Conclusions and recommendations
Reform of the FA Board
1. The
Football Association is the national governing body of English
football. It needs urgent reform to carry out its responsibilities
effectively and meet the future challenges of the game. We welcome
FA Chairman David Bernstein's commitment to reforming his Board
in pursuit of stronger governance, and the support he is receiving
from the Premier League and Football League. We accept the value
of Premier League, Football League and national game representation
on the Board, but recommend that the Board be constructed so that
vested interests do not predominate. As the governing body of
the game, the FA needs to be able to set the strategic direction
for English football. To do this, it needs to be more than just
an "association of interests". (Paragraph 52)
2. We recommend two
further FA executive staff onto the Board, in addition to the
two non-executives, which we trust the shareholders will ratify
in August. We would want the two executives to bring wider football
matters to the table. One of these should be the Director of Football
Development. (Paragraph 53)
3. We recommend that
the FA Board reduces to two professional game representatives
(one each from Premier League and Football League) and two national
game representatives, one of whom should be able to represent
the non-League football pyramid. (Paragraph 54)
4. There is a need
to strike a balance between an FA Board with a strong representative
element and a Board that is small enough to function effectively.
Our recommendations would result in a Board of ten, consisting
of the Chairman, General Secretary, two further executives, two
non-executives, two professional game representatives and two
national game representatives. While we can see the arguments
in favour of representation from other important stakeholders
such as supporters, footballers and league managers, we believe
the arguments in favour of a more streamlined Board are stronger.
(Paragraph 55)
5. The reconstructed
FA Board should reconsider whether the 50:50 divide of surplus
revenues should be scrapped in order to allow it to take strategic
decisions regarding the distribution of FA funds. In any event,
the FA Board should have greater flexibility to part-fund organisations
such as Supporters Direct, the Football Foundation and other initiatives.
Given the current availability of alternative sources of revenue
for the professional game, we would not expect the national game
to receive less than 50% of surplus FA revenue. (Paragraph 56)
Reform of the FA Council
6. The
principle that the FA Council should act as the parliament of
football is a good one. However, the FA Council as currently constructed
is not fit for this purpose. We recommend that the FA review again
the composition of the FA Council to improve inclusivity and reduce
average length of tenure. We would not expect Council members
to serve for more than ten years. The reformed Council should
review the format of its meetings. It should also absorb the
shareholder role. Although the shareholder body is larger than
the Council, there is a high degree of overlap between the two
constituencies, including the Football Associations of Oxford
and Cambridge Universities and the three Armed Services, as well
as the County Football Associations, the Premier League and Football
League. (Paragraph 61)
7. We recommend that
the FA Board review the appropriateness of the current committee
structure to support the governance of the FA and football in
general. All Committees should report to the Board not the Council.
(Paragraph 62)
8. We recommend that
the Leagues, particularly the Premier League and Football League,
consider adopting a similar approach to tenure limits as we are
recommending for the FA Council, and is already applied to the
tenure of the FA Chairman. (Paragraph 63)
Other Committee Reforms
9. There
is an absence of FA staff input on the National Game Board and
Professional Game Board. The FA Board appears effectively to have
ceded influence in two key financial decision-formulating bodies
to two separate "bunkers", comprising separate vested
interests. We urge the FA to consider whether the National Game
Board and Professional Game Board, as currently configured, promote
strategic decision making. (Paragraph 65)
Debt in the game
10. We
acknowledge the successes of Premier League and Football League
clubs in increasing turnover and improving the spectator experience
since the 1980s, but we are concerned by the extent to which English
clubs are making losses and operating on the edge of viability.
Of course, it is the ability to service debt that is the key factor
in any business, but because of demands on clubs, not least from
escalating wages, here is no doubt that debt remains a serious
problem throughout the football pyramid. (Paragraph 73)
What is causing the debt problem?
11. Since
the Premier League became the top tier of the football pyramid,
the financial benefits associated with its membership have incentivised
clubs continually to increase their expenditure to gain promotion
into the Premier League, consolidate their position in the Premier
League or achieve the additional rewards associated with a top
four placing and entry into the European Champions League. Teams
in the Premier League spend up to the hilt to stay there, and
teams in the Championship spend up to the hilt to get there.
(Paragraph 79)
Players and agents
12. While
we accept that agents have a legitimate role as players' representatives,
there is currently too much scope for conflicts of interest and
inflationary fees when agents also act for clubs. Agents should
be subject to tighter regulations—particularly with regard
to the "tapping-up" of players—enforced consistently
on an international basis, with a particular focus on transparency
of individual transactions and payments. Given the international
nature of football transfers, it is a matter of great regret that
FIFA has abdicated its responsibilities in this respect. We urge
the FA to press for an international solution for the collective
good of the game. (Paragraph 90)
The Football Creditors Rule
13. The
FA, Leagues and clubs all appeared defensive and uncomfortable
about the Football Creditors Rule. They are right to be. The moral
argument against it—that it harms the communities that football
is supposed to serve—is persuasive on its own. There is,
though, also a compelling systemic argument against it, namely
that it positively encourages excessive financial risk-taking,
in a system that already offers other inducements to so do, by
offering a safety net to those who seek to benefit from such practices.
The Football Creditors Rule should be abolished. It represents
a "post facto" preferential treatment of creditors that
would be illegal in the run-up to the insolvency of any business.
If the football authorities do not take the initiative themselves,
and Her Majesty's Revenue and Customs loses its legal challenge
to the Football Creditors Rule, we recommend that the Government
consider introducing legislation to abolish it. (Paragraph 107)
Broadcasting rights
14. The
European Court of Justice's preliminary opinion with regard to
the selling of broadcast rights within Europe poses a grave risk
to the sustainability of clubs throughout the football pyramid.
We urge the Government to use all its influence within the EU
to retain the territorial selling of overseas rights. (Paragraph
113)
Parachute payments
15. The
new financial regulations adopted by the Premier League and the
Football League mark a welcome shift in emphasis to engaging with
the financial challenges inherent in the current model of English
football. There are, however, legitimate concerns as to whether
they go far enough or will be consistently applied, particularly
in the Championship where there is a risk that the increased parachute
payments from the Premier League to relegated clubs will have
a destabilising effect on other clubs as they try to match their
spending power. We urge the FA to broker discussions with the
Premier League and Football League to review the balance between
parachute payments and solidarity payments. (Paragraph 127)
The impact of UEFA
16. The
UEFA initiative does appear to have a good chance of making a
positive difference to spending patterns within the Premier League.
The fact that Football League clubs have voted in principle to
adopt financial fair play regulations also holds out the promise
of more prudent spending patterns in the Football League and,
most significantly, in the Championship. We will follow with interest
the Football League's plans for adopting financial fair play regulations:
It will need to find a balance between curbing unsustainable expenditure
on wages and allowing the ambitious owners of smaller clubs sufficient
flexibility to fund a competitive squad. (Paragraph 141)
17. The manner in
which financial regulations continue to be introduced serves to
emphasise the disjointed nature of the English governance system.
Different rules and different interpretations of rules apply,
with different agencies applying them depending upon whether a
club is playing in European competition, the Premier League or
the Football League. The FA should take the lead in ensuring that
consistency of regulation is a priority for the English game.
(Paragraph 142)
A licensing model for England
18. While
we acknowledge that financial regulations have been tightened
of late, we are not convinced that even the new rules recently
adopted by both the Premier League and the Football League are
by themselves sufficient to curb English football's excesses.
Often their rules appear to be in response to events rather than
being proactive. It is right that clubs going into administration
should be deducted penalty points, but it is important that the
FA adopts more effective pre-emptive measures that anticipate
rather than simply follow events. (Paragraph 150)
19. We recommend the
introduction of a formal licensing model imposed rigorously and
consistently throughout professional English football to underpin
the self-regulation measures already introduced by the Premier
League and the Football League. The licensing model adopted should
both review performance and look to promote sustainable forward-looking
business plans. (Paragraph 151)
Administering the domestic licensing model
20. For
an English licensing system to deliver the prudential benefits
intended, it is essential that it is applied, and is seen to be
applied, rigorously and consistently across the professional game.
All clubs, and the leagues themselves, are affiliated to the FA,
the governing body of the game. We recommend, therefore, that
the FA takes responsibility for establishing a licensing system,
takes on a strong scrutiny and oversight role in the licensing
process and makes the final decision on contentious licence applications.
(Paragraph 160)
Foreign ownership
21. We
would not wish by any means to rule out or discourage foreign
ownership of English clubs. It is a reality that English clubs
can be bought and sold more freely than in other major football-playing
countries. A strong case can, therefore, be made that because
more owners from different backgrounds—both domestic and
foreign—are looking to purchase English football clubs,
particularly robust criteria for ownership need to be applied
before they are allowed to own a club in English competitions.
(Paragraph 172)
Leveraged buyouts
22. In
all the evidence we have received, a whole-hearted defence of
the use of leveraged buyouts to buy football clubs is entirely
absent. Within a football context, the leveraged buyout appears
to be a particularly risky vehicle with little obvious benefit,
and certainly not to supporters and local communities. (Paragraph
176)
Club ownership
23. The
FA, Premier League and Football League have spent too long behind
the curve on ownership matters. Between them they have allowed
some startlingly poor business practices to occur, and have tolerated
an unacceptably low level of transparency. In turn, this has resulted
in insolvencies; too many clubs losing their grounds to property
developers; and has contributed to high levels of indebtedness
throughout the League pyramid. We accept that there has to be
some flexibility to reflect the reality of individual cases. However,
we are not convinced that the football authorities have focused
sufficiently on the link between the fit and proper owner test
and the sustainability of English football's uniquely deep pyramid
structure. (Paragraph 191)
24. We recommend that
robust ownership rules, including a strong fit and proper persons
test, consistently applied throughout the professional game with
the FA having a strong scrutiny and oversight role, should be
a key component of the licensing model we propose. The presumption
should be against proposals to sell the ground unless it is in
the interests of the club. There should be complete transparency
around ownership and the terms of loans provided by directors
to the club. In this respect, there is no more blatant an example
of lack of transparency than the recent ownership history of Leeds
United, and we urge the FA to demonstrate its new resolve by conducting
a thorough investigation and, if necessary, to seek the assistance
of Her Majesty's Revenue and Customs. (Paragraph 192)
A way forward for supporter ownership
25. The
Minister set a challenge to come up with proposals to promote
wider supporter ownership. We recommend that he look at two areas:
measures to assist clubs that are already supporter-owned, particularly
options that increase their ability to raise money; and measures
that increase the opportunity for supporters trusts to achieve
a share in their clubs, whether on a minority or majority basis.
(Paragraph 218)
26. Supporters trusts
can be organised as Industrial and Provident Societies, that are
able to bid for social and community funds. Unfortunately, trusts
face significant legal and bureaucratic hurdles when raising funding,
including from fans themselves. We recommend, therefore, that
the Government amend the Financial Services and Markets Act 2000
in order to recognise the special nature of supporters trusts.
Supporters Direct should continue to play an important role in
advising supporters trusts on how to take best advantages of the
opportunities available, possibly including use of the Community
Interest Company model. (Paragraph 219)
27. We recommend that
the Government consider passing legislation to protect minority
supporter stakes that would otherwise be the subject of a compulsory
purchase order. (Paragraph 220)
28. As part of the
licensing process, the FA should give some thought to ensuring
that properly constituted supporters trusts, or consortia which
include supporters trusts, can play a part in rescuing clubs from
insolvency. One fruitful avenue might include giving trusts or
such consortia a real opportunity to make a successful matching
bid for a club that has gone into administration. (Paragraph 221)
29. Supporter involvement
is not just about ownership. There are a number of examples of
effective consultation with fans. These include Arsenal, Sunderland
and a new approach from Liverpool with the Liverpool Football
Club Supporters Committee. We welcome these approaches to consultation
with supporters in a more structured format, and urge other clubs
to follow suit. (Paragraph 222)
Supporters Direct
30. The
reluctance of the FA, Premier League and Football League to devise
a formula for the long term future of Supporters Direct is deeply
disappointing given the fact that all have a vested interested
in sustaining community-based clubs. It constitutes a failure
of imagination and a failure of governance by the football authorities,
and we urge them to work quickly towards a funding solution that
allows Supporters Direct to develop its role assisting supporters
trust organisations and makes realistic assumptions of Supporter
Direct's own fund-raising potential. We urge the Government, as
part of its commitment to supporter involvement in football, to
use its influence with the football authorities to work to this
end. There is a positive opportunity here for the football authorities
to show their commitment to supporting community-based initiatives.
(Paragraph 231)
Strategic planning: youth development
31. Developing
the correct strategy for youth development is properly a matter
for football. We are, however, concerned, by the evidence we received
of a lack of a co-ordinated approach to such a key component in
the future of the game. This seems to be an obvious area for the
FA to provide strategic direction and leadership, and we urge
the FA to do so. (Paragraph 244)
Strategic development: coaching
32. The
development of technical expertise in coaching is central to the
future of the game in England. There appears to be clear evidence
of historic drift that has left England far behind its main European
competitors. We welcome the fact that the FA is now making a concerted
effort to address the problem, and suggest that our recommendation
of the appointment of the Director of Football Development to
the FA Board would help to sustain the momentum. (Paragraph
248)
Finance
33. We
recommend that the FA review expenditure at the grass roots. It
should benchmark spending on the grassroots against the leading
European countries, comparing both absolute funding and funding
as a proportion of generated income, to help form a view as to
whether English football should be spending more on this important
component of the game, with a particular emphasis on coaching
education. The FA should also publish a more detailed account
of funding for youth development and training activities. (Paragraph
253)
The way forward
34. Almost
all our recommendations for the reform of football governance
can be achieved through agreement between the football authorities
and without legislation. We therefore urge the football authorities
to consider our Report carefully, and to respond positively with
an agreed strategy and timetable for change. As a last resort,
in the absence of substantive progress, we recommend that the
Government consider introducing legislation to require the FA
to implement the necessary governance reforms in line with its
duties as a governing body. (Paragraph 261)
| 
