Football Governance

Written evidence submitted by Bradford City Supporters’ Trust (BCST) (FG 46)

Summary

· The recent history of Bradford City illustrates both the strengths and the weaknesses of football in the UK:

§ team performances up to Premiership level and down to League Two;

§ periods of both financial mismanagement and of financial prudence;

§ two episodes of Administration;

§ impressive supporters’ initiatives, including community-oriented projects and the saving of the club from extinction.

· Football governance in the UK is in urgent need of overhaul, to ensure that clubs live within their means, and to establish a better sense of proportion between the different levels of the sport.

· Supporters are the moral owners of their clubs, and this provides a strong argument for their participation in the governance of every club.

· Supporters’ involvement can however take different forms, depending on the differing circumstances of each club.

· There is no justification for the current ‘football creditor’ rule.

· The German Bundesliga provides an instructive model for the reforms needed by football in the UK.

The detailed submission responds to the Select Committee’s five questions, as follows:

Q1. Should football clubs in the UK be treated differently from other commercial organisations?

1. There are some ways in which football clubs are different from other commercial organizations. They serve in most cases as important public institutions in their localities, in addition to their commercial roles. This dual character – as both a business and a public institution – requires some distinctive treatment, as argued at several points below. We do not however support the main way in which football clubs are currently treated as distinct from other businesses, through the ‘football creditor’ rule for clubs going into Administration.

2. BCST can see no justification for maintaining two classes of creditors under this rule. The application of the rule discriminates against local and commercial business interests, state organizations such as HMRC and third-sector organizations such as the St. John’s Ambulance Brigade. This has been documented in numerous cases of insolvency, including two over the last decade at Bradford City (first in 2002 and again in 2004).

3. The rule also encourages financial irresponsibility on the footballing side of clubs, by providing artificial protection for players’ wages and agents’ fees. If the rule were abolished, players transferring into clubs would have to look more closely at the financial viability of clubs, in addition to their headline levels of wage payment. This would work in favour of disciplined financial management.

Q2. Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose?

4. The short answer is ‘No’. The financial power of the Premier League, and allied commercial interests, especially Sky TV, has been allowed to distort the whole structure of the professional and amateur games in England and Wales. The FA needs to be re-established as the controlling element of the sport, with balanced representation from all the major interests involved, including supporters. There is a strong case for establishing an independent Financial Regulatory Authority with sufficient power over the Premier League and Football League to ensure financial stability, as recommended by the Burns Review. The internal structures of the FA need to be opened up and modernized at the same time, to end the preponderance of the ‘blazerati’.

Q3. Is there too much debt in the professional game?

5. The short answer here must be ‘Yes’. Excessive debt incurred by some clubs undermines the position of other clubs that are run on a more sustainable and prudent basis. This problem is now recognized very widely, and the recent UEFA initiative is rightly designed to compel clubs to ‘live within their means’. A similar approach needs to be extended by the domestic (UK) authorities to apply at all levels of the sport, and not just at the elite level. The UEFA Financial Fair Play Initiative is worthy of close attention from the Government in this respect.

6. This is nevertheless only half of the problem, whose other side is the disproportionate means available to clubs as a result of unequal revenue streams, from TV and elsewhere. Additional measures should be introduced to reduce (or at the very least to cap) the extreme financial inequalities that have developed between clubs at different levels. Leveraged buy-outs create a third kind of problem, since the issue here is not financial advantage per se, but financial exploitation of a club and its supporters, which hampers its ability to compete on equal terms.

7. The problems of financial (mis)management are exemplified by the recent history of Bradford City. The reckless financial regime at City in the period from 1999-2002, and especially the ‘six weeks of madness’ in the summer of 2000, came within a hairsbreadth of destroying the club. Bradford City’s more recent story from 2005-2010 provides a much better model of prudent financial management, but the club has still not recovered fully from the excesses of the earlier period. In particular, the earlier mismanagement led to the loss of the club’s major physical asset, the stadium at Valley Parade, which is now subject to rental payments of up to £350,000 per year – a very significant sum that holds back performance at City’s current level in the Football League.

8. To underline this point, last season provided an interesting example of how the current system works to distort competition in favour of undue financial risk. The three clubs that were promoted automatically from League Two were Rochdale, Bournemouth and Notts County. Historically Rochdale had a prudent approach to their finances and this was their first promotion in 41 years, ironically in the only season that they received winding-up orders from HMRC. Bournemouth and Notts County also had transfer embargos placed on them by the Football League when they were promoted. Adventurous financial management can produce a short-term advantage, but it can also be destabilizing, and lead to a yo-yo effect of boom and bust. This is indeed one way of interpreting the last fifteen years at Bradford City.

9. The overall aim of financial regulation must be for clubs to compete to play each other off the pitch, not to price each other off the pitch. This in turn is a recipe for building the longer-term success of clubs on a more sustainable basis.

Q4. What are the pros and cons of the Supporters Trust share-holding model?

10. We do not assume that there is a single model appropriate to the circumstances and history of every club. What is essential is the principle of supporter involvement, but the principle can be implemented in a variety of different ways.

11. This key principle flows from the relationship between the club and its supporters. At most clubs, this has deep social and historical roots that go well beyond any conventional relationship of a business to its customers. Here are just three examples from the recent experience of Bradford City:

· nearly £150,000 was raised by donations in 2009-10 for the Bradford University Burns Research Unit, mainly from City supporters, in a campaign to honour the 25th Anniversary of the Bradford Fire Disaster;

· a series of events is planned for this season to mark the Centenary of Bradford City’s FA Cup triumph in 1911. This includes a memorial dinner to be held in the same room in the same hotel on the same day (and with a similar menu!) as the celebrations of exactly 100 years ago;

· supporters working on an entirely voluntary basis have developed an impressive collection of exhibits on the social history of Bradford City and its local neighbourhood around Valley Parade. This includes oral history projects of what has become a multicultural area of the Bradford District. The bantamspast museum (named after City’s ‘bantam’ symbol) now works closely with the museums section of the local Council, to help ensure that this living history survives and is transmitted across generational and cultural boundaries.

12. Initiatives such as these have often been activated by fans from the outside of Bradford City FC itself, and operated independently of the club. They illustrate the potential for a closer working relationship between the club and its supporters. They also illustrate how supporters collectively represent the bedrock and continuity of a club. The strength of their emotional bond with their club allow supporters to be seen as the moral owners of their clubs, regardless of who is in charge of its day-to-day operations. This fact deserves to be reflected in some form in the governance arrangements for every club. This is perhaps the most fundamental argument in favour of supporter involvement, and it arises from what is most distinctive about a football club. Very few other businesses have a large body of customers who are indelibly committed to the purchase of its particular product, often independently of the quality of the product itself. This also means, of course, that supporters are vulnerable to exploitation, in ways that more typical consumers are not. Supporter involvement in governance offers some safeguards against this danger.

13. Supporters’ commitment to their club gives rise to a further ‘back-stop’ role, which typically comes into play to ensure a club’s survival in the case of untoward stewardship by the legal owners. There are many examples of such events from around the leagues, but Bradford City once again provides a case in point. The Supporters’ Trust took the initiative in raising £250,000 within a few weeks in the summer of 2004, during the club’s second Administration, and this sum saved the club from extinction. It is no exaggeration to say that without the role played by its Supporters’ Trust at that stage, Bradford City would no longer exist.

14. The participation of supporters in club governance is also likely to promote social inclusiveness, which has become a significant hallmark of football over the last twenty years. This includes the drive against racism, in which UK football now has a proud record, but social inclusiveness goes beyond this. BCST has, for example, helped to promote Bradford City’s pioneering use of cheap season ticket offers to bring the game within the reach of all sections of the community. We are a full partner in the ‘City in the Community’ initiative, which fosters all of the club’s community links, including projects catering for ‘hard to reach’ young people.

15. The key principle of supporters’ involvement will often take the form of shareholdings in the club, and participation at club Board level, but it may happen by other routes. At Bradford City, for example, the Supporters’ Trust is campaigning to take the ground at Valley Parade (which is not owned by Bradford City FC) into community ownership, with an element of supporter investment. Supporters would be represented directly in the governance of a new community-oriented holding company, which would then enjoy an arms-length commercial relationship with the private owners of BCFC, who would continue as leaseholders for the use of the stadium (as at present). The main financial incentive for this arrangement is to reduce the rental burden mentioned in point 7 above. The main social benefit would be the development of the stadium as a focus for community activity within the socially deprived, multicultural area of Manningham, which happens to be located about half a mile from the epicentre of the ‘Northern Riots’ of 2001. This adaptation to local conditions shows how different business models can implement the principle of supporter involvement in different ways under different circumstances.

Q5. Is Government intervention justified and, if so, what form should it take?

16. Self-regulation of soccer has clearly failed, and the existing arrangements within the sport have become dysfunctional. Many instances might be cited in support of this view, but one of the most striking is the inability of the FA to formulate its own response to a very reasonable set of questions about football governance put to it by the previous Government. The overall record of regulatory failure since the Premier League breakaway in 1991 makes the case for Government intervention in 2010.

17. Government intervention should establish the core governance principles for the sport, and provide powers that are sufficient to protect the new arrangements from external pressures, especially those arising from the excessive commercial weight of the Premier League.

18. The core governance principles include proportionality between the different elements and levels of the sport (both amateur and professional), the necessity of supporter involvement (as argued above), and a general ethos of social inclusiveness for all football-related activities.

19. These principles need to be incorporated in governance arrangements for the sport that can be implemented in a variety of ways, to allow for the differing circumstances of individual clubs, as illustrated above in the case of Bradford City.

Q6. Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?

20. We think that the ‘German model’ for football organization has much to commend it, and deserves close scrutiny by the Select Committee. The DFL are responsible for Bundesliga 1 and 2, and can refuse a licence for a club to play in the league for the forthcoming season. They verify and check financial agreements and spot problems early on, which is why they have never had an insolvency event. Aside from their financial viability, clubs are also assessed against other criteria such as infrastructure and youth development, which means there is more control over the safety aspects of grounds, and the social value of clubs’ local contribution, as well as the young talent nurtured for the national team. Supporters in the UK can look enviously at the Bundesliga for its inclusive ticket prices, its excellent facilities, its supporter involvement and its financial stability. And the performance of the German national team is a matter of record. It is worth asking whether these facets of the German football experience are related to each other, and whether this experience provides a useful model for the improvements that are necessary for football in the UK.

January 2011