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Football Clubs in Administration

Volume 530: debated on Wednesday 6 July 2011

Motion made, and Question proposed, That this House do now adjourn.—(Miss Chloe Smith.)

No town or city wants to see its football team go into administration, and it certainly does not want it to be docked 10 points, which leaves it with an even bigger mountain to climb, but that is what has happened to Plymouth Argyle.

The club’s problems do not end there, and I would like to draw on its experience to highlight the problems undoubtedly experienced by the 36 English clubs that have gone into administration since Charlton Athletic did so in 1984. I hope that the Minister will share these concerns, and go away, investigate and discuss them with those involved in running football. I do not want to see another club go through what Plymouth Argyle has gone through. I am sure that their best known supporter, Michael Foot, will be turning in his grave; indeed, in some ways I am pleased that he is not here to see what has happened and the misery that has been heaped on loyal staff and supporters, because he followed the club through good times and bad.

There were good times, and I must thank Gordon Sparks—Sparksy—for reminding me of some of the highlights of a club which was formed in 1886, joined the Football League in 1920 and got to the FA Cup semi-finals in the 1983-84 season—the same year in which the team were league two champions. I also thank Lee Jameson on behalf of the supporters for the information that he gave me in preparation for this debate. Plymouth has an incredibly loyal “green army” of supporters—and there are at least two of us in the Chamber—but their patience has been sorely tested.

Following a winding-up petition in November 2010, the staff faced Christmas without full pay packets. Learning from Exeter City’s experience, the supporters rallied round, and in December set up a trust designed to offer support to the then board and raise funds to support the staff and their families.

My hon. Friend mentioned the establishment of a supporters trust, and I declare an interest, as I was involved in the establishment of the Fulham supporters trust some eight years ago. The important role of Supporters Direct in helping to support supporters such as those in Plymouth who are setting up a trust should not be underestimated. Does she agree that it is regrettable that the funding for Supporters Direct is under threat because of the problems that the premier league has with the former chief executive? I hope that the Minister can help to persuade those involved to resolve that problem as soon as possible.

My hon. Friend makes an interesting point, and I hope that the Minister has heard his plea, because supporters trusts and Supporters Direct have been immensely helpful to a number of clubs.

In Plymouth the staff have been asked to sign away or defer payment of their salary. In the main, we are talking about some very low-paid people who were presented with a form to sign after the club to which they feel great loyalty was threatened with closure. With little opportunity to obtain expert advice on whether signing was the right thing to do, they signed, and most have struggled since, signing further salary deferrals. Some have now had no option but to take redundancy. The hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) and I spent quite a lot of time with the staff looking into their problems; none the less, they are in a difficult position.

The irony is that these are the very people who are keeping the ground in condition to start the next season. The players are protected to some extent by the Professional Footballers Association, and I had a brief word with Gordon Taylor about the position. He shared my concern that there was no protection for all the other staff. It was a struggle to see last season out, with relegation almost guaranteed, despite some amazing and spirited performances by a team that must have been feeling the pressure. Peter Ridsdale stepped in when most of the old board resigned and, in all fairness, worked to get to the bottom of the finances and pay key bills. At the time, he was welcomed. Help also came, as I have said, from the Plymouth Argyle Supporters and Training and Development Trust, which lent the club a not insubstantial amount. Then came the cloak and dagger stuff—the secret discussions between the administrator and various bidders. Plymouth’s local paper, The Herald, struggled to get to the bottom of the question of who they were.

We have all had concerns about what checks have been carried out to ensure that they are fit and proper people to run and sustain a football club. Where are the assurances of the ability of these bidders to meet the financial demands of running a club? Rumours have circulated about what various bidders might have wanted as part of the deal, and concerns have been expressed that they might asset-strip, including developing the current practice ground. Although no one has said that this is true, it does not help to build confidence in those most closely linked to the club, especially the supporters.

What checks are carried out by the Football League on such matters? Very few, I suspect, yet this is a sport of national importance. Where is the transparency that the administrator promised in a BBC interview? Nine days later he was quoted as saying that he did not have to know who was financing the bid. Given the amount of money that circulates at the top of football among clubs which, in some cases, use the lower division clubs as nurseries for up-and-coming stars of the future, I find it astonishing that some contribution could not come from them and/or from the Football League clubs to support the administration and ground staff when such circumstances arise, as a sort of insurance policy.

Others are affected too, especially small businesses linked to football clubs. The Federation of Small Businesses has pointed out that most football clubs operate as small or medium-sized enterprise, employing fewer than 250 people and, like other small businesses, often find it difficult to access credit from the major banks. As a result they often turn to smaller creditors, and similarly contract through many small companies. The impact of such a business going into administration can, therefore, have a knock-on effect on several other local businesses.

I ask the football authorities to look again at the negative impact of the points docking system. Is it really achieving their original aim? Is it punishing the right people? Will the Minister explain why the rules for football clubs placed in administration are different from those for other companies? I believe that Lord Sugar has in the past expressed concern about this.

I anticipate that the hon. Lady might be about to mention the football creditors rule. Earlier she spoke about the impact on small businesses. Does she agree that the football creditors rule has no place in football today, and that it acts as a disincentive for clubs to deal responsibly with each other and punishes local businesses, while protecting the interests of other football clubs and former players who might be hundreds of miles away?

I thank the hon. Gentleman for making that point. He has made it in far more detail than I intended to do. I shall reinforce it later, and I hope that the Minister will listen.

Lord Sugar made plain his view that—I paraphrase—the money thrown at clubs by television companies should be put into a trust, and half of it distributed to the clubs to spend, perhaps on players, but also to do other things. Protecting the staff in times of difficulty would be a worthwhile cause.

There are many questions specific to Plymouth which still need to be answered, despite the fact that we understand that the takeover has gone through today and the papers have been signed. Does the takeover proposal provide sufficient cash for the creditors to be paid in full, as regulation demands? Will the Football League be satisfied enough to hand over the competition share, or will deferred debts, including the remaining unpaid salaries, not be paid or simply stack up, rather like an individual in debt who puts the bills behind the clock in the hope that they will go away? Is the Football League happy that neither party to the deal is likely to be subject to any other outside investigations, which could throw their role at Argyle into confusion?

Although the various parties have signed on the dotted line today, it is still not clear whether this is the end of the story. Will they be able to get on and prepare the club for next season—and, we hope, promotion at the end of it? It will not be easy. Media stories are still circulating about concerns among former bidders that do not appear to be going away. We may never know who the mystery shareholders and directors from the Gibraltar-based company are. The lack of transparency is hugely concerning.

With clubs in the lower leagues spending £4 for every £3 that they generate in revenue, reduced Football League distributions in 2012-13 because of lower broadcasting rights values, and a range of other pressures, clubs elsewhere in the league could face the type of misery that Plymouth is going through, with all sorts of people waiting to pick up the pieces. Some of them care about football and some do not. Some should be allowed to run a football club and some should not be allowed to run a sweet shop. I urge the Minister to take a close look at what is happening in Plymouth and take action to encourage the sport to take better care of its assets—the people who work for and support it.

I begin by thanking you, Madam Deputy Speaker, for calling me to speak in this debate, and by congratulatingthe hon. Member for Plymouth, Moor View (Alison Seabeck) on securing it. I hope that she and I have illustrated that Plymouth MPs can work together across the political divide when Drake’s drum starts to beat. It is apt that we should be having this debate today, because Plymouth Argyle, which is based at Home Park in my constituency, and has been in administration since March because it could not pay its tax bill, has at long last concluded its negotiations and is in the process of being bought—in the near future, I hope.

I will not pretend for one moment to be the greatest of football fans, but I am a member of the Plymouth Argyle fans trust. I cannot explain the off-side rule with any sense of certainty, but I do know how important it is for a city with a population of 225,000 to have a football club that plays in the Football League. Plymouthians are very proud of Argyle, but they are less enthusiastic about its directors, who have caused so much angst and about whom they have been forced to read so regularly in the Plymouth Evening Herald.

The green army, as Argyle’s supporters are known, will be relieved to learn that they might be watching professional football during the coming season. Although crowd sizes fluctuate, there is a real sense of community support for the club, the players and the back-room staff. When it was announced in April that the back-room staff were not being paid, the supporters formed the Green Taverners to raise funds to help those loyal employees. The city council acted with great sensitivity and speed and agreed to delay those employees having to pay their council tax until they had been paid their salaries. I have nothing but praise for Councillor Vivien Pengelly, the leader of the council, who acted with such speed.

Plymouth Argyle’s employees should never have been put in that situation. The directors at the time behaved irresponsibly. They thought that they could use the club to make money for themselves through a property deal. Property development is something that I know quite a large amount about, because before I entered this place I ran a communications company that helped developers regenerate land and managed planning for real weekends. Indeed, I retain an interest in the company, so I suppose I should declare an interest.

Betting on England winning the world cup bid and Plymouth being one of the venues for some of the matches, the Argyle directors came up with a proposal to develop the stadium and use green undeveloped park land owned by the city council—before discussing it with officers or local politicians. I fully support the leader of the city council, who made it abundantly quite clear so some time that this would not be possible. I very much hope that the other political party on the city council supports Councillor Pengelly’s lead.

Perhaps someone could explain to me why normally sensible business men leave their business brains at the turnstiles when they get involved in football clubs. They seem to think that they can be clever and play property deals with clubs. At Plymouth Argyle the ground was owned not by the club but by a third party. Indeed, I understand that under Football League rules the directors were allowed to assign their interests in central distribution rights, including proceeds from television coverage, to a third party, Mastpoint. Therefore, when the club went into administration and the back-room staff were not being paid, the Football League froze any money from central distribution rights and would not release it, because they were concerned that it could face a claim.

I ask a very simple question: is that fair? Is it morally right that small and medium-sized enterprises and clubs’ backroom staff should have to wait to be paid—and, potentially, have to take less than they are owed, despite supplying goods and services in good faith—when some sharp-suited developer is allowed to keep the proceeds of those central distribution rights? I do not think so. In recent times the bankers have been criticised for being paid their bonuses when others have had to go without, so why are owners of football clubs allowed to play loose and free with moneys that should be used to settle debts? There is a moral imperative here.

I understand that the Culture, Media and Sport Committee has been holding an inquiry into football governance, and I shall write to the Committee’s Chairman tomorrow, because I am very concerned that the central distribution rights, which include the proceeds from television coverage, should be made available to the club rather than going to third parties, so that organisations and people who are owed money can be paid. That needs to be investigated fully. I shall also write to suggest that clubs be required to have some insurance, so that if a club gets into difficulties, back-room staff and creditors are always paid.

This has been a difficult time for Plymouth Argyle football club, but I hope that the new owners will have learned a significant amount from what has happened, and will not try property development before running a successful football club.

I echo Members’ congratulations to the hon. Member for Plymouth, Moor View (Alison Seabeck) on securing this very important debate. She has made very clear her passion for the local football team, as indeed has my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile). He also showed that he is heavily involved, and whether or not he is an avid football fan he is clearly a powerful advocate for the club.

As both local MPs said, everyone believes that a deal on Plymouth Argyle’s future has been completed today. The BBC Sport website states, however, that the agreement is conditional on the Football League’s ratification. The hon. Lady said that she has some concerns about all the criteria that the Football League may consider during ratification, so the process is not technically or entirely complete, and it is theoretically possible that the league will take a different view, but we will have to wait and see. It is very much up to the football authorities to make that decision one way or another.

I must apologise, because Members will have doubtless noticed that I am not the Minister for Sport and the Olympics, who is in South Africa doing something, I am sure, terribly glamorous and wonderful, but he has asked me to stand in for him, and I will endeavour to respond appropriately. I know that he will be following this debate very closely and will take a close interest in the reports on it.

Both Plymouth Members mentioned the fact that the Culture, Media and Sport Select Committee is completing an inquiry into the governance and regulation of professional football clubs. Its inquiry, which the Government have welcomed and given evidence to, is considering a range of issues that affect the way our national game is run, and the focus of the inquiry is on strengthening the financial health of the game.

We all look forward to receiving the Committee’s report—the Government certainly do—and its recommendations in due course, after which the Minister for Sport and the Olympics will set out the Government’s official response. He has mentioned it several times, and he is very keen to do so just as soon as the report is in.

May I echo the praise that both local MPs have showered on the fans, players and staff of Plymouth Argyle for their continuing efforts in keeping the club going? It is a perfect example of what the Prime Minister calls the power of the big society, whereby local communities come together to tackle common causes and unite behind a theme. Plymouth Argyle can be added to a long list of football clubs—Leeds United, Portsmouth and Crystal Palace to name just a few—that in recent years have fallen into serious financial trouble.

There is a worrying statistic that since 1992 more than 40 of the Football League’s 72 clubs have been insolvent at one stage or another. I should confess at this point that, although I of course support my local club in Weston-super-Mare, historically I have supported Ipswich Town as a “tractor boys” fan, and it had a little financial difficulty a few years ago, so I guess that it counts as one of the clubs in that statistic.

It is of course important to differentiate, as the hon. Member for Plymouth, Moor View did, the elite clubs in the premier league that command the most money and can therefore pay their players the greater salaries from clubs such as Plymouth in the lower divisions that operate on a far tighter shoestring. The latter rely on local businesses, sponsors, hospitality and so forth for their revenues to a much greater extent than premier league clubs.

If football today is as popular with supporters, advertisers and broadcasters as it seems, there are legitimate questions about why so many of our clubs face the prospect of having to sell their grounds, and why they cannot afford to pay players and staff or repay debts owed to local businesses. Those are the questions that the football authorities, which are entrusted to administer the game and our clubs, must continue to address seriously, as both MPs from Plymouth have pointed out.

When the Football League chairman, Greg Clarke, gave evidence to the Select Committee, he admitted as much in saying that debt is the

“single biggest problem for football”.

He believes that if football clubs ensure that debt is genuinely sustainable, issues such as transparency of ownership, which has been mentioned, supporter buy-in and co-operative ownership will fall more easily into place.

I was at the Select Committee when Mr Clarke gave evidence. He also stated that he could not find a moral case for keeping the football creditors rule. Nevertheless, it remains the position of the Football League that it should stay. Does the Minister, like me, find that regrettable?

If the football authorities find it unacceptable and regrettable, the Government probably do as well. This is something for football governance to take on first. The Government will seek not to intervene if football puts its own house in order. Mr Clarke has made his position very clear, and that should be a very powerful voice.

The football authorities deserve credit for the rules they have introduced in recent years in the areas of financial regulation and club ownership. There are now an early warning system with HMRC in relation to tax returns, transfer embargoes that help curb club spending, new salary control measures in the lowest two leagues, a new means and abilities test that requires proof of funds from prospective owners, and a strengthened owners and directors test. It is welcome that in May, all 72 Football League clubs voted in principle to adopt UEFA’s new financial fair play rules from 2013, which will require clubs to spend only what they bring in. The Government obviously support those moves. Of course, situations such as that in Plymouth demonstrate how much more may need to be done. They also demonstrate that prevention is better than cure. It is far better to avoid going into a company voluntary agreement or insolvency if possible.

We believe it is for the football authorities to continue to challenge themselves to see whether they should tighten their rules further to ensure that clubs do not fall into administration in the first place, in precisely the way I have just mentioned. Equally, the clubs have to take greater responsibility. Supporters should not have to bail out the club because of bad financial management by owners and directors, as both local MPs said.

The stark reality is that for any company or organisation, not least a football club, emerging successfully from administration is likely to be painful and difficult. The focus must be on doing everything possible to avoid clubs getting into such problems in the first place. The Government’s hope and expectation is that as part of the wider process of the Select Committee inquiry’s recommendations, the football authorities will take steps to deal with such challenges themselves. If they do not, all avenues of course remain open to the Government, and we are prepared to look closely at how best to make those changes.

Can the Minister give a reassurance that the Government will not just sit on this matter? I have heard him say that the Government will look at it. This is very important and we do not want another club to go down this route. I urge the Minister for Sport and the Olympics to have further meetings with those involved.

I can reassure the hon. Lady that my colleague the Minister for Sport and the Olympics is particularly exercised about the matter. He is on record as saying, in the Chamber and elsewhere, that he feels that football governance in general is in need of a serious overhaul. I know that he is prepared to be quite activist if he needs to be. Clearly it would be far better for all concerned if football could get its act together and put its own house in order first. That would be better for fans, and for everybody involved in both playing for and running football clubs, than to have a politician intervene. He remains willing to intervene, and will do so if necessary, but it would be a last resort.

I repeat my congratulations to both local MPs on the interest and clear care and passion that they bring to their job on this issue. Everybody will echo their concerns and their hope that the announcement today marks the beginning of a successful new chapter in Plymouth Argyle’s history.

Question put and agreed to.

House adjourned.