In part 2 of this 'Football Governance' Hearing, Louise Bagshawe speaks about Portsmouth FC-#MyPompei and questions relating to the club being put into administration.
I have followed Portsmouth FC for approximately a year and a half, before the club was finally taken over by the Liquidator and I would post comments. My opinion is that there was a nimber of factors and people who contributed to the club's near down-fall.
This club was the first ever Premier League club to be put into administration, was deducted nine points and I watched their final game and the boys along with their then manager, Avram Grant carried on regardless and I felt such a sense of pride and respect for them as they played on with Guts, with the club supporters' there to the end and with their heads held high.
My respect for Avram Grant was reinforced when he and the first team, dug into their own pockets and paid the wages of their groundsman, TUG and a few of the other employees at Portsmouth FC as well. This fine Israeli man has a big kind heart, like those Portsmouth boys-Reminds me of another man, a football club owner and his name is Terry Serepisos who owns our one and only New Zealand Professional Football Club, the Wellington Phoenix-A big, kind heart.
Many of you will no doubt have read some of my not so nice comments and tweets about Harry Redknapp and I make no apologies for them. However, Harry is just one of the people involved in what happened to Portsmouth FC and he, Milan Mandaric and Peter Storrie were arrested after a 26-month long tax and police inquiry..."dubbed Operation Apprentice", into alleged football corruption. Harry was detained in November 2007 by investigators examining transfer fees at Portsmouth Football Club". In relation to Harry Redknapp, it was related to two payments totalling $295,000 alleged to have been made by Mandaric to Redknapp via a bank account in Monaco, evading tax and National Insurance contributions due between April 01, 2002 and November 28th, 2007.
IMAGE ONE: Harry Redknapp
IMAGE TWO: Milan Mandaric
IMAGE THREE: Peter Storrie
Obviously, Harry Redknapp has paid the best lawyers as I have'nt seen any updates on what happened in court...Which brings me back to the current Inquiry into 'Football Governance', I shall now continue with a question from select committee member, Louise Bagshawe.
Ms Bagshawe: On learning the lessons, Portsmouth obviously went through many ownership changes before it went into administration. There has been some speculation in the press, Sir Dave, that you approved successive ownership changes. Do you think that the fit and proper persons test was properly applied? In the case of Mr Ali Al-Faraj there has been some suggestion in the press that not only was he not a fit and proper person, but he wasn’t even a person at all and didn’t in fact exist. Do you recognise these criticisms?
Richard Scudamore: I recognise that he has been referred to as "Mr Al-Mirage" on more than one occasion. The reality is that we went through all the tests that one would need to go through to get a passport in this country, and we had his passport. We had documentation; we had written documentation. Yes, we didn’t meet him face to face, which is why our rules have changed. Now we insist on an absolute meeting. We insist on meeting face to face. The rules have changed. But yes, we did not meet that particular person and that is why that rule has changed. We believe he did exist, though, but I can’t say I have seen him.
Sir Dave Richards: Can I make it quite plain I never approved anyone? We have a system within the league. It is very tight. It goes through lawyers and different systems so no one individual could approve it. There was one occasion I was in Rome for a Champions League game and a gentleman asked to see me. He was an Arab gentleman and he asked to see me to explain the fit and proper persons test. He was the gentleman that was trying to buy it. I went to see him. I was there no longer than 20 minutes. I explained to him it was all about documentation and coming to the Premier League and presenting who he was and what his funds were and where the funds were from, and I left. I had never met the gentleman before and I have never met him since.
Richard Scudamore: It is an important topic, a serious topic, and, Chairman, I sent you a letter last week that detailed quite a lot of what happens in our now strengthened owners and directors tests. I think it would also be useful if I sent you separately a supplementary piece of information, which is when anybody wants to look at acquiring a Premier League club or an interest in a Premier League club there is now a very detailed checklist and set of checks that we make and evidence that is required. I think I will send you this as supplementary to the letter I sent you last week, because we don’t underestimate how important this topic is.
I find what Sir Dave Richards said that he had never met "Mr Al-Mirage" really incredulous-The Fit and Proper Persons Test (FPPT) should include football officials as well!
Mr John Whittingdale (Chair): That would be helpful.
Ms Bagshawe: I take it on board, Mr Scudamore, that you have just said that you recognise there were some failures and you have strengthened your governance on that issue because of those failures. Can I put it to you that you have just said that the Premier League was taken by surprise that a club at Portsmouth’s level could get itself into such trouble? Given that the club was failing and being taken over again and again, I take the point that the fit and proper persons test has now been strengthened, but at the time, as these successive changes were going through, and with the Premier League clearly having been caught on the hop, did it not occur to you that, even under the old rules, you should be applying the then existing fit and proper persons tests more rigorously than they seem to have been applied at that time?
Richard Scudamore: Except for the fact that the fit and proper persons tests were about establishing, effectively, criminality and unsuitability because of that criminality. Therefore, we were unable to establish that any criminal act or any breaches of the absolute rule had been undertaken. Remember, it was the same time we were introducing the financial rules, which are about sustainability, and they are different things, but they are wrapped up in the same thing.
Richard Scudamore should stop trying to evade and make excuses for what was obviously a FPPT not rigorously applied in this case and as far as I am concerned the FPPT is still NOT vigorously applied in the case of the recent purchase of Blackburn Rovers Football Club by the Venky Family!
Jim Sheridan: Before I move on to the next question, can I put on record my surprise that in relation to the Andy Burnham submission, as we are now calling it, in the runup to 31 March there wasn’t a submission that came in from the Chairman of the FA yet no one bothered to ask the question why is there not a submission from the Chairman of the FA. However, I think you are quite right-that is a question for Lord T.
Wow! Richard, I do concur with his statement, " You have more say in the insolvency laws in this country than I have and if you wish to change the insolvency laws to allow charities or small business with a certain turnover threshold to become preferred creditors or preferential creditors".
Damian Collins: I think there is another element to this, and this was a point that David Gill made when he gave evidence to us. He agreed with the idea that if the football creditors rule did not exist clubs would have to be more open and transparent in their financial dealings with each other, because there would be greater risk, and transfers and payments between clubs, which are a very big part of clubs’ expenditure in putting their teams together, may have a helpful and deflationary impact. I think Lord Mawhinney also talked about the integrity of the competition and whether you can protect the integrity of the competition if clubs are using their liabilities to other suppliers to fund their football activities.
Now if there are any Manchester United fans' reading this next excerpt I am about to post...I am sure there will be a lot of 'Coughing' going on...
Richard Scudamore: David Gill is probably the best chief executive in football.[Coughing] He runs a club, but he is in a fortunate position where he runs a club with the ability to trade almost on a cash basis with others. There is the idea that across professional football all 92 clubs should go into a full due diligence situation in terms of this. Given we have this system, remember in our particular case we generate significant central revenues. Those contracts are entered into only with the Premier League, not individual member clubs. We have significant funds such that when this situation comes along, as it did in Portsmouth, we are able to keep, for example, Watford in business, effectively. Watford were owed money by Portsmouth. We were able to satisfy other foreign clubs that were owed money by Portsmouth, which has given us great standing across European football, because I think we are the only league that has ever done that, and has satisfied club debts. So I think it is easy for Manchester United to say, "Everybody should do due diligence," because they are in a situation where not many people are buying players from them, and when they are buying players themselves it is a very different position. As I say, he comes at it from a club perspective. I sit in front of you as a league organiser with a slightly different view.
Damian Collins: What you seem to be saying is it is all right for clubs that do not have big cash flows to engage in financial transactions with other clubs knowing that they may not be able to meet those liabilities, but if they can’t they have their VAT account or other unpaid bills they could pay it from.
Richard Scudamore: You go to what is the essence of the game. I would advise caution-steering clear of over-regulating or over-prescribing something that might circumvent the essence of the game. The essence of the game since it started-the thing that gets fans most interested-is the buying and selling of players, the trading of players, on the transfer deadline. You have seen the media hype around transfer deadline. We know more about what is going on from the media hype sometimes than we do from the contract registration documents that are coming into our office. The essence of the game throughout my 14 years in the executive capacity of professional football, whenever you get to a room or the pre-meeting coffee discussions, is players and player movements: who is buying whom, who is selling whom, what is happening? The idea that you would somehow put this administrative blockage of a due diligence process in front of every single trade, club to club on transfer deadline and everything else, is a place we wouldn’t want to go.
Ms Bagshawe: Surely greater transparency would prevent that. You just gave the example of Watford being protected. Watford wouldn’t have allowed Portsmouth to run up such debts with it if it had clear sight of its balance sheet, and without the football creditors rule that would have been the case.
Richard Scudamore: Okay. We have transparency, don’t we? You have seen the Deloitte report. There is no other country that can produce the Deloitte annual report of football finance on the same basis, because certainly in US sports you won’t see that level of transparency. We are all required by regulation. We are UK-registered companies. That means that everything has to be filed with Companies House. Of course, it would be good practice for a club to establish with another club whether they can pay, and that is why a lot of deals do and don’t go through. That is done now. I don’t think, though, it is the solution to obfuscating the football creditors rule. As I say, I am not here defending many aspects of the consequences of the football creditors rule, but on balance I think the Football League, the FA and I agree that, of the options available, it is better to have the rule than not have the rule.
Damian Collins: It does seem a pretty sad state of affairs if the-
John Whittingdale (Chair) decides its time to move on...
Jim Sheridan: In my experience, and in the experience of other elected colleagues in this place, abiding by the rules is not always the best form of defence.
Paul Farrelly: I will be brief on this section, which leads nicely on from your discussion of how important it is to have integrity and stability when you are running competitions. When we talked about local benefactors buying into clubs, would you prefer them to put in equity rather than take on debt?
Richard Scudamore: I think in a hierarchical situation, yes. That is, you would prefer them just to put in equity, yes, as opposed to debt.
Paul Farrelly: The oft-mentioned Lord Triesman made a contribution in a speech on debt. Why did you and the Premier League take such exception to what he had to say?
Richard Scudamore: Again, you have to put it in the context of the timing. We were having what we thought was a very good dialogue with Lord Triesman and with Andy Burnham, the Secretary of State, all through that summer. We started the dialogue in July; we continued it in August. We were all entitled to a holiday and off we went. We came back and that dialogue stopped, and almost the next thing we had was these unilateral speeches-both by Andy Burnham and by Lord Triesman-about the state of English football. If there was any effrontery, and I don’t deny there was some, it was a sort of break with the discussions that we were having. Having said that-
Paul Farrelly: So your reaction, you were described as "tired and emotional".
Richard Scudamore: No, I don’t think it was tired and emotional at all. We were rather sanguine about it. It was others. Clearly, the media enjoyed the theatre of Lord Triesman at a speech called Leaders in Football-interestingly named-and the issue is around the fact that clearly we are proud of English football. I think this comes through. We are proud of what the Premier League has achieved. We are very proud of what the Football League has achieved. We are proud of where the FA sits in relation to other football associations around the world, where the England team sits. It is the one team-probably England and Brazil-that attracts more international interest than any other team, so when you are very proud of something, my view in terms of when you are trying to move the agenda on is that you should perhaps not criticise it quite as directly. On good leaders, I think there is an art of leadership. The first art is to get people to follow. Therefore, if you are going to display real leadership-you will have seen this in your world-you have to get people either to follow, vote for you or at least engender some support, and I think it is interesting tactics people have deployed in trying to get that support, but it is not one of the ways we would have chosen to do it.
Paul Farrelly: From your answer about preferring equity to debt, who wouldn’t?
Richard Scudamore: Yes, exactly.
Paul Farrelly: I take it you would agree with Sir Martin Broughton, nobody’s fool as we have seen over many years, the Liverpool Chairman, when he said, "If you are leveraged"-by which he means highly leveraged-"that’s bad for a football club." Is that a statement of fact that you would agree with?
Richard Scudamore: Let me take it one stage further. If it was too highly leveraged, yes; if it was leveraged, not as good; if there was no leverage at all, obviously better. Therefore, we are into the proportionality of debt, and I think that is something that our new rules will bite on, because when you have to put your future financial information in, when you have to put your business plans in-we didn’t have these rules four years ago-but now our rules are tighter on this than the UEFA licensing and the UEFA rules, because the UEFA rules don’t per se deal with debt, but ours will deal with debt, and the appropriateness and level of debt. So, yes, clearly it goes without saying it is about the amount of debt and the question, is the club at risk? Our role is to make sure that clubs are sustainable, that they stay in business, and we don’t have a role that says each club must be able to win the Champions League. That is beyond our power, beyond our reasonable control, but certainly in terms of sustainability that is the issue, and, yes, clearly there is a number at which proportionately debt has to be a risk and that would be covered, I think, by our new rules.
Paul Farrelly: The final question, as time is moving on, relates to your position when it comes to any financial regulation UEFA is involved with. You have made strides with your own rulebook, so is there no role for the Football Association in any financial regulation?
Richard Scudamore: Of course there is a role for the Football Association, because they have an overarching role in the way it works. But UEFA themselves are only competition owners; that is what they are. They organise their own competitions and they say to the clubs that want to play in those competitions, "If you want to play, these are the rules." It is the same for us. If there is a lacuna in the rules or if there is a gap in the rules, yes, we would be open to that dialogue. We would also be open to the dialogue as to who applies those rules. We are not against that at all.
Paul Farrelly: Very quickly: has the Football Association any greater role in financial regulation beyond what you are already doing than just approving the rules of the FA Premier League?
Sir Dave Richards: The executives of the Premier League and the Football Association meet every second Friday to discuss all the implications of this, and they come up with scenarios-whether it is financial or about players. They discuss this every second week. They bring it back to their bodies. Their bodies then agree the formula and it goes to the board. So if the FA wants to talk more about finance, it has ample opportunity to do it at the Friday SMT with the senior executives.
Richard Scudamore: Just so you are all clear, though, and maybe I have not made it clear, the FA are the people who are ultimately the licensor of the UEFA licence, so the work, much of the data gathering and much of the evidence is gathered by the Premier League Executive. That is all presented to FA, but the ultimate people who decide on the UEFA licences are the FA. They have an integral role in the financial regulation of football.
Ms Bagshawe: I know there are pressures on time, so would you comment on two questions at once. This is related to debt in the English model of football. Obviously, there is a growing differential between the revenue gap between the Premier League and the Football League. First, do you think this encourages clubs to overspend, to gamble on success, whether that be staying up in the Premier League or joining the Premier League and entering the Champions League? As a corollary question, we have heard evidence to the Committee that the parachute payments if you are relegated, which now last for four years, are distorting competition in the Championship. Do you think that the Premier League has a role to play in cost control?
Richard Scudamore: Clearly, that is why we are advocates of the concept of break-even, and repeating the financial fair play concept of break-even is inarguable. In terms of gamble, of course football is an optimistic, upwardly mobile, aspirational business.
Ms Bagshawe: Nothing wrong with that.
Richard Scudamore: There is nothing wrong with that. It is entrepreneurial, and Mr Cameron would be proud, and would have been in all his speeches in the last three weeks, including in Cardiff at your spring conference. That is exactly what football is. It is about the aspirational, the entrepreneurial, and saying, "We think we can invest our money and we think we can improve our lot." So yes, of course, the best thing and worst thing about the Premier League is how successful it has been. It has been a success in terms of its attendance growth-60% since we started-our viewing and our audience growth, as well as our revenue growth. That success has meant more and more clubs want to be part of us. The Championship clubs all want to be in it, despite the fact that when they are not in it they like to criticise us, but they all want to be in it, and that is the reality of English football.
John Whittingdale (Chair): On the recent European Court of Justice case, or the opinion of the Advocate-General, that may lead to an ECJ judgment on the sale of exclusive territorial rights, have you done an assessment of how damaging that will be if it is upheld?
Richard Scudamore: We haven’t done an assessment of how damaging it can be, because I don’t think the opinion is clear enough as to what the outcomes will be. The opinion is difficult; it is convoluted. It suggests certain things that might happen. As you will be aware, the process of this is that the opinion gets put towards the ECJ, the judges. The judges have to answer, I think, 18 questions set by Justice Kitchin here in the UK. Then the answers to those questions come back and he has to weave them into his ultimate decision. What is very hard to see at the moment is how we get all this to add up-even the copyright issues that have been explained, even this concept where it might be possible to make a legal distinction in the UK between a domestic card not being allowed to be used in a commercial premises in the UK. So, a UK domestic card might not be allowed to be used in a pub or commercial premises, but somehow a foreign domestic card could-under some interpretation of the freedom of movement-be allowed to be used in a pub or commercial premises in the UK. It is difficult; it is complicated.
I have followed Portsmouth FC for approximately a year and a half, before the club was finally taken over by the Liquidator and I would post comments. My opinion is that there was a nimber of factors and people who contributed to the club's near down-fall.
This club was the first ever Premier League club to be put into administration, was deducted nine points and I watched their final game and the boys along with their then manager, Avram Grant carried on regardless and I felt such a sense of pride and respect for them as they played on with Guts, with the club supporters' there to the end and with their heads held high.
My respect for Avram Grant was reinforced when he and the first team, dug into their own pockets and paid the wages of their groundsman, TUG and a few of the other employees at Portsmouth FC as well. This fine Israeli man has a big kind heart, like those Portsmouth boys-Reminds me of another man, a football club owner and his name is Terry Serepisos who owns our one and only New Zealand Professional Football Club, the Wellington Phoenix-A big, kind heart.
Many of you will no doubt have read some of my not so nice comments and tweets about Harry Redknapp and I make no apologies for them. However, Harry is just one of the people involved in what happened to Portsmouth FC and he, Milan Mandaric and Peter Storrie were arrested after a 26-month long tax and police inquiry..."dubbed Operation Apprentice", into alleged football corruption. Harry was detained in November 2007 by investigators examining transfer fees at Portsmouth Football Club". In relation to Harry Redknapp, it was related to two payments totalling $295,000 alleged to have been made by Mandaric to Redknapp via a bank account in Monaco, evading tax and National Insurance contributions due between April 01, 2002 and November 28th, 2007.
IMAGE ONE: Harry Redknapp
IMAGE TWO: Milan Mandaric
IMAGE THREE: Peter Storrie
Obviously, Harry Redknapp has paid the best lawyers as I have'nt seen any updates on what happened in court...Which brings me back to the current Inquiry into 'Football Governance', I shall now continue with a question from select committee member, Louise Bagshawe.
Ms Bagshawe: On learning the lessons, Portsmouth obviously went through many ownership changes before it went into administration. There has been some speculation in the press, Sir Dave, that you approved successive ownership changes. Do you think that the fit and proper persons test was properly applied? In the case of Mr Ali Al-Faraj there has been some suggestion in the press that not only was he not a fit and proper person, but he wasn’t even a person at all and didn’t in fact exist. Do you recognise these criticisms?
Richard Scudamore: I recognise that he has been referred to as "Mr Al-Mirage" on more than one occasion. The reality is that we went through all the tests that one would need to go through to get a passport in this country, and we had his passport. We had documentation; we had written documentation. Yes, we didn’t meet him face to face, which is why our rules have changed. Now we insist on an absolute meeting. We insist on meeting face to face. The rules have changed. But yes, we did not meet that particular person and that is why that rule has changed. We believe he did exist, though, but I can’t say I have seen him.
Sir Dave Richards: Can I make it quite plain I never approved anyone? We have a system within the league. It is very tight. It goes through lawyers and different systems so no one individual could approve it. There was one occasion I was in Rome for a Champions League game and a gentleman asked to see me. He was an Arab gentleman and he asked to see me to explain the fit and proper persons test. He was the gentleman that was trying to buy it. I went to see him. I was there no longer than 20 minutes. I explained to him it was all about documentation and coming to the Premier League and presenting who he was and what his funds were and where the funds were from, and I left. I had never met the gentleman before and I have never met him since.
Richard Scudamore: It is an important topic, a serious topic, and, Chairman, I sent you a letter last week that detailed quite a lot of what happens in our now strengthened owners and directors tests. I think it would also be useful if I sent you separately a supplementary piece of information, which is when anybody wants to look at acquiring a Premier League club or an interest in a Premier League club there is now a very detailed checklist and set of checks that we make and evidence that is required. I think I will send you this as supplementary to the letter I sent you last week, because we don’t underestimate how important this topic is.
I find what Sir Dave Richards said that he had never met "Mr Al-Mirage" really incredulous-The Fit and Proper Persons Test (FPPT) should include football officials as well!
Mr John Whittingdale (Chair): That would be helpful.
Ms Bagshawe: I take it on board, Mr Scudamore, that you have just said that you recognise there were some failures and you have strengthened your governance on that issue because of those failures. Can I put it to you that you have just said that the Premier League was taken by surprise that a club at Portsmouth’s level could get itself into such trouble? Given that the club was failing and being taken over again and again, I take the point that the fit and proper persons test has now been strengthened, but at the time, as these successive changes were going through, and with the Premier League clearly having been caught on the hop, did it not occur to you that, even under the old rules, you should be applying the then existing fit and proper persons tests more rigorously than they seem to have been applied at that time?
Richard Scudamore: Except for the fact that the fit and proper persons tests were about establishing, effectively, criminality and unsuitability because of that criminality. Therefore, we were unable to establish that any criminal act or any breaches of the absolute rule had been undertaken. Remember, it was the same time we were introducing the financial rules, which are about sustainability, and they are different things, but they are wrapped up in the same thing.
Richard Scudamore should stop trying to evade and make excuses for what was obviously a FPPT not rigorously applied in this case and as far as I am concerned the FPPT is still NOT vigorously applied in the case of the recent purchase of Blackburn Rovers Football Club by the Venky Family!
Jim Sheridan: Before I move on to the next question, can I put on record my surprise that in relation to the Andy Burnham submission, as we are now calling it, in the runup to 31 March there wasn’t a submission that came in from the Chairman of the FA yet no one bothered to ask the question why is there not a submission from the Chairman of the FA. However, I think you are quite right-that is a question for Lord T.
You have a number of jobs in football. I am just reading here that you are Chairman of the Premier League. You are also on the board of the FA, you are Chairman of the European Professional League and you represent English football on UEFA’s Strategy Council. That is a very long list of jobs and it would suggest that you are a very influential and powerful person. Do you think that you having all these posts and also the fact that you are paid by the Premier League means that you can ensure that there is no conflict of interest when you apply your director and ownership tests for prospective new owners?
Sir Dave Richards: Can I say to you I have been on the board of the FA for 16 years. In 16 years we have had, to my knowledge, only four votes. One of those votes was concerning the Premier League. We stood up, the three Premier League representatives, and said, "We have a conflict of interest. We can’t take part in this. We will leave the room." We were told not to leave the room, but we would abstain from the vote. We didn’t influence it; we didn’t have anything.
The positions that I hold in UEFA and European Leagues are elected positions. I didn’t go looking for them. We are a member of the European Leagues and one might say that the Premier League is a successful vehicle and that people want to be associated with it and they want to know how it works. When they elected me Chairman, it was, "Please work with us to show us how to become as successful as the Premier League." If you look at the progress the European Leagues have made, it has been very substantial, because we have 30 leagues, 980 clubs, some of them very tiny, that are all part of our system. We work with UEFA on solidarity payments bringing more solidarity money into the smaller leagues. That is the way it works. It is not a question of whether I am powerful or not. It is the Premier League. It is the Premier League and its brand that attracts people to want to be associated with it.
Richard Scudamore: Mr Sheridan, the reality is Sir Dave is elected by our clubs to represent us at the FA. He is elected by the European Leagues to be Chairman of that, and it is because he is Chairman of the Premier League that they respect our league, they respect what this league has achieved over the last 20 years. Many of the leagues in Europe wish to emulate and copy elements of what we do and I think, as I say, it is the fact of the position that Sir Dave holds that he gets those elected positions. You will recognise the power of the electorate in returning people to office.
Sir Dave Richards: Can I say I was elected to the Strategy Council of UEFA? Mr Platini I have worked with for a number of years. When you ask him how Sir Dave is, he always says, "Sir Dave has great input and he is good at what he does." He quoted that in the paper and said how well he got on with me.
Jim Sheridan: As politicians, we know how elections work and we know how you get elected to powerful positions. Indeed, some of our previous witnesses suggested that most of these discussions took place in the corridors, not at the main meetings.
Sir Dave Richards: No, sir, they didn’t because the European one-
Jim Sheridan: You remind me of the election of the Speaker where he is dragged out from the crowd.
Richard Scudamore: By the scruff of the neck.
Jim Sheridan: "I don’t want to do it but-"
Sir Dave Richards: No, I would willingly do what the European Leagues ask. I have a term of three years, and that is the term. On the Strategy Council, I have a term of one year and that is it.
Jim Sheridan: You have mentioned other European leagues. We recently visited Germany and saw how the licence system works in Germany, quite proficient in terms of looking at clubs’ finances in particular. Do you see a role for similar in England?
Sir Dave Richards: That is Mr Scudamore’s because it is an executive matter.
Richard 'Robin' Scudamore: Of course, the reality is we have a licensing system. We have a very much more robust licensing system now than we did two or three years ago. Our rulebook is effectively the licensing system for clubs within our league. I go back to those 814 rules. That is a licence; it is a contract between the member clubs as to how they are going to conduct themselves with each other. Unless you meet those rules, effectively you are not licensed.
Then, of course, we have UEFA licensing, which has been introduced and we have been instrumental in the introduction of UEFA licensing, working with our colleagues. It is an extremely good example of how you work with the Football Association. On the brunt of the work, you heard from the Football Association and Alex Horne last week talked about how the executives of the Premier League and the FA work together on UEFA licensing. For example, this year, 19 out of our 20 clubs have applied for a UEFA licence. Therefore, you have a licensing system. You have the law of the land, which you are collectively responsible for delivering to us. You have our own rulebook. You have the Football Association’s rulebook, which then requires our rulebook to be sanctioned, and you have a UEFA licensing system for the majority of our clubs. Some of our financial rules are tougher than UEFA’s. In effect, you have a licensing system in this country and we recognise that concept.
Jim Sheridan: Both of you have expressed a desire to work with the new Chairman of the FA. If he comes forward and wants to change the rulebook that you refer to, will you co-operate with him, particularly on the question of licensing, or is the rulebook there for ever?
Richard Scudamore: We will co-operate in any discussion about improving English football. I can’t tell you here and now that I will agree with everything that he-
Jim Sheridan: So you are not ruling out the possibility of a licence system?
Richard Scudamore: We would be foolish-well, we have a licensing system and the licensing system works very well right now. In fact, nobody would argue that the UEFA licensing system, as we have incorporated nearly all of it into our own rulebook to cover every club, isn’t actually applied. In fact, the only such element of that UEFA licensing system, which is not even in place yet, is the break-even concept. It is the only bit that isn’t covered also in our rulebook. Effectively, we have a licensing system.
Jim Sheridan: The answer I am trying to get is the Chairman, in his evidence, was open minded about the licensing system similar to the one in Germany, but you seem to have a closed mind about it.
Richard Scudamore: Mr Chairman, we are open minded about anything that improves the governance of our clubs and English football. We will discuss anything.
Jim Sheridan: Including licensing?
Richard Scudamore: But we have a licensing system. Improving that licensing-
Jim Sheridan: No, I am talking about a licensing system-
Richard Scudamore: Improving that licensing system, of course we will listen.
Paul Farrelly: Just very quickly regarding the new rules, transparency and honesty are key to their effectiveness. In June 2009 in your evidence, you cite the rule that you brought in that said that, "Clubs must disclose not only to the Premier League but also publicly who owns interests of 10% or more in the club." Does that mean beneficial interests?
Richard Scudamore: Yes. It does, yes.
Paul Farrelly: It has to mean beneficial interests?
Richard Scudamore: Yes, it does.
Sir Dave Richards: Yes.
Batman and Robin give very short answers, don't they lols
Paul Farrelly: When does that bite? Let us take Leeds. Leeds may get into the top two in the Championship or they may very well be involved in the play-offs. At what point do you tell Leeds, "If you wish to be a member of the Premier League you must comply with this rule."?
Richard Scudamore: 9 or 10 June, whenever our AGM bites.
Paul Farrelly: 9 or 10 June?
Richard Scudamore: Yes. Our AGM is yet to be fixed. It will be on 9 June or 10 June. From that point they will be given their share certificate in the Premier League. At that point the Premier League rulebook bites. From my understanding of the way our rules are written, we absolutely will require disclosure from Leeds United that is over and beyond that which the Football League requires.
There's a bit of 'VERBAL BITING' going on here lols
Paul Farrelly: Why didn’t your rules bite beforehand?
Richard Scudamore: Because they are not our member club.
Paul Farrelly: No, but they are in a position where they want to be a candidate member.
Richard Scudamore: No, because they are not bound by our rules until the annual general meeting when they become a shareholder.
Paul Farrelly: So it is quite possible that if they were one of the top three and, say, came to the play-offs, if they didn’t abide by that rule for it to be publicly seen, it might be the loser of the play-off final that might become a member of the Premier League?
Batman's other half-Robin is getting quite annoyed...
Richard Scudamore: I think you are, as a lot of people do, leaping to the end of our disciplinary process. What would happen is obviously if we deemed them to be in breach of rule, a commission would have to be formed and that commission would independently decide on what the appropriate sanction would be to Leeds United. You are already rather leaping to the expulsion sanction, which again I would caution you against doing. Certainly, in our view, as drafted, our rules would require better disclosure of Leeds United’s ownership situation than is currently the case.
Mr Sanders: Can you see any benefits in the governing body of the English game assuming responsibility, or at least a stronger supervisory role, for the financial regulation of Premier League clubs and also their ownership?
Richard Scudamore: I think you have to judge us by our journey and the evidence before you. We have moved our rulebook appropriately. We have moved our rulebook proportionately and at a speed that can be done only when you are able to gain consensus from what is sometimes quite a difficult group to gain consensus from. That comes from an awful lot of hard work, an awful lot of consultation.
I think we will live by our track record of having evolved the rulebook from those 142 rules to 814. The rulebook, can it be improved? Of course. We are always improving it. We are sitting down now on the next cycle of rule improvements to discuss what can be done to improve it. But as I say, we are working with the Football Association, and I think David Bernstein last week was very clear when he said the best point of regulation is down at the league level where the members are. Whether we like it or not, the members of the Premier League will take being moved along the regulatory curve more readily from their own executive and their own board than they will necessarily from people one stage removed. Therefore, if self-regulation is the right way to go, it is much more powerful when our 14 clubs have put their hands up round the table to say yes to regulatory change.
I would ask you to look at the evidence of the evolution of our rulebook. We have a track record of moving the rulebook on and I think the best people to do that are us. Are we resistant to other people coming up with ideas, other people coming up with suggestions, whether it be media pressure or public pressure? Of course, as with you, opinions are formed from many different sources. We have to sit here and try and act as custodians of this game. We have a conservative constitution quite deliberately. You can’t have a small minority interest group come along and set us off course, but when you get that 14-club majority it is a very strong majority and it is a very strong method of governance and I would commend it to you. As I say, we at operating level have a very good relationship with the Football Association. We are always prepared to discuss things and I think the way it works now is good. The idea that somehow we need somebody external to come along and suddenly impose things upon us is not necessarily the way forward to make progress.
Mr Sanders: But there is a problem here, isn’t there? In answer to Paul Farrelly’s question in relation to Leeds, if you have at the moment a rulebook that says you have to have a proper test and obviously full disclosure of who owns a club, you ought to be able to say at this juncture that that club would not be accepted in the Premier League unless it was prepared to disclose.
Richard Scudamore: Let’s be very candid. There is an issue here because our rules are the same as the Football League rules on this topic. The Football League brought their rules into alignment with ours last summer, but this is the first time the rules have been introduced. As I say, there is an issue in one sense between the Premier League rules and the Football League rules. I can only give you my honest evidence that says the Football League may have one view of how to interpret that rule and what that rule means. We have, I think, a more stern or harsh view of what that rule means. Let’s go back to the essence of the rule. The essence of the rule was our clubs absolutely agreed unanimously that we should tell the public who owns a club. That is the essence of the rule and, therefore, anything that falls short of that we think is inadequate. I think my point, Mr Sanders, is in all that we had to get done last summer the Football League took a view about Leeds United that it is entitled to take because it is their rulebook they are applying. The fact that we might have taken a different view is an issue that needs to be resolved if Leeds get in.
Mr Sanders: Presumably this must be a real warning to Crawley Town that they should not be allowed into the Football League because their ownership has not been declared.
Richard Scudamore: Again, I ask that you address those issues to the Football League.
Mr Sanders: Yes, indeed, but to be consistent, that would have to apply.
Richard Scudamore: I can’t disagree.
Mr Sanders: I think the problem here is that there is a bit of inconsistency in not being able to state your rulebook in relation to Leeds at this point.
Richard Scudamore: Except that the people in both leagues-I commend these people to you, both Andy Williamson at the Football League, who has been there almost since time began, and Mike Foster, my General Secretary, who has been there since the very start and did 17 years at the Football League before that-are the people who have more knowledge, and more intimate knowledge, of the rules and the way these rules apply. It is about applying these rules at the point of most knowledge. I think it has worked pretty well up until now.
Here! Here! Mr. Sanders...
Mr Sanders: I think the public view is they want to see consistency, and in sport fair play is everything and, therefore, if it is seen as one rule for one club, it hurts the whole game.
Richard Scudamore: I can’t disagree with you, and what is also interesting is last summer we had some discussions with the Football League making exactly this point. Many of those clubs are ex-Premier League clubs. They are of a size, nature and infrastructure that they look like Premier League clubs; it is just their league status that says they are not. Therefore, we said, "Wouldn’t it be a good idea if there was a rule alignment exercise?", which is when all these rules-the financial rules, the disclosure rules and ownership rules-are all aligned. Leagues One and Two, to their credit, said, "Well, hold on a minute. We don’t want to be left out of this, because why should we, even though in infrastructure we might be smaller. We aspire to be Championship clubs one day." The Football League voted in those rules of alignment. Therefore, I think what we are seeing is just a very early ironing out that needs to be done. I agree with the point.
Paul Farrelly: Very briefly, Mr Scudamore, in your answer to me about Leeds, I don’t think anybody listening to this Committee will go away without the question as to whether your rule on disclosure will really bite or whether, at the end of the day, it will be as effective as a chocolate fireguard.
Richard Scudamore: Well, in fairness, we can only deal with that at the point when Leeds United are promoted. They may not be. We can only deal with that at the time of our annual general meeting, when they come under our jurisdiction. We will have to stand the test of time on that.
Sir Dave, you are elected by the Premier League to be on the FA board, but that doesn’t mean you only speak for the Premier League; you speak for all clubs. Is there a reason why you don’t make the suggestion that this applies to every single football club in the land?
Sir Dave Richards: We do speak for every football club. You have a gentleman on after us, and he will be able to tell you how much we have spoken for the Conference and the way we have tried to assist and the way we are trying to assist to bring them into the pyramid in a proper way. I do speak up for those things.
Big Mouth interjects yet again...
Richard Scudamore: But I think there’s an irony in this line of questioning-
Dr Coffey: What I am trying to say is we don’t have that many opportunities to speak to individual board members. Has this ever been discussed-the fact of the excellent rule that you have in the Premier League of making sure ownership is disclosed? Why have you not perhaps suggested that for every single football club?
Sir Dave Richards: We have tried. We have been talking to the FA in the last year about aligning all the rules.
Richard Scudamore: Just so that you are clear, we think we all have the same rule; it is just that the Football League has chosen to apply the rule in the chaos that is the summer between one season ending and one season starting, when all the rules get changed. In the chaos of that, the Football League, for its own reasons, has chosen not to apply the rule as robustly as we think we will be applying it. But the irony of this conversation, where you might be suggesting that the Premier League should be imposing its power in telling other leagues what rules they should have and how they should apply them, is not lost. The reality is the Football League has some different rules that are more appropriate for that level of football, which is absolutely right. In the subsidiarity, the Football League must be in some cases able to do that. On issues such as this, of course there is merit in having common rules, because if it is a rule that is good for football, it should be in rulebooks.
Damian Collins: I would like to begin another topic, but just to finish on this, it seems to me you may have clarity on what your rules say, but it is not necessarily clear on how they are enforced, and on something like this we have a very specific example in Leeds United, who may be promoted. They may be in a situation that, following your independent commission in the summer, they are told that they can’t compete in the Premier League. You have not ruled that out; you urged us not to go down that path, but you said that remains a sanction that you may enforce. That would be enforced maybe days before the start of the Premiership season. Would it not be possible for you to give some sort of ruling based on the situation that Leeds is in at the moment?
Richard Scudamore: No, because at the end of the day-well, clearly, the headline will be generated from this session about Leeds’ inability to play in the Premier League next season. As with all miscreant behaviour, everybody assumes the ultimate sanction will apply and that expulsion and points deduction and all these other things will fly. The reality is that such is the attraction of playing in the Premier League, it is not unknown for people to relent in order to comply with our rules. Therefore, the most likely thing to happen when clubs get promoted-we have rules about press facilities, we have rules about the match, we have rules because of our international nature and the access that is required to our grounds, we have lots of rules that clubs have to comply with-is that we start to talk to clubs, send them formal documentation.
In January, we write to the top 12 teams in the Championship, talking about a whole raft of rules that they have to comply with in an operational sense when they get promoted. I am not going to get dragged into-you will understand why-the "what ifs". We will be doing whatever we can, as we always do in any situation. We would much rather our clubs, our member clubs, stayed within the rules than stepped outside them so they have to go to sanction. We will be putting on whatever pressure. If it arises that Leeds United, on sporting merit, deserve to be in our league, we will be doing all we can to persuade them to stay within the rules.
Damian Collins: I appreciate that. What I was asking-I think probably colleagues have been asking it-is whether you could say, "This rule is so serious that if breached it could lead to a club being excluded from the league," or whether it is more of an age where it is more likely there will be some sort of sporting or financial sanction applied.
Richard Scudamore: Again, we are not involved in the sanctioning. I think, without rehearsing this, we would deem it more serious than could be dealt with under our summary powers. We only have summary powers to fine a club up to £25,000. After that, it goes to an independent commission; that independent commission will decide. That independent commission has the range of sanctions available to it, from a small fine up to expulsion. It will be for that commission to decide.
Damian Collins: A different area of rules: financial fair play. You will be familiar, I am sure, with the fact that this is an issue that we have discussed, and I suppose it goes back to the spirit of what the rules are and how they are enforced. You said UEFA’s financial fair play rules are an area of UEFA practice that has not been incorporated into what you referred to as the Premier League’s licensing system. David Bernstein said in our previous session, "I would like to see financial fair play potentially extended across the Premier League and into the Football League as well." When we discussed with some of the Premier League chief executives and chairmen a few weeks ago, they also said they would look favourably towards that. What is your view?
Richard Scudamore: We have had full consultation on this. Prior to the rule changes of last year, we went again round the houses on a full club discussion. We went round again last autumn-September, October, November, individual club discussions. In the main, they are supportive. In fact, we are entirely supportive of this break-even concept, but given that 19 of our clubs have applied for the licence anyway this year, they all have to comply with it if they wish to continue to do that. The only thing the clubs have said is, "Yes, it is a good idea, but before we decide to change our rules for it to apply to everybody, can we not see a little bit how it might work, and is it not sensible just to see if it actually works?" There are some doubts still about what it will achieve, because one of the things it may achieve is that you lock in the natural order where only those that have extremely big revenues, of course, can have extremely big expenses.
The one thing about our league this season is the joy of seeing everybody who has come up competing. In fact, at no point has a team who has been promoted ended up being in the bottom three this season, so you have a situation where, looking at our league this season, the competitiveness within it is because teams have come up and had a go. One of our issues is, is it so wrong that Mr Al-Fayed or Steve Gibson at Middlesbrough, when he was with us, or Ellis Short at Sunderland or Dave Whelan at Wigan-these people who have benefactor funding-should come along and try and get their club into the next level, into the next echelon, which will bring itself bigger revenues, which will then enable them to stay within the fair play boundaries a bit more? So, we have shaped UEFA financial fair play criteria. The leeway that clubs have with the €45 million losses-the way the rules are now implemented-is, we think, proportionate for those who are in the European competition.
I think our clubs are not objecting to it. They think it might be a good idea and they agree with break-even, but to launch full scale into applying it everywhere at every level to stop the local businessman made good investing in his local team really affects the essence of English football. If you go back to 1888, that is how we started, what it is about, and I would caution against us suddenly saying, "Yes, that’s a great idea. Let’s put it in everywhere," because I think the further you go down the pyramid, it gets harder. Having said that, cost control, cost containment, break-even-can’t argue, and would never argue, that that is not a good concept.
Damian Collins: Are you not concerned that you could end up with a league where half the teams in the league are voluntarily complying with it, because they want to compete in UEFA competitions, and the other half aren’t?
Richard Scudamore: But if that means that the other half are able to get themselves into the European qualifying positions by way of improving their sporting position, they will have to comply with it. So there is no team. Look at now: all 19 have applied, even those that aren’t anywhere near the qualifying positions. There are a number of clubs who could win a UEFA Cup place on the basis of fair play. There is no club in our league that has ruled itself out from European competition, and I can’t imagine a club qualifying for Europe and not wishing to play in European competition, because that is essentially what our league is, and every club is out there striving to deliver for its fan base in European competition.
Damian Collins: But it sounds like it is going to come in by the back door, so why don’t you find a way of implementing it properly?
Richard Scudamore: It is just a question of what. I keep saying, on balance I think it will come in. It is just, why would you straitjacket some of your clubs? This is not going to bite or affect many of clubs who have huge revenues, such as the Manchester Uniteds of this world. The idea that they can’t live within their means-they have £300 million in income, can spend £300 million and still stay within the rules. When you have smaller clubs that are aspirational-coming up from the Championship, for example-why shouldn’t those clubs, if they have the owners who have those funds available, be able to invest them to make their club slightly better to get them into that thing? Our nervousness about it-we are not objecting to it. I don’t want it to sound like I am. We think it is a good concept, but there is just one, if you like, caution or cautionary note that we are expounding, which is why would you stop those clubs breaking into that group?
Damian Collins: I fully understand that, but you said you think on balance it probably will come in. Do you think that will because the weight of clubs seeking to comply with it will be such that they will endeavour to?
Richard Scudamore: Well, effectively, when you have 19 applying for the licence, we will have it. It works the other way, doesn’t it? We don’t see any need to extend it right the way down through the system, because we want other clubs to be able to break into that group.
Damian Collins: I wanted to touch on something that was in your written submission that relates to some of the financial sanctions you already have in regards to HMRC payments. You said that, "Where the board reasonably believes that a club is behind in its HMRC liabilities, it may impose a transfer embargo and/or require the club to adhere to an agreed budget." Have you ever been in a dialogue with a club that means you might be required to enforce those rules?
I do hope that Harry Redknapp, Milan Mandaric and Peter Storrie are following this 'Football Governance' Hearing...esp this one!
Richard Scudamore: No. This was a post-Portsmouth rule and, quite frankly, we don’t see why in the first instance HMRC should treat clubs any more tolerantly than they do small businesses that they expect to pay straightaway. We would expect them to do that in the first instance. We now have a reporting mechanism where, effectively, no clubs are allowed to have any HMRC debt. Since the rule has been in, we have never seen it, no.
Damian Collins: There was a press report that suggested, following a parliamentary question, that about £14 million was owed by Premier League clubs to the taxman. Have you discussed that with any of the clubs?
Look Harry, Milan and Peter...
Richard Scudamore: No. Well, it is not that at all. That is nearly all Portsmouth from the Portsmouth creditors.
Damian Collins: So it not new liability, you say?
Richard Scudamore: No.
Damian Collins: In terms of the sanctions that are imposed, the idea struck me of a transfer embargo on clubs-if clubs have HMRC debt they are probably in quite a bad financial state anyway. Do you think those sorts of financial sanction are effective? Should you consider using sporting sanctions against clubs that are clearly in quite serious financial breach?
Richard Scudamore: Well, there is what the rulebook says, and there is also what our ability as the board to get clubs to behave in a certain way also does. Of course, we have significant funding that we give to the clubs in two main tranches-once in August, once in January-then we have a monthly stabilised cash flow, which again is not insignificant. I am absolutely sure that before we would need to go to the rulebook, we would use our good offices to use some of those funds that are not legally the clubs’ until they have fulfilled our rulebook. But we would certainly, I would think, look to be using those funds to make sure HMRC is-
Damian Collins: Do you mean you would give HMRC the money that would otherwise go to the club at each point?
Richard Scudamore: Well, certainly we would encourage the clubs to allow us to do that, yes, to avoid them getting into that situation.
Damian Collins: Is that something you have discussed?
Richard Scudamore: That is exactly how we have applied the rules in the past, yes-the ability to deduct.
Damian Collins: Yes. Obviously you have oversight to a club’s ability to meet their football obligations and liabilities, and we have discussed-as I am sure you will be aware-at great length the football creditors rule. When we discussed that with David Gill and the other club representatives, they felt that the football creditors rule had served its purpose. In previous sessions, Lord Mawhinney explained how he had tried to get the Football League to get rid of it, and the current Chairman of the League said that he couldn’t find a moral argument for keeping it, but was going to keep it anyway. What is your view?
Richard Scudamore: This is a very interesting one, and it is interesting that the people who run the FA, Mr Bernstein and Mr Horne, the current Chairman of the Football League, and his Chief Operating Officer, Andy Williamson-those of us who run competitions-will defend it, and we will defend it on the basis of the chaos that ensues if you don’t have it. We are a closed system. We trade on a closed basis between each other. If a business fails, the real sanction should be expulsion.
The problem with expulsion is it damages far more than the club involved. For example, had Portsmouth gone straight into expulsion in the January/February of last year, every single point that they had gained would have been taken off the clubs that had already beaten them. More importantly, anybody they had beaten would suddenly, effectively, have a three-point advantage. So it is absolutely essential that the clubs are forced to play each other and to play out their fixture list, and therefore it is essential that football creditors are paid. Another thing on this: there is no moral basis for saying that the St John’s ambulancemen or the local businesses shouldn’t be paid. Of course they should, and that is our starting position-there should be no bad debt.
You have more say in the insolvency laws in this country than I have and if you wish to change the insolvency laws to allow charities or small business with a certain turnover threshold to become preferred creditors or preferential creditors, I would certainly support that. But on balance, it is the best of a bad situation. Because we are a closed system, chaos would ensue if people’s playing records were eradicated. If expulsion is the only option, we think it is a bad option. Therefore, the football administrators, to protect the integrity of the league, would support the football creditors rule. I understand that the integrity of our league takes precedence over the small business creditor, which is unfortunate, but I am not ever excusing people not paying their debts.
Wow! Richard, I do concur with his statement, " You have more say in the insolvency laws in this country than I have and if you wish to change the insolvency laws to allow charities or small business with a certain turnover threshold to become preferred creditors or preferential creditors".
Damian Collins: I think there is another element to this, and this was a point that David Gill made when he gave evidence to us. He agreed with the idea that if the football creditors rule did not exist clubs would have to be more open and transparent in their financial dealings with each other, because there would be greater risk, and transfers and payments between clubs, which are a very big part of clubs’ expenditure in putting their teams together, may have a helpful and deflationary impact. I think Lord Mawhinney also talked about the integrity of the competition and whether you can protect the integrity of the competition if clubs are using their liabilities to other suppliers to fund their football activities.
Now if there are any Manchester United fans' reading this next excerpt I am about to post...I am sure there will be a lot of 'Coughing' going on...
Richard Scudamore: David Gill is probably the best chief executive in football.[Coughing] He runs a club, but he is in a fortunate position where he runs a club with the ability to trade almost on a cash basis with others. There is the idea that across professional football all 92 clubs should go into a full due diligence situation in terms of this. Given we have this system, remember in our particular case we generate significant central revenues. Those contracts are entered into only with the Premier League, not individual member clubs. We have significant funds such that when this situation comes along, as it did in Portsmouth, we are able to keep, for example, Watford in business, effectively. Watford were owed money by Portsmouth. We were able to satisfy other foreign clubs that were owed money by Portsmouth, which has given us great standing across European football, because I think we are the only league that has ever done that, and has satisfied club debts. So I think it is easy for Manchester United to say, "Everybody should do due diligence," because they are in a situation where not many people are buying players from them, and when they are buying players themselves it is a very different position. As I say, he comes at it from a club perspective. I sit in front of you as a league organiser with a slightly different view.
Damian Collins: What you seem to be saying is it is all right for clubs that do not have big cash flows to engage in financial transactions with other clubs knowing that they may not be able to meet those liabilities, but if they can’t they have their VAT account or other unpaid bills they could pay it from.
Richard Scudamore: You go to what is the essence of the game. I would advise caution-steering clear of over-regulating or over-prescribing something that might circumvent the essence of the game. The essence of the game since it started-the thing that gets fans most interested-is the buying and selling of players, the trading of players, on the transfer deadline. You have seen the media hype around transfer deadline. We know more about what is going on from the media hype sometimes than we do from the contract registration documents that are coming into our office. The essence of the game throughout my 14 years in the executive capacity of professional football, whenever you get to a room or the pre-meeting coffee discussions, is players and player movements: who is buying whom, who is selling whom, what is happening? The idea that you would somehow put this administrative blockage of a due diligence process in front of every single trade, club to club on transfer deadline and everything else, is a place we wouldn’t want to go.
Ms Bagshawe: Surely greater transparency would prevent that. You just gave the example of Watford being protected. Watford wouldn’t have allowed Portsmouth to run up such debts with it if it had clear sight of its balance sheet, and without the football creditors rule that would have been the case.
Richard Scudamore: Okay. We have transparency, don’t we? You have seen the Deloitte report. There is no other country that can produce the Deloitte annual report of football finance on the same basis, because certainly in US sports you won’t see that level of transparency. We are all required by regulation. We are UK-registered companies. That means that everything has to be filed with Companies House. Of course, it would be good practice for a club to establish with another club whether they can pay, and that is why a lot of deals do and don’t go through. That is done now. I don’t think, though, it is the solution to obfuscating the football creditors rule. As I say, I am not here defending many aspects of the consequences of the football creditors rule, but on balance I think the Football League, the FA and I agree that, of the options available, it is better to have the rule than not have the rule.
Damian Collins: It does seem a pretty sad state of affairs if the-
John Whittingdale (Chair) decides its time to move on...
Jim Sheridan: In my experience, and in the experience of other elected colleagues in this place, abiding by the rules is not always the best form of defence.
Paul Farrelly: I will be brief on this section, which leads nicely on from your discussion of how important it is to have integrity and stability when you are running competitions. When we talked about local benefactors buying into clubs, would you prefer them to put in equity rather than take on debt?
Richard Scudamore: I think in a hierarchical situation, yes. That is, you would prefer them just to put in equity, yes, as opposed to debt.
Paul Farrelly: The oft-mentioned Lord Triesman made a contribution in a speech on debt. Why did you and the Premier League take such exception to what he had to say?
Richard Scudamore: Again, you have to put it in the context of the timing. We were having what we thought was a very good dialogue with Lord Triesman and with Andy Burnham, the Secretary of State, all through that summer. We started the dialogue in July; we continued it in August. We were all entitled to a holiday and off we went. We came back and that dialogue stopped, and almost the next thing we had was these unilateral speeches-both by Andy Burnham and by Lord Triesman-about the state of English football. If there was any effrontery, and I don’t deny there was some, it was a sort of break with the discussions that we were having. Having said that-
Paul Farrelly: So your reaction, you were described as "tired and emotional".
Richard Scudamore: No, I don’t think it was tired and emotional at all. We were rather sanguine about it. It was others. Clearly, the media enjoyed the theatre of Lord Triesman at a speech called Leaders in Football-interestingly named-and the issue is around the fact that clearly we are proud of English football. I think this comes through. We are proud of what the Premier League has achieved. We are very proud of what the Football League has achieved. We are proud of where the FA sits in relation to other football associations around the world, where the England team sits. It is the one team-probably England and Brazil-that attracts more international interest than any other team, so when you are very proud of something, my view in terms of when you are trying to move the agenda on is that you should perhaps not criticise it quite as directly. On good leaders, I think there is an art of leadership. The first art is to get people to follow. Therefore, if you are going to display real leadership-you will have seen this in your world-you have to get people either to follow, vote for you or at least engender some support, and I think it is interesting tactics people have deployed in trying to get that support, but it is not one of the ways we would have chosen to do it.
Paul Farrelly: From your answer about preferring equity to debt, who wouldn’t?
Richard Scudamore: Yes, exactly.
Paul Farrelly: I take it you would agree with Sir Martin Broughton, nobody’s fool as we have seen over many years, the Liverpool Chairman, when he said, "If you are leveraged"-by which he means highly leveraged-"that’s bad for a football club." Is that a statement of fact that you would agree with?
Richard Scudamore: Let me take it one stage further. If it was too highly leveraged, yes; if it was leveraged, not as good; if there was no leverage at all, obviously better. Therefore, we are into the proportionality of debt, and I think that is something that our new rules will bite on, because when you have to put your future financial information in, when you have to put your business plans in-we didn’t have these rules four years ago-but now our rules are tighter on this than the UEFA licensing and the UEFA rules, because the UEFA rules don’t per se deal with debt, but ours will deal with debt, and the appropriateness and level of debt. So, yes, clearly it goes without saying it is about the amount of debt and the question, is the club at risk? Our role is to make sure that clubs are sustainable, that they stay in business, and we don’t have a role that says each club must be able to win the Champions League. That is beyond our power, beyond our reasonable control, but certainly in terms of sustainability that is the issue, and, yes, clearly there is a number at which proportionately debt has to be a risk and that would be covered, I think, by our new rules.
Paul Farrelly: The final question, as time is moving on, relates to your position when it comes to any financial regulation UEFA is involved with. You have made strides with your own rulebook, so is there no role for the Football Association in any financial regulation?
Richard Scudamore: Of course there is a role for the Football Association, because they have an overarching role in the way it works. But UEFA themselves are only competition owners; that is what they are. They organise their own competitions and they say to the clubs that want to play in those competitions, "If you want to play, these are the rules." It is the same for us. If there is a lacuna in the rules or if there is a gap in the rules, yes, we would be open to that dialogue. We would also be open to the dialogue as to who applies those rules. We are not against that at all.
Paul Farrelly: Very quickly: has the Football Association any greater role in financial regulation beyond what you are already doing than just approving the rules of the FA Premier League?
Sir Dave Richards: The executives of the Premier League and the Football Association meet every second Friday to discuss all the implications of this, and they come up with scenarios-whether it is financial or about players. They discuss this every second week. They bring it back to their bodies. Their bodies then agree the formula and it goes to the board. So if the FA wants to talk more about finance, it has ample opportunity to do it at the Friday SMT with the senior executives.
Richard Scudamore: Just so you are all clear, though, and maybe I have not made it clear, the FA are the people who are ultimately the licensor of the UEFA licence, so the work, much of the data gathering and much of the evidence is gathered by the Premier League Executive. That is all presented to FA, but the ultimate people who decide on the UEFA licences are the FA. They have an integral role in the financial regulation of football.
Ms Bagshawe: I know there are pressures on time, so would you comment on two questions at once. This is related to debt in the English model of football. Obviously, there is a growing differential between the revenue gap between the Premier League and the Football League. First, do you think this encourages clubs to overspend, to gamble on success, whether that be staying up in the Premier League or joining the Premier League and entering the Champions League? As a corollary question, we have heard evidence to the Committee that the parachute payments if you are relegated, which now last for four years, are distorting competition in the Championship. Do you think that the Premier League has a role to play in cost control?
Richard Scudamore: Clearly, that is why we are advocates of the concept of break-even, and repeating the financial fair play concept of break-even is inarguable. In terms of gamble, of course football is an optimistic, upwardly mobile, aspirational business.
Ms Bagshawe: Nothing wrong with that.
Richard Scudamore: There is nothing wrong with that. It is entrepreneurial, and Mr Cameron would be proud, and would have been in all his speeches in the last three weeks, including in Cardiff at your spring conference. That is exactly what football is. It is about the aspirational, the entrepreneurial, and saying, "We think we can invest our money and we think we can improve our lot." So yes, of course, the best thing and worst thing about the Premier League is how successful it has been. It has been a success in terms of its attendance growth-60% since we started-our viewing and our audience growth, as well as our revenue growth. That success has meant more and more clubs want to be part of us. The Championship clubs all want to be in it, despite the fact that when they are not in it they like to criticise us, but they all want to be in it, and that is the reality of English football.
Clearly, we are not sitting here advocating that people overstretch themselves to the point of putting them at risk, which is why we have talked probably more than we should about all the rules that are now in place to stop that happening. When it comes to the parachute payments, they are, again, in a sense a necessary mechanism. They have been in it since the start, because when clubs get promoted we want them to compete. We don’t want clubs to come up, bag the money, take it as profits and just go back down again, because it is a sporting competition.
We can talk about money and finances and everything else, but the integrity of the league this season is more evidence than ever. The clubs who have come up have competed: Newcastle have competed. Blackpool have had a fantastic run, considering the economics mean they shouldn’t have won anything like the number of points that they have, if you believe the pre-season pundits. West Brom have suddenly got themselves into not a comfortable position, but a decent position this weekend. So you want your clubs to come up and compete. That means you want them to spend money, invest. We require them to invest heavily in infrastructure. No matter what happens to Blackpool this season, they will have a better infrastructure as a club, a better stadium and better facilities, because they have invested that money in making their club better; they have community schemes. Every aspect of Blackpool Football Club has been enriched by being in the Premier League, irrespective of whether they retain their league status.
Now, the consequence of that is to de-risk some of that when they get relegated; they need a softer landing. What we have done is the parachute payments, which have always been there. On the extension to four years, it is only half what they would have got, so the positive side of this is that 12 of the 24 clubs in the Football League-half of them-enjoy the benefits of the parachute, which is good for the sustainability of those clubs. Basically, if you want them to compete when they come up, you have to protect them when they go down. Interestingly, it has not distorted the competition, if you look at the Championship this season. I haven’t checked the league table after last night, but I don’t think there was a team that was relegated. No, there isn’t. Neither Burnley, Hull nor Portsmouth is in a play-off position to come back up, so you can’t believe it has given them a huge competitive advantage over the others.
John Whittingdale (Chair): On the recent European Court of Justice case, or the opinion of the Advocate-General, that may lead to an ECJ judgment on the sale of exclusive territorial rights, have you done an assessment of how damaging that will be if it is upheld?
Richard Scudamore: We haven’t done an assessment of how damaging it can be, because I don’t think the opinion is clear enough as to what the outcomes will be. The opinion is difficult; it is convoluted. It suggests certain things that might happen. As you will be aware, the process of this is that the opinion gets put towards the ECJ, the judges. The judges have to answer, I think, 18 questions set by Justice Kitchin here in the UK. Then the answers to those questions come back and he has to weave them into his ultimate decision. What is very hard to see at the moment is how we get all this to add up-even the copyright issues that have been explained, even this concept where it might be possible to make a legal distinction in the UK between a domestic card not being allowed to be used in a commercial premises in the UK. So, a UK domestic card might not be allowed to be used in a pub or commercial premises, but somehow a foreign domestic card could-under some interpretation of the freedom of movement-be allowed to be used in a pub or commercial premises in the UK. It is difficult; it is complicated.
What I do know is this. You questioned the Secretary of State last week on this particular topic, and we are very grateful for his support on this and UK Government support, where it is essential for content owners to be able to sell their rights in a way that works for consumers as opposed to some ideology of some pan-European market. We don’t sell the same Premier League product across Europe. We sell our rights-the components to a Premier League product-across Europe. It is then for the people in each territory and each country to create a product that they in that market require.
With your other hats on as Culture and Media, you will understand the territoriality and the essential nature of territoriality in that regard. So the French, when they produce Premier League coverage in France, concentrate often on French players, French clubs. It is scheduled to avoid the French league. Similarly in Italy, in Spain, in other countries, when they show our rights, they not only concentrate on an element of the Premier League that is more relevant to their audience, but schedule it around what is a unique part of each country’s culture.
It is the same in this country, which is the reason why we will fight strongly, for example, against if Mr Platini and others come along with a summer calendar for football, because we believe it is pretty difficult to play cricket in this country in the winter-rain stopped play would be rather more prevalent. Therefore, it is things like that, where you have to protect the sporting culture of a country and you have to support media being available on a territorial basis, because that is the way you create cultural diversity and protect the culture of each individual territory. It is an important case, John-
John Whittingdale (Chair): It is an extremely important case.
Richard Scudamore: And I think you should concentrate some of your minds and efforts on it.
John Whittingdale (Chair): Indeed. That may be your view, it may be our view, it may be the Secretary of State’s view, but at the end of the day if it is not the European Court of Justice’s view, there is not a lot we can do about it.
Richard Scudamore: No, except, as I say, the problem with this case is that it is possible to sit down and work out theoretically what we might do about it, but unfortunately every solution is not as good for the consumer, not as good for the broadcasters in each country as what currently happens. The idea, for example, that we might have to sell our rights on a pan-European basis does rather make a nonsense of having broken our rights down into packages, with our other European Commission challenge, with Ofcom ensuring that we encourage plurality in the media world to make sure that more than one broadcaster has our rights. All this kind of stuff contradicts all the things we have been discussing in a regulatory sense with these people up until now.
John Whittingdale (Chair): I entirely understand that, but is that a case that you think you are capable of persuading the European Court of?
Richard Scudamore: Unfortunately, we don’t have any chance now in front of the European Court, do we? That is the way the process works. They will be crafting their opinion. If there is anything that the Government can do, whether this Government or whether other Governments across Europe, to weigh in with their views, I think that is important, because we need to-and that is what my lobby people will do.
John Whittingdale (Chair): But you will have begun to think about what will be the impact if this opinion is upheld?
Richard Scudamore: It leads you to thinking about, unfortunately, the UK as just one element of Europe and where you would have to do whatever you do on a pan-European basis, which is a bit odd because clearly the UK has more interest in our Premier League rights than any other country in Europe, and you would expect that, wouldn’t you? So the idea that we suddenly think of Europe as one market, when it is effectively 53 markets, is possible; it is doable. It doesn’t hold any fear to us, but it is just a very convoluted, complicated way of going about doing something when the current system works perfectly well.
John Whittingdale (Chair): But it is also likely to result in a drop in income.
Richard Scudamore: Again, you just can’t make that stretch. In some ways, the other challenge that we have in terms of the Ofcom pay TV review and our appeal to that is important, because it hits right to the heart of a plural media rights market, where, as you know from that particular case we are arguing, if all these other media companies have a wholesale offer situation with Sky, which has to wholesale all this sport content to them, their incentive to bid for our rights will be vastly reduced. In a sense, that has more potential threat to the income of the Premier League than perhaps the ECJ case.
John Whittingdale (Chair): On the issue of broadcasting income, you get about over £1 billion in broadcasting income. It was suggested, I think by the Sports and Recreation Alliance, that you had signed up to a target of investing 30% of net broadcasting income into sport-£300 million. Are you meeting that target?
Richard Scudamore: We are more than meeting it. There is one word you have missed out, if I may correct you. It was net broadcasting income.
John Whittingdale (Chair): Yes.
Richard Scudamore: What the code absolutely envisages is the cost of putting on that competition must be able to be deducted from your gross income. While we can sit and talk about our £1.2 billion worth of revenue, of course we have a huge cost of sale, and that cost of sale is the 20 clubs’ aggregated costs, player costs, stadium costs in staging the competition. Any other governing body-for example, the FA-is allowed to deduct the cost of running the FA, the cost of putting on the England matches and the cost of everything else, so to be treated like any other sports governing body we have to be allowed to look at net revenue, which is when you have basically extracted your cost of sale of putting on the show. We stand up very well indeed. Our £162 million we gave away by way of solidarity-13.4% of our revenue. There is no other sporting body in the world-no other business in the world, I don’t think-gives away 13.5% of its revenue. Not of its profit, of its revenue. So we stand up extremely well to anybody else, whether in a sporting context or in a business context.
John Whittingdale (Chair): So what is your estimate of net broadcasting income?
Richard Scudamore: Well, it is a net loss, to be absolutely honest, so goodness knows what that means our percentage to contribute is; it must be infinite.
John Whittingdale (Chair): So it is a pretty meaningless commitment to say you are going to give away 30% of what is a net loss.
Richard Scudamore: I would ask you to concentrate on our submission: £162 million given away. If you can show me another sporting body or another company that gives away 13.5% of its gross revenue it will be very interesting.
Dr Coffey: I wonder if Mr Scudamore could just clarify where that kind of money goes? Is that referees or is it pitches or
Richard Scudamore: What, the £162 million?
Dr Coffey: Yes, or is the parachute payments?
Richard Scudamore: No, the £162 million effectively goes-let me check the detail of it. I wouldn’t want to mislead you. Yes, £162 million of it goes into solidarity and good causes. That is roughly broken down as £60 million in parachute payments, about £62 million in solidarity payments-that is both for the Football League and for the Football Conference, who you will be speaking to later-and the rest to charitable causes, charities.
Dr Coffey: So about £10 million outside, if you like, the professional clubs?
Richard Scudamore: No, about £42 million, I think, goes to good causes in the community. That is in our submission.
Dr Coffey: Oh sorry, £162 million. I wrote down the figure wrong.
Richard Scudamore: Yes, £162 million, with £40 million-odd to charity and good causes, yes.
Dr Coffey: Supporters. At the end of the day, the game exists for players, but supporters pay for the success, whether through Sky subscriptions, ticket prices or similar, but they get terribly frustrated-probably the cause of this whole inquiry-because they feel they have no say in the governance of their clubs. What additional measures can the Premier League take to increase that say?
Richard Scudamore: Well, again, we would absolutely commend any club having a dialogue, and our rulebook envisages a supporter liaison person at each club; we would encourage all clubs to have a decent and open dialogue with their fan base. You will also see-you can do this another time-the appendices that we put into our submission. There is no other sporting body, I think, that does the extensive nature of the research that we do, among our fans and our non-fans. We are absolutely in touch, I think, with what all fans feel, and that is difficult because there are very vastly different opinions. I think in a practical sense we fund now Supporters Direct, and we have done for some time.
Dr Coffey: Will you continue to do that at the current level?
Richard Scudamore: We will continue to make available, as you know via the Fans Fund- This is an ongoing debate as to whether we, the Premier League, should be funding these organisations. We took up the Supporters Direct funding when Government decided it didn’t meet the Government’s criteria of participation only. It is the same in all the organisations, such as the Football Supporters Federation and the National Disabled Supporters Federation: for the central bodies that currently exist-associations formed by those like-minded people who wish to share common views-we will continue to make funding available to them to achieve some of their aims. They admit by their own efforts that they would rather find more sustainable sources of funding, because they find it awfully odd being paid for by the Premier League, but we were certainly always open in that dialogue. I have personal dialogue with the leaders of all those organisations, as do my team.
Ultimately, you cannot argue against having decent fan liaison and decent fan communication, but, as you have heard in evidence before this Committee, not every supporters’ trust thinks it is right that they should have a seat on the board, because they wish to remain more removed from the fiduciary duties that that would bring. There is a raging debate about this. I would put you back to the evidence. Our evidence is that since the Premier League was formed, 67% more people are coming through the turnstiles and attending our matches. English football was at its worst throughout the 1980s in terms of violence, of hooliganism, stadium disasters and no television deal. On taking the game back from that position-more fans are more interested in our surveys, very independently done by Populus, and again I offer up to the Committee access to all those Populus surveys-the reality is there are more people interested in our league and what we do now than there were before.
Dr Coffey: You mentioned that you are a bit of a closed board; there is no other entrance in and out, which was the justification for the creditors rule. I recognise you are all football supporters, but given that you are a closed board, how do you get new, fresh blood in? I suggest to you that one way, Sir Dave and Richard, would be to say that there is a fixed-term limit on how long people can be on the Premier League board to encourage new blood in, and perhaps a role for supporters on that board as well.
Richard Scudamore: If you go back to my original description of what the Premier League board really is, the Premier League board is effectively the clubs, and Mr Parry will be able to advise you exactly on the intentions when the shareholders set the thing up. We have new blood all the time. In fact, we have new blood, we have old blood. We take by rule three new clubs every year, but then the clubs themselves turn over and, effectively, the clubs come along as shareholders and that is the new blood. We are for ever being challenged by new blood on what is effectively our board, which is our clubs.
Dr Coffey: With respect, Sir Dave-who I think has been a distinguished Chairman, and has certainly seen the Premier League grow-has not been, if you like, replaced. Is there a view that the chairmanship should be not quite such a long-term election?
Richard Scudamore: I think that is entirely a decision for the 20 shareholders. We turn up and say to each other before every shareholder meeting that it is like reapplying for your job at every single meeting, and our predecessors sometimes went to those meetings and left without their jobs.
Dr Coffey: I would be really interested to hear Sir Dave’s view.
Sir Dave Richards: No, it is absolutely true what Richard tells you; you are as good as the last meeting. You could turn up at a meeting and find out it is your very last. On terms, you get elected every year. If you have a bad year you don’t get re-elected. There comes a time when you think to yourself, "Well, perhaps we’re okay," but the Premier League is so fluid, and Mr Parry can tell you the times that we have had-the way it has changed.
But we are governed in such a way that the 20 clubs are the governance of the Premier League. The board has a set of rules and it is a set of rules that we can work to, so the board is not like you believe it to be, like a PLC, because the PLC part is the shareholders and they are the board. We are very limited in how we can make decisions as the two members of the board. Mr Parry will tell you that he helped write the rules, so he will tell you how difficult it is that you must work within those parameters. If I break those parameters, I can tell you I will be out overnight.
John Whittingdale (Chair): We have to stop there. I thank the two of you very much.
This concludes the oral examination of Sir Dave Richards and Richard Scudamore. I find that one tends to dominate the other...But in a protective sense. Love to hear your comments.
Cheers!
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