Premier League parachute payments to relegated clubs are unlikely to be scrapped as discussions over a 'New Deal For Football' continue to hit loggerheads.
EFL chairman Rick Parry and Premier League chief executive Richard Masters spoke to MPs on Tuesday where the debate about ensuring a fairer distribution of money across the Football League continued to rumble.
Discussions have been in place since last year which included the potential to drastically cut parachute payments as it provides an unfair advantage to clubs who face relegation from the top flight. As it stands, relegated clubs receive £44million in their first season back in the Championship, and £35m in the second year.
If they spend more than one year in the Premier League, they will receive another final payment of £15m. The cash is designed to help keep clubs afloat due to the decrease in TV revenue and high player wages.
However, as Bristol City owner Steve Lansdown has publically stated, it creates an unfair playing advantage. It forces other Championship clubs to spend big to match their rival's ambitions meaning their expenditure is higher than their revenue.
City are one of six Championship clubs who have never received parachute payments alongside Luton Town, Coventry City, Millwall, Rotherham United and Preston North End. Former CEO Richard Gould has also been critical of the financial disparity parachute payments cause.
He said in January: "When a club gets relegated they have a £50m advantage on us and nobody can compete with that. You have clubs with salaries of £60 to £70m in this division, you also have clubs with salaries of £6 to £7m.
"It's a fascinating league with lots of challenges and I hope the football authorities can do what they can to try and level the playing field in terms of parachute payments at some point."
Parry confirmed that he hopes a deal can be struck ahead of next season but parachute payments continue to be the biggest sticking point. He said it was "hard to see how parachute payments contribute to sustainability in any way, shape, or form”.
Masters stated the intention to put the broadcast revenue of both leagues into one shared pot which would then eventually be shared between clubs. Around 15 per cent of the Premier League's income is shared with the EFL but the latter wants a deal in the region of 25 per cent.
Masters said: "The Premier League has had exponential growth over the last 15 years, the EFL less so. A gap has built up. What I think we are trying to address is to close that gap, specifically between parachute and non-parachute clubs in the Championship.
"Part of Rick's proposal is to look at a new mechanism to share revenue, which is called net media revenue.
"Essentially, you put our media revenue, the EFL's media revenue in a pot, you take away costs and you divide it on a preordained formula which means that going forward, our growth is the EFL's growth, and vice versa, so our success is shared, it aligns the two organisations in a different way and ensures that gaps don't build up in the future."
Asked to respond to Masters' proposal on parachute payments, Parry said: "We’re not in the same place, it would be fair to say EFL. Parachute clubs are three times as likely now to get promoted as other clubs.”
One possible solution being debated is to introduce a merit-based approach to the distribution of funds in the Championship. Clubs will effectively receive money depending on where they finish in the table at the end of the season while adopting a financial fair play initiative to ensure clubs spend no more than 70 per cent of their revenue on player wages.
It's suggested the Premier League is proposing a deal that would see an extra £125million filtered into the football pyramid but Championship clubs will have to agree on a salary cap while FA Cup replays will also be scrapped.
Last month, the government published its White Paper on football governance where it confirmed it will act on introducing an independent regulator to ensure clubs are run more sustainably. In turn, they will have the authority to have a final say over these disputes although Masters isn't overjoyed by that prospect.
MP Tracey Crouch, who has led the fan-led review of football governance, stated she had found the Premier League "challenging and disappointing" to work alongside.
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