Clause 15 - Operating licenses

Football Governance Bill – in a Public Bill Committee am 9:25 am ar 21 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Virendra Sharma Virendra Sharma Llafur, Ealing, Southall

With this it will be convenient to discuss the following:

Clauses 16 to 19 stand part.

New clause 8—Support to clubs—

“(1) The IFR shall provide reasonable and proportionate assistance to—

(a) regulated clubs seeking to obtain a provisional club licence;

(b) regulated clubs with a provisional operating licence seeking an full operating licence; and

(c) unregulated clubs which are reasonably likely to become regulated clubs in the next football season.

(2) The IFR shall provide reasonable and proportionate assistance to regulated clubs in their efforts to continue to comply with the conditions of a provisional or full operating licence.

(3) In fulfilling its duty under subsections (1) and (2), the IFR shall have regard to the factors listed in section 52(9).”

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)

It is a pleasure to serve under your chairmanship, Mr Sharma. Starting with clause 15, one of the regulator’s main responsibilities will be to operate a licensing system for football clubs through which the majority of its regulation will be delivered. The licensing regime will cover all football clubs that have a team playing in any competition specified by the Secretary of State in regulations. It is proposed that it will cover the top five leagues of the English football pyramid, but that is subject to the Secretary of State’s discretion and parliamentary approval. I will use “specified competitions” as shorthand to denote those competitions covered by the regime. That means that football clubs will require a licensed, lawfully operated team in any of the specified competitions. A licensing system to enact regulation is not a new idea, with sectors such as communications, finance and healthcare all operating such a system.

The clause sets out the requirement for clubs to have a provisional or full operating licence, and the regulator’s power to grant those licences, subject to clubs passing the relevant tests, which are established in the following clauses. The licence will enable the regulator to regulate clubs through licence conditions set out later in the Bill. This will enable proportionate regulation tailored to clubs rather than a one-size-fits-all approach. An operating licence will specify which club the licence relates to, the team that the club is operating and any conditions attached to the licence.

I will move on to clause 16. The introduction of a football regulator into a previously unregulated sector will be a substantial change to the industry, but a necessary one to safeguard the future of English football. In order to provide for a graduate transition to being a fully licensed club, a club will initially apply to the regulator for a provisional operating licence. We see that as the natural first step to attaining a full operating licence. That will give clubs time to adapt to the regulatory system and make the necessary changes without being unfairly penalised for not being able to raise standards overnight.

The application for a provisional licence requires basic information on the club’s owner or owners, officers and senior management as well as a strategic business plan detailing things such as the estimated costs of the club and how they are expected to be funded. The regulator should look to make that process as simple and straightforward as possible, assisting clubs with their applications where necessary. It will be aware of the possible constraints on smaller clubs lower down the football pyramid. We envisage that the majority of clubs will meet the test for a provisional operating licence through the submission of basic information and documentation, and showing a readiness and willingness to work with the regulator to meet the mandatory licence conditions and free-standing duties.

Clause 17 outlines the granting of a provisional operating licence that will allow the club to operate for a time-limited period. That may be up to three years initially, although it could be shorter or extended depending on the circumstances. The provisional period will allow the regulator time to assess the current standing of the club and determine what steps it will need to take to obtain a full operating licence as well as giving the club time to take the necessary steps. The provisional licence will ensure that all clubs under the remit of the regulator meet basic fundamental requirements, in the mandatory conditions, that will help to safeguard the club’s sustainability and heritage.

There are three aspects of the test to grant a provisional operating licence. First, the club must operate a relevant team in a specified competition, which effectively means that the club must be in scope of the regulator. Secondly, the club will comply with the mandatory licensing conditions attached to the licence by the regulator. Full details of the mandatory licence conditions are in schedule 5 to the Bill, but they encompass a financial plan condition, a corporate governance statement, a fan consultation condition and an annual declaration condition. Thirdly, the club will comply with the duties on clubs as set out in part 5 of the Bill. If the regulator is not satisfied that the club passes all elements of the test, the clause gives a club the opportunity to engage with the regulator to rectify the issues identified. That collaborative approach will aim to ensure that clubs are given every opportunity to meet the requirements and gain a provisional operating licence.

Clause 18 states that in order to pass the test for a full licence, the regulator must be satisfied that a club is meeting the threshold requirements as set out in schedule 4 and that the club is complying and will continue to comply with the mandatory licensing conditions and free-standing duties on clubs set out in part 5. The regulator must also not have determined that any person who is an owner or officer of a club is unsuitable for the position they hold.

Clause 18 also details the power of the regulator to extend the provisional operating licence for a club. That will be done only if the regulator believes that the club does not meet the bar for a full licence at present, but will if given more time. As set out later in the Bill, the regulator will be able to sanction a club if it has to extend its provisional licence. Once a club has a full licence, it will not have to be periodically reviewed. Instead, the regulator would continue to monitor and supervise the club, and there will be an annual touchpoint in the form of the annual declaration, where the club will notify the regulator of any changes within the club over the past year that are relevant to the regulator. That is intended to minimise burdens while still ensuring that the club continues to adhere to the necessary requirements, including requirements that ensure that fans’ best interests are at the heart of the club’s decision-making process.

Clause 19 details the revocation of a club’s provisional operating licence for failing to progress to a full licence, as well as when the licence ceases to have an effect. For a provisional operating licence to be revoked, the regulator must satisfy itself of three things: first, that the test for a full operating licence is not met; secondly, that the club in question has persistently and without reasonable excuse failed to take reasonable steps to meet the test; and finally, that there is no reasonable prospect of the club meeting the test within a reasonable period, even if given more time. The regulator should be engaging with the club throughout that period, and we expect that through constructive dialogue, a solution that avoids that drastic step can be found in all but the most serious cases. The regulator must notify the club of its decision and provide its reasoning. To reduce as much as possible the regulator’s impact on ongoing sporting competitions, a revocation must not be before the end of the current season.

A licence will cease to have effect only if the club ceases to operate a relevant team. The most likely cause of cessation of an operating licence is that a club has been relegated from a specified competition and is therefore no longer in the scope of the regulator.

I understand the intention behind new clause 8, which would require the regulator to provide clubs with “reasonable and proportionate assistance” as they engage and comply with the licensing system. However, I can reassure the hon. Member for Sheffield South East that the Bill already achieves that in principle. It is already implicit that any good regulator should provide support and assistance to the regulated population as necessary, to aid their understanding and support compliance. But for the avoidance of any doubt, we have also explicitly codified that participative approach into the Bill through the regulatory principles. The regulatory principle in clause 8(b) encourages the regulator to

“so far as reasonably practicable, co-operate, and proactively and constructively engage, with…clubs”.

The regulatory principle in clause 8(c) encourages the regulator to be proportionate. Those two principles would encourage the regulator to provide clubs with assistance in engaging with the licensing system.

It is in everyone’s interest to maximise clubs’ compliance with the system and minimise burdens on them as much as possible. Indeed, ensuring a smooth transition and minimising burdens on clubs has been at the heart of our design of the licensing system. That is precisely why there is a two-step structure of provisional licences followed by full licences, with clubs given time and support to progress from one to the next.

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

It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I am pleased to have reached the part of the Bill where we can discuss the content of the operating licences that will make up the regulator’s regime. As the Minister has said, clauses 15 to 19 set out the process for applying and granting both provisional and full operating licences. I would like to welcome a few things about these clauses.

First, I welcome the ability for clubs to gain a provisional licence first, with the conditions in this licence providing the building blocks for the full-time licence. This process recognises the importance of the transition period, allowing clubs to take the necessary time to understand the new requirements and get themselves in order to meet them if needed.

I also welcome that clause 16 clarifies that any club can apply for a provisional licence, allowing those expecting promotion to the National League to be proactive. Further, I am pleased that the process will require a personnel statement to be provided. That will be crucial in ensuring that the regulator is able to hold the right people accountable for the proper fulfilment of the licence at any given club.

The clauses allow for an advocacy first approach, where the regulator will provide an encouraging and flexible pathway for clubs to gain their licences. Coupled with the enforcement power in clause 19 to ensure that the regulator has the teeth it needs in the event of non-compliance, the process in this part of the Bill seems to offer a fair and supportive approach to getting clubs up to speed with the full requirements.

My hon. Friend the Member for Sheffield South East is right to highlight in new clause 8 that clubs should be supported in their transition to becoming fully regulated. That is especially important for those clubs in the National League and the lower tiers of the English Football League. In his evidence to this Committee, Steve Thompson, the managing director of Dagenham & Redbridge told us he was

“really worried that the extra reporting…will be more than a lot of them can manage without taking on extra staff.”––[Official Report, Football Governance Public Bill Committee, 14 May 2024; c. 39, Q61.]

He also highlighted that most clubs at National League level operate on one or two full-time staff, with some working on volunteers alone.

I think the Bill has done a good job of ensuring regulation will be proportionate. Further, I believe reporting requirements have been minimised wherever possible and should in any case be balanced out by the benefits of good financial planning and governance. However, given the concerns of clubs, I understand why some may feel it is better to make it explicit that the regulator will support clubs that are or will be licensed.

I hope the Minister can use this as an opportunity to highlight some of the ways in which the Bill as it stands will adopt an advocacy first approach and offer clubs the assistance they need to keep up with the regime. I do not believe it is anyone’s intention for the regulator to have to use its enforcement powers on well-intentioned clubs that are genuinely struggling to comply.

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

It is a pleasure to serve under your chairmanship this morning, Mr Sharma. I thank the Minister for his positive comments on new clause 8, which are very much in line with what it is trying to achieve. I think the Minister said that the new clause is unnecessary because the essence and intention of it is already contained in other clauses, and the regulator would be expected to operate in providing assistance to clubs in line with the way described in new clause 8. I think I have got that right.

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

The Minister is nodding on that point. On that basis, I will not push the new clause, because the Minister’s explanation, and the evidence we have heard, reassures me that clubs that are coming up from the National League and want that assistance will be helped in precisely the way the new clause would require of the regulator.

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)

I welcome the positive comments from the hon. Member for Barnsley East. She is right that we are trying to have a fair and supportive approach here and that clubs should be supported.

I want to reassure the hon. Member for Sheffield South East that we have tried to design the Bill so that it recognises that the level of activity at the top of the Premiership, for example, will be vastly different, and that, as we heard in the evidence sessions, many of the club officers in the National League will be volunteers and we would not want to overburden them.

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

The Minister will have heard the concerns in the evidence sessions about duplication. Will he be kind enough to remind the Committee that it will be for the leagues, not the statutory regulator, to decide whether there is any duplication?

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)

My hon. Friend makes an important point. This will be the statutory regulator, and this will be where the reporting will need to happen. If the leagues add anything, it is for them to make that decision. As this process progresses, I hope they will see that there is no need for the extra layer of reporting and that the regulator’s powers will be sufficient to secure the future of English football.

Photo of Anna Firth Anna Firth Ceidwadwyr, Southend West

On behalf of a National League club, Southend United, I welcome the light-touch approach set out in clause 8(c). I welcome the Minister’s comments that where the National League is already regulating itself well, there will be a proportionate, light-touch approach to any additional regulation.

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)

At the end of the day, we want to ensure a standard approach to regulation to ensure that we secure clubs in the future. As I say, I hope that as the regulator starts getting up and running, the leagues will see that there is no need for duplication and will make decisions accordingly. Ultimately, however, it is up to them to make that decision.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16 to 18 ordered to stand part of the Bill.