Football Governance - Culture, Media and Sport Committee Contents


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)



 
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© Parliamentary copyright 2011
Prepared 29 July 2011