The problem with touts: how ticket resellers got a foothold in football

Football clubs such as Spurs are replacing their ticket exchange schemes with commercial resellers. Are their fans getting a good deal?

There are few areas where weasel-worded apologism for the excesses and failures of the unfettered free market is quite as pronounced as the secondary ticketing market – or touting, as we used to call it before the internet gave it a veneer of respectability.

It’s a market estimated by the police to be worth more than £1bn a year in the UK. Companies such as StubHub, Seatwave and Viagogo are well-established in the music business, where the "service" they offer enables fans to buy a £136.50 face value pair of tickets to see Justin Bieber for £1,147.04. Plus £144.50 booking fee.

Now these firms are making a concerted effort to establish themselves in the football market. The resale of football tickets is illegal under section 166 of the Criminal Justice and Public Order Act 1994. Unless the resale is authorised by the organiser of the match. That’s why the likes of StubHub and Viagogo are striking deals with leading football clubs. So if you sell a spare ticket to a mate for face value, you are breaking the law. But if StubHub or Viagogo sell your spare ticket for a massive mark-up, that’s perfectly legitimate.

One of the clubs StubHub is currently "official partners" with is Tottenham Hotspur, whose 36,000 capacity ground sells out for pretty much every game. The deal is a surprising one given the fact that the club used to run a campaign called Out the Tout, which it said was intended to stop tickets being sold at above face value to fans. But it appears that what Spurs really objected to was not resale above face value, but not making any money out of it.

StubHub offered Spurs a large sum of money – the precise figure is commercially confidential as potentially embarrassing details so often are – to step in and replace the ticket exchange scheme the club used to run. The large sum came on the condition that there would be none of the restrictions – such as price caps on resale – that exist at some other clubs StubHub deals with. Spurs like to present the deal as a service to fans, but its decision to take the money without seeking to protect fans from the excesses of the unfettered market shows that greed, rather than customer service, was the prime motivation. And here’s where the weasel words come into play.

Spurs promoted the deal to its fans by pointing out that one of the benefits of the scheme was that "you can set your own price" when reselling tickets. That is active encouragement to price up. Yet the club also says "it is very rare indeed for tickets to sell at more than their original price". Leaving aside the question of which parallel universe the club is referring to, the observation could be made that the situation would be rarer still if the club wasn’t actively encouraging it. But there’s more.

Even though the club insists that the situation is very rare, it says: "While we understand that some fans might be frustrated to find prices higher than they hoped, it is the Season Ticket Member’s prerogative to list their seats at whatever price they choose." StubHub itself says it "does not own, price or sell any tickets". You see, all Spurs and StubHub are doing is providing an opportunity – it’s the greedy customers who are to blame for the high prices.

It is, as I said in an article for the Football Supporters Federation blog, the National Rifle Association defence – "we just supply the guns, if people choose to shoot each other with them, it’s nothing to do with us". But even this weasel-worded justification does not stand up to serious analysis.

If your business model is based on a commission structure, as StubHub and the other agencies’ is, it is in your interest for prices to be high, because the percentage you take is greater. Yet these agencies are quick to distance themselves from any responsibility for high prices. Why, one wonders, are they so coy?

Spurs and StubHub have said repeatedly that just because tickets are listed at high prices, it doesn’t mean they are selling at high prices. Yet it seems strange that people would keep listing tickets at prices they can’t get. Of course, StubHub must have the hard information. But it won’t share. Good old commercial confidentiality again.

Some may say this is just supply and demand at work, the free market in all its glory. But, as is so often the case, the "free" market is given a little help by those who can benefit the most. As has been seen with the sale of music tickets, the market can be gamed. If you can buy a sufficient volume of tickets, you control supply, and so you can push the price up. This is why fans often log on to buy concert tickets, find the gig is sold out within minutes, but then see tickets appearing at well-above face value soon after.

The agencies acknowledge that what they like to call "professional resellers" – and most people like to call touts – use the “service” they provide. It’s perfectly legitimate. That explains why on StubHub’s customer support page, for instance, it helpfully points out that you can resell tickets you buy from it. That explains why one Spurs fan who sold his ticket on StubHub at face value found it listed for sale a few days later at six times the price.

As Spurs fansite Total Tottenham pointed out: "Tottenham Hotspur were quick to point the finger at season ticket holders, their most loyal and important customers, as the cause of the inflated ticket prices being asked on StubHub", yet "It is very likely that a large share of the tickets that are being sold in excess of sometimes £500 are actually the listings of professional ticket touts."

The Mirror’s Penman and Sommerlad column reported last year that StubHub’s senior management hosted a meeting at its London offices with some of the UK’s leading ticket touts. StubHub says it merely invited them to "get feedback". I bet it did.

Spurs have generated terrible PR with this deal, although no doubt they, along with other clubs, will be watching what fans are prepared to pay for tickets carefully. Season tickets have only risen 100 per cent + over the last 10 years, so every penny counts. A group of fan sites working with the Tottenham Hotspur Supporters Trust have launched a petition against the deal, calling for proper consultation on deals such as this in future. (For transparency, I should point out I am one of the initial signatories). They are backed by the Football Supporters Federation, whose chair Malcolm Clarke called secondary ticket agencies "legalised ticket touts" amid complaints by fans of Manchester City over their club’s deal with Viagogo. Viagogo was the target of campaigning by fans of German Bundesliga side Schalke 04 last year – 10,000 of them turned up to the club’s AGM, which was dominated by discussion of the deal. In a vote, 80 per cent of club members opted to scrap the deal.

In England, clubs are not quite as receptive to fans’ wishes. Nor are fans yet as organised as those in Germany. In 2011, MP Sharon Hodgson put forward a Private Member’s Bill to restrict ticket resale prices to 10 per cent above face value. It was talked out by Tory MPs.

Spurs. Photograph: Getty Images

Martin Cloake is a writer and editor based in London. You can follow him on Twitter at @MartinCloake.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?