What do the football governance reforms mean for the beautiful game?
From its origins as a pastime for working class Britain in the 19th century, football is now more popular than ever, especially so after the unprecedented success of the 2023 FIFA Women’s World Cup. However, this rise in fame and popularity has also meant increased scrutiny of the sport and, more recently, the future of governance of English football.
In February 2023, the government published its long-awaited white paper outlining major reforms to football in England. The proposals centre around the introduction of a new independent regulator and its strategic purpose of ensuring the sustainability and resilience of English football. The regulator is likely to be installed for the start of the 2024/2025 season, which will begin a year from now.
It is without doubt a historic step in English and world football. Should the plans come to fruition as expected, England will become the first major nation to regulate football through its government. There are currently no professional sports regulated by the British government in England, a point made by Crystal Palace FC co-owner and chairman, Steve Parish, when the white paper was published.
This article reviews the proposals and sets out the key takeaways as we consider what effect these unprecedented changes to football governance will have on the future of the beautiful game and those who love it.
How did we get here?
The publication of the white paper is the latest round in a long-running saga within English football centred around the ownership and management of clubs. Several recent high-profile events preceded this newest development: from the expulsion of Bury FC from the English Football League in August 2019, when the club fell into financial crisis, to the failed European Super League (ESL) proposal, which led to widespread criticism and fan protest in April 2021. The white paper specifically refers to these events and others, including the recent financial struggles of clubs such as Macclesfield Town FC, which was wound up after a High Court ruling in 2020, and Derby County FC, which only narrowly avoided liquidation having been in administration for over nine months.
The ESL scandal led the government to commission an independent fan-led review of football governance, chaired by former sports minister Tracey Crouch MP. The review made 10 recommendations, with the creation of an independent regulator being the main one, and Downing Street supporting the review’s suggestions. That support was taken a step further by the proposals in the white paper.
What’s the plan?
The commitment to the regulator, backed by legislation, is of course the headline proposal. Its specific primary duties are to safeguard the financial sustainability of football clubs, ensure the overall stability of the football pyramid and protect cultural heritage of football clubs for fans.
It would also have regard to its secondary duties of preserving domestic competition, the international competitiveness of English football and continuing inward investment. The regulator’s proposed powers and how it may function in practice are also set out in the white paper.
The operation of a new licensing system
This would apply to clubs all the way through the football pyramid, requiring them to obtain a license to operate as a professional football club. Clubs would have to meet four threshold conditions of the licence:
– appropriate financial resources;
– fit and proper custodians;
– fan interests; and
– approved competitions.
Each threshold condition contains detailed specific license conditions for clubs proportionate to their circumstances, which will be monitored on an ongoing basis.
To improve the financial resilience of clubs and protect their long-term sustainability, the regulator would oversee financial regulation in football. This is to be delivered through the ‘appropriate financial resources’ threshold condition of the licensing system, requiring clubs to ensure good basic financial practices, have appropriate financial resources and protect their key assets.
The regulator would create a compulsory ‘Football Club Corporate Governance Code’. This would seek to improve corporate governance within clubs to avoid the lack of transparency and accountability that can lead to poor decision making and threaten financial sustainability.
Clubs would be required to report and publish on corporate governance annually and compliance with the code is to be enforced through the ‘appropriate financial resources’ threshold condition of the licensing system. A tiered approached has been suggested to accommodate the difference in size and resources of the many clubs within the pyramid.
New owners’ and directors’ tests
Aimed at rooting out unsuitable owners and directors, these new tests (enforced through the ‘fit and proper custodians’ threshold condition) would comprise:
a) a fitness and propriety test assessing a prospective owner and/or director’s integrity, honesty, financial soundness, competence and capability. It would draw on fit and proper persons tests applied by other regulators, including the Financial Conduct Authority, HM Revenue & Customs, the Solicitors Regulation Authority and the Bar Standards Board. Clubs would also be required to declare their ultimate beneficial owner as well as individuals holding senior management responsibilities.
b) enhanced due diligence checks on a prospective owner’s source of wealth aimed at identifying links to criminality or corruption. The regulator would do this in conjunction with existing government agencies and regulators.
c) a requirement for robust financial plans for owners. This would require clubs to submit detailed business plans to the regulator to be assessed as part of corporate governance and financial regulation through the ‘appropriate resources’ threshold condition. The regulator would assess the individual’s financial plans and resources, including proof of sufficient financial resources, financial forecasts, personal guarantee (where the individual would have to declare how much money they intend to invest in the club in the short and long term) and contingency plans (the individual having to explain how they would manage an unexpected downturn in the club’s financial situation). The regulator would have the power to retest owners or directors at any given time or at regular intervals.
Fan engagement and club heritage
The white paper acknowledges fans as “a uniquely important stakeholder”. Through the ‘fan interests’ threshold condition, clubs would be required to have a framework in place to regularly meet a representative group of fans to discuss key strategic matters at the club, and other issues of interest to supporters, including club heritage. The representative group is to include at least a club’s supporters’ trust and adequate representation for the women’s team, if the club has one affiliated.
Clubs would need to engage with the Football Association’s (FA) rules for changes to heritage assets introduced in August 2022 (giving fans an effective veto over such changes). Clubs would also be required to seek the regulator’s approval before any stadium sale or relocation.
The regulator would have the power to sanction individual clubs if there is a persistent and wilful lack of engagement, in breach of its licence.
Financial distributions within the football pyramid
The regulator would have a targeted power of last resort to intervene on financial distributions (should certain high thresholds be met) possibly in a mediation role similar to the Advisory, Conciliation and Arbitration Service (ACAS). This is to address the growing concern of current distribution of revenues within the football pyramid and redistribution from the Premier League to the English Football League (EFL).
With the focus on regulatory reforms and the introduction of the regulator to address these, non-regulatory issues identified in the fan-led review do not fall within the remit of the regulator. But these important issues are addressed by the white paper.
The government has committed to continue working with other organisations, including the football leagues, the FA, the Home Office and FIFA, to reach solutions in relation to issues such as equality, diversity and inclusion, agent regulation and alcohol and football. Women’s football had its own independent review launched in September 2022, and the report of former England footballer Karen Carney MBE was published last month. It too seeks to ensure the financial sustainability of the women’s game through a fully independent entity, NewCo, which will take over control of the top two leagues of women’s football in the UK, the Women’s Super League and Women’s Championship, from the FA. The government will provide its responses to the recommendations in the coming months.
The white paper confirmed player welfare, specifically those leaving the game at a young age, needs protection as a matter of urgency. It backs the call from the Professional Footballers’ Association (PFA) for support for academy players and urges the football leagues and the FA to work together to develop a programme of support allowing all academy players to access support and advice independent of the academies for which they play. Our own Debbie Sawyers will have more on this in the coming weeks
Other noteworthy points
– The majority of the decisions of the regulator would be appealable on judicial review principles.
– The government may seek to establish a non-statutory shadow regulator to begin the work of the regulator in advance of legislation coming into force.
– Following planned consultations with particular groups, the government intends to bring forward the legislation necessary for the creation of the regulator when parliamentary time allows.
What does this all mean?
It is important to note that nothing is set in stone yet. The introduction of a regulator is, of course, a very promising first step, but aspects of its proposed powers still require further consideration. This includes a detailed process for various features of its licensing system and the exact model for the regulator’s targeted power of last resort with regard to financial distributions. This is acknowledged in the white paper with references to the undertaking of “a process of targeted consultation” while it works towards legislation.
Where the regulator will be situated is also to be decided, with the government keen to ensure the location maintains the independence, accountability and effectiveness demanded of the regulator. Its chair and board will have to be of impeccable background and credibility so as to ensure it has real regulatory teeth (and not of the Luis Suarez kind). The white paper notes that the FA could be invited to take up an observer role on the board in acknowledgment of its role as the national governing body of English football.
What is clear, however, is the government’s intention to protect English football and its fans.
The white paper clearly sets out the financially unsustainable way in which some clubs operate as a primary cause of the issues with football governance, despite the unrivalled financial success of the English football pyramid. It refers to the deep emotional and social connections fans have to their clubs and the impact club financial failures can have on their welfare, as well of that of local businesses and communities.
The introduction of the regulator seeks to provide independent supervision of all clubs in the pyramid to ensure they and their owners act in the interests of their fans. Through the regulator’s licensing system in particular, the government will hope this will be achieved by further financial reporting from clubs, more stringent tests for prospective owners and directors, greater fan involvement and less risk of breakaway competitions.
It is worth noting that the white paper considers reforms from within the football industry, as opposed to government-led proposals, to still have a role to play. The government envisages the regulator and its proposed powers to be the pillars on industry-led reforms to achieve the structure of a sustainable and resilient football pyramid. Discussions between the Premier League, the EFL and the FA, over financial distribution through the leagues and other issues have been ongoing for months in a bid to reach a football-led solution.
It has been reported that the Premier League proposed £125 million a year in additional funding to the lower leagues, up by £30 million on its previous offer in December 2022 before the publication of the white paper, but that little progress towards an agreement had been made. Of course, one of the proposed powers of the regulator is the power of last resort, the statutory ability to intervene on matters of financial distribution, but an industry-led solution is the preferred outcome for the government.
A step in the right direction
The introduction of the regulator can only be considered to be in the best interests of football in England. Clubs will be held to greater scrutiny (both in their ownership and how they are run), fans will be more be involved in the key decisions that their clubs make and the cracks within the football pyramid may begin to mend with a fairer division of wealth between the leagues.
Not everyone will be happy with the proposals and even those who are pleased will acknowledge that much remains to be seen in terms of exactly how the regulator would operate. The devil will be in the detail. But there can be no doubt this is a step in the right direction in putting fans first. Though it seems to have been forgotten in recent years, one must not forget: football is the people’s game and it is so for a reason.