Written evidence submitted by David Hodges
This submission is from David Hodges. I was the researcher,
co-author and editor for the 2009 All Party Parliamentary Football
Group report into "English Football and its Governance".
I am a semi-professional footballer currently plying my trade
for Corinthian Casuals in the Ryman South (step 4) and previously
played for Glossop North End (step 5). I am an avid Leicester
City fan and former season ticket-holder.
I have answered three of the six questions that the
Committee called for evidence on. I did not feel I had either
the experience or knowledge to provide useful evidence on the
questions which I did not answer.
KEY POINTS
Should football clubs in the UK be treated differently
from other commercial organisations?
— Yes.
Football clubs are an integral part of a local community. They
help to shape its identity in a way which other service providers
do not.
Are football governance rules in England and Wales,
and the governing bodies which set and apply them, fit for purpose?
— The
governance rules and structures are not working sufficiently.
— The
FA should alter the composition of its Board, accept and implement
the key findings from the Burns review, and make the Football
Regulatory Authority (FRA) independent.
— An
independent FRA should have powers which include: control over
the Fit and Proper Persons Test; the power to investigate takeovers
which include significant debt leveraging; a role to promote good
governance which could include naming, shaming and faming clubs
for their governance procedures; and control over a new Football
Licensing system designed to prevent "financial doping".
— The
FA should be the governing body of English football that is in
charge of development, regulatory and technical matters.
Is Government intervention justified and, if so,
what form should it take?
— Yes.
The Government is investing £57.6 million over the next three
years in football. The Government has lost over £28 million
in unpaid tax from football clubs practicing poor governance procedures.
— The
potential action the Government can use is: the power of the media,
not supporting major championship bids without change, requesting
UEFA & FIFA take action, and commissioning an independent
report and binding all parties to accept its recommendations.
Should Football clubs in the UK be treated differently
from other commercial organisations?
i) Football clubs hold an irreplaceable position
within local communities. This extends from the 92 Football League
(FL) clubs to step 7 of the Non-League pyramid. There are local
services which are essential but it is the service delivery and
not the provider which is of ultimate importance. It is the provider
and not simply the service that is deemed essential in Football.
Football clubs have the power to develop and inspire communities.
ii) Over the past century as society has evolved
and transformed, football clubs have remained at the heart of
communities. Communities have a strong history, culture and heritage
that throughout the twentieth century have helped to sustain and
enrich local society. To lose a key element of that would be of
significant detriment to that community.
iii) Local footballers are idols to many in communities.
At the top level this translates into the opportunity to do much
good as a role model in the community. Premier League (PL) footballers
are often given an unfair reputation. The Premier League launched
the Creating Chances programme in 2007. The aim was to use the
power of football to increase sporting participation and encourage
individual clubs to bring about positive changes in local communities.
Between 2007 and 2010, through this scheme, there has been £111.6
million invested in community good causes. These range from the
"Kickz scheme" where clubs work with local police forces
to engage with young people in disadvantaged areas, to "Premier
League into Work", where clubs help to give jobseekers the
skills and abilities they need to help find work. This positive
community engagement can be found throughout the professional
leagues and the non-league pyramid.
iv) Football clubs should be treated differently
to other commercial organisations. However, this comes with responsibility
for clubs, the trade associations and the regulatory authorities.
We are entitled to expect good governance with transparent, accountable
leadership that acts in the interests of our game.
Are football governance rules in England and Wales,
and the governing bodies which set and apply them, fit for purpose?
i) Football governance has been a contentious
issue for many years. In my view, the governing bodies, the structure
within which they operate and the governance rules are not sufficient
to run the modern game.
ii) FA Governance: Good governance should
be in practice from the top of the game to the bottom. However,
our governing body, the Football Association, is currently not
exercising good governance procedures. Lord Burns produced a report
in 2005 which came up with many excellent proposals to improve
FA governance. The Football Association, despite promises to the
contrary, has still not implemented the vast majority of the reforms
proposed. In my opinion, the FA should introduce the following
reforms as a matter of urgency:
— The
FA Board should change its composition. It should consist of three
Independent Directors, three representatives from the National
Game, three representatives from the Professional Game and one
member from a democratic supporter's organisation.
— All
FA committees should report to the FA Board and not the FA Council.
— The
Football Regulatory Authority (FRA) should be made independent
from its current semi-autonomous status. The commissioners should
be independent. The FRA should be given greater powers. These
should include: control over the Fit and Proper Persons Test;
the power to investigate takeovers which include significant debt
leveraging; a role to promote good governance which could include
naming, shaming and faming clubs for their governance procedures;
and control over a new Football Licensing system designed to prevent
"financial doping".
iii) Levels of Debt and Governance:
— The
Fit and Proper Person's Test should be
adjudicated by an independent body. There should be a unified
test for the Premier League and Football League. The test should
go further than the current test to take into account the suitability
of a new owner or director and how they plan to finance a takeover.
— The
concerns over debt leveraging and directors loans need to be addressed.
Debt leveraging can be a perfectly legitimate business
practice. If a football club decides to leverage debt against
the club to invest in a new stadium which will bring increased
revenue then that makes financial and business sense.
— Debt
leveraged against a club merely to allow somebody to take it over
is not a sensible move for a football club. Manchester United
had no debt when the Glazer family bought them in 2005. On the
day of the buyout they incurred a new debt of £667 million.
The new owners will service the debt (although at present they
reportedly don't cover the full interest payments on the debt
each year) through the clubs revenues. All of that money will
be raised through supporters. Whether directly through increased
season tickets and shirt sales or indirectly through sponsorship
deals. The Glazers are relying on continued growth and investment
in football. This is the same cavalier philosophy that many banking
institutions took before the subsequent collapse. The effect will
mirror that crisis; the ordinary fan who takes to the terraces
come rain or shine will be the loser. The local community will
be the loser.
— Another
practice which is of particular concern is directors loaning
football clubs money instead of investing in shares. While,
this short term investment can be an important source of income
it is only increasing the debt and perpetuating the problem. This
practice should be another area of consideration for the FRA,
especially covering new directors.
— Football
revenue has increased exponentially in recent years.
Deloitte's annual football report for 2008-09 showed that in the
Premier League and Championship only eight clubs have recorded
a pre-tax profit. Only two clubs had no debt. Roughly 60% of European
football debt is English. These solemn facts surely call for the
introduction of a Licensing system. A license could be issued
annually on the basis of the club being compliant with its various
obligations. An essential element is that expenditure should not
be allowed to exceed revenue. There is an argument that you cannot
have a free market in football for over a hundred years and then
just pull up the drawbridge. However, league positions are currently
largely dictated by revenue. At present, a club is sportingly
punished if it tries to operate sustainably as others spend beyond
their means and attract higher quality players.
— The
PL has great export potential and revenue generation
for our domestic market. This needs to be sustainable in terms
of expenditure.
iv) Club Governance: Transparency and
accountability within club governance is essential to its improvement.
Top down procedures such as benchmarking, issuing reports and
naming, shaming and faming can exert significant pressure to force
change. An independent FRA would be well placed to examine and
report on club governance. They could produce an annual governance
league table which would report the good and the bad in football
club governance.
v) It is important that best practice is shared
as widely and openly as possible. The FL and PL should facilitate
regular meetings to discuss good governance.
vi) The inter-relationship between the FA,
PL and FL: UEFA noted in their submission to the APPG 2008-09
Football Inquiry into "English Football and its Governance"
that having three or more competing governing bodies is inefficient
and detrimental to the sport. The FA is the governing body of
English Football. They argued that the overall framework and control
of development policy and technical matters should be with the
national association for all levels of football. They noted that
breakaways do not often help. However, we are where we are. The
Premier League and the Football League are trade associations
which represent their members and run their respective leagues.
They should liaise with and have a positive, engaged relationship
with the FA. The FA should have ultimate control for regulation.
Is Government intervention justified and, if so,
what form should it take?
i) The taxpayer is currently spending and absorbing
losses from football:
— The
Government has allocated £25.6 million funding allocation
over a four year period from 2009-10. Furthermore, over the next
three years it has allocated £32 million to the Football
Foundation.
— More
than £28 million of tax owed by struggling football clubs
has been written off by Her Majesty's Revenue and Customs (HMRC).
Well known clubs such as Leicester City, Leeds United and Ipswich
Town have gone into administration and paid a fraction to HMRC
of the tax they owed.
ii) This combined contribution puts a responsibility
on the Government to ensure accordingly that the money they allocate
is wisely spent and that good governance procedures are in operation
to prevent further tax revenue being written off from clubs entering
administration. Although, we are in more austere times, the principle
of the Government having a responsibility and a keen interest
in the money it is spending should hold at all times. This justifies
Government intervention.
iii) How this intervention should take place
is perhaps the more prescient question. The home of good governance,
FIFA, takes a dim view of direct Government intervention. Most
Government money is spent on the grass roots game. Threatening
to remove this money would damage the grass roots, which should
not lose out from the FA's incompetence.
iv) The Government could decide to invest the
money through a different structure (UK Sport). The media report
extensively on football. The media report extensively on politics.
Politicians should not be afraid to marry these two to create
pressures on the football institutions to reform. The fuel of
publicity can cause a spark that will create an intense pressure
as the public become more informed about the problems with our
game. The Government can make it clear it could not support major
Championship bids without governance change. The Government could
request UEFA and FIFA to take action which would impact on our
governance. The Government could consider commissioning its own
independent report, which all sides could agree to be bound by
the recommendations.
January 2011
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