In May 2021, the UK Government commissioned an independent,
fan-led review of football governance in England following three
“crisis events”. The report has thus far received a
varied reception. Some have welcomed its recommendations, and
believe that they will bring about much needed reform of the
current model of football governance. Others questioned the need
for the review, and warned that the recommendations risk
over-regulating the model which brought the English leagues to the
forefront of global football. Here we will outline some of the more
controversial recommendations and consider their potential
implications on the governance of football in England.
Why was the fan-led review commissioned?
On 24 November 2021, the report on the Independent Fan-Led Review of
Football Governance was published. The UK Government
established the review in response to:
- The collapse of Bury FC, a club based in north-west
England that was expelled from the Football League and placed
into administration in 2019 as a result of financial mismanagement,
putting an end to the club’s 134 year history; - The impact of the COVID-19 pandemic, as government
regulations temporarily prevented professional football games from
taking place and led to a significant decrease in revenue;
and - The plan to create a breakaway ‘European Super League’,
in which six English clubs were to participate. After widespread
pressure from fans and the wider public, the six clubs eventually
pulled out of the proposed league.
Although the events that triggered the review were unconnected,
the report identified a number of common structural challenges
facing Football Governance, all related to three root
causes:
- The incentives of the game mean that many clubs are gambling
for success, and subsequently facing financial distress; - The way clubs are run means that the interests of the fans and
owners are often misaligned; and - The current regulatory setup is not sufficient to ensure a
sustainable future for clubs.
The report sets out 47 detailed recommendations, each relating
to an overarching strategic recommendation. These are wide reaching
and would introduce fundamental changes likely to impact almost
every area of the game. We examine five key areas in which the
report has proposed changes.
Creating a new independent regulator for English football
(IREF)
The report considers that the need for further regulation is
clear, and that an independent regulator would be the best way to
implement this. The proposed IREF would focus on the long-term
interests of the fans, clubs and wider game free of undue influence
from the more powerful clubs, and address the perceived conflict of
interest regarding member clubs controlling the constructional set
up of existing structures.
The Sports Minister, Nigel Huddlestone, has confirmed to the
House of Commons that the UK Government endorses the recommendation
for the creation of IREF “in principle”. However, the
owners of many football clubs disagree. Following an emergency
meeting of Premier League clubs, the Chief Executive of the Premier
League, Richard Masters, publicly voiced his opposition to the
plan. Opponents question the need to change the current model of
regulation, under which the Premier League has risen to become the
richest football league in the world, with Christian Purslow,
Chairman of Aston Villa FC, warning that the creation of an
independent regulator would risk “killing the golden
goose”.
The report states that IREF would be accountable to Parliament,
but does not provide much further detail on this point, prompting
concerns over accountability. Some feel that the clubs and leagues
who conduct the day to day business of running English football
should have more of a say on the decisions of a proposed
regulator.
Angus Kinnear, Chairman of Leeds United, made the point that
football has flourished as a private sector business, and compared
the philosophy underpinning the recommendations to “Maoist
collective agriculturalism”. However, this view was not shared
by the Leeds United Supporter’s Trust, one of many
supporters’ trust directly consulted by the review, which
released a statement supporting the creation of an independent
regulator. This highlights the very different views held by
stakeholders, even within the same club.
The proposed IREF would be tasked with operating a new financial
regulation regime. The report notes the existing Financial Fair
Play Rules do not prevent reckless spending and are not sufficient
to prevent clubs gambling with their finances. Many clubs,
especially those in the Championship or League One, spend outwith
their means in order to generate short-term ‘on the pitch’
success, in the hope that this will result in promotion and a
subsequent increase in revenue. Clubs have also been able to find
ways to circumnavigate the current rules, for example, by selling
their stadiums and leasing them back. The report concludes that the
current rules need to change.
The new financial regulation regime would take the form of a
license requirement for clubs to have adequate financial and
non-financial resources to meet their committed spending and
foreseeable risks. IREF would also have the power to limit the
level of money that an owner could put into a club based on the
size of the club’s existing finances. The non-financial
resources of clubs would also be reviewed through a requirement to
agree a plan for the most extreme negative scenarios with IREF.
Some stakeholders have raised concerns that these
recommendations would put English clubs at a competitive
disadvantage in international competitions. Player salaries are
clubs’ biggest expenditure by far and there tends to be a
correlation between expenditure on wages and results on the pitch.
There is therefore a possibility that restrictions on spending
could affect on the pitch results and therefore the ability of a
club to compete with foreign clubs which do not face the same
financial restrictions.
It should, however, be noted that similar financial restrictions
already exist in some foreign leagues. Clubs’ spending on
player salaries in La Liga, the top division of Spanish football,
is capped according to their turnover and revenue from the previous
year. Spanish clubs have won five of the eight Champions League
finals and six of the eight Europa League finals held since this
regulation was introduced. Some stakeholders would point to this as
evidence that financial regulation does not necessarily put clubs
at a competitive disadvantage with their counterparts from foreign
leagues.
Introducing new tests for owners and directors
The report recommends that IREF establish new tests for owners
and directors of football clubs. The proposed owners’ test
would include requirements to submit a business plan to IREF for
review and to provide evidence of sufficient financial resources to
meet the requirements of that business plan. The proposed
directors’ test would require a director to demonstrate that
they have the necessary qualifications, skills, and experience to
run the club.
Both owners and directors would also be subject to an integrity
test based on similar tests currently imposed by the Financial
Regulation Authority and the Home Office. The integrity test would
involve an assessment by IREF of whether the individual is of good
character such that they should be allowed to be the custodian of
an important community asset. IREF would consider factors such as
the presence (or otherwise) of civil and professional sanctions
against the individual, and the propriety of the individual in past
business dealings.
This would also involve consideration of the integrity and
reputation of any close family member or business associate of the
proposed owner. The proposal is topical considering the recent
takeover of Newcastle United by PIF, the sovereign wealth fund of
Saudi Arabia. Under the current regime, Mohammad Bin Salman Al
Saud, the Crown Prince of Saudi Arabia and the Chairman of PIF, was
not subjected to the owners’ and directors’ test. This was
criticised by a number of stakeholders, who consider that he has a
controlling influence on the club, but did not think that he would
have passed the tests.
The extension of this test to encompass family members and
business associates has proven to be one of the more controversial
recommendations of this report. Some stakeholders believe that this
would allow a regulator to take a more rounded view on the
integrity of the individual and those who may influence them.
However, dissenting stakeholders have questioned the relevance of
an individual’s family members and associates to their ability
to run a football club. Others have gone even further, with Steve
Parish, Chairman of Crystal Palace, opining that this aspect of the
integrity test would be more suited to a dictatorial regime like
North Korea than a free-market western economy. Given the reaction
to this proposal, it is likely that this will be the subject of
much further discussion should the Government attempt to introduce
this recommendation.
Encouraging greater fan influence in club decision making
The report acknowledges that football fans play a vital part in
the culture of the organisation while also generating a significant
portion of the club’s income, and considers that encouraging
fan engagement recognises the importance of clubs as cultural
institutions within their communities in addition to being
commercially sensible. The report notes that there is often a
disconnect between those who own and run football clubs and the
supporters of those clubs.
One way in which the report proposes to address this is through
the creation of a Shadow Board. This would be composed of a number
of diverse supporter representatives and would discuss the business
of the club, but without the same legal responsibilities as those
who own and run the club. The Shadow Board would expect to be
consulted on all material ‘off the pitch’ business and
financial matters. The report stresses that this would not be an
avenue for fans to raise grievances regarding ‘on the
pitch’ matters such as formations and player
performance.
The report also acknowledges the need for additional protection
of certain aspects of football clubs that are integral parts of its
heritage, such as the stadium, the badge and the club colours.
There have been past occasions where those who own and run a club
alter these aspects to the dissatisfaction of supporters. The most
well-known was the club formerly known as Wimbledon FC. The owners
of the club, founded and based in Wimbledon, moved the club to
Milton Keynes, renamed it ‘MK Dons’ and altered the badge
and club colours. This move was widely unpopular among the fans of
the club and, in response, a group of fans founded a successor club
named AFC Wimbledon, based in Wimbledon and sharing the colours and
aspects of the badge with the original club.
In order to protect these key aspects, the report recommends the
implementation of a ‘Golden Share’ veto right; a veto right
which would be held by the fans of a club and exercised over
certain decisions regarding key aspects of the heritage of that
club. Examples include the decision to change the name of the club,
or for the club to join a new competition not affiliated to FIFA,
UEFA or the FA. As a condition of retaining their operating
licenses, clubs would be required to amend their Articles of
Association to incorporate this ‘Golden Share’ veto right.
This veto would be held by a Community Benefit Society
(‘CBS’) formed for the benefit of the fans of said club.
The majority of the 92 clubs operating within the Football League
already have a CBS of this nature in the form of a Supporter’s
Trust, but those which do not would be encouraged to set one up.
This process would be regulated by IREF.
Redistributing revenues
Football in England has become a multi-billion-pound global
industry. However, there remains a large disparity in wealth
between divisions. Evidence submitted to the review showed that, in
the 2018/2019 season, the club which finished last in the Premier
League received £96.8 million in distributions from their
league, whereas the winners of the Championship received £8.5
million from their league despite finishing just one place lower in
the pyramid. Finances are crucial to the success and the long term
sustainability of the club, and the report considers that the
current formula used by the FA to redistribute revenues is unfit
for purpose and should be replaced. Football authorities are deemed
best placed to determine a more effective formula and are
encouraged to do so. It is proposed that IREF would have the power
to intervene and impose a solution if this is not
achieved.
Clubs that face relegation and the subsequent decrease in
distributions from their league can quickly find they can no longer
afford to pay their players’ salaries. Finding it necessary to
cut costs, clubs may be forced to offload these players, but this
can have a catastrophic effect on their performance, causing the
club to drop even lower down the standings
In order to address this, the report recommends the introduction
of a new compulsory clause in the standard player contracts that
provides for an automatic adjustment to player salaries at a
standard rate upwards on promotion and downwards on relegation.
The report also recommends the introduction of a ‘solidarity
transfer levy’, to be paid by Premier League clubs on any
transfer within the Premier League or any international transfer.
The money raised by this levy would then be redistributed to other
English clubs and leagues outside the Premier League.
This levy would not be charged on transfers of players to or
from other English leagues. This would make those transfers more
attractive to Premier League clubs and thereby achieve further
redistribution of resources. The report does not provide exact
figures, but given that Premier League clubs have spent in the
region of £9.9 billion on transfer fees in the past five
years, it predicts that the money raised by this levy would have a
significant effect on the rest of English football.
These recommendations were received less favourably by
stakeholders of Premier League clubs than those in the lower
divisions. Karren Brady, the Vice-Chairman of West Ham United FC,
has stated that the Premier League already gives away around 15% of
its revenue, a figure she says is higher than any other league in
the world. She has also argued that the introduction of a transfer
levy could make Premier League teams less competitive in the
international transfer market.
Meanwhile Rick Parry, the Chairman of the English Football
League, welcomed these recommendations as an attempt to achieve
financial stability and Kelvin Thomas, the Chairman of Northampton
Town FC, stated that the redistribution proposed by the report
would support the wider pyramid which is essential to football in
England.
Reversing the alcohol ban
The report identified a number of areas in which current policy
stifles income generation at football clubs in the lower leagues.
One of the most controversial is that the sale of alcohol in sight
of the pitch is currently banned under the provisions of the
Sporting Events (Control of Alcohol etc.) Act 1985, which applies
to all clubs playing in the National League and above.
The report highlights the case of Dulwich Hamlet, a
semi-professional club based in South London. The team currently
plays in a league in which the sale of alcohol in sight of the
pitch is permitted, and this is a substantial revenue stream for
the club. However, were the club to achieve promotion, it would
then be subject to this ban which would lead to an estimated 40%
drop in income. This creates a disincentive for success, which
undermines the merit based system of the English football
pyramid.
This case study also highlights the potential financial benefits
of repealing this legislation. Figures submitted to the review
suggest that this legislation currently costs football clubs in
League Two roughly £2 per head per match. When those figures
are extrapolated, this results in a loss of around £4.4
million across the league per season.
The legislation was originally introduced to combat the rise in
football related disorder in the 1980s, to which alcohol was
considered a contributing factor. Figures presented to the review
by the UK Football Policing Unit show an overall downward trend in
football related arrests over the last nine years.
Additionally, the review cites evidence that this legislation
might have exacerbated the problem by encouraging binge drinking
immediately before and after games. The Association of Chief Police
Officers stated that strictly controlled drinking within football
grounds is easier to police than more dispersed drinking in
locations away from the ground.
Having considered the above factors, the report recommends the
introduction of pilot programmes to allow the sale of alcohol in
sight of the pitch during matches in the National League and League
Two. It also recommends that the Home Office conduct a review of
the Sporting Events (Control of Alcohol etc) Act 1985 in order to
determine whether it is still fit for purpose.
These recommendations have been welcomed by many stakeholders,
who point to the fact that most games for which this pilot is
proposed have minimal policing requirements, and cite relatively
low levels of disorder at other similar sporting events at which
the sale of alcohol is fully permitted. Others, including Chief
Constable Mark Roberts, the football lead of the National Police
Chiefs’ Council, have warned that the figures continue to
indicate an ongoing problem with disorder at football and that
allowing drinking in sight of the pitch could fuel this
disorder.
Next steps
The UK Government is set to fully and formally respond to the
report in early 2022, at which point it will be clearer which of
the recommendations, if any, are likely to become law.
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