Football Clubs: Administration (Hansard, 24 May 2004)

§ Lord Triesman
My Lords, the order of priority for payments for creditors within an administration is set out within the insolvency legislation, along with the rules governing how an administration is to be carried out. In some cases, however, to provide the best outcome for creditors as a whole, it may be necessary to pay certain creditors or other parties outside the normal priority. Whether any such payments are appropriate are a matter for the commercial judgment of the administrator in seeking to maximise value for the creditors and are open to challenge through the courts.

§ Lord Faulkner of Worcester
My Lords, I thank my noble friend for that reply. He will know that the All-Party Group on Football, in its report on the game's finances, proposed the abolition of the football creditor rule on the grounds that it is unfair and undesirable to maintain a special category of preferential creditor, as that obviously reduces the amount that is available for other unsecured creditors.
Does my noble friend not find it strange that, while the removal of the Inland Revenue as a preferred creditor under the provisions of the Enterprise Act 2002 was intended to promote a collective approach to insolvency and rescue, in the case of football it has had the effect of, in many cases, pushing the Inland Revenue towards the back of the queue of creditors? Is he aware that in the case of Bradford City Football Club, which became insolvent in May 2002, 36 workers in club shops were sacked, the St John Ambulance brigade was left to whistle for the £5,000 owing to it, the local authorities, which were owed money from public money, were denied it, yet Mr Benito Carbone, one of the players, was allowed to collect his £40,000 a week contract without any penalty? Does my noble friend not find that very strange?

§ Lord Triesman
My Lords, I pay tribute to the work of the All-Party Group on Football and to my noble friend 1049 for his long suffering support of Wimbledon Football Club. Mr Justice Lightman considered the Football League rules relating to the payment of football creditors. He found that, although they might be considered objectionable, they were legal. Objectionable seems to be a modest word when one considers the evidence that has just been provided about Bradford. It appears that there may be cut-price lawyers, but there are no cut-price footballers.
The aims of administration and the Enterprise Act are not intended to herald a change in the Inland Revenue's debt-collecting procedures—that would be a perception not supported by fact. The aim is to support viable businesses with genuine but temporary difficulties and ensure that administration, using the concept of business rescue, tries to get the maximum benefit for the creditors. That often means that the football club has to carry on, because that is its only asset.

§ Lord Addington
My Lords, does the Minister agree that the situation described by the noble Lord, Lord Faulkner, could actually encourage the incredible wage and price inflation within football, and could therefore be very damaging to football in the long run? Can the problem be looked at in terms of protecting professional sport generally and football in particular?

§ Lord Triesman
My Lords, I am sure that the problem will continue to be looked at. The Football League is making arrangements to try to introduce wage caps and other measures of prudence so that clubs do not extend themselves beyond where they are capable of surviving, and to try to ensure that clubs are equipped, should they suffer a fall from one Football League division to another. I am sure that all of those arrangements need constant review and that we will continue to review them.