CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 792-i i

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Culture, Media and Sport Committee

Football Governance

Tuesday 15 February 2011

Greg Clarke and Andy Williamson

GordOn Taylor and Paul Elliott

Evidence heard in Public Questions 56 - 147

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Culture, Media and Sport Committee

on 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 post-war 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.

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 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 well-rounded, 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 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 broad-based 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.

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. 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 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.

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."

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 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.

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.

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."

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.

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-year-old, 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 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 well-meaning 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.

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 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 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 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?

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 door-stepped 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 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 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 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 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 ex-player, 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 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.

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.