Independent Fan Led Review of Football Governance. About time?

On Thursday, Tracey Crouch, former UK Sports Minister, published her highly anticipated Independent Fan led review.

As expected, it had several recommendations likely to ruffle feathers in the UK football community.

Immediately, the EPL commented “It is important to everyone that any reforms do not damage our game, its competitive balance or the levels of current investment.”

Battle lines drawn, and a clear warning the EPL refuses to be a golden goose, and a panacea for all the game’s perceived ills.

Following widespread dismay on issues such as Project Big Picture (the failed land grab by some of the EPL), open discontent with Newcastle United’s ownership saga and the European Super League fiasco, it seemed inevitable there would be a call to action.

However, this is well-trodden territory as one recalls the EFL’s Governance Review and the Government’s 2016 Expert Working Group on Football Supporter Ownership and Engagement. Much laudable intention, but very little action.

Will this time be any different? I believe it is highly likely things will be, not because of the nation’s visceral reaction to the ESL, but also the financial difficulties Covid caused for many clubs. Something really has to change, but it will not be straightforward.

Crouch’s report has many recommendations, with some resonating more than others. A particularly thorny issue is financial equality within English football’s pyramid. Is it right a bottom-placed EPL club receives a minimum of c. £97 million in media rights payments, but a Championship Club receives £8m? Both sides’ arguments are well-rehearsed, but one senses the Leagues’ disparities have become unsustainable.

Increasing parachute payments to relegated EPL clubs has directly caused a collective failure of responsibility and governance at the EFL, as repeated votes have increased allowable annual losses under FFP. This has caused an unsustainable ratio of average wages to revenue, of over 100%.

This is a dangerous metric pre-Covid, let alone when zero attendances caused clubs to lose one of their largest income sources. It has caused the majority of EFL clubs to be technically insolvent, with many staring into the financial abyss.

If we genuinely have an open league system with promotion and relegation – a cornerstone of UK and European football – then those in control must ensure the model is financially robust and sustainable.

The jury is out on how far the EPL can be pushed to share more (albeit the 25% share the EFL demands is highly unlikely), but it does feel that a system on the brink of collapse, needs to be shored up.

Undoubtedly, a wider (or even forced) acceptance of relegation clauses in standard player contracts would materially help – irrespective of EPL claims about distortion to the global market for players. As many other leagues show, this is a global problem. But a levy on EPL transfers would be a good start. Over the past five years, a 10% levy on international transfers into the EPL would have generated an average of £160 million annually for redistribution across the football pyramid. For context, EFL income in 2020 was £182 million.

Even without the proposed levy, the EPL already contributes substantial income to the pyramid. In 2017-18, the EPL distributed over £340 million to the EFL via parachute and solidarity payments, £17 million went to the Football Foundation and £25 million to the PFA. Additionally, the EPL was tasked with allocating £250 million to support lower divisions through the pandemic.

Other proposals sought to tighten rules on club ownership. Direct past experience of these rules suggests they are inadequate, and changes clarifying / strengthening parameters are welcome. Whilst they might prevent another Bury, they will not prevent another Derby County. One size fits all approaches always have holes.

Notably, there is the recommendation of fan empowerment via ‘golden share’ veto rights on certain key issues, such as breakaway leagues. This is a clear move away from the norms of English company law, with its clear statutory protections for minority stakeholders. However, the same company law does little to protect stakeholders with their lives invested in supporting clubs, from decisions they vehemently oppose. One cannot ignore the sentiment that with sport, there is more to it than pounds and pence.

However, in an environment where stadia will require improved facilities for female fans and players, should fan groups be able to halt progress on equality, via a move to a new ground for example, due to tradition alone? These are not straightforward questions.

Amid a complicated debate, we must remember none of the proposed reforms are worthwhile without genuine attempts to address the failings and imbalances in English football governance. Further distributions down the pyramid must not fund a perpetual blackhole. Robbing Peter (the EPL) to pay Paul (the EFL) is hard to justify when there are insufficient and ineffective financial controls. Support must come with accountability.

This leads us to the most ground-breaking of the recommendations (albeit expected) – the appointment of an independent regulator to oversee English football.

If the Government is serious about implementing the Crouch recommendations, an independent regulator will likely be required to force through some of the changes. Left to the incumbents, history shows there will be zero chance of agreement and action.

Does the FA’s current regulatory role enable implementation of independent reform benefitting the pyramid, whilst it receives significant EPL funding? This strengthens the case for an independent regulator.

Conversely, evidence suggests that in industry sectors with a regulator appointed, commercial returns – based on best business practices – are capped. This dilutes the ability to grow and affects wage inflation, return on investment and attracting future investors.

Whatever the path is chosen, setting parameters and introducing the required expertise, infrastructure and systems to make the recommendations happen, will be hugely difficult and legally complex – especially as it involves restricting commercial assets, some of which have been acquired for over a billion pounds.

If precedent is any guide, the FA can rest easy for a while yet.

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