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Economics References Committee
29/10/2015
Cooperative, mutual and member owned firms

MATHIE, Mr James Paul, Head of Club Development, Supporters Direct

[11:37]

Evidence was taken by teleconference—

ACTING CHAIR: I would like to welcome James Mathie from Supporters Direct on the line. Mr Mathie, you might like to make a brief statement, then we will go to questions.

Mr Mathie : Thanks, Chair and your committee colleagues, for the opportunity to present today. I am actually speaking to you only a few miles from Twickenham Stadium, so I wish the Wallabies well on Saturday. I will just briefly introduce my organisation, Supporters Direct. We aim to promote good governance and support to enable the development of sustainable clubs based on supports, involvement and community ownership. We began life 15 years ago, following a recommendation from a British government backed group looking at English football. We were inspired by a guy called Brian Lomax, who was the first democratically elected board director of a professional football club, and Supporters Direct helped set up cooperatives to give supporters and communities a voice at their clubs, which were becoming distant from the communities where they were based.

Fast-forward to today and there are almost 200 supporters cooperatives in the UK. Fifty of these own their clubs. Our work now extends across Europe, and we have advised supporters and clubs worldwide on this cooperative model, and that includes Australia.

For us, we think cooperatives and sport are a perfect fit. A cooperatively owned sports club or a cooperative that has been set up to give supporters a voice at their professional club has a number of benefits which include increasing the financial sustainability and transparency in the sport, improving the governance and encouraging wider community participation and investment in the ownership, and it helps deliver volunteer participation and value. It can help sports clubs deliver local services and facilities and it can develop new or protect existing community sports facilities.

Just to tell you where we are, in the UK we are experiencing a great deal of interest in this model, both top down from politicians and policy makers and bottom up from community and opinion leaders. In the UK there is widespread support for cooperative and community ownership, which is being promoted and developed, and it is highlighted in a few ways in recent years. In 2010 we had the Localism Act, which came in from the coalition government, and that encouraged communities to own and run assets and services in their area and is supported by government funding. The Co-operative and Community Benefit Societies Act, which came in last year, established these as recognised legal forms, and there was social investment tax relief, which was set up specifically, as the name suggests, for social investment to benefit the cooperatives.

Just to give you a flavour for sport in particular in the UK, all of the main political parties made manifesto commitments for developing supporter ownership in football prior to the 2010 general election, and the coalition government actually made a specific promise to encourage the reform of football governance rules to support the cooperative ownership of football clubs by supporters. A Culture, Media and Sport Select Committee was established, and a football governance review took place in 2012 which said that supporters cooperatives have become an increasing significant and successful model for club ownership and can have a beneficial influence on particularly financial governance.

Finally, something that is ongoing at the moment. The government has established an Expert Working Group on Football Supporter Ownership and Engagement to help identify ways in which barriers to cooperative ownership of English football can be overcome. This group has representation from all relevant government departments and the major football authorities, as well as Supporters Direct.

I just thought that would be useful to give a bit of context of how cooperatives in sport are playing out in the UK and across Europe. I also have a recommendation that we would recommend that the Australian government establish an inquiry or conduct a review to examine the need and the potential to increase democratic ownership and community involvement in sports clubs and safeguard and improve community sports facilities, which is identified by BCCM's Blueprint for an enterprising nation. Enough talking from me, I guess.

Senator XENOPHON: You are doing very well, considering the hour.

Mr Mathie : With that, we look forward to discussing these opportunities in further detail.

ACTING CHAIR: Thank you so much. My question goes to the Localism Act. How does it really work? I guess in the Australian context our professional sports bodies are funded by the members, who also have votes at AGMs et cetera. But, for our local sporting groups, it is very much a membership model. I am interested in the Localism Act and how it really works.

Mr Mathie : The Localism Act is not specific to sport. It basically gives communities the opportunity to propose to their local authorities that there is an asset—a physical asset: land or buildings; it could be the local town hall, the pub or, in our case, a sports facility—

ACTING CHAIR: Or a swimming pool.

Mr Mathie : and to have it recognised as an asset of community value. If that application is successful, it goes onto a register. You need a community group of 20 or more people to list the asset. If that asset is then ever sold—and it could be in private hands at the moment or it could be a publicly-held facility—the sale cannot go ahead until the community group that has registered it are notified and they have the opportunity, if they would like, to put together a bid to buy that asset. It is not as strong as we would like, because it only gives you a right to put a bid together at the end of the process. So, if that took place, it would be an extra four-month process. At the end of it, the seller does not have to sell to the community group, but it drives above ground the sale of important local assets. Obviously, for cooperatives and community groups, it is an important extra right so that they can be involved in potentially running facilities and services locally.

ACTING CHAIR: I have got this exact case in my home state. A local community wants to take over the running of the local swimming pool because the council is going to close it. So they have come together to do that. What sorts of checks and balances are in place at that bidding process to ensure that it is not just going to be a model that works for the 10 parents who, at the moment, have kids that are all doing swimming training?

Mr Mathie : It is a good point. Some people over hear call it a 'liability transfer' rather than an 'asset transfer'.

ACTING CHAIR: Exactly.

Mr Mathie : I should say that a raft of funding is available that groups can apply for, which is important—it is a kind of investment readiness type support—so that they can have support to put together a realistic bid. Ultimately, as I said, the seller does not have to sell to them. If it is a public body that owns that swimming pool then they would judge that bid in a normal scrutinising manner.

There is no guarantee it would come to fruition. It is partly a protective measure, so it is there to protect these assets from being sold and built on. But it is also partly an opportunity for community groups to come together and take on the running of the facility. It is not completely straightforward, but it is a kind of stake in the ground that did not exist before.

ACTING CHAIR: And how free of red tape is the British system for registering a cooperative? Is it a relatively easy thing to do?

Mr Mathie : Yes. I did have a read of some of the comments on how it works over in Australia. I would say it is easier than you guys have it at the moment. I think there are some similarities. We have sponsoring bodies that sponsor model rules which, typically, groups would go through to save money, rather than registering a bespoke cooperative constitution. So if a sports body wanted to register a cooperative they could come to us, we could tweak our model rules and, assuming there were not that many changes, that could be done for as little as 40 pounds. So it can be done quite cheaply. The turnaround times for the administration look to be about half the time that you guys have. Fourteen working days is their estimate.

There are still some frustrations that we have when we compare the way that cooperatives are administered. In our case, it is by the Financial Conduct Authority as against Companies House, which is the equivalent for companies. So we still have some of the same frustrations. It is a very searchable database; it has online applications and it is a much more advanced system, which makes it difficult when you are comparing setting up a company and setting up a cooperative. It still takes longer. You can set up a company over here very easily—almost on the same day, effectively, for an off-the-shelf company.

From what I can see it is easier to do is over here, but we still have the same struggles where we are behind companies and private organisations.

ACTING CHAIR: Yes. And, finally from me—and I know that Senator Xenophon has a couple of questions: why do you think this is a model that specifically could work for Australia?

Mr Mathie : We have found that the co-op model is the perfect fit for sports clubs, really. That is everywhere—wherever you are. It is really the alignment with the values of what the club is actually there to do—it is just more suited to a cooperative than to a company. That struggle is something that we have in professional sport over here, and you will have the same way you are, where—

ACTING CHAIR: With the corporatisation and professionalisation of sport that has been going on for the last two to three decades, are you actually arguing for this model in professional corporate sports? Or at a community sport level?

Mr Mathie : Well, both. For us it is a model that has advantages at a professional level. It is just dependent on how the league is set up as to whether it is a level playing field. I am not sure if you are aware, but famously over here, in the Bundesliga, which is the premier competition for professional football in Germany, all bar three teams are actually cooperatively owned. They actually have a rule in their league which says that each club must be at least '50 per cent plus one' owned by its members—that is, supporters. These are clubs that are turning over hundreds of millions and are still huge entities in sport but can compete.

The difficulty we have in England is that football clubs in the professional league—but other sports as well—typically lose money. Obviously, the cooperative model is about sustainability. For example, the average club in the fourth level of English football, which is still a professional league, loses half a million pounds a year. So we have some clubs that are cooperatives in that league—there are four—and they effectively have to make up half a million pounds of losses by running their club or their business in a better way so that they can be competitive. But, as you get higher and higher, closer to the premier league, the clubs lose more and more money, and the leagues allow them to do that. The difference is that in Germany the league will not allow them to make losses and it wants this '50 per cent plus one' rule.

So it can work at the professional level but it is very well suited for the amateur—even your local bowls club—and semi-professional level. It can work at all levels in different sports. It depends on whether there is fair distribution of wealth and a boom-or-bust culture existing in that sport.

Senator XENOPHON: Thank you for staying up so late. I am so sorry that we have subjected you to this cruel and unusual punishment: talking to Australian senators in the early hours of your morning. I just wanted to clarify my very limited understanding, to date, of the ownership structures of football clubs in the UK. You hear stories of the billionaires, invariably from another country, buying up some of the major football clubs. Are you saying this model is an alternative to that, or do you have sometimes a club being owned by a very wealthy person which has a supporter group that gives support to that club? I am not quite sure how it works. Is it one or the other—either private ownership, invariably by a very wealthy individual, or what you are espousing now?

Mr Mathie : The dominant model is certainly private ownership and, at the top of the game, there are more foreign owners of Premier League clubs. Not to say that foreigners are the issue, but it shows the difference in the dynamic of who owns the clubs. What you will find is that, for some of those clubs, the way for supporters or the local community to have influence and a voice is to set up a cooperative, which we call a supporters' trust, which sometimes can have influence through shareholding or a place on the board. Sometimes it has influence just purely from the number that are members and how it lobbies local support.

There is a club in the top league that you might be aware of, called Swansea City, and they are actually 20 per cent owned by a supporters' cooperative. They have two representatives on the board of the football club, but there are other clubs that are run—

Senator XENOPHON: So that means that it can almost be parallel. You do not have any major football clubs that are 100 per cent owned by supporters, but they can form this structure and be part of the decision-making process for the club. Is that what you are saying?

Ms Mathie : Exactly. In their case, they have bought their way in, I suppose, by buying a 20 per cent shareholding. We are on the cusp of getting, through this government expert working group, recognition that having supporters involved in governance to a degree, in decision making, should be a formal structural relationship with the clubs because it is good for the game. Some clubs would embrace that and they would see that these people are their customers and it is a good thing to do. I read an example recently of a club in Australia, the Central Coast Mariners, who seem to have realised that it is a really good thing to try to involve your supporters and your members in some decision making. It is a real mixed bag, if I am honest. In terms of ownership, as you get further down away from the premier league where all the money is, lots of clubs are looking at this model of community ownership as something that they would like to aspire to. It gives them control of their destiny, it gives them local identity and it brings in more supporters and more investors because they own the club, which is a great thing. They can be participants in it. But we struggle over here because the wealth at the top is so high and that attracts people who see it as a business opportunity. It is a mixed bag.

Senator XENOPHON: You talked about a working party. It seems to me that there appears to be bipartisan support for this model and that it is continuously being looked at, improved and finessed through that working party. Is that a fair summary of what is happening?

Ms Mathie : Absolutely. There are various initiatives going on. A Scottish government expert working group has concentrated on football. They have taken the idea of applying a right to buy football clubs and seeing football clubs as an asset of community value. That might be a step too far, but it shows where some of the intent is with some of the Scottish politicians. In England and Wales there is cross-party support for this model, or to at least have support and involvement in it. The group that I sit on are looking at how they can remove barriers and incentivise these opportunities. They see it as a real positive and it is about making it happen. We have won the argument over here. As you say, it is just about finessing some ideas to get more from this situation.

Senator XENOPHON: Finally, if you want to send any more documents to us in terms of the working group's interaction with government—you have given a very good submission, but there may be something you would like to add to that—that would be very useful. I found what you have put to us quite invaluable.

ACTING CHAIR: Mr Mathie, thank you very much.

Ms Mathie : Thank you. The group that I sit on for English football will report at the end of November, so I will share that recommendation report and the historic things too. Thanks very much for your time and for giving me the chance to contribute.

ACTING CHAIR: Thank you very much. Have a good sleep.

Ms Mathie : Thanks.

Proceedings suspended from 12:04 to 12:53