Examination of Witnesses (Question Numbers
323-345)
Dave Boyle, Malcolm Clarke and Steven Powell
15 March 2011
Chair: Right, let's continue.
Can I welcome Dave Boyle, the Chief Executive of Supporters Direct,
Malcolm Clarke, the Chair of Football Supporters Federation, and
Steven Powell, the Director of Policy at the Football Supporters
Federation? Tom Watson is going to continue on his theme from
the previous session.
Q323 Mr Watson: Perhaps
if I just open this up to you, Malcolm, to start with, and then
the other two want, if they want to take it. Is it your view that
English clubs communicate enough with their fans?
Malcolm Clarke: Thank
you very much, Chairman, for the invitation first of all. Could
I just explain at the start that my colleague, Steven, has got
a bit of a hearing problem at the moment, so if I have to brief
him on a question that will explain that. I think the answer to
your question is a mixed one; some clubs communicate better than
others. I noticed that in the Football Association evidence it
says that the majority of Premier League clubs and Football League
clubs are exemplary in the way that they communicate with their
fans. I'm afraid that I beg to differ with that as a generalisation.
It's a relevant question, because today we have published a league
table of our assessment of club charters, which all clubs signed
up to right back to the days of the Football Task Force and we
scored them on seven characteristics, and that league table doesn't
really bear out the proposition that they are exemplary. Only
one Premier League club scores more than 24 out of 35—we
scored them seven characteristics up to five. So I think it varies,
but of course the other issue is it's not just a question of communication.
You can communicate to a supporter very clearly that ticket prices
are going up way beyond the rate of inflation, that's good communication,
but it doesn't necessarily mean that it's good practice in terms
of the way that they are responding to their customers.
Q324 Mr Watson: Good,
I'm glad you've published that, I haven't had time to read it
yet. Can you tell me which clubs are good and why and which clubs
are bad and why?
Malcolm Clarke: The
club that comes top out of the Premier League is Tottenham Hotspur,
which is the only one that gets what you call a really top score.
The club that comes bottom is Everton, who got a score of nil
because nobody could find their customer charter. The club that
comes second bottom is Manchester United with a score of eight,
and I thought that was interesting after hearing your evidence
session with David Gill last week when he actually said that there
are certain groups of supporters who they simply refused to speak
to. When I attended the Carling Cup Final last year and saw Wembley
awash with green and yellow as opposed to red and white, it didn't
exactly come with the image of a club which is communicating terribly
well with its supporters. The other thing to say of course is
that that is scoring the paper charters, and the next thing we're
going to do is talk to their supporters and see what their assessment
of the communication or the customer service is to see how it
tallies with the charter, because you can have it written very
well on paper or on the internet but the performance may not be
as good.
Q325 Mr Watson: So will
you have that evidence by the time we finish our inquiry? Is that
due soon?
Malcolm Clarke: I'm
not sure what timescale you're working to. Whether we'll have
the supporter response by then I'm not sure. The actual league
table is released today, so we can certainly let you have a copy
of it and submit it formally to the committee.
Q326 Mr Watson: One thing
David Gill alluded to in his evidence was that it was difficult—maybe
I'm being a little unfair to him—to characterise which supporter
groups were truly representative of the fans. Is there a way that
you can identify the kind of basis of support that each of the
groups carry? Do you help interpret that to the clubs?
Malcolm Clarke: Supporters
groups are democratic organisations and obviously the greater
success they have in involving members the greater credibility
they have—certainly at Manchester United both the Trust
and other organisations have been very successful with very large
memberships. I think it's a bit of an excuse from Mr Gill, to
be honest, to try and pretend that some of those big groups are
not representative of very significant strands of opinion.
Q327 Mr Watson: If you
could score supporters groups in the way you score clubs, which
would be the good ones and which would be the bad ones?
Malcolm Clarke: I
think any supporters group, whether it's a supporters club or
the trust that Dave's organisation develops, if it succeeds in
getting a widespread involvement and if it operates in, which
they nearly all do, in a democratic way with its processes, then
that's a good one. I wouldn't like to sit here and give my judgment
now as to who's top of that league.
Q328 Mr Watson: Well
don't you think it would be useful if you're trying to build a
better involvement of supporters groups that you could actually
vet these groups on behalf of clubs so they can get a sort of
a health check from you guys rather than the clubs having to do
that in an arbitrary way?
Malcolm Clarke: For
any supporters organisation to be affiliated to the Football Supporters
Federation they have to meet certain standards; be a democratic
organisation, be committed to not supporting any kind of violence,
be committed to an anti-discrimination policy, and similarly with
trusts. Dave can speak with more authority on this, but the whole
approval process of supporters trusts is quite rigorous in terms
of the standards that it expects in order to meet the test of
becoming a trust, and I'm sure Dave can elaborate on that.
Q329 Mr Watson: Okay,
final question: when we heard from the Chief Executive of Leeds
earlier he seemed to say the only real issue that matters for
the fans was winning games or at least if clubs are winning games
the other issues fell down the agenda. Is that your view or what
do you think is the issue of fans today?
Malcolm Clarke: Obviously,
all fans want their teams to win every game, that's just in the
nature of it, but I think it's patronising and inaccurate to characterise
fans and supporters groups as only being concerned about the winning
of the next game and not about the long-term sustainability of
their clubs. If you look at the evidence which has been submitted
not only to this inquiry but to the various other inquiries that
have been held by the All Party Football Group, by the Task Force
and so on, you will see that it is the supporters groups that
have been promoting responsible good financial governance.
Obviously with any club there will always be fans
who are saying, "Get the chequebook out, Mr Chairman"
and so on, but there are tens of millions of fans and they don't
all think exactly the same. I think there's a certain patronising
caricature of fans, some of which we heard in the previous session,
"Oh they might want to pick the team, they can't be trusted
to keep confidential information, they don't understand",
and the evidence—and again Dave can speak with great authority
on this—is that the supporters trusts that have taken a
direct role in their clubs have shown is that among the supporter
base you get a huge range of skills and experience, you get very
senior people with wide ranges of professional skills, in financial
managements and governance and so on. One of the things that I've
personally found annoying in football, is the sort of caricature
that says, "Well they're just a load of raggy-arsed fans",
pardon my language, "that don't really understand how things
work".
If you look at the football industry and you look
at the number of clubs that have been in insolvency events in
the recent years and you look at the amount of money which is
owed by the football industry to the public purse, I don't think
the people who are running the industry at the moment are in a
terribly strong position to say that supporters organisations
haven't got the skills and experience to involve themselves more
fully in the running the of the industry.
Q330 Chair: Mr Boyle,
do you want to add to that?
Dave Boyle: Yes.
I was just chatting with Malcolm earlier. The relationship that
a lot of clubs seem to have with their fans to me is more redolent
of perhaps an Edwardian marriage where the wife would be never
told the salary of her husband because these matters were not
for her, and there is this idea that fans don't want to understand,
nor could they understand if this were ever shared, but as some
of the evidence you heard this morning said, fans do want to know
a lot of information, but that's the nature of the game. The reason
why fans want to know is also the reason why this club has been
here since 1882 when very few other businesses have survived that
long.
The depth of loyalty which is the bedrock financially
of the game's success has another side to the coin; the relationship
between the fan and the club is not a consumptive one, it's an
emotional one, and that emotional relationship compels a desire
to know more information about the club because it matters passionately
to them and to their family and to their identity, and it seems
to me the best way to deal with this is not to ignore it or pretend
it doesn't exist or to wish it away, but to manage it through
dialogue.
Speaking to a lot of people in clubs you get a sense
that, a bit like when you speak to people who staff helplines,
they have a rather jaundiced view of human nature because they
see a greater proportion of people who are not perhaps the most
constructive, which is why we'd always say there's been a trend
within football to look at fans as customers and deal with them
as customer services and that kind of relationship on a one-to-one
level, whereas the beauty of relating to a democratically constituted
supporters group is that you get a balanced view of what the supporter
base is thinking. You get a means of communicating with people
who are going to get rid of the issues off the table which really
are purely operational matters which shouldn't really be up for
discussion.
You mention about vetting supporters trusts and supporters
groups. As Malcolm said we do vet them, we make sure that they're
democratic, we make sure that they produce annual accounts, which
are audited independently, and we'd love to work with clubs. I
have to say my phone has never rung particularly hot with clubs
wishing us to perform that service, and what I would say is where
there are a lot of supporters trusts where they haven't been as
successful as others and haven't made as much of a breakthrough.
That is partly because sometimes the way the club deals with the
supporters trust makes it very clear that this is just a waste
of time. When you set up a group, and a club says we're just not
interested in talking to you, then it takes a peculiar mindset
to say, "I'm going to turn it round and we're going to win
over the club." A lot of people would just say that this
is going nowhere. If the club actually opened the door and said
we'd welcome this—if you can get to this stage—I think
you would see a transformation.
Q331 Mr Sanders: The
traditional model of the English club is for the benevolent owner
who runs the club on commercial lines and that's given us arguably
the most successful league structure in the world, so why play
around with this state? Why not leave it as it is?
Dave Boyle: I think
there's a complete flaw in your question; they're not run on commercial
lines. The fact that they spend £50 million more than what
they have brought in—that's not a commercial relationship.
Most of them do have benefactors and I think increasingly we have
to say the benefactor model is more ruinous than contributory
to the health of the game. I'm struggling to know, without knowing
who an individual is, how you can gauge their intentions for the
club's long-term future. They may have good intentions, but what
if you don't even know who they are and what their circumstances
are? Benefactors are often quite good in the short-term. The medium-term
record is very poor, and I think one of the biggest contributory
factors to football's economic poor health is the very short time
horizon. They think in seasons rather than longer-term, which
is again what most businesses would be doing. One of the advantages
of the supporters trust model is that it brings a more corporate
structure to the club, because there is no subsidy. I mean benefactoring;
you can call it benefactor or you can call it subsidy for failure,
because the club is unable to generate the resources to cover
its ambitions. If you have to do that, I think you become more
innovative, you become more expansive, you draw on a bigger range
of talents, whereas I get a sense that a lot of clubs have got
incredibly high revenues, but in their commercial activities are
not as advanced as they would have you believe, because at the
end of the day it doesn't really matter, a cheque's going to get
written by an extremely wealthy individual to get you out of the
hole that your failure to generate revenue has left you in.
You see it with very good public services. What's
the reward for innovation, because the cheque from Whitehall makes
good all failure? The other thing to add is on the record of insolvency;
it might be a very successful football system, it might be a very
popular round the world financial system; it's not a particularly
good financial system in this country with 81 insolvencies.
Q332 Mr Sanders: Okay,
but we do have more professional football clubs than any other
country in Europe.
Dave Boyle: We
do, and we have more professional football clubs, as the Chairman
of the Football League said, hanging off a precipice. Malcolm
makes the point I've heard him make in the past, so I won't plagiarise
that, but it's ironic that at a time when English football has
never had as much money as it has now, it's also never had as
much instability and financial problems for its clubs. There is
an awful lot of money in English football but there's a lot left
to be desired, and the distribution of that between leagues and
between clubs does create its own problems.
Q333 Chair: The alternative
which you would advocate with supporters trusts shows there have
been some success stories, but equally there have been failures.
Is there any evidence that the supporters trust model is any better?
Dave Boyle: Yes,
I note that what one would consider failure is where, say, a supporters
trust has become the majority owner of a football club and then
has had to relinquish that. In every one of those cases I can
point to astonishing legacy problems. In York City's case, the
previous Chairman sold the ground to a housing developer and they
had to take on a £10 million loan to buy it back.[1]
No supporter's trust has ever really inherited a club which was
going well. They've been investors of last resort, the people
who rescue it because the alternative is to let it die and that's
just not an option, and because of that, they have incredible
problems with debt, with loss of assets. Stockport County, for
example, had been quite happy to see the shepherding of an asset
for football into another sport. When you get the train up from
Manchester you go past Edgeley Park, and it says it's the home
of Sale Sharks, which will surprise anybody from Stockport who's
watched Stockport County there since about 1900, so that was the
problem the supporters trust had inherited, and in some cases
they've been able to get past it.
Exeter City have made a fantastic success of running
the club there, and one of the things which was a massive help
was when Tony Cascarino drew their number out of the hat and picked
them against Manchester United, because the return they got from
that cleared the legacy debts which would have hampered them most
probably in the way that they've hampered Notts County, Stockport
County, Chesterfield and York City. I would never say that supporters
trusts have an unblemished record, but by the same token I think
that it's an unfair fight. If these problems with supporters trusts
cause doubt for the model, then are we going to say the investor-owned
model has some serious flaws with 81 solvencies since 1986? An
equivalent sort of comparison never seems to be made that what
problems there are would seem to be systemic and structural within
football rather than being something which is peculiar to the
supporters trust form of ownership.
Q334 Paul Farrelly: There's
a world of difference between compulsion, forcing a model onto
every club, and just encouraging supporters trusts if clubs want
them. Where would you draw the line?
Dave Boyle: You
heard from John Bowler, who's been trying to create a trust. We've
been speaking with John and if there isn't the willingness amongst
the fan base at any particular moment then it goes no further,
so clearly it will be wrong to compel anybody to do this. What
I would say is that there's a difference between compulsion at
one end of the spectrum, and a bit more encouragement would actually
be helpful. Mentioning what was said by the Burnley Chairman,
where's the fans skin in the game? Well the skin in the game is
every week they turn up. The season ticket revenues which form
a key basis of the club's revenues are paid over by supporters.
Supporters are already contributing in that sense and I think
the nature of a club is that it isn't really to be run on commercial
lines in the same way as an ordinary business, because you have
these investors who want to be considered as investors, but they're
not able to be able to be part of the shareholder base in the
same way.
A lot of clubs make it very difficult for supporters
trusts to come on board because they are no shares available in
them. There are only five clubs in the English professional league
which are quoted on stock markets where you can actually go and
buy shares and become part of the ownership base, so actually
making shares available as a matter of course it would be a good
start. I think clubs could also encourage fans by saying, "We'd
like you to come and be part of a dialogue. You can have a dialogue
every three months with the Chief Executive". A lot of clubs
don't get that far.
Q335 Paul Farrelly: Malcolm,
Steve then back to Dave. We're here in this fantastic club with
its rich history because the Government in their wisdom said they
wanted to encourage more supporter involvement in clubs, but having
decided that they knew what to do with the NHS and universities,
they then had a collective scratching of heads and didn't know
what the hell it meant actually, so over to us guys. Give us a
few concrete things that we should pursue that are practical and
feasible to achieve that end but don't restrict a club's ability
to develop.
Steven Powell:
My colleague Dave is much better qualified on the technical points
of this, but I can give you my own perspective as somebody who's
been active in the supporters trust and I perhaps should just
for complete transparency here declare a couple of non-pecuniary
interests: I am a founding life member of Arsenal Supporters Trust
and a former member of the board of the Supporters Trust but I'm
also an elected director of Supporters Direct; neither position
gives reward.
Q336 Paul Farrelly: We
will hold neither of those against you. Go on.
Steven Powell: I
think that first of all we're trying to fit a square peg into
a round hole with, for instance, the Arsenal fan share scheme,
which I know you've been to look at with members of the supporters
trust and the Arsenal Chief Executive. There are regulations I
think need changing. Clearly there has to be security for anybody
who is investing money in the scheme, but the hurdles we had to
jump were designed for a different sort of financial product.
I'm a member of the trust, and I invested my money every month.
I'm not looking at that to help me in my retirement, I'm looking
at that as an investment in my football club and I've left my
units in my will to the supporters trust when I go, and I think
if you survey the vast majority of the 1,700 members of the Arsenal
Supporters Trust they'd all say the same thing. They're not looking
at it for a commercial return they're looking at it as the investment
in their football club, so I think that's one thing that they
can do.
I also think that perhaps on the other side, as we
suggested in our evidence, we could look at a sports law providing
some carrots if you like rather than sticks, to look at the form
of registration. If I give you one example in Australia, almost
all the clubs in the Australian Football League playing under
Australian rules are set up as not for profit. One club that did
convert to ownership by shares is converting back and the reason
it's doing it is the Australian taxation office is now challenging
their tactics, their status because they don't think there's sufficient
community benefits, because the structure there is very different.
The Australian rules clubs support the amateur game in their community,
and that's part of the reason that the Government invested in
sport in that way. They invested in the clubs who then invested
in the community playing of the game in their area, so I think
that's one area we could perhaps profitably look at here as part
of the sports law. I know that when Hugh Robertson addressed the
Supporters Direct conference a couple of years ago, he was interested
in the concept of a sports law for a number of reasons, and that's
perhaps something we could profitably look at and we'd be very
happy to provide further details, not to go into the whole ins
and outs today, if you would like us to.
Malcolm Clarke: Can
I just add that ourselves and Supporters Direct have submitted
evidence on that. I would just like to answer one point that repeatedly
comes up in some of the football authorises' evidence; this is
caricatured as being Governments trying to run football which
would be not allowed by FIFA. Now what FIFA are concerned about
have been cases where Governments have tried to directly run football,
but this is not what we're talking about. We're talking about
a legal framework for the regulation of the game, analogous in
Dave's evidence to charity law or the way that corporate laws
has developed, so it's setting a legal framework which would give
certain exemptions and certain responsibilities to sports governing
bodies to operate in a certain way, but it's nothing to do with
the Government running football, so I think we need to nail that
misrepresentation of the issue fairly firmly on the head.
Dave Boyle: There's
a couple of things really; you've got the localism White Paper
making its way through the House at the moment which gives a right
to bid to community groups for community assets, but the drafting
at present is unclear as to whether you might consider a football
stadium to be such an asset which you could place on a register.
Because football clubs are incredibly public institutions, the
danger is less of a private sale in the dead of night, it's more
that you don't have the access to capital to undertake a purchase
or greater involvement. There's a case in Wrexham at the moment
where whoever can come up with £2 million worth of cash gets
a football club and the difficulty is that where liquidity and
speed are what is required that's not necessarily the best qualification
for a community-minded owner of the club. That's what's affected
that club in the past, and the supporters trust have got £300,000
to deploy, but they could do with somebody lending to them, so
the idea of a big society bank perhaps providing liquidity to
such groups would be very, very helpful, because at the moment
it's that speed of access to cash which is often paramount, specifically
where a lot of football clubs have transferred ownership under
crisis terms where there needs to be an immediate injection to
cover losses.
Some other things which could be done are stopping
subsidising bad owners of football clubs by letting them write
off the losses against corporation tax, profits in other parts
of their business. It's much easier to undertake, shall we say,
a speculative investment into a football club knowing that if
the other parts of your business are profitable you can use this
to write off against the corporation tax liabilities you might
take on. We'd love to get to the bottom of how much of a subsidy
from the state it is, but the nature of opaque ownership leading
to beneficial trusts makes it quite hard to find the actual transaction
where this takes place, where the debt is for tax reasons. However,
we do know it goes on and it's something which I think has negative
consequences; in order to qualify, you have to have a dominant
owner who owns 75% plus one for it to be considered part of a
group, which immediately moves you away from, shall we say, a
balanced board like Arsenal Football Club might have, whether
it's on discussion or strategy, and more to a club which does
what the owner says it will do. Now that can be dynamic, but it
can also be incredible ruinous, which is why we prefer a democracy
to autocratic rule, because if the owner goes off the reservation,
as we're finding in Libya to say the least, then you've got no
way round it.
So this tax system incentive not only promotes that
form of ownership it also subsidises the cost base rising beyond
the revenue base, which again supporters trusts are not able to
live with. They don't have a parent company, because they're owned
by the community so they can't access that so it's not a level
playing field. The cost base which rises is harder for them to
keep up because the worst position in an insane market is sanity,
which is where most supporters trusts owned clubs are.
On the issue of levelling the playing field, just
to endorse Steve's point, there is an issue with section 21 of
the Financial Services and Markets Act 2000, which essentially
treats supporters wanting to raise funds to invest in a club as
the investment business, so you incur an awful lot of regulatory
cost. At the end of the day, whilst the Arsenal Supporters Trust
are blessed with an extremely professional and skilled membership,
they're volunteers trying to do this in their spare time, juggling
it against their other work and family commitments. I'd also argue
that if you are going to seriously get behind this you look at
what happened with the community share issue at FC United at Manchester,
where that attracted for peculiar reasons which are not replicable
enterprise investment scheme allowance. That made a massive difference
to the take-up and the flow of funds into that investment, so
some form of incentive through the taxation system like that which
could be written off against an individual's personal tax liability
would be very, very helpful. And the other idea we've talked about
is there is an awful lot more. Football sets aside some of this
money for good causes through the Football Foundation and grass
roots investment. You could argue that it would not be remiss
to set aside some of this to enable fans like those at Wrexham
to say, "Here's a loan we can get from an organisation which
has got a big fund for investment, and we will pay it back over
a few years". The beauty of that is by getting people involved
who have to pay it back you're instilling the business discipline
which is sadly lacking at a lot of these clubs. I think there
are lots of small steps you can make but I would also endorse
the point that Steve and Malcolm make that at some stage you end
up with a square peg in a round hole. It is very true that we
have a legal and regulatory framework which I don't think is fit
for purpose in the 21st century, and certainly not if you want
this idea of community engagement involved in it as well.
Q337 Paul Farrelly: I'm
going to take my life into my hands now and comment on a live
situation; in my area—and I'll ask you a question about
it—encouraging good stewardship is more important than necessarily
foisting a particular ownership model on a club. The second team
in Stoke is Port Vale. Port Vale is now under assault by a man
called Mo Chaudry who has got a documented interest in property
and financial services but no record in football. He's being helped,
quite frankly, by a local press that's not sufficiently investigative
and critical beyond just reporting who said what and when for
easy stories. Bill Bratt is a Chairman who's got a long track
record of running the club as a decent man, but he's got an ownership
structure through previous restructures that limits shareholders
to 25%, and you can see from the outside that might make it more
difficult to restructure the club again. The loss of that ownership
structure might not necessarily be a bad thing if the good stewardship
of the club is encouraged. So where do you stand on that question?
Dave Boyle: I would
agree with you that stewardship is exactly the kind of modus
operandi you want at a club, somebody who respects where the
club has come from and where it needs to be passed on to. What
I would say is that the regulatory framework of English football
is entirely agnostic about stewardship because it promotes a model
of financial operation which says that doesn't really matter.
What do you want from your owner? Do you want stewardship? No,
you want support for negative cash flow because the finances are
insane, and as long as what you need as a club is to consistently
subsidise the fact that you don't earn enough to cover your costs
then all talk of what you might like in an owner beyond their
liquidity is ultimately parlour room talk—it's not really
going to be germane. The issue at Port Vale I would say is that
you've got people like Bill Bratt. Why does Bill Bratt have financial
difficulties? Why shouldn't Port Vale be able to be a sustainable
operation to end in a small surplus each year maybe for reinvestment?
The fact that he can't do that with all the good intentions they
have says an awful lot to me about the financial environment of
English football, and most of the issues you've spoken about in
the earlier session seem to me to be about a failure to get to
grips with that fundamental tension.
You've got all these clubs who will say it's an impossible
environment and yet nothing gets done about it with the speed
and urgency you would suspect it would be. You know the football
creditors rule is essentially a sticking plaster for a game which
knows that a systemic risk is that you will be insolvent at some
point in the near future. If you weren't in a position where you
took that as a very strong likelihood you wouldn't need it because
you wouldn't be in that position. Going back to the Port Vale
situation, first, why does Bill Bratt need to move it on because
of this insane situation? The second aspect is that should there
be a supporters trust at Port Vale, and which wanted to be part
of it, it would struggle because they've not got the thing the
club needs right now, which is ready cash to support the loss-making
enterprise, which the rules of football and the structure of football
almost compels them to do.
Q338 Paul Farrelly: Malcolm
you were nodding.
Malcolm Clarke: In
agreement with Dave, yes.
Q339 Damian Collins: Dave
Boyle, in the Supporters Direct evidence to the Committee you
recommended a licensing system for English football clubs similar
to the one that applies in Germany. Now would you like to take
the German licensing model and bring it here?
Dave Boyle: I start
from the perspective that in 47 years they've had no insolvencies
and we've had 81 since '86, so they're doing something better
than us in that respect. How likely it is to actually just transplant
it? I think it will be wrong and foolish policymaking to just
transplant; you would look at what are the rudiments of a successful
model, and the main thing it seems to me it shares with the UEFA
licensing system is that it looks at the key matrix you want to
ensure clubs take account of, and then assess them against it.
Julian Tagg mentioned the due diligence issue. A licensing system
is just taking the lead on the transaction costs of doing due
diligence on behalf of everybody at the start of the season. It's
an incredibly sensible thing to do, so you have to ask yourself
why on earth haven't we had it. You got a hint of that with the
evidence from Leeds and Burnley—there's a feeling that it
might stop us doing something, even though there is an understanding
that the current state of affairs is not optimal, shall we say.
With the failure to bring in a licensing system,
we must ask whether the governing apparatus of English football
is fit for purpose. The fact that it has not been able to introduce
something like a costs control mechanism when all the evidence
says it's screaming out for it, says to me that that's the fundamental
error.
Steven Powell: If
I could just add briefly on licensing, there are a number of models
that you can use to look at. I know you've been across to Germany,
so I won't detain you with that, but I also think the model as
used in France, whilst it's far from perfect is also worth a look.
It's essentially a board with a Chinese wall within the French
professional league—the equivalent of the Premier League
of the Football League here—which has autonomy to go into
clubs and to basically implement special measures. It's not perfect—there
are some financial problems in the game in France at the moment—but
it does show that you can create within the governing or the competition-organising
body in France something which has sufficient autonomy to exercise
real financial control, because the sporting pressures are always
there to spend more money.
That's the constant plea and what you have to do
is find measures of curbing that, and there are a number of models.
I don't think a salary cap is going to work, because the sports
that use them tend to be restricted to one, two, three maybe four
countries, but I think there are measures that can be looked at.
Germany is the obvious one but there are also various models that
are used in North America and Australian sports. In terms of the
conditions which are placed on clubs and transparency, sanctions
are applied in the Australian Rugby League. The Melbourne Storm,
which won the championship, had a massive penalty imposed on them
for keeping two sets of books, which shows that you can have financial
regulations with real teeth, and the club is still suffering in
competition as a result of that penalty, which was imposed by
the national rugby league.
Q340 Damian Collins: In
practice, looking at the German licensing regime, today is the
day for submission of cases. The reason no one's ever lost their
licence is because the licence is reasonably liberally applied
and is really just a basic liquidity test for the coming season.
Dave Boyle: It
might be, but then I come back with the fact that in 47 years
they've had no insolvencies, so even though it might not be the
hardest test you could possibly conceive of, it does appear to
instil the discipline which is the ultimate aim of the process,
which is to ensure that clubs are able to meet their commitments
through the course of a season. The single problem you have in
English football is that all of the regulations are reactive rather
than proactive as Julian Tagg has mentioned. They're all about
dealing with insolvency after the event, and not as much as stopping
it before it happens. Now that's slowly changing.
The Premier League's tests, which they've brought
in this year, are a welcome step forward; they could still go
further, but the major argument against these kinds of regulatory
impositions or interventions was always that the Premier League's
big end clubs compete on a European playing field so we couldn't
tie their hands for domestic purposes, which would weaken their
ability to compete at European level. Now UEFA have taken that
off the table there is no reason why it can't cascade down. The
clubs submit forms at the start of every season to do with the
players, to do with the ground they're going to play in, and I
don't really see why they can't be submitting what their financial
plan is for the next twelve months and then you can assess them
after the fact that if they get it wrong, because then you're
into the issue of either somebody's not very good at sticking
to an operating budget or there was some degree of misinformation,
both of which in different ways are things a league can start
to tackle.
Q341 Damian Collins: Do
you think rather than an absolute licensing system, there should
be a greater role for the governing bodies of the game to have
an ongoing dialogue with clubs over their financial status, because
with the one in Germany, one of the points that came out is that
it sometimes can be difficult at one point in the year—or
in Germany, it is two points in the year—to say exactly
what the income is going to be. You know this will depend greatly
on performance, particularly whether or not they qualified for
European competition, and German clubs filing for their licence
today won't know whether they'll be playing in the UEFA league
next season, and that will have a huge impact on their finances.
Dave Boyle: Absolutely.
I think the issue is how you would implement it in detail on a
day-to-day season-to-season level, and where you would want to
liaise with the leagues, because they're the ones who've got a
lot of the data anyway, and they're the ones who have the primary
relationship with the clubs. There's a curious contradiction.
On one level, when you asked some of the previous witnesses do
you think you need something like this, they were saying it should
really be done by the clubs themselves, they should be disciplined,
and then with the very next question, the clubs said we find it
almost impossible to cut our costs because the players and their
agents make it very difficult. To me, that says that it's crying
out for somebody other than the clubs to help them instil the
discipline which has been lacking for so long. You could call
it licensing, you could call it monitoring, you could just have
more active engagement with the clubs, but it should be something
which says to the clubs we will set the framework which constrains
your field of operation. That's the absolutely essential thing,
because it's all very well saying you want to leave it to the
discipline of the club to manage its own risk, but the record
says that English football clubs collectively are pretty appalling
judges of risk.
Q342 Damian Collins: Do
you think there is an absence of leadership in the FA, a while
issue of monitoring the financial performance of clubs and managing
risk?
Dave Boyle: I was
greatly enthused when I saw Lord Triesman's original submission
to the former Secretary of State's seven questions, which clearly
calls for something like a licensing regime. I just find it saddening
that in their submission to you this time, the FA seemed to have
moved further away from that approach. I think the FA are often
unfairly criticised, but until Lord Triesman came along and that
process led to them saying this is what we'd like to do, it is
fair to say that there had been an absence. Partly, as you know,
when you speak to people who work at the FA, it's not the case
that there's no activity going on behind the scenes. For example,
with the fit and proper person test or agent's regulations, the
FA were taking a very strong lead, but I think as Malcolm can
probably speak about that more accurately me. The way the governance
of the FA works makes it not a particularly well-suited body to
this particular task. I just did a small calibration of the evidence
you've received, and only three out of the 85 submissions say
the FA and the league structures are fit for purpose, 80% of them
say not, which is pretty overwhelming to me and I think that's
something which is borne out by the evidence of their own eyes.
Q343 Damian Collins: And
finally, can I assume from what you said earlier that you would
support the ending of the football creditors rule?
Dave Boyle: I think
the football creditors rule is totemic of football basically trying
to—it's a second order solution to a first order problem.
A simple problem is that football clubs are inherently unstable
financially and the football creditors rule is a sticking plaster
to deal with that and the immorality that comes with it. It's
a sticking plaster which underwrites the risks taken by clubs,
with the community they are surrounded, which says—
Q344 Damian Collins:
Is that a yes?
Dave Boyle: That's
a yes.
Q345 Mr Sanders: To you
Malcolm, in your written evidence to the committee you advocate
wide-ranging reforms to the FA board and the FA council. What
reforms would you most like to see and why?
Malcolm Clarke: I shall
preface my remarks by saying, as I did in my evidence, that there
are, and as Dave has just said, are a lot of very talented people
working very hard at the FA on a lot of these problems, and I
wouldn't want to gainsay that at all, neither would I want to
gainsay the contribution that many of my fellow members of the
FA council have made to the development of football in this country
over a long period of time. It's not about people, essentially
it's about structure. I don't actually agree with all of the report
by Lord Burns. I know that some people are saying we want the
full implementation of Burns. I think as he said to you himself,
he sort of stopped short of some things. I think that if you look
at the Council, the role that he envisages is, firstly, that it
should hold the board to account, and secondly, that it should
act as the parliament of football in order to debate the key issues.
The reality is that it's not able to do either of those.
I have here the last Council agenda. There are 121
pages of council committee minutes which have to be worked through,
some of them well before the council meeting, and it's virtually
impossible in a body of 118 people to have a critical challenge
to the board about what it's doing, partly because the decisions
are long since passed and partly because of the sheer format of
a body of that size. If I just give you a few examples. The first
one would be the FA's evidence to this Committee. That hasn't
been anywhere near the members of the council including myself,
and in fact there are what I call the football family six: the
representatives of the players, the managers, the supporters,
the referees and the equality and disability advisory groups who
are not represented on the board. We can't stand for the board,
we can't vote for anybody on the board, we've got nobody on the
board who represents us, so we have no input at all into the evidence
that the FA itself has given you.
We were never told why Ian Watmore resigned. We didn't
have a proper debate about the failure of the England team in
the World Cup; I raised that on a minute and there were two contributions
and then the debate was closed down. Now admittedly there was
then an away day which I wasn't involved in to look at some of
those issues. It was left to me to ask a question at the last
council meeting about the failure of the World Cup bid because
there was one sentence in the General Secretary's report that
said the board have looked at this and learned the lessons. It
didn't even say what the lessons were—this was an £18
million investment, and it now appears we never stood a chance
in the first place. Peter Coates made this point to you and Niall
Quinn said it was covered in arrogance or whatever. So if the
council can't address an issue like that then there's something
wrong with it, and in terms of the board, I've already made the
point that some people aren't represented. You had evidence from
the former Chairman about the way in which it operates, as if
people are delegates. They have their meetings beforehand and
you've got these two groups, so there's a desperate need for a
different way for the whole process to operate.
There has been a lot of discussion about the two
independent directors, which I've tried to promote for the extraordinary
general meeting in the Autumn but only managed to get 1% of shareholders
to sign up to it, instead of the 5% you need even to get it on
to the agenda, but it now looks as though the new Chairman is
taking that agenda forward. But one of the things that worries
me is that it shouldn't be seen as the end, it's the first step
not the major or the last step that is needed, so I think we need
to have another look and I welcome the fact it says that the FA
are carrying out a review of governance. I'm not sure who's doing
that or what the involvement of stakeholders is going to be, but
it is still very much needed.
I know there's a lot of journalistic caricatures
of blazers and things like this, which I think is not helpful,
but there's a lot of good people there with a lot to contribute
on both the executive and on the council. The problem is the structure
and the way in which the whole power lies with the Board, but
the Board itself consists of people with vested interests, and
other witnesses have given you the sort of analogy about banks
running the regulatory body, and I think that's probably a fair
analogy. Sorry I've spoken at rather great length.
Chair: I think we're probably
going to have to draw it to a close anyway since it's now 1.10
pm. We will be hearing from Mr Watmore later, and also having
a look at the bid so we may be able to illuminate some of these
areas that you have so far failed to. Can I thank the three of
you very much for your appearance this morning?
1 Witness correction following the evidence session:
The figure is in fact £1m as I understand it. Back
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