By Tony Attwood
As was suggested in correspondence following an earlier article, the deal between Tottenham Hotspur and Haringey Council over the funding of the new stadium for Tottenham could be seen as state aid, something that is not allowable under EU law.
Now Untold can reveal that the situation has been referred to the European Commission.
This means that Tottenham now sit alongside clubs such as Real Madrid (re their land exchange deal with the Madrid city council) and West Ham Utd (over the donation to it of the Olympic Stadium by the government agencies that paid for it) as clubs that might have broken the EU regulations that forbid any form of state aid to commercial enterprise. Manchester City have escaped an enquiry as too long has now passed since they were granted the use of the stadium used for the Commonwealth Games.
The referral to the EC does not mean that the Commission will bring charges against Tottenham Hotspur plc, or against the Council, rather that is will consider the matter.
The argument is that Tottenham Hotspur football club’s planned new stadium project allows Tottenham Hotspur plc to benefit financially from Haringey council plans to develop an area opposite the new ground. This is because the close working together of Tottenham and the local council is complicated by the fact that some of the land to be developed for shops, housing etc is already owned by Tottenham, and thus the club will make a profit from the council development.
Initially the council argued that because of this benefit, it required Tottenham to pay towards the development costs. Tottenham at first agreed but then later argued it did not have the money to do so, and pointed out that they had already begun looking for another site to take over as a football ground. The council later agreed not to demand any money of Tottenham.
So the argument is that the profit that Tottenham will make is equivalent to state aid for a private project, in that no ordinary company would allow Tottenham to benefit and make a profit in this way, without it having to make a financial contribution to the redevelopment project. (The “what would a company do” test is central to this – to prove a council or government agency is giving state aid, it has to be shown that a commercial organisation would not act in the way the council has done).
Tottenham Hotspur has a substantial amount of land around its existing ground some of which it has owned for a while, some bought over time, and some bought via a compulsory purchase order with the agreement of the local council and the state. Much of this area is now proposed for redevelopment for residential property.
The local authority has an interest in this work as it has a duty to the area to aid redevelopment and economic growth. Thus the agreement under which as part of getting its planning permission Tottenham would pay Haringey council £16m from its profits towards the council’s cost of developing the housing.
The argument is that as Tottenham accepted this as an equitable deal when it started out, then anything subsequent to this which is more favourable should be investigated by the Commission as being a move from an equitable arrangement to state aid.
It has been reported that Tottenham Hotspur’s chairman, Daniel Levy, argued that the original requirements were making it difficult to raise the £400m necessary to build the new stadium, and called for the wider development to boost land values and investor confidence in the Tottenham project.
However, it is also reported that Tottenham Hotspur in its last financial year for which figures are available made £80m profit in 2014 – the largest ever by a football club in Britain. Further it is stated that Tottenham has no debt and £3m in the bank. Further this profit is part of an upward trend in that the club’s revenue from TV income was up £32m, while their wages (a major part of any professional club’s expenditure) was only £4m up.
The argument is thus that Tottenham did not suddenly become unable to pay the £16m but was simply putting pressure on the local authority in various ways to get rid of the £16m debt. By agreeing to this the council (it is argued) is in effect subsidising the football club – which would be illegal state aid.
Further, since as part of the project a council housing tower block and rows of shops with people living above will be knocked down to create a wide walkway for supporters of the football club to walk from White Hart Lane station straight to the new stadium, this is local council action to the benefit of Tottenham but no one else. There is nothing wrong with this, it is argued, if Tottenham is paying for it – since it is for its benefit. But if the council pays that is once again seen to be state aid.
The Commission now has a year during which time it can decide if it wants to examine the whole case or not. The particular problem for Tottenham is that if their case is valid and if the suggestion that they had to pay £16m to the council would undermine their ability to raise the £400m they need for the stadium is also valid, then the suggestion that the European Commission might now investigate the development for state aid, could have a bigger impact on Tottenham’s ability to raise the money, than if Tottenham had paid the £16m as it originally agreed to do.