Coventry City Football Club

Damian Collins Excerpts

Tuesday 2nd September 2014 Commons Chamber

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

I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing this debate. I thank him for giving me notice of it and asking whether I would like to participate, which I am pleased to do. All the Coventry MPs have been fantastic local champions of their football club in its plight. My hon. Friend the Member for Nuneaton (Mr Jones), who is a Coventry fan, is in his place and has also taken a strong interest in the matter. I will not seek to add anything to their local knowledge and expertise but will speak of my grave concerns about the governance of football in this country.

Coventry City is one of the worst examples of poor governance in football. It is right that the House should look at what has happened to Coventry City and resolve that it should never be allowed to happen again to Coventry or to any other football club. Very strong lessons have been learned. The hon. Member for Coventry South was absolutely right when he said that there is currently nothing to prevent what Coventry has been through from happening again either to that club or any other club.

The Culture, Media and Sport Committee looked at the ownership model under Sisu in its inquiry three years ago, when I was a Committee member. I was shocked at the time. We considered the case of Leeds United. I remember asking the chief executive of Leeds United whether he knew who owned Leeds United and he said he did not. He is now the chief executive of the Football League. The Football League did not require the public disclosure of the ultimate beneficial owners of a football club at that time and it does not do so now. It requires private disclosure, but not public disclosure. The Football League admitted during that inquiry that it has no resources to investigate properly who is the ultimate owner of a club. It largely has to take it on face value that the owner is who the club says it is.

There are many good reasons why we might want to know who owns a football club. We might want to know what other interests they have in the game or what other business interests they have in this country or around the world that might prejudice their ownership of the club. We have seen examples of very poor ownership at other clubs, including in the west midlands. In particular, the chief executive of Birmingham City was found guilty of money laundering in Hong Kong. He had to withdraw from running the club, but his son is still able to. There is no restriction on that. I know that a lot of Leeds fans are pleased to see anyone inject money back into their club, but should someone with fraud convictions in another country be allowed to take over the club? The Football League seemingly has no powers to intervene or else has a grave reluctance to do so.

The first lesson is that opaque ownership structures such as the Sisu model, where the investors sit behind a public face and no one knows who they are or what their real motivation or interest is, should never be allowed in British football. Fans should always have the right to know who owns their club, what their other interests are and what financial stake they have in the club and the facilities that the club shares. I do not think there has ever been an example of a club with that sort of opaque ownership model that has done well. The hon. Gentleman said he was concerned that the owners sought to strip the assets of the club and run it into the ground. Well, we may not know their motivation, but that is what happened and that is what it looks like. We are therefore right to be fearful and concerned about those ownership models.

The hon. Gentleman also touched on the fit and proper person test, which must be applied much more rigorously. He mentioned my private Member’s Bill in which I proposed giving the FA discretionary powers to oversee the regulation of that test. I think the FA should have subjective power to intervene and say, “We don’t believe that the owners of this club are upholding or intend to uphold the letter and spirit of the rules of the game.” I do not believe that would create a separate model just for football; in many ways it would follow the Broadcasting Act 1990, and there is an existing power for Ofcom regarding broadcasters in this country. Ofcom has a subjective power to interpret that Act and say whether it believes that an organisation holding a UK broadcasting licence is fit and proper to hold that licence and likely to live within the spirit and letter of the broadcasting code. I do not see why the Football Association could not be given the same power so that it could intervene when it feared that someone about to acquire a club might not be a fit and proper person or, as in the case of Sisu and Coventry, where a club was being run so badly that it was against the interests of the game for owners to be allowed to continue to do so.

I completely agree with the hon. Gentleman that the way the Football League allowed Coventry City to be moved to Northampton was against the interests of the club and its fans. We must consider why that decision was made so easily, and why there was no intervention sooner.

The hon. Gentleman rightly touched on the football creditors rule, which I have long campaigned against. The Select Committee recommended its abolition, and Ministers have stood at the Dispatch Box in this Chamber and Westminster Hall and said that it has had its day and should go. During the Committee’s inquiry, the then chairman of the Football League said that there was no moral justification for the creditors rule, and the Coventry case is a good example of the problems it creates. The rule means that as long as football clubs pay their football debts in full when they go into administration, they can get away with paying as little as 1p in the pound or even less to other creditors, and local businesses lose out. Those local businesses will get nothing whereas a football club that is owed transfer fees, or a player, will see every penny they are owed. There can be no moral justification for that. Everyone should be in the same boat when a club gets into difficulty.

The Coventry case is a good example of that, and the hon. Gentleman was right to ask, “What is to say that Coventry won’t be in this position again in two years’ time?” The club could get into financial difficulty, turn to the stadium and say, “We owe you lots of money but we’re not going to pay you”. It could go into administration under the rules of the Football League and get away with paying virtually nothing back to the ground and other debtors they may have in the city. As long as it meets its football debts it can just carry on, and nothing can stop that happening. That is morally wrong and should not be allowed. The local community and businesses that support their club deserve decent recompense in such situations, as that would stop irresponsible behaviour.

Getting rid of the creditors rule will create a more responsible attitude between clubs. If a clubs gets into a position where another club owes it money, it will think about whether that club can afford to pay it back. It may want more disclosure about the finances of that club before entering into a financial relationship that might put it at risk, just as other businesses would do when trading with each other. In getting rid of the creditors rule, we are not looking to impose new draconian laws that deal with football club insolvency; we wish to abolish a loophole that football exploits for its own interests—I do not believe it is in the long-term financial interest of the game for clubs to be allowed to do that. Getting rid of the rule would help the Coventry case and be good for football in the long term.

Other hon. Members wish to speak in the debate, so I will draw my remarks to a close. Local Coventry newspapers have done an excellent job in promoting this case, and I have been happy to talk to them over the past couple of years. After a recent interview with the Coventry Telegraph, the owners of Coventry City said that I was wrong in my assertions and that they would be happy to discuss them with me, but I have received no direct offer from the club for that discussion. I would be happy to discuss the issue, however, once they conduct their affairs not behind closed doors but in public. I would welcome and invite Coventry MPs to join me at that meeting, and the Coventry Telegraph and fans’ groups and anyone else who wants to come along. Let us have that discussion in the open. If the club thinks we are wrong in our assertions about the way Coventry City has been run into the ground, let us have that meeting in public and discuss the matter in detail. Under Sisu’s management Coventry City football club has been a disgrace, and that must never be allowed to happen again.

--- Later in debate ---

[Mr Ainsworth]

I think that they have been the main agents of this partial victory.

Other people who deserve congratulations include the Higgs Charity, which has an interest in the stadium and has been steadfast in the face of intimidation and attempts to distress and bully it. I have got evidence that the Football League effectively joined in that bullying. This local children’s charity has stood fast and refused to get out of the way of Ms Joy Seppala’s ambition to get the Ricoh Arena on the cheap. That was its only crime—it stood in the way of that ambition to gain control of the stadium on the cheap, for next to nothing. We have seen a well-funded Cayman Islands hedge fund seek to take on, intimidate and distress both the trustees and a well-thought-of local children’s charity to achieve its ends, and it has failed to do so. All strength to their elbow for the tenacity shown in resisting that pressure!

Coventry city council, too, should be congratulated. Labour and Conservative councillors have stood together, and I have been able to detect no politicking. Nobody has been point scoring. The entire council—the Labour majority and the Conservative minority—has stood shoulder to shoulder to resist this attempt to gain control of the city’s asset provided for by the taxpayer at great expense. Officers of the council, some of whom have been traduced by this appalling organisation, were congratulated on their work by the High Court judges in their judgments in complete condemnation of what the football club had done. The councillors have done a tremendous job and the council deserves to be congratulated.

Local journalists should be congratulated, too. The hon. Member for Folkestone and Hythe (Damian Collins) talked about the Coventry Telegraph. It has a first-class local journalist, Simon Gilbert, who has brought straight, unbiased reporting to this issue, which has done great credit to him personally, to his newspaper and to journalism in general. He should be congratulated on his in-depth reporting over a long period.

[Damian Collins]

I, too, would like to pay tribute to Simon Gilbert’s work on this story. Does the right hon. Gentleman agree that because of how insolvency law works with football clubs, in such a case, where there is a financial dispute between a club and a non-football organisation, all the power lies with the football club, which can threaten administration, knowing that the other body is likely to get virtually none of its money back?

[Mr Ainsworth]

I was coming on to that. The hon. Gentleman clearly has more expertise on football governance than I have; I come at this issue from a Coventry point of view. The hon. Gentleman is absolutely right. The football club creditors rule cannot be justified in moral terms; it does not apply in any other area of business, where following administration, creditors get treated in a proper fashion—but not in football. People are there to be ripped off by a system that was set up to protect the game. It really needs to be looked at further.

Some credit is due, too, to Mr David Conn of The Guardian, who fearlessly reported what was going on in Coventry and got threatened with legal action for his troubles. He was totally and fully vindicated in the subsequent High Court judgment, which made exactly the same claims as he had made in his reporting—that the fans and the Sky Blue Trust had been threatened with legal action by the club’s owners simply for providing a link to The Guardian article. That shows the kind of people we have had to deal with—people who have threatened their own fans with legal action for providing a link to a national newspaper.

One of my worries is that David Conn has been the only national journalist to look at this issue and to seek to expose what is an absolute scandal. In 2014, an offshore hedge fund has sought to attack the taxpayers of Coventry and gain control of an asset, attacking a local children’s charity in the process. So where were the rest of the media? Why have they not been as probing and as fearless as Mr Conn? We have had good local newspaper reporting, as the hon. Member for Folkestone and Hythe said, but we could have done with more from the national media to sort the problem out. What has happened in Coventry is indicative of a malaise in the game, as has been said repeatedly.

We must congratulate the two High Court judges, who made devastating comments about the club’s owners, Sisu, in their judgments. Coventry City are now playing back in Coventry. Ms Joy Seppala, the chief executive officer, said that she would never return to the Ricoh arena unless she owned it lock, stock and barrel. Well, she is back and she does not. She said she does not negotiate but tells people what she needs. As soon as the second High Court judgment was delivered, her right-hand man, Mr Fisher, was saying, “Let’s negotiate.” Therefore, there have been some U-turns and progress, but it has been off the back off some stern British justice that has seen through what has been going on.

Therefore, those are the people who deserve the credit for Coventry City coming back. I congratulate them. It is a good day. However, I want to give a warning, as my hon. Friend the Member for Coventry South did, against thinking that that is the end of it and this is victory. I do not think that it is.

Sadly for the people of Coventry—I am not just talking about the fans; I represent not the fans, but a third of the city; my hon. Friend represents another third and the hon. Member for Nuneaton (Mr Jones), who is sitting opposite, represents an adjacent constituency —the Ricoh Arena will never be able to reach its full potential, which is massive. It is on the Coventry to Nuneaton railway line. It is on the motorway network. It is a fantastic arena in the poorest part of the city capable of huge regeneration. That is the only thing that justified the taxpayer investment in that facility in the first place. However, it will never be able to reach its full potential until there are football club owners or partners in the stadium who are interested in creating value.

That is the thing that some people have not been able to understand. The owners of Coventry City football club have not been interested in creating value. They have destroyed the football club not through incompetence but through their deliberate actions. Their interest has been in destroying value to get their hands on the asset at a knockdown price. That is the problem, which is still there, because those owners are still there. I do not believe that they have changed and will now become partners in the local economy, working with the city council and other partners to create a good sporting culture and economic regeneration in my constituency. I do not believe they are that kind of people.

That brings me to the points that the hon. Member for Folkestone and Hythe made so well. What is it that brings that kind of owner to our national game? I have not been a football fan for many years. I used to be when I was younger but the money interest put me off hugely. Mostly these owners are flamboyant, rather extraordinary people—we see them at other clubs—with rather dodgy backgrounds. There are many of them. Up and down the country, there are many examples of the kind of owner who has been attracted to the game. The Coventry City owners are different. This is a hard and ruthless hedge fund operation prepared to destroy a children’s charity to make money. Something wrong in our national game attracts that kind of person. I think that it is the football creditors rule and the total lack of governance. I do not believe that the Football League genuinely acts as a governing body looking after the interests of the game, the fans and the British people at large. It is effectively a self-interested club for owners. The new chief executive officer of the Football League put his own club, Leeds United, into administration twice while he was there.

This is a malaise, and it is important. I am not making a party political point because we were in government for 13 years and we did nothing about this. The present Administration have been in power for almost an entire term and they have not done anything either, and it is not easy because football is glamorous, powerful and moneyed and it is hard for politicians to say, “Wait a minute, there’s something deeply wrong here,” but if we do not do so, then we saw what happened in banking. I am not suggesting that what will happen in football will be as economically disastrous as what happened within British banking, but in some respects it is more important, because this is not just economically important; it is culturally important as well.

After the World cup we are seeing the Americans getting into football in a bigger way than ever before, and there is a huge upsurge in football interest in China, too. Our national game has huge potential for this country if it is properly run and therefore can be properly exploited to project our national culture, our national identity and our national interests, but it cannot do that if it is not properly governed, and Government really must grapple with this.

--- Later in debate ---

[Mrs Grant]

I have robust and candid conversations with the football authorities. I agree that we need to see some more progress. Some has been made, but we need more. I will be meeting them on Friday, and I will certainly relay to them what has come out of this debate and the crucial need for us to start to see further progress on a number of matters.

The issue of ownership was raised by all hon. Members in the debate and, in particular, by my hon. Friend the Member for Folkestone and Hythe. Again, I reassure him that the football authorities really do take club ownership very seriously, which is why the owners and directors test applies to all clubs in the Premier League, Football League and Football Conference, and in the three leagues below.

[Damian Collins]

Will the Minister give way?

[Mrs Grant]

I will, but if my hon. Friend will just let me finish my point, he may find that it deals with the issue he is raising. Given what he and others have said today, and what I have heard—I have been listening very carefully indeed—I am happy to discuss with the authorities on Friday, and at subsequent meetings, whether they could make any improvements to the owners and directors test, or any other test that might help to deal with this situation.

[Damian Collins]

I am glad to note what my hon. Friend has just said. My concern, and that of other Members, is that the test, as it stands, is totally inadequate. If anything, the recent case at Leeds United demonstrates that the Football League does not have the legal power to apply the test as it might wish. If it sees someone from overseas coming in, as in the case of Mr Cellino, with a fraud conviction which happens to be spent, the Football League is subject to a legal challenge to try to prevent that person from taking over the club. I wonder whether there has to be some sort of statutory underpinning of the fit and proper person test to allow the Football Association or the Football League to enforce it properly.

[Mrs Grant]

I agree that certain improvements—further improvements—may need to be made to the test. We are in a better place than we were before it was strengthened, but I still have some concerns. As I said to my hon. Friend, I am happy to raise all these issues with the football authorities to see what further improvements can be made. The football creditors rule was raised again by most hon. Members, and I have touched on that. I have to say at this stage that there is no plan to legislate on that rule. The industry is trying to make changes from within. The proper implementation of the financial fair play rules should hopefully make dependency on the football creditors rule much less likely and reduce it considerably. Those were, I think, the main issues that were raised by hon. Members.

I just want to pick up one point in relation to the Football League, which has come in for a bit of criticism today. I recall Members talking about lack of leadership and the fact that it could have done more. Having looked at this situation carefully and worked with the League closely since being appointed the Minister for Sport, I think it has had to make a difficult decision in difficult circumstances. It came up with a sustainable solution, with the fans, MPs and journalists, which has allowed this great club still to be in the League. It will be back at home very shortly, hopefully focusing on football and continuing to do very well.

In conclusion, now that the differences have hopefully been resolved for the good of the club, the loyal fans and the wider local community, I am delighted that Coventry City football club may return to the city and have the chance to concentrate on football matters and their position in the League, which is important to their fans.

The Government’s strong expectation, guided by the Select Committee’s recommendations, is that the football authorities will continue to make progress in making the necessary changes and reforms. I will raise these issues with them on every occasion that I meet them in bilateral meetings at the Department for Culture, Media and Sport. My Department will also continue its ongoing dialogue with the football authorities to ensure that the support for clubs continues and that progress on governance reforms is maintained.

In the meantime, I wish the Sky Blues the best of luck for the season ahead, and I look forward to their first fixture playing back in Coventry very soon.

Question put and agreed to.