Crystal Palace chairman Steve Parish has claimed there is no alternative to parachute payments but the Premier League will increase the amount of cash that is shared among the Football League.
Talks remain ongoing over 'A New Deal for Football' that will see a larger chunk of money filtered down into the football pyramid. The Premier League earns around £3.5billion a year from media rights and sponsorship with around 15 per cent of that (£525m) shared among clubs in the Championship, League One and League Two.
A large proportion of that goes to relegated Premier League clubs in the form of parachute payments, with clubs able to receive £94m over a three-year period to help balance the books and keep clubs afloat due to the decrease in TV revenue and high player wages.
Bristol City owner Steve Lansdown has been critical of the system in the past and the unfair playing advantage it creates. It forces other Championship clubs to spend big to match their rival's ambitions meaning their expenditure is higher than their revenue.
Research conducted by Sheffield Hallam University's Business School last year confirmed clubs have a 22 per cent chance of being promoted in the last four years with the extra cash compared to 7.3 per cent without - also meaning sides are twice as likely to go up compared to the years prior.
EFL chairman Rick Parry and Premier League chief executive Richard Masters spoke to MPs last month where they signalled their intentions to create a fairer distribution of money across the EFL ahead of next season but parachute payments remain unresolved.
Parish believes there is no other alternative to keep parachute payments going forward. Speaking at the launch of the Union of European Clubs (UEC), he said: "Relegation from the Premier League is probably the biggest financial jeopardy in world football.
“If you look at (Crystal Palace’s) turnover in the Premier League, it’s in the region of £175m. First season in the Championship it would be about £70m. There’s no amount of salary cuts for players you could bake in to cover that loss.
“In the third season it’s worse and by the fourth season (without a parachute payment) you’re down to about £20million. So, in three years you have to come down from £175m to £20m.”
The government has given the green light for an independent regulator in football that could oversee the financial disparity between the Premier League and Championship. As Parish added, it has put pressure on the top flight and owners to increase their share to 20 per cent - an extra £175m.
"In the English football system, there is a good trickle down to the pyramid that will undoubtedly increase because of the pressure we’re under," he said.
“There’s a ‘New Deal for Football’ and it’s the right thing to do, so clubs in the Championship, League One and League Two will receive increased funding from the Premier League, probably somewhere in the region of 20-plus per cent of the overall Premier League revenue.”
The new deal could also see Championship clubs agree on a salary cap while FA Cup replays could also be scrapped. While parachute payments are highly unlikely to be scrapped altogether, they could be softened.
Masters said last month: "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."
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