Football Governance - Culture, Media and Sport Committee Contents

Written evidence submitted by Gordon Taylor, Chief Executive, Professional Footballers Association

Should football clubs in the UK be treated differently from other commercial organisations?

—  Football clubs are an integral part of our cultural and sporting life and need to be recognised as such by ensuring that they are a viable and vibrant part of our society. They have a significant social impact on the lives of their local communities involved in areas such as health, education, community cohesion, social inclusion and equalities. In that sense it is important that normal commercial criteria/imperatives are not the only considerations that we should take into account when looking at football clubs.

—  The European Commission when considering the Bosman case highlighted the specificity of sport with regard to the freedom of movement of workers and consideration was given to the protection of young players but also the development programmes which support this development and consideration was allowed for a compensation system to ensure these were maintained albeit, in contradiction of European legislation with regard to the freedom of movement of workers but considered proportionate. Similar sport specificity may be viewed compatible with EU Law if pursuing the "fairness of competition", uncertainty of results, recruitment and training, health and safety, contract stability for example.

—  Matters such as integrity within competition are relatively exclusive to sport and is a key reason why sport cannot be defined purely in business terms. The football creditor rule protects the integrity of the game and ensures that club cannot achieve success beyond their financial means and then enter into administration and reduce their debts whilst still maintaining the status their success has brought. This is clearly unfair and the regulations which currently apply ensure this is not achievable and should not only be maintained but strengthened. If the free market is allowed to reign supreme in football it might be the case that only the strong big city clubs will survive and the poorer town clubs will go to the wall. Some would say this would be good "pruning" in the long term but football is different to other industries in that once you lost a club like Middlesbrough, Portsmouth or Leeds United, for example, it is impossible to put a new club that is so important to its community in its place and that is why over three decades we have worked hard by club loans, wage deferrals etc to maintain a club's existence. As a result this country is unique in the world with a record number of full time clubs, full time players and the highest aggregate attendances in the world.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose?

—  The shock waves that went through football when Portsmouth went into administration with staggering debts in the middle of a Premier League season brought into sharp focus that football governance rules were far from satisfactory. The model that clubs cannot fail if levels of funding are of a very substantial nature clearly did not take into account the ability to mismanage those funds and repeatedly spend substantially more than the income they received. Although harsh lessons have been learnt from the Portsmouth experience and new measures have been brought in to reduce the chance of this happening in the future, clubs are still at risk under the current rules and more stringent regulations need to be brought in to moderate and monitor levels of spending within our clubs. A particular problem in football is often the failure of the Inland Revenue to collect tax monies due allowing large sums to build up which are then demanded at short notice, triggering potential insolvency. Although the PFA campaigned for the removal of the maximum wage in 1961, challenged the retain and transfer system in 1963 this does not mean we are against financial propriety and both fans and players want their clubs to survive rather than risk their existence with casino speculation.

—  The development of a closer working relationship between the Leagues and the sharing of information with the relevant Government departments to ensure that such situations are not allowed to develop in the future.

—  There is also a problem with the overall control and leadership at the top of football in this country. The Football Association has experienced very turbulent times in recent years and the lack of continuity and direction has left a considerable void at the heart of our national game. There has been much soul searching as to the best way to reform the somewhat antiquated structure and culture within the national governing body and in the absence of a strong and purposeful strategy of reform, the FA does not have the authority and power needed to take the whole game forward. The FA also needs to meet the challenge of engaging with and regulating the "power house" of English football, the Premier League and achieving compatibility between a strong National team/FA Cup and one of the finest League systems in the world.

—  There is a need for strong leadership within the governing body and also a modernisation of the Committees that make up the governing body. Representatives of the players (PFA), the Managers and also supporters at the highest level of the game need to be involved at the top decision making table within the game to ensure that all concerns within the game are properly represented. There is currently a distinct lack of the governing body making use of the expertise and experience which is available from former players within all areas of the game at the highest level.

Is there too much debt in the professional game?

—  Gearing is required in all industries but there has to be a balance in terms of the level of debt and whether it is sustainable in the long term. As football is a result driven business and forecasting league position and success is notoriously difficult, it is important that clubs do not overreach themselves and gamble with the club's very existence. As we have seen with a number of clubs across the leagues, the level of prudent financial management has all too frequently been lacking. That being said there are also many examples of good financial governance throughout English football that are a good template for all clubs to follow. The problem has been in England that decision making in this area has largely been left up to the clubs and this laissez-faire approach has allowed financial mismanagement to take hold in a number of cases. There have been various measures introduced to monitor and moderate excessive unbudgeted spending and the new UEFA provisions will also go a long way in ensuring more financial stability within the game. Both the Premier League and the Football League have taken steps to improve and strengthen their oversight and control of clubs in this area but there is still a long way to go in order to replicate the kind of strong and effective provisions that are a feature of German football. The German Licensing System is a model for other European clubs to follow. Sufficient liquidity is ensured through a liquidity forecast for 18 months which must exhibit that payment obligations can be fulfilled at all times. Also, the 50+1 clause ensuring that a football club must hold the majority of the voting rights of the attached football company ensures that owners who are intent on personal financial gain rather than club stability are precluded from achieving this goal. The implications for this kind of business model are that, firstly, expenditure is strictly in line with existing revenues, secondly, possibilities for using incoming capitals to replace revenues are limited and, thirdly, clubs can plan and operate with positive results. According to recent studies, 14 of the 20 Premier League clubs made substantial losses, whereas in Germany the state of their clubs' finances are much healthier. To this fact can be added the highest average attendance per match and the lowest average ticket price per match whilst at the same time increasing turn-over year on year, jumping from 1.27 billion Euros in 2003-04 to 2.036 billion Euros in 2008-09. Two of our most famous clubs, Manchester United and Liverpool, have been bought with a massive debt leverage putting the club at risk if results on the field diminish. In the USA a much greater solidarity exists with stronger, central control and a maximum 20% debt leverage with any takeover.

What are the pros and cons of the Supporter Trust share-holding model?

—  The inclusion of democratic supporter organisations at their football clubs increases participation for stakeholders of the club and generates meaningful contributions to the decision-making process. Not only does this improve the governance structure and processes at the club but can also help to strengthen civil society and also prove beneficial to their communities. Many football clubs in Europe are run as limited companies without any form of supporter involvement enshrined in their governing document. In contrast, professional football in Germany ensures that supporters are an integral part of the governance of their clubs. Of course, the level of funding required for a football club to compete at the highest level mitigates against Supporters Trust models of ownership and the size of membership of Trusts also mitigates against them being able to influence football club policy. What is required is greater support and greater involvement from a more substantial and therefore influential contingent within the club's supporter base for these groups to make serious in-roads in terms of being able to exercise their power and influence Board decisions. Barcelona, the most successful club in the world at the moment, is seen to be owned by supporters and run in a very democratic manner.

Is Government intervention justified and, if so, what form should it take?

—  It is important in every industry including sport that there is a level playing field and there is integrity emanating from the rules and regulations that govern the sporting activity. The ideal model is that the industry in question operates a self-regulatory form of governance and this has the highest standards in terms of best practice and ensures that all the stakeholders are treated fairly and have an opportunity to seek redress if the rules and regulations are not adhered to. At the present time, there are issues in English football in terms of leadership and control and there is some doubt about the role and reach and supremacy of our current governing body, the FA. The government does have a role to play in re-ordering the hierarchy of English football and working with all the leading players in the game to establish clear lines of demarcation and power in order to create more harmonious working relationships at the top of our game. This can only benefit the game and ensure that all parties take their responsibilities seriously in terms of doing what is best for football and not necessarily just their own organisation or interests. This should be driven by the FA with the government standing behind to ensure that all parties engage in a meaningful and constructive way. Government intervention was inevitable and successful in the 80's with serious hooliganism and health and safety issues and played a key role in assisting in ground improvements to the extent that our supporters and stadiums are amongst the world's best. Drug testing and corruption are other obvious areas where Government has to be involved.

Are there lessons to be learned from football governance models across the UK and abroad, and from governance models in other sports?

—  The German model has many redeeming features as mentioned earlier and contains many elements of the UEFA model that is to be introduced in the near future. The financial fair play provisions are important in that they codify the rules and regulations in this area by which clubs in Europe are obligated to operate under. This development should impact positively on the governance of clubs particularly at the top level who regularly compete on the continent. Hopefully, this will ensure greater competition and remove the spectre of financial instability and indebtedness that has been endemic in the game over a number of years. Never has the game enjoyed such income but never have balance sheets shown so much debt.

January 2011

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© Parliamentary copyright 2011
Prepared 29 July 2011