FOOTBALL INQUIRY

12 May 2008

Members Present:

Alan Keen MP (Chair)

Mark Field MP

Ian Lucas MP

Christine Russell MP

Lord Faulkner of Worcester

Lord Taylor of Warwick

Guests:           Greg Dyke (Chairman, Brentford FC)

                        Charles Sale (Daily Mail), Patrick Collins (Mail on Sunday), and Patrick Barclay (Daily Telegraph)

Dr. Geoff Walters (Birkbeck College, Univ. of London), and Dr. Rogan Taylor          (Univ. of Liverpool Management School)

                        Alan Keen MP (Chair):  Greg, thank you so much for coming.  I do not know how many times I have sat on the Culture Committee when you have been a witness.

Greg Dyke:  It is must better when you can come as yourself, as opposed to when I was running the BBC and having to spend two hours being briefed on what you can and cannot say.

            My history with the professional game started when I was Chairman of ITV Sport back in the 1980s.  It is funny when I look back now, because I remember meeting the Chairmen of the big five clubs: Everton, Arsenal, Tottenham, Liverpool and Manchester United, and saying that we would give them £1 million a year if they supported our bid.  The look of excitement on their faces was unbelievable, but when we consider what they get today, the figure hardly seems relevant.  Four years later, I was the catalyst for setting up the Premier League.  It was clear that clubs that had their £1 million a year were not going to get it from the next contract.  We had a dinner at London Weekend and discussed matters, and they decided to go off to the FA. They wanted to break away and that is what they did.

The FA was led by Bert Millichip and Graham Kelly at the time, and they made a significant mistake. They rolled over when they could have demanded anything they wanted from the clubs, because it was the one occasion on which the clubs really needed the FA.  We remember the warfare between the FA and the Football League.  That was one of the times when the warfare was at its greatest, and they just accepted what was on offer. They should have demanded greater access to the England team and a smaller Premier League; they agreed to come down to 20, but they could have got it down to less.  They are not the only people who got it wrong.  I was Chairman of ITV, and we did not win the football rights. We all got it wrong.

            A few years after that, I was asked to be a Director of Manchester United, which I did for three fairly eventful years.  It was when BSkyB tried to buy Manchester United and was stopped by the Competition Commission—I was the one director who was against.  I left in 1999 to become Director General of the BBC, and it was rightly pointed out that I could not be both on the board of Manchester United and Director General of the BBC because of a possible conflict of interests.  My kids never forgave me, because they thought that giving up four seats in the director’s box at Old Trafford was not a good swap.

Later, I was asked by the Supporters Trust at Brentford, which had just taken over the club, to become Chairman of Brentford.  Brentford had been my team as a kid and my brother was a junior there, so I had been a long-time follower.  We won the first four games when I was Chairman—in the fourth we knocked Sunderland out of the cup—and my mate rang me and told me to resign, saying, “That’s as good as it gets.”  The reality was that in the next year, we lost our manager, sold our four best players to balance the books and were relegated, and now, two further managers later, we are mid-table in League Two.

            The reality is that the economics of football do not make any sense.  It is as simple as that.  We could pay the whole of Brentford’s wages bill for next year with two months’ worth of what Ronaldo is paid, and we would still lose £500,000 a year—we are not alone in that. I ask the Chairman and Chief Executive of each club that I visit how they survive, and I would say that 90 per cent. of them survive because a rich man—it is usually a man—is putting money in.  It is as simple as that.  Can clubs like Brentford survive in this era of football?  The best hope is to do what clubs such as Hull, Swansea and Doncaster have all done, which is to build new grounds and share them with someone else to change the economics. 

Our aim is to have a new stadium and be able to move in there, debt free.  We have successfully negotiated the first stage.  With Barratt, as our partners, we have bought a new site for £11 million.  It was funny being the Chairman of Brentford and signing the letter for £11 million when we do not have tuppence, but those are the deals that we can do.  If we can achieve it, I think that it is possible to run a community-based, fans-owned club.  Our Community Sports Trust is 20 years old and it does remarkable work in the local area.  The turnover of the trust is now £1 million a year—half the turnover of the Football Club.  It works in many interesting fields, particularly education.  As you know, football can sometimes get to the kids that almost nobody else can reach.

            The future of a football club will depend on the ability to manage the wage bill, something that very few clubs achieve at any level.  The football business is similar to the movie business: it does not matter how much money comes in at one end, it goes out to the talent at the other.  The old joke about Hollywood applies to football: how do you make a small fortune out of the movies?  You start with a large one.  It is exactly the same in football. 

How do clubs that do not have rich sugar daddies survive?  I do not know.  The real test comes when a club tries to contain the wages to somewhere near its income. By and large, such a club gets relegated, because enough others have other sources of income—the source is usually a rich, new chairman.  He will lose quite a lot of money in the first few years, he will get harangued by supporters and he will then leave, and the process will start again.  I do not know how to bring stability to the industry.

            People tell me that football is a business.  I am in lots of businesses and this is not a business.  Businesses are not designed to lose money for ever, which is what happens in football.  From my experience of television, I do not think that the flow of television money into football will dry up.  Now we have competition in the pay- television world, brought about largely by European legislation and European competition policy, I cannot see the flow drying up.  It will continue to grow; I do not see any reason why it should stop now.

            This year, for the first time, the Premier League gave some of its new-found television income to the smaller clubs, which is to be welcomed.  It did not have to take such action.  Brentford received £75,000 from the Premier League.  That makes a big difference to a club that has a loss of £500,000, and we should be grateful.  The Football League has just done a new television deal for 2009-10, which will more than double the money coming in.  That is again good news and the people running the Football League have done a good job in doing that deal.  However, if everyone just gets that extra money and uses it to increase the amount that they spend on players, what is the point?  The priority must be to put football at every level, particularly the lower leagues, on some sort of stable financial base.  Until that can be done, money will just flow through.

            What I have learnt from my experience of watching the Premier League develop and being a catalyst at the start is that it is difficult to see what will happen to the England team.  I was on the board of Manchester United when the wonderful generation of Scholes, Beckham, the Nevilles and Butt were at their best, but I do not think that most of them would get a game now.  We must remember that Beckham only got into Manchester United first team because a man called Kanchelskis—we do not have privilege here, so I will be careful what I say—had a strange Russian agent who needed to get some money and insisted that he be sold.  That was in the days before the large numbers of foreign players and it is hard to see how those kids would get into a first team, even at a place such as Manchester United, which has always been interested in developing kids.

Such a situation has to do long-term damage to English football.  I bumped into Richard Scudamore the other day. Talking about the past decade, we agreed that the income now coming to the Premier League clubs from overseas is phenomenal, and no one could have envisaged that 10 or 15 years ago.  The Premier League has somehow become the world league.  It means that we are watching football of a quality that we will not see anywhere else.  It is absolutely wonderful, but at the same time it means that it is difficult for younger, English players.  I have no idea why a kid would want to sign up for Chelsea or Arsenal.

Chair:  I must say for the benefit of everyone in the room that the inquiry is not meant for Members of Parliament to issue a report telling football how it should be run.  I hope that we are providing a service to people who are giving evidence, so that they can give their views that we can publicise.  BBC will televise and show each of our sessions—I believe that last week’s session was shown on Sunday. We want to know your views and then ask the authorities what they think of them and what they are going to do about the strong views that people have about the game.  Greg has reminded us that we do not have parliamentary privilege; we are an all-party group, not a Select Committee, so everyone is liable for what they say.

Greg Dyke:  I shall be polite about Mr. Abramovich.

Ian Lucas MP:  I am the Member of Parliament for Wrexham, which, as you know, has just left the Football League.  I am interested in Brentford’s business model, because during the past few years, Wrexham had difficulties. It has an active supporters’ trust that has ambitions in respect of ownership of the club.  I gather that Brentford has a supporters group—Bees United—that owns 60 per cent. of the club.  What do you consider to be the advantages and disadvantages of that model?

Greg Dyke:  The advantages are that the group is rightly interested in the long-term viability of the club.  The group does not want to swing it from season to season, and it does not want another short-term owner who will disappear.  You know the thing: people put in £1 million or something, but it is all in debt and when they leave, they want their debt repaid by the next person, so no new money comes into the club.  The disadvantage is that that is not economically viable at the moment. Perhaps we have not got the model right, whereas other people could.

Hereford is an interesting model.  It is owned by the manager, and it has been in the black.  One can never be too sure when we meet other Chairmen and Chiefs Executives, although I am not suggesting that they lie.  Hereford says that it has been in the black now for six years.  It was promoted this year on a players’ budget that was significantly less than that of most other clubs.  The loan system is incredibly important for football.  A lot of bigger clubs want their younger players to come out on loan, to gain experience.  Sometimes, the players come on loan for nothing.

Ian Lucas MP:  You say that the model is not economic.  Do you mean that not enough income is raised from that model?

Greg Dyke:  We have just done next year’s budget, and we will lose £500,000. That assumes that we do not sell any players and that we do not have any cup runs.  We have survived the past two or three years by selling players.  When you sell a player, you often get 10 per cent. of the value of their next move.  We sold a player called D. J. Campbell to Birmingham.  He was then sold to Leicester for £1.5 million more, of which I think we got about 10 per cent.  That is how it works, so we are always looking to see what is happening to the players for whom we will receive a percentage of the sell-on price.

Ian Lucas MP:  You would not advise anyone to follow the model of the club of which you are the Chairman.

Greg Dyke:  It is very difficult if you do not have someone who is quite wealthy and is prepared to support you.

Another interesting example is Barnet. Wrexham should talk to the guys there, because Barnet went out of the league and created a different model that worked.  They say that they learnt it from being in the Conference, not from being in the Football League.  No manager ever got a better job by bringing the club in on budget.  Managers get better jobs by winning, and the way to win is to sign better players and, to do that, you have to spend more money.  It is straightforward.  I suspect that that is true at every level of football.  When I was on the board of Manchester United, the club used to make £30 million a year and no one else in the Premier League was making anything. Arsenal might have been, but we could never find out about Arsenal.  Most football clubs do not make money.  In any other business, it would be said that the employees were being overpaid—that is where most of the money is going.  My advice to Wrexham is to talk to those who have done it before, because they have worked out models of how to do it in the Conference.  The same thing applies to the Conference; a lot of clubs are being propped up by rich men.

Lord Faulkner of Worcester:  I have been listening carefully to what you have to say, Greg.  It is a depressing story.  You are saying first that the Supporters Trust model does not really work at anything above the third tier.

Greg Dyke:  We should keep the structure the same.  We are lucky, because we own our own ground, it is in a lucrative area—owning a ground in Wrexham is not like owning a ground in west London, just down the road from Kew or Chiswick—and it is an enormously valuable piece of real estate.  If we could sell that and find another piece on real estate on which to build a new stadium, we could change the model.  However, at that sort of level, not enough money will be coming through the gate, so you have to work out what else to offer the supporters.  You cannot do that in a ground that is 80 years old, so you have to find another source of income—a new ground.

There is a lot of evidence concerning clubs that go into new grounds.  If you offer supporters better facilities, more will come and they will be willing to pay a bit more.  Swansea and Doncaster are interesting examples.  Swansea’s gate, having moved from the old to the new ground, went up by an average of 5,000.  Outside London, such moves often involve local authorities.  In the case of Swansea, the local authority brought together the rugby and the football club—the clubs share the stadium.  The authority allowed planning permission on the old ground for supermarkets and so on, and that money was used to support the building of the new stadium.  It does not make any economic sense to spend £50-odd million on a new stadium that will be used once a fortnight for 30-odd weeks of the year.

Lord Faulkner:  You said that the wages bill is what holds back a club if it cannot rely on a benefactor.

Greg Dyke:  Yes.

Lord Faulkner:  The solution to that problem may be the imposition of a much tougher wages cap.

Greg Dyke:  At the moment, League Two has a 60 per cent. rule.  In other words, you can only spend 60 per cent. of your turnover on salaries.  Brentford recently proposed to change that to 50 per cent. in the year after next, when the new television deal comes in.  We were narrowly outvoted, although it was touch and go, because most clubs wanted to keep the position, and I could not understand that because everyone who I have talked to know that they face the same problem. 

Of course, people have found ways round this. Let us consider Peterborough this year.  Someone gave a large amount of money to Peterborough to sponsor the club’s shirt.  That counted as turnover, so 60 per cent. could be spent on players’ wages.  By and large, that is the sort of approach that must be taken.  People say that more money should be coming down from Manchester United, but it would only get spent and the wages bill would just be increased.  Unless there is another constraint, the basis would not be changed.  That is my fear about what will happen the year after next, when suddenly the amount of money that we get from the Football League will go up because of the good television deal—it will just mean that the wages will go up.

Chair: If anyone wants to make a written submission over the next five or six weeks, we would welcome that and it will be published as part of the report.

Mark Field:  You have painted a depressing picture, but one that anyone who has had a passion for football over the past 35 years—as I have—would recognise.  Perversely, the only people making money are those at the global brand level of one of the big four in the Premiership or clubs such as Watford and Derby County that have had a brief period in the Premiership, hope to yo-yo up and down and have not bankrupted themselves. Such clubs will take £50 million plus of TV money for their one year in the Premiership. They hope to spend one year in three in the Premiership, so that they can rely upon that.

Greg Dyke:  So that they can continue—

Mark Field MP: Even that is perverse economics as well.  Part of the issue of hope and fear is that there is too much opportunity for promotion.  Before my time, one club out of 22 or 24 clubs in division 3 north or division three south went up to division 2.  Part of the difficulty for Brentford, which is in League Two these days, is the tremendous fear of going through the trapdoor.  One in 12 of the clubs—two out of 24—will go down into the Conference without there necessarily being a quick route back.  Moreover, seven out of the 24 clubs are either getting promoted or getting a play-off place.  Do you not think that the people who live in Brentford or Isleworth will be quite happy to watch a game week-in, week-out without necessarily being overly concerned whether they will get promoted one year on next?

Greg Dyke:  The next three months is the best three months to be running a football club, because we all believe that next season will be different.  Interestingly, the fans have become less and less tolerant of failure, particularly in a world where the internet makes communication between them so easy.  It is easy to organise opposition now.  We had significant demonstrations against two managers, and me; I said that I was a non-executive Chairman who would not put in any money.  There is a comparatively small, well-organised group in any club that can organise effectively because they can communicate with each other through the online world.  They demand success and want to be promoted. 

Our biggest crowd of the season was at home to Hereford.  It was the last game of the season.  We had not had a great season, but Hereford brought 2,000 fans because it was the game that they had to win to go up.  If we take that out, the economics would be changed again.  The play-offs have been a great success, because they keep an interest for longer.  We got to about four weeks from the end of the season and there was be no season left, because we knew that we were not going to go down or go up.  The players knew that, and we started planning for next year.  Those who were going began to guess that they were going, and those who were staying knew that they were staying.  Everyone has the dream of getting promoted and you have to keep that.  We live now in a world in which the fans are less tolerant.  They organise much quicker.  That happens in all sorts of club.  As soon as you might go down, even if you came up the year before, the board goes from heroes to villains very quickly.

Mark Field MP:   Assuming that it is not confidential, how much TV money does Brentford get—assuming it does not have a cup run?

Greg Dyke: It all comes as part of one payment from the Football League.  To be fair to the Football League, it has increased over time.  It has been quite effective.  I think that we get about £300,000.  I could let you have an exact amount, but it is not enough.  We could sustain Brentford on probably 60 per cent. of the existing amount of money that we spend on players.  If we spent 40 per cent. or less and could maintain the position, we would break even.

Christine Russell MP: Last night, I was celebrating a great victory in Manchester.

Greg Dyke:  Paul Scholes should have been sent off.

Christine Russell MP: But now I feel rather depressed hearing you ending your presentation by saying that Scholes and Beckham probably would not have even made the team.  I always feel that when Scholes is playing well, Man United is playing well.

Greg Dyke:  How do you risk putting young players into those top sides and letting them learn?  It is too great a risk.

Christine Russell MP:  That is my question.  Whose responsibility is it to develop that talent?  Giggs and Scholes were at Man U from 13 or 14 year of age.  Is it the big clubs?

Greg Dyke:  It is all clubs.  We get some income directly from the Football League for our Centre of Excellence and we put in an additional £50,000 or £60,000 that we cannot afford.  I do not know whether we get our money’s worth, although the odd player comes through.  When they set up the academy system for the Premier League, they did not expect the Arsenal Academy to be the finishing school for Europe.  If you look at the players who have come through that academy into the Arsenal side, they are not British players. Obviously, clubs have a responsibility to their communities and they have a responsibility to try to develop talented players.  I can see why some would not do it.

Christine Russell MP: Do you not think that it starts at the grass roots level?  In so many towns and cities, youth teams have to pay £40 or £50 to hire the pitch, and they cannot compete with the adult teams.   Could a big difference be made if we had a real push, starting with the local authority saying—

Greg Dyke:  What my son does on a Sunday morning on a football pitch has nothing to do with what David Beckham does, and the FA has not quite worked out which of the two it covers.  There is a phenomenally professional game—it is brilliant football today—and there is football as a leisure activity.  I still play it at 60 years of age every Thursday night and get clobbered all over the place.  They are very different things.  I am not sure whether you can continue to administer them through one organisation, because I am not sure that the professional game is not so different now.

Chair:  As the Premier League approaches 50 per cent. ownership by people who have come into football purely as financiers, rather out of a love of the game or because they know anything about it, will that reduce commitment? What about the development of grass roots football?

Greg Dyke:  I do not know.  I never quite understood the motivation of the people who are coming into football.  Most of them are coming in for business reasons because they believe that there is a financial return.  I do not see it, although there are people who have made a financial return.  They owned parts of some clubs when such people came in.  It is hard to see how people get a financial return from owning clubs if all that will happen is that additional income goes on players. As to whether the motivation is less, I do not think so, because the clubs will still run the centres of excellence.  The much greater problem is that the best young footballers in London will still go to Chelsea or Arsenal, but they will not get a game.

Chair: I know that people will still develop their own academies because they see that that will enhance the finances of the club in which they have invested.  I am talking more about the fact that, at the moment, the Premiership gives quite a lot of money to the FA’s Football Foundation to develop grass roots football that has nothing to do with clubs individually enhancing their finances.  I am well aware that, as you have mentioned, Brentford has one of the best community programmes.  It is not for the benefit directly of Brentford Football Club, but for the community.  I accept that it helps to bring in support.

Greg Dyke:  The reason why I took on the job as Chairman was that the club was owned by a community trust, and that has a wider goal than just a football club.

Chair:  We are concerned about whether people who come in only for financial reasons will change the game dramatically.

Greg Dyke:  Well, it has changed dramatically, and it is bound to continue.  The Premier League is now the world league, in effect.

Lord Taylor of Warwick:  In the earlier part of your evidence, you used the expressions “football business” and “football industry”.  You then went on to say that football was not a business. What is it?  Is it changing its character?  What is football these days?

Greg Dyke:  I suspect that it has never been a business.

Lord Taylor:  Never been a business.

Greg Dyke:  No.  I suspect that over many generations in many comparatively small communities, people who had made a bit of money decided that they would like to run the football club for a while, and that is what sustained the football clubs.  Those people then became a bit bored and someone else did it.  They might have got bored because they lost.  It is no fun.  I was on the board of Manchester United. It won the league seven times in nine years, yet each time Martin Edwards went on the pitch, they booed him.  That is typical. The aggression that those of the board get from football fans if the team is doing badly is hard.  I have experienced it myself.  It is a very passionate thing.

Christine Russell MP:  It is a bit like politics.

Greg Dyke:  The staff may be like politicians.  I am not sure that there is much upside in politics.  There is upside in football; you can win some times.  But it has never been a conventional business.

Lord Taylor:  I support a little team that you may have heard of called Aston Villa, up in Birmingham.

Greg Dyke:  Doug Ellis.

Lord Taylor:  Let us not talk about Doug.

Greg Dyke:  I like Doug a lot.  He put money in for years.  He is one of the few people who did try to run it as a business, and that is why a lot of fans did not like him.

Lord Taylor:  That is right.  We now have a new owner called Randolph Lerner.  He is a billionaire and has made it clear that he is not in it for the money.  He has given a lot of money to charities in the Aston and Birmingham vicinity.  That does not benefit Villa, but the fans love him, and they love the manager too.  I am thinking about the fit and proper person test for ownership.  Is the Randolph Lerner/Aston Villa structure the best way forward?  I am comparing it to what is happening to Liverpool, without naming any names.

Greg Dyke: Lots of people have decided to buy these assets for all sorts of different reasons.  If you are a multimillionaire, you can afford to do so.  A lot of those who have done it as a business are shocked to discover that they not likely to get a return.  This could be the high point of the sale of such clubs, and the value could be going down again.  I remember meeting a young bloke at the Harvard Business School who had a few shares in Arsenal, and because I knew David Dein, I put him in touch with him.  That was 20 years ago.  He sold the shares, and I just hope that he did not read what David sold them for.  Some people have made a lot of money, but I do not think that that could have been predicted.  At the lower levels of football, there is no chance of it happening.

Chair:  Do you think that the Premier League owes not Brentford in particular, but the teams at the lower end? Should there be a fairer distribution among other clubs?  The football pyramid is changing.

Greg Dyke:  We have to go back to the history of why the thing was set up.  I was involved in that period.  ITV did a deal with the top five clubs and then with the Football League.  The old Division 1 clubs, as they were then, took objection to that and threw David Dein of Arsenal and Phil Carter of Everton off the Management Committee.  That is why the Premier League was set up..  It was a case of power being disproportionately with people who are not the really important people in the game.  The Premier League was all about getting bigger television income and bigger sponsorship income and sharing it among themselves, as opposed to the whole of football.  That was the aim, but no one could have foreseen the scale of the money that would be involved.

Obviously, every club down here would like some more.  For comparatively small amounts, the deficits of a lot of clubs could be ended, but we do not want to increase wages all over again.  If everyone in League Two went from having an average wages bill of slightly more than £1 million a year to getting an extra £500,000 from the Premier League and increasing the wages bill to £1.5 million, we would be facing the same problem.  Some of the clubs would spend it that way.  Everyone believes that if they spend more money, it will be their chance for success.   Unless that can be constrained, it will just mean that lower league footballers are paid more money.  They could be entitled to a lot more money, but in most businesses, people are only paid reasonable sums because the business is viable and profitable.  In football, the opposite happens.

Chair:  Greg, thank you very much for your time.  We are most obliged to you.  If you want to make further submissions, please do so.

Guests: Charles Sale, Patrick Collins and Patrick Barclay

Chair: Good afternoon.  If we were not impressed and entertained by what you write, we would not have invited you.  Thank you very much for coming.  Earlier, I said that we are not going to tell football how it should run itself; we are relying on you, among others, to tell us that and we are interested in what changes you feel should be made to the game.  I am not going to give you the opportunity to make a statement before you start—I am sure you have learned from politicians that if you want to get a point across you say, “That’s a very interesting question, but what I would like to say is this”.  We will do that instead of an opening statement if you do not mind.  Richard will ask the first question. 

Lord Faulkner:  I have a simple, fundamental question.  You guys follow the English league game very closely and you also follow the England national team.  What explanation do you each have for the success of English clubs in European competitions, and the abject lack of success for the national team?  What should be done to put that right? 

Patrick Collins: Before we start, I thoroughly agree with much of what Greg Dyke was saying. 

We are currently obsessed with club teams and club football and the league, obviously, on which much of our game is based.  In a sense our greatest blessing, the Premier League, is also our greatest curse.  Most of the problems in English football spring from the way that the Premier League is set up, as Greg Dyke said earlier.  Towards the end of his evidence he said something to the effect that the Premier League was designed to make a few clubs very rich very quickly.  That was the raison d’être of the Premiership and it remains so.  Given that concentration on club football, the comparative decline of the national side was pretty well inevitable.  People are recruited from all over the world—the Portuguese player was signed this morning at Chelsea for £16.5 million.  It is a routine procedure.  Given that the clubs still sees no further than their own advantage, they do not give two thoughts to whether the national team prospers or otherwise.  That does not figure in their thinking. 

Patrick Barclay:  Can you hear me?  Thank you ladies and gentleman.  I am going to answer the question quite directly.  Why are top English clubs more successful than the national team?  It is simple.  There is no transfer market in international football.  We cannot buy success at an international level.  We tried to do that by buying Sven Goran-Eriksson from Sweden—or wherever he comes from— and when that did not work we tried an Englishman, and now the FA are going down the same misbegotten route and spending a lot of football’s money, quite unnecessarily, on over-priced Italian imports.  In a way, the answer to the question provides a caricature of what is wrong with English football. 

I am very grateful to be invited here, but when Alan tells me that you are not here to tell football how to run itself, I would say that you should be.  Someone has to.  The game has been catastrophically mismanaged, particularly at the top level.  You put your finger on it, Lord Faulkner, with your opening question.  We have a superficial boom that masks an underlying catastrophe.  Lots of money is being taken out of the game by agents, players, profiteering carpet-bagger foreign owners, and some British and Irish ones who do the same thing.  They are taking huge amounts of money—huge amounts have been taken out of Manchester United without a whimper from the fans.  At the bottom level, the point of playing football is to provide money for children to play it so that it will remain strong in the future. Now, such little coaching that remains for children is largely supervised by companies like McDonald’s and Pepsi Cola which, as every health expert will tell you, make products that are largely responsible for the severe decline in the nation’s health.  It is rotten to the core and I feel that for this Committee to say that their job is simply to highlight the problem, puts the burden back on the media who are completely inadequate for the task—I speak as one who has been proving that for 25 years.  We cannot do it without political help and I plead with you to listen to the remarks that I have made today, and try to do something to put political pressure on. 

If you say, as would be reasonable, that it is not the purpose of Parliament to intervene in private business, why did all of us here give £120 million for the construction of Wembley?  It was an obscene decision to give such a large amount of public money to an already over-bloated industry.  We did not ask, as far as I know, to get the £20 million back that was promised for the construction of a running track, which was a joke.  We knew that that promise would be broken, and when it was broken, we never asked for the £20 million back.   That would have built a few football pitches. 

Chair: You slightly misunderstood what I meant.  I probably did not explain it well.  I meant that this should not be about us trying to push ourselves as experts on football.  We want to empower everyone who cares about football to give their views so that they can be counted and their views put in a concise report.  Then we can ask for proper action.  

Patrick Collins: Well, I am grateful for that

Chair:  We still need your support as well.  I made that point because when we did the previous report in 2004, we were criticised by the press which asked what MPs know about football.  We all care deeply about it—I did 18 years in the Opposition, so I know a little bit about the technical side.  We want your support to accompany that and thank you for making those points as strongly as you did. 

Patrick Collins: Sorry, may I interrupt?  I remember speaking to the all-party parliamentary group seven or eight years ago, and I urged it to have a parliamentary inquiry into the governance of football, with the ability to take evidence on oath and subpoena witnesses and various such measures.  I remember one of the MPs saying that I had a touching faith in the power of Parliament, but I still think that something like that could be done.  I entirely share Patrick’s views.  It is an important facet of our national life that politicians cannot step back from everything.  They should be much more involved that they are. 

Charles Sale: In answer to the question, obviously the first bit about the Premier League is self-explanatory because there are a lot of foreign players in the Premier League.  Moving on to what to do about it, Blatter wants a quota system introduced by 2012, where six players in the starting line up are qualified to play for their national team.  To me, that is a great idea.  The Premier League is already shouting about it and there is no way that you will get it past European law.  However, Blatter is convinced and hopefully Triesman will support him. 

Returning to political influence, Triesman’s arrival at the FA has been unfortunate at this time because he has arrived like a whirlwind.  The FA has got lease that it has never had before.  For the first time the Premier League has been put in its box to a certain extent.  Another politician who is running the Football League very well is Mawhinney.  Now, if Triesman carries on as he does, the FA could get to a position where it has a purpose.  Last week he introduced his vision.  One of the FA staff said, “We are fed up with Premier League people asking us what we do.  I will show them this from now on and say that this is our vision and this is what we are going to do.” 

The other thing that will change slightly is the structure of the FA board.  There is a conflict of interests.  The governance of football is still a huge problem.  How could you have people running the FA board whose first win—When Sir Dave Richards talks about it, he says “We”.  He is on the FA board and says, “We at the Premier League”, when talking about how to run the game.  It is ridiculous.  At the recent international round fiasco, David Gill, who is supposed to run the more firm-footed members of the FA board, had a nightmare.  He did not know whether to give his own views, those of Manchester United, those of the Premier League or those of others.  He did not know where to go.  Triesman has been a brilliant success in restoring the proper balance of the ruling body, although it is a bit early for us to see how it will develop. 

Mark Field MP:  Thank you for your previous answer.  I find it strange that we think that the Premier League should somehow be a feeder to the national team, as though that is its raison d’être.  Only twice have we got beyond the quarter finals of the world cup.  There is always a ludicrous expectation in every single world cup that we are about to be great world beaters—I was unlucky enough to be in Gelsenkirchen to watch the dismal exit last time round as well.  I would like to ask a question of all of you on the back of Patrick Barclay’s excellent article the week before last in the Sunday Telegraph.  It was about the competition and that is what lies at the great miracle of what is happening in the championship. 

You probably heard my earlier comment about the economic good sense behind what Derby and Watford have done in the last two seasons, and what I suspect Stoke and either Hull or Bristol City will do next season, which is to ride it without necessarily going down some ludicrous route of half-bankrupting themselves. 

How do you see things within the Premiership going forward?  I was a young guy in the mid-80s and I remember when football was something that you could not even admit to liking.  The reputation was at an all time low because of hooliganism and the problems that happened at the Bradford City fire in 1985.  I have always taken the view, rather like Greg Dyke, that we are only ever one step away from disaster whether that is the financial tap being closed off by TV, or football ceasing to be such a sexy game that everyone wants to get into.  Where do you see the Premiership going, given the utter lack of any sense of competition?  We all know who the top four are going to be next year, and we know that at least two, if not three of the bottom three will be clubs that are currently going well in the championship.   

Patrick Barclay: I think that it will continue to go where it is going under the current system.  My problem is that all the very good points that have been raised here all require radical solutions.  While the FA gets no help from the outside world, those radical solutions cannot even start to be pursued.  That is why politicians are so important in all this.

What has happened stealthily at the top level of so-called English football in the last 10 years is that we now have a situation where the total debt of the top four clubs, the ones who are okay, is the equivalent of the television deal that Sky television provides every three to four years. That is probably the best way to indicate how much trouble we are in.  This is supposed to be a successful business.  Can you imagine if Tesco, Waitrose, Asda and other leading supermarkets were all widely in the red and unprofitable?  That is how bad it is. 

The FA and the Premier League need to pursue radical solutions.  Greg was asked about wage capping.  Of course wage capping will not work; it cannot work in Europe.  It works in the communist state that is American sport, but they have their own laws which, sadly, European law would not look at.  Even with the Arnaud report and the more sympathetic attitude that the European Union has taken towards sport in the last few years, it is not going to happen.  In my opinion, the only way of capping wages is a campaign to eradicate debt—that might take five or 10 years.  That would solve more problems than just that of wage inflation, which is what is driving all the clubs into bankruptcy.  It would begin to solve that problem but, as you can well imagine, something as complicated as that will not happen in the foreseeable future.  That is one example of why we need a radical change in football. 

Lord Taylor:  I wondered if you had any comments on the situation where clubs are paying agents.  As I understand, agents are not perhaps the most positive aspect of our professional game.  What do you see as the future?  Are there radical solutions for changing that structure in terms of the influence of agents? 

Charles Sale: More transparency.  At Manchester United, when Alex Ferguson fell out with Coolmore and J.P. McManus and John Magnier bought the club, as part of the war with Ferguson they demanded proper governance of the club.  As a result of that, they published their agents’ fees, which were extraordinary.  Van Nistelrooy is getting £2 million for renegotiating this years’ contract.  It is a total waste of money.  Unfortunately, since then, clubs have become less and less transparent with their agents fees.  Again, Mawhinney set an example in the football league—where the monies are obviously rather less—and those clubs published their fees.  At least the FA has tried to obey regulations, but every time an agent is brought to book, he says that the FA cannot move against him.  It has taken four years for Paul Stretford, Wayne Rooney’s agent, to be brought to face an FA disciplinary hearing.  That is a relatively small matter of one agent taking four years to come to an FA court.  However hard they try, they are dealing with an unregulated body. 

Patrick Collins: When civilians look at football, they must look at the economics and wonder how it is permitted in the wider world.  Charles is absolutely right about agents and the obscene amounts that they take from the sport and some of the players also take huge amounts of money.  Greg Dyke mentioned advising a friend of his to sell shares in Arsenal to David Dein.  Look at the money taken, quite legitimately, from football by handlers and directors.  I have made a list.  Ken Bates, £17 million from Chelsea; Terence Brown, £30 million from West Ham;  Freddy Shepherd, £37.69 million from Newcastle; David Dein, £75 million from Arsenal;  Hall around £69 million from Newcastle; Martin Edwards, who apparently gets booed when he appears, £93 million plus from Manchester.  These are extraordinary sums, and we talk about greedy footballers. 

Patrick Barclay: We have forgotten that £65 million more was taken out of Manchester United than—

Mark Field MP: Another thing about agents is that the clubs want them to exist.  They would not exist if clubs did not pay them, but it is good and safe for them to blame the greed of the agents, when the problem is their lack of transparency.

Patrick Barclay: Briefly, clubs tell you that the reason they want agents is because they save money.  Every transfer deal involving a club’s use of an agent is a creation—I am amazed that the European competition commissioner has not been interested in this.  Using an agent creates a mini cartel.  The agent frightens off competition, and of course it is cheaper for the buying club. I cannot mention a club—perhaps I can—which got one of England’s greatest footballers of the last 10 years for less than the market price because a mini-cartel was created.  That is fine for the club that we are talking about, which cannot be named, but it is not so good for the club that did not get the full market value for a player it had raised  That is what is institutionally corrupt about football clubs as opposed to players. 

Charles Sale:  There is no point having official agents who play around.  If a club really wants a player, it will go to any lengths to get him and if that means dealing with unofficial agents, so what?

Patrick Barclay: But get in the real world.  If club A has a commodity to sell, a player, and club B wants to buy it, the chief executive of club A should speak to the chief executive of club B, arrive at a price and let the deal go through.  Where agents come into it is a mystery.  It can cost £2 million to make a phone call. 

Chair: When you think that the PFA gives the same service in negotiating ability, players would perhaps not do so well if they were ready to negotiate themselves. 

Ian Lucas MP: A couple of times you mentioned the football league and the governance of it.  In particular, we heard earlier about wage restrictions limited to turnover.  Would you support similar governance arrangements for the Premier League? 

Patrick Barclay: I would not simply because it is unworkable and it would set in stone the size of a club.  It would make it easier than it is now for Manchester United to continue to dominate even clubs of the size of Aston Villa.  Its wage gap would be bigger than that of Aston Villa as things stand.  For practical reasons—the fact that the financial community is not as well-ordered as it should be—particularly in football, the opportunity for rule bending would turn the whole thing into a farce, in a way that does not happen in America.  The only way to do it is by supply economics and limiting the amount of money circulating.  That would be a wage gap.  It would be a natural wage gap and make every club profitable.  To run a football club you need only 11 employees who all swear that they would do the job for nothing.  Only by limiting the supply of money—

Ian Lucas MP: Can I clarify what you are saying?  You talked about debt earlier.  For example, Chelsea last year—was it £70 or £90 million? 

Patrick Collins: It owes Abramovich £578 million. 

Ian Lucas MP: I’ll just pause for a moment! 

Patrick Collins: Don’t ask the interest rate.  Abramovich’s arrival changed everything.  Until then, after the impact of digital TV, smaller clubs were getting their act in order.  Suddenly, Abramovich arrives.

Ian Lucas MP:  If Abramovich decided to go back to Russia tomorrow, Chelsea would have some difficulties.  Do you think that such a process is one that the Premier League has sufficient power to impose on owners? 

Patrick Collins: I do not think that the Premiership has any interest in posing those sorts of powers.   Theoretically, the FA could do it with Lord Triesman and there is every reason to be optimistic that it will have a shot at it.  However, the Premier League has grown so rapacious and huge over the years.  When you look at sums, such as £578 million, being nothing to a single football club, clubs are beyond the control of institutions such as the FA.

Patrick Barclay: It is a good question.  We have now got to the stage where half the Premier League is in foreign ownership, which is not necessarily bad, but I would also say that half the Premier League is in nakedly profit-centred ownership and people do not bother to lie about it.  That is a serious situation.  If someone’s interest is in buying a club, making it look better and selling it on, why would they bother to do anything that is in the long-term interests of the game that we know and love? 

Charles Sale: The Independent Football Commission was supposed to be set up as a task force to be a regulatory body for football.  It was destroyed by the FA which treated it with disdain.  I went to its last meeting, and there were hardly a handful of people there. 

Lord Faulkner:  It was a piece you wrote! 

Charles Sale: There is no appetite for football.  Patrick mentioned the “fit and proper persons test”.  How can does Shinawatra pass that, how does Abramovich pass it?  As we said at the start, there will be problems there. 

Christine Russell MP:  Can I go back to the subject of debt and takeovers that would not happen without putting the club in enormous debt?  Can any of you foresee any way in which those kinds of takeovers, which are only made possible because of the debt incurred, could be banned? 

Charles Sale: There should be a proper body to do it.  It is a great point.  We need a proper body to investigate takeovers. 

Christine Russell MP:  And who should that body be?

Charles Sale: Well, a football regulatory body is being set up by the FA.  That has proper teeth, and perhaps it should be given those powers.  We come back to the fact that these are Premier League clubs, and the Premier League has been so dominant over the FA for so long, that we are only softly, softly getting back to a position where the FA could even suggest something like that. 

Patrick Collins: That is surely a part that politicians could play.  If you want that to happen it would happen. 

Lord Faulkner: Can I pick up on something that Charles said about fit and proper persons?  His throwaway comment was how is it that literally nobody has fallen foul a fit and proper person’s test?  Is that because that the criteria for judging people as fit and proper persons are wrong, or because football authorities are ineffective in attempting to enforce the law? 

Charles Sale: Well, they do not want enforce the law, it is a vanity thing.  No one has fallen foul of it or, to my knowledge, been investigated properly.  Journalists ask, “Has so and so passed a fit and proper test” and the answer is always yes. 

Ian Lucas MP: I think that the test is extremely narrowly defined at the moment in legal terms only.  In terms of having made administration orders and so on, it gets you a name.   Effectively, it cannot be applied to anyone on a subjective basis. 

Patrick Collins: When Sven Goran-Eriksson was at Manchester City, he called Sir Dave Richards, Chairman of the Premier League to ask about Shinawatra’s background and whether he had passed a fit and proper person’s test.  According to Eriksson, Dave said that he was absolutely clean.  

Chair: If you stay to the end, I would be happy to take you to the Strangers’ Bar afterwards and anyone with you as a guest is welcome.  Never mind whether he is a fit and proper person, I sat through somewhere to get an eight to one victory over Middlesbrough yesterday.

I was at the away end full of Manchester City supporters who care deeply about the club—after the 8-1 result, I went to see Steve Gibson after the game and owners of the club were sitting in the room.  There could not have been a greater contrast between the fans shouting for Sven Goran-Eriksson to stay, and the owners, from what we read, going to sack him.  You could not get a greater illustration that there is something wrong with that aspect.  How ever fit and proper a person may be, they obviously do not fit in with the proper fans.  The money comes from the fans, either through subscriptions to Sky in September or through the turnstiles or the purchase of merchandise.  In the end, it is the fans that pay all our wages.  We take your criticisms Patrick, and we will ensue that when we get together, we will be very strong in the words that we use.  You will get proper credit.  Thank you very much for your proactive and clear message. 

Guests: Dr. Geoff Walters, Dr. Rogan Taylor

            Chair:  Thank you, Dr. Geoff Walters, and Dr. Rogan Taylor.  You, Geoff, are a new friend to us.  I have never met you, Rogan Taylor, but you have been an icon.  Richard has mentioned the same thing. 

Lord Faulkner:  We have met.

Chair:  I have been waiting a long time to meet you.  I thank you for what you have done.  Geoff, I am sure that we will receive your support, too.  You will probably find that we care about the same issues.  We shall start without a statement, unless you desperately want to make one.  You can make whatever points you want when you answer the questions.  You can make your statements as part of that.

Dr. Geoff Walters:  Do you mind if I do?  I will try to keep it brief.  I first want to thank everyone here for giving me the opportunity to discuss these issues.  In contrast to what has been said previously, which has been quite depressing, I wish to begin by saying that, since the 1980s, some fantastic developments have taken place within the football industry.  Obviously, at the time we had problems with stadiums and hooliganism.  Since then, we have seen the formation of the Premier League and there has been a growth in the attendances in the Premier League and the Football League.  Revenue growth has been fantastic in some of the stadiums and has come to be the best in the world.  That demonstrates the underlying strength in English football in the pyramid system that is based on the roots between the clubs, communities and supporters.  It is crucial to keep nurturing those roots.  That is important.  Many more clubs are doing fantastic work in the communities.  The FA, the Premier League and the Football League are also addressing community issues.  The Football Foundation is funded by the FA, by the Premier League and the Government.  It is nurturing these strong roots.

            However, the key issue is the problem of profitability in the football industry.  The consistent lack of profitability is potentially threatening the very existence of some clubs and destroying many links between them and the communities.  For that reason, corporate governance is important.  The financial performance in the Premier League has been relatively healthy compared with the Football League and other leagues in Europe and the operating profits have been fantastic.  No club in the Football League has gone into administration since 1992.  The broadcasting deal from 2007 to 2010 has been its most lucrative ever and, as Greg said, it shows no signs of plateau-ing out.  Those signs are positive, but clubs in the Premier League make an operating profit, but continually make a pre-tax loss, which is a cause for concern.  We have also touched on debts.

            Pre-tax losses are particularly significant in the Football League.  Between 1996 and 2006, the 72 clubs in the Football League made a pre-tax loss of £981 million.  The operating losses over the same period were £781 million, which is even more of a worry.  Again, debt is another key issue in the Football League.  It does not relate to revenues; as we have seen, there has been fantastic revenue growth. 

I want to touch on briefly how the problems can be addressed.  One issue is a stronger regulatory framework.  Financial stability of football clubs is not the sole responsibility of football clubs.  Football authorities have a role to play.  We saw in the 1990s how reluctant they were to implement changes or regulations on football clubs.  However, since 2003, it has been different and the football authorities have become more proactive.  The FA, the Premier League and the Football League have all implemented various governance measures to improve the financial stability of member clubs, and that must be applauded.  Notwithstanding that, there are issues with some of the measures.  Most of them are by no means a panacea.  Another key issue is what further measures can football authorities introduce on top of those already there to, for example, improve club governance.

            As for club governance itself, football authorities have done various things to improve it but, ultimately, the clubs themselves have a responsibility to make sure that they operate in a financially sustainable manner.  When listening to Greg, it was a bit of a shame when he said that in the model that they are trying to put in place at Brentford, they are budgeting for a £500,000 loss next season.  I would advocate clubs to do that, not necessarily a supporter model, but a model when they try to engage with stakeholders, supporters and the community.  By doing that, various benefits can be had.  It is putting in place a long-term model rather than trying to focus on the short term and trying to develop long-term stakeholder relationships because hopefully it will make matters financially sustainable.  As Greg said, with the benefactor model, people come in, spend a bit of money on the club before they bail out and another benefactor has to come in.  That is not necessarily sustainable over the long term.

Chair:  Thank you, Geoff.

There was tremendous interest in the inquiry from Liverpool.  We understand that you, Rogan, have been trying to raise money from people to put some democracy into the ownership of Liverpool Football Club to avoid the problems that they have at the club now.  Can you give us a lead in and explain what is going on and outline the prospects?

Dr. Rogan Taylor:  It has come as a shock to a lot of football fans to know what the shift in the background of globalisation and club ownership means.  We are not talking about Brentford here.  We are talking about the top half a dozen or dozen clubs in the country and their reputation and long-term success.  We are just beginning to realise how vulnerable what we thought of as tremendously stable famous institutions are to leverage buyouts that translate them, in the example of Manchester United, from a profit-making football club and the only club in the Premier League without any debt, into a club that is carrying £700 million of debt that requires £70 or £80 million a year to service.  It paid £42 million last year because it is just rolling it over.  How can that be a respectable way to proceed with one of the greatest Football League institutions in the country, one of the great cathedrals?  There are many churches in the religion of football: village churches, town churches and those great cathedrals.

If I had been asked 14 months ago when Dubai and the Americans were arguing about who might own Liverpool Football Club, I would have said that I felt the same way as I would feel if my daughter was marrying a stranger.  I would be worried about how he would treat her.  I would not be worried about where he was from or who he was, but how he would treat her.  That is the key issue.  How will those great institutions be treated by those who borrow enough money to buy them? 

If you guys are happy with this situation in which such social, cultural, historical libraries are as important to people as members of their own family, do you expect them not to react?  It is a bit like being in a bar if someone is messing with your sister.  If you think that we shall just sit and do nothing, you are living in cloud cuckoo land.  People feel for those institutions.  That is what gives them their value.  That is why the sponsors are commercial interests.

Chair:  Do you think that you can interfere effectively?

Dr. Rogan Taylor:  Manchester United had to take a significant rearguard action to prevent the sale of the club to the Glazer family.  We are beginning to see a significant reaction to the way in which the American owners are dealing with Liverpool Football Club.  In my case, it was an academic question.  Why do we not ask if they want to buy it.  Let us think of some numbers—£0.5 billion.  Would 100,000 of us give £5,000 a pot?  Is that do-able?  If a club had 20 million fans throughout the world, is that do-able?  Let us consider group membership such as a lottery syndicate where 100 guys stick in £50 each and elect one member who would become the voting member.  Is there any interest in that?  The website crashed at 1,000 hits per second after seven minutes.   That was just me on my own.  I held a press conference, informed people of the website and invited their thoughts.  The next thing was a database with 35,000 to 40,000 people who want to be involved.  At the same time, other things were happening too.

There are important things that you guys can do, such as to assess how the country might respond to changes in the football climate, as I read on your website.  That includes the Government, too.  There has been a seismic change in the football climate over the past 10 years.  The LBO guys in the 1970s who were buying out, ripping up, selling off the bits, making a few bob and walking away became “buy it” in the 1980s because it had equity, it would grow, and there was a lot of money to be made by managing other people’s money.  Now, football clubs have become a source for those leverage buyouts, which are almost total.  Look at the personal amounts of money committed. I am assured on reasonably secure grounds that to buy a football club such as Liverpool costs £7 million each.  That is money personally committed by the guys who now want £0.5 billion, and in fact have been offered it by Dubai and still walk away. 

How do we change that situation?  That is what I hope you guys will help us to do. 

Mark Field MP: You paint a slightly idealistic picture—don’t get me wrong, I represent the Cities of London and Westminster, but I am not here with my City hat on.  Is not one of the issues that we now have big global brands, be them Liverpool, Manchester United or any of the large clubs?  The game has moved so far away from its roots.

Dr. Rogan Taylor: Exactly. That is one of the major dangers. 

Mark Field MP: But is it not also a reflection of what is going on in society as a whole?  You point the finger, rightly, at us the parliamentarians, and that remains to some extent the crucible of some public opinion, although the media and the like means that what goes on in Parliament is far less important.  How can we stand up and say that without putting our own house in order?  Look at what is happening— we have individual debt of more than £1 trillion in this country.  Debt is being run up by the Government.  I am not making a narrow party political point because it would be the same if it was a Conservative Government.  We have the PFI looking into the never-never land to ensure that our hospitals are being built effectively.  It is jam today for people who are around, but it will be our grandchildren who have to pay all of those costs.  Is that not the spirit of the age in many ways? 

I love your idealism and the fact that you have got off your backside and tried to do something about it by encouraging people to get a relatively small amount of money together to buy out the club.  However, is there not now a real sense—you probably heard Greg Dyke earlier—that there is a whole range of clubs, a further 88 league clubs on top of the big four, that are all trying to follow that particular route?  Perhaps the right route is the FC United type route, something that is based more on small communities.

Dr. Rogan Taylor: Anybody who knows anything about the history of football, in this country and in Europe, can see what has happened.  Our clubs emerged as clubs.  They were just bunches of people who wanted to play football, and they elected committees—someone to look after the treasury, someone else to ensure that there were shirts for people to wear, and off they went to play football.  That is what football clubs are.  It was odd in this country that they all became private limited companies. 

I remember sitting on a Radio 5 phone-in and a guy had obviously been holidaying in France, Spain and Northern Italy.  He phoned in and said, “I couldn’t believe it.  I had some friends over in France.  His wife went to play tennis at the football club during the week, his kids were there from the school and he went to play squash with his mates.  On Sunday, they all went to watch the football.  Why did it not work out like that in this country?”  I laughed and said, “If you think that the people who play tennis in this country would have anything to do with people who have watched football over the last 120 years, you are living in cloud cuckoo land.” 

What we are is what we have become.  The new danger is that it is not like individuals increasing debt, this is like somebody making a bid for the Church of England because they want to sell more fizzy water in Asia.  That is what this is about.  Quite rightly, any decent football authority in the world would not allow one owner to have more than two clubs in a league because of the possible conflicts of interest.  Nevertheless, we are happy to welcome global businesses that have agenda.  As people have pointed out this afternoon, what is the point in buying Manchester United?  It was at the top of its game, how much more money was it going to make than it was already making?  The only point is to make money in another way and that is the same conflict of interest that has made football organisations the world over disbar membership of more than one football club. 

There must be a regulatory solution such as a positively loaded community ownership, which the Government could do.  I imagine how complex an area it is to legislate in—people buying private limited companies or indeed public companies—but it could be loaded more in favour of the only people who actually love the club and do not want to make any money by owning it, the football fans.  You may think that that is idealistic, but six of the last 15 Champions League winners have been clubs owned and run by their fans.  There is nothing unusual about great football clubs being owned and run by fans.  It is that little strip of water at the bottom of England that somehow separates us culturally from the idea that football clubs are social and cultural institutions.  As such, they should be protected and you are the guys in the position to give us a chance to do that. 

I will pass the paper on, of course, so that you could have a few ideas about how that could be done; how we might control levels of leveraging in buy-outs, for example, and how we might look at conflicts of interest in competitiveness.  The fact is that people must put their hearts into it and see it for what it is.  It is one of the great cultural institutions that we have in Britain.  Not only did we write the rules that the world now plays in the ale house down the road from here in 1863, but for the people of this country, football carries tremendous cachet in important parts of their life and we should protect them. 

Chair:  We will look at the report and we will put those proposals to the football authorities when they come before us and ask whether they are practical.  We are also going to take evidence from legal experts about such measures in the context of the European Union. 

Dr. Rogan Taylor: I do not want to steal Geoff’s time, but can you put it to the Government rather than the football authorities?  I do not think that the football authority have the power to do what is required and protect football clubs. 

Chair: We would like them to have the will even if they have to come to us to get the power. 

Lord Taylor:  Each witness so far has said that football regulation lacks teeth.  You have both said that in effect.  Rogan, we first met when we were original members of the Independent Football Commission.  Over the years since we resigned—

Dr. Rogan Taylor: Now we know why, don’t we?

Lord Taylor:  Let us just say that the football industry has treated the IFC with contempt. 

Dr. Rogan Taylor: Yes. 

Lord Taylor: If you were to start again, what powers would you give the IFC?  What would you do to empower it so that it does have teeth? 

Dr. Rogan Taylor: Well, the first point is not to get football to pay for it, get the Government to pay.  We have Ofwat and various other organisations.  Could an Offoot be paid for by football itself?  The answer is no.  We want to give it teeth so that it can recommend fines, loss of points and enforce transparency.  Can you imagine what it is like for a local club trying to work out where the money came from?  Nobody has any idea, and yet this is something that is incredibly close to them.  It needs real teeth, paid for from outside football rather than from inside.  Tax football a bit more if you want to derive the money from it, but make sure that people are aware of it.  We knew where it was going, didn’t we John?  That is why we said thanks, but no thanks.  It was going to be a nodding dog that wrote things.  That was not its fault, it was spot on the button many times, but the fact is that football ignored it.  They were lackeys, they were paid by football.  We should think about regulatory issues.

Dr. Geoff Walters: Obviously, in an ideal world it would be fantastic to have the IFC, or what is now the Independent Football Ombudsman, paid for solely by the Government.  It could have the teeth and regulatory powers to intervene and tell football what it needs to do to put its house in order.  The problem is that FIFA frowns upon the Government’s intervention in football.  Back in 2005, FIFA kicked Greece out for a short time because it said that the Government were too involved in Greek football.  Two or three months ago, FIFA was threatening to throw Spain out from the forthcoming European Championships as it said that the Government were getting involved when they should not be. 

Dr. Rogan Taylor:  That was because they were interfering with the FAs in those countries, not because they were regulating it.  FIFA does not like the Government saying that they would sack one FA board and appoint another.  It will not have that.  FIFA does not like what is going on in this country, certainly not in terms of ownership—Blatter and Platini, and so on.  Platini was absolutely hilarious; he said “Why bother to have any football in England?”

Dr. Geoff Walters: That is why I have a lot of hope for the regulation and compliance unit that has come about as a result of the Burns Report.  If it goes through, becomes semi-autonomous from the FA and has the teeth and the power to implement changes—that is what will happen, touch wood—it might play a role that ideally the IFC would have been able to play.  We will have to wait and see on that. 

Lord Taylor: That is the issue I would like to pick up on, particularly with Rogan who, like me, has been around a long time in this sort of area.  He will recall that, in the football taskforce, we recommended independent regulation in the final report. 

Dr. Rogan Taylor:  Absolutely.

Lord Taylor: We made it clear that, if football was not able to deliver that, the Government should consider bringing it in themselves.  Can I ask Rogan in particular—although I am interested to have Geoff’s view as well— whether he feels that the steps that the FA has taken to establish the Football Regulatory Unit are sufficiently independent, authoritative and powerful?  Is it able to do a job that needed to be done and which, if it were not done, would have to be done by the Government? 

Dr. Rogan Taylor:  To be honest I do not know yet.  Time will tell.  I am impressed, as are others, with the new independent Chairman.  That is a great move forward. 

There is a simple way in which the Government could act.  The other day I read that the French had blocked a recent bid by Pepsi to buy the French yoghurt company Danone, on the grounds that it was a nationally strategic asset.  If a yoghurt factory can be a nationally strategic asset for the French, why cannot football be so for the English?  There must be routes there, outside of the football governing bodies, for governance to show some muscle and say that the matter is important. 

Dr. Geoff Walters: Let us go back to the MMC case in 1999.  It blocked the takeover of Manchester United by BSkyB.  Perhaps there was the opportunity in future takeovers for the Government to have stepped in and said, “No, hang on, we don’t think that Glazer should take over Manchester United” and load the club up.

Dr. Rogan Taylor:  That seems to be the obvious way to go.

Dr. Geoff Walters: Unfortunately it has now been done, and we cannot backtrack on it. 

Dr. Rogan Taylor: No, but the RMG is there.  When these deals are done, why should the Government not look at them and ask whether they are good overall for something that we value tremendously and with which millions of our citizens have very close relationships.  Should we not oversee it?  This guy lives 5,000 miles away.  He has no relationship to the thing that he has bought.  At least in the old days, as someone said, “If shiesters are going to own our football club, let’s have our shiesters, not shiesters from somewhere else”.  At least they could be pressured locally by local people, local authorities and local newspapers because they live locally and have local connections.  We could squeeze them, but we cannot squeeze the guys in Florida—they don’t care. 

Mark Field MP: The point surely is that people who have as much passion—perhaps it is a tragedy passion—for clubs such as Liverpool and Manchester United live considerably further than 5,000 miles away.  What about the 1.3 billion people of China who watch our game avariciously in south east Asia?  I understand your point, but surely the argument would be that the world has moved on and football clubs are no longer institutions of a local community. 

Dr. Rogan Taylor: But is that want you want?

Mark Field MP: It is not what I want.  I am trying to point out that the MK Dons franchising, which is being moved from Wimbledon to Milton Keynes is, I suspect, the first of many that will happen within the next 20 years.  It is desperately to be regretted, but that is probably what will happen.  New centres of population will grow up and, rather than have to wait and go through seven or eight years of the Ryman League and the Blue Square North, it will be, “Okay, let’s have a club there as we know that there will a captive audience of the 100,000 people who live in the vicinity.” 

Dr. Geoff Walters: I’m not sure, but I think that the FA has put in place regulations to ensure that something like Milton Keynes cannot happen again. 

Mark Field MP: Yeah, right!  We will see how that goes.  My point is that it is difficult to look at a football club, particularly a big global branded football club that has been in bed with Pepsi, or whoever, and not think that it is basically a flow of cash. 

Dr. Rogan Taylor: That is just holding it up, saying how terrible it is and that there is nothing we can do.  There is something that we can do.  Those global operations do not have to be accepted.  There are not many people in China watching the Premier League because they have to pay to watch it now.  It was a very bad deal that the Premier League ended up doing.  Therefore, it only has audiences of minute numbers—300,000 for some games which, in a nation of 1.3 billion, is not very strong. 

Chair: Let us bring Christine in. 

Christine Russell MP:  As academics, you have obviously looked at what goes on in other parts of the world.  Is there a model in another European country where the tests of takeovers are far more robust and stringent than they appear to be in this country?  Some of the ownerships of the Italian clubs are pretty dodgy.  Is there a model? 

Dr. Rogan Taylor:  Many of those clubs have been in families who have been connected with the industry for a long time and are associated with the place.  I think that there is a robust model—that of fan ownership, membership ownership.  There is no shortage of being able to attract money into football clubs, particularly not the big ones.  Multibillionaires are queuing up to be elected as President of Barcelona for four years.  I will put €100 million in the transfer pot.  I’ll get you Messi, I’ll get you Ronaldinho.  However, you can put €100 million in the pot, but you do not own any more of Barcelona than one single socio owns.  That is the drawback; they cannot take it. 

Christine Russell MP:  Is it a better model to have politicians meddling in the governance and ownership of clubs than to have foreign businessmen? 

Dr. Rogan Taylor:  Right now, if you asked a lot of football fans, they would say, “Yes, let’s have these deals looked at in detail. Is there some way in which we can look at leverage levels?”  It is common in accountancy and finance; such deals are looked at by either Government-appointed bodies or utterly independent bodies. 

Chair: So, not only are the Government estate agents, but also football managers? 

Dr. Rogan Taylor:  Football clubs are so badly managed that even Governments are good next to that. 

Dr. Geoff Walters: The Barcelona model is at least a democratic model.  If you are a member of Barcelona, you have a vote in who becomes president.  We do not have that in this country.  Manchester United fans did not have a vote to say whether they wanted Malcolm Glazer to take over.  Historically, it goes back to the fact that, in the ‘90s, so many clubs in this country flogged it on the Stock Exchange.  When Glazer took over, we saw fans coming out with the “Not for Sale” banners.  That was ironic because they were for sale as they were on the stock market.  In other countries, that was not the case.  It was rumoured that Roman Abramovich looked at other clubs around Europe before settling on Chelsea because he could not buy into Barcelona. 

Christine Russell MP: I was told that the rules in Germany are quite tough.  How are the rules in Germany? 

Dr. Rogan Taylor:  No single investor can own more than 50 per cent. of the football club.  German clubs are not for sale. 

Ian Lucas MP: Is that a Government rule? 

Dr. Rogan Taylor: Yes, it is a law to protect football clubs.

Mark Field MP: Football clubs rather than—[Interruption.]

Dr. Rogan Taylor:  I have a note here.  In other industries such as financial services and banking, regulators apply rules that define debt level in terms of the percentage of different classes of assets.  We could work well in football by defining debt levels as x per cent. of tangible assets, y per cent. of intangible assets and ensure that there is adequate equity finance for the needs of the business.  If anybody like that had looked at the American’s proposal for Liverpool, it would have been laughed out of court.  That, of course, was sold on the back of, “We’re not going to do a Glazer.  We are not going to borrow the money and drop it on the equity of the club once we have whitewashed the board”.  However, we are witnessing that process take place.  There must be something somewhere that could look at that and say, “Hang on”.  It is not as if there was no queue of suitors for this daughter of mine—a number of them were pretty interested in her.  I ought to be able to have a word, an interview, and ask what kind of plans they have for my daughter’s future and from where they will get the resources.  That is what we need from you now.  We need a way of protecting these clubs because they are what they are, and we must recognise that. 

Ian Lucas MP: Do you think that Chelsea supporters would prefer to have success with Abramovich or their own club? 

Dr. Rogan Taylor: There will be a lot of Chelsea supporters who will be a little queasy about what has happened.  Johnny-come-lately supporters who ride in on the back of success may take a different attitude.  They are just fame followers, success slaves.  They go wherever the glitters glitter.  There are a lot of people who would worry about the origins of the money, what the process is all about and what may happen in the future should something happen to the owner or if he were to change his mind about the ownership of the club.  There are many layers of fandom.   

Ian Lucas MP: May I put a scenario to you, Rogan?  I hear what you say about legislating and the Government putting rules in place, but if we as politicians proposed rules to stop Roman Abramovich from owning Chelsea, we might get a reaction in south-west London. 

Dr. Rogan Taylor: Well, it would not stop it because it is already there.  Instead, why not start to favour measures such as every club having to have a 20 per cent. investment by the fans?  Let it be so that it can never be squeezed.  In fact, anything above 10 per cent. can never be forced to be sold.  If you ignore that, you do not get Government grants, leases or the kind of favours that governments, local and national, must show to football.  You could load it to the advantage of people like me, and there are many of us—there are 110 fan trusts I think. 

Dr. Geoff Walters: More than 150.

Dr. Rogan Taylor: Over 150 fan trusts.  Three professional clubs are owned and run by their fans—Northampton Town and a couple of others.  It is a movement in this country.  It mirrors the way that ownership has always been treated on mainland Europe.  We are odd because it is highly deregulated.  We are a cutting-edge capitalist market and valuable assets can be bought and sold by people who we have no knowledge about.  We know nothing about what their motivations may be, and yet they occupy significant social and cultural positions.  Clubs are great institutions, and the country should not stand by and say that it is global capitalism and that is how it works, the fans like success so clubs should be bought and sold by any passing multibillionaire as if they were a woman standing on a street corner waiting for the next punter.  Is that what our football clubs are supposed to be?  Is that okay?  It sticks in the craw of every football fan’s throat.

Chair: We should begin to draw it to a close. Could you use your answers to sum up before we call it a day?  I repeat the invitation to anyone here to come to the Strangers’ Bar afterwards. 

The introduction of transparency, which Brian Mawhinney brought in on agents, had a pretty immediate effect—not immediate, but by the second season—because the figures had to be produced.  The agents’ fees began to reduce quite dramatically.  Is there a way of educating fans, getting through to them in the way that you have begun, that would make them start to demand this?  That is one of the more effective ways in which politicians can begin to take notice.  Whatever we say within Parliament, the first answer is always that it has enough problems without getting into football.  That would probably be my answer if I were Secretary of State or the Prime Minister.  Let us consider the education of the fans? 

Before I finish, let me say what I said last week.  My first political thoughts were nothing to do with party political issues.  I went to Ayresome Park in the old days to buy tickets.  I came home and asked my mum why it said “Middlesbrough Athletic and Football Co. Ltd” on the doors.  I was shocked when she told me who its owner was.  I thought that I owned it.  That to me is the difference between football and the rest of business, and I have worked in the private sector.  Even Mark, who we can detect has those sort of feelings, is different with football. 

Dr. Rogan Taylor: And he’s a Tory.

Chair: Would you sum up for the end of the session?  Let us take Geoff first, then you Rogan.  Say what you think about educating the fans and giving them the knowledge that they can begin to play a part. 

Dr. Geoff Walters: A lot of fans are already well aware of the key issues.  The Football League and Supporters Direct, in particular, have been fantastic in raising awareness.  It is firmly on the agenda of many fans. 

Chair: Is it many fans or just a few?

Dr. Geoff Walters: I would say many fans, but at the same time there are also many others that might be aware of issues, but want to go along on a Saturday afternoon to watch football and they want that success.  It is difficult.  Although a significant body of fans might be interested in such issues, there are also some that do not really follow them.  They are aware of the issues, but they just want to watch their team, and as long as it continues to exist, fantastic—they focus on the success. 

When the benefactor model comes in over the short term, a lot of fans think, “Fantastic”, because they have that investment.  With regard to the Liverpool takeover over a year ago, at the time there was some discontent, but not massive discontent from the supporters.  Now, a year later, issues have become very apparent and the supporters are more aware.  It is the balance between those supporters that really care about those issues, who owns the club and what it stands for, and those who are focussed mainly on success on the pitch.  If a club goes into liquidation, that might start getting fans thinking a little more.  Halifax Town is on the verge of it, Gretna is a benefactor model at the moment.  Unfortunately, the owner has had ill health and so it looks as if Gretna might go into liquidation, and for its supporters, that club may no longer exist.  Perhaps it will take clubs starting to go into liquidation for a lot of fans, who sit on the fence and are not interested, to start sitting up, see what is going on and ask how the club is run and how much debt there is.  It may take clubs going into liquidation for that to happen, but that is not we want.  It is not an ideal situation. 

Dr. Rogan Taylor: One of the charms of football is the difficulty in defining it.  It is a tremendously difficult thing to strap down.  Is it a business?  Nobody is spreading the ashes of their dead grandad down the aisles of Tesco, as far as I know, but every day of the week in this country, somebody is doing that at a football ground.  We must recognise that while clubs take part in the business world, they are part of many other worlds, too.  It behoves us, and the Government particularly, to protect that. 

The point about education and transparency is absolutely essential in order to have that process of education.  Football fans are not stupid.  They are just us, ordinary English people; they are not stupid.  There was a dream that there were sugar daddies but it has become apparent in recent times that Mr. Abramovich is a rather odd exception.  Nobody gives you any money. They borrow money and stick it on your tab.  If you say “Buy us Torres”, they say, “Okay”, and then the bill for Torres goes on your tab.  There must be a transparency element.  Football clubs are incredibly difficult to understand.  They are like secret societies.  I once described Liverpool as being like a cross between the KGB and a nunnery—fierce and pure.  That is how it has been for a long time, and it needs opening up so that fans can be educated on the realities.  The reality is that if you want a football club to live for ever, you have to run it without getting into significant debt.  Once they grasp that truth, we can all relax and have another 100 years of football culture, which is what we want. 

Chair: Thank you both very much.  I also thank all of you for coming, and I thank those in the room who contributed to transparency and education, the broadcasters.  Thank you for your efforts.