Examination of Witnesses

Football Governance Bill – in a Public Bill Committee am 9:30 am ar 14 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Kieran Maguire and Dr Christina Philippou gave evidence.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

We are now sitting in public and the proceedings are being broadcast. Before we start hearing from the witnesses, do any Members wish to make a declaration of interest in connection with this Bill?

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

I want to declare that I was chair of the fan-led review that led to this Bill.

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

I sit on the management committee of the Spirit of Shankly football union for Liverpool football club.

Photo of Damian Collins Damian Collins Chair, Draft Online Safety Bill (Joint Committee), Chair, Draft Online Safety Bill (Joint Committee)

I am a trustee of The Sports Trust in Folkestone, which has previously received funding from the Football Foundation.

Photo of Robin Millar Robin Millar Ceidwadwyr, Aberconwy

I am chair of the all-party parliamentary football club group, and we too receive sponsorship.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

I am chair of the all-party parliamentary group on football. I do not think it necessary to declare, but at least it is there on the record in case anyone wants to know that.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

We will now hear oral evidence from Kieran Maguire, senior teacher in accountancy at the University of Liverpool, and Dr Christina Philippou, a principal lecturer in accounting, economics and finance at the University of Portsmouth. Before calling the first Member to ask a question, I should like to remind all Members that questions should be limited to matters within the scope of the Bill. We will stick quite strictly to the timings in the programme motion, which the Committee has agreed. For this panel, we therefore have until approximately 10.10 am. I will give warning before this session finishes. Would the witnesses like to introduce themselves and say a few words before fielding questions from the Committee?

Kieran Maguire:

Hello, ladies and gentlemen. I am Kieran Maguire from the University of Liverpool. I have specialised in football finance there for the last 11 years. Along with Christina, we have been asked to submit two research papers to the Department for Culture, Media and Sport; first, in respect of the state of finances of the industry during covid, and subsequently coming out of covid. I think we last produced a paper around 12 months ago.

Dr Philippou:

I am Christina Philippou from the University of Portsmouth. I do a lot of work around sport finance and sport governance. Prior to academia, I was a forensic accountant.

Photo of Stephanie Peacock Stephanie Peacock Shadow Minister (Digital, Culture, Media and Sport)

Good morning to you both, and thanks for joining us. By way of an opening question, the fan-led review of football governance concluded that the finances of many football clubs are fragile, which obviously puts them and their communities at risk. What do you believe are the sources of this financial difficultyQ ?

Kieran Maguire:

If we take a look at the history of both the Premier League and the English Football League, they have been successful in generating revenue. Since the Premier League was formed in 1992-93, its revenues have increased by 2,857%, whereas the Championship is at just over 1,000%. Given that prices have doubled, from a consumer price index perspective, that is absolutely fantastic. However, that has gone alongside an inability to control costs. The most significant costs in the industry are wages—while Premier League revenues are up by 2,800%, wages have increased by over 4,000%. Similarly, as far as the EFL Championship goes, if we take just one division, wages are up 1,400% compared with revenue of 1,000%. Profit is revenue less costs, and there has been a struggle to control costs.

As a consequence, if we look at the figures for 2022-23, which is a post-covid year—no ramifications—the 20 clubs in the Premier League lost a collective £836 million. In the Championship, on average the clubs were losing £20 million: League One, £4.1 million, League Two, £1.4 million; and in the National League, £970,000. All those clubs have been part of a spectacularly successful industry, of which we should be proud. It has globalised the game of football as coming from the UK. There has been a collective inability to control costs.

Dr Philippou:

That summarises it pretty well. There is a general issue in relation to that, apart from that of cost control. We have also seen lots of administration, which has impacted on local communities over the years. Roughly two in five of the clubs in the top four leagues have gone into administration in the last 30 years, which is not a great stat. If we look at the post-covid years, as Kieran said—even putting into perspective what is happening at the moment—average losses in the Premier League were about £42 million, compared with its own cost controls, which are roughly £35-million losses per year. If we look at the Championship, it is roughly £20-million losses, where its own cost control saved around £15 million per year. Even by their own standards, they are not doing particularly well.

Photo of Stephanie Peacock Stephanie Peacock Shadow Minister (Digital, Culture, Media and Sport)

Q The licensing system in the Bill focuses on the financial sustainability and governance of each individual club. Do you think that that will help to mitigate some of the more systemic weaknesses in the football pyramid that you have outlined, or do you feel that some of the issues will remain?

Kieran Maguire:

As far as the potential changes are concerned, the ability to have a regulator which can do real-time monitoring in respect of finances, so that it can identify potential problems at an earlier stage, would be beneficial. That would diminish the chances of a club getting into a more long-term financial crisis, where the only solution would be administration. The ability to have a regulator with a set of financial rules and observations, where you can nudge people in the right direction—I do not think that the regulator should be telling clubs how they should behave, but should be able to help the club itself to identify problems—would be beneficial.

Dr Philippou:

Absolutely. Another strength in the Bill is that you can request information. One of the issues we have seen, which some of the leagues also struggle with, is the ability of the clubs to provide information in ways that are accessible and usable. That is something in the Bill which should help.

Photo of Stephanie Peacock Stephanie Peacock Shadow Minister (Digital, Culture, Media and Sport)

Q How would you say football compares with other industries in terms of its funding model? Are they more reliant on owner funding, and if so what impact does that have on clubs?

Kieran Maguire:

Owner funding is critical. We have ended up with the scenario where many clubs are what one could describe as trophy assets, where the ambition of the owner is not one of profitability but of soft power or kudos—the ability to say, “I own a football club”. Some of those owners are fantastic, as they want to repay the local community, which they have been brought through, and they have turned out to be successful. We tend to see commercial banks being reluctant to lend to the football industry because of the level of losses that we have previously described. From a lending position, a bank would always do a risk assessment in respect of any moneys that would be forwarded. My background, before going into academia, was as an insolvency specialist, and I did one or two investigations into football clubs where the bank’s response was: “We don’t want to be seen as the bad people in making this decision.”

Photo of Stephanie Peacock Stephanie Peacock Shadow Minister (Digital, Culture, Media and Sport)

Q Do you have any information, or any views, that you can share with the Committee on what percentage of revenue clubs should spend on wages in order to be sustainable versus the percentage that they actually spend? To elaborate on that, are there any trends on overspending, and does that vary across leagues and clubs?

Kieran Maguire:

Since the inception of the Premier League, the original wage-to-revenue percentage was around 45%, but that has now increased to the mid-60s. If we take the EFL Championship, for 10 years out of the 11, wages have exceeded revenue. Before they invest in the transfer market, before they switch on the floodlights, and before they put petrol in the mower, clubs are already losing money. Unless there is owner funding, there is no logic in keeping those businesses running, but football is a unique industry. If I was running a nightclub, a garage or a launderette, I would simply have closed the business down.

Dr Christina Philippou:

More than half of the clubs in the top five leagues are technically insolvent, so if they were any other business, they would not be in existence. The fact that they are still standing is partly linked to how monopolistic the structure is. Obviously, fans find it quite hard to move from one club to another, and clubs tend to be a bit more resilient in keeping the fans than other businesses. However, that also has the knock-on effect of it being very community-based, and there are further knock-on impacts when those clubs go into administration.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Stephanie, if you have any other questions, I will bring you in a bit later. There are a lot of Members who have indicated that they want to ask questions.

Photo of Damian Collins Damian Collins Chair, Draft Online Safety Bill (Joint Committee), Chair, Draft Online Safety Bill (Joint Committee)

Q I have a question on the redistribution of money, which is one of the Football League’s principal concerns about the current model. From what you have said, is there not a danger that, despite redistributing more money into the Championship, those clubs will not necessarily get any better? They will probably just end up paying the players they have more than they do at the moment. Redistribution without some sort of control will just fuel inflation.

Kieran Maguire:

When we had the introduction of solidarity payments from the Premier League to the EFL, which started to become index-linked to the growth in the Premier League broadcasting, exactly what you suggested tended to be the case. Any redistribution plan has to go hand in hand with a more nuanced and affirmative cost-control measure. Otherwise, you are simply transferring money from the wages of a footballer in the Premier League to the wages of a player in the Championship. I do not see how that benefits the game on a holistic basis.

Dr Christina Philippou:

As we have seen, the cost-control issues are still there. The point is to try to fix that concern, rather than just to give more money to be spent poorly, which is not going to fix the problem. Fixing corporate governance and the cost controls will have a much better effect.

Photo of Damian Collins Damian Collins Chair, Draft Online Safety Bill (Joint Committee), Chair, Draft Online Safety Bill (Joint Committee)

Q Do you agree that one of the reasons why we need the regulator is that we need a body with statutory powers to investigate clubs and use real transparency of powers to see what is going on? A lot of clubs that have failed have been reckless, and often they have been trading outside the rules of the leagues they are playing in anyway, but they have just been able to hide that fact until it is too late.

Kieran Maguire:

Historically, the authorities, given the mandate that they currently have from the clubs themselves, have tended to be looking in the rear-view mirror. Therefore, they are playing catch-up. One of the advantages of having an independent regulator would be the ability to do real-time investigations and also potentially either to offer advice or, in extreme circumstances, to look at some form of regime change that allows the appointment of trustees and advisers to assist clubs in precarious financial positions.

Dr Christina Philippou:

That is the whole point of something like an advocacy-first approach: you can work with the clubs before you get to the problem. Before you get to administration or those serious financial problems that we are seeing, if there is real-time monitoring, if you see the problems ahead of time, and if we have some proper budgeting and corporate governance in football clubs, that should mitigate the problem to a large degree.

Photo of Damian Collins Damian Collins Chair, Draft Online Safety Bill (Joint Committee), Chair, Draft Online Safety Bill (Joint Committee)

Q Briefly, I want to ask about club owners and the business plans of club owners. On your podcast, Kieran, you have recently been talking about Everton in particular. Would you look at a situation like that and say that if this is going to work and make a difference, it is scenarios like that that should be avoided? The checks on new owners’ backgrounds and their proof of finance should be robust enough to stop clubs getting into that kind of mess.

Kieran Maguire:

In an ideal world, yes. I do not think that the regulator can convert us into a zero-crisis environment. It is a case of turning down the dial. In the case of Everton, there was no doubt that money was spent in a similar way to what we saw with Roman Abramovich and Chelsea, and with Sheikh Mansour and Manchester City. There was an investment in talent and options in terms of infrastructure as well. The problem is that if you have any business that is living beyond its means, and is reliant on third-party or ownership funding, I think you have to very carefully monitor the ability of that funding to be maintained on a medium to long-term basis. We have seen, sadly in the case of Everton, that that does not appear to have been the case.

Dr Philippou:

That is the importance of looking at the sources of funding, which is part of what is in the Bill, in relation to the owners and directors test.

Kieran Maguire:

I think they do both. The intention of parachute payments when they were introduced, which was around 2006, was to address the possibility of clubs going into administration, because of the significant step-downs between the Premier League and the Championship. At the same time, it does mean that you have created a new benchmark in levels of spending that clubs in receipt of parachute payments can achieve, and therefore those clubs in the Championship that want to be competitive are incentivised to overspend, so I think we have a problem. Parachute payments are a clumsy solution to the bigger problem, which is the significant difference between the revenues of not just the Premier League and the Championship, but also between the Championship and League One.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

Q Using your own words then, do you think it is right that that clumsy solution should be written into the Bill as a no-go area, which cannot be looked at by the regulator as part of the financial backstop?

Kieran Maguire:

If we are going to look for a 92-club solution or, if we are including the National League, an 116-club solution, then the regulator should be able to deal with parachute payments, otherwise you are not dealing with the whole issue. If you have a redistribution model that does not involve parachutes, the Premier League’s position would be advantageous, and I do not think that would be in the best interests.

Dr Philippou:

You need to have access over the whole of revenue, and that forms part of the revenues of Championship clubs. It would not make sense, in that sense.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

Q We are told that the regulator will still have some powers over parachute payments. Do you understand what they are and how they might work?

Kieran Maguire:

One would imagine that you would look at parachute payments from two angles. First, the quantum—the actual sums involved. Secondly, the length of parachute payments. They have been reduced from four years to three years, in recent years. I think there is a third issue, in respect of those clubs that are in receipt of parachute payments and are then promoted back to the Premier League. The parachutes that are not received are kept by the Premier League and distributed between the 20 clubs. That does seem very harsh, given that clubs are losing more money in the Championship to begin with.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Clive, I will come back to you, but a lot of people want to get in.

Dr Philippou:

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

Kieran Maguire:

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

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

Dr Philippou:

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

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

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

Kieran Maguire:

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

Dr Philippou:

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

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

Q Touching on the global success, football fans play a huge part in that, and they are the unique selling point of the Premier League. The Bill talks about protecting heritage, and there are huge concerns at the moment about the pricing out of working-class people from football matches. How do ticket prices affect club revenue, compared with the broadcasting element? Is there a need for such price rises, as we have seen this year, for sustainability?

Kieran Maguire:

If we look at the Premier League, when it was formed in 1992-93, 43% of revenues came from matchday tickets. If we move to 2022-23, we are now down to £1 in every £7 being generated from those. That can be slightly higher for the bigger clubs, and we are not denying that. The success of the broadcasting deals has very much meant that the broadcasting revenues are now dominant, and they now constitute more than half of the total revenues. As far as prices are concerned, it is a sensitive subject. Clubs will say, “We’re still losing money, so therefore we need to target revenue streams. We’re not getting that from broadcast, because the broadcasting rights—”

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

Q Essentially, are they in danger of killing the golden goose that is laying the egg? If we look at what has happened in Italy, with the empty stadiums and the broadcasting rights there, the Premier League is on the crest of a wave. Surely the football fans are absolutely integral to the success of the Premier League.

Kieran Maguire:

They are. During covid, we saw football matches with no fans and it was a sterile, glorified training exercise—there was no emotion. Having full stadiums is critical.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Ian, we need to bring some more speakers in. Make this the last one.

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

Q Should the regulator have any ability to determine ticket prices to protect the unique heritage of football?

Kieran Maguire:

As a football fan, I would say yes. Looking at it purely from a business perspective, if you are selling 100% of your tickets at the current price, economics would say that they should be allowed to charge what they want.

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

Q Given your collective expertise, how long would it take you to write an assessment of football—let us call it a state of game report? Given your insight over time into the finances of football, what would be a meaningful timeframe of review for that assessment?

Dr Philippou:

That is a very good question. I mean, how long is a piece of string? It depends on what you are looking at. We know what the issues are, so it depends on how targeted what you are asking us to look at is. The issues are pretty well known, so it is about how deep a dive you require—you can tell I worked in forensic accounting, with my “It depends!” But it would take months. It is not something that can be done quickly. It would require proper review to get it right, because if you are basing something on the information in a report, one needs sufficient time and access to be able to provide that information.

Kieran Maguire:

The information we have put out in the reports to date has been on the basis of the financial reports published at Companies House. Therefore, we are reliant on clubs producing them on a timely basis and with a level of detail that we can make meaningful conclusions about. I used to do investigations into companies, and it is always nice to have more inside information or management information about budgets and so on, because that allows you to look forwards as well as in the rear view mirror. I think it would be a time-consuming exercise, but it is not an insurmountable one.

Photo of Matt Rodda Matt Rodda Shadow Minister (AI and Intellectual Property)

You mentioned very serious issues with the behaviour of some owners. I wonder if you could say how big a challenge this is for the game and how far you feel the Bill will go in tackling these potential problematic behavioursQ .

Kieran Maguire:

The issues with owners are that if an owner’s personal circumstances or intentions change and they have been subsidising or funding clubs, however you want to describe it, it means that under the current environment, things are very precarious. I do not think that the football authorities themselves have sufficient powers to go in and effectively do an Ofsted to the extent that they would perhaps like to at times. That is where the regulator could be broadly more of a benefit than a cost, because it would have regulatory powers and the ability to send in a forensic team to take a look and offer guidance to clubs that may not be willing to listen to it under other circumstances. There is also the stick as well as the carrot in terms of issues with licensing or ownership, which are very much a last resort. That would perhaps focus some minds where people have historically tended not to listen and take no advice.

Dr Philippou:

A lot of the issues we have seen with ownership have been in relation to sources of income. I am from the University of Portsmouth, and Portsmouth has unfortunately had two of its former owners jailed for various things relating to fraud and money coming from sources that it perhaps should not have come from. That is quite difficult if you do not have deep access to do proper due diligence. What appears to be in the Bill is access to that information and the ability to request that information, which should hopefully mitigate against some of these issues.

Photo of Matt Rodda Matt Rodda Shadow Minister (AI and Intellectual Property)

Q Do you feel then that the Bill goes far enough in tackling these issues?

Kieran Maguire:

As an investigator, you would always want more powers than less, so I think you have to be honest there. At the same time, in terms of protecting the game from over-regulation and being mindful that FIFA does not allow government interference in football, I think we have probably hit a reasonably good sweet spot with regard to the proposals to date.

Dr Philippou:

I agree with that.

Photo of Robin Millar Robin Millar Ceidwadwyr, Aberconwy

Q Dr Philippou, you describe a industry that is reliant on patronage. If I could remind you, Mr Maguire, you said that a collective inability to control costs characterises the industry. How do you reconcile the two? Is it the inability of owners to control costs? Is it the structure that has the problems? Is it actually an inability, or is it an ignorance of costs or an unwillingness to address them?

Dr Philippou:

I think it is a combination of various things. Ultimately, what you have is poor cost control and poor monitoring. Owners have to be mindful of that because, ultimately, at least half of them are putting money into football clubs every year to keep them running, so they are aware that there are cost problems there. You cannot be propping up a technically insolvent club and not know that you are propping it up, so there is that element there. You also have general cost controls —people are aware that they are losing money. It is not something where you can say there is a lack of awareness there; it is a lack of a willingness to do something about it. We saw UEFA bring in financial regulations back in 2010-11. The Premier League brought them in around about 2014. But we are still seeing these problems, even with the financial regulations in place, which tells you that there is an ongoing issue.

Kieran Maguire:

What we have in terms of the present model is one of self-regulation, and self-regulation is normally walking hand in hand with self-interest. As far as owners are concerned, and I can understand this from an owner’s perspective, if I bought a football club as a trophy asset and I have unlimited funds, then why should I not spend as much money? What there has been is a trade-off between those owners willing to put in unlimited amounts, those owners wanting to put in limited amounts, and those owners wanting to put in nothing because they see the football industry as an extension of the entertainment industry, with a view to making it profitable on a longer-term basis. That is where we are at present.

The rules have effectively failed to address the loss-making in the business. Loss-making is sustainable until it is not sustainable—until those owners, either individually or collectively, decide to change the rules. Without any form of assistance from the regulator, that would mean that the industry is naturally precarious, because you only have to have, as we said earlier, a change in circumstances, as we saw with Chelsea. We have seen a club such as Bolton Wanderers have a very beneficial owner. His personal circumstances changed due to illness, and then you have a crisis for the club.

Photo of Robin Millar Robin Millar Ceidwadwyr, Aberconwy

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

Kieran Maguire:

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

Dr Philippou:

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

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities)

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

Kieran Maguire:

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

Dr Philippou:

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

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

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

Kieran Maguire:

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

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

Dr Philippou:

I think a lot of the parts of the Bill that look to fix issues relating to the financial sustainability of clubs and corporate governance should in the long term negate the need for intervention, because stuff will be run in a much better way. The issue at present is that if there is no money forthcoming into the EFL, that creates a huge potential financial problem. That is why the backstop powers are there. It is one for the lawyers to debate, really.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

If there are no further questions from Members, I thank the witnesses for their evidence, and we will move on to the next panel. Thank you very much indeed.