Schedule 4 - Threshold requirements

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

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby 9:25, 21 Mai 2024

I beg to move amendment 4, in schedule 4, page 93, line 3, leave out from “has” to end of line 6 and insert—

“(a) adequate means by which to consult its fans about relevant matters, and

(b) structures and processes for effective engagement with its fans and takes the views of its fans into account in making decisions about the relevant matters.”

Photo of Virendra Sharma Virendra Sharma Llafur, Ealing, Southall

With this it will be convenient to discuss the following:

Amendment 16, in schedule 4, page 93, line 4, leave out “consults” and insert—

“has structures and processes for effective engagement and consultation with”.

Amendment 8, in schedule 4, page 93, line 4, after “matters,” insert—

“including any proposal by the club

(i) to play matches in a competition to which the notice requirements in section 54(7) and (8) apply, or

(ii) to play home matches at a ground other than the club’s home ground, before giving notice of that intention to IFR under section 48(1),”.

Amendment 5, in schedule 4, page 93, line 17, at end insert—

“(4) The club’s establishment and continued delivery of such fan engagement must be independently assessed ahead of it being awarded a full operating licence and in the event of the breach of relevant licence conditions or provisions of this Act.”

Amendment 17, in schedule 4, page 93, line 12, at end insert—

“(2A) The IFR must—

(1) consult the Football Supporters’ Association on defining what constitutes effective fan engagement and consultation by clubs and,

(2) issue guidance on measures to be taken by clubs to ensure effective fan engagement and consultation and lay a copy of that guidance before Parliament within six months of this Act coming into force.”

Schedule 4.

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

It is a pleasure to serve under your chairship, Mr Sharma.

I welcome the line in the Bill that gives use the opportunity to secure the grounds. The Independent Football Regulator must grant approval for a disposal only when it is satisfied that the carrying on of the activity will not undermine the financial sustainability of the club. However, we would also like to see—certainly from the perspective of fans—a consultation of the supporters and the community.

I speak from experience: Liverpool supporters stopped the club relocating from Anfield to an out-of-town ground in Speke. That would have been utterly disastrous for the heritage of the club, as I mentioned to the English Football League chair, who was chair of Liverpool at the time. Also, Everton supporters stopped Everton moving from Goodison, again to an out-of-town stadium, in Kirkby, with a huge Tesco attached. Again, we are talking about something that would have been disastrous for the heritage of the football club, and we would not be seeing Bramley-Moore come into occurrence, potentially as one of the greatest stadiums in the world.

I am saying that to the Minister because that was football supporters changing the direction of travel. I warmly welcome that line on the Independent Football Regulator, but it would be fantastic if we could also consider what the amendment proposes, which is about ensuring that the community and supporters are talked to during any process about the movement of grounds.

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

Schedule 4 sets out the threshold requirements on clubs, which I will address before moving on to the amendments. The requirements cover sustainable resourcing—both financial and non-financial—and fan engagement. Before I address each of those areas in turn, I confirm that I welcome each of all the requirements as a whole.

The first condition is about financial resources. At this point, it is important to set out some context on football finances and regulation. As the Secretary of State said on Second Reading, clubs will not and should not be required to break even under the requirements. Ambition, investment and, indeed, a level of risk are fundamental to football and the pursuit of success. That is what makes the game so exciting and varied, something football fans never want to lose.

Owners Steve Parish and Tony Bloom emphasised that in their evidence to us, with Steve Parish saying of football,

“It is not a business with a profit principle…people’s desire to win will always trump their desire to make money.” ––[Official Report, Football Governance Public Bill Committee, 14 May 2024; c. 59, Q94.]

I do not believe, however, that there are not recurring issues within English football clubs that the regulator can help to solve. Reckless overspending, an overreliance on owner funding and poor financial planning can mean that clubs are unable to adapt to shocks or sudden changes in circumstances. When shocks hit, as we have seen when owners have withdrawn funding or during the pandemic, clubs can make matters worse by looking to short-term solutions for increasing income. That can include selling off valuable assets such as stadiums or training facilities, which destroys the long-term value of the club. That is the kind of pattern that the regulator should be looking to prevent, while taking a case-by-case approach.

The same levels of debt at two clubs may mean entirely different things when taking into account the type of debt and the clubs’ ability to make repayments. The regulator should therefore have the ability to differentiate between low-risk, low-cost debt and high-risk, high-cost debt. For well-run clubs, demonstrating that they have the finances to match their planned activities should hopefully be somewhat of a formality. Such clubs will already be looking at their funding, expected revenues and expenses, and planning for the management of risks and shocks. For others, however, the requirement will guide them into good practice, with the regulator hopefully able to provide the support and expertise needed to aid that. As the Government’s White Paper consultation response recognised, the certainty that the regulator can provide on its financial requirements, alongside a proportionate and evidence-based enforcement, can actually help to encourage good investment rather than deter it.

The non-financial resources requirement is also focused on the idea of sustainability and ensuring that a club has what it needs aside from finances to sustain its activities. That might include the corporate structure of a club, the qualifications and experience of officers, and the club’s corporate governance statement. The requirement therefore recognises that there is more to being a well-run club than funds alone. A well-managed operation will have controls, clear decision-making structures, checks and balances, and transparent reporting mechanisms. Sustainable finances and a sustainable structure complement each other, and I am glad that they are both included here as a result. I will pick up the issue of what the corporate governance code should include when we discuss the mandatory licence conditions but, for now, I am pleased to welcome this requirement.

That brings us on to the final condition of fan engagement. As the Bill stands, there is a shortlist of “relevant” matters that a club must consult fans on, including the strategic direction, business priorities, match day issues and club heritage, which means the home ground, crest, shirt colours and team name. We want to ensure that fan engagement is not just a tick-box exercise. The explanatory notes say that the engagement exercises will “differ between clubs”. I believe that that is the right choice, as the range of clubs involved means that a one-size-fits-all approach would not be in keeping with proportionality, but it is still important to ensure that whatever form fan engagement takes, it is meaningful and outcomes-focused.

Indeed, the explanatory notes also say:

“Clubs will not…be bound by the views of fans.”

Although I understand why that is the case, and I believe it is right that clubs have the ultimate say in how they are run, it does pose a number of questions. What measures will be in place to ensure that the views of fans, although not binding, are truly considered rather than cast aside? How can we ensure that fan engagement meets minimum standards, and will fans have any say in what those minimum standards are? The Football Supporters’ Association proposed that the regulator should have specific powers to inspect the quality of fan engagement, which is echoed by amendment 5, tabled by my hon. Friend the Member for Liverpool, West Derby. Similarly, I have tabled two amendments to ensure that the regulator is able to judge engagement on its effectiveness and outcomes, rather than simply requiring the existence of a consultative group.

First, amendment 16 will change the wording of the schedule so that it requires clubs to have the necessary structures and processes in place to conduct “effective engagement and consultation” with fans on relevant matters, which will emphasise that fan consultation cannot be a token measure. Instead, it will be embedded into a system within clubs that requires them to listen to fans, engage with what they are saying, and feed that back through their internal processes to meaningful effect. That sentiment, and much of the same wording, is echoed in amendment 4, tabled by my hon. Friend the Member for Liverpool, West Derby.

Secondly, amendment 17 will require the regulator to issue guidance to ensure that clubs are given appropriate support in understanding what “effective” means in this context. That will not contain any prescriptive requirements on clubs to dictate how fan consultation groups should be set up, but will provide some further criteria to ensure that all engagement is done meaningfully and with genuine intent. To formulate that guidance, I have suggested that the FSA be consulted. The schedule has been designed with the right intention, but I hope that my amendments will help to ensure meaningful conversations between clubs and supporters.

I will briefly address amendment 8, tabled by my hon. Friend the Member for Liverpool, West Derby, which proposes two further cases for fan consultation. On prohibited competitions, it is vital that fans are listened to regarding whether a competition is in keeping with the values of football, so I am pleased that the regulator is given the explicit duty to determine the views of fans when prohibiting a competition.

Amendment 8 goes a step further and would require the clubs themselves to consult fans if they had plans to participate in a prohibited competition. I hope that the deterrent of the regulator’s enforcement, as well as the fact that the prohibition will apply whether or not the club is licensed, will be enough to dissuade clubs from making such plans anyway.

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby 9:45, 21 Mai 2024

The issues addressed in amendment 8 are paramount. FIFA is already talking about opening the door to games being played in another country, and the league seems to be making moves to play games in the USA. Unfortunately, that is the direction of travel that could come to our doorstep. Consultation with supporters and supporter bodies through the IFR will be hugely important if the Premier League decides that it wants to start playing games abroad, because that is a slippery slope for the heritage of football in this country.

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

I thank my hon. Friend for those comments; I am sure that the Minister was listening. I will come to the issue of playing games abroad in future Committee sittings, but I hope that the deterrent of the regulator’s enforcement, as well as the fact that the prohibition will apply whether or not a club is licensed, will be enough to dissuade clubs from making such plans anyway. A club that is willing to participate in a prohibited competition is a club that is willing to risk losing its licence, which would release it from the fan consultation requirements anyway.

The amendment is right to highlight that fans are not currently given a say in the Bill on changes to where their home matches are played. We will come to that point later, when we look at further amendments that give fans a say on stadiums.

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

On the point about playing games abroad, which we will come back to later, it is interesting that although clubs will have to consult their fans, if the competition organiser decides to move games abroad and requires the clubs to do so as part of the competition requirements, there is no requirement for the competition organiser to consult fans. That seems to be a hole in the provisions that we will have to address at some point.

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

I thank my hon. Friend for that comment, which I will talk about later. I am sure that the Minister also heard it and will respond if he feels able to. For now, I ask the Minister to set out his thinking on why fans are not consulted on the heritage implications of moving a home ground. Overall, I welcome schedule 4 but would welcome a strengthening of the fan engagement provisions.

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)

Schedule 4 introduces the threshold requirements that clubs will have to meet to be granted a full operating licence. These are the three main areas of the regulator’s club licensing regime, which build on the freestanding duties and the mandatory conditions. Meeting the threshold requirements will mean that the regulator is satisfied that the club can currently and will be able to continue to operate sustainably in its financial, non-financial and fan engagement areas.

Although the threshold requirements are principles set in legislation, what each club must do to meet those requirements will not be the same. For example, what constitutes appropriate financial resources for a Premier League club will be very different from a League One club. A club might already meet the threshold requirements—for example, through naturally good operations or by complying with competition rules—in which case, the regulator will not need to intervene directly. If a club does not, the regulator can apply discretionary licence conditions to bring it up to the required threshold. That structure will allow for a proportionate system with requirements tailored to individual clubs, rather than the approach taken by the industry to date of blanket rules catering to the lowest denominator but applying to all.

The threshold requirement for financial resources means that clubs need an appropriate level of financial resources to support their long-term financial sustainability, accounting for their circumstances and risks. For example, that might include which competition the club competes in, its financial relationship with its owners, and the wider economic context in which it operates.

In particular, the regulator should take into account the club’s financial plan and its contingency plans for dealing with financial shocks. For non-financial resources, a similar requirement and process applies. “Non-financial resources” refers to things such as internal controls, systems and policies, as well as the information and people that the club has at its disposal. Although not financial in nature, those are important resources for any well-run club, so they need to be adequate. When assessing whether the resources are appropriate, the regulator might consider the skills and experience of the senior management and its corporate governance arrangements.

The threshold requirement for fan engagement requires that clubs adequately consult and consider the views of fans when making decisions relating to certain specified matters. As we heard from the FSA on Tuesday, this is the first time that there has ever been a requirement for fan engagement to this extent. The relevant matters are listed in the Bill and cover key off-pitch decisions, which the fan-led review highlighted as important to fans across the specified leagues. The threshold requirement is designed to work in tandem with the fan consultation mandatory licence condition. Through that condition, all clubs must regularly consult a representative group of supporters to discuss the relevant matters listed in the Bill, and that must be in place by the time a club receives a provisional licence.

Appropriate fan engagement will look different at every club and will partly be based on the size and complexity of the club’s fanbase. The threshold requirement has been designed to allow the regulator to recognise the inherent variation between clubs while ensuring that standards are raised where necessary.

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

Is the Minister confident that independence will be hardwired into engagement? Regarding the fan advisory boards, there are several examples of Premier League clubs flooding them with club employees. For engagement to work, it has to be completely independent so that we can hold the powers that be to account.

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)

The hon. Gentleman is absolutely right and I give that reassurance. If fans feel that the body that is currently being consulted is not truly representative, the independent regulator can have a look and, if necessary, apply discretionary licence conditions.

Fans, as everybody has said, are the foundation of any club. Putting in place a supporter engagement threshold requirement recognises that they must be consulted on key issues that affect their club. The requirement for clubs to have adequate means to consult their fans and to take fans’ views into account allows the regulator to consider the outcomes of fan engagement and whether the appropriate processes are in place at clubs and are being utilised.

Importantly, the regulator will be able to take enforcement action, such as censure statements, where it deems it appropriate following non-compliance with the licence conditions relating to the fan engagement threshold requirement. That is just one of the factors that results in a robust fan engagement requirement on clubs.

Amendments 4 and 16, however, seek to add something that is already captured in the legislation, with the difference in legal effect of “adequate” and “effective” being negligible. There does not seem to be a way in which a club’s fan consultation could be determined to be adequate without the structures and processes for effective engagement in place. Although the Government understand the intent to make sure that the fan engagement provisions in the Bill are strong, I can provide reassurance that that is the case already and I therefore hope that the hon. Member for Liverpool, West Derby will be able to withdraw his amendment.

Turning to amendment 8, I have been clear that the Government agree with the need for many clubs to engage with their fans on more issues. We expect that the issues of joining a new competition or not playing matches at their home ground would already be captured by the “relevant matters” of

“(a) the club’s strategic direction and objectives;

(b) the club’s business priorities;

(c) operational and match-day issues;” and matters relating to “the club’s home ground”. It is therefore already implicit in the “relevant matters”, so to add this amendment would be duplicative.

Requiring clubs to have consulted fans on home matches being played elsewhere, prior to notifying the regulator, would mean that the consultation would need to occur before there is a reasonable prospect of the club entering into arrangements. That is unnecessary and may mean that clubs are overly delayed in notifying the regulator. The amendment would also require a club to consult its fans before it proposes to play matches in any specified competition, and that would mean that every licensed club would be required to consult its fans on playing its first match of a league season, which is unnecessary and disproportionate. Competition organisers are already required to consult the regulator on relevant material changes to competition rules, as established in clause 54.

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 10:00, 21 Mai 2024

Is the Minister saying that, if a competition organiser such as the Premier League, UEFA or FIFA suddenly required clubs to play their games away from home in another country, it would be covered by the regulator’s powers at present to stop that?

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)

The leagues will have to report to the regulator if they are making changes to any of the competition rules—that is a requirement within the legislation. If changes to competition rules were to impact any of the “relevant matters” in the Bill regarding fan consultation, the club will be required to consult the fans on the related club decisions. However, where changes to competition rules do not have such an impact, it does not seem appropriate to mandate that consultation. Therefore, I hope that the amendment will not be moved.

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

Is the Minister saying that if there is a requirement by FIFA, UEFA, the Premier League or any other league for clubs to play their home matches away in another country, the clubs would have to consult the fans about that issue and the regulator would take account of that consultation, even if it was a requirement on the club by the competition organiser? Could the regulator overrule the requirement of the competition organiser in line with the fan consultation that a club would have to engage in?

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 think I understand the hon. Gentleman’s question, but my understanding is that that will be looked at on case-by-case basis. I want to ensure that I have exactly the right line for him and I would not want to give any misinformation, so I will write to him, if he will allow it.

On amendment 5, the hon. Member for Liverpool, West Derby is correct that fan engagement in football clubs is an integral part of football and capturing that in the Bill is essential. Regarding the specific amendment, I assure him that the fan engagement threshold requirement and the wider licensing regime already captures what the amendment is describing. As the Bill is drafted, before a club receives a full operating licence, the regulator—which is independent—will assess if the club has adequate means to consult fans and to take their views into account on a range of issues in the Bill. The test for a full licence, which is set out in clause 18, is such that a full licence cannot be granted unless the club meets the threshold requirements, including those on fan engagement.

Once a licence is granted, the regulator will continue to monitor the club’s adherence to all the threshold requirements, including on fan engagement. For the avoidance of any doubt, the regulator’s general duties in clause 7(4) explicitly require that. If the regulator identifies that a club is no longer meeting the fan engagement threshold requirement, the regulator can take relevant action to bring the club back to meeting that threshold requirement. Given that those elements are already a feature of the licensing regime, I hope the hon. Member will not move his amendment.

On amendment 17, the FSA has been extensively consulted from the fan-led review until now. I am incredibly grateful to Kevin Miles and all those at the FSA for their support—the amount of help and support that they have given to this process has been extraordinary. The Government expect that the regulator will continue that engagement with the FSA, and it is often likely to be a relevant stakeholder on fan engagement. It is therefore not appropriate for the legislation to bind the regulator unnecessarily, but I hope that that makes it clear that we expect the FSA to be consulted where relevant.

As currently drafted, the Bill is future-proofed so that the regulator may always consult the most appropriate stakeholders in relation to and at the time of a particular decision. The regulator will be best placed to establish what adequate fan consultation looks like in practical detail, given its position of oversight and understanding of each club’s fan base. Adequate fan engagement is not a one-size-fits-all, as the hon. Member for Barnsley East mentioned, and limiting it to a strict definition would water down the intention for clubs to be able to take a bespoke approach. The legislation has deliberate, in-built flexibility so that fan engagement expectations can be tailored to a club’s size, fan base and individual circumstances.

On the topic of guidance on fan consultation, it will be for the regulator to determine the most effective course of action in relation to producing and publishing any formal guidance, the contents of guidance and the timing of publication. As we heard on Tuesday, this is a key area for the FSA, and the Government expect that the regulator will work at pace on any required formal guidance, working throughout with appropriate stakeholders, including the FSA. Setting a legislative requirement for that may risk rushing the regulator’s work in the space without sufficient time for necessary consultation with those stakeholders, or force the premature publication of guidance to the detriment of its quality. I therefore hope that the hon. Member for Barnsley East will withdraw her Bill—sorry, her amendment. [Laughter.]

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

We are not withdrawing the Bill! I thank the Minister for giving me the answers and really good explanations of why I should withdraw my amendment, so I am happy to do so. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

We are all in agreement that one-size-fits-all is not appropriate, and that certainly was not the thinking behind the amendment. We certainly do not want to make measures more prescriptive; it is about ensuring that whatever means clubs choose to consult their fans are effective and focused on outcomes. We certainly do not want to rush the regulator; the text of the amendment says “within six months”. Although I am happy not to press amendment 16, I will push amendment 17 to a vote.

Amendment proposed: 17, in schedule 4, page 93, line 12, at end insert—

“(2A) The IFR must—

(1) consult the Football Supporters’ Association on defining what constitutes effective fan engagement and consultation by clubs and,

(2) issue guidance on measures to be taken by clubs to ensure effective fan engagement and consultation and lay a copy of that guidance before Parliament within six months of this Act coming into force.”—(Stephanie Peacock.)

Question put, That the amendment be made.

Rhif adran 3 Football Governance Bill — Schedule 4 - Threshold requirements

Ie: 6 MPs

Na: 10 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

The Committee divided: Ayes 6, Noes 10.

Question accordingly negatived.

Schedule 4 agreed to.

Clause 19 ordered to stand part of the Bill.