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Football (Financial Transparency)

Volume 542: debated on Tuesday 13 March 2012

Motion for leave to bring in a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to require a football club playing in the top four tiers of English and Scottish professional football to disclose the identity of its owner, the identity of the owner of its home playing ground, training ground, any intellectual property associated with the club or a third party stake in its players and the identities of outstanding creditors; to require all creditors of a football club to be compensated equally should the club go into administration; and for connected purposes.

I want to introduce this Bill to give the House a chance to have its say on the wide issues associated with the financial failure of many professional football clubs in England and Scotland. The Bill proposes measures that would provide an early warning to the football authorities to take action and stand up for the interests of the communities that the clubs serve. Some might say that that is all well and good but is surely a matter for football and not a concern for Parliament. I believe we should be concerned when communities have to stand by powerless when their club is stripped of its assets and left drowning in a sea of debt it can never hope to repay. I believe we should be concerned when taxpayers lose millions in unpaid taxes when clubs go into administration, and when local businesses are left out of pocket and at risk of financial failure as a result. I believe that we should be concerned when, in a global game, millions of pounds are passing in and out of this country to buy clubs and players and we cannot be sure of the source or destination of that money. I believe we should be concerned when players can effectively be trafficked around the world under the control of the third-party interests who control them.

Let me say a little more about each of the areas of concern I have outlined and how the Bill is designed to help address them.

First, fans should know who owns their club and that these people pass the fit and proper person test that has been designed by the football authorities. I have no problem with foreign ownership of clubs, but we need to know who the owners are. In the case of Leeds United, fans went six years without knowing, until Ken Bates assumed control of the club from the future sports fund trust, which was registered in Nevis in the West Indies and administered from Switzerland. We do not know how much he paid for it, or whom he paid, and if we believe his testimony, he did not know whom he had paid either. The sale of the club was not advertised—rather strange if one is selling an asset and trying to get the best price. Many people believe that the only way he could have pulled off this deal was if he or close associates or family members had effectively controlled the club all along.

Last year I made inquiries with the Football League about the identity of the owners of Coventry City football club, and was told that it did not know who owned the club either. The letter that I received from Nick Craig, the director of legal affairs, went on to say:

“We have for some time expressed our concerns as regards investment vehicles (often offshore) and the issue of the lack of transparency surrounding ownership of them. Indeed we have previously sought assistance from DCMS”—

the Department for Culture, Media and Sport—

“and HMRC”—

Her Majesty’s Revenue and Customs—

“in that respect but to no avail. We are left in a position where we can regulate and seek to require clubs to comply but are reliant on self-declaration with no official means of independent verification. The proliferation of offshore investment trusts means we will never always be 100% certain in all cases but we continually assess the appropriateness of our rules in a changing environment.”

How can we apply a fit and proper person test to football club ownership if we do not know who the ultimate owners are?

On Friday last week the football authorities published their joint response to the Culture, Media and Sport Committee’s report on football governance. The report proposed the establishment of a Football Association regulatory authority. The role of the authority would be to co-ordinate the enforcement of rules between competitions and to step in if it feels that the Football League or the premier league in particular are not following through on their duties.

This is a welcome step forward, and certainly the premier league seems to have taken a tougher stance on ownership issues than the Football League in the case of Leeds. However, I believe we need to go further by requiring fuller declarations on behalf of club owners, with the authorities having the right to check this information with the club’s bankers. That is why the Bill calls for a public declaration from anyone owning any stake in a football club and its major assets, such as its playing and training ground, and for the football authorities to have access to a full list of the creditors of the club. The authorities should have the right to determine the source of funds, as well as the legal entity responsible for them.

Also, as part of the football club licensing scheme proposed by the Select Committee and accepted in principle by the football authorities, there should be some oversight of a club’s financial performance to ensure that it has the funds it requires to complete the playing season. Early intervention should be normal when, for example, clubs fall behind with their tax payments. This is now a requirement for clubs playing in the English premier league. It should have happened in the case of Rangers, a situation that should not have been able to get as bad as is it did. The double tragedy here is that Rangers’ financial failure may take down other clubs, such as Dunfermline, which had entered into agreements with Rangers in good faith and is left being owed large sums.

These are issues of concern not just for football fans, but for the law enforcement authorities. A report published in 2009 by the Financial Action Task Force, based on research across 25 countries, including England, highlighted the fact that because football is an international cash business with many assets controlled offshore, it is vulnerable to approaches from criminal organisations. The desperate financial state of many clubs may also mean that an approach from a would-be sugar daddy could be too good to resist, and without too many questions being asked.

The report indentified more than 20 cases of money laundering through the football sector, ranging from simple cases of smuggling large amounts of cash that seemed to have been derived from illegal transactions, to complex international money laundering cases. The report noted:

“Football clubs are indeed seen by criminals as the perfect vehicles for money laundering.”

It went on to say that

“the targets are frequently clubs in financial trouble looking for ‘lifesaving’ sponsors”

and that

“the lack of regulation or control over legal structures and the ownership or control of football clubs means that they are easy to acquire.”

We have to ensure that the measures proposed in this Bill can be enforced to restrict these practices and send a message out to the world that the owners of a club in England or Scotland cannot hide their identity or the source of their funds.

I shall touch briefly on third-party ownership of players and the football creditors’ rule. Third-party ownership of footballers is banned in the UK, but not in many other countries in Europe and around the world. There is already an established practice of player ownership funds buying the controlling interest in a player at a club in, say, South America, and moving him on to a European club, with a view to a further transfer to a top club at a time of the ownership fund’s choosing. Even if third-party ownership is banned in the final destination country, this financial interest could be hidden by agreements to pay agents, or for payback clauses to the selling club and then back to the player fund, depending on the number of appearances a player makes, or indeed whether he is ultimately sold on again.

In a recent survey conducted among players in eastern Europe and the former USSR by FIFPro, 40% of footballers said that their salaries were not paid by the club they played for. That is why the Bill calls for a register to be available to the football authorities for any financial ties third parties have to players in a club. That is also at the heart of one of the big problems in football: some people make money simply from the margin they take on buying and selling the assets they control and the value they can get someone to pay. For those people, that is how they make money from the game and ownership of a club is simply a means of accessing and influencing the market.

Finally, the Bill would provide for the abolition of the football creditors’ rule. The rule means that when a football club goes into administration, people in football to whom it owes money, such as players and other clubs, receive their money in full but other creditors, such as a local printer who prints the match programmes, the St John Ambulance or a local builder who works on the ground, receive just pence in the pound. In the case of the administration of Leeds United, the club also left £6 million in unpaid taxes. Even the chairman of the Football League has admitted that he

“cannot defend the morality of it”.

I believe that getting rid of the football creditors’ rule would encourage football clubs to have greater openness in their dealings with each other, as there would be an element of shared risk. A club would really want to know if another club to whom it was selling a player could afford the transfer fees it was asking. Getting rid of the rule would also give the football authorities an even greater stake in ensuring that clubs do not go into administration during the season, which compromises the competition as they are forced to sell players and severely weaken their squad.

The issues I have touched on today affect English and Scottish football, but not exclusively; they affect football right around the world. In the absence of firm leadership from FIFA on these important matters, I believe that it is important that we take a stand and do our bit to clean up football in our country and give our fans a proper say and stake in how their clubs are run. These are the reasons why we need the Bill, which I commend to the House.

I rise to point out briefly a fundamental flaw in the Bill, but I commend the hon. Member for Folkestone and Hythe (Damian Collins) for the work he has done in this field and through the Culture, Media and Sport Committee—its reports are excellent and we look forward to the report on racism in football. He identified a particular problem that is dear to my heart: the opaqueness of the ownership of Leeds United football club, a club I have supported throughout my life. Indeed, I have attended many hundreds of the club’s matches over the seasons—I appear to be the only Member of the House who regularly attends. I therefore have a great deal of sympathy for the principles and detail of what he is putting forward.

However, we are coming to the end of a parliamentary Session and I know that the hon. Gentleman will be considering resubmitting the Bill in some way after the Queen’s Speech. The Bill’s fundamental weakness is the fact that it would deal only with the top four leagues. I have another love in my life, another football club, and the world’s fourth oldest: Worksop Town football club. As a non-league club, Worksop Town would not be covered by the Bill, yet the non-league clubs across England and elsewhere have suffered far more than the professional clubs as a result of the problems of opaqueness and the asset strippers who have come and taken the clubs away. Some 33 current English league teams of the 92 have been in administration since 1992 and the Sky deal and the establishment of the premier league. Far more non-league clubs have gone into administration, and a considerable number have been liquidated. Whether in Worksop, Halifax, York, Wrexham, Crawley, Salisbury, Boston or Lincoln, non-league football across the country has been plagued by the problem of people buying clubs, asset-stripping and attempting to develop the land. It is a fundamental problem.

I shall not push the Bill to a vote, but should the hon. Gentleman come back to the House with it after the Queen’s Speech, I urge him to incorporate non-league clubs into what is a very worthy proposal.

Question put and agreed to.


That Damian Collins, Dr Thérèse Coffey, Philip Davies, Thomas Docherty, Paul Farrelly, Louise Mensch, Penny Mordaunt, Steve Rotheram, Mr Adrian Sanders, Jim Sheridan, Mr Gerry Sutcliffe and Mr John Whittingdale present the Bill.

Damian Collins accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 April, and to be printed (Bill 316)