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Government threatens to regulate football if authorities do not change approach to debt


New laws could be introduced to force football authorities to reform the sport and its attitude to finances if they do not act voluntarily, the Government has said.

The Department for Culture, Media and Sport (DCMS) said the Football Association (FA), together with league authorities, should implement recommendations made by the House of Commons Culture, Media and Sport (CMS) Committee earlier this year. The FA is the national governing body of football in England. 

The Committee had recommended changes to the way football is governed, including establishing a "formal licensing model" for regulating clubs' finances and a restructuring of the FA Board. The Committee also suggested establishing "robust" club ownership rules that ensure potential owners are "fit and proper" and recommended "abolishing" current rules on credit arrangements when clubs go insolvent which state that football clubs, leagues and players should be paid money they are owed first and in full before any other creditors' debts are settled. 

The Government said the FA, Premier League and Football League bodies should devise proposals for implementing the recommended changes by the end of February next year and "ideally" put them into effect for the start of next season. Failure to do so could result in Government action. 

"We expect the football authorities to work together to agree proposals, including plans for implementation, by 29 February 2012," the DCMS response (20-page / 398KB PDF) to the CMS Committee's football governance inquiry said. 

"The new [FA] Board can then agree the way forward for the remainder of the recommendations, ideally for implementation for the start of the 2012-13 football season," it said. 

"The Government is fully committed to ensuring that the changes put forward by the football authorities make a lasting and substantive difference. If that does not happen the Government will introduce a legal requirement on the Football Association to implement the appropriate governance clauses by the swiftest possible means. To do that the Government will seek to secure, using all available channels, appropriate legislation as soon as Parliamentary time allows. There is a strong case for such legislative proposals to be formally considered in pre-legislative scrutiny," DCMS' response said. 

The debt clubs are accruing is concerning, the Government said. It said that the FA should be involved in helping to protect "financial integrity" in football. 

"Debt per se is not always a bad thing, but it must be genuinely sustainable and should be assessed as a percentage of turnover," DCMS said. 

"Government believes that there is a legitimate role for the national governing body, working hand in hand with competition organisers, to ensure that appropriate and consistent checks and balances are in place to protect the overall financial integrity of the national game and its long-term viability. The recent moves by the Football League to work towards a break-even rule in the Championship are a welcome indication of the appetite amongst many clubs for a change," it said.

The Government said it supported proposals by UEFA, the European governing body for football of which the FA is a member, to impose sanctions on teams that do not 'break even'. 

"The UEFA rules on financial fair play hold out the promise of either directly or indirectly supporting more prudent spending patterns within the Leagues," the Government said. 

"The new approach is a welcome and significant step forward. At the same time we support the Committee’s hope that the operation of new financial fair play regulations will not prevent the ambitious owners of smaller clubs having the flexibility to invest in areas such as infrastructure and youth development for success," it said. 

Currently the FA governs football in England according to rules set out in the FA Handbook. The Handbook includes rules on the administration of football competitions run by the FA, drug testing, advertising and determining 'fit and proper' club owners. 

The Government said that footballing authorities' "corporate governance structures" belonged to "another era" and called on the FA to streamline membership of its Board to "no more than ten", with a mix of representation from across the English football spectrum. 

Further proposals, including making it easier for supporters to gain ownership of their football club, were also backed by the Govermment. 

In a joint statement the FA, Premier League and Football League said they were "grateful" for the "time taken and interest shown in the governance arrangements for football" and would "take time" to consider "what the most appropriate actions might be". 

Trevor Watkins, sports law expert at Pinsent Masons, the law firm behind Out-Law.com, said that measures to reform football finances were “long overdue”.

“Football has to be saved from itself, something that the industry as well as the government recognises” Watkins said.

‪“We have spent much of the last 20 years gazing into ourselves about the way football is run and operated and it is now clear that change will happen. The football industry as a whole has exploited its rights successfully, but has allowed that to happen in an environment where clubs in particular are recording substantial losses in the pursuit of success," he said.

‪“We have an opportunity now to establish clearly defined responsibilities for the individual football authorities that will help address the disagreements and power struggles that currently go on. Football has always had the power to make the changes Government is now demanding and to be fair the industry has taken steps to address some of the problems it has. I believe that the Government’s pressure will speed up this process to readdress the balance of power in the industry and put football on a secure financial footing in the long term," Watkins said.

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