Should football take its share of regulatory medicine?

On the Today Programme this morning, there was an interesting encounter between the BBC’s sports’ correspondent, Mihir Bose, and former Labour Minister for Sport, Richard Caborn. Bose abandoned any serious pretext of neutrality in order to launch a fairly explicit call for the government to pre-empt financial crisis in football and appoint an industry regulator.

Bose has been charting football’s malaise closely on his BBC blog for some considerable time and offers strident argument that all is not well. Previously, Premier League football clubs had become high status vassals to be traded among a coterie of foreign businessmen. Now the credit crunch has put into question the sustainability of debt which clubs have obtained and the financial structures which have allowed their owners to acquire them.

Football Association chairman, Lord Triesman, last week revealed that English clubs were £3 billion in debt and argued that measures must be taken to bring the situation back under control. In addition he highlighted deficiencies in the ‘fit and proper persons test’, which governs who may or may not buy a Premier League club. It is unlikely that Triesman did not have former Manchester City owner and ousted Thai Prime Minister, Thaksim Shinawatra, in mind.

Meanwhile West Ham United, owned by an Icelandic businessman, has suffered the double whammy of that country’s bank collapse and the bankruptcy of XL, the club’s sponsors. With the debt which Premier League teams have taken on, coupled with straightened financial circumstances for their putative benefactors and the likelihood of smaller offers when the Premiership’s television deal is up for discussion in a few months, it is surely only a matter of time before a club gets into serious difficulties.

The club which I support, Liverpool, might be preparing to launch its first sustained title challenge in years, but the owners, George Gillett and Tom Hicks financed their takeover by saddling the club with huge debt. The two Americans have already been forced to restructure this debt in order to sustain their ownership, but the credit crunch and instability at the main creditor, Royal Bank of Scotland, has put the club’s new stadium in doubt. Hicks and Gillett have intractably refused to entertain financially sounder bids from the Dubai Investment Company, and are obstinate enough to put the jewel in Britain’s football crown in jeopardy.

The specific financial difficulties which clubs face are not unrelated to fundamental deficiencies in the sport, as it has developed since the formation of the Premier League. In the 1990s, David Conn, wrote a masterly study of the manner in which Sky TV’s money and a new generation of football entrepreneur, had alienated clubs from the communities where they drew their support and starved football’s grassroots of much needed funding. With foreign ownership and an unprecedented influx of players, the situation is immeasurably worse in 2008.

A fundamental rethink as regards our national sport is now necessary. Bose’s view is that only government regulation can provide the impetus to affect the changes which are needed. He points to the Enterprise Act, whereby other football clubs acquire the status of preferred creditors when a club goes into administration, as an existing precedent for regulation. One model is Germany, which tackled financial difficulties within its game by imposing a strict auditory regime and requires part ownership by fans’ cooperatives in order to ensure supporters’ involvement and participation.

The English game has enjoyed a debt fuelled boom in recent seasons which has accrued considerable success at European level. In the short term, regulation might be unpleasant medicine and will undoubtedly rein in some of the runaway spending which is responsible for the Premier League's dominance. Ultimately it is a medicine which might well be needed, for the overall health of the game throughout Britain, and for the financial sustainability of clubs in England. It is a predicament which is not unique to football.