Clause 37 - Matters relevant to determinations

Football Governance Bill – in a Public Bill Committee am 2:15 pm ar 21 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford 2:15, 21 Mai 2024

I beg to move amendment 1, in clause 37, page 27, line 30, leave out “must” and insert “may”.

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

This important clause will give comfort to many fans about the agility of the regulator. Of particular note overall is the reference to bankruptcy, which I know many fans will take a great deal of comfort from. My hon. Friend the Member for Southend West will speak on that part of the clause if she catches your eye, Ms Nokes.

I advised in my speech on Second Reading that I would table this amendment, if only to impress the importance of independence within the regulator. There has been much commentary on the independence of the independent regulator, and much of it has focused on the fact that it is a political appointment. To allay some of those concerns, I should say that there are more than 600 agencies in Government, of which the largest number sit within the responsibility of the Department for Culture, Media and Sport. That is why the Minister always looks so exhausted: because of the number of stakeholders he must deal with. I have been there.

Some of the concern and criticism has focused on clause 37(2), which states that the regulator must

“have regard to the foreign and trade policy objectives”

of the Government. Throughout the passage of the Bill, there has often been confusion about what certain things within it mean, and the wording of clause 37 has set hares running. The Sunday Times this weekend had an interview with the Premier League’s Richard Masters, in which the journalist—not Richard—made reference to the clause, saying that it

“raised questions as to whether it could be forced to give state-backed clubs such as Manchester City and Newcastle United soft treatment”.

The piece refers to whether the regulator would have any say on the outstanding charges and, if it were to have a say, whether, due to foreign policy, there would be a softer stance on that.

Although we on the Committee understand that the clause relates to ownership, the wider world has somehow got it into its head that it also relates to the administration of the league rules, which is beyond the remit of the regulator. However, the clause would relate to the purchase of the club and, as the Minister will know from his own never-ending media round, also often relates to the public investment fund takeover of Newcastle. As the Minister has outlined, the ownership tests are set out in the legislation and apply to all potential owners and directors, regardless of where they are from, as long as they are not from a country where sanctions are in place.

However, my concern about clause 37(2) is that it adds an element of uncertainty into the test because of the fluidity of our foreign trade policy. For example—I use this with complete poetic licence—Donald Trump decides to add to his golf course portfolio and wishes to buy Arsenal. Concerns about his integrity are well documented, and yet our foreign and trade policy determines that we consider the USA to be one of our key allies and an absolute must for investment and trade in the future. Therefore, do we automatically give the keys to the Emirates to the former, and possibly next, President? Can the Minister confirm that the foreign policy test is just one part of the test, and would not overrule others where there is evidence that other matters might disqualify a prospective owner?

I am also concerned that the clause is not applied fairly across industries. Ofcom does not need to take into account foreign or trade policy when adjudicating on a takeover of a newspaper, but the football regulator does for the takeover of a club. I am not saying that subsection (2) should be removed altogether, although I am not sure I understand the value it brings. Many will be acutely aware that most of our Premier League clubs, and an increasing number of clubs elsewhere in the pyramid, are foreign-owned or owned by British people living in other countries, so it is essential that we have complete transparency in the process, including on at what point subsection (2) is relevant.

However, I fundamentally believe that if we are to truly value the independence of the regulator’s day-to-day decisions from the Government, the subsection ought to be reworded from “must…have regard” to “may…have regard”. In this morning’s sitting, in response to a question from the hon. Member for Liverpool, West Derby, the Minister said that we do not want the regulator to be involved in foreign policy. But putting subsection (2) into clause 37 does exactly that. A minor tweak to the wording satisfies everyone, but most of all retains the spirit of independence and removes some of the confusion about who is deciding who owns our football clubs. I am very interested in what the Minister has to say in reply.

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

Clause 37 has three main parts. It requires the regulator to have regard to determinations from competition organisers, requires the regulator to have regard to foreign policy and trade objectives, and provides the criteria for judging honesty, integrity and financial soundness. I will speak to each of those parts in turn and address amendment 1 with the second part.

On the regulator having regard to determinations from competition organisers, I have already raised the issue of conflicting outcomes and was reassured by the Minister’s explanation, so I will move on to the issue of the influence of Government policy objectives on the regulator.

The clause states that the regulator must have regard to the Government’s “foreign and trade policy objectives” when making determinations on ownership. That has caused concern across the board, including across football governance structures, which usually have a harder time finding consensus, and with fans. That almost unanimous voice tells us something important: everyone wants to see a regulator that is free from undue political interference. I agree. The Government should not be in a position where they can apply pressure to the regulator to make decisions on ownership just because they might be politically favourable. Club ownership must not be a tool used to reward those with which the Government have a positive relationship or penalise those with which they have a negative relationship. That is particularly so given that the Bill empowers the regulator to make decisions on incumbent owners and officers.

However, I understand that there may be circumstances in which national security and foreign policy objectives may be pertinent to the regulator’s decision making. The regulator should, and will want to, have an understanding of all relevant information when making a determination. That is part of the reason why the regulator was chosen as the location of the tests, due to its ability to access relevant information that would not otherwise be available. I therefore do not believe that the intention of the clause was to compromise the independence of the regulator, but to empower it where security or foreign policy objectives are concerned.

Whatever the intention may be, we must ensure that the clause is not open to abuse. I am therefore pleased to offer my support to amendment 1, tabled by the hon. Member for Chatham and Aylesford, which suggests that we change “must regard” to “may regard”. That amendment might help to provide some reassurance on the purpose of the clause and the independence of the regulator.

Some further clarification on how the measure will work in practice would also be helpful. In particular, there must be more guidance on how the regulator will be made aware of “foreign and trade policy objectives”. That is particularly important because transparency is a crucial tool for providing accountability, but may be difficult given that some information will naturally be confidential in line with national security considerations. Can the Minister provide any information on what good practice will look like in terms of striking the balance between accountability and security?

Finally, I will address the criteria for considering an individual’s honesty, integrity, competence and financial soundness. On the whole, I believe these are comprehensive, covering everything from whether an individual has been involved in criminal conduct and disciplinary proceedings for the integrity test, to whether the individual has become bankrupt for the financial soundness test. The influence that the Financial Conduct Authority test of honesty, integrity and reputation has had on the respective criteria is also clear. Overall, I am pleased with the transparency and clarity that the clause provides in terms of how the tests might work in practice.

Photo of Anna Firth Anna Firth Ceidwadwyr, Southend West 2:30, 21 Mai 2024

Second time lucky, Ms Nokes! I am delighted to talk about this part of the Bill and the important owner and director test, and I want to support clause 37(3) and (4). The current Premier League and English Football League owners and directors test requires that any prospective owner must not have been subject to two or more bankruptcy events—so the current position is that someone could have been subject to one bankruptcy event, and in theory still own a football club. I am pleased to see that the clause removes any minimum number of events; obviously, that will place further emphasis on sustainable management and stewardship, and is much to be commended.

For context, I should say that Southend United Football Club in the National League has had 19 winding-up petitions in the last 25 years; the last one was last Wednesday. During the course of this Bill, the club was in court and was given a further six-week adjournment—hence my interest in making sure that no other clubs in future suffer the same fate as Southend United and its loyal fans.

Photo of Rachel Hopkins Rachel Hopkins Llafur, Luton South

I want to carry on the debate about clause 37 and reflect on honesty and integrity as set out in subsection (3), on “matters relevant to determinations” of the “requisite honesty and integrity”, and subsection (3)(g), which talks about

“such other matters relating to honesty and integrity as may be specified” by rules. I would be interested in a little clarity from the Minister about that. Some of the other prerequisites or matters to be considered, such as whether someone is financially sound, can involve hard evidence, and someone’s competence can be tested by qualifications; integrity, however, is a bit of a subjective matter. It is more about things that are not against the law but are certainly not in the spirit of the law, and it is often behavioural.

Does the Minister have any examples that he might want to see in those rules? Someone might have used poor employment practices, for example, as we have seen in other industries, some of which are regulated and some of which are not. The issue would not reach a tribunal so it would not be a piece of hard evidence, but it would bring into question why an owner or officers of a club, in a different business, deployed fire-and-rehire tactics, for example, that were detrimental to their workforce and local community. Similarly, in a positive sense, would there be any consideration of what high integrity might be: for example, owners and officers who championed equality and diversity—an issue that we have been speaking a lot about in this Bill? I would welcome the Minister’s comments.

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

I will be interested in the Minister’s remarks about amendment 1. I understand the point that my hon. Friend the Member for Chatham and Aylesford is making, in seeking to create a bit more flexibility for the regulator. We would all hope that the integrity checks against an individual owner could ultimately “trump”—if she does not mind my using the word—any positive trading relationship. If the person were not considered a good and proper owner, the fact that we had a good trading relationship with their country should make no difference: they should not be able to avoid the checks simply because they come from a trusted trader nation.

However, on the other hand, I can see that having “must” would be helpful for the regulator in two ways. One is that if a would-be owner of a club met all the criteria and therefore should be allowed to acquire the club, but the only block on them was that they were a sanctioned individual, the regulator would have the certainty of knowing that it could not let the deal go through. There would not be grounds for challenge, say, at the Court of Arbitration for Sport over whether an appropriate judgment had been made. There would be no question of the sanctioned person’s suitability on any other grounds. In that particular circumstance, the provision could be helpful.

I imagine that it would be reassuring for the regulator to know that, as was the case when Newcastle United was acquired, if another Premier League club was acquired by a country that was not sanctioned—we did not have a trade embargo with it—but was nevertheless controversial, the regulator would not have to consider that, whether people wanted it to or not, because no Government policy would be saying that we could not trade with or allow investment from that country. The regulator would have the certainty of knowing that it was acting purely within the confines of its role.

I appreciate the intention of the amendment and the reasons behind it, but perhaps the Minister could give us some guidance on whether “must” may be better than “may”.

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 Government absolutely recognise the intent behind the amendment to ensure the independence of the regulator. We have been extremely clear that the independence of the regulator is vital. That is why the regulator will be set up as a new public body to ensure its full operational independence.

Clause 37(2) does not diminish the regulator’s independence. It does not mean that the regulator needs to consult the Government about the suitability of an owner, nor can the Government interfere with the regulator’s decision. If the regulator determines that an individual does not have the requisite honesty and integrity, or is not financially sound, or that the individual has any source of wealth connected to serious criminal conduct, that individual cannot be determined to be a suitable owner of a regulated club. Clause 37(2) does not override those fundamental requirements. Nor can any individual, fan, league, club or Government influence override them.

The purpose of clause 37(2) is to ensure that the regulator has to have regard to the UK’s foreign and trade policy objectives when it makes a determination about any new or incumbent owner. That will ensure that the regulator cannot make unilateral moral judgments on which countries it may consider unsuitable when it tests owners. We do not want to allow for a scenario where that happens and in effect a regulator, as I said this morning, sets the Government’s foreign policy.

The effect of the amendment would be to increase discretion for the regulator to decide when it will have regard to the UK’s foreign and trade policy objectives when making decisions about owners. The Government believe that their foreign and trade policy objectives are a relevant matter for the regulator to have regard to whenever it makes a determination about the suitability of any and all owners, not just some. Increased discretion for the regulator may risk it making unilateral judgments that stray into foreign policy.

To be clear, requiring that the regulator must have regard to the Government’s objectives does not mean that that must be a decisive factor. It might have limited relevance in a particular case and, if so, the regulator will not have to give that undue weight. The fundamental basis for a regulator’s determinations about owners will be honesty, integrity, financial soundness, source of wealth and, for new owners, sufficiency of financial resources.

I heard what my hon. Friend the Member for Chatham and Aylesford said and we will continue to reflect further, ahead of Report. But for the reasons that I have set out, I am not able to accept her amendment and I hope she will withdraw it.

Clause 37 lists the matters that the regulator must take into account when it conducts owners and directors tests, including what it must consider when determining whether an individual is financially sound and whether they have the requisite honesty and integrity and, for officers only, the competence needed to fulfil the role, and ultimately to determine whether they are sensible—sorry, suitable.

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 the Member for Southend West and the hon. Member for Luton South made important points. As a public body, the regulator must act fairly when it makes decisions. As set out in the White Paper, it will make an evidence-based objective judgment to assess whether an owner or a director is a suitable custodian of a club, and it will apply its tests consistently and fairly to every person.

The fitness element of the test will assess an individual’s honesty, integrity and financial soundness, as well as, for directors, competence. That draws on the fit and proper person test applied by other regulators, including the Financial Conduct Authority, His Majesty’s Revenue and Customs and the Solicitors Regulation Authority. The regulator will set out in its rules and guidance further detail on how it will conduct its tests.

The factors I have outlined are specified because they have a real bearing on whether an owner or officer could have a significant detrimental impact on a club’s financial sustainability. Listing specific matters provides greater clarity to the industry about what will be tested. It also constrains the regulator. The matters listed in the clause are the only things that it will take into account when considering honesty, integrity, financial soundness or competence. To ensure that the fitness test remains effective in the future, the clause gives the regulator the power to use its rules to add further matters that it will need to take into account when considering someone’s honesty, integrity or financial soundness. Before using that power, the regulator must consult the leagues.

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

I have listened carefully to the Minister, as I always do, and I will withdraw the amendment. However, as I understand it, similar provisions do not apply to any other regulator, and other regulators are faced with very similar decisions on a day-to-day basis. We do not take unilateral moral decisions, as the Minister pointed out, but I am happy to discuss the matter further with him. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.