Sports Minister Stuart Andrew says a new independent regulator will step in if football cannot agree a way forward on its finances.
On a landmark day for the sport in England, the Government published a White Paper on football governance, with the creation of a new independent regulator designed to ensure the game’s financial sustainability and clubs’ accountability to their supporters are at its core.
Crucially the Government agreed with the 2021 fan-led review that the regulator should have backstop powers to sort out the row over how the vast sums of money earned by the Premier League should be distributed down the leagues.
“Football is nothing without the fans”
We are launching the most radical transformation of English football in its history to protect clubs and their supporters ⚽️
— Department for Culture, Media and Sport (@DCMS) February 23, 2023
If no agreement is reached, the Government is considering affording the regulator the power to use binding final offer arbitration, where the Premier League and EFL each submit a proposal and the regulator chooses the most appropriate one.
Sports Minister Stuart Andrew said he felt the Premier League should be doing more to help the wider pyramid and shared the frustration of some fans on that issue but added: “In fairness the Premier League have expressed the view that more money has to be redistributed.
“That’s why we are saying to them: ‘well, if you agree that, get round the table and get that deal done as quickly as possible’.”
The Premier League, EFL and Football Association are discussing a so-called ‘New Deal For Football’ covering financial flow, cost controls, player development and the domestic calendar.
Andrew said he did not have a timescale for how long the football authorities would be given to reach a settlement before intervention but added: “We recognise the urgency of it. I’m acutely aware this is the number one issue I get regularly from colleagues in parliament and from fans groups around the country.
“They could do it now – I hope we have shown we are serious about this regulator. We are doing this. The ball’s in their court – otherwise the regulator will look at that criteria and will step in.
“I would say the clock already started ticking before we published this.”
The EFL has called for the abolition of parachute payments as part of any new deal on distribution, and the White Paper stated that those payments “can distort competition in the Championship and encourage greater financial risk taking by clubs that are not in receipt of them”.
The fan-led review which ultimately led to Thursday’s White Paper started life as a 2019 Conservative Party election promise, coming in the wake of the collapse of Bury.
The regulator’s primary aim will be to ensure the financial sustainability of clubs and their accountability to supporters via a licensing system.
Clubs will need to fulfil specific conditions unique to their circumstances related to financial reporting and corporate governance, while the regulator will also oversee a new owners’ and directors’ test.
Andrew said this would not preclude states and sovereign wealth funds becoming involved, adding: “We recognise we have had significant international investment from all over the world in English football but what we’re trying to do is get down to who is the original owner and they have to pass the fit and proper person’s test.
“The state side of things is obviously a matter for the foreign office, we’re not talking about foreign policy here, this is about the individuals, who they are, and then against the checks and balances that the regulator will have access to in determining whether or not they pass those tests.”
Interestingly the regulator could have powers to intervene if high owner subsidisation of a club – such as paying extortionate wages way above the market rate for example – started to become a wider systemic issue for the league concerned.
The White Paper does not explicitly mention human rights criteria within the owners and directors’ test but Andrew said: “We will be obviously looking at other regulatory bodies to see what mechanisms they are using.
“That’s the sort of technical detail that we’ll be going through as we get preparing for the legislation.”
Amnesty International called on the Premier League to introduce a human rights element to its owners’ and directors’ test during the protracted Saudi-led takeover of Newcastle, and reiterated that call amid Qatari interest in Manchester United earlier this month.
The White Paper proposes that the new owners’ and directors’ test will identify whether someone with controlling influence at a club is a ‘politically exposed person’ or PEP, as is already the case in financial services regulation.
“As political affiliation can expose individuals to bribery, corruption or external influence, PEP-status may be considered as part of an in-the-round assessment,” the Paper states.
It said being designated a PEP would not mean an application being approved or denied, but may lead to specific conditions being inserted in a club’s licence application.
The Government is considering setting tougher restrictions around leveraged buyouts – where loans are secured against a club in order to complete the purchase.
The regulator would also ensure FA rules giving fans veto powers over a club’s name, badge and kit colour are supported, while the regulator would also have to pre-approve any stadium sale or move.
It would also have the power to block a club entering a new competition that did not meet predetermined criteria, potentially around how meritocratic the competition was and whether it would damage the existing English league system.
While a renewed attempt to form a European Super League might fall foul of the regulator, it is understood it would be powerless to intervene if an existing competition like the Premier League ever chose to take matches overseas.
The Government will now conduct further consultation over a short period and look to bring forward legislation as soon as the parliamentary timetable allows.
Andrew said the Government was considering the creation of a non-statutory shadow regulator in the meantime.
Once backed by statute, the regulator will work on an ‘advocacy-first’ approach but will have enforcement powers to compel clubs to comply.
In extreme circumstances, it will have the ability to withdraw licences from clubs “for persistent, flagrant and wilful non-compliance with licence conditions despite direction and enforcement action”.
The regulator would not have ‘sports sanctions’ powers such as point deductions, but could recommend that the FA and/or the leagues do so.
Clubs will have the right to appeal the regulator’s decisions to a court or tribunal if they feel it has acted unfairly or outside its statutory remit.
Andrew told the House of Commons: “When fans have needed us, we have been in their corner and now we are putting them right back at the heart of football.”
The White Paper said clubs would cover the cost of the new regulator with the size of the levy proportionate to their revenue. It estimated the top-earning six Premier League clubs would cover 50 per cent of the cost themselves.