Thursday 24 February 2011
The Dons Trust's submission to the Select Committee on football governance
The following article is taken from Erik Samuelson's page in the Wrexham programme.
Good evening and welcome to the fans, officials and players of Wrexham.
Greg Clarke, the chairman of the Football League, made the national headlines last week with his evidence to the House of Commons Culture, Media and Sport Select Committee on Football Governance when he said this:
“If I had to list the ten things about football that keep me awake at night, it would be debt, 1 to 10. The level of debt is absolutely unsustainable. We are heading for the precipice and we will get there quicker than people think.”
The select committee, established to carry out an inquiry into all aspects of football governance, posed six specific questions. One of them was about the pros and cons of the supporters trust shareholding model, where we feel we are uniquely well placed to comment, and another was about the levels of debt in the sport – hence the quote from Greg Clarke, above.
The Dons Trust’s submission to the committee is available online, along with many other submissions. The full 447-page document, entitled “Written Evidence – at 8 February 2011”, can be read at Select Committee. I will, however, repeat some of the Trust’s points here.
After observing that clubs are running themselves into major financial difficulties in the pursuit of success, we commented that clubs like ours, which are run on a sustainable basis, cannot compete with clubs where owner-directors pump in short-term loans which are spent on players’ wages. In effect, there is no reward for financial virtue.
We went on to say that that this issue should be addressed by stronger financial regulation. Specifically, we recommended:
• A requirement that clubs should be sustainable.
• A licensing system to enforce regulations relating to sustainability.
• Revoking the “football creditor” rules, which encourage poor business behaviour at the expense of others.
• Any governance body should have the authority to deny a takeover which is based on leveraged debt.
• Supporter-owned clubs are a force for good in football and should be encouraged – at least in their early, formative years – by financial and tax incentives.
And last, but certainly not least, we pointed out that AFC Wimbledon was created as a response to a serious failure in football governance – and we strongly recommended that no further franchising should be allowed in UK football.
There isn’t space here to expand on all these points, but I’ll focus on a couple. Almost half the clubs in the Football Conference’s Premier Division have negative equity. Put plainly, they are on the face of it worth less than nothing, yet they continue to trade and rack up further losses. This is not a sustainable business model, and the Dons Trust recommended that the issue should be addressed through stronger and better governance.
The Trust also recommended that the football creditor rules should be revoked. These rules say that in the event of a football club going bust, football creditors will be paid before everyone else, including HM Revenue & Customs (i.e. the taxpayer, effectively you and me) and, more emotively, local traders and St John Ambulance. Mr Clarke noted that he found it difficult to defend the morality of this rule, and we agree, which is why we want to see it revoked. Football clubs should behave as all other businesses have to, and assess the risk that they will fail to collect their debts before they enter into deals.
The big question is this: will the select committee make a difference, or is it just a talking shop? We won’t know the answer to that for some time, but you may have noticed that the Minister for Sport, Hugh Robertson, said recently that football is the country’s worst-run sport. That doesn’t really augur well for those who argue to leave well alone, does it?