House of Lords, Speeches, Sport

Sport: Funding

Posted by LordSheikh

My Lords, I thank my noble friend Lord Glentoran for securing this debate and congratulate him on his excellent presentation. The enjoyment of sport is a near universal activity that transcends differences between human beings. It is hard to come across anybody who has not been touched by sport at some point in his or her life. Sport brings people together and occupies a key part in the lives of many people across all countries and sectors. A love of sport is shared globally, and pride in the successful performance of particular teams can be a strong unifying factor in any community.At a time when the economic outlook appears grim, people will instinctively turn towards sport as a means to exercise some of their frustrations and to raise their spirits. Governments have rightly been encouraging more people to engage in sporting activity as part of a healthy lifestyle. We cannot, however, avoid the fundamental truth that there is a considerable reduction in participation in sport between the ages of 16 and 18 and when moving into adulthood. That is why promoting and facilitating grassroots sport is so important. Although a number of initiatives have been developed, I want to pay particular tribute to the work of the Rugby Football Union in taking action to promote its sport through the Go Play Rugby initiative. The success of that effort has been rehearsed in other forums, but I want to repeat that it is a good example of how best to re-engage people who may have lost touch with regular sporting activity. We need to learn from its experience and apply the lessons more widely.

Another key example can be found in the England and Wales Cricket Board, whose investment has significantly increased the number of children and adults playing cricket at grassroots level, and that has had an impact on performance at elite levels. County cricket clubs are better able to choose high quality players when the pool of people playing the game is increased.

It is very difficult to debate a subject such as the Olympics without also reflecting on funding. The unfolding chaos in the Government’s approach to the 2012 Olympic Games is a clear demonstration of that point. I share the concerns stated by the shadow Secretary of State for Culture, Media and Sport that the Government’s use of lottery funds to pay for the 2012 Olympics, largely as a result of their dithering on how best to leverage private sector investment, will have regrettable consequences for sport at the grassroots.

I would be grateful if in his reply to this debate the Minister would assure the House that sports such as rugby union, cricket and netball will not lose out as a consequence of the Olympic Games. There is very real concern on this point, and it would be most helpful if the Minister could clarify the Government’s position.

I wish to focus my contribution this afternoon on the funding of grassroots sport and specifically on what could be done to the taxation regime to facilitate investment in grassroots sport. Whatever delight and success may be achieved as a consequence of the Olympic Games in London in under four years’ time, if the price to be paid is reductions in resources available to local and community sports clubs we should ask whether that is really a course that we should want to progress.

The interests of specific sports are, by and large, protected and promoted by national governing bodies, such as the England and Wales Cricket Board, the Rugby Football Union and so on. The taxation regime that they face is identical to that of companies, with this exception: national governing bodies do not obtain tax relief for expenditure on grassroots sport development, which is comparable to a company’s research and development expenditure. As a consequence, sport governing bodies are taxed on their investment in grassroots sport activity and have to bear the burden of the administrative costs incurred in achieving tax compliance, which is a rather complicated regime.

On that basis, I wonder whether the Minister would consider granting statutory tax relief for grassroots sport expenditure by national governing bodies. If, as seems reasonable, economic circumstances are going to make investment complicated, we should be examining options to facilitate the actions of national governing bodies in delivering grassroots sport activities in local communities. Another potential solution would be a corporation tax exemption for national governing bodies. A recent study has calculated that the cost of a tax exemption would be between £5 million and £10 million a year and would significantly reduce the amount of time spent by governing bodies on tax planning, compliance and payment. A recent study conducted by Deloitte found that, of the 26 European Union states that responded, all except the United Kingdom provided either a tax exemption or special relief to national governing bodies. Effectively, sport bodies in other countries across Europe do not pay corporation tax.

One argument advanced is that sport governing bodies should establish charities in order to benefit from the tax advantages afforded to them. The economic benefits of this route are, however, dubious. The time and costs associated with running a charity are considerable, possibly as much as £5 million a year for national governing bodies. Not all grassroots expenditure would meet the strict definition of charitable expenditure, and charities are unable to reclaim value-added tax, which may result in a substantial VAT bill. I understand that a number of national governing bodies have been in regular communication with the Government to press this point, with limited response.

Given that we are entering difficult times, sports bodies have genuine concern about their revenue streams. We have to acknowledge that the Olympic Games could prove more expensive than originally anticipated, particularly given the failure of the Government effectively to engage with the private sector. The stories that abound of sports professionals awash with money are not reflected in the experience of those involved at grassroots level. The National Lottery is increasingly being used to pay for projects that the Government deem worthy, and the original intentions are being undermined. In those circumstances, I urge the Minister to revisit what could be done with the tax system to assist sport governing bodies, and I very much look forward to his response to this debate.



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