EFL chairman Rick Parry insists the governing body remain committed to eradicating parachute payments and installing greater financial controls, including a soft salary cap, to ensure the long-term sustainability of the three divisions below the Premier League.
However, the EFL’s proposals are predicated on England’s top-flight embracing reforms laid out in the Independent Fan-Led Review which was published a year ago on Thursday by MP Tracey Couch, and is still waiting on action from the Conservative government.
Parry has been lobbying for changes to the way money is redistributed from the Premier League since appearing before a Select Committee in the summer of 2020, in the wake of the pandemic.
With Championship clubs, on average, spending 125 per cent of their turnover on wages and losses throughout the division, in the main, completely unsustainable - both due to Covid-19 but also considerable financial mismanagement - Parry believes English football faces a “once in a lifetime opportunity” to reform.
It’s particularly pertinent from a Bristol City perspective given the club released their accounts for 2021/22 last week, publishing losses of £28.5m, and although wages have been reduced by £5m they still make up 102 per cent of income.
Of chief concern, and something that is steadfastly supported within the corridors of power at Ashton Gate, is the abolishment of parachute payments - the money clubs relegated from the Premier League receive - to a more merit based system which would not only reduce the “cliff edge” between the top two divisions, but also spread wealth more evenly throughout the 92 clubs that make up the professional pyramid.
Parry has called for 25 per cent of TV revenues in the Premier League to be shared and a merit-based system, on league position, to replace parachute payments, something that has reportedly been discussed within the top-flight as part of their own “New Deal for Football”, albeit with no contact yet initiated with the EFL.
“Our purpose as the EFL is making clubs sustainable at every level, not just within the EFL but right through the pyramid,” Parry said. “We’re very conscious that we’ve got clubs joining us from above and from below and there are 100 to 120 clubs who are potential EFL members. It’s about making all of them sustainable.
“Sustainable means not dependent on owner funding, which is one of the greatest challenges we have. That doesn’t mean we want to stifle ambition or we’re preventing owners from funding clubs, that’s a complex debate, but we don’t want every club to be dependent on owner funding for survival.
“In order to make clubs sustainable it needs two things; redistribution of revenues and better regulation. We’re completely committed to both of those and the two are inseparable, you can’t have one without the other. You need redistribution to make the clubs solvent and you need better regulation to make sure they don’t waste the extra money.
“We’ve been trying to address the redistribution piece for two-and-a-half years. We are still waiting for an invitation to join it. We are getting nowhere and the reason we are getting nowhere is that we don’t have any negotiating strength, we’ve got nothing to trade – all we can do is to plea.
“Does the pyramid matter? Well, of course it does to us but we say it does to the Premier League as well. This isn’t us putting our hands in the Premier League’s pockets, it’s not a charity, it’s hard-nosed common sense in terms of the health of the game.
“It is, of course, becoming incredibly hard to bridge the gap between the Premier League and the Championship and it’s becoming harder. The gap is widening, as is demonstrated by media distributions. In under 30 years, the Premier League has gone up 68 times, the EFL’s up five-and-a-half times. That is a pretty astonishing widening of the gap.
“The sharpest focus is the cliff edge between top and bottom. In 2018/19, for example, Huddersfield Town, bottom of the Premier League, got £97m in media distributions; Norwich, top of the Championship, got £8m. That’s a gap of £89m. Huddersfield had a great two years in the Premier League, pretty much out of the blue but brilliant that they got there. To put it into perspective, it would take 35 years in the EFL to earn the same money as they got in two years in the Premier League. That is the scale of the problem.
“We would also say that the Premier League knows there’s a problem but its way of addressing it is totally flawed. Its solution is parachute payments, which relegated clubs receive for up to three years. First year parachute payment is now £44m and is also bigger than the solidarity payments received by all of the League One and League Two clubs added together. The parachute payments are huge and they are distorting.
“When it was making submissions to the fan-led review, the Premier League published some statistics and said that they have given £887m to the Championship over three years. The problem is that £633m of that, 71 per cent, was parachute payments. Yes, money does pass down but it passes to a very limited number of clubs.
“What’s the problem with parachute payments? Two-fold. One is parachute clubs are three times as likely to get promoted as non-parachute clubs. That’s been independently verified by Sheffeld Hallam University. They produced an independent report back in 2017 going back 10 years and at that point they said parachute clubs were twice as likely to get promoted, half as likely to get relegated. We went back to them last year given that parachute payments have increased and surprise, surprise the numbers have impacted even more greatly over the last five years.
“Two parachute payment clubs were promoted last year and a third, Huddersfield, lost in the play-off final.
“We say it’s not good for the Championship or the Premier League to have yo-yo clubs. You need variety, you need healthy clubs moving upwards and downwards. You don’t need a financial catastrophe when you’re promoted or when you’re relegated.
“The other implication of parachute payments is that it causes irrational behaviour by the other clubs in the Championship. We have to adopt the Premier League’s rather quaintly named Profit and Sustainability rules in the Championship but Championship clubs spend 125 per cent of their turnover on wages, they lose £400m in operating losses, they require owner funding of around £400m, they have debt of £1.7bn. Neither profitable nor sustainable.
“So what do we need to do? Our objective – and this is really important – is to halve the cliff edge so we don’t have a gap of £89m between top and bottom but we have a gap of around £44m or £45m. That’s what we’re trying to achieve.
In order to get there we have to do a number of things. First of all we have to split TV revenues and share them 75:25.
“Secondly we have to look at the ratio from top to bottom in how we distribute money. At the moment, it’s very flat in the Championship. We are proposing a 2:1 ratio between top and bottom. We are also proposing a 2:1 ratio between top and bottom of the Premier League to match.
“We are also proposing an abolition of parachute payments.
“If all of that comes to pass, then what we have is the bottom club in the Premier League getting around £75m instead of £100m, the top club in the Championship getting around £36m instead of £8m and a nice smooth progression from £36m to about £18m in the Championship, 2:1, and a much fairer competition.
“Thus far, no dialogue with the Premier League. We believe they are going to come to talk to us but today we’ve heard nothing and this is 12 months on from the fan-led review. The fan-led review is our best hope because we’ve got nowhere through discussion with the Premier League. It was initially pretty much targeted at legislation and licensing and we made the point that most of our clubs are insolvent so what does that mean? That they’re going to end up without a licence?
“We worked tirelessly to persuade Tracey Crouch to take on board that it was also about redistribution. I think she did so with some reluctance and her initial report was really that this was an issue for football to sort out. Football can’t sort it out. Football has had 30 years to sort it out and Premier League clubs aren’t going to vote for it because it’s disadvantageous from their point of view. We’ve said all along that it needs an external influence.
“Our message at the moment is to say to Government, hurry up please and publish the white paper which is now long overdue. We understand there have been delays at Government level, we get that, but now is the time to get on with it and make this happen.”
The Government delay on publishing a White Paper regarding the fan-led review and beginning a legal process into enshrining it into law is, in part, the result of the succession of different Prime Ministers, cabinet ministers and general upheaval within the Conservative Party but it has allowed a feeling of apathy and inactivity to seep into the power brokers within the Premier League who believe they can dictate matters on their terms.
“So, they’re now telling us they do want to come and start having conversations but they haven’t started yet. I think their willingness, in our mind, can be judged on the lack of dialogue. Tracey Couch’s report said they wanted a solution by the end of the last calendar year, 2021; we’ve been trying to get this on the agenda and talked about since 2020, and we’re still here,” Parry added.
“I think the Premier League, although it’s not for me to speculate, have thought that the fan-led review wasn’t happening, that the government weren’t going to publish so they’ve delayed and paused. We think it is going to happen. One of us will be right, and the other will be wrong, so we’ll see in the next few weeks.”
Aligned with the desire for the end of parachute payments will be the introduction of more stringent wage controls, although Parry is reluctant to call it a “salary cap”. A hard cap of £2.5m and £1.5m was introduced in League One and League Two for the 2020/21 season, to curb spending in the wake of the pandemic, but lasted just one season following a legal challenge by the PFA.
It never got past the negotiation stage at Championship level, although Parry claims an £18m cap would have eventually been approved - and certainly Bristol City were very much in favour of it, with former chief executive Mark Ashton consistently driving the subject - had it been pushed.
The new system would be broadly in line with UEFA’s Financial Fair Play proposals which will limit wage spending as a percentage of turnover - a flexible, soft cap. New regulations which came into force from June but will take three years to be fully implemented by clubs, will mean those clubs in European competition will only be permitted to spend 70 per cent of revenue on wages, transfers and agents’ fees.
“We are committed to better financial control, we have to be because all that happens is the extra money goes into wages and the losses increase and this will all be a waste of time,” “So we’re completely up for tighter cost control, which is much easier to implement where you have fairer revenue shares. I don’t think it’ll be a hard salary cap; we introduced that into League One and League Two two years ago, challenged by the PFA, unfortunately. But the PFA are not against the idea of restrictions to percentage of turnover, rather than hard caps.
“What we’ve really decided is that we need to tie the whole thing together and to debate the rules in the absence of knowing exactly what is happening about redistribution doesn’t make a great deal of sense. It’s better to see what the whole package looks like.
“We’ve done a lot of work on our own rules but we’ve paused them so we see what the Government is going to come out with, see how it dovetails with the regulator, see what the regulator’s responsibilities will be and try to make the whole thing tie together in one package.
“I don’t think it’s an exaggeration to say we see this as a once in a lifetime opportunity to have a proper reset. This isn’t about tinkering around the edges or a taking a few extra percentages, it’s about really grasping the opportunity to say we have got to have a fresh look about how the game is run and make sure all the clubs are sustainable.”
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