Darryl Eales and Steve Thompson gave evidence.

We will now hear from Darryl Eales, chairman of Solihull Moors football club, and Steve Thompson MBE, managing director of Dagenham & Redbridge football club. We have until 2.30 pm for this panel. Would the witnesses please introduce themselves for the record?

Steve Thompson:

Good afternoon. My name is Steve Thompson and I am the managing director of Dagenham & Redbridge football club. I have been at Dagenham & Redbridge—well, it was Dagenham football club when I was first there, 41 years ago. I have seen Dagenham go from the Isthmian League to League One, and back down again to the Conference. I was involved when we had the merger with Redbridge Forest in 1992. I hope I will be able to answer some of your questions.

Darryl Eales:

Good afternoon. I am Darryl Eales, chairman and majority owner of Solihull Moors football club. Prior to that, I owned Oxford United from 2014 to 2018 in the English Football League.

Before I ask Members to put any questions, I declare an interest: I am the patron of my local football club, Southall football club.

Thanks for joining us. By way of an opening question, do you have any thoughts or views on the regulator and its establishment? If a steer is helpful, what would or could the regulator do to ensure that clubs such as yours feel supported in a transition to regulation in this fashion?Q61

Steve Thompson:

In my opinion, I am worried about clubs at our level being over-regulated. Most of our clubs work on one or two full-time staff. Some of them are run by volunteers. We already do an awful lot of financial regulation reporting. There is reporting to the National League and a licensing certificate that we get from the Football Association. Many of us took advantage of the Sport England winter sports loans. The quarter reporting on that—I appreciate that it is public money—is so onerous, and I am really worried that the extra reporting that will be required by National League clubs will be more than a lot of them can manage without taking on extra staff.

There is also the cost of the regulator. We are not 100% certain how much a National League club will have to pay for their contribution. Those are some of the concerns with the set-up of the regulator. The support we need is a better understanding of how that will work.

Darryl Eales:

I agree with Steve. I think this is about proportionality and reflecting the resources available to clubs at our level. That is simply because we do not have the financial resources or the distributions from central funding that, obviously, English Football League clubs have to support the growth of an administrative function to support the information requirements of the regulator.

Q On the point about proportionality, do you think the Bill does enough to emphasise that the regulator’s approach will be proportionate and will attempt to understand the specific circumstances of clubs playing in the National League? I think you both mentioned that point, while Steve Thompson made the point about funding. How important is it to you that National League clubs can pay a lower levy than those in the upper divisions, and does the Bill go far enough to reassure you of that?

Steve Thompson:

It is imperative that the amount in fees charged to National League clubs is really proportionate, for example, between us and English Football League Two clubs. They receive 14 times the amount that a National League club receives in central distributions and solidarity money. Leaving aside the central distribution—because it could be argued that that is what the league itself raises—with the Premier League solidarity money, last season an EFL club received £519,000 each whereas a National League club received £69,000. Next year, the Premier League solidarity money for an EFL Two club will go up to £550,000; for a National League club, it will stay at £69,000—that is an eight times difference.

When Dame Tracey set up the fan-led review, I was lucky enough to be on one of the calls to present on behalf of National League clubs. One of the things that clubs at our level want to get out of this is a better financial package. The gap is going from seven and a half to eight times; we should be reducing that, not increasing it.

The other thing that the Bill does not address completely is three up and three down, and artificial pitches. As far as I am concerned, the majority of my supporters and people around my club believe that the regulator is going to deliver that. I understand why it is not in the Bill, because there are bigger things, but there is definitely a perception from supporters that three up and three down will be on the table, and artificial pitches will be allowed into the Football League. It is not there.

In the last three years, we have had three clubs promoted that had artificial pitches, and another one with Bromley this summer. Those pitches have mainly been funded by Football Foundation grants. They have been put in to support their local communities, and they have got to be ripped up. What a complete waste of money. It deprives their communities of those pitches.

With three up and three down, Darryl will speak for himself, but unfortunately last week Solihull Moors lost out in the play-off final. We have one club going up automatically and then another club—it is the only league in the pyramid where that happens. Last season—or the season before the one just finished—Wrexham won, and Notts County went up via the play-offs. Had they not won the play-offs—they nearly did not get to the final—they would have not gone up, and they had over 100 points. That would never happen anywhere else in the pyramid, but it happens in the National League.

The problem we have is that the last time a second promotion place was given was 2001. Some of the Committee might be old enough to remember that that was related to the ITV Digital collapse, when the FA stepped in and paid an extortionate amount of money to keep League One and Two clubs running. In return, we were given a secondary promotion place. My opinion is that we will only get a third promotion place if someone buys it. The only people in football these days that can buy it are the Premier League. That should be a condition of any new solidarity funding between the Premier League and the EFL. Sorry—I am talking too much.

Darryl Eales:

To pick up on what Steve said, having read the Bill, for me there is not enough focus on the regulator contributing to ensure that there is a level playing field across the pyramid—I do not even think the pyramid stops at the National League—and there is not enough focus on the crucial value of grassroots football to the whole pyramid and to communities. One of my friends runs a step nine team, and it costs him £50,000 a year to run that club. We get £60,000 a year of solidarity money in the National League.

For me, the regulator has to understand the philosophy of English football and the value of grassroots football. That seems to be missing. Obviously there is regulation, but it needs to understand that most owners at our level are stakeholders for fans and just want to move the club forward sustainably to the next owner. I would question the ownership motives of a lot of owners as you go up the pyramid, because we strive every day to look after the best interests of our clubs and generally we are not paid.

Q I am aware of the time, because I know others want to come in, and I think that you have touched on what I am going to ask. Could you share with the Committee the sort of connection that your club has to the local community and fans and how important it is that your club listens to fans? Indeed, how does it carry out that listening?

Steve Thompson:

We have a fan representative on our board; the season ticket members elect a representative on our board, so I hope that we try to be in tune. We have at least two fans’ forums, where anybody is invited along and they can ask questions of me and of the manager. But at a small club, you are walking around the ground and the bars before and after the game and talking to people, and if there is a problem, they soon come up and tell you.

Darryl Eales:

Similarly at my end, we have a monthly meeting with the SMSA—Solihull Moors Supporters Association—and we work very closely with them. From a personal perspective—this is just me—I go for a beer before every game, both home and away, with the fans in the bar, exactly as Steve says, because people will pick up on their concerns. From a community perspective, we run about 65 youth and junior teams; every weekend, they are running around in Solihull Moors shirts.

I want to touch more on the point about the proportionality of the Bill. I am looking at the part 5 duties. Do you think that this strikes a balance between regulating clubs like yours and making sure there is a framework, and allowing you to run your clubs in the way you need to? Darryl, Q if we take Solihull Moors as an example, you are a club that has come out of a merger, effectively, with other clubs and you have had to be agile in how you have done that. If you look at the journey you guys have been on, how do you think that you would have been impacted if this framework had been in place at the time?

Darryl Eales:

The interesting thing for me is that the Bill does nail a few points that are very, very important from my perspective. The stadium and the club should be umbilically linked. There should be, for every club, something that prevents owners from separating out the ownership. In our division this year, Gateshead did not make the play-offs, because they did not have tenure of their ground. To me, that seems to be fundamental. Where I echo Steve is that I think there are an awful lot of information requirements in the Bill. When I talk about proportionality, the reality of life at our level is that it will be us doing those things, and without being too rude, I have better things to do with my life than fill in forms.

I was interested in what you said about artificial pitches, Mr Thompson, because in my constituency I have Folkestone Invicta, in the Isthmian League. From what I can see, the Bromley FC model is the sort of model, from a financial sustainability point of view, that a lot of clubs in tiers five, six and seven should be following, because you have not only community use, but paid use of the site every day of the week, rather than a match every fortnight. Do you think that this should be looked at as part of a sustainability issue rather than a football competition issue? Actually, the sustainability of clubs going up into the Football League might necessitate that they have those sorts of facilities, which they monetise throughout the year, and their removal is not just a flat cost but something that compromises their commercial performance across the boardQ .

Steve Thompson:

Sutton United are a prime example from a couple of years ago. They went up and had to dig up their pitch. It was very much part of their community and their academy structure. Bromley are in the slightly fortunate position in that they have some land behind the stadium, where they are going to transfer the artificial pitch to, but it will still cost them several hundred thousand pounds. The annoying thing is that Sutton played Arsenal in the FA cup a couple of years back, and Arsenal, who are in the Premier League, happily and readily played on Sutton’s artificial pitch when they were at the National League side—no complaints. Every year, EFL clubs in the FA cup will play on artificial pitches, so that does not seem logical.

There are some arguments about how good the football is on such pitches and things like that, but the majority of young players at the top level now are coming through the EPPP—elite player performance plan—academies, and they all play on artificial pitches. It does not make sense. We have had this happen to four clubs in the past few years, and it is stopping other clubs that have the ambition to be promoted considering putting down an artificial pitch. That might help their community and their academies, but they think, “We can’t do that, because we can’t afford to put it in and then dig it up again.” Supporters are almost turning around and asking, “What’s your ambition?” The ambition of most clubs is to win their league, whatever league they are in, and to go forward.

That brings up another thing about academies at our level, and making certain that clubs at our level get the proper compensation for players that they have developed. At the moment, there is not that—National League clubs are not allowed to register a 16-year-old. Such things are not addressed in the Bill. Whether they should be, I do not know.

Q Obviously, the principal job of the regulator will be financial sustainability. Briefly, do you think one of the issues that we have is this? We have inherited a structure for how football is organised that puts clubs into certain divisions. You could say that there are financial issues at almost every step, as we go up and down, and that clubs in the bottom half of League One and in League Two probably have more in common with the National League clubs than they have with those in the Championship. Do you think there should be common rules that reflect clubs that are effectively community clubs? They will probably never be Premier League clubs, but they need a different kind of model of sustainability.

Steve Thompson:

Since 2001, when the second promotion place was introduced, some clubs have gone up and down, but before the end of this season just gone, 40 different clubs will have been promoted, and 29 of them are still in the Football League and one is in the Premier League—Luton Town. For teams that are struggling in the Football League, when they get relegated, the National League is a fantastic league for them to reorganise and to come back. There has been a number of them: Stockport and Wrexham, to name two. The football pyramid needs the National League. We have developed lots of players on loan from the Premier League, the Championship and other Football League clubs, and we are there to help support clubs.

Darryl Eales:

To pick up on what Steve said, for me, the distribution of economics is completely inequitable between the two leagues above us and our league—so much so that other than the promotion from the Championship to the Premier League, the next most valuable promotion is from the National League to League Two, which I think drives Steve’s point, but we are entitled to only two promotion places. Fans, when I talk to them—from every club—say, “We don’t understand this.”

Q It is inherent in what you said that the financial sustainability rules in the National League are more effective than those in Leagues One and Two.

Steve Thompson:

We were the first league to introduce reporting to His Majesty’s Revenue and Customs. About 20 or 25 years ago, a lot of football clubs were basically using HMRC as a bank, and HMRC was reluctant to take football clubs to court. The National League—the Football League has followed us—introduced the rule that HMRC reports to the league if a club is behind with its HMRC or VAT payments, and the league will immediately put them on a registration embargo, which concentrates people’s minds. Since then, we have not had a problem, because when a manager comes and says, “I want to sign a new player,” and you say, “You can’t, because you haven’t paid HMRC,” they look a bit silly. We have quarterly reporting to our league and an annual licence with the FA. That is why I worry that this will just be another layer of bureaucracy.

To pick up on what you said, Darryl, regarding the importance of grassroots football as the lifeblood of the game, is there anything that you feel is missing from the Bill to protect or enhance grassroots football?Q

Darryl Eales:

To me, it just does not start off in the right place from a contextual perspective. It tends to be completely focused on money, rather than the English game in its broadest context. You have only to go around your own local community to see the number of kids—girls and boys—now playing on local parks that have been funded by parents or local businesses. There does not seem to be anything in the Bill that reflects the community aspect.

Q Would that be captured under heritage?

Darryl Eales:

Possibly, yes. It is hard to interpret some elements of the Bill.

It is, yes.

Darryl Eales:

It is quite complicated. If you asked me about sanctions—I am probably going off-piste here—I would say that financial sanctions and points deductions do not work. The only sanction that will stop clubs flouting rules is relegation—three or four leagues. Even this season—and I know this is nothing to do with this Committee—the points deductions in the Premier League meant absolutely nothing. The clubs flouted the rules, but there was not a big enough points deduction to affect their league status. I am a Birmingham City fan by background, and we had a 12-point deduction a few years ago. I thought it was a joke, because we did not get any penalty from it other than the 12-point deduction.

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

Steve Thompson:

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

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

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

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

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

Steve Thompson:

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

Darryl Eales:

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

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

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

Darryl Eales:

That is quite a toughie.

Q You just said that clubs fail because of lack of money. That is not the case, is it?

We do not have much time left. Please be brief in your answer.

Darryl Eales:

For me, a critical part of the fit and proper person is: what is the motive of a person who is taking over a club? As you go up the pyramid, it is not clear to me what the motives are, beyond financial. My concern, looking at other sports, is that it is missing the fundamental trick that clubs in the UK are stewarded for the benefit of the fans. They are not franchises.

Steve Thompson:

I agree with that. Even at our level, there is not a big queue of people trying to buy a football team. It is about being involved with your community, and that is what is important.

Order. I am afraid that brings us to the end of the time for this Committee to ask questions to this panel. I thank the witnesses on behalf of the Committee. Thank you very much.

Steve Thompson:

Thank you for the opportunity.