Transcriptions have been written from an audio recording and may contain some errors.
ORAL SESSION 1 (PART 2)
Adrian Bailey MP
13. Can we spend a few minutes looking at the real disaster scenario? If, under the challenge from Europe, the football authorities lose their joint negotiating rights with the media, how many clubs would go under?
(Mihir Bose) That question is difficult to answer. It would partly depend on the way the European Union phrased such a measure. If it allowed a complete free for all, there is no question that within the Premier League a few clubs would sign incredibly lucrative deals. The rest would struggle to achieve any kind of TV income, which would have a dramatic impact. It depends on what Mario Monti finally says and does. It will depend very much on the fine print of the directive. Even at this stage, although the Premier League makes a lot about its collective selling agreement, it is only partial. It has many avenues for the big clubs. I understand that Manchester United and other big clubs would like to undertake their own overseas televising. I often travel to remote places and see fans wearing David Beckham’s No. 7 shirt. One could say that is testimony to the greatness of this country, that the days of imperial glory are not dead and that David Beckham is there to represent Lord Curzon – though I am not sure Lord Curzon would appreciate that analogy. Nevertheless, within that collectivist agreement, we must not be seduced into thinking that the Premier League is defending the great collectivist tradition. It is not. It is only defending a very partial collectivist tradition.
(David Conn) The irony is that the Premiership broke away from collectivist redistribution, yet now it is arguing that a collective deal would be the death of all civilisation. I am with the MPs, the Chair included, who say it is difficult to see how football could be organised without collective arrangements but they should be more truly collective. That was done successfully in the Office of Fair Trading case, where they managed to get 5 per cent out of the Premier League for the grass roots through the Football Foundation, which has been one of the major progressive developments. In the detail these things always end up being political but as a move to get money to the grass roots, it was great. We need more of that.
Christine Russell MP
14. I want to ask about the negative impact that foreign players can have on club finances. One reason for Manchester United’s success is that in the early 1990s, it invested in home-grown talent such as Giggs, Scholes and Beckham. The club did not spend a fortune buying in foreign players as many other clubs did.
(Mihir Bose) The word “foreign” is a curious one that nobody in this country seems to understand. In footballing terms, the UK comprises four countries – England, Scotland, Wales and Northern Ireland. The club that I have historically supported, Tottenham Hotspur, which is probably the greatest league side this country has ever seen, had at its heart a player named MacKay. He was foreign in footballing terms. He could not play for England. The word “foreign” now includes Europe. As a consequence, Scottish football has been decimated. If one looks back 50, 60 or 70 years, there was always an important Scottish player – perhaps two or three. Scotland is not producing players anymore. As a result, it has only two clubs there – neither of which wants to play in Scotland anymore. Football has a dominance in this country that is quite remarkable. It can be seen from the National Audit Office report that £120 million was given to the FA without adequate safeguards or a proper guarantee. Only the FA could have got that money. The Chair of the Culture, Media and Sport Committee, Mr. Kaufman, used to spit blood about it. I do not know whether he still does. I get the impression that most people in this country are scared about football. They are scared by the power of the football authorities. They are scared about doing anything. They have allowed the situation to develop whereby football and the personalities within it have become so dominant that everything else is completely excluded.
(David Conn) I completely agree that a football club is more than bought-in players. Clubs would say that a great deal extra is given by players who come through the ranks. People support a club for life, so the idea of players being freelancers who go from club to club is alien to supporters’ loyalty. At the same time that fewer and fewer home-grown players are coming through, there has been a massive investment in academies. Another area that the APFG could investigate is the way that Premier League and other clubs trawl for local talent among players as young as 6 and get in as many kids as possible, so that they will not miss another Ryan Giggs and get £15 million for the player or years of service. Your group could examine that cynicism and meat factory approach to children’s football. That is occurring at the same time that clubs are suffering terrible financial consequences. There was supposed to be a long-term investment in young talent, which I do not think has been done the right way and is too driven by money, but there is now a short-term approach to the first team. When Manchester United signed Ruud Van Nistelrooy, it booted out two kids that I covered when they played for the England schoolboys. One of them was released by Southport last year. Their parents had been taking them to Old Trafford to train since they were nine years old. Those boys had given their childhood and youth to Manchester United, then got booted out. It is not even like it was in 1992, when a youngster might be given a trial. United has brought in John O’Shea but one has to be an outstanding player even to be given a chance now. So many kids are sold the dream that they are going to make it and their parents are dazzled by the money prospects. In fact, the opportunities are becoming fewer and fewer. The French academy system was the basis for ours but clubs are only signing the ones that come through. I used Manchester United as an example. Six or seven of its first crop have stayed in the first team. There have not been the same opportunities for the kids who came after them. In the past eight or nine years, only Wes Brown and John O’Shea have come through. I personally feel that is disfiguring the game but perhaps I am getting old.
Lord Carter
15. I was at Southampton on a Boxing Day when, for the first time ever a Premier League team, Chelsea, produced a side that did not contain a single British player. Football has to decide whether it is in the entertainment business or has a community responsibility. If it is in the entertainment business, it needs the best players no matter where they come from. If football believes in community responsibility, how can it relate that to the status of clubs as public companies with shareholders and encourage young British players?
(Mihir Bose) Football is part of the entertainment industry to a certain extent but it has wider responsibilities. That balancing must be done by the governing body. If it is so constituted that it fails, people outside have to step in – such as the Government. After all, tax laws encourage rich people from overseas to live in this country. Provided their income is offshore, they are not taxed. Chelsea use that option. Many of Chelsea’s players are over 30 and have already built up a packet of cash that they can keep abroad. They were taxed only on their UK income. You should look at the impact of such legislation.
(David Conn) When I started investigating how structurally wrong football was in this new commercial age, people argued that it was just a business. One had to remind people about the history of the sport. Because the problems caused by people trying to make as much money as they can are so self evident, one does not have to make that argument anymore. The football authorities will not tell you that there is no community element. They will tell you that they are doing great things for communities through the Football Foundation and so on. They will not say, “We are just a business.” But they were saying that only three or four years ago, “We are just a business. Why should we be subject to any regulation? What’s all this rubbish about community?” The authorities have been shoved in progressive directions. Credit should be given for the good work that is going on through the Football Foundation and by clubs in their communities. Others need to be pushed in that direction. I totally agree with Mihir that the FA should rediscover its historic role but it cannot do that because it has too many conflicts of interest. Sitting on the FA’s main board are Premier League club chairmen who dominate. They do not dominate the board numerically but they hold all the purse strings and dominate completely politically. They have been cementing their power in the vacuum created by Adam Crozier’s absence. The Government should do something to help football to be the sport that it could be again.
(Mihir Bose) I always shop at Marks & Spencer but if that company were to change its chief executive, I would not care. If it changed its suppliers of underwear, I would not care. But if Tottenham Hotspur changed its manager, that would concern me. Margaret Thatcher said that Marks proved that Marx was wrong, whether or not one accepts that is a different matter. The point is that the great British company provides a good analogy. It is a business. The changes it makes are for the company and its shareholders to decide. But when football clubs make changes that is a different matter.
16. When you say that the Government should do something, what should they do?
(David Conn) It is more difficult than when the only challenge was to devise a framework of laws to ensure that clubs had safe stadiums. It is like the fit and proper person test. What is the point of allowing somebody who has four convictions from three or four years ago to take over a football club that is 100 years old? The argument is made that nobody knew about Robert Maxwell being a fraudster when he took over Oxford. But in the Football League, one sees takeover after takeover. One sees the same club taken over every two or three years. Someone else is allowed to have a go, only to make the same mess. The job of framing laws to protect clubs is a technical task but I am sure that laws can be drafted to make football healthy.
Lord Faulkner of Worcester
17. Would either of you support statutory regulation? Also, what briefly is your view of the work of the Independent Football Commission so far?
(Mihir Bose) The jury is still out on the IFC and what it has done. The history of this country shows that statutory legislation always comes in late but is necessary and that self-regulation does not work. Self-regulation has to be stimulated and prodded. Statutory legislation does not have to be onerous but there can be simple laws about transparency and disclosure. Such laws are accepted in other areas of life. I cannot see why football is so special that it should be immune.
(David Conn) I do not understand why football is so resistant to legislation. The redistribution of money and the way clubs are run need to be part of it. It is important to regulate not transfers but the way clubs are run, who can take them over and how they relate to their supporters are equally important. In two or three years, football would thank the Government and be boasting how well it is run as a sport. The Taylor report and the Football Spectators Act 1989 did clubs a favour by enforcing reforms that the clubs would never have introduced themselves.
Adrian Bailey MP
18. Basically you are criticising the current corporate structure of most football clubs. Do you agree that it would be far more appropriate for the majority of clubs to be based on some sort of community benefit – a mutual structure rather than be floated on the stock market?
(David Conn) I think would be a much more appropriate model. A club is something of which one is a member, not something that one person takes over and gets all the dosh if it is there. One can understand why clubs became limited companies historically. The move towards mutual ownership goes hand-in-hand with community involvement and a much more responsive approach to supporters. It will not solve everything but as a model for involving supporters and being true to the meaning of a “club”, I am a wholehearted supporter of the community model. That is one of the major progressive forces at this moment.
(Mihir Bose) I agree entirely. As to the idea that a club could be floated on the stock market, which itself is a casino in essence and where things can fluctuate, one has no guarantee when a match begins whether a club will win or lose. Financial arrangements were made at a particular time to suit a particular purpose. The fact that was allowed without any proper thought reflects on the football authorities. I urge you to show courage as legislators and deal with football – which, like Topsy, has just grown and grown. Nobody has looked at the entire picture.
(David Conn) Mihir mentioned that when Tottenham Hotspur got its flotation, the FA operated certain restrictions that led to Tottenham Hotspur forming a holding company to bypass historical rules designed to keep clubs as clubs and not allow them to become Plcs. The FA has never explained in 20 years why it allowed Tottenham Hotspur to adopt that course. One can ask the FA again and again and it will never say. The FA still has on its books a rule that is designed to protect the grounds. Last season, there was a case at York where the chairman formed a holding company and transferred the club’s ground to that company so that he could kick the club off the ground, sell it and keep the money. York fans made huge protests to the FA. If such rules exist, why does the FA allow the formation of holding companies to bypass them? The FA will give no answer. The FA is not brave enough to enforce even the rules that it already has, which convinces me that it cannot govern the game anymore. The FA can run it but within a tight framework.
(Mihir Bose) The same happened at Wimbledon. Sam Hammam sold the ground or the ground was sold to a company of his. When the club was bought, it was without the ground. If the ground does not belong to the club, where does that put it?
Chair
19. I cannot thank both of you enough for your wonderful presentations. If you wish to submit any further thoughts during the course of our inquiry, please do so in writing or by telephone. We shall be very happy to receive any further thoughts that you might like to offer. We next welcome Dr Rory Miller and Professor Tom Cannon and thank them for attending and invite them to make opening statements.
(Tom Cannon) I support the aims of the APFG because it is addressing these matters at a very important time. It should not be seen as a coincidence that it is 10 years since the creation of the Premier League. I would argue strongly that the state of the game currently – locally, nationally and internationally – is probably the worst that it has been this century. The reasons are to do with the issues that your Group is addressing. Despite all the Sky money, most of it has been squandered. The £2 billion that has gone in so far from Sky and other sources has largely been squandered. The finances of most Premiership clubs and virtually all Nationwide clubs are worse than they have ever been. There could be meltdown. It would take only one major club to hit a financial crisis and go into receivership and the house of cards would collapse. The problems go deep. The comments already made about foreign and young players are important. Only two or three Premiership clubs, despite their commitment to being people clubs and people business, have anything like a personnel director or manager. Their treatment of young people is absolutely shameful. That is good cause for parliamentary investigation. One of football’s problems is the apparent determination of individuals who have made no entrepreneurial investment to get an entrepreneurial return. Clubs that were rooted in their communities for most of their history but many individuals have not made an investment to justify their control. The situation is so opaque and lacking in transparency, and with so much money around, there is a risk of serious corruption in the game. Corruption would affect the whole nation’s confidence in the game and the ability of certain leagues to maintain competition.
(Rory Miller) I normally tell my MBA students that when someone starts talking about football, one should always find out where they are coming from. I will say at the beginning that I was brought up in Highbury but now watch mainly Crewe and Chester. I agree with much of what Tom said about the quality of management in the game. He picked up on human resources management. I would cite financial management. The quality of financial reporting to governing bodies is generally very poor. As Tom said, there is a serious danger of meltdown if one of the big clubs goes under. The reason is the growth of the Champions League from the time when just the national champion club went into the cup to where initially three clubs from England went in – now four. A large number of clubs are breaking themselves financially to get one of the coveted European spots. The reward for entering the Champions League is now about £15 million to £20 million a year, which is about half the sum that lower Premiership clubs turnover. If one adds the leverage from sponsorship and advertising deals, the return on making it into the Champions League is huge. This year, Leeds has suffered as a result of attempting to get into the league. I do not think that Leeds will be the last. There is a problem not only of imbalance between the Premiership and Football Leagues but also of imbalance and financial danger within the Premiership.
Christine Russell MP
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