ago. The FRA, as I have referenced, has four independent members and the national game and professional game members working in that body recognise the value of the expertise and experience that those independents can bring, so I think there are advocates for change in the shareholders. Q508 Paul Farrelly: Going back to your evidence, you say that the FA recognises it is important to learn from the best practice governance arrangements, both across football and wider across other sporting bodies. Could I just ask you two things you have learned so far, and from where, just to pick one each? Alex Horne: If I may go first, David, the independent director recommendation is absolutely mirroring best practice and common practice now in every other sporting body. So we understand that there are independent directors on all the major—and many other—sports’ governing body boards. For example, that is substantial evidence behind our recommendation for independents. David Bernstein: Yes, I think the proper application of wider corporate governance, you have touched on the remuneration committee issues, for example. I think we have some of these things in place. I think there is a little bit of a danger in that, historically, the FA has sometimes, because of the pressures for a speed of decision necessary, that maybe some of the controls have been innocently circumnavigated. I think it is very important, and I think the example that you have been discussing with Fabio Capello’s contract was maybe a good one, that we ensure that we fully comply with our own procedures, even when we are under pressure. One cannot overestimate the pressures that arise with football issues surrounding England. You want to see the media over the last few days about various fairly peripheral issues, I personally think. The pressures are very intense. It is very important the system stands up to those pressures. Paul Farrelly: So no more innocent circumnavigation. David Bernstein: Yes. Q509 Chair: Can I finally turn to the Football Regulatory Authority, which is responsible for disciplinary policy? It draws on members of the FA to adjudicate individual disciplinary cases. It was suggested to us that those should be done externally and it is not appropriate for the FA to do so. How do you respond to that? Alex Horne: Can I just explain the distinction, because the FRA is the rule-making body? It sets the policy. That is the body with four national game representatives, four professional game representatives and four independents on it. They do not appoint the commissions. That is a completely separate body, completely independent. Chair: But the people who judge disciplinary cases come from the FA. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 122 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr David Bernstein and Mr Alex Horne Alex Horne: No, they come from—the commissions are made up of, in the first instance body, two FA people and one person from a football panel. So there is a panel of individuals nominated from across the game, ex-referees, ex-players and so on, who will sit in hearing on each of the commissions; one football panel person plus two Council members on every commission. This is very much a manager’s decision and I think the team he will put out tonight may lack one or two of the glamour names, but will be a very strong team, indeed, and a team with players who I believe he really wants to trial, and really see how they perform on a very big occasion in front of a capacity crowd, to see how they will hopefully perform in competitive matches later on. Q510 Chair: Do you not accept that it should be done externally, completely? Alex Horne: No, I do not. I think that history on the whole would show you that the commissions made sensible decisions, and the adding in of football people has definitely helped with making consistent, appropriate decisions. So they are adding expertise into consistency. This has been done well, but I think the addition of football people has improved the process. If I may say, the second body, the appeals body, is then further independent. It has two independents, the independent chair and one FA person. Occasionally, these things are three, four. The constitution of these commissions is very much dependent on the case matter in front of them as well. So if there are doping cases or child abuse cases, then again, the balance of the commissions will change to make sure we have the right, appropriate representatives on it. Q512 Chair: So is the team that plays tonight entirely the first choice of the manager? David Bernstein: In all the circumstances, yes, no one has forced him to send players back. It is his decision to do everything that he has done with regard to the squad, absolutely. Chair: The reluctance of the Premier League clubs to release players for a match like tonight— David Bernstein: No, sorry, we had all the players that we wanted and the manager has decided to send, I think, five of them, back to their clubs for various reasons, as I have just tried to explain. I am in complete support of the manager in doing that. Q511 Chair: My last question: the FA draws parts of its income from the England team. Tonight, fans will have spent quite a lot of money to come and watch England playing. Do you think they are being shortchanged, because they are not going to see people like Rooney and Lampard on the pitch tonight? David Bernstein: No, I do not. The manager—and the manager has to have the say in these matters—has a balancing act. He picked a very strong squad for the two matches. Every member of the squad, I suggest, is a top class player. He has to balance, as we had with the World Cup, fatigue issues, other competitions that some of these players are playing in, relationships with the club managers, which is very important. We are looking for an improved balance of give and take with the clubs. It requires both not just giving and not just taking with the club managers to ensure that we get that right players, certainly for the competitive matches. Q513 Chair: One of the criticisms of the rather disappointing performance of the England team to date is that some of the star players do not get as much opportunity to play together for the team, as they might do. David Bernstein: Possibly—there is no question about the tensions we talked about earlier between success with the Premier League, the Champions League, international football, the effects on the FA Cup, which we have not touched on today. There are a great range of tensions there, and running the England team is no easy job. Just for the record—I will put it down here—of the 18 competitive matches that Fabio Capello has managed England for, we have won 13, drawn 3 and lost 2, one of which was a dead rubber match. Unfortunately, the other match we lost was a very, very important one in the World Cup, but his record overall is actually outstanding. I know that has been blurred by the very, very poor World Cup performance, but generally, his qualification record previously was good, and so far we are top of the group table for the Euro championships and hopefully, we will stay there. Chair: I thank the two of you very much. Examination of Witnesses Witnesses: Mr Roger Burden, Chairman, national game board, the Football Association, Ms Kelly Simmons, Head of national game, the Football Association, gave evidence. Chair: We are now going to turn our attention to the national game. I welcome Roger Burden and Kelly Simmons. Q514 Jim Sheridan: Beneath the FA board, the policy responsibilities are divided between, as I understand it, the national game board and the professional game board. How successful has this division of responsibilities been? Roger Burden: I think in the last four years it has been particularly successful. I say the last four years because that is since the Lord Burns review, when both the professional game and the national game were given quite clear delegated authority about responsibilities—you were discussing the PGB earlier—and with that authority came the split of the surplus too, which we call the funding formula, where it is 50:50 between us. So the relationships have been cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 123 29 March 2011 Mr Roger Burden and Ms Kelly Simmons really good the last four years. I have no issues at all. I am surprised at some of the criticisms I have heard. not roll anybody over at the FA board. It has not been an issue for us. Q515 Jim Sheridan: From whom? Roger Burden: From some of the people who have presented in front of you. Q520 Chair: You channel quite a lot of money down into grassroots football, primarily through county FAs. We have had suggestions that the county FAs are not entirely accountable for how that money is spent. Can you say what audit procedure there is that you use to make sure that the money goes to where it is supposed to? Roger Burden: Yes, I can give a couple of top level views and then Kelly can give you some detail. Most of the money we give counties—and it is something in the order of £10 million a year, I think—is for salaries, development staff salaries, referee development, child welfare officers, as well as a chief executive. Every county needs them. So that is very easily auditable, because we only give the money based on the payment of salaries. From the chairman of the national game board’s point of view, we do have an internal auditor in the FA and he has been out to counties, reported back to me and through to the national game board and Kelly with regard to the controls that operate in the counties, and he has been entirely satisfied. Frankly, it is not difficult, because it is all based on salaries, if the people are not there, and they are not earning the money, they do not get the grant. Chair: It is not entirely salaries. Roger Burden: No, it is not entirely salaries, the majority is salaries. There is also some revenue funding, and Kelly can talk about that. Kelly Simmons: There is a blend. In terms of the national game budget, some goes to the county football associations in terms of workforce, but also revenue grants, which I will come on to. Obviously, there is investment into the Football Foundation. There are league grants. There are grants for clubs. There is the skills coaching, coach development. There is a whole range of funding. So I would not want it to be thought that it just goes into county football associations. You know, they are our key delivery agency in delivering national game strategy, and provide and oversee the administration and development of 130,000 teams playing in 1,200 leagues across the country every week of the year. The national game strategy, really, sitting under that are county football association strategies in line with that national game strategy. To get that money, we assess their plans and they have to set targets on how they are going to grow the game, raise standards, increase coaches, grow referees, and so on, so a range of key performance indicators. We track that through a score card process every quarter. We have regional managers that work with those county associations as partners and we are tracking their plans and the return on the investment that we are making in those counties, and working with them to share good practice, to make sure that we get that money to work as well as it possibly can. Then on top of that, as Roger mentioned, there was a board audit committee that has gone in and looked at that funding. In terms of the workforce, there is a clear set of conditions, how the counties must recruit, deploy and develop the workforce, to make sure they are providing good service to develop the game. I think there are a number of accountabilities in there. Q516 Jim Sheridan: Kelly, do you wish to comment? Kelly Simmons: I think, from the executive side, the focus on working with a board that is completely focused and committed to driving the growth and development of the national game, and having a clear strategy and a long-term budget and investment into that has really paid dividends. I think you will see from our submission, some of the results we have had in terms of growing the game, growing and improving the quality of coaches and referees, investing in facilities. The whole range of work we have done, I think, has been very much because we have had that real focus and leadership from people who are experts around the board, in the area of the national game. I think it has been a good thing for the organisation. Q517 Jim Sheridan: Can you see any benefits in appointing FA executives or non-executives to the national game board? Roger Burden: To the national game board? We have the general secretary comes in, we have Jonathan Hall and we have Kelly coming in. They are not members of the national game board, but they speak when they have something to say. I have never thought that; 15 or 16 of us around the table, I think that is more than enough. Q518 Jim Sheridan: What is the purpose of it, if they are coming to the national game board? Roger Burden: You mean the national game and the national game board? Jim Sheridan: What is the purpose of Kelly coming into the meetings with the members? Roger Burden: They are the executives. It is just like any other board, really, where the board is looking to the executive for the initiatives, and we present what we think is the appropriate support and challenge to the executives. They come with the budgets. They come with ideas and reports against progress. We have quite a comprehensive strategy with key indicators which we like to hit, and again, that was mentioned this morning. It operates, I think, the way you would expect a board to operate, with executives reporting in. Q519 Jim Sheridan: On the criticisms that you think have been unjust, would you like to give us a flavour of what the criticisms are that you do not agree with? Roger Burden: Yes. I have heard—not followed every word of it, but I have heard—that some members of the professional game board have been criticised for being overbearing and some because they have vested interests so are not putting the fair view to the board. I do not agree with that. I do not see that. It surprises me that people are surprised that the chairman of the Premier League is not a pussycat. He is a resilient man; you would expect him to be that, but he does cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 124 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr Roger Burden and Ms Kelly Simmons Q521 Chair: If there were allegations of inappropriate awards being made by a county FA, who would investigate that? Kelly Simmons: Awards in which sense? Chair: Grants being made. Kelly Simmons: Our money goes primarily into workforce and some programme money, but the main grants would be through the Football Foundation. The strength of the Football Foundation is you have a separate body that is assessing the grants that are being worked up at a local level to the county football associations and the partners. In other words, if it was a Football Foundation grant, that would go back into the Football Foundation in terms of query. If there was a concern in terms of something the county was doing, that would come back to the executive, and if there was a concern that we could not fix, obviously, I would work with Roger and the board. Q522 Damian Collins: I want to talk about youth development. Why has it taken so long to get the National Football Centre plan up and running, and with a delivery date? It has been the longest gestation probably of any public project in recent memory. Roger Burden: Yes, that is a good question. The very first board meeting I attended, Howard Wilkinson presented for the National Football Centre. I think that was probably nine years ago. And at the same meeting, there was a meeting about Wembley too, so at a stroke the board was being asked to look at something like £150 million, and there is the answer. We did not have it. The National Football Centre has been put off, not because any of us did not think it was a good idea, purely on the basis of funding. When it eventually came through and we were satisfied that we could fund it—and the national game is putting £6 million into it, incidentally, as is the professional game—we agreed as soon as we were comfortable that we could pay for it. Q523 Damian Collins: Ian Watmore, I think, gave us the impression that he found the National Football Centre lying dirty and tattered, in rags in the gutter somewhere and picked it up and put it back on the agenda; that it had been an unloved and forgotten part of the FA’s programme. Is that fair? Obviously, I do not suppose you will say that is a fair description, but there seemed to be a lack of impetus for quite a long time, and that was not just about money, but about priorities. Roger Burden: Yes, I think the priorities thing is fair, but money is at the heart of it, because, shortly before Ian joined us, we had reviews on the National Football Centre and it just was not affordable. It did tend to come up and down on the priorities, depending on a certain amount of pressure from the then-chief executive, and whether or not the chief executive of the day really felt that this was a viable moment to put it forward. Q524 Damian Collins: I appreciate you said money was a part of it, but it was not just money. What else was it that caused it to go up and down the list of priorities? Roger Burden: I do not think the National Football Centre ever went out of favour as an idea or concept. All of us were happy with it, but with Wembley and the television money going down, we could not afford it. It was as simple as that. At least in my view, we could not afford it. I voted against it when we were asked for £40 million, because I did not think the FA had £40 million. Q525 Damian Collins: The reason I ask is that there has been criticism that we have a problem of lack of qualified coaches, and the National Football Centre plays a key role in that. We have less than 10% of the level of fully qualified coaches that you might see in other comparable European football countries. Why do you think that has happened, and who is ultimately to blame for that? Roger Burden: I am not sure why it has happened and I do not know if anybody is to blame for it. I think the important thing is now that we have got to grips with it. The World Cup was a bit of a focus for us. Kelly has various figures that she can give you. Coaching is a whole game issue; it is not just national game. We are encouraging all our teams now to have qualified coaches, at least at the first level. All the children’s teams is what we want, and we are really starting from now, and I do not think there is any point in looking back to see why we are where we are. The important thing is that we are looking forward and Kelly can tell you some of the things that we are doing. Kelly Simmons: Yes, we have been working really hard. We started from a very low base. In 2000, when the FA did the first football development strategy, less than 5% of those coaching grassroots football, youth football, had any qualification whatsoever. We are now up to 72% of all junior football—mini-soccer and junior football—is FA chartered standard, which means that they have a minimum qualification. We are just about to announce our 500th community club, multi-team girls and boys, youth to adult, minimum level 2. We are working hard on getting the Tesco skills programme out there so that children get additional, top-up, age-appropriate specialist coaching. I think you will see that in action later on. We are investing through the national game board in regional coach development managers who are working with improving the skills and knowledge of the coaches working in the grassroots game. Regional 5 to 11 specialists really focus on the new ageappropriate agenda in the philosophy that the FA has published around coaching and working with young players. We are putting a lot of effort and focus in. I think we are starting from a very low base in terms of previous history. Q526 Damian Collins: Other witnesses have commented that in some ways what we are seeing now is the coming to fruition of recommendations that were made in the Lewis report five years ago. There has been criticism of the FA with Lord Mawhinney, for example, on this point saying this is an example of the failure of the governance structures and the leadership of the FA, that these issues have been left to drift for too long, and while the right thing is being cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 125 29 March 2011 Mr Roger Burden and Ms Kelly Simmons done now, it should have been done some years ago. Do you think that is a fair comment? Roger Burden: I think it probably is fair, because the figures prove that we do not have enough coaches compared to competitor countries—I will call them that—in Europe, in the competitions. I think it is fair, but we are doing something about it. We have not just started in this past year. National game has been encouraged by Sir Trevor Brooking in investing in local coaches for some years now, as Kelly has mentioned. Kelly Simmons: We are training about 45,000 coaches a year, so we have significant numbers coming at the base. The focus will be that St George’s Park will be a major asset in making sure that more of those local coaches can get to the top. It is not just the A licence and the Pro licence, but specialising in working with young players, which has been a real gap. Q527 Paul Farrelly: What percentage of the Football Association’s total income is spent on coaching and youth development? Kelly Simmons: Coaching, I believe, it is £8 million on coach education. Youth development, through the PGB—it is not our own—I believe £7 million goes through the Football League Trust into centres of excellence and academies on the boys’ side. On the girls’ side, it is between £2 million or £3 million on the girls’ centres of excellence, and about half a million on the talent pathway for players with disabilities. Q528 Paul Farrelly: So, just under £20 million. How does that figure as a percentage? I have not got the annual report accounts in front of me. Roger Burden: Of income, surplus, we are looking at £80 million. In terms of surplus, we have a surplus of about £80 million, which is split between national game board and professional game board, but there is also other income coming into the FA, and we do not have those figures in front of us. We only have our own figures. Q529 Paul Farrelly: I am just trying to get a feel, because you mentioned other countries, how do we rank as a nation? Kelly Simmons: Significantly higher; I am on the UEFA grassroots panel and work with a number of my equivalent colleagues across Europe in some of the big countries, and the Football Association invests significantly more in children’s football, grassroots football and coaching. Paul Farrelly: As a percentage of its overall income? Kelly Simmons: I am sorry. I meant total. Yes, cash total, I meant. Q530 Paul Farrelly: That is apples and pears, is it not, depending on the country’s size? Can you give us a feeling, do you have a feeling for how the FA ranks percentage-wise against Spain, France, Germany? Kelly Simmons: You would have to go back and look at their turnover and their investment in coaching. My sense would be that we are pretty high, I think, in terms of that, and that is over recent years: as the FA’s turnover has significantly increased, we have been able to invest more back into the game. You have seen we have significant numbers of coaches in level 1, level 2 starting to come through that coaching pathway. I think now, with St George’s Park and with that focused effort, we will see us closing the gap on the top level coaching qualifications. In terms of the national game, we need a blend of funding. We need to fund coaches. It is absolutely critical, but we need facilities; we need referees; we need leagues and competitions; we need clubs. It is one piece of the whole pie, if you like, of football development we need to invest in. We are investing in skills programmes, coach education, coach development, regional coaching infrastructure. So there is a range of investment in there that we are trying to move those coaches through. Q531 Paul Farrelly: If we can write to you afterwards, it would be useful. Kelly Simmons: Yes, of course. Roger Burden: The figures must be available. We just do not have them. Q532 Paul Farrelly: This is ultimately about sharing out money. Do you think there is more the professional game could and should do, be it the Premiership or the Football League, to help improve the coaching and youth development, outside of their own academies? Is there a case to be made, if it is not in their interest but in the national interest, that they could contribute and should contribute more? Roger Burden: You mean financially? Paul Farrelly: Yes. Roger Burden: I had not really thought that there was until I was listening to the debate this morning. Personally, and from the national game board’s point of view, we have been very happy about the way the money is split. They have been really supportive of the things we have wanted to do with our money. Obviously, if there is more money around, I would hope that they would see their way to help the national game. Although I do not have any concerns or criticisms, we always want more, and in the case of the national game , we have a lot of mouths to feed in order to do what we want to do and increase participation. But I do not have any concerns about the level of support we are getting from the professional game. Q533 Paul Farrelly: Final question on this topic: we have been to Germany and taken some evidence of their response to Euro 2000, their dismal performance, and their youth development, which we saw coming through in South Africa. We have learned from them that they have a contracting system where the children at the age of 15 to 18 can be contracted, which gives some protection for proper recompense, as against the poaching that will inevitably happen. Do you think that current arrangements between the Premier League and Football League clubs and proposals for changes to the academy system are right, or should there be anything else in place that protects the smaller clubs and gives them better recompense? Roger Burden: It is not really our field, in terms of the smaller clubs, because I know you are looking at cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 126 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr Roger Burden and Ms Kelly Simmons the smaller Football League clubs, but what I have seen recently with the way the Premier League and the Football League have been talking to us and to our people, I thought it was a step in the right direction. There is going to be a change and you are probably already seeing some of that, some of the arrangements. Paul Farrelly: I am not talking from the point of view of your own niche but I am talking to you as a representative of the governing body of the national game . Roger Burden: Yes, okay. I am satisfied. I think it is right. I think the way the programme for children coming through the game and the opportunities that exist are right. That is one of the things we want to achieve. We want to get children playing and we want to make sure they have the skills coaching so that, if they are good enough, there is an opportunity and we want to make sure they do have the opportunities to get into the professional game if they are good enough and they want to. I think those opportunities are there now. Kelly Simmons: The academies and centres of excellence for boys doesn’t sit within the national game. In terms of the youth review that Alex touched on earlier, I see it as our role is absolutely vital in trying to drive through and work with the Leagues and clubs to make the changes that are required to make sure that all children have the best introduction to football. We are looking at: at what point do children stop playing mini-soccer and move into the adult game; whether nine versus nine is a better transition; at what point you bring in league tables to try to take away some of the competitiveness and make sure that all children get to play and try different positions, and it is the right kind of environment, which Respect is really trying to drive, to make sure that the environment on the sideline is good and conducive in terms of player development. I see that as being our role, alongside bringing as many players into the game as possible, which I think we are doing through the growth figures. We have had over 5,000 new teams since we launched the strategy for children, so widening the base and making sure that we continue to do that work around coach education. Then we hand them on, obviously, into the academies, the talented ones. Q534 Dr Coffey: I want to ask one supplementary question, Chair, on that particular point before moving on to structure. Do you think the national game was a bit slow in recognising that primary schools were no longer particularly teaching football any more? School sports dropped significantly in the 1980s. Kelly Simmons: It is very hard, isn’t it? You look at the scale of primary schools in this country and the resources that we would have had in the FA several years ago to try to tackle that. We work very hard, and have been working over a long term to make sure that, where football is not played in primary schools, we have a healthy English Schools FA that provides out of school competitions and we are working very hard in terms of our junior club development. I think we have made some great strides with that. I think we mentioned earlier 72% of those clubs now reach our kitemark. I think the biggest issue for football is not so much that football is not played in primary schools; it is the physical literacy of the children coming out of primary schools, which I think affects all sport. It is really important that football and the governing bodies work with the Government and with education to try to address that. That is what the skills coaching programme is that you will see later. It is not just about football skills; it is about trying to improve children’s movement and physical literacy so that, when they come out of that sort of 11 age group and pick their sport maybe that they want to specialise in, they have the foundations. What we are finding, and I saw it when I was coaching in schools, girls and boys just do not have that movement and co-ordination to enjoy any sport and have a lifelong love of it and be good at it. So I think physical literacy is a bigger issue in that sense. Q535 Dr Coffey: Moving on to the FA structures, Mr Burden, why did national game representatives oppose the full implementation of the Burns report? I am not saying they were wrong to, but why did they do it? Roger Burden: There were issues in there that we were not comfortable with. There was not much that we opposed. I think Lord Burns did suggest— Q536 Dr Coffey: Can you recall what you did oppose, specifically? Roger Burden: Yes. We did oppose the two independent directors. We were not convinced that that was necessary, but we did support the idea of an independent chairman. So it was a compromise internally. You may not be aware but, as I think the chairman said, you do need a 75% majority in Council in shareholders to get things through. It was our sense that we would not get that through with two independent directors. Colleagues were reluctant. At that time, the national game board and the professional game board held equal votes within the main board. We had six and the professional game board had six and the chairman and chief executive did not have a vote, which puts us in quite a good position, we would think. As corporate governance, it is not a great position and that is why Lord Burns was encouraging us to give the chairman a vote and give the chief executive a vote. For corporate governance reasons, I happen to agree with that. So it seemed sensible that one of the ways we could achieve what Lord Burns was after, which was to break this sort of six-six position, was to have an independent chairman. That seemed a sensible compromise, which as we went around the country talking to colleagues we thought they would support, and it did give us an independent chairman and it has given the chief executive, general secretary now, a vote. The professional game board and ourselves both gave up a member of the board, so we went down to five each, and you have probably seen that, plus the two. I think for corporate governance reasons that was a good thing to do and I think that was a reasonable compromise. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 127 29 March 2011 Mr Roger Burden and Ms Kelly Simmons Q537 Dr Coffey: We heard from David Bernstein earlier that he thought he had a good hearing. You are obviously a leading player in the national game. Do you think you will see any further changes and if so what would you like to see changed on the FA board and Council? Roger Burden: My experience of being on council for many years and working with the committees is that they are, as you have heard, sensible football people and they want to do what is best for the FA. So in the board, when the chairman put the idea to us, I was one of the ones that said, “You need to consult because, if the grounds are good, and the signs are the grounds for this are good, then Council and shareholders will go with you, but what they will not do after just a few weeks in the post is suddenly switch to something that they remember just four years ago only just got through the shareholders. So we need to tread carefully.” You heard the chairman say that is exactly what he wants to do. There is no doubt in my mind, if a strong case for more independent directors is made, Council and shareholders will support it. Q538 Dr Coffey: Will you be supporting it? Roger Burden: If the case is made, yes. Dr Coffey: So you are not convinced yet? Roger Burden: No. Q539 Dr Coffey: The Committee has already heard from Lord Burns, Lord Triesman and others that national game representatives are conservative and have acted as a brake on structural reform. Are there any changes you would like to see to the FA Council to try and not necessarily be quite so conservative but open to new ideas, perhaps term limits, not almost have a place for life? I know you have to be elected, but there is no limit to how many times you can be re-elected to Council. Roger Burden: That is true. We do have an age limit, though, and I supported that. That was challenged. There is an age limit now; you have to retire from council at 75. You have to come off the board at 70, which I think is good corporate governance. So there is an age limit; it is not a place for life. Interestingly, there is a position, after you have served the FA for 21 years, you become a life member. Only at the January council we were successful in establishing that even life members have to retire at 75, so there is no longer a place for life. Some are already on there and they can go beyond 75, but for the vast majority of us we will be kicked off at 75, even if we are elected every year. My own position is that I represent Gloucestershire on the Council; I have to be elected within Gloucestershire every year and all of us from the national game have to stand for re-election to the board every three years, which again I think follows good governance policy. Q540 Dr Coffey: So you would not want to see any changes to perhaps trying to encourage fresh blood in at the highest levels of our game? Roger Burden: It is really difficult. Part of Lord Burns’ report, which we did support, was that we should be more open in Council and make sure people were properly representative: we increased the women’s representation, we introduced a referees’ representative, players, managers and there is a disability representative. So we did become more open and there are over 100 of us and I would need to be convinced that that is not enough, that we need more. I do not think we need any more in Council. Q541 Dr Coffey: You were acting chairman for about seven months. Roger Burden: Nine months. Dr Coffey: Nine months, sorry. There is something in the papers today about a report you wrote when the inquiry started off, which was working together with the Premier League and the Football League for a coordinated response to kill off the nonsense about infighting that politicians and the media seem keen to invent. I was a little surprised by that, only because the Committee has not come to that view. It is people who have worked with the national council, like Lord Triesman and others, who very strongly suggest that there are internal tensions. So why do you think it was sensible to put your thoughts in writing? Roger Burden: Because I do not see that in the boardroom. Some of the disputes that we have heard from Lord Triesman, and I think Ian too mentioned it, I have not seen in the boardroom. Q542 Dr Coffey: Have you seen them in the corridors outside the boardroom? Roger Burden: Yes, but what is wrong with that? Ian is a good example where he resigned in frustration and others have been accused of disagreeing with him, but the place to bring these presentations, chief executive, is in the boardroom. He put up his 100-day idea, and I liked nearly all of it—not all of it, but nearly all of it. I am sure we would have made 80% or 90% of it, but he resigned so we did not have a chance to have that challenge in the boardroom. If some of my colleagues in the professional game may not have not been supportive of it, I would have heard their arguments. I liked what Ian put but we never had that opportunity, and Lord Triesman may have been in the same position where outside the boardroom he had some disagreements. He should have brought them inside the boardroom and there he may have found he got some support. Q543 Jim Sheridan: Could I ask you basically what you see as the main challenges facing the English national game? As a Scot, I am keen to find out what those challenges are and see how best we can make them even more challenging. Roger Burden: Thank you very much. Kelly has touched on them. We are here to increase participation in football. We want to see as many people playing football and going to watch football as we can, preferably playing because then, if they are today’s player, they might be tomorrow’s administrator or tomorrow’s referee, like me. I was a failed player so I went into refereeing and administration. What we want to do is give everybody that opportunity to participate. That is our challenge. Within that, of course, you then have the challenges that Kelly has touched on in terms of making sure we have good facilities, making sure that children in cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 128 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr Roger Burden and Ms Kelly Simmons particular have a safe environment in which they can play, and “safe” means they have properly checked and trained people looking after them. It is our belief, as we have said that, if they do get properly coached by coaches that have been trained, it will improve their skills and they will enjoy it. They may not go on to be elite players, but hopefully they will play football until their maybe late 30s, maybe even 40s now with veterans league. I was sitting at the back and I heard somebody was playing football. I could only suspect it was veterans league football, but forgive me. Jim Sheridan: What made you think that? Roger Burden: It is really once you are in your early 30s, you are into the veterans league. Jim Sheridan: And they don’t have any agents either. Kelly Simmons: I think we are really clear what the challenges are because one of the strengths, I believe, of the national game strategy is that, before we produced it, we had a major research and consultation into the national game, involving over 20,000 stakeholders: players, coaches, referees. They were clear what the challenges are for them and where they wanted the FA to invest its money to tackle some of those challenges. Behaviour came out very strongly. The Respect campaign was a response to that. 40% of those this year surveyed believe that Respect so far has improved their experience of the game. We know that 2.5 million people, despite 7 million playing, still want to play the game, either play more or play, and we have been working very hard to create both junior football and the 5,000 teams I mentioned earlier that we have grown since the launch of the strategy. On the point you touched on earlier with Alex, it is about trying to create more flexible football for adults and tap into the changing lifestyles and the way people want to consume their football and responding to that with the new partnership with Mars and the work that we are trying to do with Sport England to turn that round. Facilities is a big one, obviously, and we can never have enough resources to tackle the demand on pitches and facilities. But since the strategy, working in partnership with the foundation and other partners, we have invested over £200 million into new or improved facilities. So we know those are the kinds of challenges that we are working really hard to address and we feel we have made some inroads. Obviously, there is a lot more to do. We are just out now on the extension of the national game strategy to 2015. There is a survey online currently at the moment. Over 10,000 people involved in the game have done it, so we will be getting a really clear steer about how we have performed, how they think we have improved what they have set out and they have asked us to do, and where they think the priorities are going forward. Q544 Jim Sheridan: Finally, you seem to indicate that you have a good working, constructive relationship with the professional game, but just on the question of resources and powers, hypothetically, if that relationship was not there, do you have the relative powers and resources that you would need? Roger Burden: Powers, yes, because the split of cash is in the articles. We have heard that, haven’t we, with the 50:50 split of cash? That gives us the power. We have 50% of the surplus and the authority is delegated from the board to the national game board. Obviously, we have to report up to the main board. If our professional game colleagues wanted to be difficult they could protest at the main board. They haven’t done but, if they did, there are only five of them and there are five of us and we then have the chairman and the general secretary. Heaven forbid it would come to that. It never has, but I do think we have the power. Do we have the resources? It comes back to the money. Q545 Jim Sheridan: Has it never happened then? Even out in the corridors of power it has never happened? Roger Burden: No, not between us and the professional game. They have always been incredibly supportive. Kelly was telling me at her level it is the same. Kelly Simmons: The board unanimously supported the national game strategy and the investment into it. I came along to the board and presented, along with support from Roger, and there was complete support for the strategy. We have worked very closely with the Premier League through the Football Foundation, where I think they are shortly due to announce they have invested in projects totalling nearly £1 billion. So that is the kind of relationship we have with the Government and the Premier League. At local level, there is some fantastic work going on between the county associations and Premier League and Football League clubs and they have been working on driving the Football for All agenda. We have just recently announced that through the work we have done with the clubs there are over 1,000 teams of people with a disability. The new women’s super league, semi-pro league launching in April, five of those clubs are supported by their men’s Premier League club. So I think there are good relationships all the way through. Q546 Damian Collins: I wanted to go back to the Burns report and the issue of the two independent directors. From what you said in response to my colleagues, it sounds like the Council considered that having two independent directors on the board, your fear was they would be more likely to side with the professional game. If that is people’s view, four years may have elapsed, but it is a numbers game. On Mr Sheridan’s question of power and control, those numbers will not change and I do not believe it will be eloquent words that will convince you to change your position. It sounds like you want to cut a deal with the chairman of the FA if he wants to get his change through. Roger Burden: No, you misunderstood me. I understand about independent directors. I am nonexecutive director of the FA, as are nine other people. It is quite a lot of non-executive directors. There is a lot of challenge within the boardroom and we have an independent chairman with the experience of the professional game, and indeed grassroots. So there is an excellent mix there. This was the first time this had happened when this had been offered to us and previously we were six-all. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 129 29 March 2011 Mr Roger Burden and Ms Kelly Simmons There was concern that somebody who was independent of the game may find himself easily seduced by the professional game. He would much rather accept an invitation to go to watch Arsenal than he would to come down to the King George V in Cheltenham. So there was this concern and I think we have overcome that slightly. I think a lot of that has gone, and Lord Triesman helped that because Lord Triesman had a grassroots background. There was a concern about what true independence means. I think we all can see the strengths of true independence bringing some real external thinking to a board. Every board benefits from that, but that is where our concerns were four years ago: would he remain independent for long? Q547 Damian Collins: Are people still concerned at how easily independent members of the board may be seduced by the odd corporate freebie? Roger Burden: No, I am talking four or five years ago. The new idea of “Can we have two independent directors?” is a relatively new idea again, because we thought we were doing okay. Q548 Damian Collins: So your concern is that the independent directors might mean that the professional game ends up having more of a say is not found any more? Roger Burden: No longer, no, that is no longer the case and personally I do not have that concern now. I have met a lot of people who I think are certainly of the stature that they would not allow themselves to be seduced. I think that was an unfounded concern that we did have four or five years ago, which I do not believe will sit out there now. Q549 Damian Collins: From what you said, it sounds like if colleagues share your views then Mr Bernstein may be successful in getting his two independent directors? Roger Burden: Yes, I think the Chair has to put the case to colleagues; it is a strong case. It is not a strong case to say, “Everybody else will go away and they will be quiet if we do two independent directors”, or I suspect that is possibly the case. We will have less criticism. It is one case, but I would like to understand the way the board would be strengthened by independent directors and my colleagues. What are the reasons, what will they bring to us? I know some of the answers incidentally. Q550 Damian Collins: What do you think they are? Roger Burden: I think they can bring specialist skills that we do not have on the board, but I think that the chief executive of Manchester United brings particular skills to us that an independent director cannot bring, so we have to be careful that we have the right mix. Q551 Paul Farrelly: Mr Burden, you have been involved in running building societies? Roger Burden: Only one. Paul Farrelly: The picture that we have had painted to us by a number of people and I think you have rather reinforced today is that there are five professionals from Gloucester on the board who have all the money. Then there are five well-meaning people from Cheltenham who are on the board; they do not like to rock the boat because they are rather grateful for the money they are given. A day or so before every board meeting, the five blokes from Gloucester all meet up to decide that what goes on in Gloucester has nothing to do with the people from Cheltenham and certainly nothing to do with that chairman and chief executive who come from neither. The well-meaning people from Cheltenham do not disagree with that. That is not a recipe, is it, for a successful, agile, responsive organisation like a building society that needs to move with the times? Roger Burden: No, it’s not what I said. Paul Farrelly: That is the picture that has been created. Roger Burden: I’m sorry you got that impression, but it is not what I said. I was trying to respond to why we got stuck four or five years ago and I definitely did say that is not the view today, we have moved on. I think if you look at the board and the debate and board agendas—I do not know if we are going to get a chance to see that—I think anyway it’s a properly run constituted board where it has the right degree of challenge, where we do not all vote en bloc, and I think that is the way boards should be. I’m sorry you got that impression but it’s not what I said. Q552 Alan Keen: Is Cheltenham & Gloucester still a mutual? Roger Burden: No, no, no, C&G was bought by Lloyds Bank some 10 or 12 years ago. I cannot remember when. I was there. I was at C&G. It is nothing to do with me now; I’m out of C&G. I retired. Q553 Alan Keen: Was it a mutual before that? Roger Burden: Yes, it was a mutual, yes. Q554 Alan Keen: Would you agree that mutuals have been more responsible through the economic crisis than the— Chair: Alan, I think that we can refrain from— Roger Burden: I am happy to talk about that outside. Alan Keen: No, it is to do with supporters’ ownership. Roger Burden: I am not going to answer it, Chair, because I am a director of a mutual building society today. It is not Cheltenham & Gloucester but it wouldn’t be right for me to answer it. I’m happy to have a quiet word over a cup of coffee, but not here. Jim Sheridan: Out in the corridor. Roger Burden: Why not, yes. Q555 Alan Keen: It was to do with supporters’ ownership, of course, but can I move on. You mentioned veterans’ football; I understand that Germany has veterans’ football organised at quite a high age-level. Can I ask you why it has never been looked at by the FA because there are two benefits from veterans’ football: one is the obvious health one, but the other is less easily recognised by people. Veterans have money to spare compared with younger people and, if you get veterans organised to play they get them into the clubs themselves, the grassroots clubs, they can give a lot to it whereas at the moment cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 130 Culture, Media and Sport Committee: Evidence 29 March 2011 Mr Roger Burden and Ms Kelly Simmons they are probably sitting in front of the telly watching football. Why has the FA not been involved in organising veterans football? Kerry Simmons: It has in the sense that we invest in the county FAs to develop football right across from mini-soccer through to adult football. They have targets for adult male as well as adult female. The male ones have been challenging, as we’ve seen a decline in 11-a-side which we’ve halted now and a big growth in 5-a-side, for the reasons we touched on earlier. A couple of focus areas that a number of counties have done is to look at vets’ football and local vets’ leagues and keep people active in the game, but there is a balanced work programme so a big focus for us at the moment is drop-out at the younger age. As with all sports we are losing a large number of players in that sort of 14 to 16 age band. We’re trying to bring children into the game, make sure they don’t drop out, provide them with the right range of flexible opportunities to play as an adult, be it 11-a-side, small-sided or the Just Play type of concept we talked about earlier and keep them in. It is right, we could do more in terms of veterans’ football, but certainly a lot of counties and leagues have done a lot to keep people in the game and put over 35 leagues in place. Roger Burden: My own county started a veterans’ league this season from seeing the same guys playing unaffiliated football. Our development manager went out there and spoke to people and we have a league and now we’ve double-figure teams in it; it’s a few hundred chaps playing football and I think it’s growing. Alan Keen: After the kids have gone to bed, you would have to use the small pitches, still play with large balls but smaller pitches, if you don’t mind. Sorry, Chair. Roger Burden: I do see it as a growing area of football, you’re right. Q556 Chair: Can I ask you a final question, Mr Burden? As you said, you were acting chairman of the FA for a time and you contemplated applying to— Roger Burden: I did apply. Chair: One of the reasons you gave for withdrawing your application was that you said that liaison with FIFA was an important part of the job and you weren’t prepared to deal with people that you did not trust. Would you like just to expand on that? Roger Burden: Yes, it all came from the World Cup bid where the day I walked out of Wembley, having accepted the role as acting chairman, I received a call from one of the World Cup teams to ask me if I would go to South Africa and support some of the work they were doing during the World Cup, which I did, and I put off my holiday to go. I went twice to South Africa because the World Cup bid team wanted me to and I shook hands with important people, in FIFA and others, as I was asked to do. I met several of the FIFA executive committee, both in this country and in Switzerland. I treated them with respect which I thought they deserved and I felt they were treating me with respect. I think they were taking me for a fool but, at the time, I thought they were treating me with respect and I was happy to do all that for the English bid. Then of course on the day we were faced with coming second; it did not concern me, I thought the Russian bid was a good one; they were always a good competitor, I’ve got no issue with them winning. It was the way we lost that I have the issue with and we came a very poor fourth with only one vote on top of our own representative, as I expect the Committee is well aware. It was against that background, as I saw it. First of all, the background in which our bid was recognised as being the best by most objective judgements— indeed, some of FIFA’s own judgments—and they set down the criteria on which judgments were made. In our group we were at the top, level top. Yet, we only got one vote. It felt to me as though they were not being fair and they were not being objective and we had put a lot of resource into this; not just money, people, and I’ll talk about those. That was one thing. I thought, “Well, who are these people, that they’ve put us through this and then they’ve just gone and done something else?” I did not like that and I did not like the fact that they had promised—I think we were up to five, it might have been six, but certainly five— Prince William that they would support us and they did not. We only got one of those; I think most of them subsequently rang our chief executive to say that they were the one that voted for us. If we had hung on a bit longer we might even have won the vote by the end of that week. But that’s not what I’m used to. These are people at the top of the game with whom, as I recognised in my letter, I understand the FA has to have a relationship with them and I wasn’t prepared to do that. I’ve worked with people that I’m not sure whether I can trust—we have all done that in life and business— but this was the governing body. This was an important set of people. I just could not see myself at having to negotiate with them, having to agree with them and then walking away saying, “Well, their word just is not worth it; I don’t know if we’ve got a deal or not.” It is something that I’m not used to; I wasn’t prepared to put up with; and I thought it was best if I stood down rather than refuse to meet them or be rude and sarcastic, which I can do. I’m quite good at that. That wouldn’t be right for the chairman of the Football Association and I withdrew. I had applied and I had a first interview but I did not attend it; I withdrew before I got to the first interview but those are my reasons and I’ve not regretted it. Q557 Chair: You say that you think that our bid at least deserved that second place and that we had pledges from considerably more than the one person who did eventually vote for it with us. Why do you think that those others did not support us? Roger Burden: I genuinely do not know. On the objective assessment, I would have expected substantial support and on the personal commitment I would have expected at least five and I have absolutely no idea what criteria those who voted used because it was not what they set down. I just do not know. Q558 Chair: You must have thought about this. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 131 29 March 2011 Mr Roger Burden and Ms Kelly Simmons Roger Burden: Yes, I have and I have my own views and they are personal ones and I think, if I understand, you will have heard stories. I’ve heard stories. All I know is that they didn’t follow their criteria. I mentioned the people. I attended what we hoped would be the celebration party, which turned out to be the wake, working with the World Cup bid team, which was not just the two or three that most people see; there’s a lot of staff on the World Cup bid team, who had given a year to two years of their lives because they believed that the England bid was going to be the best and they believed that the criteria that they had been asked to follow would be followed by those voting. That was an emotional moment, to see those people having to deal with the fact that we only got one vote also brought that failure home to me. I find it difficult to explain what was in the minds of the people who voted. Q559 Chair: Without naming individuals, you’ve said you had your own views, would you like to expand as to what those are? Roger Burden: No, no, I would not. Those views are clearly that, for some reason, they chose not to follow the criteria and I genuinely do not know why they did that. This is not a Russia thing, because we knew Russia had a good bid for all the right reasons. But to get fewer votes than Holland was confusing and, indeed, Holland got fewer votes when they went on; that some were just voting to keep us out, by the look of it. It did not say anything about that in the book. There is no point in me in giving you my view. All I know is what I’ve told you, that we had the best bid, by most measures, and some members committed to the prince that they would support us and it did not happen. Q560 Jim Sheridan: Did those corridor meetings not work? Roger Burden: Some did I expect. There must have been some meetings in the corridors by some that got more votes than us that worked. Chair: I think that is all we have. Thank you very much both of you. Examination of Witness Witness: Stewart Regan, Chief Executive, the Scottish Football Association, gave evidence. Chair: Good morning. For the final part of our session, can I welcome Stewart Regan, the chief executive of the Scottish Football Association and also thank you for your patience in waiting to get to this point. It seems appropriate to ask Jim Sheridan to begin. Q561 Jim Sheridan: Thanks for coming along, Stewart. I think that it is well recognised that this Select Committee inquiry has principally focused on the English League and the Premier League, but it does touch on very important issues relative to Scotland in terms of governance, ownership, the role of supporters et cetera, so we felt it was important that we get a Scottish perspective on just exactly how the game is being played in Scotland. We had the former First Minister, Henry McLeish, down some weeks ago and you know Henry has produced a report. Could you give us an analysis or a perception of how you feel about Henry’s report? Stewart Regan: Henry carried out a report in two parts focusing on five key areas. Those areas were performance, facilities, regional structures, governance and league competitions. There were 103 recommendations in all. The board have considered them. We’ve prioritised them and we are implementing two key areas as we speak, one relating to governance and one relating to performance. From a governance perspective, the proposal is primarily to reduce the main board from eleven down to seven; to make it less of a representative board and more of a strategic board, focusing on strategy finance in major game decisions and sitting below the main board to split the game into two, effectively a professional game board and a non-professional game board. That would allow both sides of the game to effectively have delegated powers from the main board which would allow them to run the game and involve the expertise in the areas of the game that best suits the individuals involved. We had a series of recommendations about Council and the Council, from a structural point of view and a constitutional point of view, does not have any voting powers within the Scottish FA. However, we listened and heard Henry’s recommendations as far as how Council could be used, and our proposal is to create Council into almost a House of Lords model for inclusion of football writers, supporters, referees associations, players, managers, disabled, and women’s game and so on, so we have a much more all-embracing, inclusive view of football in Scotland. That will allow us to have a debating forum that would give us a voice from the total Scottish football landscape and decide whether that voice, particularly if it is positive, requires issues to be converted into policy. Two weeks ago, the board approved our governance proposals. They are being converted into resolutions as we speak and will go before our AGM in Scotland on 7 June. Q562 Jim Sheridan: Did I hear that they are talking about reducing the board from eleven to seven? How will you achieve that? What are the criteria for that? Stewart Regan: At the moment, the board consists of representatives from the game rather than elected individuals, so we have a number of individuals around the board table who are there because of their involvement or expertise in particular side of the game, whether it is schools, football or youth football. Our view is that a main board needs to be competence-based and able to deal with strategic and financial matters. The main board will involve the senior officials of the Scottish FA. The terminology for these in Scotland is cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 132 Culture, Media and Sport Committee: Evidence 29 March 2011 Stewart Regan “president”, and then there is a first and second vice president. They are people who effectively come through Scottish Football, through the Council; they have held senior positions in the game, either at club level or association level. There would be the Chief Executive, i.e. myself. There will be four automatic places on the board. There would then be one seat for the professional game board and one seat for the nonprofessional game board. Those two individuals would be elected by their respective boards, and then one independent non-executive director, whom would be selected based on competence criteria, i.e. if we feel we need a legal input, we would appoint a legal individual; it may be HR; it may be strategy. That depends on the competence of the board at the time we need to make that decision. In four years’ time, we will remove, subject to our member clubs’ agreement at the AGM, the second vice president position and replace that with a second independent non-executive director, thus making the board much more in tune with normal blue chip companies and normal corporate codes of governance. Q563 Jim Sheridan: Apart from the two elected people, will the rest of the board be appointed? Stewart Regan: That is correct. Q564 Jim Sheridan: One of the recommendations that Henry McLeish suggested was the reintegration of the Premier League and the Football League. Would you agree with that? Stewart Regan: I think that is a matter for the Premier League and the Football League in terms of what the structure looks like. We have discussed the matter and we feel that having one league to deal with in Scotland makes much sense. Scotland is a country of only 5 million people; it is the same size as Yorkshire, where I was chief executive previously at Yorkshire County Cricket Club. With 5 million people and all the professional football clubs that exist, it is very complex and complicated in terms of getting things done. It would be much simpler to have one league, and equally, from a performance point of view, the relationship between the governing body and the league, we feel, would be much smoother and progress could be much swifter. Q565 Jim Sheridan: Are you also aware of the discussions that are going on about the size of the league? Stewart Regan: That is correct. Q566 Jim Sheridan: Certainly, if newspaper reports are to be believed and various surveys have been carried out, the supporting fans really do not want a 10-team league but the authorities seem intent on imposing a 10-team league. Is that the case? Stewart Regan: I think the league reconstruction, as I said before, is a matter for the leagues themselves. They are in discussion as we speak. It is not as simple as simply looking at one stakeholder view, i.e. the fans’ view, if you like. We have certainly, from what I gather, taken fans’ views into account, but the principle of a 10-team league is built on the long-term survival of Scottish football. In comparison to football in England, there is not the same amount of money flowing through the game and, as you know, football in Scotland is dominated by Celtic and Rangers, particularly in the Premier League, just in terms of fan base and resources. Money needs to flow down through the game so that the landing is softened if a team is relegated from the Premier League to the First Division, because the drop in income is potentially cataclysmic for a club that falls out of the Premier League. Therefore, the intention is to try to provide some funding that can flow down through the game from the Premier League into the First Division, and in order to do that, you need to create that income from somewhere. The proposal is on the table to reduce the size of the Premier League from 12 teams down to 10, which would create two shares of income that could be divided across the Football League and thus have a much more attractive First Division in Scotland. There are also performance criteria to be put in place. Following Henry McLeish’s report, we have recently commissioned a performance strategy using Alistair Gray from a company called Renaissance, who have done a lot of work with sport right across the world and right across a number of different sports. The performance strategy is built on four guiding principles. One is to create 10,000 hours of contact time with the ball for younger league players coming up through the system, which actually links to the provision of sport in schools, which we probably will not have time to get into, but it is something we feel particularly strongly about at the Scottish FA. The second principle is around providing “best versus best”: the opportunity for the best players to play against the best players. The third principle is around coaching, and the fourth is around something called The New Scotland Way, which is our performance system and the infrastructure that we put in place. I was interested earlier to hear one of the comments about preventing foreign players coming in and dominating the national team. In Scotland, we are also concerned about that, and we are looking at putting in place performance-related fee permits for our clubs to incentivise them to actually play young Scottishqualified players in the first team, to actually bring them through and provide the “best versus best” opportunities. So, to address your question as far as the restructure of the League, yes, on the face of it, it does mean a reduction in the number of teams, but both from a financial and a performance point of view, we believe it is absolutely the right thing to do. Clearly, there are differences of opinion even within our own board, but it is one of those matters that are very subjective. People either agree with it or they do not, but when you look at it from different perspectives, there is a lot of common sense to the proposal. Jim Sheridan: So finance has been the dominant factor, then, in making the decision or the proposals. Stewart Regan: No, that is not what I said. What I said was that finance and performance have been looked at. Performance, and in particular the development of Scottish-qualified, home-grown talent, is a key criteria. If you look at recent articles from Craig Levein, the national team manager, you will see cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 133 29 March 2011 Stewart Regan that he personally is very supportive of that restructure because it gives the young players the chance to play against the best players in a very much stronger 10team, top tier of football in Scotland. Q567 Jim Sheridan: If it goes to a 10-team Premier League, how many times will Celtic and Rangers play each other? Stewart Regan: That is clearly for the Scottish Premier League to decide. This season already they are playing each other seven times because of the nature of the cups that they have been drawn against each other and the progress that they have made. The number of times Celtic and Rangers play each other is actually a key factor in the broadcasting contract in Scotland. Obviously, any structure that is put forward has to look at that particular clash as a key contributor. I don’t know where that will end up, but it will certainly feature strongly in any proposal. Q568 Jim Sheridan: Have there been any discussions about, putting Cup games aside, how many times in the league Celtic and Rangers will play? Stewart Regan: Yes, there will have been discussions. As I said, it is the League— Q569 Jim Sheridan: Do you have any idea how many times it will be? Stewart Regan: I could not say off hand, because I have not been involved in the detail of fixture planning. What would need to be discussed, particularly with the Leagues themselves, is any fixture scheduling that they have put in place. Jim Sheridan: There is a distinct danger there of becoming repetitive and boring, and the end result will be that fans will not come and watch it. Stewart Regan: I think, if you talk to the fans of Celtic and Rangers, they would probably disagree. They are the biggest-attended matches in Scotland; they are the matches that grab the public interest and television interest around the world. When Celtic and Rangers play fans of other Scottish Premier League clubs and also in Cup matches against Scottish Football League clubs, they are particularly attractive and generate revenue for the clubs and provide economic impact for the local communities where the teams play. Q570 Jim Sheridan: Henry also suggested the regionalisation of the lower leagues. How do you think that will work out? How will it help the lower leagues? Stewart Regan: It has been discussed with the Scottish Football League. The principle really comes down to looking at whether or not a pyramid system can be put into Scotland. At the moment, at the bottom of the Football League, there is no opportunity for any team to come up from amateur football or non-professional football into the Football League. If you look at the performance strategy, which provides the opportunity for clubs to play against the very best clubs, we feel at the Scottish FA that there needs to be an incentive for clubs that want to invest in their infrastructure and want to develop their standards to aspire to become professional and, therefore, we feel that the door needs to be opened up for clubs to come through the ranks. However, because of the size of Scotland, to create another division and have clubs travelling from Wick or Elgin right the way down to Dumfries or Berwick just doesn’t make commercial sense, so there are a number of options, one of which is regionalisation. When you look at it purely from a financial or commercial perspective, there is a lot of sense in it. The clubs themselves, however, see that as potentially challenging what they have currently, which is to be part of the national League, to be a national, professional team, and any suggesting of regionalising is met with the view that it would be a step backwards. That one is still very much a work in progress. That one, again, is for the Scottish Football League at look at the way forward. Q571 Jim Sheridan: In terms of the revenue from, particularly, television, how will that flow down to the lower League clubs? Stewart Regan: There are two aspects, really. There is the television revenue that comes in through the Leagues themselves, and the Leagues make a distribution to their clubs based on a particular formula. Obviously, that would be something for you to discuss with the Leagues, if you feel it appropriate. I can only talk for the television deal for the Scottish FA. We provide a number of distributions based on things like the Scottish Cup, based on a distribution award at the end of every year to clubs, and what we are looking at doing as part of the governance review is refocusing how we reward money. What we are keen to do is reward clubs for delivering behaviours or initiatives that are going to contribute to the achievement of our strategy. We want to move from being seen as a grant-giving governing body to a body that actually measures outcomes, and measures outcomes that contribute to the strategy, particularly the performance strategy and the participation strategy, which are the two key pillars that we are working on. We are looking at the sort of outcomes that we can reward, for example, playing young Scottish-qualified players in the first team, developing a number of coaches in order to provide the necessary coaching support for young kids, and also to encourage participation, which means having a volunteer strategy and having an officials and coaches strategy. At the moment, we are probably not as good as we could be or should be in how we distribute the money, but we have recognised that and we are looking to change how we reward clubs in the future. Q572 Jim Sheridan: Regardless of the attractions of the Old Firm, there is no way they are going to compete financially with Manchester United or Liverpool, et cetera, so given the limited resources in terms of Scottish football, do you think that salary capping would be an appropriate way to go forward? Stewart Regan: I think it is an interesting debate, and it is one that I was involved in when I was at the Football League. I think you have to look at the market in which clubs play. If you are in the top tier cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 134 Culture, Media and Sport Committee: Evidence 29 March 2011 Stewart Regan of football, you actually view yourself as playing on a world market, and if you have restrictions imposed upon you, you then see yourself as being unable to compete at the highest levels. To put a cap on a team, which then has to compete against the Barcelonas, Real Madrids and Inter Milans, which do not have caps, it is potentially restrictive, and that is why I think that at the top end of football, it is not something that is easy to achieve. However, at the lower ends of the game, I do feel that it is possible, and certainly, I was part of the team that looked at implementing this in the Football League, particularly in League One and League Two, when I was on the management team at the Football League then. I think it depends on which team you are talking about and how you view the market in which you compete. Q573 Jim Sheridan: Obviously, there is a competitive imbalance in the Scottish game, and it is very predictable. It is either Rangers or Celtic, or Celtic or Rangers that is going to win the League. Does that affect the game in Scotland? Stewart Regan: I think that has been in place for many, many years and I would argue that, if you look at most categories of business, you will find a consolidation taking place to two or three major players in every category, whether it is petrol stations, banks or supermarkets. Football is no different. It is consolidation down to a small number of big brands that have the global power and presence in order to dominate their particular market. I think what is really healthy in England is how the Premier League has seen a widening at the top now to maybe four or five clubs, and I think it is important for Scottish football that we seek ways of making the top tier more competitive. Certainly, Hearts this season have given the top two a good run for their money and it would be very healthy for the game to see stronger clubs. That is why I think the reconstruction of the League and the distribution of income could help that and potentially develop stronger teams for the future. Q574 Jim Sheridan: There were expectations upon your good self, when you were appointed, that you would try to change things so that there would not be this predictability and there would be some sort of effect of competition, but you seem to be suggesting is that it has been like that for years, so we need to keep it that way. Stewart Regan: No, I think you missed the point. I think what I said was that it is not a good thing for the game, but Rome wasn’t built in a day. I have been in the post for six months. That has been in place for 100 years. I think it will take a little longer than this financial year for me to change it. What we are looking at doing is putting in place initiatives to provide income flowing down through the game so that we can have stronger teams at the top end of the Premier League. Q575 Jim Sheridan: Can I ask you just to consider the current financial regulations? This morning, you will know that Rangers are now effectively being run by the bank, and there are all sorts of speculation about who should own the club or who is buying the club and so forth. Do you have any views on these things and how the financial regulation should be operating in Scotland? Stewart Regan: It is not for me to comment on Rangers’ individual circumstances. That is a matter for the club and the Scottish Premier League. We at the Scottish FA have no direct involvement in the dayto-day running and the day-to-day financial matters. We are very keen to make sure that we have a strong League or Leagues and that we have clubs that can survive financially, and anything we can do to help that, we would support. The idea of things like fit and proper persons tests is something that we have within our current articles. We have introduced club licensing and we audit all clubs regularly to make sure that we feel that they are being run efficiently and effectively and have standards in place that satisfy supporters, the league and the association. In terms of other financial regulations, there is nothing at the moment that I am aware of that we are doing or putting in place to change it. It is working reasonably well at the moment. There are always things we could do differently and better, but at the moment, there are no immediate plans to change that. Q576 Jim Sheridan: Do you think that there should be a role for the FA in terms of looking at clubs’ finances, or scrutinising them or monitoring them? Stewart Regan: The Scottish FA is the ultimate governing body in Scotland and we have almost an overarching responsibility to protect the long term good of the game so, yes, I think that we should take an interest in these matters, but we have delegated responsibility on a day-to-day basis to the leagues to effectively run their own business, and we would only get involved if there were a major appeal or a major issue. For example, we became involved when Dundee recently went into administration and were in financial difficulties, so we are the ultimate right of appeal, but the day-to-day matters are handled by the leagues themselves because they are the bodies of which the clubs are members. Q577 Damian Collins: I was going to ask about Dundee. It seems a good point to follow up on in terms of questioning. Is Dundee symptomatic of a bigger problem in the Scottish game of clubs simply living beyond their means? Stewart Regan: I think there is an issue with rising levels of debt in Scotland and across the game generally. I think my colleague from the FA down here, Alex Horne, made the point earlier that there is only a small number of clubs making a profit. In Scotland, we have exactly the same issue. The way that clubs tend to deal with it in Scotland is to try to operate to a much tighter budget. What you have to understand is that in Scotland, the financial numbers that you are talking about are substantially less. Even at the top end of the game, the clubs are not getting anywhere near the money that clubs in England get, and that is largely because of the size of the television deals. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 135 29 March 2011 Stewart Regan We have some very good examples in Scotland where clubs run to a tight budget, where they have salary controls in place, and where they operate within a budget and stick to that. We have other examples where clubs come in and potentially spend more money than they should be spending, particularly on things like player wages, but I do not think Scotland is unique in that. If you look across the world of football, and perhaps other sports as well—cricket, as an example from where I was before, is facing a similar issue—and as television money flows into the game, there is a desire to have more of it and to chase the dream and potentially get into European and world competitions. I think you are always going to have that, and it comes down to governance. It comes down to having good management and strong leadership on the boards, so I think there is a problem in Scotland at certain club levels, but it is no different to anywhere else and we are trying to encourage clubs to live within their means. Q578 Damian Collins: Just taking what happened with Dundee, do you think there should be a review of the audit? You said that you audit the clubs. Do you think that the criteria that the clubs are audited against should be reviewed in light of the problems that Dundee has had? Stewart Regan: It is a difficult one, because at what point do you step in and decide that there is a problem? Clubs can change their performance and shape very quickly if a new director or a new chairman or whatever comes in and has a different policy. You can move from operating within your means to operating outside your means very quickly and it is at what point you step in. We have to differentiate the rules of the league bodies from the rules of the governing body that effectively is running the game, as opposed to the league, which is overseeing the performance and the management of the clubs. Our view is that it is the league’s responsibility to police and manage their own clubs, and there are numerous ways of doing that, whether it is fit and proper persons tests, salary caps and effectively taking a much keener interest in things like profit-loss accounts and logging audited accounts at the end of the year. The governing body, the Scottish FA, effectively sits over the top of all of those, and we would only get involved at the last resort. Q579 Damian Collins: Just to follow, lastly, Jim’s questions about Celtic and Rangers, do you think, at the other end of the scale, that Celtic and Rangers struggle to compete consistently at the high level in competitions like the Champions League because there is not enough money for them to draw from the Scottish Premier League? Stewart Regan: I think if you asked the clubs, fans and a number of the stakeholders in Scotland, they would probably agree with the comment that the gap is widening between the top end of the Scottish Premier League and the top end of the English Premier League, but again, that is happening all across Europe in particular, simply because down in England they have a very good television deal that has been expertly negotiated and money has come into the game. They have created a very strong brand and they have grown it around the world, so naturally that money has come in and clubs have taken advantage of that and built their own club brands. In Scotland, we have not had that luxury. We have a much smaller League with fewer clubs competing at the top end, so I do feel the gap has widened. That said, particularly the Old Firm have competed very well in the competitions that they have participated in, and clearly, this season, Rangers have made progress in the Europa League until recently, despite having limited resources. Q580 Damian Collins: To adapt a question I asked Martin O’Neill last week, do you think you will ever see a club like Aberdeen winning major European honours again? Stewart Regan: That is a difficult one, because I do not have a crystal ball and I would not like to predict or otherwise. I think the challenge is much greater now for a club, particularly a club that has not won anything recently and does not have the resources or the infrastructure to risk up through the ranks, but I think football is about being able to offer the opportunity to live that dream and the opportunity to go from, as I said, parkland to professional stadium, which is why we think the pyramid system is important. We have to open up football and have a pathway that goes right the way through so that clubs can aspire to be successful. If you had a club like Aberdeen or Kilmarnock or whatever that is taken over by a Roman Abramovich character, then who knows where that club may get to in the future? We have seen what has happened to the success of the likes of Manchester City and Chelsea in England in recent times, when they have had huge investments and financial backing. That could happen in Scotland, and it would be great for the game if it did. Q581 Dr Coffey: Just turning away from football for a while, and going on your previous experience as chief executive of York Country Cricket Club, are there any good examples of governance that the SFA and FA could learn from the ECB, whether that is actual governance in decision-making or youth development? Stewart Regan: Absolutely, and we are already starting to see examples of that with some of the initiatives we are putting in place in Scotland. A great example of that is the principle of performance-related fee payments, as I referred to earlier. This is something that the England and Wales Cricket Board have been pushing now for several years, and that is setting out a series of criteria that are important to the game of cricket in England and Wales, asking clubs to either opt in or opt out of delivering those criteria. If you opt in and deliver them, you get paid. If you don’t deliver them, you don’t get paid, and it is almost creating incentives rather than punishments. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Ev 136 Culture, Media and Sport Committee: Evidence 29 March 2011 Stewart Regan On how we manage the handout of cash and the distribution of cash through the game, I for one am in favour of distributing it based on the achievement of performance targets. One good example of that, as I said before, is playing Scottish-qualified players in club first teams to give them first-team opportunities rather than signing foreigners or journeyman players that can come in and perhaps do a job for a short period of time. I think that makes opportunities open for all clubs to benefit and not a just a small number of clubs at the top end of the game. I also think that cricket has managed the independent non-executive director route very well. The England and Wales Cricket Board has a strong diversity agenda. They have representation on the main board from a number of minority groups, and I feel that is something we can learn from and something that we would like to develop over time in Scotland. Q582 Jim Sheridan: In the short period of time that you have been there, you have probably seen the poison of sectarianism in the Scottish game and, to be fair to both clubs, they have tried their hardest—and in some ways, succeeded in trying—to end sectarianism, but that poison, that sickness, is still there. It would be one half of the city supporting the SFA and the other half supporting the city against the SFA. How do you see things developing in the future? What is your relationship, for instance, with the Scottish Premier League these days? Stewart Regan: My relationship with the Premier League is excellent and, having listened to the debate this morning, what is interesting is that there is a very strong relationship and a willingness to work together between the Scottish Premier League, the Scottish Football League and my own body, the Scottish Football Association. I think Henry McLeish’s report, in many ways, has acted as a catalyst for change and we are all working together to put the various changes through this year. You are right; there are some challenges in Scotland that are pretty unique and I think I have faced most of them in my first six months. The whole sectarian issue is one that reared its head again over the last couple of weeks. Tomorrow we are actually meeting with the Old Firm, the police and members of the Scottish Government to discuss what can be done. It is pretty unique to the west of Scotland, although I know the issue is wider than that. It cannot rely on one body to address it; I think it needs a whole concerted effort on behalf of everybody and I think it requires the need to start at school level and look at education. Going back to this lady’s point about learning from other sports, the other thing that cricket did really well was the link with bodies like health and education and government to use sport to address a number of key issues. On sectarianism, racism in football and some of those kinds of areas, I am really keen to look at what we can do in Scotland, but it is a big issue. It is one that has been around, again, for 100 years or more, and we are not going to solve it overnight, I don’t think. Q583 Jim Sheridan: Yes, I think most people accept that. During this inquiry, we have emphasised the importance of grassroots football, and you mentioned schools as well. For me, there is nothing more exciting, from a schoolboy’s or schoolgirl’s perspective, than playing football at their national stadium, whether it is at school level or amateur level. Yet, the SFA—I think it is the SFA—for some reason have refused permission for the Scottish schools to play their cup final there, and likewise for the Scottish Amateur League. Could you explain why that is the case? Stewart Regan: Absolutely: the decision was taken by the Hampden Park Stadium Board, which I sit on. What many of you will not realise is that Hampden Park is also the home for Queen’s Park Football Club, and they play on it and play a full season of fixtures there. In addition to that, we stage cup finals, cup semi-finals, international matches, and we also have a series of concerts there during the course of the year. We take criticism regularly on the condition of the pitch because of the amount of fixtures and amount of use that the pitch is getting. Equally, the Hampden Park board has commercial targets that it has to achieve in order to operate as a profit-making body, so the board decided that playing a match for a few hundred people in a 56,000-capacity stadium was not viable any longer both from a usage and financial point of view. That decision was relayed to both the Scottish schools and the Scottish amateurs, and alternative dates were sought for this year, the last year, to try to offer support and find alternative venues, but the decisions have been communicated and we are still in dialogue with both bodies on that. Q584 Jim Sheridan: Correct me if I am wrong, but grassroots football is not there for viability. It is there to encourage people to participate in the game. And while you make provisions for international games, cup finals and professional games—and taxpayers’ money has been used to build Hampden in the first place—here the people at the bottom of the pile are saying, “We would like an opportunity to play at our national stadium two games: schoolboys and Scottish amateurs”, and they are the only ones who have been punished while the professional game put their money in there and get their own way. Stewart Regan: I do not think it is about punishing anybody. As I said before, it is about looking at what goes on at Hampden Park and how many fixtures are actually playing there during the course of a season with a club team using it as their home ground. That is very different to a national stadium like Wembley or a stadium like the Millennium Stadium where there is no club team playing there week in, week out. We have to look at the quality of the surface, which is key for the professional competitions and the international team. We have offered to support the schools and amateurs by trying to find alternative routes, but if I were a schoolboy footballer coming through, I would be really excited about playing at any professional stadium, irrespective of the national stadium. The chance to play at a major ground is equally attractive, and that is why we feel that there are viable cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:49] Job: 011145 Unit: PG06 Source: /MILES/PKU/INPUT/011145/011145_o006_michelle_HC 792-vi corrected.xml Culture, Media and Sport Committee: Evidence Ev 137 29 March 2011 Stewart Regan alternatives to playing at a stadium that is getting an awful lot of hammering from people using the pitch. Jim Sheridan: Just for the record, the last time I was in Wembley was watching the Scottish v. England schoolboys international, played at Wembley, so I would hope you would reconsider your position. Q585 Chair: I think that is probably all we have for you, so I would like to thank you very much for coming. cobber Pack: U PL: COE1 [SE] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 138 Culture, Media and Sport Committee: Evidence Tuesday 5 April 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe Dr Thérèse Coffey Damian Collins Philip Davies Paul Farrelly Mr Adrian Sanders Jim Sheridan ________________ Examination of Witnesses Witnesses: Sir Dave Richards, Chairman, the Premier League, and Richard Scudamore, Chief Executive, the Premier League, gave evidence. Chair: Good morning. This is a further session of the Committee’s inquiry into football governance. I welcome for the first part of this morning’s session the Chairman of the Premier League, Sir Dave Richards, and the Chief Executive, Richard Scudamore. Adrian Sanders will begin. Q586 Mr Sanders: Good morning. Sir Dave Richards: Good morning. Richard Scudamore: Good morning. Mr Sanders: Do you accept that the Football Association is the governing body of the English game? Sir Dave Richards: Yes. Q587 Mr Sanders: Unquestionably? Sir Dave Richards: It is the governance of the game. Q588 Mr Sanders: Would English football benefit from having a stronger Football Association as well as a strong Premier League, and will you support FA Chairman David Bernstein’s efforts to achieve this? Sir Dave Richards: We have always supported the FA in every way we could. The FA is an association of people, but it needs to keep the balance among those people who are associated with it. As regards supporting David Bernstein, yes, we will support David Bernstein in what he is trying to do. Richard Scudamore: Can I maybe add some detail to what Sir Dave has said? The FA is the governing body of football in this country. Under the FIFA statutes, that is the way it must be and has to be. We are a league and therefore we come under the auspices of the FA and the FA sanctions our rulebook every year. That rulebook is effectively the contract between our member clubs and therefore we do support that. We have a history, certainly in our time at the Premier League, of supporting the reforms of the FA whenever they have come along. Sir Dave was instrumental in moving the board to six and six—national game/ professional game—in 1999. That was four representatives from the Premier League, two from the Football League and six from the national game. Those reforms were brought in around then. We also were and are on record as being the only people who came out and unconditionally accepted the Burns report. When Lord Terry Burns did his report on the governance of the FA, out it came and we supported it. Even though there were elements of it that we would not have, perhaps, as individual items have supported, we absolutely supported it. So we have a history of progressive modernisation of governance and we would be more than happy, as I say, to support proportionate proposals. But Dave does hit upon the fundamental point that the Football Association is an association of interests, and that is its genesis. Its genesis goes way, way back to the mid-19th century: J.S. Mill—I am sure you are all familiar with him—freedom of conscience and opinion, freedom of association, freedom of getting involved in pastimes and interests that interest you. So, 1859. The FA itself was being formed around about 1863 and this is what we are—we are an association of interests. It might be difficult, it might be tough, but that is what we are. That is where we are today and I would defend the FA. No matter what other issues we may discuss today or at any point, I would absolutely defend the FA’s right to associate as an interested group—those who are interested in football and those who actually run football to form as an association. Q589 Mr Sanders: That is an encouraging answer, because the FA has told us that it wants to rethink the architecture at the top of the game. Do you therefore agree that the respective roles of the FA and the Premier League need to be looked at and, if so, how should the division of responsibilities change? Richard Scudamore: Well, there is a concept of constant improvement. We have never, ever rested on our laurels and therefore, in a sense, we are looking at all things all the time. We have strategic reviews; we have regular dialogue. I think people misunderstand a lot of the relationship between us. We have such regular dialogue. Every two weeks the executives of all three football bodies—Football League, Premier League and FA—get together. We exchange and work together on most initiatives. Yes, if there is ever a discussion around moving the game on—progressing the game—we want to be active participants in that because we think we have a role to play, but we are not resistant to change, as I said. Any review that comes along we will take our full part in. I go back to Burns. Burns, as I say, was absolutely endorsed by us. We were the first to do that and I think we were the only body to do it. Q590 Damian Collins: Sir Dave Richards, do you think, thinking purely of the England national team, there will be an advantage to having a winter break in cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 139 5 April 2011 Sir Dave Richards and Richard Scudamore the season or fewer premiership games played in the season as part of a reduction in the number of domestic matches? Sir Dave Richards: It goes a lot deeper than that. Obviously we want to do the very best we can for the English game, being the England team. We want to do the best. We have been discussing ways forward on how we could introduce a winter break by possibly looking at the FA Cup, looking at the league, and Richard and the executives of the FA have been looking at that to try to find a proper synergy where it actually works. Richard Scudamore: Damian, your question hits upon a number of things—helping the England team and, effectively, fixture congestion. I have to say that in my time here we have had four goes at this, looking at the fixture calendar. It is very difficult because if you go back, from the formation of the Premier League, remember English football was historically 22 teams in the top division and each team playing 42 matches. That is not now the situation. We are now down to 20. If you remember in the season prior to the Premier League’s formation the FA Cup was openended and, therefore, the replays went on ad infinitum or ad nauseam, depending on your particular view of each particular match. Now, winning the FA Cup is six matches plus replays, but at least only one replay and it doesn’t go on for ever. The Football League Cup used to be eight rounds plus replays to win it, and that has been reduced to seven finite rounds with every game played to a finish. When you are looking at fixture congestion, which really is your question, I think, I am afraid we have to look at our friends at UEFA and FIFA as more the culprits than ourselves. UEFA used to have—in the season we started in, 1992–93—13 match dates they required. Now they need 21 match dates to fulfil their fixtures. FIFA traditionally were about nine or 10 international dates, which is now averaging 12. The difficulty is somebody has to give something up. We put on 380 events and those events are watched around the world. They are extremely popular. Those 380, if you took two teams out, don’t go down by a few; you go down to 306 events. There is no way that you would do that in terms of public interest, in terms of fan interest, in terms of the expense of other competitions. If you want me to talk about other competitions—the Football League Cup, for example, or the FA Cup— we have never advocated the radical altering of those competitions because they are hugely, hugely important to the solidarity of football in this country. The FA Cup is worth about £100 million value. Basically, if you mess with that competition, that reduces. Of that £100 million, £75 million is for the benefit of the FA and redistribution. The calendar is extremely difficult. We have always said if it could be practically done we would advocate some sort of winter break, but we have failed because it is just hard to come up with a practical suggestion. Q591 Damian Collins: Thank you for a very full answer, and you are right, the general congestion of the calendar was part of my question. I did mention the English national team and neither of you mentioned the English national team in the answer to the question. Sir Dave, do you think all this complexity and all this work that might be undertaken in reducing congestion in the fixture list, if that could be achieved, would be to the benefit of the English national team? Sir Dave Richards: I think it is an old answer to give you. The winter break would help providing we didn’t put extra games in on friendlies. That is always the danger, but more and more, our Chief Executive and the executives of the Football League and the FA are looking at these scenarios all the time, and looking at not just what is best for the Premier League, but how we can develop better youngsters and better playing of the England team. Richard Scudamore: Can I go back to the winter break— Q592 Damian Collins: If I may, Mr Scudamore, I would like to follow up on the question before you come in. In what you are saying in your answer, do you accept that there is an issue that people in football have to address, which is that England players are tired at the end of the season because they play too much football and we should look at how they can prepare for major championships by easing some of that burden on them? Sir Dave Richards: You say, how can we prepare for major championships? I can tell you the preparation for the World Cup was incredible. The training, the high altitude training, the training in South Africa— you couldn’t have done any more. It is not about just saying, “We want to find a little bit more space for the English team to play.” It is about how we can bring the whole game to a higher level to win competitions. Richard Scudamore: Can I just answer specifically about the winter break? We have no body of absolute evidence that a break around about December/January time, whenever you might choose to do it, would make a physical difference come May/June. That is one of the problems. We have opinion. There is a body of opinion on this subject, but there is no empirical evidence that says take your break then—clearly, any break any time. Then there are some doctors who talk about having to get back to match fitness after that short a space of time. It is all quite difficult and we certainly don’t yet have a body of evidence that says, “A break now leads to success in June and July.” There are many other factors, which I am sure you will want to ask us about. Q593 Damian Collins: Of course. There is another part to my question. The reason I am particularly directing it to you, Sir Dave, and the reason I am particularly asking about the England national team, is whether you think you are conflicted as Chairman of the Premier League and sitting on the FA board, because the FA is responsible for the national team and you have responsibility both to the Premier League and to the national game. Certainly, your answer betrays the complexity and the torment that you might find within yourself, but I am not sure whether the England national team is uppermost in your thoughts. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 140 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore Sir Dave Richards: I can tell you that when I go on any tournaments or help in organising any tournaments, my uppermost thought is how we can do it best. Not the team, but how we can deliver the facilities, the training time, the transport, the hotel, the food, because that was part of my job. My job was not to decide how the team trained, when it trained, what the tactics were. That is the manager’s job, but it is our job to give him the time to facilitate all those things. People talk about conflict. I don’t really understand how you get to that because it is an association of people. People say, “Well, you were Chairman of Team England during the World Cup.” It is just a name of a person who had the responsibility if anything went wrong. Whether a player got injured, whether it was the medical staff, whether it was part of the staff that had to be flown home, they were responsibilities that I had, but not the team and the way it played and the way it trained. That was the manager’s job. Q594 Damian Collins: But if the England team manager said to you, “I think the players are too tired. We need to reduce congestion in the game,” and the FA board agreed, there was consensus among FA people that was the right thing to do and we should look at that, would your first reaction be, “Let us go away and see how the Premier League can make a contribution to that along with other competitions.”? Sir Dave Richards: No, it wouldn’t. Q595 Damian Collins: Do you not think that does slightly conflict you? You said no, it wouldn’t; that is not how you would respond. Do you not think that gives you a slight conflict being Chairman of the Premier League and being on the FA? Sir Dave Richards: If you just give me some time to answer you, I will try and answer you the best way I can. If you say that fixture congestion is too much, we have to go right back and start looking at how fixtures are made at UEFA, FIFA, the FA and the Premier League. The Premier League has tried over many years to make the calendar fit to suit everybody’s purpose. It has tried extremely hard. The manager has never, in all my years—I have been on the FA since 1994—said to me, “The players are too tired, they have over-trained,” because it is his job to decide that. The board and everyone else do not have any input into that. It is purely what the manager decides. Richard Scudamore: In a sense, Mr Collins, the issue has moved on because I think you would admit, Dave, you were the reluctant sole representative with that title during South Africa, because Lord Triesman had left the organisation, and the minute David Bernstein arrived you handed over that title or that pass had gone. Some may call it a hospital pass, who knows? But it has been handed on to David Bernstein and that is right in some ways. In some ways we are talking about an issue that has passed. Q596 Damian Collins: I am not doubting these are very difficult issues or saying that there are easy solutions to them. A lot of our inquiries have looked at the FA board and the way it is made up, the people who are on it, the way they make their decisions. Is there an inherent conflict of interest in your role, Sir Dave, and would it be better, as has been recommended to us by Ian Watmore, that the FA has a wholly independent board and, therefore, these conflicts don’t arise? Sir Dave Richards: We would like to discuss that further, but can I say to you the FA needs the whole of the balance from the Premier League, the Football League, the national game, the Conference. It needs that because each person brings something a bit special to it, where we have accountants, club chairmen, club chief executives, professional game chairmen, professional game representatives and secretaries from the national game, because it creates that balance inside the FA of what is really needed. What we are not saying is that it doesn’t need some independence. Q597 Damian Collins: But you would not go so far as having a wholly independent board or a majority independent board? Sir Dave Richards: I think it would be a retrograde step if you did that. Q598 Damian Collins: One final question: given you think there should be a role for independents on the FA board, should there be a role for independent directors on your board, like most successful companies have independent directors? Sir Dave Richards: We are governed by shareholders. Richard Scudamore: That is the point. You cannot conflate our board with anything like a business board. Effectively, if you go back to Cadbury or you go to the Combined Code, it quite clearly says that independents are there to represent the shareholders’ interests. All our shareholders get to make every material decision that goes on. All our 20 shareholders meet at least five times a year, usually six, and we have ad hoc meetings if an issue arises. I think the maximum we have had is 12 meetings in a year during certain times when the European Commission issue was around. Basically, our constitution, deliberately written by Rick Parry and our forefathers, enabled the shareholders to vote on every material issue. Anything that exposes the shareholders to either a £200,000 liability or an income, a contract that generates £200,000 or we spend £200,000—we had one only last week—all the shareholders have to approve that. Therefore, effectively, our shareholder meetings are the board meetings. Once a year we agree on a rulebook and then, yes, we have summary ability to apply that rulebook during the year where we use extensive external legal advice, so you can’t conflate it. When I came back to the Football Association, though, the reality is that since the mid-19th century, as I said before, these associations have been formed and it is an association of interests. On the idea that you would have a wholly independent board, independent of whom? Representing whom? The whole point is with the FA, it might make it more difficult, but the essence of the FA has to be a representative body where representatives of the game come together in an association to try and do what is in the best interests of the whole game. I would defend cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 141 5 April 2011 Sir Dave Richards and Richard Scudamore the FA to the ends of the earth, really, to make sure that it was allowed to associate as an association of interests. Q599 Damian Collins: You both are in favour of having independent representation on the FA board, but you wouldn’t countenance it for the Premier League, even if that might bring an outside view, some other expertise? Richard Scudamore: Just so as we are clear, a personal view: I don’t think independents necessarily are necessary on the FA board because it is an association of interests. However, if that is what Mr Bernstein, as the FA Chairman, wishes to promote, I think we would support that, as we did with Burns. I did say we didn’t like everything in Burns, but Burns basically said, “We think you should have independents here.” It said an awful lot of other things as well, which I said to you. In the round, we think Burns, therefore, was worth adopting. Q600 Paul Farrelly: Mr Scudamore, have you not just said of the FA, “We are an association of interests.”? In 2008, responding to a speech given by the now departed Lord Triesman, you said, “We are like competitors. We compete for sponsorship and for television rights and we are in the same space.” How do representatives of the Premier League manage those competitive interests while at the same time, as you say, recognising the FA as the authority and the governing body of the game? Richard Scudamore: Of course, in one sense I can’t deny we do compete, but there is a difference between competing and it necessarily being conflicting. Of course, when it comes to our broadcasting rights, for example, we don’t compete directly in the sense of we are out to market together and we are out to market at the same time and we are taking each other’s revenues. In fact, we Chinese wall that entire discussion. We are regulated—heavily regulated—in that sense. But, yes, there is an element on the commercial side where there are properties that we each have, but it is not a zero-sum game here. When you go back to the way the game has grown, the game has grown immeasurably in interest. If you look at all the data since the Premier League was formed, 1992–93 to today, our revenues have grown; I can’t deny that. Our television viewing has grown; can’t deny that. But so have attendances grown. Attendances have grown at the Football League; attendances have grown certainly at England matches; television rights have grown at the Football League; television rights have grown at the FA. The whole economic interest in English football has all grown. It is not a zero-sum game. The game has generated huge amounts of interest and we have not just become of national interest. As you know, we have become of global interest. You raise an interesting point, though, as to where the properties of the FA sit in terms of the governance structure because, in effect, like us they are competition owners, just like UEFA are competition owners. That is a very separate issue from the governance in terms of disciplinary matters and regulatory matters, and it is also a very different issue in terms of running the England team. It is a different issue in terms of running Wembley. Of course, that has always been the situation where these interests come together and it is perfectly possible. We, even within our Premier League environment, have to manage and reconcile individual clubs’ commercial aspirations with our own collective Premier League aspirations. The clubs to date, over the 20 years since the Premier League has been in existence, have had this interesting dynamic where they have stayed very solid with the collective on television rights; on other commercial matters, they are out there looking for the same sponsors and competing. It doesn’t mean to say you can’t reconcile that, you can’t manage that. There is space for all of us and I don’t see it is an inherent difficulty in running the organisation. Q601 Paul Farrelly: Is it unequivocally a good thing that the likes of Newcastle Town from Newcastle-under-Lyme get the opportunity through the FA Cup to play the Manchester Uniteds? Richard Scudamore: Absolutely is. Q602 Paul Farrelly: Is that unequivocally good for the game? Richard Scudamore: Absolutely unequivocally good, yes. Q603 Paul Farrelly: Sir Dave, I put a passage in a book to Lord Triesman, so it is only fair I put the same passage to you. This goes back to the time of Adam Crozier, before his resignation. The author of the book, David Conn—it is The Beautiful Game?— said of the events at that time, when you were questioning the potential participation of the clubs and the future of the FA Cup, “I have it from three members of the FA’s main board that Dave Richards was constantly threatening to withdraw the premiership clubs from the FA Cup or saying that clubs would withdraw if he didn’t get his way on an issue, usually over money. The sources complained that they would not debate with Richards in any detail. He would fly off, be dismissive or issue a threat. I put this question, whether he threatened that the premiership clubs would withdraw from the FA Cup, to Richards through the Premier League press office because he never talks publicly. He was walking past and I asked him and he said, ‘Bollocks’.” That was the passage I put to Lord Triesman in the context of the picture he was painting of the behaviour of the professional game. Could I give you a fair opportunity to respond to that in more than one word? Sir Dave Richards: Yes, certainly. Richard Scudamore: Be careful which word you use. Sir Dave Richards: At the FA Cup Committee, we had lots and lots of debates about what was the best way forward. I had a particular friend on the FA Cup Committee in Barry Taylor and we had this rivalry about what is best for English football in the FA Cup. One day we were discussing replays and he said, “No, no”—he has always been a great advocate of having to keep replays, which sometimes we look at and we think, “That’s odd,” but that is the way it is and we accept that. It got on to, should clubs be seeded? Should clubs be seeded so that they could pick out of cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 142 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore the box that club against that club? I said, “If you do that I will take it back to the Premier League and I know some of them will not do that and they won’t play.” That is the kind of statement that was made. When Mr Conn rang and put that statement to our press officer, Phil French, I did use those words. I did say to him it was that word. Yes, sir, I did. Q604 Paul Farrelly: That is a lovely response and a lovely anecdote, but it doesn’t respond to the central question, which is the portrait that is painted of the behaviour of the professional league representatives on the FA board. Let me give you another instance. If you recognise the FA as the authority in the governing body, why did you not allow the Football Association, either in the same terms as Lord Triesman wanted or in different amended terms, to make any submission to Andy Burnham’s questions, rather than simply referring to the submissions made by the Premier League and the Football League? Sir Dave Richards: Sir, may I give you the actual story? Andy Burnham came out to the FA and asked for a submission on the governance of the game. A dialogue was started with the Premier League, the Football League and the FA. Originally, it was going to be one submission from all parties, but after a lengthy discussion between the three executives they decided the best way was to co-ordinate a reply from all three parties, and they did that. They worked on it for weeks and weeks. There was consultation between the three leagues and between the board, saying, “Do we believe that is right? No, we should take it back and look at it because that doesn’t fit with that.” Eventually, the submissions were made to the DCMS. Lord Triesman came to a board meeting after the submissions were made and agreed with the executives of the three different bodies, came to the board with some papers and said, “This is the FA’s response to the DCMS.” It had already gone in. Nobody had seen those papers. There had been no consultation. The deadline had passed, and not just me, but everybody on the board, was astonished at the way that came about. Lord Triesman started to discuss the changes and the board said, “We have submitted the information that we want. We won’t allow that to go forward.” Now, that was not just me as one independent person; it was 10 people. It is a matter of record in the minutes, sir. Richard Scudamore: Can I add some facts to that, because I think it is important? You certainly, in your jobs as Members of Parliament, will recognise the need for proper consultation. When Andy Burnham’s letter arrived in the autumn of that year, we went on an extensive consultation. We held club meetings—in small groups, wasn’t it? It is hard work when you have to meet every club on every topic, and we met them at every club. We had full club consultation. It was on our shareholders’ agenda for two of our meetings. We produced four drafts of our submission, which the clubs fully approved the final draft. We also consulted with our FA executive colleagues and our Football League colleagues. Within the time frame agreed, by 31 March, in went our submissions. It was May before Lord Triesman, without any consultation, wrote his own paper and sprung it on us—remember, we discussed our paper with the FA, because the FA attends our shareholders’ meetings and everything else. All of a sudden, Lord Triesman’s paper was late and it had no consultation process. As I say, it is a matter of history and conjecture as to whether the individual ideas within that paper had merit; in fact, most of them—I think probably 75% to 80%—were already covered by way of topic in our papers and have subsequently been acted upon by both ourselves and the FA. But it is just no way to run an association of interests, without consultation. Q605 Paul Farrelly: I want to ask one final question of Sir Dave. This is a curiosity question, but it is asked by quite a number of people. You are the Chairman of the Premier League, but you are not the chairman of a Premier League club. Has the Premier League ever considered having one of its own as Chairman, possibly on a rotation basis? Sir Dave Richards: I used to be a chairman of a club. When I first was asked to do this job I was a chairman of a club. The Premier League shareholders—Mr Parry will be able to fill you in—decided that they had to have someone independent of a club. I was elected and I left the club. Richard Scudamore: Our rulebook, our constitution and our articles are very clear that the board is wholly independent of any club interest. From the time the season starts right through to the time the season ends we have to apply that rulebook in a very independent way. Q606 Paul Farrelly: But that is not good enough for the FA to be independent? Richard Scudamore: No, we are independent of the shareholders. Q607 Paul Farrelly: No, but the same model is not good enough for the FA? Richard Scudamore: Well, it is an association of interests. We are a limited company. They are an association of interests. As I say, we have no pathological objection to independence, but total independence doesn’t work. Q608 Chair: Sir Dave, you have been a member of the FA board for 16 years, I think? Sir Dave Richards: Yes, sir. Q609 Chair: It has been suggested that part of the problem is that the FA board is a narrow group of various interests and both the board, and even more so the Council, are hardly representative of either the modern game or modern Britain. Is that something that causes you any concern? Sir Dave Richards: We have always looked at the representation of the board and every single person is elected. They are elected members of the board. They are elected by councillors, leagues and the Premier League. We have always wondered about inclusion and what it really needs, but we have always followed the Chairman of the FA, who has been the natural leader, and followed his wishes. When Burns came along, we were quite up for all the changes that Lord Burns put in because we thought it became very cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 143 5 April 2011 Sir Dave Richards and Richard Scudamore inclusive and it was good for the game. Unfortunately, it didn’t get through in its entirety. It was piecemealed to give the FA what they wanted at that time. So, are we up for inclusion? We are always looking at the way things ought to be brought forward. Q610 Chair: But you say you always followed the Chairman of the FA, who takes the lead, and yet one of the people who made this point most strongly was Lord Triesman, who was Chairman of the FA. He suggested that he was blocked, principally by you. Sir Dave Richards: You know, the statement that Lord Triesman made really saddened me and made me feel a little bit dejected, because on the statement that he made that I blocked him, first, I have never blocked anyone. It is a free and democratic board at the FA and to think that the Premier League Chairman could block nine others is ridiculous. Secondly, Lord Triesman suggested that I bullied people. Well, that really hurt me because for 12 years I have been one of the chairmen at the NSPCC, which raised quarter of a billion pounds for children—for bullied and abused children. Lord David knew that and he knew how passionate I was about protecting all these different styles of things. It makes me wonder why he said such a thing because I thought I was reasonably close to Lord T because we travelled quite extensively together. I helped him very much. When he wanted to be introduced to people and wanted to be taken into different places, I went with him. I was always very supportive to him. Why would he ever think that I blocked him? Sir, there may have been differences of opinion with me and Lord David, but I never brought them into the boardroom. Richard Scudamore: Chairman, can I just add something? I don’t know Lord Triesman as familiarly as Sir Dave does—I certainly wouldn’t call him Lord T—but the reality is that Lord Triesman, at no point in his tenure, brought Burns back to the table because had he done that we would have absolutely supported that initiative, and I think that is very important. I would point you back to Roger Burden’s evidence last week. He very eloquently, I think, on behalf of the FA board, talked about his view of how the FA board functioned, his view that he was not bullied or they were not bullied. Ian Watmore also clearly wouldn’t recognise that when he was asked. Roger Burden quite articulately talked about how the FA board, in his view, worked. We, the Premier League, now have three representatives on the board and there is no way we have a majority position on that board, as the professional game does not. I think you need to listen to the evidence from others as well, and I know you will do that. Q611 Chair: Can I just be clear? Sir Dave, you are saying on Lord Triesman’s efforts to broaden representation, both on the board and on the FA Council, you were absolutely four square behind him in that? Sir Dave Richards: Lord Triesman only ever once spoke about it and it was in the original document. He had ample opportunity to bring Lord Burns’s proposal back as Chairman and start to work in the FA board to get where he wanted to be. He had ample opportunity, but he never did that. Q612 Chair: Were you disappointed? Were you encouraging him to do so? Sir Dave Richards: Look, I never encouraged him; I never discouraged him. The only thing that I did discourage him from doing was becoming Executive Chairman of the FA, which probably was one of the main agreements we couldn’t reach. He wanted to be Executive Chairman of the FA and that was a very difficult scenario. We did disagree and we did consult with the other board members about it. But regarding progress at the FA, no, sir, he cannot say that. Richard Scudamore: I think Sir Dave raises an interesting point that most of this discussion we have been having around Lord Triesman, his submissions and certainly around the Andy Burnham letter was done at a time when, effectively, there was not a Chief Executive of the FA. They had announced Brian Barwick’s departure in August of that year, the evening of a friendly against Czechoslovakia and he gave notice that he was leaving. Not wishing to personalise it to Brian, there was an element of lameduck nature of his tenure at that time, and again I think Lord Triesman did attempt to become Executive Chairman on a number of occasions, but the board resisted that particular move. Q613 Jim Sheridan: Sir Dave, I can almost feel a lump in my throat when you talk about the sincerity and passion you feel about being hurt by Lord Triesman. Could I just clarify that the only reason that his submission was rejected was because it was time barred? Sir Dave Richards: No, sir, it wasn’t a question of being time barred; it was a question that Lord Triesman brought a document to the board that had never even— Q614 Jim Sheridan: Too late? Sir Dave Richards: No, sir, it wasn’t a question; it had never been discussed. It had never been discussed at all. Richard Scudamore: The facts on that particular document are that the entire board—the national game as much as the professional game—said that that was an inappropriate document for the FA to submit. What was submitted was a smaller, shorter letter that did get the approval of the entire FA board, which is good governance. Q615 Jim Sheridan: But the evidence that Lord Triesman gave us is the document that he brought forward there wasn’t a page turned; it wasn’t even looked at. I think you said, Richard, that it was time barred. It was too late; the date was passed. Is that the case? Sir Dave Richards: The submission had been made. The submissions had been made to Government and all agreed. Q616 Jim Sheridan: No, I am talking about Lord Triesman’s submission. cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 144 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore Richard Scudamore: Let us get the facts absolutely right. The Football League’s and the Premier League’s submission had been made within the time that Andy Burnham had set. We had promised him 31 March. I think it was May before Lord Triesman’s paper was produced, almost with literally no warning. It was professional game board one day, main board the next. The main board of the FA at that time said, “There is no consultation on this paper. We don’t wish you to submit this paper.” So, a letter was written, as I understand it, to Andy Burnham, which was for Andy Burnham either to accept or not accept into his evidence. That was up to him. He can write a letter to the Secretary of State if he chooses, but on this issue of time barring, I was making the point that it was late in terms of the deadline we were all set. The Football League and the Premier League were working with the FA—with the Executive—on these submissions, and it was a surprise to everyone when this suddenly arrived at the very last minute. Q617 Jim Sheridan: What I am trying to establish is, did someone tell Lord Triesman that there was a cut-off date at the end of March? Richard Scudamore: Well, he would have known; he had exactly the same letter from Andy Burnham that we had asking to make submissions. His public policy advisers would have known. They would all have known. We all knew we were working to a 31 March deadline, which is why we spent October and November consulting all the clubs, convening regional club meetings in small groups and going back to two board meetings, because we had to get this done by 31 March, which is the way we, the Premier League, operate. I can only give you by contrast the fact that the genesis of the Lord Triesman paper was a very different genesis. Q618 Jim Sheridan: Therefore, Lord Triesman must have ignored this letter and carried on regardless? Richard Scudamore: I think you would have to ask him that. Q619 Dr Coffey: Could you just confirm how long you had sight of the proposals of Lord Triesman? I have heard from other sources it was about 48 hours before you were asked to approve this. Is that true? Richard Scudamore: I think it was a professional game board meeting where we suddenly saw it. I think it was a Wednesday before a Thursday. It was somewhere between 24 and 48, depending on where it was, yes. But remember, I have no role in this other than I attend the professional game board, where I think we saw it first, and it was the next day that the main FA board saw it for the first time. Q620 Dr Coffey: So a very limited amount of time for such a substantial paper? Richard Scudamore: That is it, and there was no consultation. Q621 Dr Coffey: I want to revisit something I brought up last week with the FA about what I thought was a terrible example of governance, which was the renegotiation of the contract of the England manager. I think you were Chairman of Club England at the time, Sir Dave? Sir Dave Richards: No. Q622 Dr Coffey: Okay, but you were involved on the board. Could you shed a bit more light on your role or on what happened? Sir Dave Richards: Yes, I certainly can. Fabio Capello’s contract had a clause in it and Mr Capello spoke to Lord Triesman, because Lord Triesman was the Chairman of England at the time. Richard Scudamore: Team England. Sir Dave Richards: Yes, Team England. It was on 22 April that I was summoned to a meeting with Fabio Capello’s son; Adrian Bevington, the company lawyer; Lord Triesman and me to talk about the Capello Index, because Mr Capello had brought out an index on performance of players, which was against his contract and he could not do it. He had to seek permission of the FA and he had been talking to the Chairman prior to that. He requested a meeting and we went to that meeting. During that meeting, Mr Capello’s son brought up the question of the clause being taken out of his contract. He said Lord Triesman agreed that the mutual break clause could be deleted in line with his previous assurance to Fabio Capello and that he wanted him to stay until 2012. That was the very first time we had heard of that, but it was pre-agreed with the Chairman and Mr Capello that that would happen. Unfortunately, I had to pick the pieces up with that, and the press being what they are, I took the brunt of it. Q623 Dr Coffey: I think at the time you may have taken a little bit of the credit for it in securing Fabio. Sir Dave Richards: No, I didn’t take any— Dr Coffey: But I recognise the brunt of it. Do you think it would have been appropriate for you, Sir Dave, to have said, “We can’t make this decision here and now, it needs to go to the whole board.”? Sir Dave Richards: I wouldn’t make decisions like that. You can ask all my colleagues on the board. I have always been one to consult: the Premier League board, the Football Foundation board, the European Leagues board, the International. I am a consultative person. I will not make a decision just like that which affects the kind of issues that these involve. Q624 Ms Bagshawe: Can we talk a little bit about Portsmouth? What more could the Premier League have done to have prevented Portsmouth from going into administration? Richard Scudamore: On the genesis of the Premier League, if you go back, the rulebook has evolved. The rulebook was 142 rules when it was first crafted; it is now 814 rules. Given the revenues and given the way clubs have been run, and basically the way English football has been since 1888 in many ways, there were things in the rulebook, certainly, that we never envisaged we ought to see at Premier League level. With the income that we were generating centrally, with the way the clubs generally have been run and the professionalisation of the clubs, certainly over 20 years and the time I have been involved, it was hard cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 145 5 April 2011 Sir Dave Richards and Richard Scudamore to see, I have to say, how a club at the highest level could get itself into those particular difficulties. We slightly foresaw it maybe some five or six years ago when we introduced the sporting sanction rules that basically said it is unacceptable for a football club to go into administration, because clearly there is a not perfect, but an almost perfect, correlation between the amount you spend and your performance. That has been the same since time began. We absolutely put those rules in, as did the Football League, in saying, if you overstretch yourself, if you spend more money than you can afford, if you get yourself into financial difficulty, we are going to impose a sporting sanction because it is not right with your playing peers that you should enjoy the same status as you did before. Ours is a nine-point sanction. So we made that step. We had also, through the licensing systems and various other systems, improved our financial regulatory position quite considerably, but I have to admit to this group that we didn’t foresee a club with that amount of revenue being able to get itself into the sort of difficulties that Portsmouth got into. In fact, we were a train in motion. If you read our submission to Andy Burnham, if you read what we had already embarked upon, we brought forward to the summer meeting of 2009 considerable changes in our financial regulations, the irony being probably that one of the only clubs to vote against some of them were Portsmouth. They were members at the time. We then went on to strengthen those rules further in September and then we went on to strengthen them still further post the Portsmouth situation. We strengthened them further again at the summer meeting of 2010. Yes, I am admitting we could have done more, but on good governance, you can’t have a rulebook that entirely envisages every situation, just like you don’t have laws in this country that envisage every unknown situation. Should we have foreseen it? Perhaps yes, but having seen what happened at Portsmouth we acted very quickly, very swiftly, and we think the rulebook now is very robust. Certainly, the experience of this summer with club takeovers and acquisitions, we have been put in a much, much better position in being able to regulate our way through that. Q625 Ms Bagshawe: On learning the lessons, Portsmouth obviously went through many ownership changes before it went into administration. There has been some speculation in the press, Sir Dave, that you approved successive ownership changes. Do you think that the fit and proper persons test was properly applied? In the case of Mr Ali Al-Faraj there has been some suggestion in the press that not only was he not a fit and proper person, but he wasn’t even a person at all and didn’t in fact exist. Do you recognise these criticisms? Richard Scudamore: I recognise that he has been referred to as “Mr Al-Mirage” on more than one occasion. The reality is that we went through all the tests that one would need to go through to get a passport in this country, and we had his passport. We had documentation; we had written documentation. Yes, we didn’t meet him face to face, which is why our rules have changed. Now we insist on an absolute meeting. We insist on meeting face to face. The rules have changed. But yes, we did not meet that particular person and that is why that rule has changed. We believe he did exist, though, but I can’t say I have seen him. Sir Dave Richards: Can I make it quite plain I never approved anyone? We have a system within the league. It is very tight. It goes through lawyers and different systems so no one individual could approve it. There was one occasion I was in Rome for a Champions League game and a gentleman asked to see me. He was an Arab gentleman and he asked to see me to explain the fit and proper persons test. He was the gentleman that was trying to buy it. I went to see him. I was there no longer than 20 minutes. I explained to him it was all about documentation and coming to the Premier League and presenting who he was and what his funds were and where the funds were from, and I left. I had never met the gentleman before and I have never met him since. Richard Scudamore: It is an important topic, a serious topic, and, Chairman, I sent you a letter last week that detailed quite a lot of what happens in our now strengthened owners and directors tests. I think it would also be useful if I sent you separately a supplementary piece of information, which is when anybody wants to look at acquiring a Premier League club or an interest in a Premier League club there is now a very detailed checklist and set of checks that we make and evidence that is required. I think I will send you this as supplementary to the letter I sent you last week, because we don’t underestimate how important this topic is. Chair: That would be helpful. Q626 Ms Bagshawe: I take it on board, Mr Scudamore, that you have just said that you recognise there were some failures and you have strengthened your governance on that issue because of those failures. Can I put it to you that you have just said that the Premier League was taken by surprise that a club at Portsmouth’s level could get itself into such trouble? Given that the club was failing and being taken over again and again, I take the point that the fit and proper persons test has now been strengthened, but at the time, as these successive changes were going through, and with the Premier League clearly having been caught on the hop, did it not occur to you that, even under the old rules, you should be applying the then existing fit and proper persons tests more rigorously than they seem to have been applied at that time? Richard Scudamore: Except for the fact that the fit and proper persons tests were about establishing, effectively, criminality and unsuitability because of that criminality. Therefore, we were unable to establish that any criminal act or any breaches of the absolute rule had been undertaken. Remember, it was the same time we were introducing the financial rules, which are about sustainability, and they are different things, but they are wrapped up in the same thing. Q627 Jim Sheridan: Before I move on to the next question, can I put on record my surprise that in relation to the Andy Burnham submission, as we are cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 146 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore now calling it, in the run-up to 31 March there wasn’t a submission that came in from the Chairman of the FA yet no one bothered to ask the question why is there not a submission from the Chairman of the FA. However, I think you are quite right—that is a question for Lord T. You have a number of jobs in football. I am just reading here that you are Chairman of the Premier League. You are also on the board of the FA, you are Chairman of the European Professional League and you represent English football on UEFA’s Strategy Council. That is a very long list of jobs and it would suggest that you are a very influential and powerful person. Do you think that you having all these posts and also the fact that you are paid by the Premier League means that you can ensure that there is no conflict of interest when you apply your director and ownership tests for prospective new owners? Sir Dave Richards: Can I say to you I have been on the board of the FA for 16 years. In 16 years we have had, to my knowledge, only four votes. One of those votes was concerning the Premier League. We stood up, the three Premier League representatives, and said, “We have a conflict of interest. We can’t take part in this. We will leave the room.” We were told not to leave the room, but we would abstain from the vote. We didn’t influence it; we didn’t have anything. The positions that I hold in UEFA and European Leagues are elected positions. I didn’t go looking for them. We are a member of the European Leagues and one might say that the Premier League is a successful vehicle and that people want to be associated with it and they want to know how it works. When they elected me Chairman, it was, “Please work with us to show us how to become as successful as the Premier League.” If you look at the progress the European Leagues have made, it has been very substantial, because we have 30 leagues, 980 clubs, some of them very tiny, that are all part of our system. We work with UEFA on solidarity payments bringing more solidarity money into the smaller leagues. That is the way it works. It is not a question of whether I am powerful or not. It is the Premier League. It is the Premier League and its brand that attracts people to want to be associated with it. Richard Scudamore: Mr Sheridan, the reality is Sir Dave is elected by our clubs to represent us at the FA. He is elected by the European Leagues to be Chairman of that, and it is because he is Chairman of the Premier League that they respect our league, they respect what this league has achieved over the last 20 years. Many of the leagues in Europe wish to emulate and copy elements of what we do and I think, as I say, it is the fact of the position that Sir Dave holds that he gets those elected positions. You will recognise the power of the electorate in returning people to office. Sir Dave Richards: Can I say I was elected to the Strategy Council of UEFA? Mr Platini I have worked with for a number of years. When you ask him how Sir Dave is, he always says, “Sir Dave has great input and he is good at what he does.” He quoted that in the paper and said how well he got on with me. Q628 Jim Sheridan: As politicians, we know how elections work and we know how you get elected to powerful positions. Indeed, some of our previous witnesses suggested that most of these discussions took place in the corridors, not at the main meetings. Sir Dave Richards: No, sir, they didn’t because the European one— Q629 Jim Sheridan: You remind me of the election of the Speaker where he is dragged out from the crowd. Richard Scudamore: By the scruff of the neck. Jim Sheridan: “I don’t want to do it but—” Sir Dave Richards: No, I would willingly do what the European Leagues ask. I have a term of three years, and that is the term. On the Strategy Council, I have a term of one year and that is it. Q630 Jim Sheridan: You have mentioned other European leagues. We recently visited Germany and saw how the licence system works in Germany, quite proficient in terms of looking at clubs’ finances in particular. Do you see a role for similar in England? Sir Dave Richards: That is Mr Scudamore’s because it is an executive matter. Richard Scudamore: Of course, the reality is we have a licensing system. We have a very much more robust licensing system now than we did two or three years ago. Our rulebook is effectively the licensing system for clubs within our league. I go back to those 814 rules. That is a licence; it is a contract between the member clubs as to how they are going to conduct themselves with each other. Unless you meet those rules, effectively you are not licensed. Then, of course, we have UEFA licensing, which has been introduced and we have been instrumental in the introduction of UEFA licensing, working with our colleagues. It is an extremely good example of how you work with the Football Association. On the brunt of the work, you heard from the Football Association and Alex Horne last week talked about how the executives of the Premier League and the FA work together on UEFA licensing. For example, this year, 19 out of our 20 clubs have applied for a UEFA licence. Therefore, you have a licensing system. You have the law of the land, which you are collectively responsible for delivering to us. You have our own rulebook. You have the Football Association’s rulebook, which then requires our rulebook to be sanctioned, and you have a UEFA licensing system for the majority of our clubs. Some of our financial rules are tougher than UEFA’s. In effect, you have a licensing system in this country and we recognise that concept. Q631 Jim Sheridan: Both of you have expressed a desire to work with the new Chairman of the FA. If he comes forward and wants to change the rulebook that you refer to, will you co-operate with him, particularly on the question of licensing, or is the rulebook there for ever? Richard Scudamore: We will co-operate in any discussion about improving English football. I can’t tell you here and now that I will agree with everything that he— cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 147 5 April 2011 Sir Dave Richards and Richard Scudamore Q632 Jim Sheridan: So you are not ruling out the possibility of a licence system? Richard Scudamore: We would be foolish—well, we have a licensing system and the licensing system works very well right now. In fact, nobody would argue that the UEFA licensing system, as we have incorporated nearly all of it into our own rulebook to cover every club, isn’t actually applied. In fact, the only such element of that UEFA licensing system, which is not even in place yet, is the break-even concept. It is the only bit that isn’t covered also in our rulebook. Effectively, we have a licensing system. Q633 Jim Sheridan: The answer I am trying to get is the Chairman, in his evidence, was open minded about the licensing system similar to the one in Germany, but you seem to have a closed mind about it. Richard Scudamore: Mr Chairman, we are open minded about anything that improves the governance of our clubs and English football. We will discuss anything. Q634 Jim Sheridan: Including licensing? Richard Scudamore: But we have a licensing system. Improving that licensing— Q635 Jim Sheridan: No, I am talking about a licensing system— Richard Scudamore: Improving that licensing system, of course we will listen. Q636 Paul Farrelly: Just very quickly regarding the new rules, transparency and honesty are key to their effectiveness. In June 2009 in your evidence, you cite the rule that you brought in that said that, “Clubs must disclose not only to the Premier League but also publicly who owns interests of 10% or more in the club.” Does that mean beneficial interests? Richard Scudamore: Yes. It does, yes. Q637 Paul Farrelly: It has to mean beneficial interests? Richard Scudamore: Yes, it does. Sir Dave Richards: Yes. Q638 Paul Farrelly: When does that bite? Let us take Leeds. Leeds may get into the top two in the Championship or they may very well be involved in the play-offs. At what point do you tell Leeds, “If you wish to be a member of the Premier League you must comply with this rule.”? Richard Scudamore: 9 or 10 June, whenever our AGM bites. Q639 Paul Farrelly: 9 or 10 June? Richard Scudamore: Yes. Our AGM is yet to be fixed. It will be on 9 June or 10 June. From that point they will be given their share certificate in the Premier League. At that point the Premier League rulebook bites. From my understanding of the way our rules are written, we absolutely will require disclosure from Leeds United that is over and beyond that which the Football League requires. Q640 Paul Farrelly: Why didn’t your rules bite beforehand? Richard Scudamore: Because they are not our member club. Q641 Paul Farrelly: No, but they are in a position where they want to be a candidate member. Richard Scudamore: No, because they are not bound by our rules until the annual general meeting when they become a shareholder. Q642 Paul Farrelly: So it is quite possible that if they were one of the top three and, say, came to the play-offs, if they didn’t abide by that rule for it to be publicly seen, it might be the loser of the play-off final that might become a member of the Premier League? Richard Scudamore: I think you are, as a lot of people do, leaping to the end of our disciplinary process. What would happen is obviously if we deemed them to be in breach of rule, a commission would have to be formed and that commission would independently decide on what the appropriate sanction would be to Leeds United. You are already rather leaping to the expulsion sanction, which again I would caution you against doing. Certainly, in our view, as drafted, our rules would require better disclosure of Leeds United’s ownership situation than is currently the case. Q643 Mr Sanders: Can you see any benefits in the governing body of the English game assuming responsibility, or at least a stronger supervisory role, for the financial regulation of Premier League clubs and also their ownership? Richard Scudamore: I think you have to judge us by our journey and the evidence before you. We have moved our rulebook appropriately. We have moved our rulebook proportionately and at a speed that can be done only when you are able to gain consensus from what is sometimes quite a difficult group to gain consensus from. That comes from an awful lot of hard work, an awful lot of consultation. I think we will live by our track record of having evolved the rulebook from those 142 rules to 814. The rulebook, can it be improved? Of course. We are always improving it. We are sitting down now on the next cycle of rule improvements to discuss what can be done to improve it. But as I say, we are working with the Football Association, and I think David Bernstein last week was very clear when he said the best point of regulation is down at the league level where the members are. Whether we like it or not, the members of the Premier League will take being moved along the regulatory curve more readily from their own executive and their own board than they will necessarily from people one stage removed. Therefore, if self-regulation is the right way to go, it is much more powerful when our 14 clubs have put their hands up round the table to say yes to regulatory change. I would ask you to look at the evidence of the evolution of our rulebook. We have a track record of moving the rulebook on and I think the best people to do that are us. Are we resistant to other people coming up with ideas, other people coming up with cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 148 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore suggestions, whether it be media pressure or public pressure? Of course, as with you, opinions are formed from many different sources. We have to sit here and try and act as custodians of this game. We have a conservative constitution quite deliberately. You can’t have a small minority interest group come along and set us off course, but when you get that 14-club majority it is a very strong majority and it is a very strong method of governance and I would commend it to you. As I say, we at operating level have a very good relationship with the Football Association. We are always prepared to discuss things and I think the way it works now is good. The idea that somehow we need somebody external to come along and suddenly impose things upon us is not necessarily the way forward to make progress. Q644 Mr Sanders: But there is a problem here, isn’t there? In answer to Paul Farrelly’s question in relation to Leeds, if you have at the moment a rulebook that says you have to have a proper test and obviously full disclosure of who owns a club, you ought to be able to say at this juncture that that club would not be accepted in the Premier League unless it was prepared to disclose. Richard Scudamore: Let’s be very candid. There is an issue here because our rules are the same as the Football League rules on this topic. The Football League brought their rules into alignment with ours last summer, but this is the first time the rules have been introduced. As I say, there is an issue in one sense between the Premier League rules and the Football League rules. I can only give you my honest evidence that says the Football League may have one view of how to interpret that rule and what that rule means. We have, I think, a more stern or harsh view of what that rule means. Let’s go back to the essence of the rule. The essence of the rule was our clubs absolutely agreed unanimously that we should tell the public who owns a club. That is the essence of the rule and, therefore, anything that falls short of that we think is inadequate. I think my point, Mr Sanders, is in all that we had to get done last summer the Football League took a view about Leeds United that it is entitled to take because it is their rulebook they are applying. The fact that we might have taken a different view is an issue that needs to be resolved if Leeds get in. Q645 Mr Sanders: Presumably this must be a real warning to Crawley Town that they should not be allowed into the Football League because their ownership has not been declared. Richard Scudamore: Again, I ask that you address those issues to the Football League. Q646 Mr Sanders: Yes, indeed, but to be consistent, that would have to apply. Richard Scudamore: I can’t disagree. Q647 Mr Sanders: I think the problem here is that there is a bit of inconsistency in not being able to state your rulebook in relation to Leeds at this point. Richard Scudamore: Except that the people in both leagues—I commend these people to you, both Andy Williamson at the Football League, who has been there almost since time began, and Mike Foster, my General Secretary, who has been there since the very start and did 17 years at the Football League before that—are the people who have more knowledge, and more intimate knowledge, of the rules and the way these rules apply. It is about applying these rules at the point of most knowledge. I think it has worked pretty well up until now. Q648 Mr Sanders: I think the public view is they want to see consistency, and in sport fair play is everything and, therefore, if it is seen as one rule for one club, it hurts the whole game. Richard Scudamore: I can’t disagree with you, and what is also interesting is last summer we had some discussions with the Football League making exactly this point. Many of those clubs are ex-Premier League clubs. They are of a size, nature and infrastructure that they look like Premier League clubs; it is just their league status that says they are not. Therefore, we said, “Wouldn’t it be a good idea if there was a rule alignment exercise?”, which is when all these rules— the financial rules, the disclosure rules and ownership rules—are all aligned. Leagues One and Two, to their credit, said, “Well, hold on a minute. We don’t want to be left out of this, because why should we, even though in infrastructure we might be smaller. We aspire to be Championship clubs one day.” The Football League voted in those rules of alignment. Therefore, I think what we are seeing is just a very early ironing out that needs to be done. I agree with the point. Q649 Paul Farrelly: Very briefly, Mr Scudamore, in your answer to me about Leeds, I don’t think anybody listening to this Committee will go away without the question as to whether your rule on disclosure will really bite or whether, at the end of the day, it will be as effective as a chocolate fireguard. Richard Scudamore: Well, in fairness, we can only deal with that at the point when Leeds United are promoted. They may not be. We can only deal with that at the time of our annual general meeting, when they come under our jurisdiction. We will have to stand the test of time on that. Q650 Dr Coffey: Sir Dave, you are elected by the Premier League to be on the FA board, but that doesn’t mean you only speak for the Premier League; you speak for all clubs. Is there a reason why you don’t make the suggestion that this applies to every single football club in the land? Sir Dave Richards: We do speak for every football club. You have a gentleman on after us, and he will be able to tell you how much we have spoken for the Conference and the way we have tried to assist and the way we are trying to assist to bring them into the pyramid in a proper way. I do speak up for those things. Richard Scudamore: But I think there’s an irony in this line of questioning— Q651 Dr Coffey: What I am trying to say is we don’t have that many opportunities to speak to individual cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 149 5 April 2011 Sir Dave Richards and Richard Scudamore board members. Has this ever been discussed—the fact of the excellent rule that you have in the Premier League of making sure ownership is disclosed? Why have you not perhaps suggested that for every single football club? Sir Dave Richards: We have tried. We have been talking to the FA in the last year about aligning all the rules. Richard Scudamore: Just so that you are clear, we think we all have the same rule; it is just that the Football League has chosen to apply the rule in the chaos that is the summer between one season ending and one season starting, when all the rules get changed. In the chaos of that, the Football League, for its own reasons, has chosen not to apply the rule as robustly as we think we will be applying it. But the irony of this conversation, where you might be suggesting that the Premier League should be imposing its power in telling other leagues what rules they should have and how they should apply them, is not lost. The reality is the Football League has some different rules that are more appropriate for that level of football, which is absolutely right. In the subsidiarity, the Football League must be in some cases able to do that. On issues such as this, of course there is merit in having common rules, because if it is a rule that is good for football, it should be in rulebooks. Q652 Damian Collins: I would like to begin another topic, but just to finish on this, it seems to me you may have clarity on what your rules say, but it is not necessarily clear on how they are enforced, and on something like this we have a very specific example in Leeds United, who may be promoted. They may be in a situation that, following your independent commission in the summer, they are told that they can’t compete in the Premier League. You have not ruled that out; you urged us not to go down that path, but you said that remains a sanction that you may enforce. That would be enforced maybe days before the start of the Premiership season. Would it not be possible for you to give some sort of ruling based on the situation that Leeds is in at the moment? Richard Scudamore: No, because at the end of the day—well, clearly, the headline will be generated from this session about Leeds’ inability to play in the Premier League next season. As with all miscreant behaviour, everybody assumes the ultimate sanction will apply and that expulsion and points deduction and all these other things will fly. The reality is that such is the attraction of playing in the Premier League, it is not unknown for people to relent in order to comply with our rules. Therefore, the most likely thing to happen when clubs get promoted—we have rules about press facilities, we have rules about the match, we have rules because of our international nature and the access that is required to our grounds, we have lots of rules that clubs have to comply with—is that we start to talk to clubs, send them formal documentation. In January, we write to the top 12 teams in the Championship, talking about a whole raft of rules that they have to comply with in an operational sense when they get promoted. I am not going to get dragged into—you will understand why—the “what ifs”. We will be doing whatever we can, as we always do in any situation. We would much rather our clubs, our member clubs, stayed within the rules than stepped outside them so they have to go to sanction. We will be putting on whatever pressure. If it arises that Leeds United, on sporting merit, deserve to be in our league, we will be doing all we can to persuade them to stay within the rules. Q653 Damian Collins: I appreciate that. What I was asking—I think probably colleagues have been asking it—is whether you could say, “This rule is so serious that if breached it could lead to a club being excluded from the league,” or whether it is more of an age where it is more likely there will be some sort of sporting or financial sanction applied. Richard Scudamore: Again, we are not involved in the sanctioning. I think, without rehearsing this, we would deem it more serious than could be dealt with under our summary powers. We only have summary powers to fine a club up to £25,000. After that, it goes to an independent commission; that independent commission will decide. That independent commission has the range of sanctions available to it, from a small fine up to expulsion. It will be for that commission to decide. Q654 Damian Collins: A different area of rules: financial fair play. You will be familiar, I am sure, with the fact that this is an issue that we have discussed, and I suppose it goes back to the spirit of what the rules are and how they are enforced. You said UEFA’s financial fair play rules are an area of UEFA practice that has not been incorporated into what you referred to as the Premier League’s licensing system. David Bernstein said in our previous session, “I would like to see financial fair play potentially extended across the Premier League and into the Football League as well.” When we discussed with some of the Premier League chief executives and chairmen a few weeks ago, they also said they would look favourably towards that. What is your view? Richard Scudamore: We have had full consultation on this. Prior to the rule changes of last year, we went again round the houses on a full club discussion. We went round again last autumn—September, October, November, individual club discussions. In the main, they are supportive. In fact, we are entirely supportive of this break-even concept, but given that 19 of our clubs have applied for the licence anyway this year, they all have to comply with it if they wish to continue to do that. The only thing the clubs have said is, “Yes, it is a good idea, but before we decide to change our rules for it to apply to everybody, can we not see a little bit how it might work, and is it not sensible just to see if it actually works?” There are some doubts still about what it will achieve, because one of the things it may achieve is that you lock in the natural order where only those that have extremely big revenues, of course, can have extremely big expenses. The one thing about our league this season is the joy of seeing everybody who has come up competing. In fact, at no point has a team who has been promoted ended up being in the bottom three this season, so cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 150 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore you have a situation where, looking at our league this season, the competitiveness within it is because teams have come up and had a go. One of our issues is, is it so wrong that Mr Al-Fayed or Steve Gibson at Middlesbrough, when he was with us, or Ellis Short at Sunderland or Dave Whelan at Wigan—these people who have benefactor funding—should come along and try and get their club into the next level, into the next echelon, which will bring itself bigger revenues, which will then enable them to stay within the fair play boundaries a bit more? So, we have shaped UEFA financial fair play criteria. The leeway that clubs have with the €45 million losses—the way the rules are now implemented—is, we think, proportionate for those who are in the European competition. I think our clubs are not objecting to it. They think it might be a good idea and they agree with break-even, but to launch full scale into applying it everywhere at every level to stop the local businessman made good investing in his local team really affects the essence of English football. If you go back to 1888, that is how we started, what it is about, and I would caution against us suddenly saying, “Yes, that’s a great idea. Let’s put it in everywhere,” because I think the further you go down the pyramid, it gets harder. Having said that, cost control, cost containment, break-even— can’t argue, and would never argue, that that is not a good concept. club slightly better to get them into that thing? Our nervousness about it—we are not objecting to it. I don’t want it to sound like I am. We think it is a good concept, but there is just one, if you like, caution or cautionary note that we are expounding, which is why would you stop those clubs breaking into that group? Q657 Damian Collins: I fully understand that, but you said you think on balance it probably will come in. Do you think that will because the weight of clubs seeking to comply with it will be such that they will endeavour to? Richard Scudamore: Well, effectively, when you have 19 applying for the licence, we will have it. It works the other way, doesn’t it? We don’t see any need to extend it right the way down through the system, because we want other clubs to be able to break into that group. Q658 Damian Collins: I wanted to touch on something that was in your written submission that relates to some of the financial sanctions you already have in regards to HMRC payments. You said that, “Where the board reasonably believes that a club is behind in its HMRC liabilities, it may impose a transfer embargo and/or require the club to adhere to an agreed budget.” Have you ever been in a dialogue with a club that means you might be required to enforce those rules? Richard Scudamore: No. This was a post-Portsmouth rule and, quite frankly, we don’t see why in the first instance HMRC should treat clubs any more tolerantly than they do small businesses that they expect to pay straightaway. We would expect them to do that in the first instance. We now have a reporting mechanism where, effectively, no clubs are allowed to have any HMRC debt. Since the rule has been in, we have never seen it, no. Q655 Damian Collins: Are you not concerned that you could end up with a league where half the teams in the league are voluntarily complying with it, because they want to compete in UEFA competitions, and the other half aren’t? Richard Scudamore: But if that means that the other half are able to get themselves into the European qualifying positions by way of improving their sporting position, they will have to comply with it. So there is no team. Look at now: all 19 have applied, even those that aren’t anywhere near the qualifying positions. There are a number of clubs who could win a UEFA Cup place on the basis of fair play. There is no club in our league that has ruled itself out from European competition, and I can’t imagine a club qualifying for Europe and not wishing to play in European competition, because that is essentially what our league is, and every club is out there striving to deliver for its fan base in European competition. Q659 Damian Collins: There was a press report that suggested, following a parliamentary question, that about £14 million was owed by Premier League clubs to the taxman. Have you discussed that with any of the clubs? Richard Scudamore: No. Well, it is not that at all. That is nearly all Portsmouth from the Portsmouth creditors. Damian Collins: So it is not new liability, you say? Richard Scudamore: No. Q656 Damian Collins: But it sounds like it is going to come in by the back door, so why don’t you find a way of implementing it properly? Richard Scudamore: It is just a question of what. I keep saying, on balance I think it will come in. It is just, why would you straitjacket some of your clubs? This is not going to bite or affect many of clubs who have huge revenues, such as the Manchester Uniteds of this world. The idea that they can’t live within their means—they have £300 million in income, can spend £300 million and still stay within the rules. When you have smaller clubs that are aspirational—coming up from the Championship, for example—why shouldn’t those clubs, if they have the owners who have those funds available, be able to invest them to make their Q660 Damian Collins: In terms of the sanctions that are imposed, the idea struck me of a transfer embargo on clubs—if clubs have HMRC debt they are probably in quite a bad financial state anyway. Do you think those sorts of financial sanction are effective? Should you consider using sporting sanctions against clubs that are clearly in quite serious financial breach? Richard Scudamore: Well, there is what the rulebook says, and there is also what our ability as the board to get clubs to behave in a certain way also does. Of course, we have significant funding that we give to the clubs in two main tranches—once in August, once in January—then we have a monthly stabilised cash flow, which again is not insignificant. I am absolutely sure that before we would need to go to the rulebook, cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 151 5 April 2011 Sir Dave Richards and Richard Scudamore we would use our good offices to use some of those funds that are not legally the clubs’ until they have fulfilled our rulebook. But we would certainly, I would think, look to be using those funds to make sure HMRC is— Q661 Damian Collins: Do you mean you would give HMRC the money that would otherwise go to the club at each point? Richard Scudamore: Well, certainly we would encourage the clubs to allow us to do that, yes, to avoid them getting into that situation. Q662 Damian Collins: Is that something you have discussed? Richard Scudamore: That is exactly how we have applied the rules in the past, yes—the ability to deduct. Q663 Damian Collins: Yes. Obviously you have oversight to a club’s ability to meet their football obligations and liabilities, and we have discussed—as I am sure you will be aware—at great length the football creditors rule. When we discussed that with David Gill and the other club representatives, they felt that the football creditors rule had served its purpose. In previous sessions, Lord Mawhinney explained how he had tried to get the Football League to get rid of it, and the current Chairman of the League said that he couldn’t find a moral argument for keeping it, but was going to keep it anyway. What is your view? Richard Scudamore: This is a very interesting one, and it is interesting that the people who run the FA, Mr Bernstein and Mr Horne, the current Chairman of the Football League, and his Chief Operating Officer, Andy Williamson—those of us who run competitions—will defend it, and we will defend it on the basis of the chaos that ensues if you don’t have it. We are a closed system. We trade on a closed basis between each other. If a business fails, the real sanction should be expulsion. The problem with expulsion is it damages far more than the club involved. For example, had Portsmouth gone straight into expulsion in the January/February of last year, every single point that they had gained would have been taken off the clubs that had already beaten them. More importantly, anybody they had beaten would suddenly, effectively, have a three-point advantage. So it is absolutely essential that the clubs are forced to play each other and to play out their fixture list, and therefore it is essential that football creditors are paid. Another thing on this: there is no moral basis for saying that the St John’s ambulancemen or the local businesses shouldn’t be paid. Of course they should, and that is our starting position—there should be no bad debt. You have more say in the insolvency laws in this country than I have and if you wish to change the insolvency laws to allow charities or small business with a certain turnover threshold to become preferred creditors or preferential creditors, I would certainly support that. But on balance, it is the best of a bad situation. Because we are a closed system, chaos would ensue if people’s playing records were eradicated. If expulsion is the only option, we think it is a bad option. Therefore, the football administrators, to protect the integrity of the league, would support the football creditors rule. I understand that the integrity of our league takes precedence over the small business creditor, which is unfortunate, but I am not ever excusing people not paying their debts. Q664 Damian Collins: I think there is another element to this, and this was a point that David Gill made when he gave evidence to us. He agreed with the idea that if the football creditors rule did not exist clubs would have to be more open and transparent in their financial dealings with each other, because there would be greater risk, and transfers and payments between clubs, which are a very big part of clubs’ expenditure in putting their teams together, may have a helpful and deflationary impact. I think Lord Mawhinney also talked about the integrity of the competition and whether you can protect the integrity of the competition if clubs are using their liabilities to other suppliers to fund their football activities. Richard Scudamore: David Gill is probably the best chief executive in football. He runs a club, but he is in a fortunate position where he runs a club with the ability to trade almost on a cash basis with others. There is the idea that across professional football all 92 clubs should go into a full due diligence situation in terms of this. Given we have this system, remember in our particular case we generate significant central revenues. Those contracts are entered into only with the Premier League, not individual member clubs. We have significant funds such that when this situation comes along, as it did in Portsmouth, we are able to keep, for example, Watford in business, effectively. Watford were owed money by Portsmouth. We were able to satisfy other foreign clubs that were owed money by Portsmouth, which has given us great standing across European football, because I think we are the only league that has ever done that, and has satisfied club debts. So I think it is easy for Manchester United to say, “Everybody should do due diligence,” because they are in a situation where not many people are buying players from them, and when they are buying players themselves it is a very different position. As I say, he comes at it from a club perspective. I sit in front of you as a league organiser with a slightly different view. Q665 Damian Collins: What you seem to be saying is it is all right for clubs that do not have big cash flows to engage in financial transactions with other clubs knowing that they may not be able to meet those liabilities, but if they can’t they have their VAT account or other unpaid bills they could pay it from. Richard Scudamore: You go to what is the essence of the game. I would advise caution—steering clear of over-regulating or over-prescribing something that might circumvent the essence of the game. The essence of the game since it started—the thing that gets fans most interested—is the buying and selling of players, the trading of players, on the transfer deadline. You have seen the media hype around transfer deadline. We know more about what is going on from the media hype sometimes than we do from the contract registration documents that are coming cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 152 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore into our office. The essence of the game throughout my 14 years in the executive capacity of professional football, whenever you get to a room or the premeeting coffee discussions, is players and player movements: who is buying whom, who is selling whom, what is happening? The idea that you would somehow put this administrative blockage of a due diligence process in front of every single trade, club to club on transfer deadline and everything else, is a place we wouldn’t want to go. Q666 Ms Bagshawe: Surely greater transparency would prevent that. You just gave the example of Watford being protected. Watford wouldn’t have allowed Portsmouth to run up such debts with it if it had clear sight of its balance sheet, and without the football creditors rule that would have been the case. Richard Scudamore: Okay. We have transparency, don’t we? You have seen the Deloitte report. There is no other country that can produce the Deloitte annual report of football finance on the same basis, because certainly in US sports you won’t see that level of transparency. We are all required by regulation. We are UK-registered companies. That means that everything has to be filed with Companies House. Of course, it would be good practice for a club to establish with another club whether they can pay, and that is why a lot of deals do and don’t go through. That is done now. I don’t think, though, it is the solution to obfuscating the football creditors rule. As I say, I am not here defending many aspects of the consequences of the football creditors rule, but on balance I think the Football League, the FA and I agree that, of the options available, it is better to have the rule than not have the rule. Damian Collins: It does seem a pretty sad state of affairs if the— Chair: We need to move on. Jim Sheridan: In my experience, and in the experience of other elected colleagues in this place, abiding by the rules is not always the best form of defence. Q667 Paul Farrelly: I will be brief on this section, which leads nicely on from your discussion of how important it is to have integrity and stability when you are running competitions. When we talked about local benefactors buying into clubs, would you prefer them to put in equity rather than take on debt? Richard Scudamore: I think in a hierarchical situation, yes. That is, you would prefer them just to put in equity, yes, as opposed to debt. Q668 Paul Farrelly: The oft-mentioned Lord Triesman made a contribution in a speech on debt. Why did you and the Premier League take such exception to what he had to say? Richard Scudamore: Again, you have to put it in the context of the timing. We were having what we thought was a very good dialogue with Lord Triesman and with Andy Burnham, the Secretary of State, all through that summer. We started the dialogue in July; we continued it in August. We were all entitled to a holiday and off we went. We came back and that dialogue stopped, and almost the next thing we had was these unilateral speeches—both by Andy Burnham and by Lord Triesman—about the state of English football. If there was any affrontedness, and I don’t deny there was some, it was a sort of break with the discussions that we were having. Having said that— Q669 Paul Farrelly: So your reaction, you were described as “tired and emotional”. Richard Scudamore: No, I don’t think it was tired and emotional at all. We were rather sanguine about it. It was others. Clearly, the media enjoyed the theatre of Lord Triesman at a speech called Leaders in Football—interestingly named—and the issue is around the fact that clearly we are proud of English football. I think this comes through. We are proud of what the Premier League has achieved. We are very proud of what the Football League has achieved. We are proud of where the FA sits in relation to other football associations around the world, where the England team sits. It is the one team—probably England and Brazil—that attracts more international interest than any other team, so when you are very proud of something, my view in terms of when you are trying to move the agenda on is that you should perhaps not criticise it quite as directly. On good leaders, I think there is an art of leadership. The first art is to get people to follow. Therefore, if you are going to display real leadership—you will have seen this in your world—you have to get people either to follow, vote for you or at least engender some support, and I think it is interesting tactics people have deployed in trying to get that support, but it is not one of the ways we would have chosen to do it. Q670 Paul Farrelly: From your answer about preferring equity to debt, who wouldn’t? Richard Scudamore: Yes, exactly. Paul Farrelly: I take it you would agree with Sir Martin Broughton, nobody’s fool as we have seen over many years, the Liverpool Chairman, when he said, “If you are leveraged”—by which he means highly leveraged—“that’s bad for a football club.” Is that a statement of fact that you would agree with? Richard Scudamore: Let me take it one stage further. If it was too highly leveraged, yes; if it was leveraged, not as good; if there was no leverage at all, obviously better. Therefore, we are into the proportionality of debt, and I think that is something that our new rules will bite on, because when you have to put your future financial information in, when you have to put your business plans in—we didn’t have these rules four years ago—but now our rules are tighter on this than the UEFA licensing and the UEFA rules, because the UEFA rules don’t per se deal with debt, but ours will deal with debt, and the appropriateness and level of debt. So, yes, clearly it goes without saying it is about the amount of debt and the question, is the club at risk? Our role is to make sure that clubs are sustainable, that they stay in business, and we don’t have a role that says each club must be able to win the Champions League. That is beyond our power, beyond our reasonable control, but certainly in terms of sustainability that is the issue, and, yes, clearly there is a number at which proportionately debt has to cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 153 5 April 2011 Sir Dave Richards and Richard Scudamore be a risk and that would be covered, I think, by our new rules. Q671 Paul Farrelly: The final question, as time is moving on, relates to your position when it comes to any financial regulation UEFA is involved with. You have made strides with your own rulebook, so is there no role for the Football Association in any financial regulation? Richard Scudamore: Of course there is a role for the Football Association, because they have an overarching role in the way it works. But UEFA themselves are only competition owners; that is what they are. They organise their own competitions and they say to the clubs that want to play in those competitions, “If you want to play, these are the rules.” It is the same for us. If there is a lacuna in the rules or if there is a gap in the rules, yes, we would be open to that dialogue. We would also be open to the dialogue as to who applies those rules. We are not against that at all. Q672 Paul Farrelly: Very quickly: has the Football Association any greater role in financial regulation beyond what you are already doing than just approving the rules of the FA Premier League? Sir Dave Richards: The executives of the Premier League and the Football Association meet every second Friday to discuss all the implications of this, and they come up with scenarios—whether it is financial or about players. They discuss this every second week. They bring it back to their bodies. Their bodies then agree the formula and it goes to the board. So if the FA wants to talk more about finance, it has ample opportunity to do it at the Friday FMT with the senior executives. Richard Scudamore: Just so you are all clear, though, and maybe I have not made it clear, the FA are the people who are ultimately the licensor of the UEFA licence, so the work, much of the data gathering and much of the evidence is gathered by the Premier League Executive. That is all presented to FA, but the ultimate people who decide on the UEFA licences are the FA. They have an integral role in the financial regulation of football. Q673 Ms Bagshawe: I know there are pressures on time, so would you comment on two questions at once. This is related to debt in the English model of football. Obviously, there is a growing differential between the revenue gap between the Premier League and the Football League. First, do you think this encourages clubs to overspend, to gamble on success, whether that be staying up in the Premier League or joining the Premier League and entering the Champions League? As a corollary question, we have heard evidence to the Committee that the parachute payments if you are relegated, which now last for four years, are distorting competition in the Championship. Do you think that the Premier League has a role to play in cost control? Richard Scudamore: Clearly, that is why we are advocates of the concept of break-even, and repeating the financial fair play concept of break-even is unarguable. In terms of a gamble, of course football is an optimistic, upwardly mobile, aspirational business. Ms Bagshawe: Nothing wrong with that. Richard Scudamore: There is nothing wrong with that. It is entrepreneurial, and Mr Cameron would be proud, and would have been in all his speeches in the last three weeks, including in Cardiff at your spring conference. That is exactly what football is. It is about the aspirational, the entrepreneurial, and saying, “We think we can invest our money and we think we can improve our lot.” So yes, of course, the best thing and worst thing about the Premier League is how successful it has been. It has been a success in terms of its attendance growth—60% since we started—our viewing and our audience growth, as well as our revenue growth. That success has meant more and more clubs want to be part of us. The Championship clubs all want to be in it, despite the fact that when they are not in it they like to criticise us, but they all want to be in it, and that is the reality of English football. Clearly, we are not sitting here advocating that people overstretch themselves to the point of putting them at risk, which is why we have talked probably more than we should about all the rules that are now in place to stop that happening. When it comes to the parachute payments, they are, again, in a sense a necessary mechanism. They have been in it since the start, because when clubs get promoted we want them to compete. We don’t want clubs to come up, bag the money, take it as profits and just go back down again, because it is a sporting competition. We can talk about money and finances and everything else, but the integrity of the league this season is more in evidence than ever. The clubs who have come up have competed: Newcastle have competed. Blackpool have had a fantastic run, considering the economics mean they shouldn’t have won anything like the number of points that they have, if you believe the pre-season pundits. West Brom have suddenly got themselves into not a comfortable position, but a decent position this weekend. So you want your clubs to come up and compete. That means you want them to spend money, invest. We require them to invest heavily in infrastructure. No matter what happens to Blackpool this season, they will have a better infrastructure as a club, a better stadium and better facilities, because they have invested that money in making their club better; they have community schemes. Every aspect of Blackpool Football Club has been enriched by being in the Premier League, irrespective of whether they retain their league status. Now, the consequence of that is to de-risk some of that when they get relegated; they need a softer landing. What we have done is the parachute payments, which have always been there. On the extension to four years, it is only half what they would have got, so the positive side of this is that 12 of the 24 clubs in the Football League—half of them—enjoy the benefits of the parachute, which is good for the sustainability of those clubs. Basically, if you want them to compete when they come up, you have to protect them when they go down. Interestingly, it has not distorted the competition, if you look at the Championship this season. I haven’t checked the cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 154 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore league table after last night, but I don’t think there was a team that was relegated. No, there isn’t. Neither Burnley, Hull nor Portsmouth is in a play-off position to come back up, so you can’t believe it has given them a huge competitive advantage over the others. Q674 Chair: On the recent European Court of Justice case, or rather, the opinion of the Advocate-General, that may lead to an ECJ judgment on the sale of exclusive territorial rights, have you done an assessment of how damaging that will be if it is upheld? Richard Scudamore: We haven’t done an assessment of how damaging it can be, because I don’t think the opinion is clear enough as to what the outcomes will be. The opinion is difficult; it is convoluted. It suggests certain things that might happen. As you will be aware, the process of this is that the opinion gets put towards the ECJ, the judges. The judges have to answer, I think, 18 questions set by Justice Kitchin here in the UK. Then the answers to those questions come back and he has to weave them into his ultimate decision. What is very hard to see at the moment is how we get all this to add up—even the copyright issues that have been explained, even this concept where it might be possible to make a legal distinction in the UK between a domestic card not being allowed to be used in a commercial premises in the UK. So, a UK domestic card might not be allowed to be used in a pub or commercial premises, but somehow a foreign domestic card could—under some interpretation of the freedom of movement—be allowed to be used in a pub or commercial premises in the UK. It is difficult; it is complicated. What I do know is this. You questioned the Secretary of State last week on this particular topic, and we are very grateful for his support on this and UK Government support, where it is essential for content owners to be able to sell their rights in a way that works for consumers as opposed to some ideology of some pan-European market. We don’t sell the same Premier League product across Europe. We sell our rights—the components to a Premier League product—across Europe. It is then for the people in each territory and each country to create a product that they in that market require. With your other hats on as Culture and Media, you will understand the territoriality and the essential nature of territoriality in that regard. So the French, when they produce Premier League coverage in France, concentrate often on French players, French clubs. It is scheduled to avoid the French league. Similarly in Italy, in Spain, in other countries, when they show our rights, they not only concentrate on an element of the Premier League that is more relevant to their audience, but schedule it around what is a unique part of each country’s culture. It is the same in this country, which is the reason why we will fight strongly, for example, against if Mr Platini and others come along with a summer calendar for football, because we believe it is pretty difficult to play cricket in this country in the winter—rain stopped play would be rather more prevalent. Therefore, it is things like that, where you have to protect the sporting culture of a country and you have to support media being available on a territorial basis, because that is the way you create cultural diversity and protect the culture of each individual territory. It is an important case, John— Chair: It is an extremely important case. Richard Scudamore: And I think you should concentrate some of your minds and efforts on it. Q675 Chair: Indeed. That may be your view, it may be our view, it may be the Secretary of State’s view, but at the end of the day if it is not the European Court of Justice’s view, there is not a lot we can do about it. Richard Scudamore: No, except, as I say, the problem with this case is that it is possible to sit down and work out theoretically what we might do about it, but unfortunately every solution is not as good for the consumer, not as good for the broadcasters in each country as what currently happens. The idea, for example, that we might have to sell our rights on a pan-European basis does rather make a nonsense of having broken our rights down into packages, with our other European Commission challenge, with Ofcom ensuring that we encourage plurality in the media world to make sure that more than one broadcaster has our rights. All this kind of stuff contradicts all the things we have been discussing in a regulatory sense with these people up until now. Q676 Chair: I entirely understand that, but is that a case that you think you are capable of persuading the European Court of? Richard Scudamore: Unfortunately, we don’t have any chance now in front of the European Court, do we? That is the way the process works. They will be crafting their opinion. If there is anything that the Government can do, whether this Government or whether other Governments across Europe, to weigh in with their views, I think that is important, because we need to—and that is what my lobby people will do. Q677 Chair: But you will have begun to think about what will be the impact if this opinion is upheld? Richard Scudamore: It leads you to thinking about, unfortunately, the UK as just one element of Europe and where you would have to do whatever you do on a pan-European basis, which is a bit odd because clearly the UK has more interest in our Premier League rights than any other country in Europe, and you would expect that, wouldn’t you? So the idea that we suddenly think of Europe as one market, when it is effectively 53 markets, is possible; it is doable. It doesn’t hold any fear to us, but it is just a very convoluted, complicated way of going about doing something when the current system works perfectly well. Q678 Chair: But it is also likely to result in a drop in income. Richard Scudamore: Again, you just can’t make that stretch. In some ways, the other challenge that we have in terms of the Ofcom pay TV review and our appeal to that is important, because it hits right to the heart of a plural media rights market, where, as you know from that particular case we are arguing, if all cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 155 5 April 2011 Sir Dave Richards and Richard Scudamore these other media companies have a wholesale offer situation with Sky, which has to wholesale all this sport content to them, their incentive to bid for our rights will be vastly reduced. In a sense, that has more potential threat to the income of the Premier League than perhaps the ECJ case. Q679 Chair: On the issue of broadcasting income, you get about over £1 billion in broadcasting income. It was suggested, I think by the Sports and Recreation Alliance, that you had signed up to a target of investing 30% of net broadcasting income into sport— £300 million. Are you meeting that target? Richard Scudamore: We are more than meeting it. There is one word you have missed out, if I may correct you. It was net broadcasting income. Chair: Yes. Richard Scudamore: What the code absolutely envisages is the cost of putting on that competition must be able to be deducted from your gross income. While we can sit and talk about our £1.2 billion worth of revenue, of course we have a huge cost of sale, and that cost of sale is the 20 clubs’ aggregated costs, player costs, stadium costs in staging the competition. Any other governing body—for example, the FA—is allowed to deduct the cost of running the FA, the cost of putting on the England matches and the cost of everything else, so to be treated like any other sports governing body we have to be allowed to look at net revenue, which is when you have basically extracted your cost of sale of putting on the show. We stand up very well indeed. Our £162 million we gave away by way of solidarity—13.4% of our revenue. There is no other sporting body in the world—no other business in the world, I don’t think—gives away 13.5% of its revenue. Not of its profit, of its revenue. So we stand up extremely well to anybody else, whether in a sporting context or in a business context. Q680 Chair: So what is your estimate of net broadcasting income? Richard Scudamore: Well, it is a net loss, to be absolutely honest, so goodness knows what that means our percentage to contribute is; it must be infinite. Q681 Chair: So it is a pretty meaningless commitment to say you are going to give away 30% of what is a net loss. Richard Scudamore: I would ask you to concentrate on our submission: £162 million given away. If you can show me another sporting body or another company that gives away 13.5% of its gross revenue it will be very interesting. Q682 Dr Coffey: I wonder if Mr Scudamore could just clarify where that kind of money goes? Is that referees or is it pitches or— Richard Scudamore: What, the £162 million? Dr Coffey: Yes, or is the parachute payments? Richard Scudamore: No, the £162 million effectively goes—let me check the detail of it. I wouldn’t want to mislead you. Yes, £162 million of it goes into solidarity and good causes. That is roughly broken down as £60 million in parachute payments, about £62 million in solidarity payments—that is both for the Football League and for the Football Conference, who you will be speaking to later—and the rest to charitable causes, charities. Q683 Dr Coffey: So about £10 million outside, if you like, the professional clubs? Richard Scudamore: No, about £42 million, I think, goes to good causes in the community. That is in our submission. Dr Coffey: Oh sorry, £162 million. I wrote down the figure wrong. Richard Scudamore: Yes, £162 million, with £40 million-odd to charity and good causes, yes. Q684 Dr Coffey: Supporters. At the end of the day, the game exists for players, but supporters pay for the success, whether through Sky subscriptions, ticket prices or similar, but they get terribly frustrated— probably the cause of this whole inquiry—because they feel they have no say in the governance of their clubs. What additional measures can the Premier League take to increase that say? Richard Scudamore: Well, again, we would absolutely commend any club having a dialogue, and our rulebook envisages a supporter liaison person at each club; we would encourage all clubs to have a decent and open dialogue with their fan base. You will also see—you can do this another time—the appendices that we put into our submission. There is no other sporting body, I think, that does the extensive nature of the research that we do, among our fans and our non-fans. We are absolutely in touch, I think, with what all fans feel, and that is difficult because there are very vastly different opinions. I think in a practical sense we fund now Supporters Direct, and we have done for some time. Q685 Dr Coffey: Will you continue to do that at the current level? Richard Scudamore: We will continue to make available, as you know via the Fans Fund—This is an ongoing debate as to whether we, the Premier League, should be funding these organisations. We took up the Supporters Direct funding when Government decided it didn’t meet the Government’s criteria of participation only. It is the same in all the organisations, such as the Football Supporters Federation and the National Disabled Supporters Federation: for the central bodies that currently exist—associations formed by those like-minded people who wish to share common views—we will continue to make funding available to them to achieve some of their aims. They admit by their own efforts that they would rather find more sustainable sources of funding, because they find it awfully odd being paid for by the Premier League, but we were certainly always open in that dialogue. I have personal dialogue with the leaders of all those organisations, as do my team. Ultimately, you cannot argue against having decent fan liaison and decent fan communication, but, as you have heard in evidence before this Committee, not every supporters’ trust thinks it is right that they should have a seat on the board, because they wish to cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 156 Culture, Media and Sport Committee: Evidence 5 April 2011 Sir Dave Richards and Richard Scudamore remain more removed from the fiduciary duties that that would bring. There is a raging debate about this. I would put you back to the evidence. Our evidence is that since the Premier League was formed, 67% more people are coming through the turnstiles and attending our matches. English football was at its worst throughout the 1980s in terms of violence, of hooliganism, stadium disasters and no television deal. On taking the game back from that position—more fans are more interested in our surveys, very independently done by Populus, and again I offer up to the Committee access to all those Populus surveys—the reality is there are more people interested in our league and what we do now than there were before. Q686 Dr Coffey: You mentioned that you are a bit of a closed board; there is no other entrance in and out, which was the justification for the creditors rule. I recognise you are all football supporters, but given that you are a closed board, how do you get new, fresh blood in? I suggest to you that one way, Sir Dave and Richard, would be to say that there is a fixed-term limit on how long people can be on the Premier League board to encourage new blood in, and perhaps a role for supporters on that board as well. Richard Scudamore: If you go back to my original description of what the Premier League board really is, the Premier League board is effectively the clubs, and Mr Parry will be able to advise you exactly on the intentions when the shareholders set the thing up. We have new blood all the time. In fact, we have new blood, we have old blood. We take by rule three new clubs every year, but then the clubs themselves turn over and, effectively, the clubs come along as shareholders and that is the new blood. We are for ever being challenged by new blood on what is effectively our board, which is our clubs. certainly seen the Premier League grow—has not been, if you like, replaced. Is there a view that the chairmanship should be not quite such a long-term election? Richard Scudamore: I think that is entirely a decision for the 20 shareholders. We turn up and say to each other before every shareholder meeting that it is like reapplying for your job at every single meeting, and our predecessors sometimes went to those meetings and left without their jobs. Q688 Dr Coffey: I would be really interested to hear Sir Dave’s view. Sir Dave Richards: No, it is absolutely true what Richard tells you; you are as good as the last meeting. You could turn up at a meeting and find out it is your very last. On terms, you get elected every year. If you have a bad year you don’t get re-elected. There comes a time when you think to yourself, “Well, perhaps we’re okay,” but the Premier League is so fluid, and Mr Parry can tell you the times that we have had— the way it has changed. But we are governed in such a way that the 20 clubs are the governance of the Premier League. The board has a set of rules and it is a set of rules that we can work to, so the board is not like you believe it to be, like a PLC, because the PLC part is the shareholders and they are the board. We are very limited in how we can make decisions as the two members of the board. Mr Parry will tell you that he helped write the rules, so he will tell you how difficult it is that you must work within those parameters. If I break those parameters, I can tell you I will be out overnight. Chair: We have to stop there. I thank the two of you very much. Q687 Dr Coffey: With respect, Sir Dave—who I think has been a distinguished Chairman, and has Examination of Witnesses Witnesses: Brian Lee, Chairman, the Football Conference, and Dennis Strudwick, General Manager, the Football Conference, gave evidence. Q689 Chair: I welcome Brian Lee, Chairman of the Football Conference and Dennis Strudwick, General Manager, and thank you for your patience in waiting until we reached this point. We are very pleased you were able to come and join us this morning. Perhaps I might begin, following on from the theme we were discussing with the Premier League just now about the involvement of supporters, and in particular supporters’ trusts and clubs, by asking, what is your experience of the success of supporters’ trusts and clubs, and do you find that they are more likely to be involved in community activities? Brian Lee: First, thank you for seeing us and, secondly, this is a very hot seat. Chair: Indeed. Brian Lee: We support supporters’ trusts generally, but there is no one model; one size does not fit all. There have always been supporters’ clubs and supporters’ clubs have formed themselves into supporters’ trusts more legally. We have good examples at Exeter, which is a supporters’ trust. If you go there, an example is after the game: all the supporters, having paid their entrance fee, go and clean the terraces, as it were, as their contribution to their club. I think that is supporting and supporters’ trusts. We have AFC Wimbledon, which obviously came out of a specific set of circumstances. FC United of Manchester came about in another set of circumstances. They are all different. The problem with supporters’ trusts is that they do not have the financial background. They have a lot of enthusiasm and a lot of passion, but unfortunately enthusiasm and passion don’t pay the bills, an example being a club we lost last year, Chester City. cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 157 5 April 2011 Brian Lee and Dennis Strudwick In fact, nobody could save them. They did have a group of supporters and a supporters’ trust, but the finances involved were just too great. As you know, they went out of existence and were reformed by the supporters. They started at the bottom of the ladder and are now top of their division. They are getting crowds of 2,000, which is way beyond the average there, and are on their way back. Supporters’ trusts really are supporters’ clubs more professionalised. Q690 Chair: Where it has not been possible for them to acquire a stake, are you generally in favour of the idea of their being represented on the board? Brian Lee: Yes, indeed. I think nobody could exclude good dialogue between the club and the supporters. Whatever the constitution of the club, they want their supporters because those are the people they set out to cater for, those are their customers. My own club is Wycombe Wanderers; we have a board of five and two of those are from the supporters’ trust. They have a say. They are not going to change everything overnight, but they can practically demonstrate, as I have said about Exeter, a major contribution to the club. Q691 Mr Sanders: It was said in the last session that the big story out of the session would be about Leeds United. I think the big story is the possibility that AFC Wimbledon, the fans’ own club, could end up getting into the league at the cost of Crawley Town because they won’t come clean on their ownership. Do you have ownership rules within the Conference in wanting to know who owns what, or are you considering having that as a rule? Dennis Strudwick: We don’t at the moment. It is dealt with by the Football Association and we liaise with the Football Association on ownership, so it is not as transparent as we would probably like in the Conference. It is something we are prepared to consider. Q692 Mr Sanders: Transparency is important. Supporters ought to be entitled to know who owns their club, so would you push for this to be a rule? Dennis Strudwick: Yes, I think it is something we need to take up with the Football Association because, as I say, it is dealt with by them at the moment. If we have any questions to ask, we ask them and they liaise with us. We have a rule within our competition about conflict of interest or dual ownership as such, and we would liaise on any issue that we were aware of. Q693 Mr Sanders: Crawley could end up not going into the Football League because they are not meeting the Football League rules and so wouldn’t meet your rules. Dennis Strudwick: You have mentioned Crawley Town, and we suspected that might be on the agenda anyway, but the Football Association, through our liaison—the Football Conference—has visited Crawley Town. They are due to go back there. They have established the investment there so it is being dealt with. Brian Lee: I think it is very difficult, from the Conference point of view, if the model at Crawley Town satisfies the Football Association. It will satisfy the Football League, because they are due to go into the Football League and you have heard about the Football League rules. Therefore, if they are satisfied it is difficult for us to do anything about it because we are completely satisfied from the Football Association and the Football League. Q694 Paul Farrelly: I want to go back to supporters. The reason that we are doing this inquiry is because, for good or ill—it is there in the coalition agreement, just below eradication of debt and transformation of the National Health Service—the Government will do something about encouraging more supporter involvement in their local clubs. That covers a wide range of possibilities, from the Maldon Sea Salt’s works team to Torquay United or even Stoke City. Brian Lee: Who? Paul Farrelly: Stoke City, a club quite close to my heart. But the question is whether the Government were well advised to put this in the coalition agreement and how should they best go about doing it. What three or four things would be in the Government’s grasp to fulfil that coalition pledge? Brian Lee: First, I don’t think there should be intervention. I think there should be co-operation and development of the game with the governing body. As you have heard, the governing body isn’t—I would agree with this—the governing body it was or should be, in my view. In terms of governance, it has lost it. It is fair to say that there are other governing bodies in a similar position—a state of flux—at the moment. Lawn tennis is an example. I think the importance from a Conference point of view is to give the independence. We are going along a line, I think, which is satisfying the member clubs and a bit like the evidence you have heard. We are there to satisfy them. We have 68 clubs. Sorry, we have 67, because one club went during the year because they were living beyond their means. We are doing everything we can to get clubs to live within their means and we have financial initiatives and we have co-operation with HMRC. Unlike the previous evidence, we don’t agree with the creditors rule. We think that everybody is the same, as far as debt is concerned, and we will encourage everything we can and we are working at it. We have taken evidence this year, as a trial year, to try to implement it in rules next year in terms of greater financial responsibility. Q695 Paul Farrelly: Still I am not getting an answer. What can the Government do? If it is in a Government’s grasp, what lever can a Government pull? Let me give you one example. If you wished to set up an ownership model that encouraged fans to get involved, you could make special exemptions from tax or give tax incentives to invest in football clubs, then the question would be, does football occupy such a special place in the country’s life that the same shouldn’t happen with cricket or rugby? That is one example. I am just trying to see what your thoughts are, from the lower reaches of the leagues, on how the Government can implement this manifesto pledge. Brian Lee: It can certainly give relief to sports clubs and football clubs, bearing in mind the clubs are not cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 158 Culture, Media and Sport Committee: Evidence 5 April 2011 Brian Lee and Dennis Strudwick just there for themselves; they are there for the communities. The Premier League has been extremely helpful to the Football Conference and this year we have, for example, £800,000, and that is for three years, so that’s £2.4 million we are putting into our clubs via the communities. Therefore, the Government may well say, “Yes, that’s good, we might look at some rate relief on that.” That will be quite logical because we are making a financial contribution. In doing so, each club is allowed £12,000 over three years, but that is 50%, so if somebody else is putting in the other £12,000 there is a partnership, often the local authority— Paul Farrelly: No, supporter involvement? Brian Lee: And supporters, and supporters are— Q696 Paul Farrelly: To encourage supporters’ involvement, that is— Brian Lee: Yes, but the supporters are involved in it, you see. Again, a lot of it is done at the low level— in school, in health and education and in developing players—and those players eventually are going to be supporters. They all have parents involved. There are all sorts of things that are happening. Dennis Strudwick: I think every club—we have 67 at the moment, as you have heard—is an autonomous body. If the Government wished to make that an aim or an objective, as a Conference we would welcome some advice on what might be a good business model for supporters’ involvement because we have to sell the idea to these autonomous bodies, which are run under a variety of business models. If it is such a good idea to have that degree of supporter involvement, we have to sell the idea. There is the Football Association and there are major leagues like us to get this message across. Q697 Paul Farrelly: Final question, because we are at an impasse here. You are asking the Government to give you some advice and the Government is asking for some advice, in part through a Select Committee inquiry, so we are no further forward. Dennis Strudwick: Okay, there is a discussion point that we need to meet to decide the best way forward. If it is such a good idea, let’s both talk about it. Q698 Damian Collins: What is the average wage to revenue ratio in the Football Conference? Brian Lee: We are working on it so that it will be about 60%, but some are above that, some well below it. That is part of our exercise—gathering information this year to implement next year. Q699 Damian Collins: Is that to be implemented as a rule similar to the rule that exists for League Two? Brian Lee: It is not a rule; it is advice and guidance. As I said, we have this financial initiative independent committee on which the Football Association also has representation from its financial regulation department. That is how that is being devolved and being aimed at—roughly 60% after turnover. Q700 Damian Collins: If clubs are in breach of that guidance, is that a matter for them? Brian Lee: It is not in the rules at the moment, but that is where we are working to in terms of advice and it is going to go into the rules, yes. Q701 Damian Collins: It will go into the rules? Brian Lee: We are hoping it will go into the rules, yes. Q702 Damian Collins: If it is approved, there could be sanctions for breaching the rules? Brian Lee: Yes, but we are gathering evidence at the moment. Dennis Strudwick: Can I go back a little bit on that? When I joined the Football Conference four years ago, we had what we call the improved playing budget scheme and it was a comparison between expenditure on wages with turnover and the yardstick figure was 60%. It was quite labour intensive to work. We relied on the information that we were given by the clubs, which we would naturally expect, and it was difficult to prove the figures in support. What we have done since then—we found it quite laborious, that system—is move on in our reporting system so that each quarter a club will report debt, HMRC debt and what the position is, whether it has agreed arrears and whether it is paying it off. But we have not abandoned the first idea. What we have in there is turnover and salary, player wages. What we are finding though is—it emphasises our reason for moving away from the very focused structure of the APB system—that some clubs who spend below 60% of turnover on wages might be perceived to be in some financial trouble when other clubs who are spending above 60% perhaps are not. The 60% really means that some clubs might run very prudently on voluntary labour and may be able to afford to pay more than 60% while others are a bit more labour intensive and can’t. We have shifted the reporting system on to a broader base and it has proven quite interesting in the last two years. Brian Lee: I think the interesting thing, if I may say, about the Conference is we have all these clubs coming down from the Football League, wellestablished clubs with their own models, and we have the clubs coming up in the pyramid that are developing their models, possibly more sensibly but at the same time being ambitious. Each year we hope that one of those clubs will go into the Football League, and that one of the clubs that comes down will have rehabilitated. Q703 Damian Collins: Obviously you have a concern about unsustainable models of finance that clubs have, but it seems that even at the Conference and at lower levels there have been incidences of clubs that have a wealthy owner—Crawley has been talked about; a couple of divisions below you have the problems with Croydon Athletic as well—who pumps in a lot of cash in the short term to try and get the club into the league. That money goes away and the club comes crashing back down to the ground again. Is that part of your thinking in trying to create a more sustainable business model? Brian Lee: Absolutely, those are the things to aim at and to defeat. We also have to make sure we have cobber Pack: U PL: COE1 [O] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Culture, Media and Sport Committee: Evidence Ev 159 5 April 2011 Brian Lee and Dennis Strudwick greater knowledge, I think; that is really what we want. Q704 Damian Collins: You said, Mr Lee, that you disagree with the football creditors rule. Is there a football creditors rule that applies in the Conference at the moment? Brian Lee: No. Damian Collins: No, there is not. Thank you. Dennis Strudwick: Sorry, what was that? Brian Lee: The football creditors rule. Damian Collins: Yes, you don’t have one? Brian Lee: No. Dennis Strudwick: The football creditors rule? No, we insist on football creditors being paid. We have an empathy with the theory of football creditors because a football club does most of its business with other football clubs. There is this empathy on understanding of the rule. However, in the broader system, our reporting and our rules are geared to paying all the bills. Q705 Damian Collins: Just so I am clear, in the conditions of membership of the league, if you like, or the Conference, football creditors don’t have a preferred status? Brian Lee: No. Damian Collins: So they are treated the same as all other creditors? Dennis Strudwick: There is an observed status. We want people to pay the other football clubs, the clubs they are competing against. They are the ones who have this integrity problem with the competition, but the bottom line is we want the football clubs to pay all their bills. Q706 Chair: You will have heard we spent some time this morning discussing the structure and composition of the FA, particularly the Board and the Council. Do you feel that your interests are given proper weight in the deliberations of the FA? Brian Lee: We have representation, following Lord Burns’s report. We have representation on the FA Council, so we have two members. The three feeder leagues also have one representative. At our level of the game, if you can call it that, there are five Members of Council. Council, on the other hand, is 118 people, which is far too big. The board is far too big and we don’t have any representation on the board. We find ourselves betwixt and between: the Premier League is up there and we have the national game down here, and we are at the point there and at the bottom there. We feel that our level of the game deserves and needs its own board, so we would become a board of 266 clubs—the Alliance Game Board, as has been suggested. When the Premier League disappeared, everything was on its own—the Premier League and the Football League. We were non-league, but when we started we were non-league from the Football League, when it had four divisions. Non-league now—what does it mean? We are supposedly at the top of the national game alongside the teams that play in the Bolton and District Sunday League. That can’t be right, particularly as the professional clubs are coming down from the Football League and we have clubs who are ambitious to move. There is a fair amount of money involved. We are pressing the Football Association, but, as an example, the decision has been agreed by all the four competitions and gone to the Football Association and the board. The board has deferred it for comment, as it were, from the national game. I find that that is one of the problems. When you have all the members agreeing, I feel that we should be able to carry on and do it for the benefit of those member clubs—266 clubs all agree, but no. The Football Association shouldn’t hold it back; it should encourage it. Dennis Strudwick: Chairman, if I could try and illustrate a little more about our position. At the moment, it is the professional game and the rest is the national game. We all understand the professional game; we have met those two gentlemen today. The national game embraces the rest. We believe, with the Football Conference having 19 full-time clubs out of its top 24 in its top division, and being semiprofessional at least for the rest of it, that there is a niche to recognise that level of football, even with our feeder leagues below, which would fit in below the professional game, but above the national game. We think there is a niche there. I think your question was about how we feel our level of the game is being represented. To give an example of our level of the game, our fixture calendar has recently been published. It is very comprehensive, from all the matches taking place at international level to under-15 girls’ team friendlies. Nothing wrong in that, very comprehensive. At our level of the game, we have an international level. It is called England C; if you like, call it England’s third team or whatever. Their fixtures are not on that calendar yet we have just won a series of international matches in what is known as the international trophy. We are in the final, where I believe we are playing Portugal. Brian Lee: We are playing Portugal in this country, at home. Dennis Strudwick: The final is not on the calendar. We think there is a niche there for our level of the game, which is being overlooked and underrepresented. Q707 Mr Sanders: The television coverage that the Conference was getting seemed to give it a higher profile for a while. It was ESPN, wasn’t it? Brian Lee: Setanta. Mr Sanders: Setanta, yes. ESPN has taken over Setanta, but not the contract, so you don’t benefit from that. But was it helpful to have that profile? Brian Lee: Yes, you can’t argue really about presenting the game. We now have an agreement with Premier Sports Television—they film just over 30 matches during the season, but it is not of financial benefit to all the clubs as the Setanta agreement was. The only clubs that benefit from the present agreement are the competing clubs, but it does give us the profile. Q708 Paul Farrelly: One question, and I won’t call it a breakaway or a break-in, but you mentioned 266 clubs. How far does that extend? cobber Pack: U PL: COE1 [E] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG07 Source: /MILES/PKU/INPUT/011145/011145_o007_michelle_HC 792-vii corrected.xml Ev 160 Culture, Media and Sport Committee: Evidence 5 April 2011 Brian Lee and Dennis Strudwick Brian Lee: That extends to what are known as steps 1 to 4, so that would take in the Conference and the North and South divisions. Then it would take in the Evo-Stik, the Ryman League and the Southern League and their divisions. That group also plays in the FA Trophy and they are also probably the end of contracted players, if you think about the— Q709 Paul Farrelly: Would that be permanent? The 266 wouldn’t be an exclusive club? Brian Lee: People are coming in and out of it, just the same as in promotion and relegation, absolutely. Dr Coffey: My local club, I hope, will be promoted tonight into the bottom league of Ryman South. Q710 Jim Sheridan: Apologies, Chairman, if the question was asked when I was out of the room, but you may have heard the accusations this morning about bullying. Are you aware of any bullying within the FA structure? Brian Lee: Bullying? A lot of it has been levelled at Sir Dave Richards and I found it astounding. I have been a member of the professional game board and seen it happen, and I find it amazing. They have been unbelievably co-operative as far as we are concerned. They need not do it but they have, and we have a very good relationship. We have a good relationship with the Football League because of the promotion and relegation there and I think we also have a good relationship with the Football Association because we partially represent them, as you have just heard. Q711 Jim Sheridan: The reason I am asking is that in earlier evidence some people suggested that the lower league clubs would be reminded of their obligations when anything was going on in the FA and they would have their freebies withdrawn if they didn’t co-operate. You have never heard anything? Brian Lee: Absolutely not. Never heard anything like that, no. Q712 Chair: The only other suggestion, I think, was that Cambridge United were critical of the fact that their up and coming players immediately got poached by Football League clubs. Is that just inevitable? Brian Lee: It is a problem because we have been encouraged to do it. We have a Football Conference Youth Alliance that is aimed at the 72 clubs in it; it is for the 16-to-18 group, but only boys at the moment. No reason why girls shouldn’t join in—we would encourage that—but at the moment there are boys, 16 to 18, who are going to college, so it is an education and a football course. They do so many hours of coaching per week. The problem with the development of youth football is travel and the cost of travel, but that is one thing. The problem really is one of losing those good players at clubs. An example is Weymouth, which almost went out of existence last year, but continues to run 26 clubs in the community of lower age range, starting with the under-sevens. Despite the big club going, there is sufficient encouragement and enthusiasm there, so the parents rallied round, but you don’t hear that story. I think the important message on youth is compensation when a player is taken from a lower club to a higher club. There is some formula being worked out through UEFA and it is being discussed in England. I hope that true, proper compensation will ensue based on some sort of formula. I think that is being worked on. Dennis Strudwick: Can I go back to Mr Sheridan’s question? I don’t want to go back into the too-distant past, but I have heard of sanctions from county FAs, many years ago. I have never heard of it from the Football Association, but it was, “If you don’t play in the County Cup or Senior Cup, you won’t get your FA Cup tickets.” It was that kind of thing. I have looked upon those as, perhaps, sanctions, but never heard of bullying. If nobody is listening, working with the FA is a bit like running through treacle sometimes, but it is not bullying. Jim Sheridan: There are about 2 million people listening. Chair: I think that is probably all we have. Thank you both very much for coming. cobber Pack: U PL: COE1 [SO] Processed: [27-07-2011 10:50] Job: 011145 Unit: PG08 Source: /MILES/PKU/INPUT/011145/011145_o008_michelle_HC 792-viii corrected.xml Culture, Media and Sport Committee: Evidence Ev 161 Tuesday 26 April 2011 Members present: Mr John Whittingdale (Chair) Ms Louise Bagshawe Dr Thérèse Coffey Damian Collins Paul Farrelly Mr Adrian Sanders ________________ Examination of Witness Witness: William Gaillard, Adviser to the President, UEFA, gave evidence. Q713 Chair: Good morning. This is a further session of the Committee’s inquiry into football governance, and for the first part of our evidence this morning I would like to welcome William Gaillard who is the adviser to the President of UEFA. Can I invite Thérèse Coffey to begin? Dr Coffey: Welcome, Monsieur Gaillard. Why is it important for UEFA to introduce Financial Fair Play Regulations at this time for its competitions? William Gaillard: Thank you. Certainly, it is not too early to introduce Financial Fair Play measures. It may be a bit late but I think the financial crisis has induced us to probably quicken the pace of the financial reforms that we were contemplating for the past two or three years. We felt, in particular, that the growing inflation of wages and transfers, the large number of clubs facing an unsustainable debt burden and the fact that a number of clubs Europe-wide were going into administration, meant that the system needed some reform. We felt that the countries where a strong licensing system had been in place were not facing the same problem as the ones where licensing was weak or nonexistent and, therefore, we felt that, through our licensing mechanism for our own competitions, we could introduce some order and more rationality into professional football. Q714 Dr Coffey: So what would you suggest UEFA is doing to avoid unintended consequences, like increased ticket prices? UEFA has already come under criticism for the high cost of Champions League tickets that are open for purchase. What about the clubs? William Gaillard: In terms of the Champ