Football Governance Bill

Stuart Andrew Excerpts

2nd reading
Tuesday 23rd April 2024 Commons Chamber

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

I thank all Members for their thoughtful and wide-ranging contributions, and I am grateful for learning about the first black professional footballer, Arthur Wharton, from my hon. Friend the Member for Darlington (Peter Gibson). I am pleased to hear the broad support for what the Government are proposing, and I am grateful for it. I am also grateful for the continued engagement with colleagues as we have prepared for the Bill.

My right hon. and learned Friend the Secretary of State rightly pointed out the successes of English football, and the contribution it makes to our economy and the pride of our nation, but it is important to remember why we are here today. My very first meeting when I was appointed as Minister was with fans’ groups. I heard at first hand their experiences of when it all goes horribly wrong—even to the point of having to boycott their own club for five years, in one instance. The fans felt unheard. We know that clubs are more than just football clubs. When they go into administration and are run down, the fans are obviously in despair, but that also has a significant impact on the wider community because they are more than football clubs; they are community assets.

That is why we committed to the fan-led review. Like everyone else, I want to put on record my thanks to my hon. Friend the Member for Chatham and Aylesford (Dame Tracey Crouch) and to the people who helped her, including Kevin Miles from the Football Supporters’ Association. The review was the foundation for the White Paper, and now we have the Bill today. I thank all those who engaged with us for all they have done: the FA, the Premier League, the EFL, the National League, the FSA and the Select Committee. I also want to put my particular thanks on the record to the officials in the Department. I cannot tell the House how many hours they have put in; they have been first rate and I thank them a great deal.

I want to focus, in the short time I have left, on some of the points that were raised. Many issues were raised and I will try to get through as many of them as I can, but I am happy to engage with colleagues afterwards if need be. When constructing the Bill, we have been careful to ensure that it is carefully drafted, considered and proportionate, and that it provides an advocacy-first approach; and that there is focus on the clubs where it is needed, and we make sure it is proportionate to their place in the pyramid.

A number of Members raised the owners and directors test. Too many clubs have been brought to the brink with unsuitable owners taking over, stripping them of assets and refusing to adequately fund them. That is why we are bringing in strong statutory tests to help prevent unsuitable owners at the point of entry, before they can do harm to clubs. Prospective individuals will be prohibited from becoming club owners unless the regulator has determined beforehand that they are suitable. They must pass a fitness test, which means: they have the requisite honesty and integrity; are financially sound; have passed the source of wealth test to ensure that their wealth is not connected to illicit finance; and have a plan and the resources to run the club.

Even once an owner is in place at a club, the regulator will still be able to make sure that they continue to be suitable. If it has grounds for concern about their suitability, it can test them on their fitness and their source of wealth. If it finds them unsuitable, they will have to sell the club. To prevent further harm being done to the club during the sale process, the regulator will have the powers to limit the owner’s involvement in the club, and if the unsuitable owner ultimately refuses to sell the club, the regulator will have the powers to step in and force a sale as a last resort. Strengthened tests and robust powers to remove unsuitable owners will mean that fans have the suitable owners that they deserve.

Hon. Members asked about what would happen if a club’s owners were forced to divest. Let me be clear: we hope that such a circumstance will be incredibly rare. The regulator’s objective is to promote clubs’ financial sustainability, and it will introduce tests on governance and financial oversight, which will greatly reduce the likelihood of financial distress and make football more resilient in the long term. For example, we will ensure that the regulator is able to look at a liquidity buffer, which could provide the club with time to seek a new owner, and the regulator will have the power to test an incumbent owner where it has grounds for concern about their suitability.

Almost every Member mentioned the backstop, and I repeat that we want football to come up with a deal itself; it is the best option, and this delay serves no one. We need to remember that we are talking about a commercial arrangement—businesses giving businesses money—which is why we believe it is best that football does it, but we recognise that there is no deal at the moment. That is precisely why we have put provisions in the Bill for a backstop—something to fall back on—so that they can consider the relevant revenues.

[Dame Tracey Crouch]

Does my right hon. Friend agree with my interpretation of clause 55, which is that international broadcast income is included in the relevant revenue for redistribution? That is currently not the case for solidarity payments. If it is the case, has this issue come up in his discussions with the Premier League?

[Stuart Andrew]

My hon. Friend raises an interesting point. I have had dozens of meetings with the Premier League, but as far as I can recall, I do not think that it has raised carving out international broadcast revenue in those discussions, which have always revolved around the net media revenues and the aggregate revenue received by both the Premier League and the EFL; she raises a very interesting point.

Some say that the regulator should be able to trigger the backstop right at the outset. Frankly, that would just be a frontstop, and it may hinder a deal being struck by football itself, but the Bill provides that if there is no deal because one has not been offered or one side cannot sign it because it is not a good deal, that side can ask the regulator to trigger the backstop.

Members have mentioned parachute payments, and I am always happy to meet colleagues to discuss and look at that matter further, particularly in Committee. I am also happy to organise a briefing, if that would be helpful, because it is quite a complex issue. Parachute payments play an important role in the sustainability of the system by softening the financial blow of relegation, and removing them could have adverse effects. Look at Bradford City: when they were relegated from the premier league in 2001, there were no parachute payments, and the following season they went into administration.

[Mr Betts]

Will the Minister give way?

[Stuart Andrew]

I literally have two minutes. I have offered a briefing, and we can have this debate afterwards.

We realise that parachute payments can have a distortive impact, particularly in the championship, which is why the regulator has the power to address any structural or systemic issues through its licensing regime. Any distortion created by parachute payments also has the potential to be addressed through distribution to non-parachute payment clubs; that is exactly what the regulator will be able to look at as part of the backstop. Leading experts have advised us to keep the backstop targeted and simple, which we have done, and to design it so that it may never need to be triggered, which we have also done. As such, we do not think it is appropriate to include parachute payments in the backstop, nor we do think it is necessary to do so, as we have ensured that the regulator will be able to address any distortive effects that they cause via the licensing regime.

I am running out of time to answer more questions. This is a landmark Bill for football. It has been carefully designed to celebrate the sport’s success and encourage investment, but it is about providing stability for clubs, sustaining the pyramid and putting fans at the heart. We recognise that there are many successes, but it is important that we tackle the issues. The IFR will be focused on football, focused on financial stability and focused on fans.

I close by playing on the iconic words of 1966. Too many fans have seen their club on the brink, and they think it’s all over. Well, it’s not now.

Question put and agreed to.

Bill accordingly read a Second time.

Football Governance Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)), That the following provisions shall apply to the Football Governance Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 6 June 2024.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Joy Morrissey.)

Question agreed to.

Football Governance Bill (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Football Governance Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred under or by virtue of the Act by the Secretary of State.—(Stuart Andrew.)

Question agreed to.

Football Governance Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Football Governance Bill, it is expedient to authorise:

(1) the charging of a levy by the Independent Football Regulator in connection with the exercise of its functions under the Act; and

(2) the payment of sums into the Consolidated Fund.—(Stuart Andrew.)

Question agreed to.

Football Governance Bill (First sitting)

Stuart Andrew Excerpts

Committee stage
Tuesday 14th May 2024 Public Bill Committees

[Mr Betts]

Fair enough.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

Q We have heard some accusations that the Bill is over-regulation for football. What is your view on that?

Dr Philippou: It is fairly light touch from a compliance background, if you look at the financial implications and what is being asked for. In summary, you are effectively asking for some budgeting, some basic risk assessment, and knowing the roles of your senior management. It is fairly light touch, if you are running the club properly. From my perspective, it does not look particularly over-regulated. Certainly, from a compliance perspective, I would expect that if you are running the club properly, a lot of that information should be there anyway, and should be easily reportable without adding much burden to clubs.

[Stuart Andrew]

Q You gave us quite a lot of information about the financial situation in both the Premier League and the EFL, but what about the National League?

Kieran Maguire: As far as the National League is concerned, I think the average losses were £970,000 a year. There are no cost-control measures as far as the national league is concerned, so that is why we have seen the recent arrival of owners who have transformed individual clubs, because they have been allowed to achieve effectively unlimited levels of loss. That potentially has implications when those clubs are promoted to League Two, although again they have tended to do very well.

The National League has been intriguing, and certainly issues arose with governance during covid, such as the grants that were given to support those clubs, which proved to be quite contentious. Like both the Premier League and the EFL, there appears to be some form of civil war taking place within—or between—clubs. We talk about the Premier League, the National League and the EFL, but I do not think there is a collective viewpoint within those institutions themselves from an individual club basis.

Dr Philippou: From a financial profile point of view, the National League shows very similar financial issues to League One and League Two. It is not as if National League clubs are free from problems, and the reason why they are in here is because they are pro clubs—it is professional football.

[Ian Byrne]

Q Is there anything in the Bill that imperils the financial sustainability and global success of the Premier League?

Kieran Maguire: The Premier League has been successful because it has gone out to an audience and it has sold its services. There is no reason why the Premier League will not be competitive on a European basis in recruiting players, in respect of these rules. On attracting investment into the Premier League, part of the reason for its success is that we have moved effectively from a duopoly, which is where we were in 2005, to a more competitive product. In my view, if I was an investor, I would like to be able to invest in an industry where the opportunity to break even becomes greater, and I think that is more likely with the regulator than not.

Dr Philippou: We are not seeing much investment from certain areas that you would expect in most businesses. Part of that is the loss-making and the difficulty in conducting due diligence around football clubs. What we see in the Bill should fix that, and therefore we would expect to see more of a certain type of investment. Yes, perhaps there will be less investment from those who would rather not be in a more regulated environment, but that is not the overall picture.

--- Later in debate ---

[Robin Millar]

Q I am curious, then, because the Bill itself is a regulatory Bill. It talks about a licence to operate owners and directors tests, but in some of your replies, you have suggested something much more interventionist—something that is much more warning people about things that will cause them a problem further down the line. Is what you are describing about a regulation of interests rather than simply a regulation of finance? If that is the case, does this Bill focused on finance actually manage to do that?

Kieran Maguire: I think it does deal with the financial issues. Effectively, if the regulator becomes the Martin Lewis of football in giving appropriate advice, that can benefit the industry. Many people enter the football industry with very good intentions. They have been successful in their own roles in their own businesses and think they can replicate that in football, and then they are seduced by the nature of football. For example, you run a club on a sustainable basis, and you are in seventh in the Championship in January. Your manager comes to you and says, “I’ve spotted this centre forward—costs £8 million, wants 30 grand a week, can get us into the play-offs. We can be in the Premier League in six months,” and all your common sense goes out of the window. That is part of the joy of football, but it is also one of the reasons why we have resulted in a loss-making industry. Provided the owner is aware of the consequences of their decisions, all you can do is give advisory assistance, rather than telling them what to do.

Dr Philippou: But there is an element of investment fatigue. We see all these great things, it is all going well and people are pumping money in, and then something happens in their other businesses or they lose interest, and that is when things start going wrong in the industry. I guess that is why there is also the non-financial side of the Bill, which looks at the corporate governance and fixes that side of the game too.

[Stuart Andrew]

Q Do you worry about the competitiveness of the bottom of the Premier League, particularly after three weak clubs were promoted? That relates to some of the questions that were asked earlier. Do you have any thoughts about a reasonable timeframe for approving a takeover?

Kieran Maguire: In terms of the issues at the bottom of the Premier League, three clubs have just been promoted and have almost been relegated. The three clubs above them—excluding Everton, because if it had not had a points deduction, it would have been on 48 points—have been in the Premier League for two or three seasons, so there is an acclimatisation issue. There is also an issue at the top of the Championship. The clubs that have just been relegated have greater resources than their peer group, and that is going to have a yo-yo effect, which we appear to be locking in on a greater basis. That tends to be more of the case in the Championship and League One, where some clubs are moving. That is driven by the culture of the owners. The system at present encourages overspending. We have not seen that in respect of the three clubs that are being relegated, but we did see it to a greater degree with the clubs that were promoted in 2022.

Dr Philippou: Absolutely, there is that competitiveness issue, which we have seen diminish over time. That has a long-term impact on the commercial side and on broadcasting rights, because the less competitive a league becomes, the less likely people are to watch it and the less likely broadcasters are to put money in, so that can also have an impact.

[Mr Betts]

Q On the regulator’s powers, is it unusual to have a regulator that cannot decide to intervene until you have gone through a process, and will step in and do anything only after the parties have failed to reach agreement?

Kieran Maguire: You would hope that the parties would be able to sort something out between themselves. If we did not have a regulator, we would be in a very similar position to the one we have at present. The Premier League has no incentive to be more beneficial, in terms of the distribution of money. It would have to be dragged to the table by the regulator, so that is why the backstop powers are important. The EFL is a fantastic league in its own right. The chances are that anybody who has supported a club in the Premier League have also supported it in the EFL.

When it comes to the regulator using last resort powers, it is effectively the same as the Bank of England. The Bank of England is the lender of last resort, but there are alternatives. Surely the same should be true in football. It is testament to the intransigence of the Premier League, in particular, which is unwilling to look at the broader football issues in the country.

--- Later in debate ---

[The Chair]

I am going to move on to the Minister, as we are going to be short of time.

[Stuart Andrew]

Q The regulator will have a duty to work with the leagues when they are exercising their regulatory functions and have regard to the existing rules within your leagues. How do you see that working in practice, and how are you reforming your own structures to ensure that regulation works effectively? You talked about unintended consequences, Richard—can I just push you to give the Committee a specific example of what those might be?

Richard Masters: It is unclear—a lot of this depends not on the technical drafting of the Bill, but the personality of the regulator, who we are yet to meet. Now the appointments have been made, it depends upon how the regulator and its powers are going to be utilised. For example, if the regulator wishes to put financial controls on virtually all the 116 clubs that it wants to license, I believe that will stop investment into football squads and football in general, and will slow down the growth of English football. That is the principal unintended consequence I would be concerned about.

Mark Ives: On unintended consequences, there are a couple of things, particularly when you consider the size of the National League clubs and how they are staffed. The Bill is written in a way that sets out what it intends; it does not give how it is going to achieve those aims. As far as the clubs are concerned, there is massive uncertainty.

As we see it, one of the unintended consequences is the drain on the resources of those clubs because of the duplication of work and the over-bureaucracy that there may be. For example, we already have a licensing system. Our system includes our football finance regulations, which have been activated since 2013. It is worth noting that we are talking about improving the sustainability of our clubs—but the National League, which is the only division that I can talk about, has not had a club going into administration since 2013, since it brought in its financial regulations. That is not a bad record. Our concern is the duplication of that licensing scheme. As the Minister rightly says, there is a referral back to the league regulations. We had hoped that that would go further and put the onus on the league, on the competition, to be the first to react. If that does not work, then the regulator steps in—rather than create a lot of duplication of work for our clubs, as we see it.

The other issue is costs. The Bill is intended to ensure financial sustainability. Yet the concern of this is that, as with all regulators, the people who pick up that bill are those who are being regulated. I am not sure that the clubs fully understand that. When you are at the bottom level of what is being regulated, the fear is the quantum of those costs. If you have a challenge that goes to judicial review from one of the National League clubs, I suspect that the financial cost on that is not going to be too great. However, if one of the top clubs in the Premier League challenges the regulator, the costs on that are going to be really significant. Those costs get passed on to those being regulated, and they could run into millions of pounds, when the cost of those are being borne by clubs at the National League level. In our view the Bill is not strong enough in clarifying what proportionality means. We have been given assurances: we have had some good meetings with the Department for Culture, Media and Sport, with the Minister and the Secretary of State, where assurances are that it will be proportionate. However, we do not understand what “proportionate” is. So, one of the unintended consequences is the financial and human resource burden on our clubs.

Rick Parry: It is incumbent on us to work with the regulator to make sure that this works for the good of the game. We see big pluses in terms of the regulator bringing independence, transparency and consistency across leagues, which is a bit of a disaster area at the moment. We view it positively: everything we have found so far in terms of engagement with DCMS and in terms of the shadow body that is the regulator is that all these concerns can be addressed. It is going to be a tougher environment, but football needs a tougher environment. We have had 30 years to get this right and we have failed.

Richard Masters: Just to answer your question about what plans the bodies are making to adjust to the regulatory world, we will all have to adjust to the new environment that is coming. I am very happy to do so. Like Rick, we are already meeting with the shadow regulatory team on a regular basis and have had good conversations about how it might work in practice. In reality, I think the performance of the regulator can be managed. We will meet that obligation head on and ensure that they get all the information they need, and we will respond at all times.

The issue that we are most concerned about is what impact that might have on the wider system—beyond the very positive objectives of the regulator to give fans a stronger voice—to improve the sustainability of the pyramid and individual clubs, and to avoid some of the issues we have had in the past. We agree with all that, but it is important to make sure it does not impact on the very good success story that we have at the moment.

Mark Ives: Can I echo that and clarify some points about where we stand on the regulator? From day one, and from when Tracey started the fan-led review, we met the review and we were asked whether we wanted to be part of the regulator. We said yes we did, on the understanding that it would not be too onerous for our clubs, and we would keep a mind on the costs. So we are mindful of that. We embraced the regulator. Our position was always that if there is a regulator, we thought it should be the FA, but for well-documented reasons, we know why that cannot happen. So we move on and embrace the regulator as it is.

Our challenges are not about having a regulator; they are about understanding and clarifying how the regulator will work. We embrace it and we will work with it. We have had some very productive meetings with DCMS and discussions all the way through. All we are trying to do is make sure that it is not too onerous and too costly for our clubs, because we have to protect the interests of those clubs, and they need clarity.

[Damian Collins]

Q Richard Masters, at the beginning you raised some concerns about the checks on new owners. You said you wanted a process that was governed by objectivity and certainty—I think those were the words you used. A lot of people would look at the live example of Everton and 777 Partners and say that that does not look like a situation that is being governed by objectivity and certainty, and that it is the kind of case where the regulator may well have taken a different view from the Premier League and may well have rejected the takeover. Given your concerns about the regulator in this regard, and given that, after eight months, 777 has still not met the criteria that the Premier League has set, I would be interested to know why the Premier League has not rejected it.

Richard Masters: Let me be clear about what the Premier League’s role in this is. As regulator, it is to perform the test. It is not to decide who the current owner wants to sell this club to. That is his decision. At the moment, he wants to continue to have discussions with 777 about it. The Premier League has made very clear the conditions that have to be met by 777 if it wishes to become the owner of Everton. At the moment, obviously, because the takeover has not been confirmed, I will leave it to the Committee to make its own conclusions about where we are with that.

Rick and Mark have talked about some of the benefits of the regulatory ownership test, in the sense that they will get access to more information that we can have, because we are not a statutory body. So we can only get the information that we are provided with and we have strong investigatory powers.

The other thing that Mark talked about was speed. I accept that takeovers that carry on for a very long time are not good for fan certainty. That is why we have a very big team of people who do nothing else in this. All I would say is that over time, particularly in the Premier League, takeovers are becoming increasingly complex. It is not a small undertaking on the part of the regulator to take this burden on. That is why we want to remain involved with it as well. This is very complicated, and we need to make sure that all those decisions are correct, even if that means taking a little more time to make sure that a decision is correct.

--- Later in debate ---

[Stephanie Peacock]

Q Are there any particular topics that you would expect fans to be consulted on but that the Bill does not require?

Kevin Miles: We have had a long discussion with officials about exactly what the scope of engagement with fans should be. We think the fan engagement regime needs to be robust, it needs to be appropriate to the circumstances of all the regulated clubs and it needs to be based on democratic principles, with the composition of the fan representatives being determined independently of the clubs themselves. We have had some conversations about what the particular terms of the content of fan engagement should be and we have been talking to officials and Ministers about that. The list includes strategic direction and objectives of the club, the club’s business priorities, operational matchday issues, the club’s heritage and the club’s plans relating to additional fan engagement. That is as it currently stands.

When we have asked officials about specific examples of that, they have come back, for instance, on ticket pricing, saying “We expect those to be included in business priorities and operational and matchday issues.” However, there is currently a set-up in the Premier League of fan advisory boards that are required, under the Premier League’s rules, to engage with clubs. It seems to officials in the DCMS, as a matter of common sense, that ticket pricing would be one of the things that fans would discuss with their clubs. It seems to me a matter of common sense that ticket pricing is one of the things that fans would discuss with their clubs.

Yet, in the Premier League system, our members tell us that at Newcastle United, the fan advisory board was given three days’ notice of the ticket price increases without any consultation. At Fulham, there is no fan advisory board, but the supporters’ clubs there got four hours’ notice with an embargo before the announcement of ticket price increases. Nottingham Forest announced its prices without any discussion with its fan advisory board or the trust. Similar representations have been made to us about similar experiences at Bournemouth, Tottenham, Arsenal and Liverpool. That is happening already, and that is why we think that perhaps it would be useful to have in the Bill the additional words “including ticket prices”, just to make it explicitly clear.

The general point is that there is a lot in the Bill that depends on the view the regulator takes about what is included and the guidance that is given to the regulator. We would appreciate really strong statements from Ministers in the course of this process. That might help us to avoid the necessity of amending the Bill, but a strong direction from Ministers about what should be in scope and what is required of fan engagement to fill some of those gaps would be really useful.

[Stuart Andrew]

Q First of all, thank you, Kevin, for what you said about the officials. You are absolutely right; they have been superb throughout this whole process. Thank you, too, for your engagement.

I remember when I was first appointed, the first meeting I had was with you and with other fans. It was clear from that meeting that some clubs do engagement extremely well and, as you have just alluded to, there are others that do it differently. Given that fan engagement is part of the licensing regime, do you think that that is going to be sufficient to bring about a significant impact on the quality of fan engagement that we are currently seeing across the board? That is, are we levelling up, to coin a phrase?

Kevin Miles: I very much hope so, and I am optimistic in that regard. It is the first time that we will have had a requirement from clubs to engage with the fans and, to use the Prime Minister’s words, to put the fans’ voice “front and centre” of all those discussions. I do think, though, that there are a lot of details still to be worked out about how that actually looks.

There are some clubs, as you say, that are very good, but one of the illustrations of the limitations of self-regulation has been that when the leagues have been trying to put together their own requirements on fan engagement, because it has to be voted on by their members and agreed by their rulebook, the lowest common denominator tends to be put into the rulebook. We know that there are clubs that will resist the idea. There are owners who think they have nothing to benefit from in listening to the fanbase—their customer base, if you like. We know from experience that there are some who will do everything that they can to get around this. We will need to have an underpinning of that in the regulatory system, and some monitoring of it through the club licensing system. We recognise that this is challenging, because it cannot simply be a look at what structures are put in place. The regulator will have to do more than just monitor that there is a fan advisory board notionally in place. There will have to be some evaluation and examination of the content and spirit of the fan engagement. We are not expecting a fan veto on club decisions, but we are expecting that the fan voice is not just heard but listened to and given due consideration.

Evaluating that is a more complex process. Somebody referred earlier—I think in the first witness panel—to the possibility of Ofsted-type investigations. Maybe in some cases it will require the regulator to be able to consult the fan groups to see how they think it has been done, and to make its own evaluation about whether the spirit of what is intended here is actually being carried forward. That will need to be underpinned by requirements in the licensing condition.

[Ian Byrne]

Q Kevin, on the regulatory principles, I have tabled an amendment saying that supporters and supporter organisations should be added to clause 8(b). Does the organisation you represent agree with that?

Kevin Miles: Absolutely. If you look at that clause, you see that it is about the principles of the regulator. It currently reads that the regulator should,

“so far as reasonably practicable, co-operate, and proactively and constructively engage, with

(i) clubs,

(ii) owners, senior managers and other officers of clubs, and

(iii) competition organisers”.

We think that it is in the spirit of the rest of the Bill if a further provision is included that says “supporters and supporter organisations”. If the Bill really is about giving fans a voice at the heart of the game, the regulator should have that as part of those regulatory principles.

I cannot help thinking that this is an oversight rather than a conspiracy. Actually, the spirit of all the engagement we have had with the Department and with Ministers has been precisely that the supporters’ input into the regulation of the game would be an important component. But I think there’s a requirement for it to go on the face of the Bill in that clause.

Football Governance Bill (Second sitting)

Stuart Andrew Excerpts

Committee stage
Tuesday 14th May 2024 Public Bill Committees

[Ian Byrne]

Q Moving on from that, how does fan engagement look in your club, and does the Bill add to or enhance it? What is your opinion? We sort of have fan engagement from the Premier League perspective, but what it is like at your level?

Steve Thompson: We work with supporters and have different supporters’ groups. We also work in our community; all our clubs have a community trust, and all the Football League and Premier League clubs will have a community trust. Everybody does lots of work in the community. As parliamentarians, many of you will know that at the 2010 election there was a big British National party problem in Barking and Dagenham, and as a football club Dagenham & Redbridge stood up and made a big thing about that. A couple of months before the election, there was a big game, and McDonald’s was selling burgers for 99p, so I said, “We’ll let everybody in for 99p, with kids in for 25p.” We had the managers of small local football teams buying all the players a ticket and it costing less than a fiver.

That put out a message, and it was an important message. At the time, I was reported as saying that we are in a white working class area, as it was in 2010, that the majority of our supporters are white males, and that if there are 10 BNP councillors out of 50 in Barking and Dagenham, some of the supporters must have voted for them. We had a really multiracial team at the time: we had a Barbadian international, a South African player and a Muslim player. We had several. I turned around and said, “You’ve got to show them that you can’t be cheering on a multicultural team on a Saturday and then expect them to all go home on a Monday.” That took traction. We stood up. Darren Rodwell, who might be part of this establishment within the year, will turn around and say that “he”—unless I am in the room, in which case he will say “we”—kicked the BNP out of Barking and Dagenham. That is the power of your local football club. We can stand up and do things like that, and it is important that we can. The supporters will go with you.

[Stuart Andrew (Pudsey) (Con)]

Q First, thank you for all your engagements so far as we have been preparing the Bill. On the point about proportionality, you made good representations as we were preparing the Bill. I hope the Bill reflects that the amount of work you will have to do will be dependent on where you are in the pyramid.

If the Bill goes through, there will be a statutory regulator. What discussions have clubs had with the National League about whether it will row back and allow the statutory regulator to do the work so that there is no duplication?

Secondly, the independent experts we had in this morning said that clubs are looking in the rear-view mirror at the moment and that the advocacy-first approach means that there will be a real-time approach to analysis of clubs, which would be helpful for clubs. Do you agree?

Steve Thompson: I was quite hoping that the regulator would work with the National League, the EFL and the Premier League, allow them to continue with their reporting, and step in only if there was a problem with particular clubs. It would be a much more light touch. We have discussed that before. I understand that that will be down to the regulator, but I was hoping it would be more like that.

Darryl Eales: I think the forward-looking approach is to be welcomed. I am an accountant by background, and I am very happy to share my ideas on how that approach can put more pressure on owners to be financially responsible. The only reason football clubs get into trouble is their playing budget, so there needs to be some linkage between your playing budget and the financial resources of the owner.

[Robin Millar (Aberconwy) (Con)]

Q Mr Eales, I was really struck by your comment that you question the motives of owners higher up the leagues. Something that came through strongly for me in this morning’s session was the differences between the leagues: differences in motives, if I understand you correctly; differences in the level of contact owners have with fans, which was a very important point that you made; and, I suspect, a difference in the closeness to the operations of the organisation.

I am interested in how clubs fail, too. This touches on what the Minister was just saying: where should the balance of the regulator fall? Should it simply issue licenses, have a fitness test for owners, and so on—take more of a “control the bad actors” approach—or should it be more interventionist and say, “We think there’s a problem here; we think there’s a mismanagement. They’re going to make a mistake, and it’s going to cause problems”? Where does the balance properly fall?

Darryl Eales: That is quite a toughie.

--- Later in debate ---

[Mr Betts]

Q Should the regulator not have the power to do that?

Steve Parish: As I said, if you had a regulator that we all believed would uniquely make all the right decisions for football, of course we would be in favour of it. What you asked me is what my concerns about the Bill are; my concern with the Bill as a starting point is that relevant revenue is only broadcast income, which would be 75% of Bolton’s revenue should they get into the Premier League, and it is about 20% of the top six’s revenue. That straight away is an example of an area of concern.

I just want to come back on parachute payments, because I need to give you some numbers. In the Premier League, if you finish around midtable, you will turn over about £180 million—it is not an unreasonable thing to budget for. The first year in the Championship, with parachute payments, is about £70 million—so you have about an £110 million drop in revenue, which is pretty catastrophic for any business to try and contend with if they get relegated. Many clubs manage to get back in the first year—on average, it is about one a season for the last 10 years—but the average finishing position of a parachute club is eighth. Many clubs, like Stoke or Sunderland, disappear from the Premier League, and that big gap and big drop gets them in a lot of financial difficulties. This is why parachute payments are so important for the sustainability of football.

Tony Bloom: You talk about self-interest: that is not the case at all. I care about every football club in this country. I am not worried about the top six—I have not said anything about the top six. We have regulations in the Premier League, and if something is going to be changed, you need a two thirds majority; if they get two thirds majority, and the top six vote, and get a few more people, that is the way it is. I am not complaining. Football needs to vote, and the Premier League has its constitution; I have no issues with that.

I used to be in the Championship, and we had parachute payments. I was not complaining—we just worked away to try and be the best we could for our football club. I was never in favour of parachute payments when we went and won the Championship; I never voted for that or discussed that. All I was asking when I was in the Championship was for there to be a bit of sustainability so clubs did not lose an average of £10 million a year, which was voted against because clubs wanted to give themselves a chance to get promoted to the Premier League. I am saying exactly the same in both divisions.

[Stuart Andrew]

Q Tony, I was interested in the comments that you made a moment ago. You said that your concern about the regulations and the Bill is that your preference would be for the Premier League, EFL and National League to all work together for a solution for the future of football. Why has that not happened?

Tony Bloom: Because of the talk of a regulator, as I said—

[Stuart Andrew]

Let me finish my question. There has been talk of a regulator for a much shorter period than there have been issues relating to the historical problems in football; this has not just happened since the publication of the White Paper or the fan-led review. The reason why the fan-led review was brought in the first place was that a solution had not been brought by football. My question again is why that has not happened, because that is why we are here today—because football has not stepped up.

Turning to another thing that I want to talk about, I agree with you and I am glad to hear that you want to see the sustainability of clubs within the pyramid. The independent experts who we heard this morning said that the problem in the past was that too many clubs were looking in the rear-view mirror, whereas this Bill presents us with a real-time approach that will identify problems much earlier so that they can be addressed. Do you welcome that?

My final question is about fan engagement—to change the subject completely. I am interested in whether you think the Bill hits the right notes on that and what you do there, because I hear that you have an interesting approach as a club.

Tony Bloom: In terms of fan engagement, we are a club that regularly engages with the fans. Even before talk of a regulator, we had many fan forums with a broad range of our supporters’ clubs. I do them, as do the CEO, the head coach and so on. We have seen in the last couple of years that we have a fan-led board and we have many meetings as well. Our relationship with our fans is really good. I can talk only about my football club, but if you speak to our fans, they would be very happy with the engagement. What was the second question?

[Stuart Andrew]

Q The first question was, why has football not sorted this out?

Tony Bloom: When I was in the Championship about 10 years ago, there were big discussions, big debates and big negotiations with the Premier League. For sure, as you can imagine, the English Football League wants to have more revenues and a bigger percentage of the Premier League revenues. A deal was done—it was not easy, but it got done.

Of course the lower league clubs always want more money. As Sharon was saying, if she gets promoted, she is going to have a much bigger bill. If there was more money going into Bolton, no doubt for that season and the season after, things would be a bit easier, but have no doubt that when more money goes into the English Football League—the vast majority of it will go to the Championship—it will go on player salaries. That is what happens, so there will still be issues. Unless you have sustainability levels where there are caps on spending, and clubs have their money there, there will always be such issues.

On your first question, regardless of the Bill, the English Football League and the Premier League are becoming much more forward thinking in the way they have the football regulations for finance. Regardless of what is happening with the Bill, that is what the Premier League and the English Football League are looking to do, which I think is a positive thing.

Steve Parish: The implication is that nothing is being done. Profit and sustainability rules were the first step in trying to control spending. People have to realise that we are subject to competition law as well, and we are being challenged on some of these things within the league. Some of the things that the majority of clubs would like to do—salary caps in some instances, which some people would like to do, or the cost caps that we are working on at the moment, which are broadly salary caps—are challengeable under competition law, so we have to get advice and be very careful that we are proportionate in the things that we undertake.

In terms of why a deal has not been done, I think it is quite simple: it is the backstop. It was made quite clear in the last panel that view of people at the EFL is that whatever deal is given to them now, they will pocket it and then go and see the regulator to get a much better one, because they do not think it will be good enough. I genuinely think that is the reason that a deal has not been done so far.

[Ian Byrne]

Q You are both custodians of the clubs that you own, and bloody good ones, to be fair—you are two of the better ones. Would you not agree that if something happened to you and you had to walk away from them, having the regulator would mean that there was a better chance of getting two custodians like yourselves, and not like some we have seen previously? I am speaking about the experience of Liverpool, with Hicks and Gillett, and what is happening at Everton now. The status quo cannot prevail. For the benefit of your clubs, when you move on, do you not think that the regulator gives you a better chance of getting better owners?

--- Later in debate ---

[Mr Betts]

Q Are you frustrated at the FA that, somehow, this great competition and its heritage are being undermined by the interests of a handful of clubs who are going to play European games? It is the top few clubs, again, driving what happens for everybody else.

David Newton: I do not think that is necessarily a fair characterisation. The fixture calendar is extremely complex. We sit down two years prior to the season with our colleagues at the Football League and the Premier League and discuss how we are going to best fit in the games we have. We are the only major European footballing nation with three domestic cup competitions: the EFL trophy, the Carabao cup and the FA cup. We have 20 teams in the top league and 24 in each of the other three leagues, and the calendar is extremely congested. It is not just as a result of European ties. Each of those is a fantastically vibrant competition in its own right. Each of those competitions has a heritage and importance, and it is about a balance between all those competitions, as well as the European ones, that allows them to be fitted in.

[Stuart Andrew]

Q We have heard, in these sessions and beforehand, about the scope of the Bill. Some feel it goes too far; some feel it does not go far enough. Can you talk about your perspective of its narrowness in terms of financial regulation, and why that matters in relation to the relationships and statutes that FIFA and UEFA have?

David Newton: It is common knowledge around the room that UEFA and FIFA have statutes of their own, which basically prevent state interference in the running of football and football competitions. We have worked closely with UEFA and FIFA, and with the DCMS staff who have worked so hard on this Bill. They have been taken through where we have got to. Although we have not had a definitive view as such, it is reasonably clear that a tightness of the Bill relating to football governance is not likely to present huge or significant problems, subject to any changes that may occur. However, anything wider would increase the risk of FIFA or UEFA intervention. That is obviously a place we do not want to be, because of the sanctions that may flow, in theory, from that. We continue to work closely with both those bodies and keep them abreast, along with DCMS, of where the Bill has got to, but I think the narrowness of scope is very important.

[Matt Rodda]

Q To return briefly to the point that Clive made, there is enormous strength of feeling among many fans and clubs about the replays. What is the process for reviewing that decision?

David Newton: The decision has been signed off, effectively, by the FA board for next season. Indeed, the fixture calendar is so full that the spare slots, if you like, have already been allocated. At the moment, there is no review of that position. We are obviously aware of the strength of feeling, and I hope I have gone some way towards explaining how we take that decision. We take the custody of the FA cup extremely seriously.

Football Governance Bill (Fourth sitting)

Stuart Andrew Excerpts

Committee stage
Thursday 16th May 2024 Public Bill Committees

[The Chair]

I hope everybody has had a good lunch. We will now move on to clause-by-clause consideration.

Clause 1

Purpose and overview

Question proposed, That the clause stand part of the Bill.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship this afternoon, Sir Christopher. I thank members of the Committee for their time and commitment, and I thank all the officials who have done an enormous amount of work in preparing the Bill. It would be remiss of me not to thank my hon. Friend the Member for Chatham and Aylesford for all her work on preparing it.

Clause 1 sets out the purpose of the Bill and summarises what each part of it provides for. Its purpose is crucial: it underpins the regulator’s entire regime, as the regulator will be obliged to act in accordance with it at all times, so far as is reasonably practicable. Since the fan-led review was published, the Government have been clear that the pre-eminent failure in this market is the growing risk of football clubs being unable to continue providing their service. The potential harm that that can cause to fans and the local communities reliant on the clubs is unacceptable, and the industry has not been and is not doing enough to tackle the risk. That is why we are intervening here, and that is the Bill’s purpose.

The clause explains that the purpose of the Bill is

“to protect and promote the sustainability of English football.”

It goes on to define that, for the purposes of the Bill, sustainability refers to a continuation of service in the interests of fans and for the wellbeing of local communities. In essence, clubs should not be lost to their fans and communities now or in the future, be that through financial collapse, relocation 60 miles away or turning their back on their fans to join a new breakaway competition. I commend the clause to the Committee.

[Stephanie Peacock (Barnsley East) (Lab)]

It is great to be here today to welcome the Bill as it enters its next stage of scrutiny. As I outlined on Second Reading, Labour has supported reforming football through an independent regulator for football for a long time. We echo the Minister’s thanks to all the officials for all their hard work, to all Members on both sides of the Committee, and in particular to the hon. Member for Chatham and Aylesford for all her work on the fan-led review.

We want to scrutinise this Bill appropriately, and I look forward to doing just that in the coming days. However, given how long it has taken for this legislation to be introduced and the number of fans who have had to watch their club pushed to the brink in the meantime, we want to see the regulator implemented as swiftly as possible. I am therefore pleased to see a degree of consensus around the implementation of an independent regulator across the House. With that in mind, I have been focused on tabling amendments and will shape my remarks to be constructive where possible, while of course giving the Bill the scrutiny it deserves. I hope to be able to work with fellow members of the Committee to make sure that the Bill truly achieves its aim of ensuring the future of English football for generations to come.

Getting clause 1 right is crucial to the rest of the Bill. The purpose of the Bill, and therefore the regulator, will underpin all the other measures that we go on to discuss. It will act as a reference point to return to when interpreting the overall sense of intention and direction of the whole regulatory system.

It was the fan-led review that first noted that the regulator would need a clear statutory objective, which it said would be useful for dictating to the board and employees of the regulator what the body is there to achieve, how it should assess any problems and the outcomes it should deliver. If well designed, it should seek to tackle many of the problems identified within English football: the poor management of clubs, substandard corporate governance, the lack of fan involvement and the unsustainable finances that have threatened the long-term health of football. As a result, the fan-led review suggested that the objective should include acting in the interests of both local fans and communities. It said:

“There is no one else more important”,

a sentiment with which I absolutely agree. It must be central to both the Bill and the future regulator that football works in the long-term interests of fans and communities. I am therefore pleased that the clause defines English football as sustainable if it

“continues to service the interests of fans of regulated clubs”

and

“continues to contribute to the economic or social well-being of the local communities”

with which the clubs are associated.

Given the centrality of those concepts, it is curious that the likes of fans’ communities and social wellbeing are not defined in the Bill. The explanatory notes indicate what those terms might mean in practice: “fans” might mean season ticket holders and regular match-goers, and “local communities” might mean the people

“who live, work or trade in the geographic area associated with a football club”.

However, those indications will not become law when the Bill is passed, which leaves ambiguity as to how they might be interpreted. I ask the Minister why fans, communities and social wellbeing are not given clear definitions and whether he believes that there is potential for such terms to be misunderstood or misused as a result.

Further to that point, some clarity is needed that when we talk about the “interests of fans”, we mean their long-term interests. I can imagine quite a few scenarios in which it might be in the fans’ interest for their club to adopt reckless short-term strategies to achieve immediate on-field success. Yet those short-term strategies might lead to the club’s long-term financial demise, which is contrary to the aim of the Bill and against the long-term interests of fans and communities. Can the Minister therefore confirm that the phrase “interests of fans” must be taken to indicate a long-term continuation of the club and its heritage, rather than anything to do with on-pitch results at any given time? I agree with the principle of centring fans and local communities in the Bill and the regulator, but we must make sure that we are clear on what that means right from the very beginning, to ensure that the intended outcomes are achieved.

[Stuart Andrew]

I thank the hon. Lady for her opening comments. She will know from our engagement that we centre fans in the whole of the Bill’s process. She is right that as we go through line-by-line scrutiny, I will be able to give more indications that fans need to be consulted when it comes to important decision making by clubs up and down the country. Some clubs are doing that brilliantly, but we need to raise the bar. I hope that the provisions in the Bill will ensure that that happens and that fans will rightly be at the centre of the clubs they support.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Key definitions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 3 stand part.

Schedule 1.

Clause 4 stand part.

New clause 1—Reporting requirements (women’s football)—

“(1) The Secretary of State must, no later than five years from the date on which this Act is passed, carry out a review of the professional tiers of women’s football to determine whether the competitions specified by the Secretary of State under section 2(3) should include women’s football competitions.

(2) For the purposes of subsection (1), the review should take account of—

(a) the State of the Game Report,

(b) the risk of financial failure in women’s football, and

(c) such other considerations as the Secretary of State considers appropriate.

(3) The results of the review must be published and laid before Parliament.”

This new clause would review whether or not women’s football should be added to the scope of the IFR.

[Stuart Andrew]

Clause 2 sets out the key definitions used in the Bill. It also gives the Secretary of State the power through a statutory instrument to specify competitions. Those specified competitions then define the regulated population—the clubs and competition organisers in scope of regulation. Defining the scope in that way is important in future-proofing the Bill. In particular, it will allow the regulator’s regime to adapt to future innovations in the market like those that we saw when the old First Division became the Premier League in 1992, or when the Football League was expanded and rebranded in the years that followed.

I turn to clause 3. Owners of football clubs play a pivotal role in the sport; without their efforts and investment, English football would not be the success that it is today. Owners have an immense responsibility not just to their club, but to fans, local communities and businesses in the surrounding area. While current league rules outline a requirement to declare who controls a club, the fan-led review identified concerns with the application of the role, in particular where clubs are owned or controlled by offshore entities or complex company structures. Fans have also expressed concerns about the opaque nature of who owns their club. Fans deserve to know who has ultimate responsibility for the club they support, and the clause will ensure just that.

Clause 3 signposts to schedule 1, which defines when a person is an owner of a club. The clause also defines a club’s ultimate owner or owners as those who have the highest degree of influence or control over the activities of a club. When a club applies for a provisional operating licence, it has to identify its owners and ultimate owners to the regulator in a personal statement. Clause 51 requires licensed clubs to publish their personal statements.

Defining the ultimate owner of a club and requiring clubs to declare who they are will be a crucial step in improving transparency and accountability in the game, and in ensuring that fans know who owns their club. Schedule 1 defines owners for the purposes of the Bill and equips the regulator to apply this definition in different real-life circumstances.

It is crucial that owners are suitable in order that the sport can be placed on a more sustainable footing. An ownership chain may be long and complex with many links. To ensure that clubs have suitable custodians, the regulator needs to identify the person with actual control at the very end of that chain, rather than the holding companies or the legal structures that are just links along the way. That is why, under the Bill, only individuals or registered societies are defined as club owners.

Registered societies are specific legal structures defined in clause 91. They must be run as co-operatives or for the benefit of the community. When used by fans for collective ownership of professional football clubs, they are typically “one fan, one vote” organisations in which control is split equally between hundreds or thousands of members. As such, they do not concentrate influence or control with just a few individuals.

[Mr Clive Betts (Sheffield South East) (Lab)]

This is a really important clause. There have been so many problems in so many clubs where actions have happened but there is some mystique about who is responsible. The mystique is often deliberate, to hide the real owners and what they are doing.

Although this will be the rule from now on, one issue that I can see arising is about what happens when a league wants to look at who was responsible for the actions of a club in past months and years. Will there be a trail to discover who the owner was in past months and years, so that that sort of action can be taken by the leagues?

[Stuart Andrew]

That would probably be an issue for the leagues. This is about setting up the statutory obligations and the powers that the regulator will need, and will have, to be able to identify the specific owner. The hon. Gentleman is absolutely right: I have heard time and again from fans that trying to identify who the specific person is has been almost impossible. As we are now putting this measure on a statutory footing, the clubs themselves will be obliged to identify who that person is, but I think retrospective work would be something for the leagues to deal with. If the hon. Gentleman will permit me, I will have a further think about the point and come back to him in writing.

I was explaining why ownership chains can end with registered societies without those societies needing to identify the named individuals behind them. The Bill’s definition of an owner is designed to apply to those at the end of ownership chains, no matter how complex the chains are. It draws heavily on precedent from other legal regimes where ownership can be complicated or opaque, including the “persons with significant control” regime in the Companies Act 2006. It is designed to capture those who have significant shares or rights in or other forms of significant influence or control over clubs. The definition also includes owners who meet one of those conditions at arm’s length, such as via a trust or similar body. This robust and comprehensive definition of owners recognises that clubs have different ownership structures. Part 3 of schedule 1 allows the definition to be amended to ensure that it is future-proofed.

Ultimately, the definition enables the regulator to look behind ownership structures to find the person who is actually responsible. That means that owners cannot simply evade regulation by creating ever more complicated ownership structures. Having a clear definition of an owner that reflects those who have influence or control over a club means owners can be identified, tested and held to account as custodians of the club.

I turn to clause 4. The Bill will introduce two key things that are missing in the industry at present: transparency for fans and accountability for decision makers at clubs. Central to both those points is clarity about who the decision makers are. Officers and senior managers must be clearly defined within the new regime so that regulatory requirements and enforcement can bite on the right people and fans know who is running their club. The clause defines an officer and a senior manager of the club for the purposes of the Bill. The definitions have been drafted in recognition of existing legislative precedent, including the Companies Act 2006 and the Financial Services and Markets Act 2023. It also uses the definitions currently used in the football industry.

The purpose of the clause is therefore to appropriately define the people who run or have a significant level of direct influence over the day-to-day running of the club. Other provisions in the Bill will require regulated clubs to publicly set out who their officers are and which persons carry out specified senior management functions. Officers of the club are subject to legislative requirements, including owners and directors tests. Senior managers will be accountable for the aspects of the club’s affairs that they are responsible for. The regulator may take enforcement action against a senior manager if the club commits a relevant infringement that is connected to a senior management function carried out by that individual or individuals.

--- Later in debate ---

[Stephanie Peacock]

I will begin by addressing clause 2 and my new clause 1 before looking briefly at clauses 4 and 3 with schedule 1. Clause 2 provides important definitions that will help make sense of the Bill. Most of the definitions are relatively straightforward, so I will focus on the Secretary of State’s ability to designate which specified competitions will fall under the remit of the regulator.

It is widely understood that the Government’s intention is to identify step 5 and above of the men’s football pyramid as being within scope. That choice is the right one as long as the regulator’s enforcement is proportionate to ensure that clubs in the National League and lower tiers of the EFL are not burdened by compliance. Indeed, at this early stage it is important to set out that regulation does not necessarily need to result in burdensome compliance requirements. As long as the Bill is done right, that will not be the case.

It is important that we leave room for the competitions in scope to be amended in future should circumstances change. I appreciate the Minister’s comments on my new clause 1, but I am sure the Committee will allow me to outline the arguments on why I tabled it.

We should pay close attention to ensuring the healthy growth of the women’s game and whether it should be brought into the regulator’s remit. Despite its recent soaring success, as shown by the historic achievements of the Lionesses and sustained by the growth in support for the Women’s Super League and Championship, the women’s game faces a wide range of issues. The Carney review, commissioned as a result of the need for parity identified by the fan-led review, brought many of those issues to light.

The review raised concerns, for example, about the growing gap between those at the top of the elite game and the rest of the women’s football pyramid. Indeed, the annual turnover in the Women’s Super League, featuring teams such as Chelsea and Manchester City, peaked at around £7 million. Meanwhile, in the Women’s Championship, where teams such as London City and Sunderland play, sides are recording turnover as low as £150,000.

Further to that, the review noticed that there has not been enough progress on ensuring minimum professional standards. Players have been reported as being treated as second-class citizens rather than elite athletes, with everything revolving around the schedules of the men’s teams. Also, women players are three times more likely to suffer an anterior cruciate ligament injury—a serious rupture that strikes top players out for around a year—than their male counterparts, and there is no guaranteed access to even a basic level of mental health support even for those who might be seriously struggling.

Finally and perhaps most relevant to the Bill, the review also identified that the costs of sustaining participation in the women’s game are much higher than the revenues being organically generated by women’s teams. That is true even with the growth of broadcasting audiences and sponsorship revenue. Rather than bringing women into scope of the independent regulator at this stage, however, Karen Carney’s review concluded that women’s football would benefit from the opportunity to incentivise investment and self-regulate first.

Given that the IFR has been designed with the failures of the men’s game in mind, I agree that the women’s game and NewCo should be given the chance to take learnings and to proactively address issues so that it can run on its own two feet. However, I also believe that the option of an independent regulator must remain on the table, not least so that if it is needed, the regulator can act at an earlier point than it has been able to in the men’s game. That is why I tabled new clause 1.

Players, fans and the whole country want to see healthy growth of the women’s game and NewCo, and they now have the opportunity to see just that with the right investment, support and approach. However, if issues prevail, as they have done in the men’s game, it is right that we be proactive rather than reactive this time.

The Government agreed to all the Carney review’s strategic recommendations, but I believe there has been only one meeting of the implementation group. Parity of importance must be given to change in the men’s and women’s game, and I hope the Minister can provide an update on the Department’s progress either in this debate or in writing.

Clauses 3 and 4 and schedule 1 set out some of the other key definitions in the Bill, particularly of owners and officers, and I welcome their clarity. Due to the complex ownership structures of some clubs, it has not always been clear who or what might count as an owner, ultimate owner or indeed who can be held accountable as officers.

The fan-led review identified the example of Birmingham City, who at the time were alleged to be in £100 million of debt. They were in breach of profit and sustainability rules and in a situation where the club and ground were owned by two different people under a complicated offshore ownership structure. Trying to untangle and resolve such difficulties without being able to understand where accountability lies in an opaque structure is no easy task. The detail in clauses 3 and 4 and schedule 1 on how calculations will be made in relation to shares and the like is therefore welcome. In combination with the duty in clause 16 on clubs to provide a personnel statement, the Bill will improve transparency and ensure that the regulator is able to operate from a much clearer standpoint.

I have one question on behalf of the Football Supporters’ Association, which is concerned that the definition of “senior manager” might include football-related posts that were not intended to be within scope of the Bill, such as team managers. Can the Minister confirm that that is not the case and that football-specific posts will not be covered?

[Stuart Andrew]

I completely agree with the hon. Lady on ensuring that clubs, specifically those further down the pyramid, are not over-burdened. That is why we have been careful throughout the drafting of the Bill to ensure that it is proportionate and that our approach is dependent on the size of the club and where they are in the pyramid. I do not think there should be anything for many of those clubs to fear. We heard from witnesses in the evidence sessions that many of those clubs rely on volunteers to do a lot of the paperwork, and we have taken that into account.

I absolutely welcome the hon. Lady’s comments about the women’s game. We all want to see healthy growth in the women’s game, and it has been incredible to see how popular it has become. That is precisely why we brought about Karen Carney’s review, and I put on the record my thanks to her for the work that she has done in this area. What has been useful about that—rather than just doing it through the IFR—is that it has enabled there to be a much broader approach to the women’s game; and she rightly highlighted health and wellbeing as a really important aspect. Although the implementation group has only met once, it was an important meeting for us to set out the questions that need answering, and work is going on behind the scenes in preparation for the next meeting to ensure that we see progress. As she acknowledged, we support all the recommendations of Karen Carney’s review. We want to now ensure that progress is made in implementing them.

The hon. Lady is right that we need to learn from the men’s game at a much earlier stage, which is why we are looking at all aspects, but should we get to the point where it needs to be looked at by the independent football regulator, provisions are in the Bill for that purpose. On the issue of owners, as we have described in the Bill, it is those with a controlling decision-making process within the club that will come into scope.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5

Establishment of the IFR

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss schedule 2.

--- Later in debate ---

[Stuart Andrew]

The provisions in schedule 2 ensure that the regulator has the necessary structures in place to function effectively and efficiently with appropriate accountability as a public body. It ensures that an agreed and transparent process is adhered to when establishing a governance framework, including its board, committees and expert panel. It provides the necessary flexibility to future-proof the regulator and the agility to act quickly where required.

We have made provision for the regulator to appoint an observer from the Football Association. As the national governing body for English football, it will be able to provide insights on behalf of the football industry to support the board if needed in the execution of its functions. Ultimately, the regulator will be accountable to Parliament, but it will be operationally independent and free from undue political or industry influence. The provisions in the schedule are central to creating this framework and strike the right balance between those competing demands.

[Stephanie Peacock]

I am extremely pleased to welcome these provisions, which establish the long-awaited Independent Football Regulator as a body corporate. This is a good opportunity to discuss why it is important that the independent regulator has been established in the form it has—a body that is operationally independent of current football governance structures. This independence will be key in ensuring that decision making is impartial, free from conflict and credible. As the fan-led review clearly reveals, public confidence in existing football authorities is unfortunately very low. Part of the reason for this, according to the review, is that the constitutional set-ups of existing authorities are inherently conflicted and

“the rules of regulation being set by the parties that are to be regulated.”

There are two big problems with that. First, it results in clubs being naturally incentivised to prioritise their own interests rather than the long-term view of what is best for the game. Secondly, it means that there is a natural disincentive for disciplinary action to be taken where it might be commercially damaging for the club involved. Though this new phenomenon was identified by the fan-led review, it is not a new concept. It has been over a decade since the 2011 Culture, Media and Sport Committee’s report that made recommendations to improve the accountability of the regulation of football, and it is almost 20 years since the Burns review, which found football governance unfit for purpose.

Opportunities have been presented over and over, but the same problems have prevailed. This is why it is important that we are finally here today. Independence does not mean that the regulator will have no relationship with existing structures. As we will discuss, working constructively with football governance will be vital to the regulator’s success. This does, however, bring up questions of regulatory clarity.

As it stands, I am not entirely convinced that everyone is clear about whose rules will take primacy and when. The Government’s response to the White Paper consultation seemed to be firm on this, identifying that although there needs to be collaboration, the regulator will be the ultimate authority on matters within its remit. However, the Bill is not always clear, so I hope this is something we can come back to and clarify as we progress.

It is also important to note that the regulator will be independent from politicisation and undue influence from the Government, which is important not only for the sport as a whole, but to ensure that the regulator in no way impacts compliance with UEFA and FIFA rules. Overall, however, I am pleased with the institutional location of the regulator and the fact it is finally being established through the clause.

--- Later in debate ---

[Mr Betts]

Can I just raise two issues? The first is about appointments to the board. Does the Minister feel that the issue of conflict of interest is important? Does he feel that he ought to be setting down somewhere what conflicts of interest may amount to, and what may disqualify someone from being a member of the regulator’s board? Secondly—this issue arises in Select Committees from time to time—will the regulator’s chair be subject to a pre-confirmation hearing by the Select Committee?

[Stuart Andrew]

I agree with the hon. Member for Luton South about the independence of the football regulator; we were really careful to ensure that as we drafted the Bill. She is right that we have to take into account the UEFA and FIFA rules. That is why we have made sure throughout that the regulator will be independent, including from political interference. We would not in any way want to see any sanctions on English football because of any pressure that might be given. As with others, we have engaged with both of those bodies. So far, we feel that they recognise that we have gone to great lengths to ensure that that independence is recognised.

On the board being reflective of society, I am a big advocate of making sure that that happens. There are the usual processes of Government appointments; as hon. Members will know, that issue is very much a consideration. Work is constantly being done to encourage a wide range of candidates to apply. I suppose this gives me an opportunity to shout out to the wider society: get involved! We need a very diverse range of candidates to apply for these positions.

We absolutely need to ensure that the measures on conflicts of interest are in there, just as we would with any other public body, and, yes, there will be a requirement for pre-confirmation of the chair through the Select Committee.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Schedule 2

The Independent Football Regulator

[Stephanie Peacock]

I beg to move amendment 14, in schedule 2, page 82, line 20, leave out “is satisfied” and insert “has ensured”

This amendment would strengthen the responsibility of the appointer.

--- Later in debate ---

[Stephanie Peacock]

I welcome that input, and that is absolutely right. I am trying with these probing amendments to seek some clarity from the Government, so that all hon. Members and everyone who has an interest in the Bill are satisfied. I tabled them to make important clarifications and to ensure that appointments to the regulator are free from vested interests. I believe that that is the intention behind the Bill.

It is peculiar that the process of declaring a conflict of interest does not involve potential appointees making any declarations themselves. Given that potential appointees are the experts on their own history, they must take a level of responsibility for ensuring that time is not wasted as part of their appointment. Amendment 15 would ensure that candidates are obliged to make a declaration if they hold any relevant interests that might give rise to a conflict. That would create a pathway for unsuitable candidates to be easily and quickly dismissed, and ensure that the appointer is not the only person responsible for identifying conflicts. That shared accountability would strengthen the process.

The involvement of the appointer in any investigation of any potential conflicts will also be crucial. I tabled amendment 14 to require appointers to categorically and objectively ensure that the candidate is free from vested interests. It is not enough for an appointer to simply say they are satisfied that there is no conflict; the Bill must require a level of intentional due diligence on behalf of the appointer, so that if any conflicts are identified later down the line, there is a level of objective accountability. Replacing “is satisfied” with “has ensured” will strengthen not only the wording but the entire system of appointments.

I hope that the Minister can accept the changes as a necessary part of achieving the Bill’s aims, or at the very least can provide clarification on why the Bill as drafted allows for subjectivity in decision making when it comes to conflicts. It is only by getting the appointment system right that we will get the regulatory system right. We hope that the process will be watertight.

[Stuart Andrew]

The Government recognise the intent behind the amendments, which is to make certain that the board is free from conflicts of interest—not least given the fact that so many of the witnesses talked about trust, as the hon. Member for Liverpool, West Derby just mentioned. It is essential that the regulator can deliver its regime free from influence from Government or the industry that it will regulate, which is why independence has driven the design of the regulator from the start. That is reflected throughout the Bill and will continue to shape how the regulator is established, including the appointment of its board.

I strongly support the objective that conflicts of interests should be managed appropriately, but the amendments are unnecessary. The current drafting, supported by public law principles, as my hon. Friend the Member for Chatham and Aylesford hon. Friend mentioned, and non-legislative measures already in place achieve that objective. The appointer must already satisfy themselves that a candidate board member is free from conflicts before appointing them, and the board members will have responsibilities to openly and honestly declare any interests that could give rise to actual or perceived conflicts.

In addition to the checks for conflicts at the point of making the appointment, there is an explicit requirement in schedule 2(22) for members of the board to declare their interest in any matters that fall for consideration by the board. That paragraph sets out a process for managing any interests in line with the approach taken for other regulators, and provides assurance regarding the suitable management of board members’ interests. Members of the regulator’s board and their terms of appointment will be subject to the Cabinet Office’s “Code of Conduct for Board Members of Public Bodies”, which sets out clear requirements on the appropriate disclosure and management of conflicts of interests. For the reasons that I have set out, I am not able to accept the amendment tabled by the hon. Member for Barnsley East, and I hope that she will withdraw it.

[Stephanie Peacock]

I am grateful to the Minister, and on the basis of what he has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Clause 6

The IFR’s objectives

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The clause sets out the regulator’s objectives, which are its primary aims and also the limits of its statutory remit. As clause 7 sets out, the regulator may only act if the action taken advances

“so far as reasonably practical…one or more of the IFR’s objectives”.

The fan-led review highlighted a myriad problems facing football in this country, and they are all important issues on which action is need. However, in our response to the independent review, and the White Paper that followed, we were clear that not all those problems are for a regulator to fix. The Government have been clear about the areas on which a potential football regulator would need to act. They are areas related only to sustainability, as it is on the issue of sustainability that we believe the market has failed and remains ill-equipped to act. The three objectives in clause 6 codify that intention into legislation, while limiting the opportunity for scope creep to the various broader issues in football.

The first objective on financial soundness looks to deal with the ability of individual clubs to continue to meet their debts and liabilities, even in the face of changing circumstances, new risks and financial shocks. The lower the risk that a club will be unable to meet its debts and liabilities in the future, the more financially sound it is. More financially sound clubs should help to reduce the risk of clubs being run into the ground and lost to their communities.

The second objective is on the wider financial resilience of the English football system. It involves the regulator taking a more macro view of the market to address structural issues and systemic financial risks. There are issues that individually are a small problem, but when aggregated or multiplied pose a significant threat to groups of clubs or the pyramid as a whole. Examples include the distribution of broadcast revenue throughout the football pyramid, or where several clubs are highly dependent on similar sources of income or similar credit markets.

[Mr Betts]

I am interested in what the Minister says about the sustainability of the football pyramid. If a particular measure on the distribution of funding affects other clubs and those in the pyramid that receive that money, that could be construed as posing a risk to the pyramid and might fall within the remit of clause 6(b).

[Stuart Andrew]

We have had this discussion many times, and I look forward to further debate on this as we go through the Bill. The hon. Gentleman will know that we also have provisions in the Bill for the regulator to look at those sorts of issues through the licensing conditions. I look forward to going into that in a bit more detail with him when we get to that part of the Bill, but I am acutely aware of his interest in that specific issue.

The third objective is on safeguarding the heritage of English football. Since the game was first played more than 160 years ago, football clubs have been an integral part of local communities and the lives of their supporters. The identity of each club is unique and often entwined with the identity of its fans and the history of the local community. Clearly, financial collapse is a risk, but so is the potential for clubs to become unrecognisable to their fans and communities.

[Ian Byrne]

That is a really good outline of why heritage is important. The Minister has talked about communities and football clubs. Maybe two words were missed out: “working class”. We have to ensure that working-class representation in the game stays within the game, as part of the heritage. I ask the Minister to include ticket pricing in that, because if we price working-class fans out of the game, we lose the lifeblood of the game.

[Stuart Andrew]

I never thought I would get into a discussion about class when talking about this Bill. My view is that football is there for everybody, and I absolutely recognise the roots of it in various parts of the country. Of course, particularly in the hon. Gentleman’s part of the world, there is a close association. I know we will come on to ticket prices later, but I hope the clause provides reassurance that the things that are important to fans—the identity of their club with their community, the colours, the names and so on—are an integral part of the work that the regulator will do to protect them.

[Mr Betts]

I am interested in the Minister’s definition of heritage. So far he has talked about the heritage of English football clubs, not the wider game, and that is quite interesting. Does he accept, for example, that the FA cup is very much part of the heritage of football in this country, and therefore the regulator ought to be able to give some thought to that competition and its future?

[Stuart Andrew]

The hon. Gentleman tempts me to get drawn into an area of further expansion. I understand his point. I have never in my entire life been stopped by so many people to talk to me about football as on the weekend that announcement was made. I of course recognise the importance of the FA cup, but for the regulator to get into areas of match timings, replays and so on may be a bit too far. We will probably look more into that later.

The third objective looks to safeguard the elements I mentioned in the interests of the community and future fans, but not to stand in the way of the natural growth and renewal of a club. I commend the clause to the Committee.

[Stephanie Peacock]

Given the purpose of the Bill, as set out in clause 1, it is important that the regulator’s objectives are shaped carefully and clearly, as they will underpin many of the other measures. Although the fan-led review initially recommended a dual focus on sustainability and competitiveness, when it came to the regulator’s objectives the White Paper streamlined things so that the primary duties were regarding sustainability, with competitiveness becoming a secondary focus. I understand the Government’s reasons for that and have welcomed the subsequent primary duties being in three areas: the financial sustainability of individual clubs, the systematic stability of the football pyramid, and protecting cultural heritage.

I am pleased that the proposal from the White Paper is largely reflected in the Bill. However, I am curious about a few small changes, to which my hon. Friend the Member for Sheffield South East alluded in his intervention. For example, the exact wording in the Bill has “financial soundness” rather than “sustainability”, as was in the White Paper. Will the Minister explain why? It seems strange that the word “sustainability” is not included at all in the objectives. Further to that, the White Paper framed the systemic financial resilience objective in terms of the football pyramid, but the Bill goes only so far as to say “English football”. Will the Minister tell us whether the word “pyramid” has been purposedly omitted? Or does he believe that the definition of “English football” adequately covers things? I have no further issues with the intent of the objectives, but the wording is important if the Bill is to achieve its stated aims.

--- Later in debate ---

[Mr Betts]

We should always be cautious when we look at regulation. Without drawing you into the debate, Sir Christopher, I am sure that you would echo that point. Nevertheless, the fact is that there is a bit of conflict in the Government’s argument. Why are we here today with the Bill in terms of regulation? One of the reasons why is that a handful of clubs decided that they wanted to break away into a European super league, so the Bill specifically mentions clubs not being able to simply up roots and go into a different league without permission. The Bill legislates for and gives the regulator powers over new competitions and which clubs may enter into them, but no powers over existing competitions and how they may be changed.

Let me put a scenario to the Minister that involves not just FA cup replays, because I suppose that decision could be reversed; it would not be too difficult to manage if we got to the point where we wanted that to happen. Let us say there is a scenario—it nearly happened a few years ago—in which the Premier League decides to create a Premier League Two, then pulls the drawbridge up and stops relegation from that league. What would happen then? Would the Minister say, “That is terrible. I am getting a lot of letters and emails and people stopping me in the street; I cannot do anything about it and the regulator has no power”? Indeed, would the regulator have a power to intervene at that point, because that would be a major disruption to the whole structure and pyramid of English football? If the regulator will not be there to protect the pyramid, what will it be there for?

[Stuart Andrew]

On the hon. Lady’s points, the term “sustainability” is used in the purposes and not again in its objectives. Our advice from the Office of the Parliamentary Counsel said that “soundness” achieves the same thing, but we are talking about the remit over the entire pyramid. We feel that would overstretch the regulator, which is why we are focusing on the top five leagues.

I understand the points made by the hon. Member for Sheffield South East. On a recent podcast, I repeated the phrase, used by many, that replays are often the David and Goliath of English football. However, in terms of financial sustainability, I cannot imagine a single club relying on the off-chance that it may have a replay at some point as a sustainable business model for its individual club. As I say, that is why the regulator will focus tightly on what the business plans would be.

[Damian Collins (Folkestone and Hythe) (Con)]

Does my right hon. Friend agree that part of the tension here is that the FA is under pressure from UEFA to free up days in the football calendar? That means it is left in the invidious position where it either does that, or requires teams to play scratch sides to fulfil fixtures when they must otherwise manage their resources for competing fixtures as well. That is why we moved away from never-ending replays in the FA cup in the ’50s and ’60s to a far more limited scope for replays today.

[Stuart Andrew]

My hon. Friend has got it exactly right and articulated it extremely well. We recognise that that is the challenge football has with the obligations it must match with the likes of UEFA and so on. I thank my hon. Friend for his intervention, and with that I commend the clause to the Committee.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

Clause 8

The IFR’s regulatory principles

[Stephanie Peacock]

I beg to move amendment 2, in clause 8, page 5, line 33, at end insert—

“(iv) supporters and supporters’ organisations”.

--- Later in debate ---

[Mr Betts]

I was thinking of moving my amendment from the Chair and then I could have directed the Minister to agree with it. [Laughter.] This proposal would feel very strange, as Ben Wright from the PFA said this morning, without the two groups of people who are absolutely key to football. We can manage without owners and directors, but we cannot manage without fans and players, and they are not mentioned in this part of the Bill. Will the Minister give us some comfort at least about how that particular point will be addressed?

[Stuart Andrew]

I recognise the intent behind the amendments, which is to add further groups to the list of persons the regulator should co-operate and proactively and constructively engage with. However, we do not think that is necessary, and we believe it would alter the intention and effect of the regulatory principle in question. We have always said that the regulator should take a participative approach to regulation, which means to co-operate constructively with the regulated industry where possible.

The principle’s original intention was to guide the regulator to take that approach, which might not otherwise have been implicit, since the natural instinct for regulators may be not to co-operate with the persons they are regulating. By contrast, for other groups such as fans and members of local communities, it is implicit that the regulator should engage with them where appropriate, not least because the sustainability objective of the regulator is in the very interests of fans. Indeed, fans and local communities are the key consumer group that the regulator is established to protect. They feature in the very purpose of the Bill in clause 1.

My concern is that to list every possible stakeholder that the regulator should engage with during the course of regulation would be a slippery slope that could impact on the effectiveness and, crucially, the speed of the regime. That is not the intention of this principle, nor is it necessary detail for the face of the Bill.

I absolutely recognise that players and fans have a huge role to play in football. It will be for the regulator to engage with those stakeholders during the appropriate process. That is why, absolutely, where collaboration is working well, we would expect the regulator to continue that. Having a comprehensive list might mean that we miss out a group that we would like the regulator to consult. It might also mean that the regulator then feels obliged to consult that entire list on everything, whether appropriate or not, clogging the regulator up, if we are not careful.

[Damian Collins]

I am following what the Minister is saying carefully. Does he believe that it would be appropriate for the regulator to require the clubs to engage effectively with their fans, as the Bill asks them to do, and to ensure the welfare of their players, and that the regulator should stipulate that the clubs set out how they will do that through their corporate governance statement, as part of the licensing regime? When we consider schedule 5, it might be appropriate to reference some of those points specifically in the Bill as part of the licensing condition.

[Stuart Andrew]

My hon. Friend makes some interesting points. We will come to those measures later. I am slightly nervous about having a prescriptive way of engaging with fans. Depending on which club it is, it might be that the way a club engages its fans absolutely meets what the fans want. They might recognise that it is a good working relationship, which achieves the objectives they want. What we want is a minimum standard. Perhaps that is what he is alluding to.

[Damian Collins]

I think my right hon. Friend is right. I would not suggest a prescriptive requirement, but simply a requirement for the club to state its policy.

[Stuart Andrew]

Absolutely, and we will come to that later in the Bill. I take on board the point made by the hon. Member for Barnsley East about the health regulator, for example. We do not need to tell that regulator to co-operate with the very people it is designed and obliged to protect the interests of, so we are following the same pattern here.

[Rachel Hopkins]

I listened to what the Minister said, but a number of regulators have statutory consultees, including groups of people who are involved in that industry or the service that they receive. I am coming from that point, which is why I would like to see them on the face of the Bill.

[Stuart Andrew]

I understand the hon. Lady’s point. I do feel confident, and I am trying to make this as clear as possible, that I cannot envisage why the regulator, where there is an issue that affects the fans, would not be looking at that. We will continue to look at this very carefully and make sure that we have got it right. I want to make it very clear, as the Minister, that we expect fans to be very much part of this process. That is why I said that clause 1 was so important in making that point right at the very outset.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The regulatory principles outlined in this clause are designed to guide the regulator to exercise its functions appropriately and in the manner intended by Parliament. They are hugely unobjectionable but fundamental principles that should help to establish the regulator’s mode of operating and culture. The regulator must have regard to these principles when acting. The first principle encourages time and cost-efficiency in everything that the regulator undertakes, encouraging swift action and value for money. The second principle encourages a participative approach to regulation, where the regulator should look to co-ordinate and co-operate with clubs, individuals at clubs and competition organisers. This reflects that the ideal regulatory environment is one where all stakeholders are working towards the same goals. The third principle encourages proportionality. The regulator should always look to choose the least restrictive option that delivers the intended outcome, and be able to justify why any restriction or burden is worth it for the benefits expected.

The fourth principle encourages the regulator to acknowledge the unique sporting context it is regulating within. For example, it should consider the existing rules and burdens clubs are subject to, and that market features—such as transfer windows—impose unique constraints on clubs.

The fifth principle encourages the regulator to apply regulation consistently, while still ensuring requirements are appropriately tailored to a club’s specific circumstances. A Premier League club and a National League club operate in very different ways and face different risks. The regulator must take this into account when regulating. When clubs are equally risky, they should face equivalent requirements.

The sixth principle encourages the regulator, where appropriate, to hold the individuals responsible for making decisions at a club accountable for the actions of the club and its regulatory compliance. For too long, clubs and fans have suffered the consequences of bad actors and mismanagement by the individuals calling the shots.

The seventh and final principle encourages the regulator to be as transparent as possible in its actions. While the regulator will handle some sensitive information that should not be shared, it should look to provide and publish appropriate information on decisions wherever possible. It is important that the regulator, and its regime, are open and accessible to the industry, fans, and the general public.

[Stephanie Peacock]

I am pleased to welcome this clause, which sets out the principles with which the regulator will regulate. Along with clear objectives and duties, as well as the guidance which we will go on to discuss, the principles will provide the regulator with clear direction and transparency in its dealings, which have long been missing from football governance. In particular, I would like to welcome the principle of proportionality. This principle should be very reassuring to well-run clubs who may otherwise have feared an over-burdensome regime. The proportionality requirement will ensure that where clubs are running sustainably, with low risk of harm, the regulator will have less of a role. In return, any restriction that the regulator does impose will be linked to a beneficial outcome.

It is also good to see the importance of consistency recognised, so that the regime is applied fairly, while acknowledging the relative circumstances of clubs. It is important that regulation is applied in the same way, where circumstances and risks are also the same. However, there may very well be differing conditions at the very top of the Premier League, in comparison to the National League, where I know there are fears about the burden of compliance, as we heard in our evidence earlier this week. The principles should help to alleviate any fears that the regulator will act without nuance on these differences. It will be an appropriately tailored regime, while maintaining a fair application of the rules overall. This is something that I am sure we will revisit multiple times in Committee.

I have a few questions I would like to clarify on these principles, including how the principles have changed since the White Paper. The initial document set out 10 proposed regulatory principles that were described as “basic and fundamental rules” for the regulator to follow. In the Bill, however, we are left with just seven. Some of this is due to condensing the principles into a smaller number. I understand the desire to not be over-wordy, but I do question whether that was necessary. For example, although the concepts of coherence and being context-specific overlap, each deserves an individual consideration.

Perhaps more concerning is that, looking closely at what has changed, some of the principles have been left out altogether. One clear omission is the principle of bold enforcement. The White Paper described how this principle would work as follows,

“When advocacy is ineffective, or in critical situations, intervention and enforcement should be bold. Sanctions should be strong and aim to deter future non-compliance.”

I am interested to hear from the Minister why this has been left out of the Bill. It is, of course, incredibly important that the regulator is not unduly heavy handed but, given the requirements for proportionality and constructive working, it is interesting that this is not complemented by the principle of bold enforcement, when this is actually necessary in critical situations.

Another omission is the principle that all decisions taken by the regulator should be evidence led. In the White Paper this was framed as being important so that all the regulator’s decisions can be defensible under scrutiny, being backed up by data, investigation, and information. Could the Minister give a reason as to why we would not want to see a regulator that puts data and evidence at the core of decision making? That is surely the intention of the Bill, and we cannot have regulation based on whims alone.

--- Later in debate ---

[Stuart Andrew]

I have to say that some things are not appropriate for the face of the Bill. Office of the Parliamentary Counsel advice tells us that to have bold enforcement does not do anything legally. Much of the work that the hon. Member alluded to, such as the advocacy-first approach and looking at the evidence—we will come on later to the sanctions a regulator will have at their disposal—involves trying to work with clubs to adhere to the conditions, and to get them on a stable footing before we get to that stage.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Transfer schemes

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it is convenient to discuss schedule 3 stand part.

[Stuart Andrew]

We are committed to establishing the regulator as fast as possible post the passing of the Bill. To that end, we are building the regulator in shadow form within the Department for Culture, Media and Sport in parallel to the passage of the Bill, to enable the regulator to hit the ground running once it is legally established.

On the creation of the regulator, it will be necessary for property, rights, liabilities and staff held by the shadow regulator within DCMS to be transferred to the regulator. The most appropriate vehicle for affecting those transfers will be a statutory transfer scheme, as has been used in similar situations involving transfers of assets following the transfers of functions between public bodies. The details of such transfers will be determined at the point of transfer.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 10

State of the game report

[Stephanie Peacock]

I beg to move amendment 11, in clause 10, page 6, line 21, at end insert—

“(ba) an evaluation of the potential impact of ticket pricing and kick off times on fans and make recommendations in accordance with that evaluation.”

--- Later in debate ---

[Stephanie Peacock]

I completely understand the hon. Gentleman’s point, and we respect the fact that it is a commercial decision. Obviously, like me, he will have heard the evidence sessions. Fan groups said time and again that this is a really important issue and that they are not being consulted meaningfully. My hon. Friend the Member for Liverpool, West Derby gave a good example of the benefit to fans; we are simply trying to highlight that point, because we want that meaningful relationship with fans to be as constructive as possible.

I will briefly move on to kick-off times. The FSA says that one of the biggest sources of complaints to its inbox is match-going fans complaining about the scheduling of games. That is not just grumbling about inconvenience; late changes to scheduling can impact on fans’ lives and finances. With good notice for games, fans can book time off work, access advance rail tickets and accommodation, and budget accordingly. Late changes to kick-off times, which are becoming increasingly common, mean that fans are forced to make expensive cancellations or spend large sums on last-minute public transport and hotel bookings.

If the purpose of the Bill is to ensure that the game continues to serve the interests of fans and contribute to the wellbeing of local communities, the regulator must at least be taking note of the areas that matter most to fans. To reiterate, I do not believe it would be right for the regulator to take any kind of proactive role in dictating to clubs and competition organisers when matches should be played, but as I have said many times before, Ministers have repeated themselves over and over about how important fans are to football, so if that is the case, both the state of the game report and the clubs, when consulting fans, should be looking at the areas that matter most to those people.

[Stuart Andrew]

I absolutely recognise that issues such as ticket pricing are really important to fans. Indeed, match days, as others have said, would not be what they are without the fans. The Government believe it is important that clubs consult fans on key off-pitch issues that impact supporters, including operational and match-day issues. These provisions, and the wider provisions for fan engagement, will ensure that fans have a voice on the issues that are most important to them, but it would not be appropriate—the hon. Member for Barnsley East was alluding to this—for the regulator to be a fix for all of football’s woes. Rather, it will be set up with a tightly focused and defined scope and purpose, to tackle the specific market failures that carry a risk of significant harm to fans and communities.

[Ian Byrne]

I do not think the supporters expect the regulator to fix ticket prices. What they are expecting the regulator to do is to ensure that the clubs go into dialogue with the supporters, so that they can understand the difficulties that supporters may have in relation to affordability. Also, as we heard during the evidence sessions today, many decisions are being made by clubs instantaneously, or within hours, and with zero consultation, which is a cause of massive discomfort. We heard about Arsenal and Tottenham football clubs getting rid of concessions. My own football club, Liverpool, made a decision to increase ticket prices with zero consultation. That is what needs to stop. These are important things. I link this to the heritage element: if we price football supporters out of the game, we lose the heritage of football.

[Stuart Andrew]

I absolutely understand the hon. Gentleman’s point. It is why, on page 93, the Bill specifically says that the “relevant matters” include

“matters relating to…operational and match-day issues”.

I encourage the clubs to speak to the fans about these very issues.

The Bill is very focused on sustainability in order to protect the long-term future of clubs, in the interests of the fans and the local communities. That means that the regulator will not intervene directly on issues outside this scope—including match scheduling and ticket prices. Issues of that kind are for football to address. It is well within the gift of the leagues and the authorities to intervene if clubs are not getting it right.

The purpose of the state of the game report is to allow the regulator to better understand the finances and economics of the industry and its individual clubs. As industry experts said on Tuesday, the state of the game report will allow the regulator to look forward as well as in the rear-view mirror. In turn, that allows it to deliver on ensuring the sustainability of clubs. To specifically require the regulator to consider ticket pricing and match scheduling as part of the report would detract from that purpose.

[Mr Betts]

The Minister is saying that this is a job for the leagues and the clubs. One problem with the legislation—it relates to the point made a few minutes ago by my hon. Friend the Member for Liverpool, West Derby—is that clubs consult their own supporters. The real argument in the Premier League a few years ago was about the price of tickets for away supporters. How do clubs consult on that? Why should not the regulator, in looking at the sustainability of the game, consider the impact on the future of the game of pricing out away supporters?

[Stuart Andrew]

Again, the clubs will have that engagement and raise those points with their own individual club—the away clubs can raise the issues within their club. This is actually putting it into legislation. It gives them that opportunity, which does not currently exist.

The Government do not believe that amendments 6 and 18 are necessary, as we expect that

“operational and match-day issues”

will already capture ticket pricing, and kick-off times are ultimately a sporting decision. It is not for the regulator to intervene on the sporting calendar, but I do recognise the issues that it causes for fans. It has been raised in Culture, Media and Sport questions with me on a number of occasions, and I have raised it with the authorities. They have promised to come back to me although, in fairness to them, these decisions are sometimes out of their control too. It is quite a challenging area.

The Government would welcome any club that chose to go beyond the relevant matters and consulted fans on kick-off times and everything else. However, as I have just mentioned, it is not always an issue that clubs have enough control over to adequately consult fans and respond to opinions. Therefore, to mandate them to do so could be problematic.

For those reasons, I am not able to accept the amendments and I hope the hon. Member for Barnsley East’s will therefore withdraw them.

[Stephanie Peacock]

I appreciate the Minister’s comments. I am happy not to move amendment 18 but I would like to proceed to a vote on amendment 11.

Question put, That the amendment be made.

--- Later in debate ---

[Stuart Andrew]

The purpose of the state of the game report is to allow the regulator to better understand the finances and economics of English football, and is currently intended to include the top five tiers of men’s professional football. That, in turn, informs the regulator’s approach to the exercise of its functions and decision making across the regulatory framework.

The amendment would require the regulator to, in addition, consider the state of women’s football in England in the state of the game report, but we have been clear that that is not the intended scope of the regulator’s functions. As we set out in the White Paper, consultation response, and the Bill’s accompanying explanatory notes, we intend this to be for the top five tiers of the men’s professional game. That reflects the fact that the regulator’s scope has been carefully targeted at addressing harm where industry has failed to reform.

That said, where appropriate, the regulator has the ability to share relevant information, guidance and best practice with relevant industry bodies to deliver an effective framework of regulation. Indeed, the Government expects that that could include sharing information with NewCo, the independent entity responsible for managing the women’s professional game. The women’s game is at an exciting and pivotal stage, and should be afforded the opportunity to self-regulate in the first instance. That is why it is not part of the regulator’s intended scope, nor would it therefore be appropriate for it to be within the scope of the state of the game report.

But, even without an explicit statutory requirement, there is nothing to stop the Government or industry looking into women’s football and the unique challenges that it faces. Indeed, this Government have remained committed to supporting women’s football at every opportunity, including with the review that I mentioned a moment ago. In our Government response to that review, we demonstrated our support for all 10 strategic recommendations, and we believe that those need to be acted on to lift minimum standards and deliver bold and sustainable growth for women’s football at both elite and grassroots levels.

If, in future, the women’s game was brought into the scope of the regulator, it would then fall within the matters to be covered as part of the state of the game report. I would like to reassure Members that the future of women’s football, and addressing the challenges that it faces, is hugely important. However, we think that considering that as part of the state of the game report would not be appropriate, given that the report is focused on matters within the scope of the regulator. For those reasons, I am not able to accept the amendment from the hon. Member for Barnsley East, and I therefore hope that she will withdraw it.

[Stephanie Peacock]

I thank the Minister for his explanation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Football governance statement

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 12 stand part.

Clause 13 stand part.

[Stuart Andrew]

Clause 11 provides a power for the Secretary of State to issue a statement on the Government’s policies relating to football governance. A football governance statement can be used only to flag issues within the scope of the regulator’s regulatory regime and should not be used to direct its day-to-day operations.

The regulator’s general duties, set out in clause 7, require it to “have regard” to any football governance statement when exercising its functions under the Bill. It is common practice for the Government to issue a similar statement with other regulators. The clause is an appropriate and proportionate power, which will help to give assurance to the Government and Parliament that the regulator is acting within its regulatory scope and has regard to arising issues. It will not interfere with any daily operations or affect the independence of the regulator.

On clause 12, the football industry should not be left to piece together what is expected of it based on the legislation alone. That is why the clause empowers the regulator to prepare and publish guidance on the exercise of its functions. That guidance will be crucial to translating the legal framework in the legislation into a detailed and practical explanation of the regulator’s regime. It will ensure that the industry understands the regulatory system, what to expect from the regulator and what is expected of it. Not only will that reduce burdens but it should, hopefully, improve compliance. The clause sets out that the regulator must publish guidance about the exercise of its functions under specific sections of the Bill and also permits the regulator to publish guidance about the exercise of any of its other functions. The regulator must consult any persons it considers appropriate before publishing guidance for the first time and before revising guidance in future, unless those revisions are minor. That will ensure the regulator takes into account the views of all relevant stakeholders and experts when preparing its guidance.

Clause 13 permits the Secretary of State to prepare and publish guidance on the regulator’s functions. That guidance is an opportunity to provide some additional detail as to how the Government intend the regime to be implemented, which was not suitable for inclusion in legislation. The industry and fans alike have been clear that they do not want to see ongoing Government involvement in football. That is why the regulator must have regard to the Secretary of State’s guidance but is not obliged to follow it.

[Stephanie Peacock]

Clause 11 allows the Secretary of State to prepare, publish and lay before Parliament a football governance statement setting out the policies of the Government that relate to the governance of football, to which the regulator should have regard. First, I want to acknowledge that it is right that the regulator’s processes are independent of political influence. The core purpose of the new body is to be given independent jurisdiction over a remit focused on the sustainability of English football and it should have autonomy over its decision-making processes. I know that the likes of the Premier League are concerned that the statement might jeopardise that independence. Can the Minister confirm otherwise? I am sure he spoke about that in his remarks, but he can add more when he gets to his feet again.

Regardless of that, the independence of the regulator does not mean that there will be no interaction between its work and the will of the Government on football governance more broadly. It will therefore be helpful for the regulator to have a clear statement from the Government on relevant policies that might have an impact on its work. It is right that the statement is non-binding, to hopefully give the regulator the contextual information it needs without compromising its independence. It is also right that the statement cannot contain policies that are inconsistent with the purpose of the Bill or the regulator’s objective. That means that Government policy and the regulator will be united on the cause of ensuring the sustainability of English football. I am hopeful that the clause will therefore act as another confirmation that the independent regulator will work collaboratively within the many existing structures that have an impact on the game.

As the hon. Member for Chatham and Aylesford said on Second Reading, clauses 12 and 13 will be key to how the regulator evolves. Indeed, many of the questions I will ask the Minister in Committee are on topics that I believe will likely be answered more fully as part of the guidance that will accompany the Bill’s provisions. In short, the Bill is intended to provide a robust framework, and the guidance will flesh out how that framework can be translated into a real-life explanation of how the regulator will work in practice.

The guidance will improve transparency while also providing clarity for the competitions and clubs that will have to comply with the new regime. On clause 12 in particular, which relates to guidance that will be published by the regulator itself, that set-up will also enable the regulator to have some autonomy in the detail of its approach, subject to proper consultation and clear parameters set by the Bill. The IFR guidance on how it will exercise its functions relating to the discretionary licence conditions will be mandatory, with further guidance in other areas being optional. That will be incredibly important for clubs, allowing them to understand what the regulator seeks to achieve through the use of club-specific licence conditions and to become familiar with the detail of how the regime will be enforced.

There are many further areas in which I believe the IFR guidance will be beneficial so that the minimum standards are set. One area that springs to mind, and that I am sure we will go on to discuss, is how clubs can ensure their fan consultation meets the regulator’s expectations, as well as the requirements in the Bill. I would be interested to hear from the Minister on any other areas in which he believes guidance would be helpful. As with the state of the game report, the timely publication of the guidance will be crucial. Clubs and competitions will want clarity at the right time as they prepare for and adjust to the new regulatory regime. Can the Minister provide some insight on the timelines to which the IFR will or should be working to with regard to the guidance on passage of the Bill?

Clause 13, “Guidance published by the Secretary of State”, will primarily benefit the IFR. It is important that the regulator is able to understand the full intention behind the framework that the Bill provides so that it can exercise its functions accordingly. It is right that the guidance involves consultation with the IFR and relevant parties so that the resulting guidance is genuinely useful for facilitating the IFR’s work on football governance. In combination with clause 12, this will provide the colour to the clear boundaries that we are working to set through this Bill.

[Stuart Andrew]

I absolutely want to assure the hon. Lady about independence. It is essential that the regulator can deliver its regime free from any undue influence from industry or Government. However, as is the case with other regulators, it is appropriate that the regulator is accountable to both Parliament and Government. Holding it to account is also important to industry, which is why the Bill provides for that in a way that is proportionate while also protecting the regulator’s operational independence.

It will be for the regulator to determine when and where it publishes its guidance. We do not specify where it should be published, but we strongly expect that it will be published on its website in an easily accessible format in the way that most other regulators do, such as the Financial Conduct Authority with its handbook.

[Robin Millar]

Could the Minister imagine a situation in which the Secretary of State issues guidance as per clause 13—for, example, on some of the issues raised by the shadow Minister, the hon. Member for Barnsley East (Stephanie Peacock)—and the IFR then subsequently issues its own guidance as per clause 12?

[Stuart Andrew]

Yes, I have been very clear that the regulator must have regard to statements from the Secretary of State but is not compelled to follow them entirely. That is an important safeguard to ensure that independence in the setup that we are establishing.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clauses 12 and 13 ordered to stand part of the Bill.

Clause 14

Annual report

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The clause requires the regulator to report annually to Parliament on its activities for that year. As with all public bodies, the regulator must arrange for the report to be laid before Parliament by the Secretary of State for purposes of transparency and scrutiny. The Secretary of State will have some flexibility to direct additional material to be included in the annual report to reflect further specific activity undertaken by the regulator or wider industry that year. That will help to ensure that the regulator produces its annual report consistently each year, and it will also ensure that it captures all relevant information, thereby allowing Parliament to have adequate oversight.

[Stephanie Peacock]

It is right that the independent regulator be required to submit an annual report on the exercise of its functions. In the interest of transparency and accountability, I believe it is standard practice for regulators to produce such annual reports and accounts, and the Independent Football Regulator should be no exception, so I have no particular worries or further questions.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Football Governance Bill (Fifth sitting)

Stuart Andrew Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Clauses 16 to 19 stand part.

New clause 8—Support to clubs—

“(1) The IFR shall provide reasonable and proportionate assistance to—

(a) regulated clubs seeking to obtain a provisional club licence;

(b) regulated clubs with a provisional operating licence seeking an full operating licence; and

(c) unregulated clubs which are reasonably likely to become regulated clubs in the next football season.

(2) The IFR shall provide reasonable and proportionate assistance to regulated clubs in their efforts to continue to comply with the conditions of a provisional or full operating licence.

(3) In fulfilling its duty under subsections (1) and (2), the IFR shall have regard to the factors listed in section 52(9).”

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mr Sharma. Starting with clause 15, one of the regulator’s main responsibilities will be to operate a licensing system for football clubs through which the majority of its regulation will be delivered. The licensing regime will cover all football clubs that have a team playing in any competition specified by the Secretary of State in regulations. It is proposed that it will cover the top five leagues of the English football pyramid, but that is subject to the Secretary of State’s discretion and parliamentary approval. I will use “specified competitions” as shorthand to denote those competitions covered by the regime. That means that football clubs will require a licensed, lawfully operated team in any of the specified competitions. A licensing system to enact regulation is not a new idea, with sectors such as communications, finance and healthcare all operating such a system.

The clause sets out the requirement for clubs to have a provisional or full operating licence, and the regulator’s power to grant those licences, subject to clubs passing the relevant tests, which are established in the following clauses. The licence will enable the regulator to regulate clubs through licence conditions set out later in the Bill. This will enable proportionate regulation tailored to clubs rather than a one-size-fits-all approach. An operating licence will specify which club the licence relates to, the team that the club is operating and any conditions attached to the licence.

I will move on to clause 16. The introduction of a football regulator into a previously unregulated sector will be a substantial change to the industry, but a necessary one to safeguard the future of English football. In order to provide for a graduate transition to being a fully licensed club, a club will initially apply to the regulator for a provisional operating licence. We see that as the natural first step to attaining a full operating licence. That will give clubs time to adapt to the regulatory system and make the necessary changes without being unfairly penalised for not being able to raise standards overnight.

The application for a provisional licence requires basic information on the club’s owner or owners, officers and senior management as well as a strategic business plan detailing things such as the estimated costs of the club and how they are expected to be funded. The regulator should look to make that process as simple and straightforward as possible, assisting clubs with their applications where necessary. It will be aware of the possible constraints on smaller clubs lower down the football pyramid. We envisage that the majority of clubs will meet the test for a provisional operating licence through the submission of basic information and documentation, and showing a readiness and willingness to work with the regulator to meet the mandatory licence conditions and free-standing duties.

Clause 17 outlines the granting of a provisional operating licence that will allow the club to operate for a time-limited period. That may be up to three years initially, although it could be shorter or extended depending on the circumstances. The provisional period will allow the regulator time to assess the current standing of the club and determine what steps it will need to take to obtain a full operating licence as well as giving the club time to take the necessary steps. The provisional licence will ensure that all clubs under the remit of the regulator meet basic fundamental requirements, in the mandatory conditions, that will help to safeguard the club’s sustainability and heritage.

There are three aspects of the test to grant a provisional operating licence. First, the club must operate a relevant team in a specified competition, which effectively means that the club must be in scope of the regulator. Secondly, the club will comply with the mandatory licensing conditions attached to the licence by the regulator. Full details of the mandatory licence conditions are in schedule 5 to the Bill, but they encompass a financial plan condition, a corporate governance statement, a fan consultation condition and an annual declaration condition. Thirdly, the club will comply with the duties on clubs as set out in part 5 of the Bill. If the regulator is not satisfied that the club passes all elements of the test, the clause gives a club the opportunity to engage with the regulator to rectify the issues identified. That collaborative approach will aim to ensure that clubs are given every opportunity to meet the requirements and gain a provisional operating licence.

Clause 18 states that in order to pass the test for a full licence, the regulator must be satisfied that a club is meeting the threshold requirements as set out in schedule 4 and that the club is complying and will continue to comply with the mandatory licensing conditions and free-standing duties on clubs set out in part 5. The regulator must also not have determined that any person who is an owner or officer of a club is unsuitable for the position they hold.

Clause 18 also details the power of the regulator to extend the provisional operating licence for a club. That will be done only if the regulator believes that the club does not meet the bar for a full licence at present, but will if given more time. As set out later in the Bill, the regulator will be able to sanction a club if it has to extend its provisional licence. Once a club has a full licence, it will not have to be periodically reviewed. Instead, the regulator would continue to monitor and supervise the club, and there will be an annual touchpoint in the form of the annual declaration, where the club will notify the regulator of any changes within the club over the past year that are relevant to the regulator. That is intended to minimise burdens while still ensuring that the club continues to adhere to the necessary requirements, including requirements that ensure that fans’ best interests are at the heart of the club’s decision-making process.

Clause 19 details the revocation of a club’s provisional operating licence for failing to progress to a full licence, as well as when the licence ceases to have an effect. For a provisional operating licence to be revoked, the regulator must satisfy itself of three things: first, that the test for a full operating licence is not met; secondly, that the club in question has persistently and without reasonable excuse failed to take reasonable steps to meet the test; and finally, that there is no reasonable prospect of the club meeting the test within a reasonable period, even if given more time. The regulator should be engaging with the club throughout that period, and we expect that through constructive dialogue, a solution that avoids that drastic step can be found in all but the most serious cases. The regulator must notify the club of its decision and provide its reasoning. To reduce as much as possible the regulator’s impact on ongoing sporting competitions, a revocation must not be before the end of the current season.

A licence will cease to have effect only if the club ceases to operate a relevant team. The most likely cause of cessation of an operating licence is that a club has been relegated from a specified competition and is therefore no longer in the scope of the regulator.

I understand the intention behind new clause 8, which would require the regulator to provide clubs with “reasonable and proportionate assistance” as they engage and comply with the licensing system. However, I can reassure the hon. Member for Sheffield South East that the Bill already achieves that in principle. It is already implicit that any good regulator should provide support and assistance to the regulated population as necessary, to aid their understanding and support compliance. But for the avoidance of any doubt, we have also explicitly codified that participative approach into the Bill through the regulatory principles. The regulatory principle in clause 8(b) encourages the regulator to

“so far as reasonably practicable, co-operate, and proactively and constructively engage, with…clubs”.

The regulatory principle in clause 8(c) encourages the regulator to be proportionate. Those two principles would encourage the regulator to provide clubs with assistance in engaging with the licensing system.

It is in everyone’s interest to maximise clubs’ compliance with the system and minimise burdens on them as much as possible. Indeed, ensuring a smooth transition and minimising burdens on clubs has been at the heart of our design of the licensing system. That is precisely why there is a two-step structure of provisional licences followed by full licences, with clubs given time and support to progress from one to the next.

[Stephanie Peacock (Barnsley East) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I am pleased to have reached the part of the Bill where we can discuss the content of the operating licences that will make up the regulator’s regime. As the Minister has said, clauses 15 to 19 set out the process for applying and granting both provisional and full operating licences. I would like to welcome a few things about these clauses.

First, I welcome the ability for clubs to gain a provisional licence first, with the conditions in this licence providing the building blocks for the full-time licence. This process recognises the importance of the transition period, allowing clubs to take the necessary time to understand the new requirements and get themselves in order to meet them if needed.

I also welcome that clause 16 clarifies that any club can apply for a provisional licence, allowing those expecting promotion to the National League to be proactive. Further, I am pleased that the process will require a personnel statement to be provided. That will be crucial in ensuring that the regulator is able to hold the right people accountable for the proper fulfilment of the licence at any given club.

The clauses allow for an advocacy first approach, where the regulator will provide an encouraging and flexible pathway for clubs to gain their licences. Coupled with the enforcement power in clause 19 to ensure that the regulator has the teeth it needs in the event of non-compliance, the process in this part of the Bill seems to offer a fair and supportive approach to getting clubs up to speed with the full requirements.

My hon. Friend the Member for Sheffield South East is right to highlight in new clause 8 that clubs should be supported in their transition to becoming fully regulated. That is especially important for those clubs in the National League and the lower tiers of the English Football League. In his evidence to this Committee, Steve Thompson, the managing director of Dagenham & Redbridge told us he was

“really worried that the extra reporting…will be more than a lot of them can manage without taking on extra staff.”––[Official Report, Football Governance Public Bill Committee, 14 May 2024; c. 39, Q61.]

He also highlighted that most clubs at National League level operate on one or two full-time staff, with some working on volunteers alone.

I think the Bill has done a good job of ensuring regulation will be proportionate. Further, I believe reporting requirements have been minimised wherever possible and should in any case be balanced out by the benefits of good financial planning and governance. However, given the concerns of clubs, I understand why some may feel it is better to make it explicit that the regulator will support clubs that are or will be licensed.

I hope the Minister can use this as an opportunity to highlight some of the ways in which the Bill as it stands will adopt an advocacy first approach and offer clubs the assistance they need to keep up with the regime. I do not believe it is anyone’s intention for the regulator to have to use its enforcement powers on well-intentioned clubs that are genuinely struggling to comply.

[Mr Clive Betts (Sheffield South East) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I thank the Minister for his positive comments on new clause 8, which are very much in line with what it is trying to achieve. I think the Minister said that the new clause is unnecessary because the essence and intention of it is already contained in other clauses, and the regulator would be expected to operate in providing assistance to clubs in line with the way described in new clause 8. I think I have got that right.

[Stuart Andrew]

indicated assent.

[Mr Betts]

The Minister is nodding on that point. On that basis, I will not push the new clause, because the Minister’s explanation, and the evidence we have heard, reassures me that clubs that are coming up from the National League and want that assistance will be helped in precisely the way the new clause would require of the regulator.

[Stuart Andrew]

I welcome the positive comments from the hon. Member for Barnsley East. She is right that we are trying to have a fair and supportive approach here and that clubs should be supported.

I want to reassure the hon. Member for Sheffield South East that we have tried to design the Bill so that it recognises that the level of activity at the top of the Premiership, for example, will be vastly different, and that, as we heard in the evidence sessions, many of the club officers in the National League will be volunteers and we would not want to overburden them.

[Dame Tracey Crouch (Chatham and Aylesford) (Con)]

The Minister will have heard the concerns in the evidence sessions about duplication. Will he be kind enough to remind the Committee that it will be for the leagues, not the statutory regulator, to decide whether there is any duplication?

[Stuart Andrew]

My hon. Friend makes an important point. This will be the statutory regulator, and this will be where the reporting will need to happen. If the leagues add anything, it is for them to make that decision. As this process progresses, I hope they will see that there is no need for the extra layer of reporting and that the regulator’s powers will be sufficient to secure the future of English football.

[Anna Firth (Southend West) (Con)]

On behalf of a National League club, Southend United, I welcome the light-touch approach set out in clause 8(c). I welcome the Minister’s comments that where the National League is already regulating itself well, there will be a proportionate, light-touch approach to any additional regulation.

[Stuart Andrew]

At the end of the day, we want to ensure a standard approach to regulation to ensure that we secure clubs in the future. As I say, I hope that as the regulator starts getting up and running, the leagues will see that there is no need for duplication and will make decisions accordingly. Ultimately, however, it is up to them to make that decision.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16 to 18 ordered to stand part of the Bill.

Schedule 4

Threshold requirements

[Ian Byrne (Liverpool, West Derby) (Lab)]

I beg to move amendment 4, in schedule 4, page 93, line 3, leave out from “has” to end of line 6 and insert—

“(a) adequate means by which to consult its fans about relevant matters, and

(b) structures and processes for effective engagement with its fans and takes the views of its fans into account in making decisions about the relevant matters.”

--- Later in debate ---

[Stephanie Peacock]

I thank my hon. Friend for that comment, which I will talk about later. I am sure that the Minister also heard it and will respond if he feels able to. For now, I ask the Minister to set out his thinking on why fans are not consulted on the heritage implications of moving a home ground. Overall, I welcome schedule 4 but would welcome a strengthening of the fan engagement provisions.

[Stuart Andrew]

Schedule 4 introduces the threshold requirements that clubs will have to meet to be granted a full operating licence. These are the three main areas of the regulator’s club licensing regime, which build on the freestanding duties and the mandatory conditions. Meeting the threshold requirements will mean that the regulator is satisfied that the club can currently and will be able to continue to operate sustainably in its financial, non-financial and fan engagement areas.

Although the threshold requirements are principles set in legislation, what each club must do to meet those requirements will not be the same. For example, what constitutes appropriate financial resources for a Premier League club will be very different from a League One club. A club might already meet the threshold requirements—for example, through naturally good operations or by complying with competition rules—in which case, the regulator will not need to intervene directly. If a club does not, the regulator can apply discretionary licence conditions to bring it up to the required threshold. That structure will allow for a proportionate system with requirements tailored to individual clubs, rather than the approach taken by the industry to date of blanket rules catering to the lowest denominator but applying to all.

The threshold requirement for financial resources means that clubs need an appropriate level of financial resources to support their long-term financial sustainability, accounting for their circumstances and risks. For example, that might include which competition the club competes in, its financial relationship with its owners, and the wider economic context in which it operates.

In particular, the regulator should take into account the club’s financial plan and its contingency plans for dealing with financial shocks. For non-financial resources, a similar requirement and process applies. “Non-financial resources” refers to things such as internal controls, systems and policies, as well as the information and people that the club has at its disposal. Although not financial in nature, those are important resources for any well-run club, so they need to be adequate. When assessing whether the resources are appropriate, the regulator might consider the skills and experience of the senior management and its corporate governance arrangements.

The threshold requirement for fan engagement requires that clubs adequately consult and consider the views of fans when making decisions relating to certain specified matters. As we heard from the FSA on Tuesday, this is the first time that there has ever been a requirement for fan engagement to this extent. The relevant matters are listed in the Bill and cover key off-pitch decisions, which the fan-led review highlighted as important to fans across the specified leagues. The threshold requirement is designed to work in tandem with the fan consultation mandatory licence condition. Through that condition, all clubs must regularly consult a representative group of supporters to discuss the relevant matters listed in the Bill, and that must be in place by the time a club receives a provisional licence.

Appropriate fan engagement will look different at every club and will partly be based on the size and complexity of the club’s fanbase. The threshold requirement has been designed to allow the regulator to recognise the inherent variation between clubs while ensuring that standards are raised where necessary.

[Ian Byrne]

Is the Minister confident that independence will be hardwired into engagement? Regarding the fan advisory boards, there are several examples of Premier League clubs flooding them with club employees. For engagement to work, it has to be completely independent so that we can hold the powers that be to account.

[Stuart Andrew]

The hon. Gentleman is absolutely right and I give that reassurance. If fans feel that the body that is currently being consulted is not truly representative, the independent regulator can have a look and, if necessary, apply discretionary licence conditions.

Fans, as everybody has said, are the foundation of any club. Putting in place a supporter engagement threshold requirement recognises that they must be consulted on key issues that affect their club. The requirement for clubs to have adequate means to consult their fans and to take fans’ views into account allows the regulator to consider the outcomes of fan engagement and whether the appropriate processes are in place at clubs and are being utilised.

Importantly, the regulator will be able to take enforcement action, such as censure statements, where it deems it appropriate following non-compliance with the licence conditions relating to the fan engagement threshold requirement. That is just one of the factors that results in a robust fan engagement requirement on clubs.

Amendments 4 and 16, however, seek to add something that is already captured in the legislation, with the difference in legal effect of “adequate” and “effective” being negligible. There does not seem to be a way in which a club’s fan consultation could be determined to be adequate without the structures and processes for effective engagement in place. Although the Government understand the intent to make sure that the fan engagement provisions in the Bill are strong, I can provide reassurance that that is the case already and I therefore hope that the hon. Member for Liverpool, West Derby will be able to withdraw his amendment.

Turning to amendment 8, I have been clear that the Government agree with the need for many clubs to engage with their fans on more issues. We expect that the issues of joining a new competition or not playing matches at their home ground would already be captured by the “relevant matters” of

“(a) the club’s strategic direction and objectives;

(b) the club’s business priorities;

(c) operational and match-day issues;”

and matters relating to “the club’s home ground”. It is therefore already implicit in the “relevant matters”, so to add this amendment would be duplicative.

--- Later in debate ---

[Mr Betts]

Is the Minister saying that, if a competition organiser such as the Premier League, UEFA or FIFA suddenly required clubs to play their games away from home in another country, it would be covered by the regulator’s powers at present to stop that?

[Stuart Andrew]

The leagues will have to report to the regulator if they are making changes to any of the competition rules—that is a requirement within the legislation. If changes to competition rules were to impact any of the “relevant matters” in the Bill regarding fan consultation, the club will be required to consult the fans on the related club decisions. However, where changes to competition rules do not have such an impact, it does not seem appropriate to mandate that consultation. Therefore, I hope that the amendment will not be moved.

[Mr Betts]

Is the Minister saying that if there is a requirement by FIFA, UEFA, the Premier League or any other league for clubs to play their home matches away in another country, the clubs would have to consult the fans about that issue and the regulator would take account of that consultation, even if it was a requirement on the club by the competition organiser? Could the regulator overrule the requirement of the competition organiser in line with the fan consultation that a club would have to engage in?

[Stuart Andrew]

I think I understand the hon. Gentleman’s question, but my understanding is that that will be looked at on case-by-case basis. I want to ensure that I have exactly the right line for him and I would not want to give any misinformation, so I will write to him, if he will allow it.

On amendment 5, the hon. Member for Liverpool, West Derby is correct that fan engagement in football clubs is an integral part of football and capturing that in the Bill is essential. Regarding the specific amendment, I assure him that the fan engagement threshold requirement and the wider licensing regime already captures what the amendment is describing. As the Bill is drafted, before a club receives a full operating licence, the regulator—which is independent—will assess if the club has adequate means to consult fans and to take their views into account on a range of issues in the Bill. The test for a full licence, which is set out in clause 18, is such that a full licence cannot be granted unless the club meets the threshold requirements, including those on fan engagement.

Once a licence is granted, the regulator will continue to monitor the club’s adherence to all the threshold requirements, including on fan engagement. For the avoidance of any doubt, the regulator’s general duties in clause 7(4) explicitly require that. If the regulator identifies that a club is no longer meeting the fan engagement threshold requirement, the regulator can take relevant action to bring the club back to meeting that threshold requirement. Given that those elements are already a feature of the licensing regime, I hope the hon. Member will not move his amendment.

On amendment 17, the FSA has been extensively consulted from the fan-led review until now. I am incredibly grateful to Kevin Miles and all those at the FSA for their support—the amount of help and support that they have given to this process has been extraordinary. The Government expect that the regulator will continue that engagement with the FSA, and it is often likely to be a relevant stakeholder on fan engagement. It is therefore not appropriate for the legislation to bind the regulator unnecessarily, but I hope that that makes it clear that we expect the FSA to be consulted where relevant.

As currently drafted, the Bill is future-proofed so that the regulator may always consult the most appropriate stakeholders in relation to and at the time of a particular decision. The regulator will be best placed to establish what adequate fan consultation looks like in practical detail, given its position of oversight and understanding of each club’s fan base. Adequate fan engagement is not a one-size-fits-all, as the hon. Member for Barnsley East mentioned, and limiting it to a strict definition would water down the intention for clubs to be able to take a bespoke approach. The legislation has deliberate, in-built flexibility so that fan engagement expectations can be tailored to a club’s size, fan base and individual circumstances.

On the topic of guidance on fan consultation, it will be for the regulator to determine the most effective course of action in relation to producing and publishing any formal guidance, the contents of guidance and the timing of publication. As we heard on Tuesday, this is a key area for the FSA, and the Government expect that the regulator will work at pace on any required formal guidance, working throughout with appropriate stakeholders, including the FSA. Setting a legislative requirement for that may risk rushing the regulator’s work in the space without sufficient time for necessary consultation with those stakeholders, or force the premature publication of guidance to the detriment of its quality. I therefore hope that the hon. Member for Barnsley East will withdraw her Bill—sorry, her amendment. [Laughter.]

[Ian Byrne]

We are not withdrawing the Bill! I thank the Minister for giving me the answers and really good explanations of why I should withdraw my amendment, so I am happy to do so. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[The Chair]

With this it will be convenient to discuss the following:

Amendment 19, in schedule 5, page 95, line 36, at end insert—

“8A Where a club’s fans have established legally registered Supporters Trusts, clubs must have regard to whether these bodies should become the appropriate representation in its fan consultation process under paragraph (8).” Amendment 7, in schedule 5, page 95, line 40, at end insert—

“(3) Persons selected as representing the views of the club’s fans should be appointed through a process that is democratic and independent of club control.

(4) Where the club’s fans have established a legally registered Supporters Trust, that body should have appropriate representation in the club’s consultation processes.” Schedule 5.

[Stuart Andrew]

Clause 20 requires the regulator to attach the four mandatory licence conditions to the provisional and full operating licences of all licensed clubs. These are basic and fundamental requirements of the whole regime, so apply to all licensed clubs, regardless of their individual circumstances. The mandatory conditions vary in what they attempt to achieve, and are set out in schedule 5, which I will discuss after amendments 19 and 7.

In our view the amendments risk undermining the key intention to implement a proportional and flexible system for fan engagement. Mandating specific forms of fan representation may lead to clubs being required to implement an entirely new way of engaging with their fans, even where existing frameworks are working well. Should it be deemed necessary, the regulator already has the power, established in schedule 5, to specify the means by which clubs are required to consult those representing the views of fans, which may include how a representative group of fans should be constituted. The regulator may specifically choose to require a club to implement a mechanism for the independent selection of fan representatives. On that basis, I hope that Opposition Members will not press the amendments.

The conditions set out in schedule 5 are related to core areas of financial management, corporate governance, fan engagement and reporting, and will form the foundations for the overall improved standards and sustainability of a club. Long-term financial sustainability is at the heart of the Bill, and is vital to make clubs more resilient to financial difficulties. The financial plan condition allows the regulator to understand the risk profile of the club and its plans for mitigating risks if necessary. To do this, the regulator needs detailed financial information about clubs. This allows it to establish the risk profile of a club and then, if necessary, to make a considered, proportionate intervention to reduce the risk of that club getting into financial difficulty.

As well as allowing the regulator to assess the risk profile of a club, a detailed financial plan will help clubs to establish their funding requirements over a period of time. Clubs need to have sufficient funds, or access to such funds, to support their intended level of spending. Clubs will need to model their financial plan against different scenarios and over different periods. They will also need appropriate contingency plans that they can enact if their finances worsen, in order to get them back to a sustainable state. This is to ensure that clubs can be ambitious and, equally, to prevent the failure to achieve those ambitions from putting the club’s long-term financial sustainability at risk.

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[Mr Betts]

On corporate governance, I do not want to name names, but this relates to a club not too far from me. Is the Minister saying that in the future it will not be appropriate to regulate the corporate governance of a club if it merely has an owner who is the chairman, and no board of directors to run the club?

[Stuart Andrew]

The hon. Gentleman makes a really important point, which is why one of the mandatory conditions is good corporate governance. Some clubs do that extremely well, and he gives an example of one that may not be doing so well. For it to get a licence, the regulator would expect a minimum level of corporate governance.

[Stephanie Peacock]

Clause 20 and schedule 5 provide us with the building blocks of a licensing regime. The Minister set out the mandatory licence conditions that all clubs must comply with in order to obtain a provisional or full licence. That will ensure that base-level requirements are fulfilled on key areas such as finances, corporate governance and fan engagement. I will speak briefly to each area in turn, and then address the amendments.

The first condition relates to financial plans. I will not spend too much time on it as we have already discussed financial resources. However, I believe that the requirement to submit a financial plan would be fundamental for clubs wanting to exercise best practice.

The second requirement is on corporate governance. As we just discussed, good corporate governance can help to deliver better business outcomes, improve the efficiency of decision making and demonstrate to stakeholders that a club is well managed, to the benefit of both fans and investors. Furthermore, as the Government’s White Paper says, poor governance can exacerbate financial issues, allowing reckless decisions to be made without challenge or scrutiny. Many clubs already engage in good corporate governance, and for those that are not, the introduction of requirements should genuinely help to move them towards best practice.

However, I have some questions about the content of the corporate governance code of practice, which will be published by the regulator and reported against by clubs. In particular, Fair Game and Kick It Out have questioned whether issues such as equality, diversity and inclusion will be included in the code. Indeed, the Government chose not to pick up the recommendation of the fan-led review to mandate EDI action plans through the licence regime, pointing instead towards enhanced industry assessments in that area.

I understand the need to ensure that existing structures that are working well are not disrupted, and to give the regulator a well-defined scope. Given the explicit focus that the regulator will have on good governance, however, it seems slightly odd to divorce the concept from the issue of EDI. The fan-led review said:

“Aside from a clear moral case, improving diversity is also a key aspect of driving better business decisions by football clubs. Diverse companies perform better”.

A football that welcomes everyone, then, is a football in which clubs have the best possible chance of success. But change is needed at almost every level for that to happen.

Kick It Out’s reporting statistics from last season show that it received a record 1,007 reports of discriminatory behaviour across the professional game, including a 400% increase in reports of sexism and misogyny. Meanwhile, in 2019, the law firm Farrer & Co found that across all professional football clubs only 7% of board directors were female. Just one club met the 30% target set for other industries, and only 7% have a woman in a leadership position on the board. Work must be done to address the problem across the board. I am keen to hear from the Minister about how whether issues such as EDI will form part of the governance code will ultimately be decided, and whether he has a view on whether they should.

I have spoken about fan consultation in detail during our discussions on schedule 4, so I will save repeating how important it is. However, I would like to raise some further concerns. Namely, I am disappointed that the Bill makes no provisions regarding supporters’ trusts, as noted by my amendment 19 and amendment 7 tabled by my hon. Friend the Member for Liverpool, West Derby.

At the time of the fan-led review, 73 clubs had a community benefit society in the form of a supporters’ trust. Community benefit societies are incorporated co-operatives that conduct business for the benefit of their community. They must follow certain rules, including operating on a democratic basis and ensuring that any profits gained by a trust can only be reinvested into the club or returned to the community. Those minimum standards mean that CBSs in the form of supporters’ trusts operate with a broad level of consistency and reliability. Many of them have a long legacy of connecting with the local area, liaising with their club and organising on behalf of fans. Many trusts should therefore be viewed as an asset to the community that clubs can learn from and engage with positively. We saw that at first hand in our evidence sessions, with the insight that Action for Albion, Supporters’ Trust At Reading and Arsenal Supporters’ Trust brought us in respect of their clubs and the view of their communities.

I understand why the Bill has sought to ensure that fan engagement measures are not a one-size-fits-all. However, where trusts are established, I believe that clubs should consider them when forming their consultation processes. Amendment 19 would ensure that where a club’s fans have established a legally registered supporters’ trust, that body is considered for representation in the club’s fan consultation process. Clubs would not be bound by any hard-and-fast rules, but would be encouraged to consider the benefits of engaging relevant existing trusts.

That brings me to the broader issue of how fans will be selected for consultation. Amendment 7 suggests that fans are given a democratic mandate if they are to be consulted by the club regularly. That way they would have the backing of fellow fans, helping to avoid scenarios in which the fans are seen as a mouthpiece for the club directed at fans, rather than the other way round. I am keen to hear how the Minister thinks we can ensure that fans are both selected and treated fairly. Will there be standards or guidance on that specific issue?

Finally, I am pleased to touch on the annual declaration condition. Given that there is no requirement for licences to be renewed, it is right that there is a touchpoint for clubs with the regulator to ensure that everything is in order, but I have one brief question. The schedule outlines that the annual declaration must contain a summary of any “material change” at the club over the year. That phrase is used 11 times throughout the Bill, but its definition is not clearly set out. Will the Minister provide a working definition today, or write to me with one?

Overall, I am broadly happy with the contents of the clause and schedule, albeit with a few questions that I would like answering on governance code and on supporter involvement.

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[Stuart Andrew]

I thank hon. Members for their contributions. I agree with the hon. Member for Barnsley East that the guidance on corporate governance should be really helpful to clubs that are perhaps struggling with that, and puts it on a statutory footing. As my hon. Friend the Member for Folkestone and Hythe quite rightly points out, many of these clubs, by obligation of the leagues they are in, already have to provide a corporate governance code. However, as we go further down the pyramid, there are varying degrees of quality for that corporate governance code. That is why having a statutory requirement will, we hope, improve those standards. We recognise that some of those codes work well, but my hon. Friend is right: this will enable the regulator to hold those clubs to account for the way in which they are implementing those corporate governance codes.

[Damian Collins]

My right hon. Friend makes a good point. The requirements will differ at different levels of the pyramid. It would be wrong for us to require a club in League Two to meet the same corporate governance standards as a Premier League club. However, the provision could be worded to say that the corporate governance statements must set out how the clubs meet all the requirements they are expected to meet by the competition organisers for the competition in which they play.

[Stuart Andrew]

I expect that clubs would have to work closely with the leagues as well.

On the issue of EDI, I hope that it is clear this is an area that I personally feel very passionate about. We have made sure that the Bill and the regulator are tightly focused on the finances of clubs, the sustainability of the pyramid and fan engagement. We recognise the importance of equality, particularly, as the hon. Member for Barnsley East mentioned, in light of unacceptable abuses. I regularly engage with the Football Association and the leagues to put pressure on them and to work with them to do more to make improvements in this area. We also work with organisations such as Sport England and UK Sport, because it is not just football where this is an issue.

[Dame Tracey Crouch]

On the sports governance code, which I may have had a hand in helping to design and shape many years ago, is the Minister saying that when looking at the issue of corporate governance, he will draw on the experience of the sports governance code, which has specific EDI aspect it, or is it more about looking at the UK corporate governance code, which has elements of that but is certainly not as strong as the sports governance code?

[Stuart Andrew]

My hon. Friend makes a really important point, which I was just about to come on to. I am glad that she did so—it was a perfect introduction. She is absolutely right. The regulator can consider all of those, and I would expect that it would do so. It can draw on established principles such as, as she rightly points out, the code for sports governance and the UK corporate governance code. It can also draw on the Wates principles on corporate governance for large private companies, and it can also draw on the regulator’s own state-of-the-game reports. There is a whole host of information which I hope will address those issues.

I can confirm to the hon. Lady for Luton South that the phrase, “likely to be affected”, includes fans, so I expect that they will be consulted.

[Damian Collins]

My right hon. Friend’s response is helpful. If the Government are not willing to amend the Bill, and do not feel the need to do so, would he consider writing to the Committee, setting out the guidance which he would give to the regulator when preparing the codes of practice on what the corporate governance code should include?

[Stuart Andrew]

Yes, I would be more than happy to do that.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 21

Discretionary licence conditions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 22 to 24 stand part.

Schedule 6.

Clause 25 stand part.

[Stuart Andrew]

I will begin with clause 21. Where needed, discretionary licence conditions will be used by the regulator to bring a club up to the required level of compliance with the threshold requirements. That means that the regulator is satisfied that the club can currently, and will continue to be able to, operate sustainably in financial, non-financial and fan engagement areas, as per the regulator’s objectives. Those conditions will be in addition to the standardised mandatory licence conditions and, when applied, will be tailored to the club’s specific circumstances and identified financial risks. If a club already meets the threshold requirements set by the regulator, the regulator will not need to attach any discretionary licence conditions. That means that it can be light touch where appropriate, and need not directly intervene if the desired outcomes are already being met. Discretionary licence conditions could also be used to protect and promote the financial resilience of the football system. The conditions would be used to resolve risks that might not threaten any one club significantly, but their potential aggregated, correlated or multiplied effects may pose a significant risk to large parts of the football system, or the pyramid as a whole.

Clause 22 sets out the scope of the regulator’s powers to attach or vary a discretionary licence condition. Under the financial resources threshold requirement, discretionary conditions may only relate to one of four areas including debt management, liquidity requirements, and overall cost reduction, or they might restrict a club’s ability to receive illicit finance. The fourth area is integral and enables the regulator to restrict the club’s ability to access funding that it has reasonable grounds to suspect is connected to serious criminal conduct. It will empower the regulator to limit illicit finance, which is inherently unsustainable for a club.

Under the non-financial resources threshold requirement, conditions may only relate to one of three areas: internal financial controls, risk management, and financial reporting. As outlined in the previous clause, the regulator can also attach discretionary licence conditions to advance its systemic financial resilience objective. That objective is specifically to address systemic risks, or structural issues, by applying conditions to multiple clubs or even to all licensed clubs. Clause 22 limits the scope of discretionary licence conditions to only conditions that relate to debt management, liquidity requirements, and overall cost reduction.

To future-proof the regulated regime, the Secretary of State will have the power to amend the areas to which discretionary licence conditions may relate. However, that can be done only if the regulator makes a request in writing to the Secretary of State, having first held a consultation, explaining why an amendment is needed by reference to the purpose of the Act. That will limit the risk of unwanted, politically motivated scope-creep in the future.

Clause 23 sets out the procedure for attaching or varying financial discretionary licence conditions on clubs. The procedure outlined in the clause ensures that clubs and competition organisers are notified and given the appropriate opportunity to engage in advance when the regulator considers a discretionary licence condition is needed. Where appropriate, the regulator will seek to allow the relevant club and league to address identified issues and risks so that it does not have to intervene formally. That may produce a better regulatory response and outcome. The football industry may be best placed to address specific issues within the overall context of a league’s regulatory framework.

[Ian Byrne]

I thank the Minister for what he has said so far. I want to touch on a point for the clubs and, certainly, for supporters, having spoken to those of both Everton and Nottingham Forest, regarding profit and sustainability rules and the tariff that was served on them. At the moment, there seems to be zero confidence in the Premier League’s ability to govern that system and there are many calls—in fact, I got about 14 last night—from supporters right across the board who are asking why the independent financial regulator is not taking control of the whole profit and sustainability issue, any breaches and then levying the punishment to clubs in a manner that people think would be fair and transparent and, as I say, a process that they have a belief in. At the moment, they undoubtedly do not have that and that is a real worry.

It would be remiss of me not to touch on Manchester City winning the league yesterday and congratulate the club on that. However, there are 115 charges hanging over the club’s head and there is lots of disquiet around the whole process. It would have been welcome if the Minister had considered whether that should sit with the independent financial regulator to restore faith in the whole process, which, unfortunately, is not there.

[Stuart Andrew]

I understand what the hon. Gentleman says, but there is a balance about football having its rules and independence. We have to honour that in terms of relationships with UEFA and FIFA. However, we are ensuring that there is a regulatory regime that I hope will start to improve confidence among fans, as the hon. Gentleman describes. When it comes to the specific area under focus, if the regulator feels that the league’s proposition does not meet the objectives it needs to fulfil its duties, it can decide that it will still impose its own. The regulator will have to be satisfied that what the league is proposing will meet its required objectives.

Before any action is taken by the regulator, there will be a period where both the relevant leagues and clubs can make any representations and in which the relevant league, as a competition organiser, can also give a commitment to take action in lieu of the condition being attached or varied, as proposed by the regulator. Where the regulator is looking to attach financial discretionary licence conditions to a club, it must go through the relevant procedure to do so, as outlined in clause 23.

Clause 24 sets out further details on one key aspect of the procedure: a final, formal opportunity for competition organisers to offer a self-regulatory solution to a problem identified by the regulator so that the regulator does not have to step in. That is known as the competition organiser making a commitment in lieu of a financial discretionary licence condition. The clause is another important aspect of the regulator’s approach, which emphasises engagement and working with the industry to minimise formal intervention where possible. The regulator will still have powers to step in if the issue is not resolved, but it provides the chance for a competition organiser to present a football industry-led solution to an identified risk.

The regulator can accept a commitment if it concludes that that commitment should achieve the same results as the proposed discretionary licence condition and it does not conflict with the regulator’s objectives. If the commitment proposed by the league will not achieve the regulator’s desired outcome, the regulator can reject it—to repeat the point to the hon. Member for Liverpool, West Derby—and retains the power to intervene directly by imposing the discretionary licence condition.

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[Stuart Andrew]

This is in relation to the mandatory conditions that all clubs have to meet under the regulatory regime. If the regulator identifies that a club is not meeting one of the mandatory conditions set out in the Bill on the financial side, it can apply its own discretionary conditions. If the league proposes a solution to the problem and the regulator believes that it will work, it can then allow the league to apply that. However, if the regulator feels that the proposal put forward by the league would not get that club up to the standards required, it can then impose its own rule. I hope that makes sense.

Schedule 6 outlines the procedure for when the regulator is minded to accept a commitment given by a competition organiser, and covers requests to vary an existing commitment. The schedule therefore expands on clause 24. As I say, if it does not accept the commitment, the regulator can impose the original conditions. The intention is that commitments could provide a less burdensome solution for all parties that still addresses the risk. However, for that to be the case, it is important that there is a clear procedure for the interaction between clubs, the relevant competition organisers and the regulator. Schedule 6 sets out that procedure in further detail. The notification processes and timings set out in the schedule allow clubs the opportunity to make representations before the regulator accepts a commitment or requested variation of an existing commitment from a competition organiser, and before the regulator releases a competition organiser from a commitment.

Finally, clause 25 sets out the procedure for the regulator to attach or vary non-financial discretionary licence conditions. Such conditions, set under the non-financial resources and fan engagement threshold requirements, will not be subject to the commitments procedure involving relevant leagues as outlined in the previous clauses. Instead, the procedure is that the regulator must notify only the club and give the club a period of no less than 14 days to make representations. As per previous clauses, this is an important safeguard to allow the club to make its case. However, the clause allows the regulator to take more immediate action in situations that are more urgent and serious. If the regulator believes that giving the club notice and allowing a period for representations will jeopardise or risk jeopardising one of its objectives, it can apply the discretionary licence condition immediately, without prior notice.

[Stephanie Peacock]

I will start by briefly addressing the broad provisions around discretionary licence conditions in clauses 21, 22 and 23 together, before moving on to a discussion on commitments in lieu of licence conditions, covering clauses 24 and 25 and schedule 6.

Looking first at the discretionary licence conditions, clause 21 allows the regulator to attach licence conditions that are specific to a particular club. This allows the regulator a mechanism to put the principles of proportionality and consistency into practice: every club will be required to meet the threshold conditions for a full licence, providing us with consistency, but where a club falls short, the regulator’s response can be bespoke, allowing for proportionality.

Clause 22 provides strict limits as to what the discretionary licence conditions can cover, ensuring that they are focused on the areas in which they are most needed. Finally, clause 23 requires the Independent Football Regulator to notify a club, as well as the relevant competition organiser, about a proposed financial discretionary licence condition before attaching it to a licence. This is a sensible provision, which allows for a club and the regulator to remain in conversation unless there is an immediate risk that further delay would threaten the club’s financial sustainability.

I will move on to the idea of commitments in lieu of discretionary licence conditions. This requirement, which was not initially proposed as part of the fan-led review or the Government’s White Paper, says that the regulator must invite the relevant competition organiser to give a commitment to make a rule of its own instead of the proposed condition’s being attached to the particular club’s licence. I understand that the reasoning behind that provision is to ensure that competition impacts can be reduced, allowing a competition organiser to try to ensure that one club alone does not have to face a rule that other clubs do not. Further to that, it exists to offer competition organisers an opportunity to improve consistency across clubs in following good practice. However, despite that, a number of concerns about these clauses have been raised with me, so I hope that the Minister can provide some further context in answer to some of the following questions.

First, it would be good to have confirmation that this provision cannot be exploited to delay the regulator from imposing licence conditions. Consultation will be incredibly important as part of the regulator’s functions, but the regulator must have the teeth to make an executive decision where needed. In that vein, it would be good if the Minister could provide some insight on what these commitments might mean for rule primacy.

I understand that the regulator will have the final say on whether a commitment in lieu is accepted, and that the discretionary licence condition must be dropped while a commitment is in force, but it still remains the case that any accepted commitment will mean that both the regulator and competition organiser will have oversight and scope in the same area. That could see clubs paying twice for two sets of overlapping rules. Who has ultimate power in these cases?

Another area where clarification is needed is on the topic of commercial sensitivities. Although the Premier League is in many ways representative of clubs, it is also a competitor to clubs when it comes to gaining big sponsorship deals. Can the Minister confirm that the regulator will be alert to the ways in which discretionary licence conditions are discussed with competition organisers, so that sensitive information is not disclosed? Indeed, in cases involving such commercially sensitive information, it seems slightly odd to think that the competition organiser, which will not have the full picture, would be better placed to create a rule than the regulator itself, which will be privy to more of the financial details.

Finally, it is welcome that the relevant club will be consulted about a commitment in lieu beforehand, as per schedule 6, but, for the other clubs competing in a relevant competition, who will also be impacted by the commitment, there is no right to consultation. That might seem strange to clubs that have done what is required of them to meet the threshold requirements; they face being subject to further regulation due to the specific circumstances of another club’s finances, without a fair say in the matter. I should be grateful to the Minister, therefore, if he would set out how the Bill will ensure that clubs are not ignored in the engagement process when the commitment in lieu being proposed will directly apply to them.

[Stuart Andrew]

The hon. Lady makes important points. The idea is that as we have a regulator on a statutory footing, which will improve standards, hopefully that will bring football along with those improved standards. However, she is right to highlight the point about sensitive information. The regulator will be on a statutory footing and will be able to look at that information.

That is why it is important for the regulator to allow the leagues and clubs to make representations. The leagues may be able to say, “We can offer a commitment in lieu that will address this and look at the detail of that,” but the regulator, having information from the club that may be sensitive and private, can work out that, “Actually, that commitment in lieu will not meet the objectives,” and therefore impose its own discretionary licence condition.

Question put and agreed to. 

Clause 21 accordingly ordered to stand part of the Bill. 

Clauses 22 to 24 ordered to stand part of the Bill. 

Schedule 6 agreed to. 

Clause 25 ordered to stand part of the Bill.

Clause 26

Part 4: overview and interpretation

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The Government’s White Paper laid out several failings of the existing owners and directors tests conducted by the football authorities. The tests are conducted on a self-declaration basis, and have allowed owners with long histories of business bankruptcies and owners later imprisoned for crimes including money laundering. To address such shortcomings, the Bill includes strong statutory owners and directors tests, a vital part of the new Independent Football Regulator’s regime.

Part 4 gives the regulator the power to test the suitability of prospective new owners and officers of regulated clubs. In certain circumstances, it also gives powers to test incumbent owners and officers. The clause provides an overview of part 4, and signposts the rest of the clauses in this part.

One element of the regulator’s tests is the fitness criteria for individual owners or officers. They will ensure that custodians have the necessary characteristics to run or own an important community asset. Subsections (7) and (8) of the clause specify the fitness criteria: having the requisite honesty and integrity; being financially sound; and, for officers only, having the requisite competence for their role at the club. Alongside other elements of the test, ensuring that owners and directors are suitably fit for their roles will better protect each club against unsuitable custodians, ensuring the sustainability of English football over the long term.

[Stephanie Peacock]

I am pleased to have reached the part of the Bill where we can discuss the owners and directors tests. Football clubs are historical institutions with deep community ties; thus we must be careful to ensure that owners are people who view themselves as caretakers of an asset that has existed long before them, and we hope will continue to exist for years afterwards. As such, it is right that owners and directors are subject to fitness tests to ensure that the custodians of beloved football clubs meet certain standards.

At the moment, the tests are operated by different authorities depending on the league a club plays in. The Premier League, the EFL, and the FA on behalf of the National League all administer owner tests and have powers to disqualify unsuitable individuals. While those tests have been in place, many successful owners have been appointed, making selfless and sustainable investments in their clubs, which have brought about rewards on the pitch. However, not all owners have the same outlook, fortune, capacity or capability. Despite ownership tests, too many clubs and fans still have to deal with malicious, absent or incompetent ownership.

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[Anna Firth]

It relates to clause 37, so I will wait.

[Stuart Andrew]

Everyone is obviously getting so excited that they are getting ahead of themselves. To be fair, I understand why. It is important to acknowledge what my hon. Friend the Member for Chatham and Aylesford said about the many people who put themselves forward to support their local football club to build and become competitive. They are hugely important to the local communities in which they are based. We should acknowledge that there are many who do that well and with the best of intentions—even those who make mistakes, as the hon. Member for Sheffield South East said. Their intention is right.

We are focusing on ensuring that owners and directors tests get to the heart of the detail that we need. The test will be much stronger with the regulator, which will have access to information from statutory organisations such as the National Crime Agency, as the hon. Member for Barnsley East mentioned. She asked about the Premier League continuing with its own owners and directors test. It can continue with it if it wishes. I note that the EFL has made a different decision, because it recognises that the tests that the regulator will provide will get much more detail and information than the leagues may be able to. Because the tests will be statutory, they will take primacy.

[Stephanie Peacock]

I appreciate that clarity. I also appreciated the intervention from the hon. Member for Folkestone and Hythe. Richard Masters’s comments to the Committee about two green lights are welcome, but it is important that the Bill is clear on this point and that we are clear about it in Committee, so the Minister’s comments are welcome.

[Stuart Andrew]

I thank the hon. Lady. I commend the clause to the Committee.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Clause 27

Duties to notify IFR of prospective new owner or officer

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 28 to 31 stand part.

New clause 3—Owner’s commitment to future use of a club’s football ground—

“(1) A person may not become or continue to be an owner of a regulated club unless they provide to the IFR a commitment to maintain long-term use of the football club’s grounds as a mandatory licensing condition.

(2) The IFR must codify the commitment.

(3) The IFR may only determine a person to be or remain a suitable owner of a club if the person has made a commitment under subsection (1).”

This new clause introduces a new licensing condition requiring an owner to provide a commitment to the future ongoing use of a football ground by a club.

[Stuart Andrew]

Clearly we have got to the bit that everyone is itching to speak to. Ensuring that new owners and officers of clubs have passed the regulator’s owners and directors tests is a key tenet of the new regime, and is designed to prevent unsuitable custodians from running or owning clubs. The regulator therefore needs to know who a club’s prospective new owners and officers are before they buy or join the club, so that they can be tested for suitability.

Clause 27 will place duties on a person to notify the regulator where there is a reasonable prospect of that person’s becoming a new owner or officer of a regulated club. The clause will ensure that the regulator receives advance notice of an application from a prospective new owner or officer, and will help the regulator to prepare to act quickly when it receives the application. The clause will place the same duty on regulated clubs themselves, as another means of ensuring that the regulator will be notified.

The regulator needs to know a person’s role at the club so that it can prepare to assess whether they are suitable to be an owner or an officer of that club. That is why, where the notification relates to an officer, it must state their proposed job title or job description, as well as any senior management functions that they will carry out. Enforcement measures such as censure statements or financial penalties are also available to the regulator if it determines that this requirement has not been complied with without a reasonable excuse. This will deter those who do not wish to comply with the regime.

Clause 28 will prohibit a person from becoming a new owner of a club unless the regulator has determined beforehand that they are suitable to own that club. It requires prospective new owners to provide an application containing information about how they propose to run the club, the estimated costs, how those costs will be funded and where that funding comes from. This will better ensure that prospective new owners are clear from the outset about their plans for the club and how they will deliver the resources to fund those plans.

Once a complete application has been provided, the regulator can pass the individual owner only if they meet the individual ownership fitness criteria, as defined in clause 26; they have the requisite honesty and integrity and are financially sound; they have sufficient financial resources; and the regulator does not have grounds to suspect that the individual has any source of wealth that is connected to serious criminal conduct, which is defined in the Bill by reference to part 1 of schedule 1 to the Serious Crime Act 2007, which includes crimes such as drug trafficking and fraud. This will mitigate illicit finance in the game.

Registered societies are one vehicle by which fans can collectively own clubs. They must be run in accordance with specific legal requirements regulated by the Financial Conduct Authority. Registered society owners are not assessed against the fitness criteria or the source of wealth test, but they still need to complete an application, including providing a plan for running and funding the club.

[Dame Tracey Crouch]

The Minister is setting out clearly the purpose of these clauses of the Bill. It is clear that the regulator has been designed to be as agile and as future-proof as possible. If a crime that we have not yet imagined is added to the Serious Crime Act, how will the regulator assess a potential owner who has committed that crime?

[Stuart Andrew]

My understanding is that if the 2007 Act is updated with a new crime, it will still be relevant to the Bill. However, I want to be absolutely sure, so I will write to my hon. Friend, and if I am wrong I will correct my homework.

By requiring new owners to undergo the regulator’s test, clause 28 will better mitigate harm to clubs by stopping unsuitable custodians.

[Ian Byrne]

Further to the point made by the hon. Member for Chatham and Aylesford, what happens if the ownership is a nation state that does something falling within the remit of potential international criminality?

[Stuart Andrew]

Well, the Bill identifies an individual as the owner, not a state, but we will come on to some of those points. I have heard some of these representations as we have been preparing the Bill. It would not be right for the regulator to be getting into foreign policy—I do not think any party would want a regulator of any sort to be setting the nation’s foreign policy—but I get that it is an area of interest, and we will come on to it later in our proceedings.

Football clubs hold unique importance to their fans and local communities, who are the ones who lose out when clubs are exploited or mismanaged by unsuitable officers. Clause 29 will prohibit individuals from becoming a new officer of a regulated club unless the regulator has determined beforehand that they are suitable to be an officer.

Once the prospective officer has provided a complete application to the regulator, it will assess them to ensure that they meet the individual officer fitness criteria, as defined in clause 26. They must possess the requisite honesty and integrity and the requisite competence and must be financially sound. If the regulator is satisfied that the individual meets these requirements, it must find them suitable to be an officer of the club; otherwise, it must find them unsuitable. When the regulator is making this determination, it will take into account the matters listed in clause 37. By requiring new officers to undergo the regulator’s tests, the clause will better mitigate harm to clubs by stopping unsuitable individuals from becoming officers.

The Bill requires prospective new owners and officers to pass the regulator’s owners and directors test before they join or buy a club. However, it is possible that someone might take up a position at a club without first having undergone those tests. This may be a blatant and deliberate breach of the requirement to undergo tests before joining the club. A prospective owner may act in bad faith, hoping that once they are in, the regulator will be more hesitant to fail them, but in some circumstances a person may fall into the definition inadvertently or have some other relatively innocent reason for the breach. This may occur, for example, if a person inherits significant equity in a football club or if a person disputes in good faith whether or not their actions bring them within the Bill’s definition of an owner.

Clause 30 will therefore provide the regulator with the powers that it needs to respond decisively but flexibly when a person has become a new owner or officer of a club without the regulator having first determined whether that person is suitable. When the regulator becomes aware that this has happened, it must either notify the new owner or officer that they are being treated as unsuitable automatically or require them to provide an application, treating them as though they were a prospective applicant. When deciding which option to take, we expect the regulator to assess the circumstances of each case carefully and consider whether the new owner or officer has an innocent explanation or whether they have deliberately breached the regime.

The regime cannot be allowed to be abused. The regulator must have the discretion and the teeth that it needs to address harm to the sector. Clause 30 is an important step towards achieving that aim.

When the regulator is minded to fail a new or prospective owner or officer, clause 31 will require the regulator to give that person and the relevant club an opportunity to make representations before the regulator makes its final decision. Affected persons can also require an internal review of the regulator’s decision and then can appeal the outcome of that review to the Competition Appeal Tribunal. The purpose of clause 31 is to allow a new owner or officer, or the relevant club, an opportunity to argue their case before the regulator finds them unsuitable, which will ensure that the regulator has all relevant information available to it, allowing it to make better decisions and ensuring the regime is more effective.

The Government recognise the intent behind new clause 3, which is to ensure that football continues to be played in a club’s home ground. The Bill takes account of a variety of ownership structures relating to home grounds that exist across the football pyramid. The new clause would capture only one type of ownership structure. Owners may not necessarily directly own the rights to the club’s ground; in fact, only about 40% of clubs own their stadium outright. The new clause would require owners to make a commitment about something over which they do not necessarily have complete control or influence.

Let me be clear: the intent of the new clause will already largely be achieved by the Bill as drafted. The Bill places duties on the club itself regarding selling the club’s home ground or relocating from it; clauses 46 and 48 will require clubs to obtain approval from the regulator before a home ground is sold or relocated. If that requirement is breached, the regulator can exercise its enforcement powers.

[Mr Betts]

The Minister refers to what the Bill will do in regard to future sale, but the new clause does not deal with future sale; it deals with something that has already happened. The Minister says that it does not cover all eventualities, which may be true, but surely there are eventualities that need to be covered. If the Minister does not think that the new clause goes far enough, is he prepared to table another new clause that goes further to ensure a sustainable future for a club with a ground to play on?

[Stuart Andrew]

The hon. Gentleman makes an interesting point. I will not commit to introducing a new clause, but I will commit to going away and having another look at the points that he has raised, if that will satisfy him.

The Bill also allows for senior managers to be held accountable if they are responsible for the club breaching the requirements. That means that enforcement action could be taken against an owner of a club who was also a senior manager of the club and responsible for the club failing to comply with clauses 46 and 48.

[Matt Rodda]

Further to the point made by my hon. Friend the Member for Sheffield South East, in some cases there may also be an issue with training grounds being separated from the main organisation of the club. The current owner of Reading was trying to sell the training ground separately from the ground itself and from the club. Can the Minister write to me on that matter? It does not currently appear to be covered by the Bill, and I would be very grateful if he could reassure local fans.

[Stuart Andrew]

I am happy to commit to writing to the hon. Gentleman. He is right that it is really the perimeter of the stadium, the car park and so on. I will happily give him further details.

When the regulator is testing the fitness of prospective new or incumbent owners of clubs, it must have regard to any action of a regulatory or disciplinary nature that is being or has been taken in relation to the individual. The regulator already has the power to consider that as part of an owner’s suitability termination. For those reasons, I cannot accept new clause 3, and I hope that the hon. Member for Sheffield South East will not press it.

[Stephanie Peacock]

This group of clauses begins to set out how the new tests for prospective owners and directors will work in practice. I broadly welcome the clauses and will begin—I am conscious of time—to speak to each of them in turn, addressing new clause 3 last.

Clause 27 will require prospective owners and officers, as well as the club, to notify the regulator. This is an important first step that will allow the regulator to start the work of conducting the test itself.

Clause 28 will ensure that a person cannot become an owner unless the regulator has decided that they are suitable. This decision is called a positive determination and will be given to a candidate based on their ability to meet three main standards.

First, the candidate must pass the ownership fitness criteria, which are based on the idea that an owner must have the requisite honesty and integrity and be financially sound. I understand that those criteria have been based on the work of the Financial Conduct Authority; I hope that there will be an opportunity to share learnings and best practice across regulatory organisations as the regulator finds its feet.

Secondly, a candidate must show that they have sufficient financial resources, judged on the basis of an application that must include proposals on running the club. As with the regulator’s enforcement of financial sustainability more broadly, it is important that this process does not deter investment or require clubs to break even. Rather, I trust that the test will seek to ensure that good practice and long-term planning are embedded in owners’ plans from the very beginning.

Finally, there must be no grounds to suspect that the candidate’s wealth is connected to serious criminal conduct. That will prompt a welcome due diligence search on an owner’s wealth sources with the backing of institutions such as the National Crime Agency. Taken together, those standards will provide a comprehensive analysis of a potential owner.

For applications made by registered societies, the regulator will have a slightly different process, making a determination on the basis of sufficient financial resources alone. I am pleased that this recognised route to fan ownership will be treated with a tailored, yet proper, process.

Clause 29 covers officers. As I have mentioned, it is right that officers face a slightly different set of crafted criteria—

Football Governance Bill (Sixth sitting)

Stuart Andrew Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[Mr Clive Betts (Sheffield South East) (Lab)]

I am speaking in the right place this time. I was pre-emptive in my comments before the break, but that has given the Minister an opportunity to go away and look at the wording that he will come forward with to improve new clause 3.

I take the Minister’s point about the complicated circumstances for many clubs with respect to who owns the ground and what form they own it in, and that is understood. I hope that we can find a way of ensuring that, whatever the complications, the owner cannot simply put the club and the ground into different organisations—different legal constructs—but that in all cases there can be an assurance that the club will have use of the ground going forward, because otherwise the club cannot be sustainable by anyone’s definition.

I thank the Minister for agreeing to go away to look at the issue. I accept that new clause 3 is probably imperfect, and I very much look forward to a perfect clause coming back from him in due course.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship this afternoon, Ms Nokes.

I thank hon. Members for their contributions. The hon. Member for Sheffield South East thinks I can work that quickly, just in the time we had during the break, but I have committed to write to him. Work is going on among colleagues in the Department for Levelling Up, Housing and Communities, for example, but I will write to him with further details.

On the specific question of the hon. Member for Barnsley East about local information, she made an important point. Fans and other sources are able to provide information to the regulator about the suitability of their owners or officers should they wish to do so. It will of course be up to the regulator to determine the relevance and significance of any information provided to it, but the mechanism exists.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28 to 31 ordered to stand part of the Bill.

Clause 32

Determinations under sections 28 and 29: time limits

[Stephanie Peacock]

I beg to move amendment 12, in clause 32, page 24, line 2, at end insert—

“(2A) A determination period as specified in subsection (2) should have an end date which is as soon as is reasonably practicable.”

This amendment would ask the Secretary of State to propose a timely end date to a determination period.

[Stephanie Peacock]

I welcome the principle of the clause. I will discuss that first, before moving to the amendment.

That decisions on ownership should be taken within a reasonable timeframe is right. Allowing the Secretary of State to set maximum time limits, alongside allowing for extensions where a case is particularly complex, seems a sensible way to go about ensuring that decisions are made in good time. Indeed, although I hope that I have set out my belief that the owners and directors test should be comprehensive, the purchase of any club is likely to be time sensitive. Circumstances are subject to changing quickly on both ends of a deal, and in many cases the right takeover deal can be the difference between a club surviving and not.

Oldham Athletic was in trouble after a period of severe turbulence that saw assets sold, staff unpaid and its main stand unable to be used for certain games due to a lease dispute. After a successful takeover, its new owner, local man Rothwell, cleared Oldham’s debts. Birmingham City and Wigan Athletic also appear to have reversed their fortunes thanks to new ownership. Birmingham City is now one step closer to a new stadium as St Andrew’s falls into disrepair, a long-term project that owners have promised will not be affected by relegation this season. In Wigan’s case, local businessman Mike Danson has appeared to stabilise the club after a period of losses on and off the pitch. Those examples show just how crucial the timing of ownership change can be for clubs in financial distress.

I welcome what the clause is trying to achieve, but I wonder whether it could go one step further. It is of note that the time limits in the clause are not accompanied by a general duty on the regulator to make determinations as soon as is reasonably practicable. That is why I tabled amendment 12. As the English Football League has argued, it is crucial that owners are able to sell their clubs when needed, particularly in instances of financial distress. Protracted takeovers can impact a club’s finances further, and they are hardly an advert for potential investors in clubs.

Given the fear some have expressed about the unintended consequences of the Bill on investment, it is important that the clause is watertight in ensuring that the time limits are truly seen as a maximum, rather than as a target. That is of particular concern given that the clause says that if the regulator does not make a determination within the time limit, it is automatically to be treated as having determined that the prospective owner or officer has failed the test. Again, I understand why that measure is in place—it is dangerous to allow a takeover where a person cannot be approved by the criteria set by the regulator—but we must ensure that the provision is protected against misuse. A regulator working in good faith would surely not time-out a test just to ensure an owner or officer is prevented from being granted a positive determination.

Protections should be built in to the legislation to ensure that it cannot be exploited. Not only is it built into the principles of the regulator to work efficiently, but it is within its general duties to avoid any adverse effects on financial investment in English football. I hope that the Minister will carefully consider amendment 12, which would ensure that determinations are made as expeditiously as possible, and recognise it as in keeping with the underpinnings of the regulator.

[Stuart Andrew]

The Government recognise the intent behind amendment 12, which is to ensure that the determination period is set at the right level so that the regulator makes a timely decision. Clause 32, which I will turn to shortly, provides that the determination period will be set in secondary legislation by the Secretary of State, who will have to consult such persons as she thinks appropriate when setting the period.

The purpose of the determination period is to provide more certainty to the industry about how long the determination of a new owner or officer will take, to incentivise new owners and officers to promptly provide the information the regulator needs to assess whether they are suitable, and to keep the process efficient. It is important to get the length of the determination period right. If it is too long, it could result in a slow and bureaucratic process, as the hon. Member for Barnsley East said, which could have a negative impact on investment. However, if decisions had to be taken too quickly, there would be a risk of them being less rigorous, and investors might worry about being failed because the clock runs out before the regulator can gather all the relevant information to make a decision.

The Government do not believe that amendment 12 is necessary because the Secretary of State will already consider those trade-offs, as well as other matters, including existing deadlines for comparable tests in other industries and the views of appropriate stakeholders. For example, we expect that the regulator will likely be consulted when the determination period is being set in regulations. For the reasons I have set out, I am not able to support the hon. Lady’s amendment, and I hope she will withdraw it.

With regard to clause 32, football is a fast-paced industry, where clubs operate within constraints such as league seasons and transfer windows. Timely decision making about the suitability of new owners and officers is important for clubs’ financial sustainability. Without deadlines, we have seen league determinations drag on, with a decision unable to be reached.

The regulator will need to conduct thorough scrutiny of new owners and directors, but it will also need to make decisions in an appropriate timeframe to ensure that clubs are not unnecessarily impacted in this fast-paced industry. That is why it will be subject to a statutory deadline when it tests the suitability of prospective owners and officers. The determination period will start when a person provides a complete application to be a new owner or officer of a regulated club. By the end of the period, the regulator must find the applicant suitable or unsuitable.

As well as providing certainty to the industry, the deadline will incentivise new owners and officers to provide the information the regulator needs to assess suitability. If the regulator cannot decide before the initial deadline is met, it can extend the determination period. That will provide it with the necessary flexibility to gather more information to make a well-informed, but still timely, decision.

As I set out, the determination period, including the maximum amount of extra time, will be set by the Secretary of State in secondary legislation. That will ensure that the regulator is bound by it but that there is still flexibility for the deadline to be amended in future. If the regulator cannot make a decision about a prospective new owner or officer before the period expires, the person will automatically be determined to be unsuitable. That means that only owners and officers that the regulator is confident are suitable will be allowed to get involved with clubs.

[Stephanie Peacock]

The amendment was simply intended to ensure that decisions on owners and directors are made with time sensitivity in mind. I appreciate the Minister’s comments and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Clause 33

Duties to notify IFR of change in circumstances relating to incumbent owner or officer

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

It is important for clubs’ sustainability that their incumbent owners and officers continue to be suitable. That is why the Bill gives the regulator the power to test incumbents if it has grounds for concern about their suitability, to mitigate the risk of harm from individuals already in the system. To do so it needs to be aware of any material change in the circumstances of incumbent owners and officers that is relevant to their suitability.

The clause therefore places a duty on incumbent owners and officers, as well as regulated clubs, to notify the regulator when they consider there has been, or may have been, a material change in circumstances that is relevant to whether the individual is suitable to be an owner or officer of the club. For example, if an officer became subject to criminal or relevant civil proceedings that the regulator was not previously aware of, that would constitute a material change in circumstances.

The notification must include certain matters listed in subsection (3), including an explanation of the material change in circumstances and why it is relevant to whether the owner or officer in question is suitable. If that information gives the regulator grounds for concern about the incumbent’s suitability, it can test them using the powers in clauses 34 and 35. If they are determined to be unsuitable, the regulator has a strong suite of powers to remove them. By ensuring that the regulator is aware of relevant material changes, we will better enable it to ensure that incumbent owners and officers continue to be suitable.

[Stephanie Peacock]

The clause mirrors the notification requirements for prospective owners and officers, requiring incumbent owners and officers to go through the same process of notifying the regulator in the event of a material change that might affect their suitability. This is an important provision that will ensure that owners and directors cannot circumvent the standards set out in the tests after their appointment. I certainly think it is the intention that the tests should act as the beginning of an ongoing compliance with the standards by owners and clubs, rather than the end.

If an owner or officer becomes subject to criminal proceedings, or new information comes to light about a criminal source of their wealth, it is only right that their suitability should be reviewed by the regulator. For example, the owner and chairman of Fleetwood Town FC was recently found guilty of defrauding creditors, false representation and being concerned with the retention of criminal property. The multimillion-pound fraud operation, which duped firms into expensive energy contracts, earned him jail time amounting to 13 years. Of course, in that case, Mr Pilley resigned following his conviction.

--- Later in debate ---

I hope that guidance can play a role in making it abundantly clear what circumstances might trigger a need to notify the regulator. Overall, I am pleased to welcome the clause for many of the same reasons I have welcomed this part of the Bill in general: that it is right that we ensure the integrity of the custodians of our football clubs across the board.

[Stuart Andrew]

I welcome the hon. Lady’s comments and commend the clause to the Committee.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clause 34

Incumbent owners

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 35 and 36 stand part.

[Stuart Andrew]

Clause 34 provides the regulator with the necessary powers to test incumbent owners who are already in place at clubs. It limits the regulator to testing where there is concern about an owner’s suitability. That will allow the regulator to tackle any risks to clubs from unsuitable owners already in the industry, while recognising that there are suitable owners already in the system who do not need to be tested. If the regulator has information that gives it concern about the fitness of incumbent owners, those owners can be assessed to ensure that they have the requisite honesty and integrity and are financially sound to own a club.

If the regulator has information that gives it grounds for suspicion, incumbent owners can also be tested on their source of wealth to establish whether it is connected to serious criminal conduct, including crimes such as drug trafficking and fraud. The regulator will not remove incumbent owners because of mere suspicion about their source of wealth; rather, an incumbent owner must be treated as unsuitable if the regulator is more sure than not that the source of wealth is connected to serious criminal conduct. The clause will ensure that the regulator has the appropriate powers to test incumbent owners where a risk of harm arises. Clauses 39 to 44 provide the regulator with the powers needed to remove unsuitable owners, allowing the regulator to address such risks. That will help ensure the sustainability of clubs over the long term, benefiting football now and into the future.

Clause 35 provides the regulator with the necessary powers to test incumbent officers who are already in place at clubs. It limits the regulator to testing where there is concern about their suitability. That will allow the regulator to tackle any risks to clubs from unsuitable officers already in the industry, while recognising that there are suitable officers already in the system who do not need to be tested. Again, if the regulator has information that gives concern about their fitness, incumbent officers can be tested to ensure that they have the requisite honesty, integrity and competence and are financially sound enough to continue in their role. The clause will ensure that the regulator has the appropriate powers to test those incumbent officers, and clauses 39 to 42 provide the regulator with the powers needed to remove them if necessary. That will help ensure the sustainability of clubs over the long term.

Finally, on clause 36, the regulator’s ability to test or re-test incumbent owners and officers will prevent unsuitable custodians from harming clubs over the long term, not just at the point of entry. The Government are aware that a finding that an incumbent owner or officer is unsuitable brings about significant consequences for that person and may cause concern for the club or fans. That is why, when the regulator is minded to fail an incumbent owner or officer, clause 36 requires it to give them and the relevant club an opportunity to make representations before making its final decision. That will allow an owner or officer an appropriate opportunity to argue their case before the regulator finds them unsuitable, ensuring that the regulator has all relevant information available to it and allowing it to make better decisions and ensure that the regime is more effective.

I commend the clauses to the Committee.

[Stephanie Peacock]

I have no major issues with the clauses, so in the interests of not repeating what the Minister outlined, I will simply welcome them.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Clauses 35 and 36 ordered to stand part of the Bill.

Clause 37

Matters relevant to determinations

--- Later in debate ---

[Damian Collins (Folkestone and Hythe) (Con)]

I will be interested in the Minister’s remarks about amendment 1. I understand the point that my hon. Friend the Member for Chatham and Aylesford is making, in seeking to create a bit more flexibility for the regulator. We would all hope that the integrity checks against an individual owner could ultimately “trump”—if she does not mind my using the word—any positive trading relationship. If the person were not considered a good and proper owner, the fact that we had a good trading relationship with their country should make no difference: they should not be able to avoid the checks simply because they come from a trusted trader nation.

However, on the other hand, I can see that having “must” would be helpful for the regulator in two ways. One is that if a would-be owner of a club met all the criteria and therefore should be allowed to acquire the club, but the only block on them was that they were a sanctioned individual, the regulator would have the certainty of knowing that it could not let the deal go through. There would not be grounds for challenge, say, at the Court of Arbitration for Sport over whether an appropriate judgment had been made. There would be no question of the sanctioned person’s suitability on any other grounds. In that particular circumstance, the provision could be helpful.

I imagine that it would be reassuring for the regulator to know that, as was the case when Newcastle United was acquired, if another Premier League club was acquired by a country that was not sanctioned—we did not have a trade embargo with it—but was nevertheless controversial, the regulator would not have to consider that, whether people wanted it to or not, because no Government policy would be saying that we could not trade with or allow investment from that country. The regulator would have the certainty of knowing that it was acting purely within the confines of its role.

I appreciate the intention of the amendment and the reasons behind it, but perhaps the Minister could give us some guidance on whether “must” may be better than “may”.

[Stuart Andrew]

The Government absolutely recognise the intent behind the amendment to ensure the independence of the regulator. We have been extremely clear that the independence of the regulator is vital. That is why the regulator will be set up as a new public body to ensure its full operational independence.

Clause 37(2) does not diminish the regulator’s independence. It does not mean that the regulator needs to consult the Government about the suitability of an owner, nor can the Government interfere with the regulator’s decision. If the regulator determines that an individual does not have the requisite honesty and integrity, or is not financially sound, or that the individual has any source of wealth connected to serious criminal conduct, that individual cannot be determined to be a suitable owner of a regulated club. Clause 37(2) does not override those fundamental requirements. Nor can any individual, fan, league, club or Government influence override them.

The purpose of clause 37(2) is to ensure that the regulator has to have regard to the UK’s foreign and trade policy objectives when it makes a determination about any new or incumbent owner. That will ensure that the regulator cannot make unilateral moral judgments on which countries it may consider unsuitable when it tests owners. We do not want to allow for a scenario where that happens and in effect a regulator, as I said this morning, sets the Government’s foreign policy.

The effect of the amendment would be to increase discretion for the regulator to decide when it will have regard to the UK’s foreign and trade policy objectives when making decisions about owners. The Government believe that their foreign and trade policy objectives are a relevant matter for the regulator to have regard to whenever it makes a determination about the suitability of any and all owners, not just some. Increased discretion for the regulator may risk it making unilateral judgments that stray into foreign policy.

To be clear, requiring that the regulator must have regard to the Government’s objectives does not mean that that must be a decisive factor. It might have limited relevance in a particular case and, if so, the regulator will not have to give that undue weight. The fundamental basis for a regulator’s determinations about owners will be honesty, integrity, financial soundness, source of wealth and, for new owners, sufficiency of financial resources.

I heard what my hon. Friend the Member for Chatham and Aylesford said and we will continue to reflect further, ahead of Report. But for the reasons that I have set out, I am not able to accept her amendment and I hope she will withdraw it.

Clause 37 lists the matters that the regulator must take into account when it conducts owners and directors tests, including what it must consider when determining whether an individual is financially sound and whether they have the requisite honesty and integrity and, for officers only, the competence needed to fulfil the role, and ultimately to determine whether they are sensible—sorry, suitable.

[Rachel Hopkins]

And sensible.

[Stuart Andrew]

Absolutely.

My hon. Friend the Member for Southend West and the hon. Member for Luton South made important points. As a public body, the regulator must act fairly when it makes decisions. As set out in the White Paper, it will make an evidence-based objective judgment to assess whether an owner or a director is a suitable custodian of a club, and it will apply its tests consistently and fairly to every person.

The fitness element of the test will assess an individual’s honesty, integrity and financial soundness, as well as, for directors, competence. That draws on the fit and proper person test applied by other regulators, including the Financial Conduct Authority, His Majesty’s Revenue and Customs and the Solicitors Regulation Authority. The regulator will set out in its rules and guidance further detail on how it will conduct its tests.

The factors I have outlined are specified because they have a real bearing on whether an owner or officer could have a significant detrimental impact on a club’s financial sustainability. Listing specific matters provides greater clarity to the industry about what will be tested. It also constrains the regulator. The matters listed in the clause are the only things that it will take into account when considering honesty, integrity, financial soundness or competence. To ensure that the fitness test remains effective in the future, the clause gives the regulator the power to use its rules to add further matters that it will need to take into account when considering someone’s honesty, integrity or financial soundness. Before using that power, the regulator must consult the leagues.

[Dame Tracey Crouch]

I have listened carefully to the Minister, as I always do, and I will withdraw the amendment. However, as I understand it, similar provisions do not apply to any other regulator, and other regulators are faced with very similar decisions on a day-to-day basis. We do not take unilateral moral decisions, as the Minister pointed out, but I am happy to discuss the matter further with him. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38

Disqualification orders

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 39 to 44 stand part.

[Stuart Andrew]

The financial distress experienced by some of English football’s most historic clubs was partly down to unsuitable owners and directors. As discussed, the regulator will be able to conduct strengthened owners and directors tests to help to ensure that each club has suitable custodians.

Clause 38 ensures that when the regulator finds that someone is unsuitable to be an owner or officer of a particular club, it can disqualify that person from being an owner or an officer at any regulated club in future. In order to ensure sufficient protections, relevant parties will be allowed to express their views before the regulator makes its decision. Then, once the decision taking those views into account has been made, the regulator must publish a notice of the decision, including the rationale behind it. The process will help to ensure that key community assets have suitable custodians who run the club properly.

Clause 39 details the process that the regulator must begin to remove an owner from the club when it finds them to be unsuitable. In most cases, that will mean giving them a direction under the clause to take all reasonable steps to cease being an owner by a specified date. Those steps could include, for instance, selling their stake in the club. As I just mentioned, in order to ensure sufficient protections, the regulator must consult the unsuitable owner, the relevant club and the relevant league before issuing the direction.

Similarly, clause 40 ensures that when the regulator finds that someone is unsuitable to be an officer, it must either give the unsuitable officer a direction to take all reasonable steps to cease to be an officer of the club, give the relevant club a direction to take all reasonable steps to ensure that the unsuitable officer is no longer at the club, or both. Once more, to ensure that sufficient protections are in place, the regulator must consult the unsuitable officer, the relevant club and the league, as before.

--- Later in debate ---

[Stephanie Peacock]

It is incredibly important that if the regulator is going to take on responsibility for conducting the owners and directors tests, it is also given the teeth to enforce the outcome of those tests. I am pleased to have reached the part of the Bill where we can discuss those powers.

I will speak to each clause in the group in turn, starting with clause 38, on disqualification orders. In some circumstances, a test may reveal that not only is the person in question unsuitable to be an owner or officer of a particular club, but their record is such that they should not be considered for such a role again. I agree with the principle of the clause, which is to ensure that tests are not unnecessarily duplicated and to protect multiple clubs from the same issue.

On clause 39, if the regulator has determined an owner of a club is not suitable, it is right that it is bound to give a direction requiring that person to take reasonable steps to cease being an owner. That binds the regulator to the outcome of its test, rather than giving it discretion over whether a negative determination results in the departure of an incumbent owner. I have a few questions about what that would mean in practice. I am curious to hear the Minister’s take on what taking “all reasonable steps” to cease ownership might involve. It surely implies that a person needs to sell their shares, but what if they are unable to find a buyer? Would they be required to give the club away if there was no willing purchaser? Furthermore, if there is a buyer but they offer a price below market value, or a value that would result in big losses for an owner, would the person still be forced to sell?

The answers to those questions, and a clear direction on the application of the clause, is important for two distinct reasons. First, it matters because this process may have a knock-on effect on people’s willingness to invest in football clubs. Secondly, it matters for the sustainability of the club and its fans. It is important that the club is in the right hands for the right price, or this entire part of the Bill on owners will be undermined. I hope the Minister can today, or in due course, provide some further information on how clause 39 will work in practice.

Clause 40 largely mirrors the removal directions for owners, but applies them to officers. How the clause will work in practice is less complex, as the removal of officers is less likely to hinge on the finances of an outside party. I am also satisfied that the alternative officer arrangements in clause 42, to appoint an interim officer, might mitigate any problems with an officer’s removal.

Clause 41 provides an important protection against unsuitable officers or owners carrying out activities that might negatively impact the club in the long term. When it comes to actions that have an impact on a club’s future, it is right that anyone who has been identified as a potential harm to a club can be limited in those areas if needed.

Finally, I welcome clause 43, which gives the regulator the ultimate power to ensure that a person ceases to be an owner when they have failed to comply with orders given under powers in this part. That power is complimented by the safeguards and notice provisions in clause 44.

[Stuart Andrew]

I thank the hon. Lady for her comments.

As I said, if the regulator deems that a current owner is unsuitable, it would first direct them to leave the club in the specified timeframe. During that period, the regulator will have available several powers to safeguard the club from further harm. However, as the hon. Lady rightly said, there is a risk that an unsuitable owner does not comply with the directions. For instance, they may refuse to leave the club or may continue to use their position as owner to damage the club. In those situations, the regulator will have the powers to directly remove the unsuitable owner from the club.

The hon. Lady makes a point about cases in which there is a failed incumbent owner but no new prospective buyer for the club. By conducting strong statutory tests on prospective owners, the regulator will ensure that clubs are run by suitable custodians and that unsuitable owners can be stopped at the point of entry. That will help to reduce the risk of unsuitable owners entering the industry.

The wider regulatory system of financial regulation and improved governance will further put clubs on a more sustainable footing, which should ensure that clubs are attractive as investments for prospective buyers. If an owner wishes to sell, or is required to sell by the regulator, the club should therefore be a much more attractive asset.

[Mr Betts]

The Minister is almost assuming that the regulatory regime is going to make a perfect world, and that there are not going to be failures. The question being asked is: what happens when there are? When there is an owner who is required to sell, what happens to the club in those circumstances?

[Stuart Andrew]

The hon. Gentleman is right. I am not saying that this is going to be the panacea for all football clubs; they are businesses, and businesses go under at times. When the regulator is ensuring that the club has to be sold, its powers will minimise the risk of a bad owner further damaging the club, which adds to the pressure of finding a good new owner to take over. By having those powers, we are not drumming that club into the ground, as we have seen in other instances; it remains a positive and attractive prospect for investment. I hope that answers the hon. Gentleman’s question.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clauses 39 to 44 ordered to stand part of the Bill.

Clause 45

Duty not to operate a team in relation to a prohibited competition

[Mr Betts]

I beg to move amendment 21, in clause 45, page 37, line 11, leave out from “fans” to “about” in line 12 and insert

“players and staff of regulated clubs in England and Wales”.

--- Later in debate ---

[Stephanie Peacock]

Yes, that is true, and it is true for all of us and anyone who takes a wage, but I think it is a rather unfair expectation to put upon players. I am not sure that I accept the hon. Member’s argument, but obviously, if he has strong views on this issue, he can make a speech when I have concluded.

As my hon. Friend the Member for Sheffield South East set out, there are two main components in football, and they are the players and the fans. I think it is incredibly curious that this Bill does not mention players at any point. That is why I am making the case for these amendments.

I will draw my remarks to a close in a moment. I would just like to share a few other examples with the Committee. To give a troubling example, we will all remember that, following the penalty shoot-out at the Euro 2020 final, a wave of racist social media abuse was aimed at certain players. Ensuring a duty of care to protect players from abuse deserves its own conversation, but I think it is relevant to raise. It is not right that players are not given any say in relation to prohibited competitions, but could be told that they must compete in one—only to face the wrath of fans afterwards. Football is for the fans, of course, but it cannot exist without the players. I therefore encourage the Minister and members of the Committee to consider the benefit of player input on the regulator’s decision making in that area. Given that fans and the FA will already be consulted for their views, it would only require a simple change to the legislation. I hope that we can all get behind amendment 13 to strengthen the clause as much as possible.

Amendment 22, tabled by my hon. Friend the Member for Sheffield South East, would strengthen the duty of the regulator to understand the view of fans, so that the full impacts of any particular competition are considered. As the European Super League attempt showed, the consequences of a closed competition, where qualification is not based on merit, are plenty. It is therefore important that the full range of impacts is considered. Is the Minister satisfied that the current wording will ensure that, or is amendment 22 needed to require the regulator to take everything into account when gathering the views of relevant stakeholders?

[Stuart Andrew]

Amendments 21 and 13 would require the regulator to determine and have regard to the views of club staff and players, placing them on equal footing with the club’s fans for the purposes of clause 45. I do not believe that the inclusion of players and club staff is necessary here. The Bill is designed to protect and promote the sustainability of clubs so that they continue to serve the interests of their fans in local communities, who have been around far longer than any owners and will be around long after those owners have moved on. That is why clause 45 requires the regulator to determine and consider the views of fans.

A decision to prohibit a competition may also impact a wide range of other stakeholders, which is why the clause already requires the regulator to

“consult such other persons as”

it

“considers appropriate.”

That allows for consultation with a broad range of potential stakeholders. If the regulator considers players and staff of regulated clubs to be an appropriate group, it must consult them. It is right that the regulator has the discretion to make the judgment.

Amendment 22 seeks to draw out that when the regulator is determining the views of fans about a competition being prohibited, it must include their views on the full impact of the competition being prohibited. Specifying that in the Bill is unnecessary as it is already implicit that fans would consider the potential impacts as part of reaching a view on a competition’s prohibition. For the reasons I have set out, I hope the amendment will be withdrawn.

[Mr Betts]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 13, in clause 45, page 37, line 15, at end insert—

“(aa) professional football players,”.—(Stephanie Peacock.)

This amendment expands the list of those whom the IFR must consult.

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That clause 45 stand part of the Bill.

[Stuart Andrew]

The proposed European Super League in 2021 posed an existential threat to the English football pyramid. It was an attempt by a small number of clubs to set up a closed-shop league to benefit themselves at the expense of all other clubs and against the wishes of fans. Ultimately, the European Super League was stopped by the sheer will of fans around the country and the Government’s promise to consider legislation. However, the risk of a similar breakaway competition rearing its head in the future remains. The clause will prevent a regulated club or a club that has been regulated in the previous 10 years from entering a team into a competition that the regulator has prohibited.

[Mr Betts]

Why does the Bill give powers to the regulator to stop clubs entering into new competitions but no powers to stop fundamental changes to existing competitions, which fans might find just as unsuitable?

[Stuart Andrew]

I understand the point that the hon. Gentleman makes. We have had this conversation several times on the replays, and I understand that point. As I have said before, not drawing on the merits of the decisions that have been made, I understand some of the challenges that those organisations have in terms of a very crowded field and in terms of competitions.

[Ian Byrne (Liverpool, West Derby) (Lab)]

It is always a very crowded field in the FA cup replays. I am sure that the Minister has seen the news, today I think, about Tottenham players getting on the plane to go to Australia for their end-of-season friendly. Is that not a smack right in the face of player welfare and ensuring that players are okay? That is why the FA cup replays were allegedly taken off the table.

[Stuart Andrew]

As the hon. Gentleman knows, the purpose of the Bill has been tightly focused to feature those particular issues. We have a fine balance to ensure that we do not upset or get into challenges with UEFA and FIFA, and it is for football to make some of the decisions that it has made, but I would expect that, as the provisions in the mandatory conditions say, clubs will consult their fans on decisions on match days.

The extension to clubs regulated in the past 10 years will stop them circumventing the rules by withdrawing from existing competitions in order to join a new breakaway competition. The regulator is expected to prohibit competitions on the basis of the predetermined, proportionate and transparent framework based on the prescribed factors set out in legislation. That will provide up-front clarity to the industry and means that new competitions will not just be prohibited outright. That is important to ensure that the regulator does not unduly stand in the way of innovation in the market—for example, like when the old First Division became the Premier League in 1992.

The clause requires the regulator, when deciding whether to prohibit a competition, to consider several factors, including whether the competition is merit based, operates on the basis of fair and open competition, jeopardises the sustainability of English football’s existing competitions or the clubs in those competitions or harms the heritage of English football. Of course, football belongs to its fans, so the regulator will also determine and consider the views of fans in England and Wales before prohibiting a competition. As the national governing body for football, the FA will be consulted before the regulator prohibits any competition, and the regulator will also consult anyone else it considers appropriate. I commend the clause to the Committee.

[Stephanie Peacock]

Apart from my amendments, which I had hoped would strengthen clause 45, I am pleased to offer my support more generally for the clause. I will not repeat my remarks from previous debate, but given the fallout from the so-called Super League attempt, the Bill is absolutely right to make provisions around prohibited competitions.

However, I have three remaining questions on wording that I hope the Minister can clarify. The clause provides that a club will not be able to join a prohibited competition so long as it has been regulated in the last 10 years. However, that does not apply retrospectively, so if a club has never been regulated—as is the case now, before the Bill passes—the rules cannot be enforced. That has sparked concern that clubs might form a breakaway league before the Bill passes and the regulator will be left unable to enforce its own rules. Will the Minister confirm whether the regulator will have any power to act in such a situation?

--- Later in debate ---

Overall, I am pleased to see the inclusion of this clause. I hope it puts an end to destructive, money-oriented breakaway projects that take fans and the magic of football for granted.

[Stuart Andrew]

I thank the hon. Lady for her contribution. On the ruling that she mentioned, my understanding is that it will be considered, but I want to make sure I have that right, so if she does not mind I will write to her.

The regulator will not be able to take action until it is fully operational. It would be inappropriate to give it backdated powers in relation to competitions, as clubs cannot comply with preapproval requirements after an action has been taken, so I hope the hon. Lady understands the position we are in.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Clause 46

Duty not to dispose etc of home ground without approval

[Ian Byrne]

I beg to move amendment 3, in clause 46, page 38, line 15, at end insert—

“(6A) Before the IFR grants an approval under subsection 6 it must—

(a) consult the supporters of the body in question, the relevant competition organisers and persons representing the local community with which the body is associated; and

(b) have regard to the views expressed by those consulted.”

--- Later in debate ---

[Stuart Andrew]

The Bill requires regulated clubs and clubs that have been regulated in the past five years, which I shall simply refer to as clubs, to notify the regulator where there is a reasonable prospect of either the club selling or otherwise disposing of its home ground or using it as security for a loan or other liability. The proposed transaction can proceed only if the regulator grants approval. Clause 46, which the amendment seeks to change, deals with only the narrow issue of a home ground disposal or the use of the home ground as security. Those matters do not necessarily threaten the heritage of the club in the same way as forcing a relocation. Where currently regulated clubs propose to relocate in parallel, which may impact on the clubs’ heritage, that is subject to a separate approval from the regulator under clause 48.

Clause 48 sets out that the regulator can grant approval to a relocation only if it does not undermine the financial sustainability of the club and does not cause significant harm to its heritage. Given that clubs will be required to consult with fans on matters relating to home ground, we expect that the regulator would consider that in reaching its decision on whether to approve a relocation.

[Mr Betts]

The Minister is therefore saying that a club makes a proposal, consults with the fans and comes to a view, then the regulator must accept the view that the club has come to. Why does the regulator not have a responsibility to ensure that the fans are comfortable with any proposal in the way that amendment 29 suggests? Why is it simply left to a club, which may have a vested interest, to consult with fans and report at second hand to the regulator?

[Stuart Andrew]

The regulator will be able to see whether that consultation was done properly, and the mechanisms that we are setting up for fan engagement are much strengthened from what they may be at the moment. That gives confidence that what the clubs consult on will be done through a mechanism that is much stronger than some of the examples mentioned earlier by the hon. Member for Barnsley East. By doing that, because it is about the club’s heritage—it is its home ground, and the club is going to move—the club must demonstrate that it has properly consulted with the fans in the way described by the Bill.

[Mr Betts]

Where does it say precisely that the club must consult on that? It must consult about shirt colours, names and crests, so where does it specifically say that about the ground?

[Stuart Andrew]

The heritage of the club will include its home ground. Of course that is part of the description of heritage, so it will come under that aspect. Just selling the club to get a loan, for example, will not move the stadium, but if it is going to relocate, that is a change to the club’s heritage, so that will come under the heritage aspect of the Bill.

[Mr Betts]

Which bit of the clause covers that? Can we have the word, please?

[Stuart Andrew]

As I said a moment ago, clause 48 sets out that a relocation can be granted approval only if it does not undermine the financial stability of the club or cause significant harm to its heritage. It will come under that.

[Mr Betts]

That is the IFR’s responsibility, but nowhere in the Bill does it say that fans have to be consulted. Neither the IFR nor the club has to consult on the matter, does it?

[Stuart Andrew]

In schedule 4, paragraph 4(3)(a) on page 93, it says “the club’s home ground”. It is there.

The regulator will examine each transaction in the context of the regulated club’s individual financial circumstances. That should provide sufficient comfort for fans or other proposed stakeholders that the proposal does not adversely affect the financial sustainability of the club. The additional stakeholders to be consulted will not have a financial interest in the transaction. Amendment 3 would impose an additional level of bureaucracy and complexity to the process. It would also introduce a potential delay in completing a transaction, which is often time-sensitive, and it may have adverse implications, such as the buyer pulling out or renegotiating terms. That could undermine the sustainability of clubs. For the reasons I have set out, I am unable to accept the amendment.

Turning to clause 46, a home ground is often one of the most vital and valuable assets that a club can own. However, home grounds are sometimes used as collateral for debt or even sold off entirely to raise money. Although there can be sensible financial reasons for clubs to do that, both courses of action may result in a club’s financial position seriously deteriorating, or it having no ground to play at. Selling the home ground also potentially seriously weakens the club’s balance sheet. Likewise, using the home ground as collateral for a loan might make financial sense depending on the use of the cash raised, but it may also saddle the club with too much debt or high interest costs.

The clause therefore places a duty on clubs that own their home ground to obtain the approval of the regulator prior to any sale or use as security in a loan or liability. The regulator will consider the risk of the proposed transaction to the club’s financial sustainability and block any potentially financially damaging sale of a club’s home ground. The provision applies not only to regulated clubs, but we are also extending it further to capture clubs that are not currently regulated but have been within the last five years. The regulator must be satisfied that the club has taken reasonable steps to ensure that a team play their home matches at the ground prior to its sale or use in a loan—that is, that football club continues to be playing at the ground. That protects against potential bad actors who might otherwise choose to pull their team from the league and no longer be a regulated club so that they can asset-strip and sell off the ground to make money.

Turning to amendment 29, the Government believe that the safeguarding of club heritage and the voices of fans is vital. We expect the regulator to consider whether a club has adequately engaged with its fans in reaching its decision on whether to approve a relocation. However, there will be a number of additional factors for the regulator to consider when assessing whether a proposed home ground relocation will significantly harm club heritage. Those may include the history of the club, distance from the original home ground or the views of others in the local community. Although fan views will be an important consideration, the Government believe that the regulator should be able to take an holistic view of any proposal. I therefore hope that the hon. Member for Liverpool, West Derby withdraws his amendment.

Turning to clause 48, home grounds play an important role in the history of a club, and are often the club’s most valuable asset. Relocating home grounds permanently to areas that have no connection to the heritage and history of a club can have a significant impact on those supporters and the local area, as we saw when Wimbledon moved to Milton Keynes. This clause is aimed at stopping that from happening again.

However, the Government do not want to stifle development that brings value and aligns with the heritage of a club. The impact of a home ground relocation on both fans and the club is why we are legislating for the regulator to preapprove any proposal in this regard. As set out in subsection (4), the regulator must be satisfied that the proposed relocation would not undermine the financial sustainability of the club, or significantly harm its heritage. Clause 48 makes the important and necessary recognition of the vital role that home grounds can play in communities, and adds an extra layer of protection to them.

I commend the clause to the Committee.

[Ian Byrne]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 46 ordered to stand part of the Bill.  

Clause 47

Duty not to appoint administrator without approval

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The regulatory framework is not a zero-failure regime. Therefore, it is possible that football clubs may enter administration despite the best efforts of the regulator. We would of course, hope that this is rare. There already exists a legal framework for companies—and that includes football clubs—to enter into administration, which is detailed in the Insolvency Act 1986, and in many cases this existing framework has enabled clubs to go into administration and re-emerge as solvent clubs. It should be noted that those clubs often re-emerge in a lower league as a result of the sporting sanctions placed on them by the competition organisers.

Given that the existing administration regime seems to work well in relation to appointments initiated by creditors, it is not necessary for the regulator to cut across that process. However, there are occasions where the administration of a club is not initiated by creditors but by the club itself. A club can appoint administrators directly, and so does not require a court to sanction the appointment in advance. In those circumstances, there have been occasions in which some stakeholders have had cause to question the relationship between the insolvency practitioner appointed as administrator and the football club.

That is why, in those specific circumstances, the appointment of an administrator requires the regulator’s approval to ensure that the process is transparent and to avoid conflicts of interest. Such approval should give all stakeholders, particularly fans, more confidence in the system and more confidence that the outcome is the best available, in the circumstances, for the individual club.

The requirement to seek approval from the regulator for the appointment of an administrator applies to clubs that have a licence, and those that should have a licence but for whatever reason do not, as well as clubs that were formerly regulated within the previous five years. That is included to ensure that clubs are not deliberately run so that they are no longer in the leagues that the regulator has oversight of, to then take advantage of being an unregulated entity to appoint an administrator without approval of the regulator.

I commend the clause to the Committee.

[Stephanie Peacock]

The clause sets out that regulated clubs and clubs that have been regulated at any point in the last 10 years must seek approval from the regulator before appointing an administrator. I understand that this measure is needed to offer protection against rushed insolvencies that end up having adverse effects. It is also needed so that club owners are not able to appoint firms or people they have connections to as administrators in an attempt to manipulate the administration. Although we hope that, with the regulator’s guidance, fewer clubs will face administration, it is important that, if the worst happens, proper administrators, without conflicting interests, are appointed to oversee the process. I therefore support the clause.

Question put and agreed to.

Clause 47 accordingly ordered to stand part of the Bill.

[Mr Betts]

I will reflect on what the Minister said. I will perhaps do so at a future date, but I will not move it at this stage.

Clause 48 ordered to stand part of the Bill.

Clause 49

Duty not to change crest, home shirt colours or name without approval

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

A club’s name, home shirt colours and crest are intrinsic parts of its heritage, and therefore the decision to materially change any of them requires considered thought and consultation. The clause requires a club to establish that a majority of domestic supporters approve any material changes to its badge or predominant home shirt colours. In practice, we expect that to take place through a formal survey of fan opinion, as happened last season when Bristol Rovers supporters opposed the final proposal put to them, resulting in the club halting the redesign of its crest.

The clause also requires clubs to get Football Association approval prior to changing the name their team plays under. The view of supporters is a significant factor in the FA’s final decision, but it may also need to balance wider considerations, such as the effects on other clubs in the pyramid, and the relationship between the club’s current name, the proposed name and the locality with which it is traditionally associated.

[Ian Byrne]

On the scope of the independent regulator, Liverpool football club tried to trademark the name “Liverpool”, which caused absolute outrage among Liverpool and Everton supporters and market traders. The local community fought back, and the supporters of both football clubs came together. Is something like that within the scope of the regulator’s ability to influence?

[Stuart Andrew]

That is a very good question, and I feel my officials thinking, “Not another letter!” If the hon. Gentleman does not mind, we will write to him. I apologise to my officials, who have enough on their plate, but I want to make sure I am not saying something that is not correct.

The existing FA rule has been used to prevent name changes that have been proposed in the past against the wishes of fans, as happened at Hull City, for example. Codifying that as a legal duty will mean that there are additional powers to ensure that clubs do not make changes without proper approvals and to respond to instances of non-compliance. I commend the clause to the Committee.

[Stephanie Peacock]

Heritage assets are incredibly important to a football club and its fans. They carry the history of where the club is based, what its identity is and the journey fans have been on through the years, in victory and loss. It is therefore pleasing that, in the light of the fan-led review, the FA has updated its rules on changes to club heritage assets. Those rules, supported by the clause, will hopefully ensure that a majority of fans are in favour of a change.

It is not just fans who will benefit from owners not being able to make unilateral changes to heritage items. There have been cases of clubs changing badges and crests without consultation, only to find that fans dislike them and will not buy replica kits or merchandise. Avoiding such situations is beneficial for people on all sides.

I know that some fan groups and Fair Game are disappointed that fans will not have a direct say over changes to a club’s name, because that is done via the FA. However, the FA told us in evidence that it consults fans as part of the name change process, so it would be good if the Minister can confirm whether he thinks that that is adequate.

The clause offers the bare minimum of fan engagement. Clubs can and must build on it through the consultation requirements in other clauses, forging ongoing listening exercises with their supporters on relevant matters. In many ways, therefore, this measure should be seen as a backstop, ensuring that a club cannot be stripped of its identity against the wishes of fans. In that context, I am pleased to welcome it.

[Stuart Andrew]

I absolutely have confidence that the FA rules will apply.

Question put and agreed to.

Clause 49 accordingly ordered to stand part of the Bill.

Clause 50

Duty to notify of changes in circumstances relevant to the IFR’s functions

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

In order to regulate clubs effectively, the regulator will need the complete picture of each club. Complete transparency and timely updates will allow the regulator to stay abreast of any relevant changes. That is why clause 50 imposes a duty on all regulated clubs to notify the regulator of any material changes in circumstances relevant to the regulator’s functions as soon as reasonably practicable. For example, the club’s finances might have materially changed, or the club might no longer comply with the licence condition. The self-reporting will facilitate the regulator’s ongoing real-time monitoring of clubs.

[Stephanie Peacock]

Clause 50 ensures that a club notifies the regulator if there is a relevant material change in circumstances affecting the club and, again, we must be clear what “material change” means. However, it is absolutely right that if a shift in a club’s nature, behaviour or external context might impact compliance with its duties under the regulator, the regulator should know about that as soon as possible. I have no issues to raise with clause 50.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Duty to publish a personnel statement

Question proposed, That the clause stand part of the Bill.

[Stuart Andrew]

The owners and officers who control and run football clubs are vital for clubs’ sustainability. The regulator therefore needs to know who is running a club behind the scenes, so that it can implement the regime. The Bill requires licensed clubs to prepare a personnel statement and submit it to the regulator for approval. A personnel statement must outline each of the club’s owners and the club’s ultimate owner; officers and the job description of each officer; and senior management and their roles at the club.

Once the statement has been submitted, the regulator will review it and decide whether to approve or modify it. Any modification must be made in consultation with the club to ensure that the statement is accurate. Once the statement is approved by the regulator, clubs must publish it online, increasing transparency and accountability in football. Subsequent statements must be submitted to the regulator if an old statement becomes out of date, such as after the departure or hiring of an officer.

[Stephanie Peacock]

During our discussion of clause 16, I spoke about the importance of clubs publishing personnel statements. By identifying exactly who holds key positions, including owners and officers, the regulator will be absolutely clear who must be held accountable for the proper fulfilment of licence conditions at each football club. With that in mind, I am pleased to support clause 51.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52

Duty to pay a levy

--- Later in debate ---

[Stephanie Peacock]

When the fan-led review first proposed the creation of an independent regulator for football, it suggested that the most logical way to pay for it would be through a levy on those who would benefit from it: the clubs. I agree with that conclusion, and I am pleased that the Bill confirms that the regulator will be able to require licensed clubs to pay an annual levy.

However, even though clause 52 is relatively detailed, there is surprisingly little on how the levy will be split between the clubs themselves. That is something that amendment 30, tabled by my hon. Friend the Member for Sheffield South East, has sought to rectify. If the regulator is given wide discretion to determine the extent of the levy, clubs further down the pyramid might be concerned that their payments will not be proportionate to their wealth and size. Of course, clause 52 states that the regulator should have regard to the financial resources of each club and the competition it operates in. That is promising, but it is worth clarifying today what that is expected to mean in practice. Will decisions be based on broadcast incomes, as per the fan-led review, or just on average total revenue, as per the White Paper?

There is broad agreement that the richest clubs should subsidise regulation for others. The majority of costs should, in this case, fall on Premier League clubs. The Government identified that these clubs could pay about 80% of the cost, with the six richest clubs taking on 50% of the total cost. The regulator will ultimately dictate the shape of the levy, but it should be under a clear direction to ensure that the levy is progressive and proportionate. It hardly makes sense for a regulator focused on financial sustainability to shackle struggling clubs to paying large fees. It is important that clubs do not fear the introduction of the new regime and view it as an opportunity, rather than being scared into thinking it will be a hindrance.

Clause 53 requires the regulator to consult before making the levy rules. That will include taking input on a draft version of the rules from the Secretary of State, the Treasury, regulated clubs and other appropriate persons. That welcome measure will hopefully shape the levy rules in a progressive way. It is also right that the regulator must publish information about the costs involved in calculating the levy charge before it starts charging in any given year. That transparency will be important, particularly for the clubs, which will want to understand exactly what they are paying for and why.

Overall, I welcome the levy and the method of payment, and I look forward to clarification on how the Minister expects the levy will be set.

[Stuart Andrew]

The Government understand that the intent behind the amendment is to create certainty about how the regulator’s levy charges will be distributed between clubs. The clause gives the regulator the necessary discretion to determine how the levy is calculated and the individual charges to be paid by clubs. The Government do not have the information or datasets required to determine the appropriate way to calculate levy payments, but those will be available to the regulator. Therefore, the regulator, rather than Government, will be best placed to determine how to distribute levy charges across clubs. Importantly, that reinforces the regulator’s operational independence.

I strongly support the objective that levy charges should be affordable to clubs, which is why there is already provision that should ensure that. However, requiring the regulator to be guided by a percentage of a club’s annual revenue in its levy calculations could undermine its ability to ensure that the charges are proportionate and affordable. In addition to revenue, the regulator should have the discretion to take into account clubs’ other financial resources when determining levy payments, which may be a more appropriate indicator of what a club’s charges should be. That could include resources such as owners’ funds, but also the offset of club expenditure.

Clause 52 already provides assurance that the regulator must take into account clubs’ differing financial circumstances. That includes clubs’ financial resources and the leagues that club teams play in, as that ultimately has a direct link to revenue. For the reasons I have set out, I am not able to accept the amendment from the hon. Member for Sheffield South East, so I hope he will withdraw it.

[Robin Millar]

On that point, I would be interested to know the Minister’s thoughts. As I understand it, the purpose of the levy is cost recovery rather than to be a redistributive mechanism. Is there a reason why a simple flat percentage should not be sufficient to achieve all that we described? It would offer certainty, but it would also make sure that those with broader shoulders pay more, and it would achieve the IFR’s objective of recovering its costs.

[Stuart Andrew]

The reality is that, to help it understand the specifics of club finances, the regulator will have at its disposal information that we do not have at the moment. If we set the levy by percentage, we may unintentionally cause a problem for some clubs and cause an unintended consequence. The regulator will be best placed to make sure that the levy is proportionate, which is why we want the regulator to determine it. My hon. Friend is right, in the sense that some clubs will pay more for a player than most clubs earn in a year, but we will make sure that the levy is proportionate. I understand the points the hon. Member for Sheffield South East made, and I have heard what some of the smaller clubs have been saying, but I am confident we will be able to achieve that aim.

Clause 52 will allow the regulator to charge a levy to licensed clubs that covers the regulator’s running costs, following the precedent of other regulators, such as the FCA and Ofcom. The cost of the regime will be paid for by licensed football clubs. By making football clubs more sustainable in the long term, the regulator will be providing a service to the industry. As the industry would benefit from regulation, it is logical that it, rather than taxpayers, should cover the cost.

The legislation puts robust checks and balances on the regulator, which will be limited to raising funds to meet its annual regulatory running costs. That includes the costs of ongoing regulatory activity, additional money for new activities, and costs associated with recouping set-up costs. In line with the principles of transparency and accountability, the regulator will be subject to “Managing Public Money” guidance, and its forecast running costs will be subject to review by the Department for Culture, Media and Sport and the Treasury.

The clause also gives the regulator discretion regarding the method for calculating the levy and in setting the levy payment level for individual clubs. To ensure that the regulator takes into account clubs’ differing financial circumstances, and to prevent charges from being unaffordable for clubs, clause 52 requires the regulator to take into account a club’s financial resources and the league it plays in. Clause 53 imposes a statutory duty on the regulator to consult regulated clubs and the Government on its levy rules.

The levy is an operational matter that should be determined independently by the regulator, and it would not be appropriate for the Government to make the assessment. As I say, running costs will be checked by both the DCMS and the Treasury.

[Mr Betts]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

Duties to notify and consult the IFR

[Stuart Andrew]

I beg to move amendment 23, in clause 54, page 43, line 29, leave out “23” and insert “24”.

This amendment corrects a cross-reference in clause 54(1)(b).

[The Chair]

With this it will be convenient to discuss clause stand part.

[Stuart Andrew]

Amendment 23 will correct a cross-reference in the Bill, to ensure that clause 54(1)(b) correctly refers to section 24.

Clause 54 outlines the circumstances in which a relevant league must notify the regulator whether, for example, it believes or suspects that a club has breached one of the league’s own rules that is relevant to the regulator’s regime. The clause also requires that a relevant league consult the regulator when it is considering changing its own competition rules where a rule is relevant to the regulator’s regime. Just as the regulator is required to consult the industry in certain circumstances, these duties on relevant leagues will ensure appropriate notification and consultation in the other direction, too. If a relevant league has certain pertinent information, given its knowledge and understanding of the football industry, it must tell the regulator. Equally, if the relevant league is intending to take certain action that might impact on the regulator’s regime, it must engage with the regulator. That will allow for co-operative regulation whereby information is pooled and action can be co-ordinated. That should help both the regulator and the relevant leagues to deliver their respective regulations more effectively, and ultimately minimise the overall burden on clubs.

[Stephanie Peacock]

Clause 54, with the correction made by amendment 23, is one of the only measures in the Bill that directly places duties on competition organisers. As I have made clear throughout these Committee proceedings, I believe it is extremely important that the regulator has a constructive relationship with existing football governance structures where possible, and that they work together to ensure a coherent regulatory regime. This clause will ensure that by placing a clear duty on competition organisers to keep the regulator updated on the enforcement of its own rules, as well as on areas where they might have information that overlaps with the regulator’s remit.

It is good to see, for example, that competition organisers will report to the regulator on any risk to financial resilience, as well as on any breach of specified competition rules and any subsequent sanctions they are placing on clubs. Competitions will also have to consult the regulator before adding to their own rules; this, again, is a positive step which will hopefully prevent any such rules from undermining the regulator.

However, I do think there needs to be further consideration for how the respective regimes will work when rules and regulation overlap. Ultimately, although the regulator will be consulted on new rules, competition organisers have the final say. The Government’s White Paper says:

“Where rules of industry bodies stray into the Regulator’s remit, the Regulator would have oversight to ensure that regulations are coherent and effective.”

I would like to ask the Minister, therefore, whether he thinks that the regulator has all the powers it needs to make sure that the landscape is coherent and effective when there is crossover. This is important for all of those who enforce rules in football, as well as for clubs.

[Stuart Andrew]

I can confirm that I am confident.

Question put and agreed to.

Amendment 23 accordingly agreed to.

Clause 54, as amended, ordered to stand part of the Bill.

Clause 55

PART 6: OVERVIEW AND INTERPRETATION

[Mr Betts]

I beg to move amendment 27, in clause 55, page 45, line 1, leave out paragraph (b).

This amendment allows the regulator to consider the effect of “parachute” payments when assessing the distribution of revenue between competition organisers.

--- Later in debate ---

[Dame Tracey Crouch]

I completely agree with my hon. Friend. I always refer back to that point in the fan-led review, and we mulled over that issue at length. The truth is that we did not come to a conclusion ourselves, because it is so complex. We have made it clear in the chapter on financial distribution that we hope that there will be reform to the system, but this was back in 2021, for goodness’ sake. I want to bang everybody’s heads together and send them to bed without any tea, because we are dealing with the failure of the leagues to reach a solution, and I hope that the message they get from today’s sitting and the evidence sessions that we had last week is to go away and come up with another solution. The Bill sets out the process if there is no deal on that, and ultimately if there is no amendment to the Bill, let that be an inspiration to people to come together and find a solution.

[Stuart Andrew]

I must say that I almost want to stand up, say what other Members have said and sit down again. I agree with everybody else: I wish we were not at this stage and that there had been a deal between the parties concerned, because it is in the interests of football for them to come up with a deal. I hope that the mechanisms we are talking about will enable us to encourage that deal to happen sooner rather than later.

On amendments 27 and 31, although the parachute payments can have the distorting effects outlined, they play a pivotal role in protecting clubs at risk of relegation from going bankrupt, as others have said, and certainly give certainty to clubs competing for promotion. As I mentioned on Second Reading, in the past, relegation from the Premier League often meant financial ruin, as teams such as Bradford City failed to adjust to the huge drops in revenue. Given the important role that parachute payments play in helping to ensure the financial sustainability of relegated clubs, removing them entirely could have significant adverse effects on the game, and we do not want to create an opportunity through the Bill’s distribution mechanisms to get rid of parachute payments by the back door. Including parachute payments in the Bill’s scope, as amendment 27 proposes, could do just that. It could mean the regulator accepting a final proposal from one of the leagues that removes those payments, and if the mechanism allowed for that, it could create significant financial uncertainty for clubs that could not confidently invest in promotion. My hon. Friend the Member for Chatham and Aylesford also mentioned the commercial agreements that are in place.

An exciting, competitive and sustainable pyramid is at the heart of what makes English football the asset that it is, and we should not put that at risk. We have excluded parachute payments from the backstop, because it needs to be targeted and simple to work effectively. Including parachute payments in the backstop means that the regulator could be presented with two entirely incomparable final proposals, which could render decision making almost impossible, but it is important to remember that the backstop may never be triggered, and is only ever intended as a last resort. We expect the leagues to reach a football-led solution themselves and will continue to press them to do so.

I recognise there are also concerns about the potentially distortive effects of parachute payments, and that is why the broader regulatory framework is designed to address it. If the regulator finds that parachute payments are causing a structural or systemic issue, it could attach discretionary licence conditions to parachute payment clubs to address that. We are creating a financial regulator, and it is entirely right that we solve issues like this through financial regulation wherever possible.

[Mr Betts]

It would help if the Minister was clear on what he was suggesting the regulator should do to deal with the massive gap between the clubs with parachute payments and those in the Championship without. Is he suggesting that the regulator should come in and tell clubs with parachute payments, “You have got them, but you cannot actually spend them, or not all of them, because that is distorting competition”? It seems a very odd way to try to deal with the problem.

[Stuart Andrew]

The whole point is that the regulator can look at financial controls and make discretionary licence conditions if it wants to try to minimise that impact. However, if the backstop ever gets triggered, if two very different bids are put in, the regulator is put in an incredibly difficult position; in contrast, if those backstop payments are there, the two sides will be able to adjust their bid to address it in another way, such as by improving the solidarity payments to other clubs as a proposal to reduce that cliff edge. That is the point we are trying to make. As I say, I cannot accept the amendment that the hon. Member tabled and I hope he will withdraw it.

[Mr Betts]

Could the Minister explain what he has just said? I still do not understand how it is going to work. On the regulator’s powers to deal with the problem created by parachute payments, which he accepts could be created, what exactly are those powers? How does he expect the regulator to use them?

[Stuart Andrew]

As I mentioned, it can introduce a discretionary licence condition. There will be a range of options that the regulator may consider, but it will have discretionary licence conditions that it could put on clubs in receipt of those payments that will manage the amount of money they are spending while helping to keep clubs financially solvent and sustainable. That is the point I am trying to make.

By way of background to clause 55, the Premier League earns significant revenues from selling its TV rights. It then determines how much of its broadcast revenue is distributed within its own league, and how much is distributed to the rest of the game, including the EFL and the National League. These backstop powers have been designed to incentivise reasonableness, encourage industry solutions and tackle any bargaining imbalance between the leagues. The clause sets out an overview of those backstop powers and defines some terms that are important for setting their scope.

One key term defined in the clause is relevant revenue. It expressly includes broadcast revenue, which is the predominant source of revenue for the relevant leagues and of any redistribution. The clause allows the Secretary of State to specify other kinds of revenue to be included as relevant, which will future-proof the policy—for instance, if broadcast revenue is no longer the main source of income for the leagues. There are safeguards on the use of this power, as the Secretary of State must consult the regulator, the FA and the relevant leagues, and can use the power only when there has been a material change in circumstances.

The exclusion of parachute payments in the clause is to ensure that the two final proposals can be easily compared. That is based on detailed analysis and advice on similar mechanisms. However, as mentioned, the regulator will still be able to consider parachute payments through the licensing regime.

The clause also sets out several other definitions, including the idea of a “qualifying football season”. The effect of this definition, together with the operative clauses in this part, is that the backstop can be triggered only in relation to the current season and the five subsequent seasons. That ensures that the backstop powers are used only in a reasonable timeframe and not for the remote future. I commend the clause to the Committee.

[Mr Betts]

I am not convinced by the Minister’s arguments, I must say. I think that we will be giving further consideration to this, as I hope the Minister will, and that we will come back to this issue on another occasion. I just hope that, by the time we come back, the Minister might be able to better explain the powers of the regulator to smooth out the issues where there are problems for Championship clubs trying to compete with those clubs with parachute payments. I was not convinced about that point from his arguments, but we will consider that further at another stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 31, in clause 55, page 45, line 3, at end insert—

“unless the IFR specifies otherwise in rules.

(2A) The IFR can only make such rules if it can be satisfied that their inclusion furthers its objectives under section 6 by protecting and promoting—

(a) the financial soundness of regulated clubs, and

(b) the financial resilience of English football.

(2B) The IFR should also have regard when making any rules under section 7 to act in such a way that avoids any—

(a) effects on sporting competitiveness of any regulated club against another regulated club,

(b) adverse effects on the competitiveness of regulated clubs against other clubs, and

(c) adverse effects on financial investment in English football.”—(Stephanie Peacock.)

Question put, That the amendment be made.

Football Governance Bill (Seventh sitting)

Stuart Andrew Excerpts

Committee stage
Thursday 23rd May 2024 Public Bill Committees

[The Lord Commissioner of His Majesty’s Treasury (Mike Wood)]

Before I move the Adjournment, I would like to express my thanks to you, Ms Nokes, to Sir Mark, Sir Christopher and Mr Sharma, to the Clerks of the Committee and to all its members. I wish all those who are standing for re-election the best of luck—but not too much luck, in some cases.

I beg to move, That further consideration of the Bill be now adjourned.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is with a very heavy heart that I stand here thinking about all the work that has gone into preparing the Bill, the foundations of which were set in stone by my hon. Friend the Member for Chatham and Aylesford. She put in an enormous amount of work to make sure that we had a strong evidence base for a Bill that would be effective for the future of English football. I am extremely grateful to her for all that she has done. I know how passionately she cares about this.

I thank those who supported my hon. Friend in that work, not least the Football Supporters’ Association, Kevin Miles and everyone who spent hours and hours listening to evidence. That helped us to produce initially the White Paper and eventually the Bill.

I pay tribute to the officials in the Department for Culture, Media and Sport. When I was first appointed as sports Minister, most of my friends laughed, but the Department’s officials have managed to make me understand more about football than I ever thought I would. They have been phenomenal at making sure that the Bill has been drafted as it is. I am incredibly grateful to them.

I thank the hon. Member for Barnsley East, who has been constructive throughout the whole process. I have really appreciated it.

I thank all members of the Committee, and indeed colleagues across the House, for their help and support over the past few weeks. We have had positive engagement as we have tried to address the challenges and issues that needed to be dealt with. There is a Bill ready to go, so I hope that whoever wins the next election will realise that this is a good piece of legislation that is quick and easy to pick up.

[Robin Millar (Aberconwy) (Con)]

May I add to the Minister’s thanks for the exceptional work led by my hon. Friend the Member for Chatham and Aylesford? When I was going through the Bill, it struck me that this is the first time that football and politics have collided in this way. I cannot believe that the work, the attention and care paid to the Bill in our debates and in the many months running up to it will be lost. For the record, I am grateful. I am sure that what has been preserved of the debate so far will be useful for the future.

[Stuart Andrew]

My hon. Friend is right. I genuinely think that this is an excellent Bill: it is considered, and it will achieve the objectives that we want. As I have said on so many occasions, when a football club goes into administration, it is not just the club that feels it, but the whole community, all the businesses supported by the club and its sense of identity.

I hope that whoever wins the election on 4 July will see this as a good Bill to crack on with, because it is important for the future of football and, crucially, for the future of football fans. They are the ones we have been thinking about through the whole process. They are the heart and centre of the Bill. I hope it will be taken up. I thank everybody for all their help and support.

[Stephanie Peacock (Barnsley East) (Lab)]

I understand why we are adjourning, and I echo the Minister’s comments that that is with disappointment and a heavy heart, because the Football Governance Bill is so important to communities up and down the country. I know that from my own in Barnsley.

I have a few thank yous. I thank you, Ms Nokes, and the other Members who have chaired our sittings. I thank all the officials and stakeholders who have worked so hard on the Bill. I thank the hon. Member for Chatham and Aylesford for all her work on the fan-led review; I pay her huge tribute and wish her very well as she stands down from Parliament. I would like to say a big thank you and pay tribute to the Minister. It has been a real pleasure to shadow him: he has been courteous, polite and kind throughout. He has done a really good job and will be missed.

I would like to say a big thank you to everyone in my office, and particularly to Anna Clingan. We have done three Bill Committees together. It is not the easiest thing to do in opposition. We are watching wash-up very closely. A big thanks to all the staff who have worked incredibly hard on this. The Bill is incredibly important. I end by wishing everyone the very best.