MUST response to the House of Commons Culture, Media and Sport Committee inquiry on Football Governance
January 2011
1. Introduction
This inquiry is extremely welcome, as we believe both Parliament and Government should be acting to ensure football governance and regulation is reformed. We know that politicians from all sides of the House do not wish to interfere in the running of the game, but the Government should be establishing the correct framework so that football can then run itself more efficiently, professionally and in the interests of both clubs and supporters. Football authorities have been given multiple opportunities to reform but have failed to do so.
MUST has been at the forefront of the debate on Football Governance (and the related issues surrounding ownership of clubs) and had meetings with representatives of all parties prior to the last election with a view to influencing manifesto content. MUST directly represents thousands of UK citizens as well as the interests of millions of Manchester United supporters.
However we recognise we are just one supporters’ trust amongst many at clubs across the country but we believe the issues confronting us are representative of those for a huge number of supporters at all levels as well as specific issues affecting the bigger Premier League clubs.
We understand there is no single one size fits all solution for clubs and their fans so, in addition to considering the issues affecting football as a whole it is also important to consider the different challenges faced by groups of clubs of different sizes and ownership structures.
Further information on MUST, our membership and our history can be found at the end of this document following an outline of our concerns and our suggestions for changes to governance in English football.
2. Current ownership of Manchester United
The Glazer family purchased Manchester United in May 2005 and removed the club’s public listing. The purchase, which also forced supporters to sell their shares in the club, was financed largely through acquisition debt. Before 2005 the club had no debts and was on a sound financial footing, with the then (and current) Chief Executive, David Gill, (along with the entire board) opposing the attempted purchase of the club - stating “Debt is the road to ruin”. Sir Alex Ferguson added that any approach to buy the club was “unnecessary and unwelcome”.
At present, the most commercially successful football club in the world is still struggling to finance the debts that served no purpose other than to help fund the Glazers’ acquisition of the club. The club’s commercial, matchday and media revenues have all risen since the takeover, mainly due to the success of the team and the success of the Premier League’s collective deals for all its member clubs, yet the amount of money required to finance the debt exceeds the club’s operating profits. Supporters are paying dramatically increased ticket prices (which the Glazers gave assurances to the then Department of Trade and Industry would not happen). They see the club generating higher revenues than ever before, yet do not see any significant investment in the team and certainly not at the levels of pre-2005. There is a major distinction here between other high profile clubs who have run up debts in order to compete on the field (e.g. Leeds United and Portsmouth) and the case of United where the creation of debt has not been for football reasons at all.
Adding to supporters’ frustrations over the debt is the secrecy and lack of communication by the Glazer family. They have failed to meet with or communicate with any supporter group, and relations with the fans are at an all time low. No open conversation has ever been held about the club’s finances, which is alarming to supporters especially when the Bond prospectus published in January 2010 revealed so much worrying information on the levels of the debt. It was this that provoked the now famous green and gold protests, when supporters chose to wear the original colours of the club. Conversation has been limited to one scripted interview on the club’s own television channel, MUTV, shortly after the takeover, and we find this unacceptable for a cultural institution with the importance and reach of Manchester United.
We find it remarkable that the governance of the game allows supporters to be treated with such contempt, and can think of no other business that treats its ‘customers’ in such a dismissive and complacent manner. Unlike in other industries, businesses or brands, football supporters have a loyalty to the team they support and they cannot just choose to buy the same product elsewhere. This loyalty should not continue to be exploited as it is at present.
3. Addressing the governance of the game
We believe that:
a) The Government should encourage the growth of shareholdings by registered supporters’ trusts by offering tax incentives to promote investment. Such incentives, as have been successfully offered previously to the film industry for example, would be universally popular with both supporters and the football authorities. It would also help the Government to fulfil the Coalition Agreement’s pledge to “encourage the reform of football governance rules to support the cooperative ownership of football clubs by supporters”.
b) There is widespread agreement that the Football Association needs reform to make it fit for purpose. It should be empowered to regulate the game effectively with a board which is completely independent from the organisations it seeks to regulate. The board should also have notable supporter representation from all levels of the game ideally with the introduction of real democracy.
c) The Football Association should continue to have a commercial arm that seeks to maximise revenues from sponsorship and media deals, but this should be a separate function to its regulatory responsibilities. Currently there is a clear conflict of interest. For example if the FA wished to impose rules on debt or capping ticket prices this creates a major dilemma when the financial status of the Wembley Stadium project has created their own debt and a pressure to drive ticket prices higher and explore all commercial avenues to raise revenues. The Association should be acting as a strong regulator in the game. The regulatory function should be genuinely independent with secure and guaranteed funding that would not make it reliant on keeping the ‘big clubs’ in favour. Nor should it allow the Premier League to have control/ veto of appointments. The new regulatory arm would also need powers to impose sanctions and to have a strong say in the rulebooks of the English leagues.
d) A new strengthened club licensing system, in line with UEFA’s existing criteria, would allow the Football Association to enforce regulation of debt and ownership. A timetable to convert existing debt to equity is needed and, and in future, football debt should be replaced by issuing new equity (with supporters encouraged to participate) as the mechanism for raising capital. If it isn’t possible to raise capital through uptake of new equity there must be a good reason and so this forms a natural brake on embarking on high risk activities. The Premier League has been a fantastic success and we welcome the changes that have improved the standard of football on offer and allowed English clubs to take on the best in the world. However, while we accept and understand the benefits of the Premier League’s commercialism and the investment it has brought, we also feel it should be regulated properly for its own long term good. A lack of regulation and restriction around ownership is especially concerning, and we note that it is not in the long term interests of the Premier League to allow models which remove money from the game rather than encourage investment in it. The Premier League’s current structure, in which it must represent its twenty member clubs even if they are short-term investors with no interest in the long-term state of the game, does not currently allow them to address this issue. This impacts on a whole host of wider issues such as the England national side.
e) The Football Association and/ or Premier League should be required to ensure that all club owners contribute to taxation in the United Kingdom. At present, the Glazer family are taking advantage of the fact that interest is tax deductible for companies when calculating corporation tax. By loading so much debt onto United, they manage to generate an interest bill that offsets all the club's profits and hence pay little or no corporation tax. The club’s accounts show a tax charge from 2006 to 2010 of £82.0m (ex-deferred tax) or £89.5m (inc-deferred tax) but the parent company (Red Football) only actually paid £3.4m. While this isn't a football specific issue - it's common to all leveraged buyouts - the football authorities could not permit it within the game. Alternatively, a wider law could ensure that no company should receive tax relief should it not be permanently registered in the UK and subject to the maximum transparency and disclosure requirements.
4. About MUST
MUST is an Industrial & Provident Society- a democratic and not-for-profit mutual society which is registered with and overseen by the Financial Services Authority. We were formerly known as Shareholders United, but reconstituted as MUST after the Glazer family’s purchase of Manchester United in 2005 when all supporters who had not already done so were forced to sell their shares in the club.
We are a voluntary organisation representing over 160,000 Manchester United supporters and our aim is to ensure that supporters of Manchester United have a meaningful stake in the ownership of the club. Our board and committee are elected, and we also have a number of high profile patrons from the worlds of sport and entertainment, as well as five members of the Houses of Parliament.
We want to make clear from the outset that we do not wish to run the club – we believe it should be professionally managed by qualified individuals who are best suited to doing so – but we do believe the priorities of the club should mirror ours, namely a stable financial future and a continuing improvement in the standard of football on offer. Supporter ownership does not prevent us from wanting the club to generate strong profits - we want to see high revenues at Manchester United - but our concern is about where this money goes at present. It should be used for the good of the football club and its supporters, not to pay off acquisition debt loaded onto a profitable football club by owners who patently did not have resources of their own to acquire the club in the first place.
We would very much welcome the opportunity to come and discuss these issues in front of the Committee during the course of the inquiry.
ENDS
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