Mihir Bose: West Ham renting the Olympic stadium shows how the British state has failed in the modern sports business

West Ham must have hoped that the dust had finally settled on their move next year to the Olympic Stadium. Not a bit of it. There are growing calls for public inquiry by fans of other football clubs into the decision by Boris Johnson to let the Hammers rent the stadium built by taxpayers’ money for the 2012 Olympics, an occasion of great British national celebration.

What makes this very interesting is how this controversy has reignited. This is due to the media, in particular the Daily Mail, which a few weeks ago ran a detailed comment page article on the saga highlighting how many aspects of the deal between Johnson and West Ham have not been made public.

There is a suggestion that this is part of a wider campaign by the paper to get Boris. The paper has a reputation for feisty campaigns and it is possible editor Paul Dacre has got Boris in his sights. However, if this is what prompted it the paper clearly wants to be fair for this was followed by the paper’s celebrated sports writer, Martin Samuel, interviewing Karen Brady, the club’s vice chairman, providing a defence for the deal. Since then David Sullivan, the co-owner, has gone further in the London Evening Standard arguing that West Ham far from benefiting will actually lose out by moving to the Olympic stadium.

West Ham have contributed just £15 million to the £272 million cost of conversion of the stadium. Sullivan’s riposte to calls for an inquiry is that the deal was arrived at after “the most robust bidding process”. Compared to what UK Athletics are paying, £1 million, West Ham are contributing millions. West Ham rent it for only 25 days and are also, he claims, taking a big hit in giving up “all sorts of areas of income”. People, he says, “don’t know the details”, not that he helps the people know by revealing what the details are. So he does not specify what all these “areas of income” are. And the two examples he gives are quite curious. They are “tours and pitch events” from which, he claims, West Ham earn an “absolute fortune at Upton Park”. Again he does not spell what “this absolute fortune” amounts to.

West Ham, like all clubs, bundle such figures into general income. But when you claim the club earns fortunes it would help to quantify the fortunes. My fortunes, for instance, would not even be pocket money for Roman Abramovich. I would be surprised if this “absolute fortune” is anywhere near even a million a year, more likely it is in the hundreds of thousands. It would almost certainly pale in comparison to the income West Ham, like all Premiership clubs, get from television which, of course, will not be affected by this rental deal. And nor will the club’s future income from sponsorship be affected. If anything it will rise on the back of this fantastic deal. But it is the elephant in the room Sullivan does not mention that is really crucial. This, of course, is the great smoking gun in the deal: what happens should Sullivan and his partner, David Gold, sell the club?

All Boris Johnson has said is that a percentage of any profits will be paid to the taxpayer but he has not disclosed what the percentage is. Barry Hearn, then owning Leyton Orient, in his failed bid to share the Olympic stadium, revealed that when he met Johnson he told the Mayor, “‘I’ll tell you something, if I am allowed to share and I ever sell Leyton Orient, every penny of profit will go back to the taxpayer.'” He then went on to ask: “Have Gold and Sullivan made the same commitment? The Olympic Stadium has added £100 million to the value of West Ham. It could be a most attractive purchase for a foreign buyer: a 54,000-seater stadium in an iconic building on the Olympic Park. The British taxpayer could end up funding a trophy asset for a Qatari.”

Hearn is, of course, an aggrieved party and may be seen as very biased. But we have history here. More than a decade and a half ago another stadium built for a multi game festival was also rented out to a club then in a grave situation both on and off the field. The rental had such a dramatic impact that the club is now foreign owned, has gone on to twice win the Premiership and could well win it again this season. That club is Manchester City and the stadium is the one built for the 2002 Commonwealth Games.

The stadium had been constructed with public money: £78 million from Sport England and £49 million from Manchester Council. But the authorities, anxious not to have a white elephant on their hands after the games, decided the best option was to rent the 48,000 seat stadium to Manchester City. In return for that, Manchester City gave its historic ground, Maine Road, to the council. They also paid £15 million, the same amount West Ham are paying, to rip out the running track and convert the Commonwealth Games arena for football. But the best part was the outrageously favourable deal on the rent: a small yearly rent which only became substantial if more than 36,000 turned up for a match. This meant that the club paid between £1.4 million and £2.5 million a year in rent for seven years between 2003 and 2010 and it is worth noting West Ham’s rental is £2.5 million a year.

For this Manchester City got a state-of-the-art stadium. Arsenal’s Emirates stadium cost £440 million and landed the Gunners with debts of £250 million. Manchester is not London, but a new stadium of the standard Manchester City got could well have cost the club a few hundred million, if in the first place they could have managed to borrow the money.

The deal was done by David Bernstein, the former FA chairman, and he remains very proud of the extraordinary terms he got from the council. It must be pointed out that Francis Lee, who was then chairman, has also claimed credit for the deal. Indeed the day before Manchester City won the 2012 title – becoming only the fifth club to win the Premier League – Lee, looking back at his time as chairman, confessed that when he became chairman, “the club were completely bankrupt. They were really dark days.” He then went on to say how his stadium deal revolutionised the club. “The new stadium,” he declared, “made it attractive for people to buy into it.”

The first of these buyers was Thaksin Shinawatra, the disgraced Thai prime minister, who took over the club in June 2007. The first of the two foreign owners of the club, Thaksin had been looking for an English club for years, having fallen in love with the Premiership when he was owner of television rights in Thailand. He had failed to buy Fulham and Liverpool before being offered Manchester City for around £60 million and snapped it up. It may seem strange that he should buy a club which had achieved nothing for nearly four decades and had finished 15th and 16th in 2006 and 2007. But Manchester City had one big advantage over Liverpool and Fulham. This was that it was playing in a brand new stadium at a knock down rent.

How much of a carrot this was to Thakshin emerged when he explained to American professor Tom Plate why he chose Manchester City, a club and a city with which he had no known connections. Thakshin said: “Manchester City is a team with good fans and good infrastructure. It’s not too difficult to improve.”

Observe the word “infrastructure”. This makes it very clear the City of Manchester stadium was crucial to the deal. He could hardly have said good infrastructure if City was still playing at Maine Road. And for the new owner, given that the stadium was in place, it was not difficult to see that improvement required would have to be in players, not bricks and mortar. Thaksin did not, himself, put in much money and if he had any master plans for the club he never let on, unless bringing Sven-Goran Ericksson as manager is considered as a master move. Thaksin appears to have seen it as something enjoyable to do while in exile. For him sitting in the directors’ box ranked as a pleasure along with the one he derived from playing golf. It was something to take his mind off as he endlessly plotted a return to power in his native land.

However, a year after he had bought it, he found the Bank of Thailand had frozen his assets. Had they not done so he would, probably, still be deriving enjoyment from owning Manchester City. Instead, he sold it to another foreigner, Sheikh Mansour of the royal family of Abu Dhabi for a reported £150 million, making a profit of £90 million. The new owners had money, knew they would not have to build a stadium, unlike rivals such as Liverpool, and the purchase fitted in neatly with their plans to promote their state.

Sheikh Mansour has never told the world why he bought City. Indeed he has never talked to the media. According to City chairman Khaldoon Al Mubarak, who has given the odd interview, the Sheikh is an astute businessman who believes: “You can create a valuable proposition in football that has not yet been accomplished.” Al Mubarak, who also heads the country’s Executive Affairs Authority and has a role in making sure Abu Dhabi conveys the right image to the world, sees owning the club as a bridge building exercise between the Arab world and the West. There has certainly been no lack of money to build this particular bridge.

City’s rise to supremacy has seen Sheikh Mansour spent billions on players but not a penny on acquiring a new stadium. Abu Dhabi did have to pay more in rent when the lease was revised in 2010–2011 and the stadium was renamed after the country’s airline Etihad. The new rental agreement meant the club started paying a single fixed sum, which goes up in line with inflation with additional payments linked to City’s participation in European competitions. The figure is a substantial increase on the one Bernstein negotiated and the council makes much of club’s commitment to helping regenerate one of the most deprived areas in the city.

Mansour has certainly invested in the re-generation of the area round Etihad. But all this cannot deny a quite remarkable fact about Manchester City. The club, which in the last decade has twice been champions of England and is owned by a foreign state, plays in a stadium funded by British taxpayers and owned by the local council. In other words, the British taxpayers have paid for a vehicle that helps a foreign state promote itself.

Of course, when the stadium deal was done, Manchester City was not owned by Thaksin or Mansour, but given that public money was involved, why were restrictions not put on any future sale of the club? Why should British public money promote the goals of a foreign country?

Similar questions need to be asked about the West Ham deal. But I doubt they will be. And we can see what an advantage this gives West Ham when you compare the club with Bournemouth, in the Premiership for the first time and owned by a foreigner, the Russian Maxim Demin. However, the ground they play on is not owned by them. It belongs to David Pearl, a Tottenham supporter and former Tottenham shareholder – he still goes to the Tottenham boardroom on match days.

When I asked Jeff Mostyn, Bournemouth chairman, about the West Ham deal he said: “I would love our local council to give us a ground. We have spoken to them. They don’t seem to be as generous as their London counterparts for whatever reason. The Olympic legacy has benefited West Ham, benefited them more than any other group of individuals. It is a fantastic legacy to have. Hopefully, they will use it wisely and leave a legacy to their supporters and the conurbation there.”

Time will tell if this proves to be the case. However, what we need to do is ask why the British state does not wake up to the fact that the money that has come into football means the old hands off Victorian attitude towards football clubs needs to be looked at again. Unlike Germany which insists that a club must be 51% owned by a German, the British believe in a free for all. And this means stadiums built by public money can help a foreign buyer acquire a British asset and use it to promote his own objectives. In any other walk of life this would cause outrage. In football it barely registers, even as a matter worth discussing. That is a tragedy and is the great lesson to be learnt from the West Ham Olympic stadium deal.

Mihir Bose was the first sports editor of the BBC. He has worked for various media outlets and launched the Inside Sport column for the Daily Telegraph. Now a freelance journalist he has written 29 books. His most recent books are The Spirit of the Game: How Sport Made the Modern World and Game Changer: How the English Premier League Came to Dominate the World. Follow him on twitter @mihirbose