24 February 2023

English football is a global leader – so why is the Government proposing to sabotage it?


The Government’s endorsement of the proposal for an Independent Regulator for English professional football, set out in Tracey Crouch’s ‘Fan Led Review’ nearly 18 months ago, has been welcomed by many football fans and commentators.  But faith in regulators suggests the triumph of hope over experience. In sectors such as energy, finance, water supply, the railways and education, they have rarely covered themselves in glory.

The Government has previously said that regulation should only be imposed on an industry if it is necessary and proportionate. We would normally regulate an industry if there was evidence of misuse of market power or substantial external costs imposed on society. Neither is the case in relation to football.

Crouch’s emphasis – repeated in the Culture department’s press release yesterday – was on financial risk. She homed in on the weird economics of professional football. For decades, this has involved clubs spending more than their immediate revenue in pursuit of sporting success. Crouch and her colleagues, few of whom had much business experience, thought that this was dangerous. But the Review failed to justify the claim that it represented an existential threat to the game.

Financial disasters for individual clubs certainly occur from time to time, but they almost all survive, or are reincarnated at a lower level. The impact on the rest of the football pyramid remains minimal. In reality, football clubs have remarkable longevity and resilience. Sir Norman Chester, in his 1968 report on football, made exactly the same point as Crouch about the incontinent finances of the clubs. But all 92 teams in the Football League at that time still exist, even if some have slipped down the leagues or had to reform. It is difficult to think of any other business sector where firms remain intact after 55 years.

Nevertheless, we are to have an FCA-style regulator with powers to require detailed business plans and regular financial updates from clubs – a requirement not imposed on other parts of the economy with far greater problems. This will extend down from the Premier League to the fifth-tier National League, where it will be a more considerable burden to clubs which usually have only a very limited administrative staff.

Clubs must restructure boards and put equality, diversity and inclusion programmes in place. If the Crouch recommendations are followed, they will also have to set up arrangements for a fan body to hold a ‘golden share’ giving veto powers over certain club decisions, and separate arrangements for a ‘shadow board’ to be consulted on most matters. Owners will find their room for manoeuvre severely reduced as their property rights are thus diluted.

Business plans will have to adhere to a stricter version of Financial Fair Play rules. Failure to satisfy the regulator will, in principle, lead to a withdrawal of a licence to participate in competitions – a sanction which will be difficult to impose and would surely face legal challenge, in addition to the uproar it would cause amongst fans who would expect the regulator to be on their side.

If effective, the regulators’ requirement to balance the books sustainably within a limited period would actually act to reduce competition rather than increase it, as some seem to expect. It would be a recipe for mediocrity, entrenching the current top dogs at each level of the pyramid. It would be near-impossible for a new Manchester City to rise from the current also-rans in the Premier League or Championship, but also for a Forest Green or Salford City to rise from non-league obscurity.

The proposals for the regulator require new tests for owners and directors going well beyond those in other sectors of the economy and may well deter investment in clubs, particularly in lower leagues where it is often very difficult to find people willing to put money into unglamourous teams in unfashionable areas.

Perhaps most controversially, it is proposed that the new regulator should have powers to impose redistributive levies on top clubs. This would in effect be a tax, and powers of taxation should belong to the Government, not an unaccountable regulator who will no doubt be subject to constant alms-seeking by lower-league teams, local authorities, women’s football, diversity consultants, community groups, climate activists and anybody else with a case to make.

The proposed changes will be expensive, will require a massive box-ticking exercise and are likely to lead to clashes over boundary issues with the existing football authorities. These authorities, remember, have steered the game successfully for most of its history.

There is, of course, always a case for improvement. Perhaps the FA and the Premier League have not moved in the way some fans would like. But football has changed beyond recognition in recent decades, and could potentially change in many other exciting ways in the future. Regulation may seem to offer some fans things which they want – no European Super League, no colour changes, no grounds being sold and clubs relocated. But if we are not careful, it could usher in a period of stasis. Moreover, the history of regulation suggests that career regulators constantly expand the limits of their fiefdoms, while giving rise to unintended and often perverse consequences,

English football is a global leader. It has the richest and most successful club competition at the elite level, watched by hundreds of millions worldwide. And below the Premier League there is a vast ecosystem of professional and semi-professional leagues which supply live sport to millions across the country, with amateur and junior competitions feeding into this. All of this has been created by private initiative and private money over more than 150 years.

And here comes the Government, which often seems incapable of carrying out core functions such as defence and policing, or delivering good quality health and education. It’s going to interfere with sporting property rights, impose a crippling bureaucracy, complete with the usual box-ticking woke demands, allow arbitrary redistribution, restrict competition and hamper new entrants.

We would need strong grounds for doing this to an industry which was destroying the environment, exploiting workers, stealing resources…. so how do we justify it for a sport?

And all this to satisfy a noisy minority of fans, and opportunistic politicians who want to be popular with a chunk of the electorate who probably pay little attention to politics and are unaware of the downsides of regulation. What could possibly go wrong?

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Professor Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.