Football Governance - Culture, Media and Sport Committee Contents

Written evidence submitted by Lord Triesman



The Football Association welcomes the opportunity to respond to the questions from the Rt Hon Andy Burnham MP, Secretary of State for Culture, Media and Sport. The answers are occasionally inter-dependent. The FA wholly understands the strong interest in Parliament in English football, just as there is among the wider public, in its governance, decision making and long-term future.

The FA have noted with interest the All Party Parliamentary Football Groups report on English Football and its Governance and thank them for their contribution to the debate.

We attach a copy of the FA's vision 2008-12 to which this response refers.


Football is England's most popular sport; it was born here and took root worldwide. The Football Association, since its inaugural meeting in October 1863, has had the responsibility and privilege of overseeing football in all of its aspects in England and the Crown Dependencies of Jersey, Guernsey and the Isle of Man. We exercise the responsibility with a powerful and effective professional game and through our own organisation distributed throughout the country. However the overarching responsibility lies with The FA and we are determined to meet our obligations in full.

The FA is well placed to handle these responsibilities. It is not only the oldest association in the world but is the association that many in the world football family look to. Standards of integrity and operational experience in organising at all levels have meant that The FA has the prestige of being asked regularly to assist throughout the world, just as emerging professional leagues seek the excellent guidance of the FA Premier League.

Football is uniquely successful. It is played in England by approximately 7 million adults and children, with 125,000 teams competing in 1,700 affiliated leagues. There are currently 26,000 referees, 150,000 qualified coaches and over 400,000 volunteers running the game.

The game has enjoyed a sustained period of commercial growth. New broadcast deals for England and FA Cup matches have secured £425 million over the next four years starting in 2008 and £145 million for the overseas television rights. These sums are under stress in current economic circumstances impacting on broadcasters, but The FA looks to continue to invest in the future development and growth at every level from parks to the senior England team.

Other members of The FA's football family, especially the FA Premier League, the Football League and their remarkable professional clubs, generate significant income in their own right from their clearly successful competitions. The commercial advances of The FA and the Leagues are integrally related.

Yet it is important to understand the unique attributes of football and other professional sports clubs. They are not simply commercial businesses. They operate in a closed economic environment. While they obviously compete, each is also a monopoly supplier—the only supplier of that clubs history and affinity available to its supporters. Those fans that pack grounds and create the unique atmosphere, whom the players applaud and acknowledge, are not "rational consumers". It is highly unlikely they will transfer their allegiance whatever their dissatisfaction with their current supplier.

It is inevitable that the criteria for governance will go beyond those operating in a normal market. The financial solidity and motivation of club owners is critical to the long-term viability and sustainability of football clubs. For example, it is not an accident that solidarity payments from the wealthier to less affluent businesses characterises this sport, unlike other areas of business. This is because there is a unique element of mutual dependency in sporting competition which recognises the fact that even the pre-eminent teams are reliant on the competition provided by other teams for the success of their business and sporting models.

The FA also has obligations to use its resources wisely including its subsidiary businesses -Wembley, FA Learning and the National Football Centre. As a not-for-profit body we meet these responsibilities through widespread distributions to grassroots football, development of the next generation of players, coaches, referees and administrators; and a significant contribution to the Football Foundation and charities. We work with education, health and social inclusion authorities, with the Police and the Armed Forces

The FA is a member of FIFA, the world regulatory body, holds a permanent seat on the International Football Association Board (IFAB) that sets the rules of football and is a member of UEFA. Our international work is extensive. We are campaigning for the right to host the FIFA World Cup in 2018 or 2022.

For all of these reasons, we see our role as promoting a "One Football" approach, with one set of values guiding every level of football. To fulfil this vision, whether measured by the performance of representative teams, financial growth, attendances or participation, The FA must also incorporate long-term sporting and social objectives (balance of competitions, integrity, sustainability of clubs as vital social institutions, the positive social impact of football and so on). We are guided throughout by the Principles of the Better Regulation Task Force—namely proportionality, accountability, consistency, transparency and targeting.

We celebrate success and we also have the duty to adopt a prudent approach, much challenged in the present economic conditions, to protect the long term viability of our sport.


One of the key Goals of the FA vision is to be trusted to lead. As well as The FA's commercial and redistributive responsibilities we also have important responsibilities as the governing body for football which require The FA to regulate the game at all levels. The FA must be trusted to lead across the full breadth of its remit including its role as regulator, which as a core function of The FA will clearly have an impact on the perception of the organisation both inside and outside the game. In England we have this exclusive remit under FIFA statutes, and at European level the remit is endorsed by the organisers of European competitions, UEFA.

The FA's role as regulator is handled through its Council which delegates responsibility for such matters to the Football Regulatory Authority (FRA). The FRA is responsible for the Rules and Regulations of The PA, for the disciplinary processes relating to misconduct and for matters of policy relating to the regulation of the sport.

In addition to the constitutional framework that provides the backdrop to The FA's work as regulator, The FA is also mindful of acting in a responsible, open and accountable manner with its stakeholders. In doing so, The FA seeks to ensure that it is, as far as possible, able to drive better regulation through a consensual approach. This accords with the Principles of Better Regulation and ultimately should ensure that The FA puts in place regulations that have the buy-in of the majority of its stakeholders and which are therefore easier to monitor and enforce. Nonetheless, the ultimate responsibility lies with The FA.


The FA's role as regulator arises in a private law context; that is to say it is not supported by any statutory or legislative framework. This means that The FA regulates via contract and the rules laid down by The FA essentially make up the contract that binds The FA and its participants together. As such The FA has to be mindful of, and act in accordance with, the legal framework provided by UK and European Community Law.

Arguably the two most significant facets of this legal framework insofar as The FA's position as a private regulatory body is concerned, are: the doctrine of restraint of trade and competition law.

It would be sensible for this specific set of obligations to be couched in Sports Law, legislation that resolves ambiguities that demonstrates inter alia the direct link between FIFA and The FA, with parallel arrangements for other sports.


The FA has to develop particular rules and regulations for the good of the sport, has a responsibility to ensure that at all times it imposes a regulatory regime that is proportionate and legitimate and that is built to withstand, as far as possible, any legal challenge.

However, given the status quo, the current legal context sets the framework for a number, if not all, of the areas that arise in the seven questions, could and should more be done to protect this great game through a more robust regulatory regime.

Consequently, and in light of the undoubted success of English football, from the FA Premier League to every local league, we advocate limited changes which build on what already exists. The changes should build trust and reduce the areas of doubt that are sometimes expressed.

1.  How can we ensure that the regulation of financial matters in football is more joined-up and ensure consistency between the leagues?


The FA, the FA Premier League and the Football League undertake a significant level of collective work and operate closely together at all levels (from The FA Board down to day-to-day contact between the staff) and across a broad range of issues that affect the governance of the game. While a significant proportion of this work is centralised through The FA, there is also a significant amount of delegation to the leagues on issues that are competition specific.

The current environment

Some believe that in England the "professional" game is separate from The FA. This is wrong. In fact the professional game is an important constituent part of The FA and some of the key constitutional and executive bodies demonstrate the close inter-relationship.

—  The FA Board

     The FA Board comprises the Independent Chairman, Chief Executive, five representatives of the professional game and five representatives of the national game. Three of the professional game representatives are appointed by the FA Premier League and two by the Football League. The FA Board manages the affairs of The FA and has wide powers which can be found in The FA's articles of association.

—  The Professional Game Board

     A number of The FA Board's powers are delegated to committees and boards; one of the most important is the Professional Game Board (PGB) which consists of four members each from the FA Premier League and the Football League. The PGB makes recommendations to the main FA Board about matters of importance to professional football.

—  The Football Regulatory Authority (FRA)

     The (FRA), a division of The FA which reports into The FA Council, is responsible for performing the regulatory, disciplinary and rule-making functions of The FA. After the initial three year period (July 2007—June 2010), the composition of the FRA will be four Professional Game representatives, four National Game representatives and four independent members.

—  Football Management Team (FMT)

     In addition to the discussions which take place at more formal levels, directors of The FA, The FA Premier League and Football League meet fortnightly to discuss the major issues affecting the game and each organisation.

It is important to recognise that many of the Rules and Regulations that apply are broadly similar across The FA, the FA Premier League and Football League. This provides a helpful basis for modest reform.

It is also important to recognise that there are areas where the leagues and competitions that are sanctioned by The FA face different challenges due, for example, to the scale of their operations. The challenges faced in the FA Premier League are different in certain aspects from those faced by the Football League, Football Conference and leagues operating below that. Consequently a one-size-fits-all approach would simply not work and there has to be recognition that some divergence in the regulatory regimes is likely.

In principle there is little wrong with this approach. It ensures a reasonable level of autonomy at league level. While there will be areas where leagues have distinct concerns to address for their competitions, The FA and the leagues liaise closely to ensure that wherever possible issues across the game are addressed appropriately and with consistency.

However it is clear that there are areas where the organisations adopt differing approaches and where a coherent approach will make more sense and be more efficient—the most obvious example of this in the area of financial regulation is probably the Fit and Proper Person Test ("FAPPT") to which we will return in response to Question 5.


Any significant changes resulting from the issues raised by the Secretary of State would follow full discussion with the professional leagues. Consensus is desirable. The FA believes that some areas are best approached on a football-wide basis and others best delegated to the leagues. In these latter areas The FA should, of course, establish guiding principles to provide the framework within which the leagues can operate.

It is a control function of The FA as the governing body to protect the framework so that there is coherence and clarity for those in the sport and the wider public.


There should be one common standard for financial reporting by clubs on an annual basis, prepared by independent auditors, with the information to be lodged with The FA and the league in which the club competes. The report should, for the clubs in the top four divisions (The FA Premier League and the Football League Championship and Divisions One and Two), be based on:

(a)  The financial criteria of the UEFA Club licence.

(b)  The auditor's statement on the "going concern" audit requirement.

(c)  Any further stress tests that The FA through the FRA may from time to time consider necessary.

(d)  Any additional information that the leagues require.

Group business accounts should be treated on the same basis.


The FA will publish on its website these annual returns (future financial information (included in UEFA licence) and stress test information may be particularly commercially sensitive and not suitable for publication (eg competitors who may be negotiating against the clubs concerned).


Below these top four divisions The FA will design in consultation with the leagues down to tier 6, a lesser set of requirements which nonetheless meet the objectives of consistency, clarity and transparency.


At all these levels, The FA through its regulatory department will have the power to alert any club to an identified problem and may require a proportionate set of conditions to be met to provide an appropriate solution. This will only be done in consultation with the appropriate league.

We believe that this is straightforward and logical. Those within the game and wider public will see a consistent set of standards operated by the appropriate regulatory authority and based on the constantly improved standards already demonstrated by the leagues. Nonetheless, handling these issues is frequently sensitive but the time is right to make real progress. It will clarify the hierarchy in governance including with the international bodies. Jurisdiction, properly described, will lead to greater efficiency alongside greater clarity and consistency.

The Government should actively consider, in discussion with all sports authorities, whether it can assist them by clear specification of rights and responsibilities in financial and other matters either through legislation or other levers in public policy.

2.  Is there a case for greater transparency and scrutiny of ownership of a club, including the amount of debt used to finance any takeover and whether the level of debt is sustainable and in the wider interest of the game?


Football is a sport. It has generated significant, valuable commercial enterprises but it remains a sport with a specific character. It is different from other enterprises in one vital sense - its fan base is not made up of conventional customers who will switch between products in a normal open market. The enduring history and social significance of clubs flows from this monopoly supplier characteristic.

The Deloitte "Annual review of Football Finance" (May 2008) reported around £1.4 billion had been used to fund changes in ownership of clubs in the FA Premier League and Football League Championship since the start of 2005.

Responding to the Secretary of State it would be hard to argue, legally or in policy terms, that significantly different rules should apply to football transactions than apply in the wider economy although the specificity of sport does have implications for probity, reputation and competition. The FA seeks the right balance in the long-term interest of football.

Today, it would be myopic to disregard the global financial climate, credit restrictions, re-financing difficulties and broad trading downturns that impact all economies.

The current environment

The FA and the leagues have measures in place to address these issues.

(a)  Fit and Proper Person Test ("FAPPT") Regulations

     These exist to assess and monitor the probity of those persons who have management or ownership control over English football clubs.

(b)  Notification of Changes in Ownership in Clubs

     The FA and the professional leagues require they be notified of any changes in the ownership structure of clubs. A number of clubs which must also comply with the listing requirements on the London Stock Exchange.

(c)  Transfers of Membership

     The FA and leagues closely regulate changes in ownership when a club's membership transfers to a new limited company.

     Most frequently this occurs when a club enters insolvency and its membership of The FA and league is transferred or sold as an asset to a new company. These provisions do not apply to a takeover where shares in an existing company are sold to new owners. We deal further with insolvency in question 3.

(d)  Dual Interest Rules

     Both The FA and the leagues regulate individuals taking an interest in more than one club competing in the same competition. These rules protect competitive integrity and prevent inappropriate influence on the outcome of matches.

(e)  Statutory Provisions

     Clearly the requirements under football rules are additional to other provisions that apply to the sale of companies and the source of funds used for such transactions. For example, any transaction must be conducted in accordance with UK company law and the Proceeds of Crime Act ("POCA") 2002.

The FA has recently issued guidance on the application of the POCA (and money laundering) in a brochure sent to all the FA Premier League and Football League clubs.


In regulating the ownership of clubs it is important to identify and consider the specific problems that need to be addressed. The main issues are increased transparency, a strong threshold for probity and, so far as possible, and a grasp of intention on the part of owners. Consequently we ask:

—  Is there sufficient, proportionate regulation of potential new owners?

—  Are there issues about the sources of funding by new owners of clubs?

—  Are there disproportionate risks, especially under conditions where more rigorous stress testing is prudent, as a result of debt levels?

—  Should there be concern over non-English investors becoming club owners?

In several of these areas, UEFA as a competition organiser is likely to modify its licensing requirements. If it does so, to ensure consistency of reporting to The FA, we are bound to consider these requirements in our regulatory system. We anticipate the major European leagues including the FA Premier League will do the same.

The Regulation of New Owners

Any regulation in this area must be legitimate and proportionate. With the FAPPT the game has implemented an additional layer of regulatory oversight that applies beyond the statutory requirements of UK Law. The football authorities believe their approach satisfies the requirements that apply to them as regulators i.e. the FAPPT is based on clear, objective factors and not subjective views or indeed unsubstantiated allegations.


There should be a single FAPPT, administered by The FA, of all professional clubs in membership of The FA. No doubt it will largely mirror the position in the leagues but the aim is a single, consistently applied, transparent requirement. It would apply to all individuals holding a Director's role in the top six leagues. The tests we commend are set out in question 5 and they extend the ambit currently used and, as with current practice in the leagues, go beyond UK statutory requirements.

Sources of Funds

There are already legal requirements that funds may not come from illegitimate sources; and rules governing integrity so that no more than one property in any competition can be owned by a single owner. Strong application of such rules will dissuade many would-be illegitimate investors who might view football clubs as relatively lightly regulated, high cash turnover businesses.

However, given the number of high-value, multi jurisdictional transactions in football, it would be appropriate for any regulatory, governing body to base its approach on the right risk assessment. Naturally, if any football authority is concerned about the legality of funding sources, it has an obligation to bring such anxieties to the relevant authorities.


The FA believes that with greater resources devoted and a mutual obligation to work with professional partners, the requirements for transparency in the regulation of this area should, as a minimum, mirror the existing regulations for the transfer of memberships and be applied consistently across the top six leagues.

It will never be possible to track financing arrangements entirely through multiple companies and offshore corporations (as finance businesses worldwide have amply demonstrated). However solutions adopted to ensure for accountability in t banking corporate transparency will help over the coming period.

The minimum standard should be complete disclosure of the sources of the investment sums, the accuracy and completeness of which are attested to by owners (and where appropriate their proxies). Penalties for mis-reporting could range from disqualification of directors or clubs, to points deductions and fines since the purpose of misinformation is likely to be unfair competitive advantage.

Increasing the indebtedness of clubs

Clubs have raised money in a variety of ways to achieve remarkable success. It will, in any business, be for those running the business to judge risk and make sensible decisions. It is right for those with the long term responsibility for football in England to think ahead. In football there are already provisions including sporting sanctions where clubs have over-reached and thereby sought an unfair competitive advantage.

So a thorough discussion of the options does not undermine pride in the unquestionable successes. Indeed the greater risks have occurred below the very top of the sport. The FA can play a positive role by fostering a sustainable approach to the management of clubs as great community assets.

Recent club takeovers have seen significant levels of debt incurred to fund share purchase, in some cases added to the club's balance sheet together with the associated interest payment obligations. This is wholly legitimate in English law and happens in other industries.

The FA does not impose restrictions on the capital structure of a club. The Football League does specify the share capital for a club transferring its membership to a new company. The key to sustainability is that those responsible for the company manage debt appropriately. No doubt this is more testing in the current economic circumstances, as the Deloitte Annual review 2008 demonstrates.

Our position is that debt is not wrong per se but one of the legitimate methods that clubs use to fund operations and working capital requirements. Numerous clubs in the professional game have greatly improved their facilities in the last 15 years as a result. Given there is no public funding comparable to that in Germany and France, for example, to build or improve stadia or bid successfully for international competitions, the use of debt financing is more important in England.

The key questions for clubs and regulators are: is the debt serviceable as part of a sustainable business plan and are the arrangements sufficiently transparent to the regulatory association?

We believe that given the rate of clubs facing insolvency events, sustainability is an issue. It is evident that a proportion of clubs trade continuously at or beyond their financial means. Thus the enhanced "going concern" provision The FA advocates is essential.

The generosity of many owners sustaining trading losses on the basis of growing debt nonetheless increases risk when not supported by an achievable business plan. The owners of some clubs have recognised that debt in this form may be unattractive and there is considerable admiration for the conversion of a proportion of such debt from these "soft loans" into new equity at Chelsea FC. We recommend a discussion with professional partners of schemes to take such steps more widely, perhaps on an annual basis, adding to sustainability and transparency. This would lessen the risk and impact of individual's calling in debt at short notice.

With the professional leagues we would aim to agree a framework in greater detail that deals with clubs that repeatedly get into insolvency events; that make consistent losses without a realistic plan to extricate the club and where the "going concern" report reflects this; and clubs whose owners fund debt on the balance sheet at a level unlikely to be resolved by a business plan and where conversion into equity has not occurred.

The FA would welcome an early discussion with the professional clubs, as an element of the licensing regime, to agree the appropriate ratio between equity and "soft loans" to be sustained at all times unless varied for extraordinary reasons acceptable to The FA and the league in which the club competes.

The FA believe that it would be difficult to stipulate that clubs start any season with positive net assets (essentially the French licensing model) unless special arrangements are made to exclude capital investment from any such regulations and a provision for conversion into equity is in place. The argument that it is unhelpful to distinguish between types of debt is understood but is unappealing. The standards set for securitisation of different types of debt is well-understood and therefore the likely extent of risk.


The FA should conduct a review with the FA Premier League and Football League to consider the merits of a more proactive approach to the financial security of football clubs, including measures to improve stability, enhanced financial information, specify equity: debt ratios, equity levels, sources of funds and beneficial ownership within the umbrella of a domestic licensing regime.

Non-English Investment

The case against "foreign" ownership of clubs rests largely on the assertion that clubs should have a local (including regional and national) character. Owners failing to have this characteristic are perceived to lack a depth of affiliation to that club and its geographic environ.

The FA is clear. It does not accept discrimination on any basis including nationality. UK businesses including utilities are often foreign owned and UK owners often own overseas businesses. It is both a reality of global equity ownership and European commercial law.


These anxieties can be alleviated by:

(a)  Boards of Directors of clubs voluntarily agreeing that one or more English nationals are a member—indeed most satisfy now.

(b)  A formal relationship being developed with supporters groups, whether or not they have secured Board representation, promoting discussion of the distinct local character of the club and its community role.

(c)  Boards publishing as part of the licensing requirement an annual statement of their plans for the club, commitment to it over the longer-term and commitment to the underpinning values of England's football.

Licensing regime

In the answer we have discussed what would be a number of new features of an enhanced licensing regime. While they often are derived from UEFA requirements, as a whole they would provide a better framework irrespective of whether clubs enter into UEFA competitions.


The FA advocates that, like France, Germany, Holland and Spain that alongside the UEFA licensing framework, a domestic licensing regime is adopted in England, but adapted to our culture. We accept the research findings that (with the exception of Spain) such systems have led to more stable finances although in general they have not changed competitive balance for the better.

In the event that England re-enforces its licensing system, aside from the FAPPT provisions discussed earlier, it would be appropriate to embody non-financial criteria to which most clubs are sympathetic. These include:

(a)  Minimum level of community involvement.

(b)  Minimum levels of supporter involvement and a customer charter.

(c)  Investment in youth development.

(d)  Security of tenure of ground.

(e)  Open meetings—including, of course, shareholder meetings where appropriate.

Such a system would benchmark good governance and be commensurate with the better regulation principles

The FA, allowing for these propositions, recognises that the sport has been very robust at the highest level, and that the clubs are independent and autonomous businesses responsible for their own stewardship. We aim as do other regulatory bodies today to assist in securing the long term financial health of our "industry" namely the whole football economy. In this light, The FA is a willing partner in any discussions that lead to significant change in the structure of the football business sought by its participants.

3.  Is there a need to look again at the rules that penalise clubs that fall into insolvency, including the introduction of an early warning system in respect of clubs falling into arrears?


According to research published in 2008 by the Centre for International Business of Sport at Coventry University, since the introduction of the Insolvency Act in 1986, 56 clubs in the English league system have gone into insolvency with a total of 68 incidents of insolvency (some clubs having been declared insolvent more than once). The two most recent examples have occurred during the current season, Southampton FC and Stockport County FC.

The Premier League does not have any clubs that have experienced insolvency whilst in that league. However relegation would appear to be a key factor in causing clubs to become insolvent: in 30% of insolvency events the club had been relegated in the previous 12 months; in 36% the club had been relegated in the previous 24 months; and in 49% the club had been relegated in the previous 36 months.

The Football League must take great credit for the fact that, despite many predictions to the contrary in the wake of the collapse of ITV Digital, its competition is still intact, with 72 professional clubs taking part in its competition in spite of the significant number of its clubs that have suffered insolvency.

Current Environment

Football has established a set of provisions for insolvency events that have to be understood as a whole.

Football Creditors Rule

The Football Creditors Rule (FCR) prioritises debt within football itself and is frequently challenged by HM Revenue and Customs because HMRC has not got preferential creditor status.

Sporting Sanctions

Since 2004, The FA Premier League, Football League, Football Conference and feeder leagues to the Conference have had sporting sanctions, namely the deduction of points, in place to apply to clubs entering an insolvency event. The purpose is to apply a sporting penalty to member clubs mismanaging their finances and thereby potentially gaining a competitive advantage. This approach is usually perceived as harsh by supporters but needs to be properly understood. For example, the 20 point penalty applied to Luton Town FC by the Football League did not result from insolvency but failure to satisfy creditors once they had become insolvent.

Clubs may be sanctioned by not being re-admitted to a competition. Re-admission in any specific circumstances is granted on specific terms since the alternative would be simple exclusion.

Broadly The FA does not believe that these sanctions are wrong but they are not the whole approach needed.

Insolvency Policies

Aside from Sporting Sanctions, the Football League and the Football Conference have Insolvency Policies governing clubs exiting insolvency events. Since these leagues are most affected by insolvency problems and have therefore done most to address the issues in order to protect competitive integrity, they deserve credit.

The Football League requires, inter alia, payment in full to football creditors and satisfaction of other creditors through a Company Voluntary Arrangement (CVA) protecting football interests and addressing wider obligations. If these requirements are not satisfied, the League may attach additional conditions to an application for membership.

The Football Conference requires payment in full of all creditors. Failure leads to the Club being removed from the Competition and that generally results in relegation by one or two divisions.

The approach of the football authorities has been "back end" to deter insolvency. The FA and all authorities prefer an "end to end" approach underpinned by the deterrent measures described. We need to try to prevent clubs facing such dire outcomes.

In the last 18 months, The FA's Financial Regulation Department has made progress by identifying and analysing the problems and devising preventive measures.

HMRC Debt reporting

The FA has worked with the Football Conference on initiatives to reduce its club's exposure to HMRC debt, reducing the risk of HMRC objections to any proposed CVA as an exit route. This also aims to increase competitive integrity by preventing clubs from continuing to accumulate significant HMRC debt whilst at the same time maintaining expensive squads. Breaches of these league requirements lead to a registration embargo.

Clubs are required to self-report PAYE, National Insurance and VAT indebtedness with a two month period of grace to pay it off or agree a repayment scheme with HMRC. The FA has supported the league in this process including the registration embargo.

The Football League intends, we understand, to implement a similar scheme.


The approach across the whole of the professional football scene would benefit in wider public perception from consistency. This should be the case whether or not the competition has or never yet suffered an insolvency event. The UEFA licence requires robust management of tax and football debt and this provides a good base.


The FA believes that in discussion with the professional leagues it should devise one scheme for insolvency events in all their aspects including re-entry allowing for a reasonable but restricted spread of discretion to the leagues; and which prevents a club timing an insolvency event (as happened at Leeds United FC) to minimise the impact of sanctions

As the regulatory body, The FA should continue to embrace its "end to end" approach. With full and relevant reporting by clubs, it will be increasingly possible to devise measures to prevent crises in the first place. We have already invested heavily in capacity around early warning, not least in respect of HMRC


For the measures to work fully The FA must exercise its right to inspect club accounts across the leagues if there are reasonable grounds. Again this is best done in partnership with the leagues in the professional game and national game.

The Football Regulatory Authority has formed a sub-group to consider insolvency issues and examine new scenarios, as have arisen recently with Southampton FC.


The FA believe that it would also be worth considering whether, on those occasions where a new company steps into ownership involving Supporters Direct holding equity or the use of other community based ownership structures, this might mitigate penalties to some extent as promoting an intention to pursue competitive integrity.

The FA believe that the proposed framework provides a reasonable level of intervention on a punitive and preventative basis, at the same time recognising that clubs and club directors have to accept ultimate responsibility for the proper management and stewardship of their clubs.

4.  Do we need to reconsider the rule that requires insolvent clubs to pay "football debts" before other debts?


Football and other sports clubs have in some cases stretched their financial resources beyond the limits in pursuit of success. This has principally happened in the second and third tiers of our sport.

The FA recognises the fact that to an external observer it can be hard to understand the justification for a rule that may disadvantage local businesses and individuals when other football parties are afforded a greater level of financial protection.

Current environment

The Football Creditors Rule (FCR)

Since its introduction in 2000 by the Football League this has provided an additional layer of protection to certain participants in football through preferential status as creditors. It has withstood HMRC challenges in the courts.


The majority of insolvency events involve significant debts to HMRC. Having failed to challenge the FCR on policy terms, HMRC tends to vote to block CVA's as a creditor and where owed more than 25% of total debt, is able to do so. This can lead to failure to exit a CVA since the club is bound to pay football creditors in full but cannot satisfy HMRC if its ratio of debt is above 25%.

The FA and Football League have discussed this with HMRC not least because the Revenue has allowed clubs to build up significant tax debts. HMRC could remove this "credit line" and enforce greater responsibility. They fail to do so.


There is no agreement across football to remove the FCR, with arguments on either side of the case.


The FA through the Football Regulatory Authority's sub-group on insolvency matters will seek greater consensus on the application of the FCR.


All clubs should report, every two months, to The FA and their leagues in the same form on the extent of all classes of debt to HMRC and on any arrangement made where debt is deferred by agreement. This will reinforce the early warning system and trigger remedial steps early rather than too late.


The "going concern" report at audit should in every club address what has happened during the report period on this matter specifically with appropriate recommendations. Such advice to clubs in avoiding undue risks would require specific proposals from clubs on how they intend to respond that gives sufficient comfort to the auditors—broadly what is required of companies that are regulated by the Financial Services Authority.


In the same audit statement clubs would be required to show they have no debts to other clubs or football creditors other than those outstanding in a programme for payment mutually agreed

The FA Premier League operates a redistribution (solidarity payments scheme) devised to dampen the impact of relegation. However some of the most severe collapses have followed relegation


The FA recognises the difficulties in addressing the problems of relegation, for example the parachute payments may not wholly cover the consequences of relegation but may still provide a considerable advantage over other clubs. The FA and leagues should address this matter thoroughly and soon to ensure the risks of collapse following relegation are minimised.

5.  Do the "fit and proper" persons tests need to be strengthened and should they be applied prospectively? Is there a case for a single `fit and proper' person requirement in both the Premier and Football Leagues for directors and others involved in the management and ownership of clubs?


Since 1999 there have been discussions of the best way to ensure that the stewardship of football clubs is in the right hands. All discussions have found it easier and more acceptable to devise legal tests) that go beyond domestic and European Community law rather than more subjective ones. However, these issues are plainly back at the centre of discussion.

Current environment

In 2004, The FA Financial Advisory Committee created a FAPPT implemented by The FA for clubs in the Football Conference and feeder leagues. The FA Premier League and Football League also introduced FAPPT tests for their member clubs. The tests involve a number of similar principles but there are currently three sets of rules in English Football.

The FA Regulations currently require any individual acting as a "Director" to complete and sign a form stating that they are not subject to any one of a number of "Disqualifying Conditions". These are similar to the conditions adopted by, for example, the Financial Services Authority. The FA defines a director not only an individual registered as such at Companies House, but also those exercising either direct or indirect control over a club and any person holding 30% or more of the share capital of a club.

The Disqualifying Conditions comprise:

—  A disqualification order under the Company Directors' Disqualification Act 1986.

—  Unspent conviction for any one of offences listed on a wide-ranging Schedule of Offences.

—  Being subject to any bankruptcy order.

—  Being a Director of one football club that has been subject to two Insolvency Events or two football clubs that have been subject to one Insolvency Event during the preceding five years.

—  Being banned by a Sports Governing Body from the administration of that sport.

The three sets of FAPPT differ slightly from one another in respect of the tests although it is also true in every case the test goes beyond the scope of existing legislation. All parties review the provisions regularly. For example the 30% provision was included in 2007-08 to mirror the City Code on Takeovers and Mergers, and further changes deal with "shadow directors".


The FAPPT is a critical test both in terms of football and public confidence. It is not currently sufficiently consistent or robust notwithstanding efforts on all sides.

The FA believes that changes would be of real benefit in the following areas:


The FAPPT should be extended to cover not just those disciplinary or criminal offences already recorded, but also to whether a person has been notified of any potential proceedings or an investigation that might lead to those proceedings.

This would include such considerations as the freezing of an individual's assets and would follow similar provisions to the FSA Test


FAPPT checks should extend to the annual reports of Human Rights Watch (The Foreign and Commonwealth Office) which can identify people not subject to legal threat, despite serious allegations, because they control or can exercise control of the legal system that might otherwise intervene in their cases. This has the merit of being the authoritative public domain review which commands global respect.

These extensions would protect clubs and the sport from reputational damage. These new tests would be applied prospectively. Where these tests fail to identify grounds for a disqualification that subsequently comes to light, The FA believes that there would be a proper desire to put the matter right. In UK domestic law this should not be exercised so as to prevent unreasonably the opportunity of an individual to defend themselves from charges.


For clarity, The FA and others should share a single FAPPT. It should be widely published with full explanations to those it might affect (See Recommendation 2.1)

Whilst application forms might ask for commercially sensitive information this can be handled with complete discretion and should not deter prospective directors or investors. This discretion would not compromise the identity of those seeking to purchase a club. These arrangements may not prevent acquisition of shares in the open market, any more than with financial institutions, but would make it possible on discovery to ensure the exercise of proper pressure to divest/step down.

The FA believes that these provisions should form part of the domestic licensing regime.

6.  How can we most effectively promote competitive balance and reward success in the professional game while preventing the game from being too predictable?


This is undoubtedly one of the most complex issues. First, football in England is regarded around the world as passionate and of outstanding quality. This is reflected in attendances and the value of televised rights and sponsorship. It is a story of success. Nobody will welcome changes that diminish success and fair rewards for achievement. The success is dependant on a thoroughly competitive environment from the pinnacle of our league system to safeguard its attractiveness and hence its long term prosperity. Every business environment changes so it is appropriate to reconsider arrangements periodically indeed this is taking place in the FA Premier League. The FA and the Football League will have significant interest in this discussion.

At the heart of the structure is the pyramid, and the principle of promotion and relegation. By its nature this principle increases financial instability as clubs move through very different trading environments.

So in the interests of football throughout the pyramid, The FA must try to ensure clubs are as evenly matched as possible to sustain attractive football, avoiding exposure to unwarranted risks, while encouraging the excellence that makes English football hugely attractive.

This is not simply a domestic issue. The funds that flow from UEFA both enable four English clubs to attract among the best players in the world and to become increasingly distinct from other clubs, a pattern equally evident in other major European leagues. Indeed it is vital to acknowledge that the FA Premier League shares more of its revenues than the majority of its European counterparts.

The current environment

The UEFA Champions League is the leading international club competition and the success of the English clubs a matter of national pride. Distributions from the competition are worthy of consideration. Qualification, performance bonuses, the market pool and prize money make a fundamental difference not only for the big four English clubs but for Real Madrid, FC Barcelona, AS Roma, Internazionale, AC Milan, Olympique Lyonnaise and Bayern Munich in particular.

UEFA solidarity payments in each league are equally shared. Hitherto this has amounted to 1/50th of the revenues earned by those competing in the group stages. In short this is negligible. This creates a significant financial advantage for those reaching the UEFA Champions League group stages compared with their domestic rivals. The Independent European Sports review recommended that in future there should be greater distributions of sums to grassroots football.

The FA Premier League

Without doubt, a huge success story. Like other top leagues, though it is hard to argue on the evidence that its highest reaches have become less predictable. Only Everton (2005) has dented the complete dominance of four clubs—Arsenal FC, Chelsea FC, Liverpool FC and Manchester United FC—over the last five years. It could be argued that the league operates in three tiers. The UEFA Champions League is the greatest contributor to this outcome at the top of the table.

Because the FA Premier League is the most successful league on and off of the pitch, it is important to understand the data. The average revenue (broadcast, matchday and commercial) earned by the big four clubs is 3.5 times greater than average for the other 16 clubs. Nonetheless, the collective bargaining system used by the FA Premier League clubs is certainly the fairest intra-league distribution mechanism for broadcasting revenues in Europe. A redistribution mechanism formula secures this. For example in 2007-08 the top revenue earners, Manchester United FC received £49m from broadcasting rights and the bottom club, Derby County FC received £29 million, or 60% of the top clubs revenue. Objectively viewed this is a reasonable balance.

Of course, matchday and commercial revenues have an impact, and there has been a significant level of investment in new stadia and facilities post the Lord Justice Taylor's Report. Income consequently grew from corporate boxes, ticket sales and hospitality. The largest return is unsurprisingly at the largest stadia. The big four earned an average of £59 million from matchday revenue; non relegated competitors averaged £17 million; and relegated competitors £9 million. It is a similar picture when looking at commercial revenues. The average big four club earned £54 million from this source; for those clubs not relegated it was £15 million; and those relegated it was £8 million (all based on 2006-07 figures).

The Football League

We are not aware of any suggestions that the three divisions of the Football League suffer from predictability. We are also aware of the growing attraction to spectators of that competition with the Football League enjoying its highest attendances for nearly 50 years and over 16.5 million fans attending the matches this season.

However the revenue gap with The FA Premier League is a considerable one. The Deloitte 2006-07 report shows that The FA Premier League earned £1,512 million in total revenue between its 20 clubs and in the Football League Championship earned £329 million between 24 clubs.

Many argue that the impact of the "parachute payments" for clubs relegated distorts the Championship. It is hard to sustain this case fully on the evidence. Fewer than one in three are promoted back at their first attempt and fewer than half get back before the parachute payments cease. lt does not appear that these payments have a particularly distortive effect on the balance of the Football League Championship. However, as stated in Recommendation 4.5, The FA and leagues should address this matter thoroughly and soon.


The balance needed to sustain great quality and enhance wider competition will not easily be found. No one wants to damage the former. Most people would welcome the latter. Over the years, people have explored various options from salary caps to revenue sharing to handicapping systems to forms of distributing the talent pool of players.

Salary Caps

Salary caps are sometimes urged on the basis that they encourage prudent financial restraint rather than excess. Controlled wage costs would assist clubs to live within their means. In England this approach, a "soft cap" where clubs agree on an upper limit on wage expenditure of 75% of income is in place in Football League Divisions One and Two. A scheme in France was introduced and then withdrawn as it was unenforceable when clubs incentivised players in other ways.

It is, in our view, a matter for the leagues to decide based on the range of financial circumstances they face. At the top levels it would face challenges of legality and would require Europe or worldwide consent to prevent damage to competitiveness. Additionally, freezing expenditure at a particular point—for example at a percentage of current revenues—would cement into the competition the advantage of clubs with the largest revenues and they would simply dominate. At lower levels, the attractions would be greater to leagues where insolvency events occur more often.


The FA believes there is merit in a preliminary discussion across professional football with The FA of a new element of redistribution. If clubs operated to an agreed and specified salary benchmark, it might be appropriate to levy a charge against those choosing to exceed it, with the excess element to be distributed in the game at youth and grassroots level, or within the league on a redistributive basis.

Handicapping systems in fixtures

While these systems may make outcomes less certain it would undermine the symmetry of the fixture list and the ultimate guarantee of competition. The FA does not consider this a viable option.

Distribution of the talent pool

Systems of this kind operate in other sports, for example the NFL and Australian (Aussie Rules) Football League. They operate as "drafts" and have broadly been adopted by tough-minded business people to protect the commercial value of highly competitive environments. It would change fundamentally the structures of young player identification, the transfer market and a range of international arrangements. The FA does not consider this a viable system.


The FA believes that a preliminary discussion may be valuable in assessing the economics of young player development, potentially improving the incentives for clubs to invest in talent development. A levy currently exists at the FA Premier League and Football League level where 5% is paid to the League in respect of transfers. It is paid to the PFA/Players fund, with surpluses returned to the clubs. Given the mechanism exists it may be possible that either a proportion of the fund or the returnable surplus is retained and applied to young player development on a hypothecated basis or that a slightly higher percentage is paid for this purpose.

Revenue sharing

We have already noted the redistributive solidarity payments in England. The FA believes that it is timely to consider sources of revenue that either do not enter the game or are too concentrated among too few competitors.


The FA would welcome a discussion on the revenues achieved by the gambling industry, both to:

(a)  pay for the costs of policing its relationship with football upon which it depends to a considerable extent, and

(b)  for further distribution throughout the pyramid.


The FA would welcome and would willingly participate in, a discussion between the European Leagues and UEFA on wider distribution of UEFA Champions League Broadcast income. Both the quantum and destination might appropriately be explored.


In the event of further discussion between the FA Premier League and the Football League about the distribution, The FA believes that it would be appropriate to take full part.

There are no easy answers; however, we hope we have provided significant food for thought in terms of potential ways in which the current system and transfer market could be used to the greater benefit of the game as a whole.

7.  Is everything possible being done to develop and bolster the national side? Is there a case for introducing a specified number of home grown players in the domestic league to promote young talent?


The FA currently sends 24 representative teams into World and European Competition. Our explicit vision is that they are winners. We aim to produce teams with a genuine chance of winning and our country expects no less. The success of our great clubs and national teams is intimately linked.

Current Environment

As the Governing Body our first responsibility is the education and preparation of coaches, preferably outstanding coaches. It is a requirement of UEFA and FIFA statutes. We intend to develop a fully qualified profession with standards directly comparable to other professions in terms of assessment and continuous professional development.

This will be done through FA Learning, the FA Premier League and Football League as well as stakeholders throughout the national game. Only with an exceptional profession (analogous to other teachers) and with academies and centres of excellence (analogous to exceptional schools) can we achieve the development of the next generations of footballers. We will write the core coaching manual to guide this work. This is our future.

At senior level, Club England supports the teams. The support level includes coaches, sports scientists, medical and physiotherapy staff and many others. This underpins the best performance possible on the pitch.

Our aim remains to have a world class hub—The National Football Centre.

At the youngest level of players, through age-specific coaching, we are improving the technical ability of young players especially in the 5-11 age group. Work in the 12-16 and 17-21 age groups is also progressing and as the ages increase, so does the need for partnership with professional clubs. We are guided in significant part by the Lewis Review (2007).


A number of proposals have been made about the ratios of players eligible to play for their country, in our case England, in the past year.

The FA have been in favour of exploring the "six-plus-five" principle advocated by FIFA because the decreasing number of players in top club football eligible to play for England poses an appreciable risk to the success of the national teams. Equally, we have all been aware that European legislation may prove a major barrier and this is unlikely to provide a quick change in any event. We understand that many would oppose it even if legal.

In 2005 UEFA introduced a "home grown" player declaration. It emphasises the training and development of young players and argues their importance to the clubs that found and nurtured them. This concept is not in itself one about nationality. These proposals have been sanctioned by the European Union and have been in operation since the 2006-07 season although they only apply to UEFA'S own competitions (UEFA Champions League and the UEFA Cup (to be renamed the Europa League).

The definition used by UEFA for 'home grown' is those players regardless of their nationality, that have been trained by a club or by another club in their national association for at least three years between the ages of 15-21. Currently there have to be eight "home grown" players in the 25-man competition squad. The rule is now well established and is to be reviewed by the European Commission in 2011. Since its inception 13 FA Premier League Clubs have complied with the rule and played in UEFA competitions.

The Football League voted to adopt a "home grown" rule to apply from the 2009-10 season broadly based on the UEFA regulation. A 'home grown' player will have been registered domestically for a minimum of three seasons before their 21st birthday and at least four such players must be included in every 16 man squad.

The FA Premier League has announced it has reached a similar decision and we look forward to seeing the details of their proposal.

The FA believes that both Leagues should be congratulated. These measures may not necessarily have an impact on the national side but they are likely to do so.

The proposals need on-going thought. Under the UEFA rule if a player is signed by a club from Spain at 15 (or 18 under the Football League Rule) he would qualify as a "home grown" player after three years. He would be eligible for the UEFA Champions League but not for our own national team. Indeed, perversely, he conceivably might have kept someone out of an academy that would qualify for the national team. Hence the importance of considering restricting the movement of young players.


The FA supports these developments and welcomes them. We believe that the interests of young people, their educational opportunities and families mean that it is undesirable that they move from one nation to another, one education system to another, before the age of 18.

We know many argue that 16 is an appropriate age. The whole thrust of mainstream education policy in Europe and the world aside from the poorest nations, is to try and retain all children in education until the age of majority at 18. It is felt to reflect their best interests. In any event this may be a matter for EU Community law, by which we will all be bound but The FA is sensitive to the wider social policy issues at stake alongside football considerations. UEFA is finalising proposals, with EU law in mind, for further discussion with associations, leagues, clubs and players and we look forward to taking full part in those discussions.

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© Parliamentary copyright 2011
Prepared 29 July 2011