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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