Football Governance - Culture, Media and Sport Committee Contents


Examination of Witnesses (Question Numbers 148-224)

David Gill, Peter Coates, Tony Scholes and Niall Quinn

8 March 2011

Q148 Chair: Good morning, everybody. This is a further session of the Culture, Media and Sport Select Committee inquiry into football governance. I would like to welcome this morning David Gill, the Chief Executive of Manchester United; Peter Coates and Tony Scholes, the Chairman and Chief Executive of Stoke City; and Niall Quinn, the Chairman of Sunderland FC.

Dr Coffey: Mr Coates, why did you decide to become a football club owner and what encourages you to keep pumping money into your club?

Peter Coates: I am a Stoke boy, I have supported the club since I was a boy and I have had two comings at Stoke—an early one in 1985, after which I sold the club to an Icelandic consortium and then bought it back again in about five years ago this summer. I bought it back again against my better judgment, in some ways, and my family's, who all thought I was daft to do it. The club was in a mess at the time and I thought I could help it and do things for it, and I was a bit disappointed with my previous time, a there was little bit of unfinished business about it and all that sort of thing. But I thought it would be important for the area if the football club were doing well. Stoke was having a difficult time. It has lost the pot banks and the mining industry. I thought that if Stoke could get in the Premier League it would give the place a lift and would be good for it. I think that that has happened, I am pleased to say.

Q149 Dr Coffey: Would you say it is a kind of philanthropy that you do as opposed to, say, putting money into the Potteries Museum or—

Peter Coates: There is an element of that, because I don't expect to make any money out of it. I do not think you can make money out of football at Stoke's level. I think you can at a certain level, but not at the level of a club of our size. I think it is almost impossible, but obviously I enjoy it as well. Obviously football is important to me and I enjoy it when we win, yes.

Q150 Dr Coffey: Let me come across to Mr Quinn. What inspired you to get that consortium together to form Sunderland?

Niall Quinn: I suppose that the potential of the club had not been reached. Having been a player there and having seen the journey going really well and then having come to a shuddering stop, I felt something. "Unfinished business" is probably not the correct term, but I felt at the time of my departure that things were not done properly. I bore that for a couple of years in my mind. I worked as a journalist and in TV, and the opportunity came to go back and—Peter said the same thing—to make the place go and reach its potential and work, and therefore the spin-off was the region would benefit. My belief was that the football club that I was involved with, which had won one trophy since the war, was managing to have 47,000 people at matches when it was about to be relegated. How good could that be if we got it up? Could we become a much bigger force? That is what drives me, and it still drives me today. That is the reason I came, although I also came because I had had such a good time as a player there. I had played for big clubs—Arsenal, Manchester City—but I never had the same feeling of potential and collectiveness between fan and club as I did at Sunderland, so I am trying to push that on.

Q151 Dr Coffey: So for Stoke or Sunderland, what are your aspirations or targets as owner and chairman?

Peter Coates: To stay up.

  Dr Coffey: To stay in the Premier League?

Peter Coates: That is it, yes. We want to move on from there, obviously, but the truth is for us staying up is a considerable achievement and that is what we have to do year in, year out. It is immensely difficult. It is hugely competitive and in every game we play, we do not know whether we are going to win at all. Every game is difficult and is a battle, but that is what we are there for.

Q152 Chair: Can I just follow that up? To what extent does it matter to you that your two clubs—we will leave Manchester United for the moment—realistically do not stand any chance of winning?

Niall Quinn: If I went to a fan's forum and said that, I would be chased out of Sunderland. We have to believe that we will make progress. We started the Premiership journey a couple of years before Stoke and we are now beginning to feel, with the investment and the policy that we have and the way the club is run, that we can look at playing European football at the Stadium of Light. That has to be the next realistic target for us now. I would like a few more points on the board this year. We are not mathematically safe at this moment in time, but we are up in eighth place in the Premiership. We are looking to a consistent run of top 10 finishes which allows us to join the Evertons and Aston Villas—Tottenham and Man City seem to have moved on a level lately. I am of the opinion that there is a top half of the league. Initially, there was the top four, who everybody thought was impregnable, and City and Spurs seem to be doing something about that. Everton and Aston Villa were the next clubs and we would like Sunderland to be part of that group. That is a realistic target for us and if a cup competition came along—

Q153 Chair: That is not winning. It is playing in Europe, which is an aspiration. You say that your fans want to believe, but do they actually believe that one day Sunderland could win the Premier League?

Niall Quinn: Win the Premier League? I guess they do not. I guess they don't, but what they expect of me and expect of everything that is drilled down to our club is that when Manchester United come to town, that we give them a game, and we have done this year, and when Arsenal have come to town we have given them a game. That is what keeps us going. There is only one winner every year, but there are three people who burn, and lots of disgruntled fans. We love this Premier League so much. The world loves it. Sunderland itself loves it. It is vital to be in it, and in itself that is good success.

Q154 Chair: Is that the same in Stoke?

Peter Coates: We try to get better every year. We think that the longer we stay in, the better we will get, because knowledge and infrastructure will be improved. Also I think that there is some evidence that the longer someone stays in, the better chance they have of staying in. We want to get better every year and I suppose the first thing would be to become a solid Premier League club—one that does not have to worry quite as much about relegation. The truth is that probably 12 or 14 clubs have that concern at the start of the season. If the number is 12, say, there will be a 25% chance of being relegated. Those are quite high percentages, but equally we play some of the best clubs in the world. We play Manchester United, and we play Arsenal and Chelsea and other such clubs. They are world-class clubs. That is good for Stoke City and it is great to have them in the city. Playing with them is great, and we like to give them a game—and usually we do. We do not play them thinking we are going to lose. We play them hoping that we are going to beat them and certainly give them a good game. I think that means a lot to the supporters.

Q155 Chair: But realistically that is the height of your aspiration, to stay up in the Premier League and to regularly play against Arsenal and Manchester United?

Peter Coates: No. We have a big game on Sunday; we play West Ham and we could get into the semi-finals of the FA Cup. It will be great if we do that. That is further progress. We have not done that for 40 years, so it would be excellent. There are things for us to go for, and the higher up the better. One day we might have a terrific season and play in Europe. You do not know, but we are trying to get better all the time.

Niall Quinn: It is possibly worth noting that when we play Championship football, our fans are not as invigorated and as in love with their club as they are when we are in the Premiership. When you make the comparison you sound as if it is deflatory to not be able to win, but on being in the Championship or Premiership, ask our fans. There is only one place to be.

Q156 David Cairns: Mr Gill, I have a general question. What do you think are the biggest challenges facing you as the Chief Executive of Manchester United?

David Gill: If you look at the level of the club, you will see that we have always had the team as our focus. Everything we have done has been about how successful the team has been. The challenge for us is making sure that we have the best team on the pitch. We have to make sure we have the best manager. Obviously, Alex Ferguson will retire in due course. The replacement for that is clearly a key business decision—

David Cairns: Feel free to tell us who it will be now if you like.

David Gill: Those are the key things, but obviously we want to make sure that we play a role in the development of football generally. We need to have competitive games against Stoke and Sunderland, for example. We need to ensure that it is a competitive game. We need to make sure that the English game develops and continues to be as successful as it has been so that we can benefit from that. We play within a game. We cannot go and buy five other clubs so that there are only 15 in the Premier League every year. It starts with 20 teams. We start in the third round of the FA Cup, the opening stages in Europe and so on. The biggest challenge is to ensure that the team remains successful, and our goal is to be the best team in the world, both on and off the pitch—things which are clearly interrelated.

Q157 David Cairns: As Chief Executive, on a day-to-day level, how large does the debt loom in your management of the club as a business?

David Gill: It doesn't. The debt level that we have is £500 million in gross terms. There is roughly £130 million in cash in the bank at the moment, so there is a net debt of £370 million. We have gross interest costs per annum in the order of £45 million, and our cash profits are around about £100 million. So we have more than two times interest cover. The bonds that we have in place are covenant light—in other words, we do not have quarterly reporting in terms of covenants and so on—and we are very comfortable with that. We have seen great growth in the last five years in terms of our turnover. Also it is a profitable business if you get it right and that has generated cash profits. From my perspective, we know that the debt is there but it doesn't impact on what we do. We look at trying to grow our revenues and invest in the business to make sure that we can continue to expand and be successful.

Q158 David Cairns: We are going to talk about debt financing in more general terms a bit later on. It does not impact on what you do, but surely servicing that debt, and interest payments and fees and all the rest of it, are money that is not being spent on players or improvements of the facilities or whatever?

David Gill: No; let us look at improvements to facilities. We have spent a lot on Old Trafford in the last few years. We have just had approved a £13 million improvement to our training ground, which has been open 10 years, upgrading it to reflect what has happened in football in the last decade. There has been no impact in terms of our transfers.

Q159 David Cairns: But you would rather you did not have this debt, presumably?

David Gill: Well, not having the debt is one thing, but the other point to note is what the owners have brought in terms of growth in certain aspects. For example, when they bought the club they saw lots of opportunities on the commercial side. Our commercial revenues in 2006, the first year after ownership, were £40 million. Last year, to June 2010, the amount was £80 million; this year it will be over £100 million. So they have grown that. We have invested in people. We had 460 employees then and we have 600 now. Yes, in answer to your question, simply the amount is £45 million. If that was not there it would be better in some respects, but at the same time it is not hampered us in developing the club. The net spend on players since the owner has taken over is greater than in the five or six years before that.[1]

Q160 David Cairns: I am sure that that is true, but there can't be any ambivalence about this. Obviously it would be much better if Man United was not carrying those levels of debt and servicing them, surely?

David Gill: In isolation, yes, but there is no issue in terms of asking whether Manchester United has been hampered in terms of what we have had to do as a club in respect of investing, as you quite rightly say, in facilities, players or player contracts. I personally believe that there has been no impact in that respect.

Q161 David Cairns: What kind of communication do the owners make with you in terms of setting out their strategy and so on? How do they communicate that to you? How do they set out their vision for the club on a year-to-year basis?

David Gill: We have both annual budgets and five-year plans, and we have constant dialogue in board meetings, in calls and so on. That speed of decision has been very positive, and I think that they have taken a view on longer-term investment which perhaps we would not have undertaken if we had been a quoted company. Who is to say? But that is the view, so I think they are intricately involved. As I said to you earlier, they clearly saw the commercial opportunities for Manchester United. They liked how the Premier League was run. They thought it was a very well-run league in comparison, say, with some aspects of the NFL. They felt that they could use the strength of the Premier League, but also the strength of Manchester United, to push the club forward. I think that they have demonstrated they can do that.

Q162 David Cairns: Would you prefer it if they were able to demonstrate that to the fans? There is clearly a breakdown in communication somewhere. The fans say that the Glazers do not talk to them, and they are not getting the positive message that you are getting.

David Gill: The owners have delegated to me—to the team that we have, and to Alex Ferguson and so on—the task of doing that. That is a model that other owners have copied within the Premier League. I can give you other examples where owners have not spoken directly to the fans. The sheer size and nature of Manchester United perhaps means that we get more coverage on such matters, but as an executive team, on behalf of ourselves and the club, and so on, we have extensive communications with our fans. Yes, we do not communicate with certain fan groups, but they have an avowed aim to change the ownership. It would be slightly strange to enter into dialogue with those groups who have that intention or that objective. I am not sure where it is going to lead. We have to take all those elements of fan communication very seriously.

Q163 David Cairns: Why do you think so many of the fans just simply loathe the Glazers?

David Gill: You say "so many." They are well organised. They are very domestic. We have done studies which show that we have 333 million followers around the world. Our mailbags are large. We get thousands of e-mails; we had 36,000 phone calls last month. Not everyone hates the owners. The success that we have delivered on the pitch in the last five years is significant. There have been seven trophies since they have taken over. A lot of the fans want to ensure that there is money to spend on the team. They want to come to a safe modern stadium and see exciting, attractive football—and I think we have delivered on those counts.

But that has always been the case. Looking at Manchester United pre the Glazers, when we first went public in 1991, a lot of fans did not like the club at that time. We couldn't understand why it was. The share price dropped. They didn't buy the shares, then it went back up. They loathed the Edwards family. There are a lot of examples, not only around this table but across the Premier League, of fans who do not like the owners or management. That is one of the strengths of football. It creates opinion.

Q164 David Cairns: The situation of Man United in relation to the Glazers is no different to any other club?

David Gill: I am not saying it is no different. The size of Manchester United and the coverage means that perhaps it is magnified, but without doubt, there are issues at other clubs. You just have to read the papers or watch the television to understand that.

Q165 David Cairns: Mr Scholes, I have a similar question for you. What are the biggest challenges facing you in your job?

Tony Scholes: The No. 1 challenge, as Peter has just said, is putting a team out on the pitch that is good enough and competitive enough to stay in the Premier League—to stay in the best league in the world. Bearing in mind that we were out of the top league for 23 years, when we got promoted in 2008 we were some distance behind everyone else. By keeping the team in the Premier League we were able to build the club up, to build the support base and to pick up on those lost generations, if I can put it that way, derived from our being out of the top league for 23 years. Being in the Premier League gives us the opportunity to do that. The No. 1 objective is to stay in the Premier League, and doing that enables us to fulfil our objectives, which are to build a support base and the infrastructure of the club, and ultimately to build a sustainable Premier League club.

Q166 David Cairns: In day-to-day terms, what would you characterise as the main difference between being in charge of a football club in the Championship and being in charge of one in the Premier League?

Tony Scholes: I guess that running a football club is the same as running any company in many respects. You have to know what your objectives are, and you have to have good management to achieve those objectives. That is the same in the Championship and the Premier League. The differences, of course, come from the fact that we are playing in the biggest and best league in the world and the money that that brings with it. Obviously our income level went up substantially. That makes some things a lot easier, but it also brings some new challenges. Perhaps one of the key challenges is always managing the downside as well, so that if things do go wrong, we are strong enough to come back.

Q167 Ms Bagshawe: What do you think makes Premier League clubs so attractive to foreign investors? Could we start with you, Mr Gill?

David Gill: You are quite right; it is admired around the world. The way the league is structured is a factor, and it has clear objectives. The collective selling of the television rights has clearly been a success and it has made things more competitive.With regard to how the league is organised, there is light-touch regulation from the centre of the league but also an understanding what the commercial parameters are. The clubs get on very well. We all support the collective selling. We understand that strength behind that. Within that we have seen a sport that is growing. The sheer interest of this Committee shows that, and what is happening in football around the world, whether in the World Cup, the Euro or the Champions League. We are the most admired league in the world. We travel a lot with the club. Our following in Asia, and also in North America, is fantastic. If you ask all those people what their favourite league is, it is the Premier League, because the Premier League is one of the best leagues in terms of selling those rights on a collective nature in those markets. You can pick up all the teams, all the games and it is a very positive thing. So I think the time was right with the advent of satellite television. The league plays exciting football and it has attracted a good mix of foreign players—top, top players. All those factors coming together in a growing industry has meant it has become attractive.

Q168 Ms Bagshawe: Mr Coates, you took a club back out of foreign ownership. What do you think made something like Stoke so attractive in the first place to foreign investors?

Peter Coates: What?

Ms Bagshawe: You took a club out of foreign ownership by buying it back.

Peter Coates: They wanted to go because they had lost their money and that happens a lot in football.

  Ms Bagshawe: Whether they decided to sell it or they didn't, but what do you think they—

Peter Coates: They were desperate to go.

  Ms Bagshawe: What do you think attracted them to it in the first place?

Peter Coates: They thought they could make it work. They thought they could take Stoke into the Premier League. That was their objective. They thought they had a manager, an Icelandic manager, who could do it. They were confident. Iceland, if you remember, was doing rather well and growing and taking over the world and one of the first things they took over was Stoke City. They found it was much more difficult than they thought. Foreign owners come in and it is immensely difficult. It is the best league in the world and it is the most international league and that is why it attracts foreign owners, because of its international dimension. It attracted even small Iceland, which is a population less than Stoke. They thought they could make it work and do well. I remember it very well. They had a bit of money to spend; they thought they would have a bit of fun, enjoy it and make some money, because they thought they were going to get into the Premier League. Of course, they discovered how difficult it was. It is an immensely difficult industry to work in. You have immense pressure from the media, immense pressure from your supporters and it is a tough business.

Q169 Ms Bagshawe: Mr Quinn, what do you think?

Niall Quinn: I suppose the example of Sunderland would be, again, one where the owner has bought into the potential. One of the first things I asked him to do was understand the emotion of our football club, and I think that is the area where foreign owners, through the lack of PR or whatever, sometimes have an issue where people do not understand where they sit in terms of their love and affection for the club. I would say one of the issues—it is not my issue but Manchester United's—is the people do not really know how the Glazers feel deep down in their hearts about when a referee makes a bad decision. Do they go home really fed up after a game like we all do or are they taking the call from the golf course wondering how the team got on today? I think that is the thing that is out there.

I know that is not true, of course, and in our case it is especially not true. One of the great things about our owner, which is appreciated by our fans, is he has more than bought into the emotion of it. He has bought into it financially, but also in terms of his week being a bad week, no matter what he is doing, if the club has not done well. I think that is a measure of his involvement at the club.

The other good thing is he lets football people run the football side of it. There is trust in the air, and it is to get the fans in Sunderland to believe that, which makes our team—which is fans, work force, players, and of course our owner, and our board—know that we are all pulling in one way. That is a tough ask and nobody is more aware than me of how foreign ownership is mistrusted. In our case it is not; it is welcomed with open arms. In selling the club to Mr Short and selling the idea of the club, for somebody in that bracket as he was at the time it seemed a great story, a great adventure to go on. These people are winners. They like to see can they improve it. If I can marry that in with the fans' approval, then we have a good formula.

David Gill: I can assure this Committee that our owners have had a very bad week.

Q170 Ms Bagshawe: In terms of restoring some of that trust with the public and foreign ownership and in terms of governance, do you as a panel think that the Premier League is making sufficient inquiries of foreign investors before they purchase a club? Do you think there is enough due diligence going on? Mr Quinn, we will start with you on that one.

Niall Quinn: It is interesting. I can think of one or two cases in the past where there was a media outcry on people who were involved with clubs. It involved fit and proper persons, as they were called, and the issues came into the public forum. Basically what I can say is that in the period over the last few years—post Portsmouth's demise, post other things that have happened—that has really tightened up now. I think we are confident and we know that the Premier League have tightened that up and shifted that to a point. Without going too deeply into it, there is now an international company that covertly will find out everything they need to know about somebody coming into the game.

  Ms Bagshawe: Associates, is it?

Niall Quinn: We can't tell anybody who it is. That needs to be understood on the basis that if we were to turn around and stop somebody who can invest in other business in the country from investing in our business, could they sue us?

Tony Scholes: One of the things that is worth saying, I think, is that in football most things get into the media immediately. There is very little we do that does not get reported on the following day. This is an area that doesn't. There have been a number of people who have wanted to take over football clubs but have been prevented from doing so because of the Premier League's rules that never get into public exposure.

Q171 Ms Bagshawe: Are you prepared to name one of them?

Tony Scholes: To be honest with you, I don't know them either. That is the Premier League's job. We are aware that there are a number but that is their job to do that; to have a look at them and to vet people who want to take over clubs.

Q172 Mr Watson: Were the Glazers vetted?

David Gill: Were they vetted? They went through the process. Not to the extent that both Niall and Tony have said. I think there are two things here: one is that the Premier League has learnt from certain situations. We learnt from the Portsmouth situation and we, as a group of clubs, all supported wholeheartedly the recommendations from the Executive to improve the rules in terms of financial information and so on going forward. As Niall and Tony have said, in terms of the vetting of owners, that has been improved. I think it is important for industry and for sport to learn from past issues and to look them.

I do not think that, regarding the attractiveness of English football versus other football and English business perhaps versus British business and other business, passport is an issue. You can have very bad British owners or very bad English owners. It is the ability of the people coming in, their aspirations for the club and the objectives of the club that matter. So I think we should shy away from saying it is a passport issue and saying that you can only be English in order to be a proper owner of a football club, because I don't think that is true. It is much more about the right owners than about their passport.

Q173 Mr Watson: Am I right in saying that Manchester United, the actual company that is Manchester United, is now resident in Delaware in the United States?

David Gill: That is one for the owners. Manchester United Limited, is clearly a UK company. The football club is a UK subsidiary of that. As to the ultimate owners, that might be the case. Where is the ultimate owner of Chelsea Football Club or—

Mr Watson: I don't know, where are they?

David Gill: It doesn't matter, because my job as the Chief Executive of Manchester United is to run the club according to our own financial structures, to ensure we continue to compete at the highest level of the game. The ultimate ownership up there is something for the owners. But what I would say is they have confirmed—and the Premier League checks this—the ultimate owners of Manchester United, 100%, are the Glazer family.

Q174 Mr Watson: My point is, though, that don't you think there should be some national embarrassment that a great English club like Manchester United is owned in Delaware?

David Gill: Not at all. Manchester United Limited publishes its accounts every quarter of every year. I am not quite sure why they would be an embarrassment as long as the company is operating properly within a great competition. I think Manchester United should be a source of pride for England, in terms of what it does and has done within the Premier League, and in terms of its performance and importance to the economy. We understand football is very important to the economy of the United Kingdom, and to the social fabric, and we act responsibly within that. So I don't think it is an embarrassment in any way, shape or form.

Q175 Mr Watson: I am sorry to make this about Manchester United, but just on the point about the due diligence, the secret organisation that vets potential buyers—

Niall Quinn: It is a law firm.

Mr Watson: Yes, law firm. Can I just ask, would you be confident that the Glazers would pass that new test today were they buying the club?

David Gill: Without a doubt.

Mr Watson: Without a doubt. Okay, thank you.

Q176 Jim Sheridan: Just on this point, do you think it is fair to your supporters that there is some sort of secret organisation that vets—

Niall Quinn: It's not a secret organisation. It is a law firm; sorry, I beg your pardon.

Jim Sheridan: We are getting closer; it is now a law firm.

Peter Coates: I think it is a specialist in that sector. It is something I wanted them to do because I felt if we were to improve the fit and proper person test, you want to make sure it is properly vetted and I thought a specialist company would be the best way to do it.

Q177 Jim Sheridan: Did you not think it would be helpful to share that experience, that information, with your supporters?

Niall Quinn: Just on that point again—

Jim Sheridan: Aren't they entitled to know what kind of person is owning the club?

Niall Quinn: Yes. Where there are certain people that this firm did not want involved, we couldn't make that public, because those people could maybe have come along and tried to sue us.

Q178 Jim Sheridan: Are you aware of any other industry discipline that behaves like this?

Niall Quinn: In terms of trying to get to the best possible result for the fans?

  Jim Sheridan: People don't know what kind of person owns the business.

Niall Quinn: I think they do. We obviously pass.

David Gill: The point here is that ultimately it becomes clear what this process is. There might be five people bidding for a club, and I think what the Premier League has done is institute quite proper procedures to look at various things regarding the appropriateness of that takeover, whether it relates to the actual person in terms of his past business dealings or past issues, or to their business plans, which will involve asking whether they have the finances and objectives to take the club forward. That will mean looking prospectively from a financial perspective. So out of that five—they vet five—three might pass the test, and for them it then becomes a bidding situation in terms of who gets the club. The other two might be failed and we as clubs and supporters don't need to know who the Premier League has turned down. I think it is more appropriate for the organisation controlling the league to do that.

Tony Scholes: It is a very positive thing because the league in football has been criticised in the past for allowing people to take ownership of clubs which are very important institutions, allowing the wrong people to do so. So they have implemented what started as the fit and proper persons test and it has been strengthened as a result of learning from some incidents that happened in the past. They have got an independent firm in. Recognising they didn't necessarily have skills to do that themselves, they got an independent firm in to vet those people. So the people who end up owning clubs are those people who have passed. The Premier League and everyone in football knows that they will be appropriate stewards and good custodians of the football club; so it is a very positive thing. I would not see it as a bad thing at all.

Q179 Jim Sheridan: The point I am trying to make, perhaps rather badly, is that if you do not have that open transparency in sharing that information, you are then left with the conspiracy theories—the speculation about whether people owning clubs have an interest in laundering money, for example. That is the kind of speculation and conspiracy that opens up when you seem to be hiding or not sharing information that should be there.

Niall Quinn: I don't think there is any hiding there. I think what we are saying to you is as a group this Premier League—

Jim Sheridan: But you won't even tell us who this organisation is, this law firm.

Niall Quinn: That could change. Maybe I sounded a bit too covert there. It is a law firm, a specialist law firm. It is up to the Premier League in a meeting to agree whether to make that public. I can't make that public on their behalf. What I would say to you is the issue that you want is the issue we want, and we want to make sure that fans have a say about that. Do they need to be told about somebody who probably chanced their arm and came along and we saw coming early? I think it only creates a little bit of instability where people think that we even would speak to those kind of people. We have to do the thing right, Jim, to get the right kind of owner.

Q180 Jim Sheridan: It just doesn't sit well with me.

Niall Quinn: I am happy to bring that back to the Premier League and say, "Should we make it clear because people have a doubt about this?"

  Jim Sheridan: In terms of the fans, it is a need-to-know basis.

Niall Quinn: I am here to take that on board and I will bring it back and we will look at that on your behalf.

Peter Coates: But the UK does have open borders with business, and football is partially a business as well as a sport, and we have lots of foreign ownership of many of our companies around the UK. It is a fairly normal thing in that regard. They do not necessarily tell you who the people are who might have wanted to buy a company and who did not buy it for whatever reason. They only focus on the people who have taken it.

Q181 Chair: It has been suggested in the past that, given some of the people who have ended up owning football clubs, it is difficult to see what you have to do to fail the test. Are you saying to us there are people who have been told they are inappropriate to own a football club?

Niall Quinn: Yes.

  Chair: Do we have any idea of how many?

Peter Coates: We don't know the numbers but we do understand that there are people who wanted to buy and failed to buy because they did not pass the test. That is our information from the executive of the Premier League, but we have no numbers for you.

  Chair: We will pursue it with the Premier League.

Q182 Mr Sanders: What role, if any, should supporters' trusts play in the governance of your clubs?

Niall Quinn: When it comes to fans and their love for the club, I could just tell you about Sunderland and what we do with groups of supporters. We have a meeting every four weeks with our supporters' liaison group. We have a meeting every six weeks with the branches. We have senior management attend those meetings. We take into account their fears and requests, and their desire for the club to do better—their side of the story. We bring it in and that reaches board level and we look at ways of comforting them that their club is being run properly. I think that is probably the issue. Just last night, for instance, I had a forum of 400 fans; I have another one tonight with 500 fans. Every so often we do this; we go out and we give them a state of union address. We hear their fears from the floor and not through the media, which is a much better way of getting to the problem. Look, there are problems out there. The Premier League is the most incredible thing. The world loves us, but in our own back garden everything isn't so perfect and we are not here today saying it is. But what we have to be able to do is to listen to people and hear what they have to say, and feel that we can behave appropriately and give them the comfort that we run the clubs properly. In terms of fan representations and stuff like that, I am the fan. I am their person in there.

Q183 Mr Sanders: I think there is a certain difference in north-east football being just that much more passionate and maybe even that much more local compared to Manchester United, whose fan base is perhaps not just located in the Manchester area. How does Manchester United communicate with its fans, given that its manager will not even communicate with the world at the moment?

David Gill: We communicate with our fans on an extensive basis. We have invested in our fan relations team heavily over the last few years to improve that area. As I said earlier, we had 36,000 phone calls last month. We have thousands of letters and e-mails, which we respond to appropriately. In terms of formal processes, we have a fans' forum that I sit on with four other senior executives where we meet a representative group of fans to discuss issues.

Q184 Mr Sanders: How often does that happen?

David Gill: We meet a minimum of three times a year, sometimes four. We have an extensive branch network, both in this country and overseas, and again there is regular dialogue between the branches and the team responsible for managing those relationships throughout. Then I went to a meeting just before our City game and answered questions in an open forum with other members of the team. So we communicate all the time. We understand it, but as Niall says, on our board we have Bobby Charlton. He is a big fan. We are all fans on the board. We understand it and we work with them, but I think we do communicate appropriately and sensibly with our fan groups.

Q185 Mr Sanders: But somewhere communication must have broken down for something like FC United to have been created. Have you tried to improve your communication with fans since the creation of FC United?

David Gill: There are two groups: FC United and MUST. As I said earlier, MUST's objective is to change the ownership. So I think it would be rather strange, unless they change their objective, to open a dialogue with those fans. But there is nothing to stop a member of MUST or a member of IMUSA or a member of FC United sitting in the Fans' Forum if they choose to apply. There are elections every year—half changes one year, half the next—to our fans forum. They can apply if they are a season ticket holder or a junior member and so on. They can apply to go on and appear through that. We are happy for them to be on those forums. Clearly, at the same time, we are not going to engage in structured dialogue with organisations like that. I do not think it is appropriate or sensible.

Q186 Mr Sanders: I am just bemused because Niall Quinn has perhaps given a model on how you would communicate with supporters—individual meetings involving lots of people on a regular basis. No disrespect to Sunderland but they have not won the league or the cup or been European champions, and here you are, a premier Premier League team, and yet you have all these supporters' groups you will not even talk to because they are at war with you. What is going on?

David Gill: They are at war with us? They are at war with the owners. There is a group there, we understand that. But I am not going to sit here and say that we are going to suddenly open the dialogue. We understand the importance, like any business and any sport, of the fans and we do have those regular dialogues with them. We have many, many communications, as I have outlined. We take those on board when we are making decisions, whether on ticket pricing, concourse catering or the shape of the programme. Digital media is a great feature that we're using, the internet. Particularly we have a number of sponsors overseas and we are developing products for them; for example, in Saudi Arabia for our fans there through Manchester United content. So we understand the importance of communication and we don't take it lightly. We discuss at our management meetings, at board level, what we are doing with that. If we are going to be castigated for not speaking with one or two groups who have particular very clear agendas then so be it, we will take the castigation. We are very comfortable with our method of communication and we would be naive and stupid if we did not understand what the fans think and what they want, and reflect that in our business policies. We are comfortable that we do that.

Q187 Mr Sanders: But don't you see a pattern here that when you disagree with somebody you stop talking to them?

David Gill: No. Okay, I will ask you a question. Their intention is to change the owners. Do you think it is sensible to sit down and change the owners? This body came out of Shareholders United Against Murdoch, which was formed in 1998 when Sky tried to take us over. They have evolved since that. They want to have a situation where they have other owners, or they can own the club or whatever. So unless they change their situation I do not see a reason to sit down and talk to them.

Q188 Ms Bagshawe: Let us just go back for one second to the last question on the issue of foreign ownership. Fully half the clubs in the Premier League are now foreign-owned and there is quite a lot of concern out there that that was going to affect the decision-making capabilities of the Premier League, particularly in ways that relate to support for the national team and for training young players up to be England players in the national team. Do you have any concerns at all that vast swathes of the Premier League being under foreign ownership may have a knock-on effect on our national team and our national game?

Peter Coates: I think that improvements have been made on that. There has been an argument, and it may be a good argument, that perhaps the balance had gone too far; there were perhaps too many foreign players. But the introduction of the new 25-man squad has changed things. Every club does want to produce indigenous players, obviously. There is nothing like your own players. We would love to have at Stoke—and I am sure Sunderland and Manchester are the same—boys who come up through the system and are local to the area. That is a very important thing. We pour millions of pounds into development. One of the arguments against the Premier League is that they perhaps don't get enough opportunity, but with the difference in squad size, I think that is a positive thing and has improved the opportunity for young players to come through.

Q189 Ms Bagshawe: Of course you are a British owner that took the club back out of foreign ownership, and I suppose the concern that fans have is that foreign owners are looking at the club as a successful investment, something where they want to make a bit of money. They have no skin in the game whatsoever if the England team does well or does poorly, and that is a concern for some fans. Mr Gill, how do you address that?

David Gill: No, I disagree with that. As I said earlier, the whole strength of football works in a pyramid system and I think if the national team does well there is certainly a knock-on impact to the Premier League, and to the attractiveness of it. We have seen what is happening in Spain at the moment with their team doing very, very well and I think that trickles down.   So I don't agree with that. As Peter said, we are very interested in developing our own talent. We put millions in and there is a big review going on now in terms of youth development, which is a tripartite process, involving the FA, the Premier League and the Football League to see what has happened. The academies have been in existence now for 13 or 14 years. We are now looking to see what changes and improvements need to be made. We are putting a lot of money in and perhaps the players are not coming out, so how do we improve that? Around the Premier League table, there is great support for the national team in making sure England does well. There are issues to be worked on, for example the match calendar, but it has never entered any discussion I have either had with the owners or around the Premier League table that there is lack of support for the English team, because I personally think it does benefit the game.

Q190 Ms Bagshawe: What about you, Mr Quinn?

Niall Quinn: I suppose one of the proudest moments we had both as Sunderland fans, as the owner, as myself and the board and our manager, was when Jordan Henderson, who was at our academy since he was eight years of age, made his England international debut this year. I think to us that justified everything we have tried to do in the last few years about bringing our home players through. It is funny how things go. When I came back to the club five years ago even local kids in Sunderland didn't want to come to Sunderland. We were losing them to Middlesbrough and Newcastle because our academy was not working. With the owner's help we have been able to put more funds into that academy and, as I say, Jordan is the picture postcard this year. But the great thing is that on Saturday we were at the Emirates in a game that went all around the world—a fantastic game against Arsenal—and four of the players stripped out of our players and subs had come through our academy. We think that should augur well for English football in the future.

Q191 Dr Coffey: Debt has come up several times in this conversation and although my colleague Mr Collins is coming on the aspect of financial fair play—and it is interesting to hear your comments, Mr Coates—I wanted to ask Mr Gill, in terms of the financing choice for Manchester United, how much was driven by tax aspects, such as interest relief offset against tax and similar? How is it used potentially as a loss making vehicle to offset other tax? Is that the main driver for the reason why you financed that way?

David Gill: That is an owner issue really. It is true to say that interest expense for any UK corporate is a tax deductible item and they have used that. But I think if you step forward, we still pay significant amounts of tax. Our tax payments to the Exchequer last year totalled about £75 million; over the last five years it has been £370 million.

Q192 Dr Coffey: Is that corporation tax?

David Gill: No, it is various elements. There is VAT; PAYE is a big one, clearly; national insurance and corporation tax. So, yes, our corporation tax charge has clearly gone down as a result of that interest expense, but as to whether it makes sense to use that in terms of the overall planning of their finances, it is for them to answer.

Q193 Dr Coffey: I recognise that, but if you go across the other side of Manchester, Sheikh Mansour came in and made an equity investment. Do you think we should be changing the financing laws to encourage that rather than allow debt finance to leverage?

David Gill: I think if you are going to change it—and it goes back to Peter's point, sport is a business but it is also a sport—you are going to have to change it for all UK corporates. I think companies should operate within UK corporate law, company tax and so on. If the Government do not want to operate that way, fine; but I do not think it will change for football's purposes.

Q194 Dr Coffey: I do not want to steal Mr Collins' question so I will try not to, but with the forthcoming regulation is there not a case for you already making changes to how you operate financially in order to cope with what is coming?

David Gill: No, we are very comfortable with financial fair play, if you are talking about that, and how it operates and we understand the impact. Our interest expense is an operational cost to the business and it will be, quite rightly, included under financial fair play. It should not be excluded. We are very comfortable with that and we will operate within it.

Peter Coates: I think there is nothing wrong with debt so long as it is sustainable debt and affordable debt. I think that that is the critical matter. Quite clearly, Manchester United can afford their debt. Debt is wrong when you cannot afford it and you are irresponsible. As for the tax aspect, there is an argument which I know is doing the rounds, and it is for UK legislators to decide whether interest should be allowed or not. But that is a matter for parliamentarians, not for football clubs.

Q195 Dr Coffey: Could you clarify, Mr Quinn: are you debt financed or are you equity owned?

Niall Quinn: Five years ago when we took over the club we inherited a quite sizeable debt. A group of Irish investors came in and invested themselves in the club, maintaining the level of debt. Ellis Short then came in and took all the shareholding and we have worked consistently over the last three or four years, since Ellis has come in, on the club's progress. While we have made progress, we have also reduced that debt by about 25% and other money that he has put into the club he has capitalised. So he has been a model owner.

Q196 Damian Collins: Following on the questions about financial fair play, do you have any concerns about the structure of the UEFA fair play rules? Mr Gill, does that pose any problems for Manchester United? For the representatives of the other clubs, could you live within those rules if you qualified for European competition next year?

David Gill: We were involved through the European Club Association, as were other clubs, such as Chelsea, for example, who were on the working group to develop those proposals with UEFA and make sure that what was being put in place was workable, made sense and was for the benefit of football; whether it be the benefit in terms of making sure, on Peter's point, that clubs could operate within their own resources, in terms of ensuring, potentially, a limiting effect on player cost, or in terms of transfers and wages, so there are benefits coming out of it. We are comfortable with it. The critical issue will be around implementation and the sanctions around that, and making sure that it is appropriately applied. But I do not think anyone can criticise the objective of ensuring that clubs operate within their own resources, personally.

Peter Coates: I think it would be a good thing for football. My only concern will be its implementation and I want it to apply to Italy and Spain just as rigorously. We will play by the rules, as we should and as we would want to, and we have to be confident that UEFA will see that other clubs in other countries do the same. Even in the Bundesleague, it is not quite clear where everybody fits. They have lots of problems, lots of debts, and they have the kind of issues that we have been discussing today.

Niall Quinn: I suppose, from our point of view, at the very start when this first came into being a couple of years ago, when it was first heard of, we wondered was it an attempt to bring the Premier League back to the other leagues. I think there was a little bit of that at the very start, but we have worked our way through it now. It has been quite extensive in terms of the research and where we are all trying to get. A lot of people have put a lot of effort into this and I would back up exactly what everybody is saying. We are very comfortable. We think it will be very good for the game. I think the important thing is that fans feel like that and they feel that it is a good thing coming in, too. But can I also point out that I put petrol in my car yesterday and a fan told me to get my bloody chequebook out and sign Danny Welbeck from Manchester United? So while we talk this game we are under severe pressure to keep doing what the fans want. Hopefully, if they learn that FIFA fair play is a good thing too, then we can all make progress.

Q197 Damian Collins: I suppose Welbeck might have cost about the same as the cost to fill up your car as well?

Niall Quinn: A little bit more.

Tony Scholes: Spiralling wage costs at one club affect the rest of us, so financial fair play is an important thing to bring in. In its first guise, though, it would have been damaging to us. A club like Stoke City would have fallen foul of financial fair play because there was no latitude at all. But with the latitude that has now been negotiated into it, which does allow a limited amount of losses each year or a limited amount of owner investment, then I think we as a club are happy with it and as a league we are happy with it. Peter's point is the crucial one. This country, our Premier League, our FA, will apply it rigorously. Our concern and our request is that every other country throughout Europe does the same.

Q198 Damian Collins: Given the positive response to it from you all, why shouldn't we ask the Premier League to adopt this as a form of standard practice so that any club competing in the Premier League would be eligible to compete in European competition if they qualified?

Niall Quinn: That is a journey we hope to go on and we would welcome being brought into that if everybody else was. I think some people would turn around and say, "But, Niall, you have had a couple of years of investment and you have had a leg up to get to a point now where you want to narrow the rules", and I have to accept that. But again, for the general good and the greater good of the game, I think it would be a better idea if all of us came under that. Yes, I would agree with that.

Tony Scholes: Many clubs in the Premier League at the moment adopt the UEFA licensing process. We do as a club. We have done since we have gone into the Premier League. You could argue quite reasonably that our chances of qualifying for Europe in the first couple of years were very slim, but as a club we thought it was the right thing to do. We are in the company of the vast majority of clubs in the League to do that.

David Gill: I think, if you look at it over time, as we understand how it operates, I think you can see that happening. We referred to an earlier example. The Premier League voluntarily agreed last year to introduce squad sizes, put the 25 in with the home-grown limit within it. As Tony said, a lot of clubs who apply for licences—they are operating anyway—would operate, if they got into Europe, within that. I think you move over time and I can see that happening.

Q199 Damian Collins: You could see that?

David Gill: Yes, over time I think that would be the case; as people understand it, how they operate. As Niall said, people get into shape for it and prepare for it. I think you will see that happening.

  Damian Collins: Mr Chairman, I want to move on to my next question on the football creditor rule, but I think Mr Farrelly is going to come in.

Q200 Paul Farrelly: Clearly, I think that experience across sport shows something about the issue of salary caps: they only work when you have a community of interest—for instance, as in rugby—and there is arguably not a community of interest between the Manchester Uniteds and the Chelseas and the Arsenals and everybody else who just wants to stay up in the league. I am sure, David, that many clubs operate an individual cap, even if it is not formalised, because everybody will want something else, if somebody gets another 10 grand a week, and then there will be no doubt in the interests of running a club an overall wage bill. But then you come along and you pay an outrageous amount to Wayne Rooney and you must have them all tearing their hair out, and any parent or teacher because you are also rewarding bad behaviour. How can you justify that if you have any feeling for your wider responsibilities to the game?

David Gill: We do have feelings for the wider responsibilities of the game. You said it is outrageous; that is your view. I do not think it is particularly outrageous and we have acted very sensibly in Manchester United. I agree with you 100% that a wage cap will not work. You use an example; yes, that is English Premier rugby but a lot of the players go to France where there is not a cap. These sort of things happen. Personally, I think a salary cap will not work but I think financial fair play will help within that. In Manchester United we have our own self-imposed cap. Ever since I have been there, we have imposed a cap whereby 50% of our turnover can be used on total salaries. A lot of that is players, clearly, and staff, but we have done that.

Within that, we believe that we can both retain the best players and attract the top players, and compete against other teams both domestically and European-wide, but at the same time retain money to invest back into the club, whether it be the training ground I mentioned earlier or revamping our boxes and so on. So we think that is the best way to do it and we are very comfortable with that. I think we look at it in the round. We are very careful in terms of what we pay our players; we make sure we do it and understand it. As I said in response to the first question, the business policy and business objectives of Manchester United depend on what happens on the pitch. We have to be out there playing attractive football, competing and making sure that we can do that, and we will do that by paying players appropriately.

Q201 Paul Farrelly: Just a brief supplementary, Chairman. Tony from Stoke commented on the knock-on effects of rising settlements. With Wayne Rooney, one could take the view that from a business perspective you have simply protected the value of an asset in what you have done; so fair play to you. But at the same time you have given a message, haven't you, that bad behaviour pays off? Players making statements against the club will have agents encouraging them to carry on, because they will just say, "Look what we did in the Wayne Rooney case."

David Gill: Wayne Rooney is a great player both for this country and for Manchester United. They are role models, players, and there are examples of behaviour that is inappropriate; I would not disagree with that. But at the same time he is there, we want to keep him and I think it has not had a knock-on effect. We have done certain deals with other players, which we have announced recently, and the impact of what we paid Wayne—not that they know that—never came up. It was about what they believed they should be getting for playing for the club and we have acted accordingly. I do not think we should hone in on Wayne Rooney in this particular situation. He is a great player for the club and country and will continue to be so.

Q202 Damian Collins: There has been some discussion in our previous hearings about the football creditor rule, and I think concern has been expressed in the written evidence we have received as a Committee that this is an outdated practice and that it is unfair for football clubs to give each other preferential treatment while other creditors, be they the taxpayer, the taxman or even St. John Ambulance, potentially lose out. I would just like to ask your comments as people running clubs as to whether you think it would be good for football if we moved on from the football creditor rule. Mr Gill first, please.

David Gill: I can understand why it was in there in the first place. We have not formally adopted a board policy on it, but I think the general view of Manchester United is that it is a rule that has had its time. I think we have had to address it in certain instances in the Premier League whereby we now put in quarterly reporting—I believe the Football League does as well—to certificate that we are not in arrears in respect of HMRC debts in any way, shape or form, which I think is a positive thing.

But I agree with you: I think the whole issue of fairness in administration or liquidation or whatever is that everyone should be treated the same. One argument for it has been that it ensures that a club that has overtraded does not then get back into the League, albeit with a points deduction, or perhaps into a lower league, having gambled without its having come off, to the detriment of another club in that league. I can understand that argument. The positive benefit would be that clubs would not get into that situation. Their due diligence in terms of their dealings with another club, whether it be on transfers or whatever, would be perhaps more rigorous and, therefore, they should not find themselves in that situation. If it does occur, it is rare. On balance, we would favour its being withdrawn.

Q203 Damian Collins: When you talk about the dealings between clubs being more rigorous, are you saying that if a club was selling a player to another club they would be much more cautious about reaching that agreement until they were convinced the club had the money to pay them?

David Gill: I think so. I think you have seen in the last few years that there has been a trend for transfer fees to be paid over a long period. Previously, the rule was you had to pay within the year, which again I think is a better discipline. I think it could lead to that rule being scrapped, personally.

Q204 Damian Collins: Just to pick up on one thing; in terms of the transfer payments, are you saying that you think because transfer payments are spread in instalments that has an inflationary pressure on transfers and encourages clubs to make commitments they may never have to fulfil?

David Gill: Well, I am not sure they will never have to fulfil because I do not think anyone would enter a legal agreement knowing they do not have to fulfil it. But there may be an opportunity to use other clubs as a funding mechanism as opposed to if you have to go to a bank or a third party institution to make that purchase; then perhaps they would look at it from a different perspective. That is what I am saying. I do not know; it could do, it may not do. But I think that is—

Peter Coates: I am ambivalent about it. I am not sure which way I want to go on this. I understand fully David's arguments. We have improved and tightened the rules, both for the Premier League and the Football League, whereby clubs have to report if they have not paid the Inland Revenue. So we have made an improvement there. I am very surprised the Inland Revenue allow it to happen. That has always surprised me. It is a difficult argument. It may help clubs lower down the leagues maintaining it and retaining it, so there is an argument both ways.

Q205 Damian Collins: But as Chairman of Stoke City—heaven forbid that Stoke should ever be in a situation like this—how would you justify it to the community that you might have to pay a football debt to a club, say like Ipswich, before paying a local supplier in Stoke?

Peter Coates: I would find it very difficult but I have been in business all my life; I have never not paid Inland Revenue. You pay your bills, it is normal. I just do not do things like that and never have. I would not dream of not paying bills that I know are due and have to be paid. It is not in my mindset to do it. I would not store up debt in that way, it is wrong. The clubs should not do it and businesses should not do it.

Tony Scholes: I think that the main issue with the football creditor rule has been with HMRC over the last few years. The Premier League has taken action in that regard, as David and Peter have already said, in making sure that clubs cannot get into arrears with HMRC. I think it is also fair to say that we have debated this around the table many times and I do not think anyone feels comfortable with the fact that another football club may get paid but a small local supplier in that community does not get paid. No one feels comfortable with that.

There is another side that needs to be weighed in when considering the football creditor rule and that is that it does help to maintain sporting integrity. When a team is playing another team, team A may have sold a player to team B and not been paid for that player and as a result of that may have been unable to go and strengthen their own team. If they then play in a game there is an imbalance in the sporting competition. The source of the football creditor rule is to do with sporting integrity, but I think it is fair to say that where we are now there is probably an appetite for having a fresh look at it.

Q206 Damian Collins: I just have a question on that. I am not sure where the integrity is there, because if a club is competing at a level beyond that which it can reasonably financially sustain simply because other clubs are prepared to sell players to them knowing that their risk is protected, how is that good for the integrity of the game?

Tony Scholes: It is the club who have sold the player and not been paid and would reasonably have assumed they would have got the money to go out and strengthen their team as well as a result of paying that player. This is the original argument for the football creditor rule. If they cannot rely on those payments coming to them, then that club has been weakened as a result of it.

Q207 Damian Collins: But wouldn't it be better to have a system where the transfer was not made in the first place if it was clear the club couldn't make the payment?

Tony Scholes: That is David's point. If the football creditor rule was changed it would put the onus on clubs to do more due diligence over the creditworthiness of the clubs buying players.

Niall Quinn: Yes, and I suppose there are 17 other chairmen around the country who I am conscious will want to have a view on this before we put this rule in the dustbin. From our point of view, the fan in the street meets the guy who printed the programmes who did not get paid and he sees the player driving out in the big car who was paid. I think that is damaging and we have to look at stuff like that and say, "Yes, tidy this up and give that guy who printed the programmes as much skin in the game as the big players."

Q208 Damian Collins: Can I ask just one final question, Mr Chairman? You heard what David Gill said about transfer payments. Sunderland and Stoke, would you concur that there should be tighter guidelines on the period of time over which transfer payments can be made?

Niall Quinn: Not all payments are Premiership club to Premiership club; so there is an outside force there when you are buying foreign players and that becomes a minefield, too. But certainly with club to club in the Premiership I think we are all of the opinion that there is enough money in the Premiership kitty to hold back to protect anybody and then punish somebody who did it the wrong way. I think we could handle that in-house ourselves.

Q209 Jim Sheridan: Could I perhaps ask about the role of players' agents in the game today? The evidence that we have taken so far seems to suggest that there is a general consensus that players' agents are a necessary evil, that there is no alternative. Is that an accurate assessment?

Niall Quinn: I would think from our experience, yes. It sounds about right. I never had an agent. I came back into the game and I had this great idea that at Sunderland we would not allow agents at the training ground, we would never engage with them, and then all of a sudden you realise to make progress these guys were getting their players to go somewhere else and were laughing at us because they had power. The big power came with the Bosman ruling and the way European law supports them; then you throw in the transfer system that allows a window of time. It was manna from heaven for the agents who squeezed us and who continued to squeeze us in all those periods. The game is heavily stacked in their favour. One of the big problems that that causes is that while, okay, they are getting too much money because they are squeezing us all and we all want to stay in this brilliant league, the man in the street, the football fan, feels ever more distanced from it when you talk about the wages.

Let me say what I would like if there was anything that could be changed in our set-up. We have our media, we have the Premier League, we have our football club, we have our fans here and we have our players here. If there is anything I could change it would be that any improvement we could make would go directly here and satisfy that and repair the gap. I think we should all look for something that says, "How can we help this group of people out to still stay in love with the game?" If we send the matches abroad with empty stadiums, it is over; the Premier League is over and these are the lifeblood of the game. So how do we protect these? Every revenue that comes in, the agents have the upper hand to squeeze it out of us. That is the case; I think you would agree with that. How can we stop that? How can we find a better way of these people to love the game?

Now, these are the same people who tell us, "Get your chequebook out, I want us to be top six." They are also saying now, "You are paying too much money; this is wrong", and at the same time saying, "Can we go to the matches a bit cheaper?" The big thing we are getting from the forums is about ticket prices; for the guy who wants to go and bring his two or three children, it is impossible. In the old days it was possible; it is not possible now. Obviously, incomes have changed and the economic situation is as it is. But what I would love from any group, whether it is this group or any group of significance that really cares about the game, is consideration of how we can bring them into the stadium cheaper without the agents cranking it all up again and causing a big problem for the club.

I think we would all agree here; if we stayed with the same net amount of money each year on the basis that we were giving them a discount on tickets and we did not lose it somewhere else, we would all go for that, welcome it with open arms and fill the stadium out. I think we can talk about a lot of the fan issues, and the federations and the sports trusts will bring up hundreds of things, but the big thing is they want to come into the grounds cheaper and I think we should look at ways of accommodating that. The players are big winners here in this; the players and the agents are big winners. Inland Revenue is a big winner in this. The Inland Revenue takes a big take of all this, too. Is there some way that we can get those two—and I am not saying they are together in this; I think that that is coming—not to all go in their way as it does now? Could we give something back here without affecting our business going forward? It would be suicidal for us to let them in half price now. The agents will still press the crank on, the Revenue still take their take, but could there be a way, if we tilted it back this way, that would benefit them? I think that is something we should all aim for.

Peter Coates: I think agents are a fact of life and I think I should be free to do what I want in terms of what I pay them. It is up to us to negotiate sensible business with them. One of the things you could do that might improve it is transparency; in other words we have to say what we have done in terms of agents. You can't divulge a player's contract—obviously that would be completely wrong—but you could have transparency in agents' payments. We all want to drive agents' payments down. On the other hand, it is a marketplace and we should be free to deal in that market. It is up to us to be smart enough to make sure we do not pay too much, and that when we pay a higher fee, we are seeing whether there is possibly some reason for it.

Tony Scholes: It is fair to say, though, that some agents perform a very valuable role. They are part of the industry now and they do perform a valuable role. But agents are paid a disproportionately high amount of money for any deal that they are involved in. That is a fact and I think we would all accept that.

Q210 Jim Sheridan: They can also be used as scapegoats as well. When a club wants to transfer someone they can then blame the agent. But putting that aside, everyone we have spoken to in football during this inquiry, when we talk about agents, more or less says the same thing as yourselves, which suggests to me that there could be a role for FIFA if they act collectively. It seems to me that FIFA have abdicated any responsibility whatsoever to try and regulate this part of the game. At the end of the day, whether it be in England or anywhere else in Europe or the world, agents take money out of the game. It is not going back in again; it has gone out of the game and it is never seen again. Why is FIFA or UEFA not taking a firmer role?

David Gill: It is interesting to talk about taking it out of the game. I am always interested by that statement because accountants take money out of the game, and it does not go back in. Lawyers take money out of the game, and it does not go back in.

Q211 Jim Sheridan: They are a necessary evil.

David Gill: But agents are. I think agents do have a specific role. It is like any walk of life; the actual term "agent" has a bad connotation, but there are good agents and bad agents. But the players do need them for services and I think we should understand that. When we look at what we are going to pay a player, whether it be renewal of a contract or a player transfer, we look at the overall investment. Like any sensible business, we look at the player wages, the agent's fee, and we determine whether that is appropriate for our business, and we do that on the transfer fee. I am not saying there is no issue, but I agree with you in terms of FIFA. FIFA have been looking at the matter. I think that there are a number of cases with respect to agents in which they are looking to see whether the term should be changed to intermediaries. That certainly has many more syllables, but we will still call them agents, and they will still be there. They are looking to do something whereby they put the onus on the clubs and the players to have responsibility.

I think Peter makes a very good point in terms of transparency and understanding. As long as in any particular transaction if a player is aware what his agent has received from the club or from himself and everyone is aware of it, I do not see a particular issue in it. It is another way of using the club's resources and making sure we are responsible for how we discharge those club resources. I think it is a very interesting issue; it has been there for many years, and we cannot change it domestically. The Premier League tried a few years ago to make the players responsible for paying their agents. It failed miserably. We had to change the rules back again.

Q212 Jim Sheridan: That was my last question. How did that fail, though? Effectively the fans are paying twice now, are they not? They are paying their player and they are also paying the agent.

David Gill: I do not think you can separate them out. I do not think the agents' fees are necessarily incremental. It is part of the overall investment. So I do not think it is true to say, "That is it, you can just pay the player X and forget about the agent.". One of the reasons it failed was the tax implications. Under UK tax rules, if the payment that the club paid on behalf of a player was not a tax-deductible expense, he had to gross it up. That was a key point, and we became uncompetitive versus what was happening in Spain, in Italy and in Germany. Again, we operate in a worldwide market for talent. As part of this earlier discussion, it is not just about players developed in England; it is a worldwide market. So we have to operate against that if we want to attract those players in with what the regime is in other countries. Your point is exactly right; FIFA has to take the lead as a world governing body to make sure it is managed and appropriately controlled.

Q213 Jim Sheridan: Just finally—still with you, Niall—do you think it makes you a better player if you are paid £1 million or £10 million?

Niall Quinn: No, I do not. I can't stand here and defend where wages have gone. It is the greatest show on earth, the Premier League, and we want it so badly and the agents have manoeuvred themselves to manipulate that whole situation brilliantly. To be a little bit fair to them and to ourselves as to why we tolerate it at times, we would at times as a football club be carrying wages on a player who is of no use to us; he is sitting on a long contract, it is really tough and we get a phone call from an agent who says, "I can get him to wherever", some part of the world. For us the big thing is that, "Okay, we might be exposed to £1.5 million wages for the next year, what do we do? We can get him out there. The agent wants £250,000 for one day's work, you know something, we are £1.5 million better off, let us do it". That is the pressure we are under sometimes as football clubs and they manipulate it and market themselves brilliantly. It is a necessary evil, going back to the very start.

Q214 Paul Farrelly: I wanted to come on to the Football Association, but first can I just ask a couple of questions about your own house, the Premier League? Is there merit in the Premier League shaking up its structure and having more independent directors? Is the board too small? Should the Premier League's governance structure be more representative of the different shades of opinion and the different ambitions of different segments of the league?

Peter Coates: I suppose you have to say, and it is only our third year, the Premier League is very well managed. It has, I think, probably a quite outstanding Chief Executive who has done a great job for the Premier League. As a model it has worked very well and it has been a big, big success. You do have shareholders; you have 20 shareholders all with a vote who you meet four times a year and, therefore, you are able to have your input. I can understand you thinking it is perhaps Richard Scudamore and Dave Richards, but it does not quite work like that because all the shareholders have a vote, you meet four times a year and you are able to have your views represented.

David Gill: I agree. I think if you look at it, the actual Premier League is a success story without any question. You are just adding people because of a need to add them. I think the remit of the Premier League is relatively narrow. It runs the actual game, the competition. It is responsible, quite rightly, for the selling of the television rights and other commercial aspects of it, whether it be the ball sponsorship, the title sponsorship and so on. I think it is well run and I think the way that it works, the voting structure with 14 votes required to pass a resolution, means the objective and discussions and debates and issues are taking place in the forum of the shareholder meeting. In adding an independent or another non-executive person, I think you are just doing it just to say you have ticked the governance box as opposed to adding value to what is a very well-run league, very well respected around the world.

Niall Quinn: Yes, I feel the same. This is our fourth year. What I found interesting was that every Saturday you have 20 clubs who want to beat each other up and then we go to a room to find ways of making it all as one. It was unusual and I sat back and I watched and listened for quite a long time before I got involved and felt that the good work it is doing is not publicised as well as it might be. It is an extraordinary success story, the Premier League, in theory. I am not saying it is perfect in our back garden, but we do have the forum there to alter things as they occur.

Q215 Paul Farrelly: Can I move on to the FA? We had a very strong picture of the FA painted to us by Lords Triesman and Burns in the opening session. I am sure you have read the reports. The FA is pictured as operating with the chairman and the chief executive; with representatives of the professional game meeting the day before, agreeing, in good old Marxist/Leninist/Trotskyist fashion, the line. When they say no they mean no. The representatives of the amateur game do not always agree with them but they never vote against them and if the chairman and chief executive have some interesting ideas, they are left up a creek without a paddle if the professional game simply says no. We have seen the Triesman report, which was going to be a submission to questions by a former Secretary of State as why the FA did not put their own submission in. Was that position adopted by the FA and the professional league and the premier representative reflective of all shades of opinion across different clubs in the Premier League or are there clubs in the Premier League that would be more progressive in accepting reform?

Peter Coates: I think that it has a recent very bad record, the FA, with lots of own goals and lots of things that have gone wrong, which were frankly very bad and reflect very bad on the game, and I think it does need reforming. The Burns Report is not a bad marker for that. I am strongly in favour of two non-executive directors. I think we have made an appointment of a good chairman. Like any good organisation, I think you need a good chairman and a good chief executive, and he will get the people around him.

But he does have to be able to do his job and you referred to some of the more dysfunctional problems that he faces. I think two non­executive directors—and he should have some influence as to who they are, they should not be foisted on him—would be very good for the governance of the game. I think along with that you would need to reduce the size of the board. It would become too big. I think the chairman needs help and I think two non­executive directors of the right calibre would be an enormous benefit to him; so that is something I would like to see. We have not had support for that in the FA. I am hoping perhaps that is going to change and there will be a move in the direction of that and some of the other things that I have just referred to.

Q216 Paul Farrelly: Niall, was the "just say no" brigade reflective of the position and opinion of Sunderland?

Niall Quinn: I do not think so. First and foremost, we are in a tough place in Sunderland and it is a hard job. Concentrating on your own world 16 hours a day sometimes does not give you the space in your mind to map out a perfect road plan for your thoughts on the FA and where it goes. What you try and do is to see the big picture and hope that you can contribute and that we would not block things; just blocking for the sake of blocking something. David sits on the board. I think David would be in a better position to speak clearly on this, but we would take the view, each of our shareholders of the club, we take the Premier League's view on everything that comes up about the FA. I thought it was really good in my time that the FA had representation at our meetings, that there seemed to be something happening between it. Now, obviously that came to a shuddering halt and it needs to get going again. Instead of looking back, I would be all for finding a way that is transparent, that we all feel we are doing our best for the game, because without the kids playing football in their respective amateur clubs, without this great love for the game, the Premier League will be at a loss, too. There has to be a collective buy-in there.

David Gill: As Niall says, I am on the board. In terms of where it is going I would support it wholeheartedly and I want to reiterate what Peter said because I think he articulated why independent executive directors would be helpful. That needs to be done in conjunction with trimming the board. I think that the FA has a very broad remit from grass roots through to coaching, through to the England team, through to the FA Cup through to the professional game and so on, and then goes on to discipline. Another area I would look at seriously, which Burns sort of advocated, was separating out the disciplinary side and making that semi-autonomous under the rules and regulations stipulated by the FA, but then with the actual body dispensing that discipline being separate. I think that would assist the FA because a lot of bad press comes out through the FA not acting on a particular issue because of this, that and the other. I think that would help.

Before I went on the board I thought on the national game and the professional game we would be at loggerheads. I do not see that. I think the debate and discussions at the board have basically been about moving in the same direction for football. If it is particularly just a national game issue, then we would support what they are recommending; they are experts in that area. That also works the other way around. It makes eminent sense to me. Without doubt the FA is not completely broken, but there are issues and the turnover of staff at the top, whether it be at the chairman, chief executive or general secretary level, cannot help. It cannot help any organisation for that to happen, and I think we have to bed it down, have some stability. In order to do that we also need to give the new chairman some support and some assistance at that level, and that makes eminent sense to me.

Q217 Paul Farrelly: Which representatives, which sectional interests, should be trimmed or cut back?

David Gill: At the moment that would take it up to 14—five national game, five professional game, the general secretary, chairman and two non-execs—so I think you can do it pro rata. I do not think anyone is that desperate necessarily to be on it. I think what we want to do is have a proper body there because that will determine the strategy of the organisation, monitor the implementation of that strategy, the day-to-day running of the FA, so whatever is best for the FA. I do not think people should just hang on because they have been there for ever. It is what is best for the organisation.

Q218 Paul Farrelly: The German FA has adopted a different approach. It has what you might call sectional interests on the board, which has evolved. It has representatives of women's football, which is very big here as well as in Germany, and the director of football for the national team, because they feel the national side should have an input. Is that a route that we should be considering as well?

Tony Scholes: I think you probably need to be a bit careful. David is talking about reducing the size of the FA board, and if they are going to be effective they need to be small enough to be able to make good and clear decisions. If you start adding on sectional interests it makes it more difficult. But there is a structure below the board, of course, where such interests could and should be represented.

Peter Coates: We have two boards below the board; we have a national game board and a professional game board. There is no reason why the structure cannot accommodate the right balance and I think it is very important that the chairman and the chief executive are allowed to get on and run the business and are not stopped by the board from carrying out their role. Going back to earlier, I think two non-execs would be a very big improvement.

Q219 Paul Farrelly: You have been quite outspoken in our local press and for anyone who wants to listen, really, about the failings of the FA on a much broader front, from the turnover of chief executives, which has been mentioned, the way Wembley was handled and, indeed, the World Cup bid. What do you think the FA needs to do to improve its international standing overseas and its reputation here? Are there any organisational weaknesses that contributed to our dismal failure to get more than two votes in the World Cup bid?

Peter Coates: Well, it was pretty shocking, really, wasn't it, whichever way you look at it? Now, who is responsible for that? Well, I am surprised that we did not know more. We have guys out there, we have a representative on FIFA and we had no idea all we were going to get was one vote. There is something wrong if we cannot do better than that. We should have known, for example, and maybe this is a criticism of FIFA and the chairman—if he has an agenda that he wants to spread football around the world that is a perfectly reasonable agenda in my view. If he wants to go to Russia, there is nothing wrong with going to Russia if he wants to spread the gospel, or the Middle East for that matter so long as we can play it in the summer. But things like that ought to be known and we say, "We are out of it, we have no chance". It surprises me that we are not smart enough to get a feel and get a flavour for what is going on and end up with egg on our face with one vote. So, yes, I was very upset about it. I wanted the World Cup in England obviously and I thought we had a chance from all that people were saying, but we seemed to have no chance.

Q220 Paul Farrelly: Niall, you have seen a few ructions in your time between the blazers and the players in Ireland. What is your perspective?

Niall Quinn: Well, I was heavily involved and I led the campaign in Sunderland. We got a great camaraderie going not just in Sunderland but the region. We called it a regional bid. We were thrilled to be called out first as the first city that was going to be hosting a game if it did come our way. We got very excited. But looking back now that it is all done and dusted and where it went, what I would say is if we were back again there was a lot of good stuff, but a lot of that good stuff got drowned in arrogance. I really believe that. We did not hear anything from Russia in those 18 months. People heard from us all the time. I am not saying that that would have annoyed or upset the people, but it did really take away from a lot of the real gilt-edged stuff that we had done. The next person who would dare venture to take on something like this in the future, I would plead with them to keep your good stories and keep your successes wrapped up and roll them all out in the last couple of days.

Q221 Paul Farrelly: David, in Germany we heard from a very senior, respected and reliable source that Sir Bobby Charlton was told a year prior to the failure that England had no chance because the numbers, were not there. Are you aware of that? Has that passed through? Does the game share this conviction?

David Gill: I am not aware of that situation.

Q222 Mr Watson: My interest in the governance of football is about how you protect players. As chairman, can you tell me if you know of any current or past players who may have had their privacy invaded through phone hacking?

David Gill: I am not aware of anyone at Manchester United, no.

Q223 Mr Watson: Niall, you played against Sol Campbell a few times. Were you aware when you played against him that his phone was being hacked?

Niall Quinn: No, I did not. Thankfully, nobody has any suspicions around the club. We do not feel threatened at all.

Q224 Mr Watson: You do not know whether Alex Ferguson's phone was hacked?

David Gill: He has not mentioned to me, no.

  Chair: Right, I think that is it. Can I thank the four of you very much?



1   Witness correction following the evidence session: Excluding the sale of Cristiano Ronaldo to Real Madrid CF for £80m in 2009. Back


 
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Prepared 19 July 2011