Written evidence submitted by the Manchester
United Supporter Trust (MUST)
1. INTRODUCTION
This inquiry is extremely welcome, as we believe
both Parliament and Government should be acting to ensure football
governance and regulation is reformed. We know that politicians
from all sides of the House do not wish to interfere in the running
of the game, but the Government should be establishing the correct
framework so that football can then run itself more efficiently,
professionally and in the interests of both clubs and supporters.
Football authorities have been given multiple opportunities to
reform but have failed to do so.
MUST has been at the forefront of the debate on Football
Governance (and the related issues surrounding ownership of clubs)
and had meetings with representatives of all parties prior to
the last election with a view to influencing manifesto content.
MUST directly represents thousands of UK citizens as well as the
interests of millions of Manchester United supporters.
However we recognise we are just one supporters'
trust amongst many at clubs across the country but we believe
the issues confronting us are representative of those for a huge
number of supporters at all levels as well as specific issues
affecting the bigger Premier League clubs.
We understand there is no single one size fits all
solution for clubs and their fans so, in addition to considering
the issues affecting football as a whole it is also important
to consider the different challenges faced by groups of clubs
of different sizes and ownership structures.
Further information on MUST, our membership and our
history can be found at the end of this document following an
outline of our concerns and our suggestions for changes to governance
in English football.
2. CURRENT OWNERSHIP
OF MANCHESTER
UNITED
The Glazer family purchased Manchester United in
May 2005 and removed the club's public listing. The purchase,
which also forced supporters to sell their shares in the club,
was financed largely through acquisition debt. Before 2005 the
club had no debts and was on a sound financial footing, with the
then (and current) Chief Executive, David Gill, (along with the
entire board) opposing the attempted purchase of the club—stating
"Debt is the road to ruin". Sir Alex Ferguson added
that any approach to buy the club was "unnecessary and unwelcome".
At present, the most commercially successful football
club in the world is still struggling to finance the debts that
served no purpose other than to help fund the Glazers' acquisition
of the club. The club's commercial, matchday and media revenues
have all risen since the takeover, mainly due to the success of
the team and the success of the Premier League's collective deals
for all its member clubs, yet the amount of money required to
finance the debt exceeds the club's operating profits. Supporters
are paying dramatically increased ticket prices (which the Glazers
gave assurances to the then Department of Trade and Industry would
not happen). They see the club generating higher revenues than
ever before, yet do not see any significant investment in the
team and certainly not at the levels of pre-2005. There is a major
distinction here between other high profile clubs who have run
up debts in order to compete on the field (eg Leeds United and
Portsmouth) and the case of United where the creation of debt
has not been for football reasons at all.
Adding to supporters' frustrations over the debt
is the secrecy and lack of communication by the Glazer family.
They have failed to meet with or communicate with any supporter
group, and relations with the fans are at an all time low. No
open conversation has ever been held about the club's finances,
which is alarming to supporters especially when the Bond prospectus
published in January 2010 revealed so much worrying information
on the levels of the debt. It was this that provoked the now famous
green and gold protests, when supporters chose to wear the original
colours of the club. Conversation has been limited to one scripted
interview on the club's own television channel, MUTV, shortly
after the takeover, and we find this unacceptable for a cultural
institution with the importance and reach of Manchester United.
We find it remarkable that the governance of the
game allows supporters to be treated with such contempt, and can
think of no other business that treats its "customers"
in such a dismissive and complacent manner. Unlike in other industries,
businesses or brands, football supporters have a loyalty to the
team they support and they cannot just choose to buy the same
product elsewhere. This loyalty should not continue to be exploited
as it is at present.
3. ADDRESSING
THE GOVERNANCE
OF THE
GAME
We believe that:
(a) The Government should encourage the growth
of shareholdings by registered supporters' trusts by offering
tax incentives to promote investment. Such incentives, as have
been successfully offered previously to the film industry for
example, would be universally popular with both supporters and
the football authorities. It would also help the Government to
fulfil the Coalition Agreement's pledge to "encourage the
reform of football governance rules to support the cooperative
ownership of football clubs by supporters".
(b) There is widespread agreement that the Football
Association needs reform to make it fit for purpose. It should
be empowered to regulate the game effectively with a board which
is completely independent from the organisations it seeks to regulate.
The board should also have notable supporter representation from
all levels of the game ideally with the introduction of real democracy.
(c) The Football Association should continue
to have a commercial arm that seeks to maximise revenues from
sponsorship and media deals, but this should be a separate function
to its regulatory responsibilities. Currently there is a clear
conflict of interest. For example if the FA wished to impose rules
on debt or capping ticket prices this creates a major dilemma
when the financial status of the Wembley Stadium project has created
their own debt and a pressure to drive ticket prices higher and
explore all commercial avenues to raise revenues. The Association
should be acting as a strong regulator in the game. The regulatory
function should be genuinely independent with secure and guaranteed
funding that would not make it reliant on keeping the "big
clubs" in favour. Nor should it allow the Premier League
to have control/ veto of appointments. The new regulatory arm
would also need powers to impose sanctions and to have a strong
say in the rulebooks of the English leagues.
(d) A new strengthened club licensing system,
in line with UEFA's existing criteria, would allow the Football
Association to enforce regulation of debt and ownership. A timetable
to convert existing debt to equity is needed and, and in future,
football debt should be replaced by issuing new equity (with supporters
encouraged to participate) as the mechanism for raising capital.
If it isn't possible to raise capital through uptake of new equity
there must be a good reason and so this forms a natural brake
on embarking on high risk activities. The Premier League has been
a fantastic success and we welcome the changes that have improved
the standard of football on offer and allowed English clubs to
take on the best in the world. However, while we accept and understand
the benefits of the Premier League's commercialism and the investment
it has brought, we also feel it should be regulated properly for
its own long term good. A lack of regulation and restriction around
ownership is especially concerning, and we note that it is not
in the long term interests of the Premier League to allow models
which remove money from the game rather than encourage investment
in it. The Premier League's current structure, in which it must
represent its twenty member clubs even if they are short-term
investors with no interest in the long-term state of the game,
does not currently allow them to address this issue. This impacts
on a whole host of wider issues such as the England national side.
(e) The Football Association and/ or Premier
League should be required to ensure that all club owners contribute
to taxation in the United Kingdom. At present, the Glazer family
are taking advantage of the fact that interest is tax deductible
for companies when calculating corporation tax. By loading so
much debt onto United, they manage to generate an interest bill
that offsets all the club's profits and hence pay little or no
corporation tax. The club's accounts show a tax charge from 2006
to 2010 of £82.0 million (ex-deferred tax) or £89.5
million (inc-deferred tax) but the parent company (Red Football)
only actually paid £3.4 million. While this isn't a football
specific issue—it's common to all leveraged buyouts—the
football authorities could not permit it within the game. Alternatively,
a wider law could ensure that no company should receive tax relief
should it not be permanently registered in the UK and subject
to the maximum transparency and disclosure requirements.
4. ABOUT MUST
MUST is an Industrial & Provident Society—a
democratic and not-for-profit mutual society which is registered
with and overseen by the Financial Services Authority. We were
formerly known as Shareholders United, but reconstituted as MUST
after the Glazer family's purchase of Manchester United in 2005
when all supporters who had not already done so were forced to
sell their shares in the club.
We are a voluntary organisation representing over
160,000 Manchester United supporters and our aim is to ensure
that supporters of Manchester United have a meaningful stake in
the ownership of the club. Our board and committee are elected,
and we also have a number of high profile patrons from the worlds
of sport and entertainment, as well as five members of the Houses
of Parliament.
We want to make clear from the outset that we do
not wish to run the club—we believe it should be professionally
managed by qualified individuals who are best suited to doing
so—but we do believe the priorities of the club should mirror
ours, namely a stable financial future and a continuing improvement
in the standard of football on offer. Supporter ownership does
not prevent us from wanting the club to generate strong profits—we
want to see high revenues at Manchester United—but our concern
is about where this money goes at present. It should be used for
the good of the football club and its supporters, not to pay off
acquisition debt loaded onto a profitable football club by owners
who patently did not have resources of their own to acquire the
club in the first place.
January 2011
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