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10.16 pm

The Minister for Sport (Kate Hoey): First, may I congratulate my hon. Friend the Member for Eastwood (Mr. Murphy) on securing a debate on the European Commission's present review of the football transfer system? I feel that the players' union in Scotland is very lucky indeed to have such a fine spokesman in the House. He has shown his deep concern for football from top to bottom and has represented strongly the views of many people in the country.

The debate is of great interest. It has also been of great interest in Scotland, as my hon. Friend is aware; the Scottish Parliament itself has taken up the issue, which concerns everyone in football and all of those with an interest in its well-being. It is an issue of some complexity and, partly because of that, recent press comment has created a rather misleading impression of the progress of negotiations and, indeed, the Government's role in the matter. I am happy to set out the present position and discuss the Government's aims for the future of the transfer system and the steps that we are taking with football to achieve a satisfactory outcome.

First, we must consider the reasons for the Commission's present review, which is a prerequisite for any informed discussion of the issue. It has been said that the Commission seeks nothing less than the destruction of the transfer system. The Government's understanding is that that is not the case. The Commission is legally obliged to investigate complaints made to it. In this case, the present review is a result of a complaint made to it some time ago by a Belgian trade union against FIFA's transfer regulations and of complaints from two clubs in the European Union.

One complaint held that the present regulations restrict competition in the football market by concentrating sporting power in the hands of a small number of clubs that can afford inflated transfer fees for top players. It can be argued that the grounds of that concern are doubtful in the light of football's present economic structure. Player salaries may be thought to be more relevant. Whatever the merits, the Commission has raised legitimate concerns, including the possible effects of the remaining restrictions on players' freedom of movement following the important Bosman ruling.

Following the Commission's statement of objections in 1998, FIFA was asked to make proposals for revising the regulations to address the concerns that arose from the original complaint. However, it took rather a long time to do that. The Commission is proceeding under an established administrative procedure and, to the Government's knowledge, its agenda is no wider than that. I should add that the Commission is currently considering only international transfer regulations--player moves between European Economic Area countries. However, as my hon. Friend said, it is possible, but by no means certain, that domestic transfer systems would have to be revised to reflect any reform of international regulations, as happened after the Bosman ruling. Whatever form it takes, reform of the transfer system will come from football itself. The Commission's role is to ensure that any new framework is compatible with European Union law and capable of withstanding any subsequent legal challenges.

There have been calls recently for the Government to attempt to influence the negotiations by pursuing the matter with the Governments of other member states or

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by some unspecified means. That is very understandable because the legal process in the European Union is often cumbersome and unexciting. However, it is important to realise that there are no easy answers in the matter and there are limits to what may reasonably be achieved. Having said that, the Government have been active throughout not only in helping football to achieve a solution, but in seeking to mobilise support in other European Union countries for the beneficial aspects of the current system and of football's reform proposals.

Given the importance of football in our sporting culture, it is natural that the Government should have our own views on the future of the transfer system. We wish to see a framework that continues to support the smaller clubs which encourage the development of young players, promotes competition between clubs and affords stability to the sport. The Prime Minister has made that clear on a number of occasions, particularly in a very important joint statement in September with the German Chancellor. However, that does not mean that we seek to defend every aspect of the current system, because the system has weaknesses.

The current framework does indeed perform a role in supporting smaller clubs. It also encourages them to develop talent. However, that support and encouragement are both limited and arbitrary. They are limited as the amounts paid by the premier league to football league clubs are greatly exceeded by the amounts that the premier league clubs pay to each other and by the amounts paid for overseas players. Additionally, much of the trickle-down effect is offset by transfer money going back from the football league to the premier league.

The support and encouragement are arbitrary as the benefits derived by smaller clubs are neither targeted at need nor reflect the true costs of developing young players. When Les Ferdinand joined Tottenham Hotspur from Newcastle United, in 1997, his first club, Hayes--I am very pleased to see my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) in the Chamber--received £800,000 under a sell-on clause. Hayes did well and invested its windfall in a new stadium. However, that example is not typical. Many struggling clubs receive next to nothing for players whom they have developed. We would like to see a system in which clubs are fairly recompensed for identifying and bringing on talent.

I am glad to say that the football authorities themselves recognise that the current system is not perfect. However, the sport recognises as we do that the current transfer framework is the best known means of achieving the benefits that we seek.

The Government are therefore helping football to work towards a new system that will be acceptable to the Commission while retaining the beneficial effects of the current arrangements. Under the proposals put to the Commission by the joint FIFA-UEFA task force, on 31 October, clubs developing players will be guaranteed a fair level of recompense for losing promising talent.

Support for smaller clubs, however, forms only one part of the negotiations. Many observers are more concerned by the suggestion that players should be able to break contracts if their teams are relegated, if they are not selected for matches or if they disagree on tactics. That proposal came from FIFA, but has now been withdrawn. The Government share football's concern about the possible effects of that proposal on the stability of domestic and international competitions.

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We have made plain our concerns to football, but it is right that all sports should run themselves and it is for the football authorities to reform their transfer system. The Government's proper role is to help that process and to ensure that the interests of all parts of the sport are fully considered by the sport's international governing bodies and by the Commission.

To that end, we have had three roles in the negotiations. First, through the United Kingdom football authorities we have actively encouraged the FIFA-UEFA working group to come up with sensible proposals that meet some of the Commission's concerns while achieving a solution that meets the needs of the whole sport. It is well known that the international governing bodies were for a time unable to agree a common approach. After a couple of weeks of uncertainty, the Commission is once again discussing the 31 October proposals with the taskforce, starting with a meeting tomorrow. The Government are receiving regular reports of the progress of the negotiations, and we shall continue to offer every possible assistance through our national football authorities.

Secondly, we have sought to encourage football to speak with one voice. The Football Association and the premier league are taking the lead in negotiations. The Scottish FA has been kept fully informed of developments and is represented at the regular UEFA Euro leagues meeting. My Department has also remained in close touch with the other devolved Administrations on the issue.

Thirdly, we have tried to ensure that the Commission acknowledges the special characteristics of sport. That was the aim of the declaration on sport, which the Government fully supported, at the Nice summit. The declaration expressed the belief of European Union states that sport is different from other industries, and that the Commission should take account of that, not least when considering the transfer issue. The Nice declaration included a specific paragraph on that issue. That shows how seriously Governments in the European Union are taking the issue. We are confident that the Commission has taken account of that message as negotiations have continued.

We have remained close to the issue, and have offered every assistance to football when appropriate and potentially productive. UEFA and FIFA will pick up the negotiations with the Commission again, and I believe that there are grounds for cautious optimism.

It is entirely possible that we will end up with a transfer system that, although rather different from the present arrangements, has some significant advantages over current practice.

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Mr. Bob Russell: In view of the serious points that the hon. Member for Eastwood (Mr. Murphy) made in his powerful speech, would the Government intervene if there was a possibility of smaller clubs going to the wall?

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