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Coventry City Football Club

Volume 560: debated on Tuesday 12 March 2013

Thank you, Mrs Main, for presiding over this debate, which gives us an opportunity to discuss an issue of such concern to the city of Coventry, to local people and, most particularly, to Sky Blue fans.

Coventry City football club has been in deep financial difficulty for many years. Five years ago, when it had lost its ground, Highfield Road, and most of its assets, the club was sold to the hedge fund Sisu 20 minutes before the administrators were due to take over. Sisu specialises in acquiring distressed assets, and under Sisu the club’s ownership is multilayered, opaque and partly offshore in the Cayman Islands. It is claimed that Sisu has lost £43 million over the period, but nobody can be sure as substantial management fees of millions of pounds are passed between the layers of ownership and debentures seem to protect unknown investors.

A bitter battle has waged for the past year over the rent and ownership of the Ricoh arena, where the club play. The club’s owners have been on a rent strike. They say they are fighting for a more realistic settlement for a league one club, although Arena Coventry Ltd, which is jointly owned by Coventry city council and the Alan Edward Higgs Charity, believes the agenda has been to destabilise the company and thereby gain control at a fire-sale price. A much lowered rent has been offered, but the dispute continues.

Meanwhile, the fans and the people of Coventry despair as the club’s owners threaten to liquidate the business or move the club out of the city. I am grateful to the Football League, which yesterday, ahead of this debate, issued a statement reiterating its position:

“Any application to move the club to a stadium outside the city would need to be considered by the Board of the Football League. In doing so, the Board would require the club to demonstrate that it had a clear plan for returning to Coventry within a prescribed timeframe.”

I hope the Football League’s rules will therefore not allow Sisu to do anything like what was done to Wimbledon football club.

The Football League has a reform of governance programme under way, on which I would like the Minister to comment. However, the Football League, which is within the democratic control of the clubs themselves, can only do so much. Do the Government believe that will be adequate to address the challenges faced by Coventry City football club and the game?

Although the dispute between the parties over the rent level has been in the public domain for many months, and much innuendo and allegation inevitably surround such disputes, one key aspect has not had any public exposure. If we are to go forward, it must be flushed out. The football club’s owners are seeking to challenge the validity of the original rental agreement made back in 2002, and are using that challenge in an attempt to discredit the city council’s motives for paying £14 million to Yorkshire bank in December for the stadium’s debts. I cannot see what right the club owners have to issue threats on that front as they bought the club more than five years later. They had the opportunity for due diligence, and I would hope that the principle of caveat emptor meant something in that case. If the hedge fund is allowed to reopen the issue, it will be a blatant attempt to profit at the expense of those who built and paid for the stadium: in part, the people of Coventry.

My right hon. Friend has obviously done considerable investigation into the matter. I have the impression that the parent company, Sisu, bought the football club to acquire the stadium; that is my view, although I have not gone into it in depth. Has he considered a way forward? Is it worth while exploring arbitration? He will know better than I do; he has dealt with the matter a lot more than I have.

I will come to exactly that point later in my speech. It is a potential way forward that has been put to the club owners in the past few days.

To return to the issue of whether the owners will be allowed to reopen the agreements that existed long before they arrived in the city and took over the club, Martin Reeves and Chris West of the city council and Arena Coventry Ltd dismissed the threats as “desperate stuff”. However, in my view, the club owners must be prepared to justify their threats and allegations publicly or drop the issue if we are to find a way forward. I challenge them to do so.

The Sky Blue Trust, which represents fans, now has more than 800 members, an indication of the growing amount of alarm among fans. I thank the trust for helping and supporting me to prepare for this debate and for all the work that it has done over the past few years. The club has made a proposal that I put to the club owners yesterday: binding arbitration conducted by a well-qualified local man, Dr John Beech, who has a PhD in business strategy from Cranfield university and more than five years’ experience examining football finance.

Board member Mark Labovitch indicated his enthusiasm for that course of action. However, the response that I received today demonstrates how difficult it is to deal with Joy Seppala and her team. It seeks to turn the proposal of binding arbitration into an opportunity to investigate Arena Coventry’s finances and set the agenda for the arbiters. Of course, there is no suggestion that the football club’s finances or ownership structure should be subjected to investigation.

I congratulate the right hon. Gentleman on raising this important matter. The fortunes of top sporting clubs are key in any community, and the fortunes of Coventry City are important to my constituents in Rugby, as Coventry City is their closest league club. In Rugby, where some of us play a game with a slightly differently shaped ball, we had an issue with the administration of our top rugby club, the Rugby Lions, and it took some time for the sport’s administrative body to get involved. Does he believe that the football authorities are currently sufficiently involved?

I accept what the hon. Gentleman says. I will raise the general issue of the need for new governance in football, which I think applies to other businesses, and certainly to other sporting businesses. We will have to see what the Minister says, and whether he can give us any comfort with regard to pressure that the Department might be putting on the authorities or discussions that they might be having with them to ensure that the arrangements are sufficient to the task in hand.

Before I leave the issue of arbitration, I find it astonishing that Mr Labovitch, a member of the football board, should have sent me this e-mail a few minutes ago about the offer to arbitrate:

“Bob, I forgot to mention one (hopefully obvious) point: arbitration should all be conducted in public, no hiding behind claims of ‘commercially sensitive’”.

This from a company deliberately structured to prevent anybody from seeing what its business is, where the money is moved and who the eventual beneficiaries are. It is cheeky beyond belief.

The Sky Blue Trust has campaigned for fans to be given a stake in the club. In the past, club owners have said that they will do so, but when asked to make a firm offer, they have come up with 5% to 10% at a discount at some undefined future date, with no representation on the main board. The trust feels that such an offer is of absolutely no value, as it will not provide the transparency necessary for good governance.

I am also grateful to the enormously impressive Supporters Direct, which points out to anybody who will listen—this goes right to the point made by the hon. Member for Rugby (Mark Pawsey)—that this country’s record of football governance is not good. Some 92 clubs have gone into receivership in the past 20 years. In Germany, where fan ownership is the norm, not one Bundesliga club has experienced insolvency since the league’s creation in 1963. Are the Government happy with English football’s governance? Banking regulation has failed us spectacularly. Are not the same issues—lack of accountability, greed and lack of transparency—a problem in football too?

The Ricoh arena has massive potential to benefit the most economically deprived part of Coventry. It is directly connected to the motorway network and will soon be connected to the railway. Many in the city have worked hard to bring what used to be a derelict, contaminated site back into economic use, and the city is open to plans that will bring more benefit.

Many of us accept the need for a realistic approach to the lease and management issues if the stadium is to reach its full potential. Changes would be supported with the right partner at the right time. But Sisu is not entitled to bully its way into control of an asset that it did not provide, build or pay for. It must prove that it is not simply a predator with greed running through its DNA before it can expect such treatment.

The football club is a valuable part of our city’s life. In an age when communities struggle for relevance, it has the capacity to motivate people and give them collective spirit. This dispute has gone on for far too long and needs to be brought to a conclusion. I fear that Sisu, despite its words and slick presentations, has no interest in such things.

I am a Huddersfield Town fan, and my club is very much at the heart of my community, raising hundreds of thousands of pounds for the Yorkshire ambulances. Mark Robins has recently moved to Huddersfield Town as manager, so us fans feel a close kinship with Coventry City, and we went through our own financial problems in the previous decade. Also, only on Friday night, I spent the evening at a charity dinner with Brian Kilcline, who lifted the FA cup for Coventry City in 1987; I told him about this debate and he, too, sent his best wishes to all Sky Blue fans. Good luck with the quest to save the club for the community.

I thank the hon. Gentleman. For Coventry, 1987 was the pinnacle so far of what can be achieved by a football club on behalf of a city, and it was the entire city; whether football fans, rugby fans or whatever, they were lifted for such a long time by that magnificent occasion, and we want to see many more of them. We all fear, however, that we will not see such occasions unless there is a new settlement, a new realism and a new acceptance of community responsibility by the owners of the club, with a constructive approach to settling the dispute that they appear to have deliberately prolonged. They are not stupid—we are dealing with clever people—so one has to assume that their motives are not good for the community, the city or the club and its fans.

Will the Minister respond to the need for the reform of governance and for transparency in our national game? Has he looked at the reform programme of the Football League, and does he believe it adequate to the challenge faced by the game? My reading is that it would not have helped us to any great extent with the existing problems in Coventry, but if the Minister can say otherwise I will be pleased to hear it. Have the Government looked at the licensing proposals of Supporters Direct? Could those proposals provide sustainability and accountability for what is overwhelmingly our biggest national sporting game?

To the club, I say that there has been a reduced rent offer. If the owners want to be taken seriously, the time is long past for them to respond clearly by accepting or putting a definite counter-proposal, rather than the deliberate obfuscation and delay, for whatever motives, that has gone on for month after month. A reasonable response to the proposition for binding arbitration, which my hon. Friend the Member for Coventry South (Mr Cunningham) mentioned, would have been an opportunity for the club to win trust. If it had accepted the proposition, it would have seen the supporters’ trust, me and I do not know how many others prepared to join it and say that that was a reasonable way forward; my hon. Friend raised the issue independently today, so he would have been minded to get behind such action. In its response, however, the club has failed absolutely to grasp the opportunity to get with the parts of the community that care so much about the football club and economic development in the city. Instead of all the deliberate talk, innuendo and attempts to destroy reputations that have gone on, the club should come clean about its threats over the 2002 rental agreement. If we had some kind of straight response from the owners, even at this late stage, some good will would rally to their cause. They must start to examine the behaviour that we have seen for far too long.

I thank the right hon. Member for Coventry North East (Mr Ainsworth) for securing the debate and for his contribution. As I hope he knows, he is well respected both as a Member of the House and in the Ministry of Defence, where he served with much distinction at the end of the previous Government. That is evident in how he presented his case today. May I also record a small apology for some confusion over who was to respond to him in the debate today? I was due to be in a Bill Committee all afternoon but, fortunately, it wound down a little early, so I am sorry if that caused any confusion.

The right hon. Gentleman put his case extremely well. I entirely agree with him on almost everything he said. I place on record my sympathy for the fans of Coventry City football club for the position in which they have been put and for the way in which it came about. No one who cares about football clubs or sport in general can find the series of events that he has outlined today in any way satisfactory. In fact, almost everyone would conclude that that is a disastrous way in which to run a sports club, in anyone’s judgment. The tragedy, in a sense, is that the situation he outlined is not unique to his club. At some stage over the past 10 years, more than half of the Football League’s 72 clubs have been insolvent, which is clearly not satisfactory.

Rather than read through my prepared speaking notes, if the right hon. Gentleman is happy, I will try to answer the various questions that he posed to Government. First, do the Government believe that the Football League’s approach is sufficient? It is fair to say that under the leadership of Greg Clarke, the Football League has made considerable strides and, as I would expect, the right hon. Gentleman fairly alluded to that in his remarks. The tightening up of many of the financial fair play rules that have happened on the current chairman’s watch are welcome, necessary and a step in the right direction. Indeed, when Greg Clarke was interviewed by the Culture, Media and Sport Committee as part of its inquiry into football governance, he straightforwardly said that debt is

“the single biggest problem for football”.

That was entirely mirrored in what the right hon. Gentleman said today. He also asked if I thought that the reform programme would in itself be sufficient. The honest answer is, no, I do not. There is a great deal more ground to be covered. I will come on to some of the ways in which we are trying to cover that in a moment.

The second area touched on by the right hon. Gentleman was the legal dispute between the club owners and the city council. I hope that he does not think that I am ducking the question completely if I say that without precise knowledge, it is difficult to comment in any detail. From what he said, it certainly sounds as if it is at least an unsatisfactory situation. Clearly, if it will lead to legal action, I must be a little careful.

I have an interest in the club to declare, which I do so willingly.

Before the Minister moves on to the general considerations, could he find any way in which he might facilitate mediation? The two sides are locked in what seems to be a deeply held, personal, embittered struggle, and someone needs to find a way to help them out of it. I know that he cannot appoint a mediator, but is there anyone in the Department who could use the enormous influence of his office to facilitate such an event? It is difficult but if he could be positive it would help.

I have no statutory power as a Minister to intervene. The hon. Gentleman, however, is not asking for that; he is asking if I could use my good offices to effect a solution. As long as my powers and the limitations on what a Minister can achieve are clearly known, I have enough respect for the Opposition Members present, in particular the right hon. Member for Coventry North East whom I have dealt with over many years, to say simply that if there is a stage at which my intervention might be helpful, I am happy to do so. The danger is that that card, once played, might be the final card, so it might be better to try some other avenues first.

I would be wary of asking the Minister to become involved in mediation, because the proposal has been made by the club, and there are grave worries that it may be just part of the prevarication that has gone on for some time, whatever the motive.

I thank the right hon. Gentleman for that helpful intervention. I leave the matter with him, but if he thinks I can do something to help, I am happy to do so. I suspect that a more obvious target might be the chairman of the Football League, who is supposed to be independent in these matters.

The problem is exemplified by my right hon. Friend’s intervention. Assuming that it is impossible—the people involved are bitter, and are at it like that all the time—someone should go in with a cool head, look at both sides without taking a prejudiced position, and try to bring them together. That would be the role to take, but I appreciate that the Minister has no statutory power.

The hon. Gentleman puts the issue well. That is the role that should be carried out by the Football League in the first instance, but if for any reason that proves impossible, I will be happy to look at any sensible proposal.

The right hon. Member for Coventry North East asked about supporter representation on the board. I will come to the bigger ticket way that that is being dealt with in a moment. I have worried about this, having looked at it during most of my three years as a Minister, and it can become a bit of an Aunt Sally. It is not much use having one supporter on a board, if there are 10 others who can vote him or her down on each and every occasion. It is about the message it sends out. The drift from the Government and the Select Committee on Culture, Media and Sport is that this is an area that needs to be addressed, and that until now supporters have been under-represented in and under-consulted on the running of football clubs, and their views on how football clubs are run have not been sufficiently taken into account.

The football authorities—I will come to the process in a moment—have been invited to make proposals. It remains to be seen precisely where they get to. If this area were working well, different solutions would probably work for different clubs, depending on their ownership structure and the history of their involvement with supporters. If that does not happen, the Government will have to take action, and I will come to that.

The fourth question, which wraps all this up, is whether the Government are happy with football governance. The honest answer is no. That leads to a question about what we have done about it. There has been some progress over the last couple of years. All 92 professional clubs are adopting the financial fair play proposals—I will come to the Culture, Media and Sport Committee’s process in a moment—and the Football Association has finally set up a regulatory authority that will have power to determine applications under FA and Football League licences and directors’ criteria, and to look after moves.

Soon after I became a Minister, I turned up for a Wednesday morning debate in Westminster Hall to find the best part of 60 Members of Parliament wanting to speak, and it is clear that football governance is an area that is causing concern throughout the House. To try to maintain a cross-party position, we asked the Culture, Media and Sport Committee to look at it. In the middle of 2011, it produced a report, which I am sure the right hon. Gentleman has seen, with a series of recommendations for the football authorities. They were challenged to go away and work together, which was something they had not done very successfully until then. There is often friction between the Football League, the Premier League and the Football Association. They have worked much more constructively together in this instance, and produced an interim response to the Committee. They agreed that there was a need to change, and that they would bring forward new regulations by August. With our encouragement, the Select Committee invited them back to review progress at the end of last year or the beginning of this year, and produced a report that basically said that some progress had been made, but not quickly enough. It contained a straightforward recommendation to the Government that if further progress was not achieved by the middle of this year, the Government should not hesitate in legislating.

Those of us who have been in government would be properly wary of that move, but if it is the only to achieve proper progress, we are prepared to do it, albeit that I would want it done on a cross-party basis. There would be little point otherwise because if the Government changed, the regulations might move about. An absolutely key part of any legislation would be the regulations on supporters’ involvement in their football clubs.

Those were the questions the right hon. Gentleman asked me. Time is running out, so I will not read my script. If he is happy with that and does not want to ask me anything else, I will simply finish where I started and thank him for the debate. I wish him and his local MPs well with Coventry football club. It is a great club, and it does not deserve to have got into its present position. I wish him and others every success in their efforts to bring about a brighter future for it.

Question put and agreed to.

Sitting adjourned.