Memorandum submitted by Richard Baldwin
INTRODUCTION
I am delighted to submit evidence to the Culture,
Media and Sport Committee as an individual who has been involved
in advising sport, particularly sports organisations in the voluntary
sector involved in community sport, for the past 25 years. In
view of the limited time frame for submitting evidence to the
Inquiry, my comments are brief though they are intended to form
the basis for a follow up discussion on the detailed action needed,
specifically in the voluntary sector.
MY SPORTS
EXPERIENCE
I have specialised in providing professional
advice to sport since 1980, principally in relation to taxation
matters, but also in relation to management organisational constitutional
and broader financial issues. I have advised DCMS, the National
Governing Bodies of Sport (NGBs), the Sports Councils and Business
In Sport and Leisure. I am currently Lead Tax Partner in Deloitte's
Sports Business Group.
Over the past two years I have also been an
individual member of The Central Council of Physical Recreation
and have been working with CCPR, DCMS, Bates Wells and Braithwaite
solicitors and the Inland Revenue in a Working Party to secure
tax breaks for Community Amateur Sports Clubs (CASCs). The Working
Party met initially in 1999, but having secured the introduction
of favourable legislation for CASCs in 2002 and 2003 it continues
to meet to encourage the development of grass roots sports through
CASCs.
My comments are principally concerned with the
voluntary sports sector. I have read and fully support BISL's
paper to the Committee on Community Sport, which has recently
been submitted.
COMMUNITY SPORT
AND THE
VOLUNTARY SPORTS
SECTOR
Government's approach
Over recent years there has been an increasing
and welcome realisation by Government both that sport itself is
a powerful force for good (sport for sports sake) and that sport
also can be an important tool to deliver Government policy objectives,
especially health policy. The current Government has demonstrated
that it clearly recognises the importance of sport, and there
appears to be an emerging commitment to play a role in improving
both grass roots participation rates and elite success.
Sports policy has over recent years evolved
considerably. "Game Plan (2002)", Government's
key sports strategy document, sets an exceptionally demanding
target for increased participation rates, but lacks detailed delivery
strategies and funding commitments. Government's twin aims for
sport (increasing grass roots participation and elite success)
exactly mirror the strategic objectives in organisational structures
of NGBs within sport.
Game Plan and other policy documents contain
concrete examples of the positive impact of sport on health and
strong but less quantifiable evidence of sports' benefit to anti-crime,
education and social inclusion issues. These positive impacts
are largely based on increased grass roots participation. DCMS
seems to have identified Sport England as the strategic leader
for the delivery of community sport in England. The Government
must recognise that neither DCMS nor Sport England can deliver
the community sport objectives of Game Plan without partnerships
in the public, private and voluntary sectors. Though Government's
stated policy is to devolve authority for spending to professional,
competent and modernised NGBs, this has not yet become a reality.
Indeed, voluntary sport continues to suffer from a lack of funding
and a tax system that deters investment in grass roots development;
sport swells the Exchequer by making a massive tax contribution,
little of that contribution being reinvested by the public sector
in sport.
The voluntary sectors' contribution
It is recognised that there are four major sectors
contributing to the development of grass roots sport, being:
— education, principally through school
sport;
— the private and commercial sector;
— NGBs and the voluntary sector.
It is my belief that insufficient attention
has been given by Government to creating an effective partnership
with the voluntary sector, based on stable financing of the sector
in order to achieve Government aims.
Voluntary sector sport and recreation is the
only delivery system whose primary purpose is the development
of sport and recreation. Voluntary sports clubs, of which there
are around 150,000, cater for millions of participants and offer
a wide range of opportunities for all, including volunteering.
There are an estimated 1.1 million volunteers in the four major
sports of cricket, football, lawn tennis and rugby union alone.
NGBs provide the structures under which sport at grass roots level
can operate and develop. They also invest significant sums each
year into grass roots development. The major sports of cricket,
football, lawn tennis and rugby union alone invested over £120
million in grass roots development in 2002. Broadly, these funds
are sourced from their "professional" activities, and
the investment takes place without any matching contribution from
Government. Indeed, in some cases this investment is taxed (see
below). They face serious issues of under-funding, mountains of
red-tape and difficulties in maintaining a plentiful supply of
volunteers, which are essential to their prosperity.
Investment in sport in the UK currently lags
behind our main international competitors. This is reflected in
grass roots participation. Thus, for example, Australia invests
£51 per person per year compared to only £21 in England.
Participation levels in Australia are 39% compared to England's
28%. (Source: CCPR Red Book for Sport and Recreation—March
2005).
The tax system
It is not only the case that direct funding
to sport needs to be improved but also an arbitrary tax system
that does not encourage voluntary sport at any level needs to
be changed. Unlike many of our international competitors, the
tax system levies a heavy burden on this sector. Indeed, "The
Value of the Sports Economy in England in 2000", published
by Cambridge Econometrics, estimated that total revenue to Central
Government from sports related activities exceeded £5.5 billion
in 2000 (comprising mainly income tax and VAT) compared with direct
investment in sport of £661 million, ie for every £1
Government invests in sport, it takes out nearly £9.
I have first-hand evidence of the vagaries of
the tax system as it applies to sport, particularly NGBs. All
seem to be taxed slightly differently; there are no corporation
tax exemptions (unlike Australia for example). In the case of
many NGBs, eg Rugby Union and Lawn Tennis, the effective tax rate
suffered by the NGB is significantly in excess of the statutory
rate of 30% and higher than their commercial counterparts. At
the extreme, the sports governing body that breaks even and makes
no profit will find itself paying corporation tax because of the
disallowance of its grass roots development costs. For example,
if the Lawn Tennis Association were to break even as a result
of distributing all of its profits for grass roots development
purposes, it would still face an annual corporation tax liability
of between £2 million and £3 million. These direct costs
are in addition to the significant professional fees and management
time spent in planning around a tax system a design for commercial
operations.
Valuable help was provided to local sports clubs
in 2002 if a club registered as a CASC. This help principally
comprises 80% mandatory rate relief, and gift aid relief for individual
donations; there are also corporation tax exemptions for income
and gains, limited in some cases. However, CASC registration provides
no relief whatsoever from value added tax, which continues to
take massive amounts out of voluntary sport. There is little incentive
to invest in new sports facilities when a major part of the cost
does not qualify for corporation tax relief, and the VAT charged
on the cost of those facilities, particularly in the case of members'
sports clubs, is largely irrecoverable. This could easily be addressed
by the adoption of a VAT refund scheme similar to that introduced
by the Government for churches.
There seems to be no appreciation within Government
of the extent to which grass roots sport relies on volunteers
who are inundated with red tape largely generated by Government.
This problem extends towards grant funding, which seems to change
regularly with each new initiative and impacts to the extent that
often volunteer officials just give up. Added to this is the disincentive
of heavy-handed accountability and monitoring, particular of capital
spending, where grants are involved. A good example of the bureaucracy
that clubs face is the national minimum wage where regional Inland
Revenue monitoring teams have been visiting clubs to ensure that
NMW requirements are dealt with. Were it not for the recent intervention
of the Inland Revenue Head Office Policy Team at CCPR's instigation,
NMW would have become a serious disincentive to volunteering.
Government support
There is no single source of advice for the
grass roots club. Government agencies seem to think it more important
to compete for power, authority and funding than they do to support
and provide guidance/advisory services on a national basis. Finally,
there seems to be a lack of trust of NGBs within Government, and,
particularly within Treasury, a lack of interest in adequately
funding the sports sector. Certainly there is no joined-up thinking
within Government, despite all the benefits that sport brings
in terms of health, physical education, crime and disorder reduction,
social inclusion and improving the quality of life within the
community.
My suggestions for the future
If Government wishes to develop grass roots
sport effectively and to encourage further participation thus
meeting its Game Plan objectives, there needs to be a significant
change in approach. I offer the following suggestions:
— Government needs to engage the voluntary
sector fully with a sensible co-ordinated plan for its involvement,
together with the other three key sectors. The benefits are enormous
but, despite protestations about joined-up thinking within Government,
this is not happening. A starting point would be to have a one-day
brainstorming meeting attended by representatives from all four
sectors. This could then be used as a basis for developing a new
partnership, particularly with voluntary sector sport to help
achieve the Game Plan vision of a mass participation culture and
the associated health and social inclusion benefits.
— Funding to voluntary sport needs
to be significantly improved. Funding is needed for new capital
spend on facilities and revenue funding for coaching and development,
principally people costs. A recent study for the four sports of
cricket, football, lawn tennis and rugby union estimated that
at least £400 million pa over 10 years was needed to drive
a significant increase in the number of participants. Whilst this
seems a substantial figure, it should be read in the context of
Game Plan's conservative estimate that the health cost benefits
of a 10% increase in physical activity will be approximately £500
million pa. I suggest that as an initial step, Exchequer funding
for sport and recreation should be doubled. A much more imaginative
approach would be for DCMS to agree a joint funding of community
sport with its colleagues in Health and Education.
— A small part of any increased funding
should be devoted to setting up a new national unit, possibly
organised through CCPR, to provide advice to the voluntary sports
sector, particularly clubs. The CASC scheme has provided a useful
template with a free hotline being established by CCPR. This arrangement
demonstrates that the demand is there and, indeed, the CASC initiative
has been successful in ensuring that club registration is now
well over 2,000 clubs, with over £5.5 million injected into
sport already. This success has been based on free seminars and
publications such as Deloitte's "Community Amateur Sports
Clubs—The Tax Options" providing detailed guidance
particularly for NGB's and their membership clubs.
— The tax system could be significantly
changed to provide an incentive for voluntary sector sport. Some
suggestions are:
— to exempt NGBs from corporation tax,
or to provide them with incentives to invest in grass roots sport
through a sports development allowance;
— to provide tax relief for capital spending
on sports facilities;
— alleviating the VAT burden for clubs
and NGBs, particularly in relation to expenditure on new facilities;
and
— Government should develop a coherent
tax plan to encourage grass roots sport, which HM Treasury buys
into.
— It is acknowledged that the structure
of voluntary sport is complex, as is the funding of sport from
various Government departments. What is needed is a true partnership
between Government and the voluntary sector, the latter having
real influence on Government policy. Voluntary sector input could
be co-ordinated through CCPR and the major sports bodies. At the
moment, Government policy seems to be developed without having
the input of those who know how grass roots sport operates. Further,
Government seems to lack the necessary commitment, which is evident
from the inadequate funding for sport, an unfair tax system that
forces international sports federations such as ICC to relocate
away from the UK, and the relative unimportance of DCMS amongst
Government departments.
31 March 2005
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