Steve Phillips – The Bare Minimum Man

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Every time I’ve read any sort of correspondence involving Welsh Rugby Union chief executive Steve Phillips, whether it be an interview or the notes of a meeting, I’ve been left with a sour taste in my mouth.

Perhaps it extends from a mis-trust of the WRU as an organisation, or from a pre-judgement of Phillips as someone nowhere near qualified to be CEO of a £90m professional sport business, but either way he fundamentally fails to cover himself in glory when it comes to speaking in these semi-public arenas.

From a stereotypical perspective you wouldn’t expect a lifelong accountant to be the most open and engaging of leaders, but what strikes me most after reading the recent notes of a meeting between the WRU and the Joint Supporters Group, is that Phillips isn’t speaking as an accountant, he’s speaking as a politician.

In a similar fashion to when he was asked questions in a recent media briefing, published by WalesOnline, the CEO answers questions without really providing answers. It’s big on rhetoric and short on detail, dismissive of attempts to probe and clarify but quick to refute any suggestion of wrongdoing or inaction.

My main take away from all of these interactions Phillips has had though is that he and the WRU are not interested in the success of the four professional clubs in Wales. Crucially, not that they are actively preventing the sides from achieving success, but that they are just not interested, which in many ways is worse.

It’s important to remember that he has been at the Union for close to 15 years now. He’s seen Roger Lewis’ attempts to directly take on the four clubs and he’s seen Martyn Phillips’ attempts to manoeuvre through them, neither ultimately working. Now it appears he’s going to sit back, do the bare minimum to ensure the supply chain for Team Wales survives and reap the financial rewards the national team supplies.

I want to note the following section of the JSG minutes. HJ is Huw Jones of the CF10 Arms Park Rugby Trust;

HJ – You’re quoted as saying (in an interview with Simon Thomas) ‘The question that
you’re really asking me is who should bear the repayments? But it probably doesn’t
matter because it’s the WRU who generate the money that will fund the repayments.’
The problem with that is that the WRU doesn’t employ or develop any players.
SP – It does fund the community before it gets to the regions so you’re back in a
virtuous circle really. Where do the regions get their players from? The community. Who
funds the community? This is why we have to be aligned.
HJ – But it’s the regions that are putting in significant money to develop those players
and they rely on payment for services from the WRU.
SP – I accept that, they rely on payment of services pursuant to the PRA. The answer
from the PRA was £3m.

Phillips is entirely happy, so it seems, that the WRU has discharged it’s obligations under the Professional Rugby Agreement that sees the professional clubs receive all money left in the Union pot after it’s own costs and the ringfenced £11m of community game funding. That should have been £26m for the 2020/21 financial year, instead it was the £3m mentioned.

It doesn’t take an accountant to understand that those numbers don’t add up, but Phillips doesn’t acknowledge that the PRA doesn’t pay a fair amount for the services the WRU receives. If the Union really wanted to see the pro sides successful it would ensure those services are paid for properly, but instead he notes the following in the WalesOnline quotes;

We are complying with the Professional Rugby Agreement between ourselves and the regions. The PRA funding model is a risk and reward strategy. Sometimes it pays more, sometimes it pays less.

Of course the PRA could not have predicted the covid-19 pandemic, but that’s not important to Phillips. He’s done what the document says he has to do. He’s paid the £3m left in the pot, but now there’s the problem that this isn’t enough to sustain the four sides and subsequently his Team Wales money maker ceases to fill the pockets of the Union.

Except Phillips doesn’t paint the picture that way, as the politician comes out to paint the WRU as the great heroes in the story;

HJ – The CVC Six Nations Deal. With regards to the PRA, one of the things you could
have done as the WRU is to say, COVID has now hit, we’re in a totally different ball
game financially and developmentally – everything is totally different – we need to look
at the PRA, but what has happened is you’ve stuck rigidly to the PRA.
SP – You accuse us of sticking rigidly to the PRA? I would have stopped the
conversation at £3m, washed my hands of it and I have discharged my obligation. We
didn’t do that. A lot of people went through a lot of hassle for this so our reaction to that
was landing the loan, so I don’t accept that. To put it into context, there is nothing in the
PRA that talks about the WRU getting a loan to help our regional colleagues. There is
nothing further from the truth – landing the CLBILS was really tough.

This is pure spin from Phillips. It suggests the loan was secured above and beyond the WRU’s responsibility, yet it is clear the loan was secured to ensure the professional clubs did not go out of business which, as we know, would have a huge knock-on effect on the Union.

They would not be able to run more than two professional sides themselves, which would cut the pool of Welsh players available to the national team in half and massively reduce the strength in depth available to Wayne Pivac. In the middle of the pandemic there’s a question mark over whether they’d even be able to finance two teams anyway.

Then you look at the terms of the loan. A £20m loan required to be repaid in three years including interest. Meanwhile in Scotland the SRU received £20m with only £5m made up of long-term low interest loans, and in England the Gallagher Premiership sides received £59m in largely low interest loans to be repaid over 20 years.

Phillips continues to maintain that the terms of the loan are being negotiated, but here we are just three weeks before the first repayment is due to be made without any news. If negotiations are successful the WRU may once again claim they have gone above and beyond, but with the current loan agreements creating huge risk to the four teams going forward, the evidence remains that it’s another act of self-preservation from the Union.

As an aside to all this, the actions of the WRU away from their PRA funding obligations and crippling loan securing have to be scrutinised, in a year during which they have agreed to sell part of their stake in the Six Nations, announced the opening of a high-end hotel in central Cardiff, detailed plans for a roof walk on the Principality Stadium and invested in a beer brewing company.

Phillips has maintained during this time that the investments outside of rugby, which utilise the money paid by CVC for that Six Nations stake, are to ensure that the loss of future revenue due to the selling of that stake is recouped elsewhere. Yet, back to the JSG minutes;

SP – What is not going to be acceptable is signing up the regions to less in four years
times than they have now. How do we mitigate that? We need to reinvest it to make up
any deficit.
There is an upside – we have two benefits. CVC can make the Six Nations better by
having better commercial arrangements and can tilt the Six Nations graph, plus there’s
a new income stream, but under no circumstance can we allow ourselves to be worse
HJ – The whole point of selling 15% of the assets is for CVC to make money for
SP – Absolutely – we wouldn’t let them in if they couldn’t tilt the graph

This is just a plain and straightforward contradiction. If CVC aren’t allowed to purchase the Six Nations stake without a confidence that they can improve commercial revenues in order that the WRU don’t see a drop in revenue despite owning less of the competition, then why must the CVC payments be invested in beer and roof walks?

Of course nothing is certain in life, but Phillips is fairly unequivocal here regarding the decision to allow CVC to buy-in. There’s also an argument that asks why shouldn’t the WRU carry some risk? Push some of the CVC payments into the professional game and back up the confidence that the Six Nations deal won’t have any impact on future payments.

This would be a sure-fire example of wanting the pro sides to be competitive. Instead though, the investments in non-rugby initiatives will just further line the pockets of the WRU along with CVC’s increase of commercial revenue.

When this time comes will the pro sides see any extra money through the PRA? Well, with the Six Nations CVC money declared as a capital receipt and therefore outside the PRA, who is to say that profits from the beer, hotel and roof walk won’t be classified in a similar way? We know there are £24.5m worth of debentures repayable in 2024 as well.

In the end we return to the WRU doing the bare minimum to ensure the pro sides don’t collapse, something Phillips mentions in the JSG minutes repeatedly. Not once does he mention that he will ensure the teams are financed adequately in order to be consistently competitive, as that impacts on the Union’s ability to line it’s pockets.

The way out of this? The four chairmen need to work together to turn the Union’s governance of Welsh rugby on it’s head. Club committee men like geography teacher Rob Butcher should not be the chairmen of £90m professional sporting organisations run day-to-day by the accountant. Experienced businessmen like David Buttress and Simon Muderack should be driving the professional game forwards.

It’s time the professional game flexed it’s muscles and finally got over being the last to visit the watering hole. Otherwise mediocrity will continue to reign.

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