Money would unbalance league
11 April ~ Proposals to increase the money paid to teams relegated from the Premier League are threatening to drive an immovable wedge between the top level and the lower divisions. With its new TV rights deal worth £5.5 billion over three years, the Premier League plans to give £23 million to teams the year after they are relegated. Overall, these clubs stand to receive £59m over four years, an increase of almost 25 per cent on the current payments. The Championship's other teams will receive £2.3m each in so-called "solidarity" payments.
The dispute is made toxic by the fact that this season is the Championship's first under its own version of UEFA's financial fair play (FFP) rules to curb excessive spending and debt. Under their own FFP rules, Premier League teams can lose up to £105m over a rolling three-year period. In the Championship that figure is a maximum £6m this season, which will reduce incrementally over the coming years.
The financial gulf that will be created between the two leagues is difficult to overstate and the effects will be long-lasting if a solution cannot be reached. The proposals compromise the Championship's entire FFP system, as pressure grows on owners to spend more to compete with the wealthy teams dropping down from the Premier League. Some chairmen even claim they will quit if an alternative arrangement is not agreed.
Championship clubs met in March to discuss withholding some of their own TV revenue from any team in receipt of parachute payments, dividing up their share among the rest. Another ploy is a salary cap, something Italy's Serie B has introduced, that would mitigate against excessive wealth and the financial disparity. The Premier League subsequently threatened to withdraw from the League Cup, which few of its teams seem to take seriously anyway. Any such move, or even the threat of it, would damage the value of television rights for the competition, compounding the problem.
At present little is being suggested that might encourage a reconciliation of the warring parties. Premier League chief executive Richard Scudamore has stressed the fact that 16 per cent of their revenues currently go to the rest of the football pyramid, but the majority is made up in parachute payments. He has also pointed out that most teams given parachute payments do not bounce straight back up. Indeed, two of the three teams relegated from the Premier League last year, Blackburn and Wolves, are struggling to avoid relegation to League One – but they are both unusually badly run even by the prevailing standards.
Such unequal wealth rarely has an immediate impact, however – it can take years before the disparity emerges and West Ham last season were a sign that it is already having an effect. Their finances were in a parlous state following relegation in 2011 and they made a further £25m loss last season. So they took a huge gamble with the aid of parachute payments, hiring Sam Allardyce and several established Premier League players then squeaking promotion with a late winner in the play-off final.
Parachute payments can protect clubs whose income will drop significantly the season after they are relegated, thus helping them to avoid financial collapse. But there is an important balance to be found. Skewing the Championship so that a handful of clubs, like West Ham last year, have revenues which far exceed those of their rivals risks turning what is currently one of the most competitive leagues in Europe into a procession.
A clear warning of the dangers ahead comes from Spain. Barcelona make slightly less than Real Madrid in revenues, but their £400m income is still more than the accumulated annual takings of the third to eighth richest teams in the country. In La Liga financial inequality is destroying both bank balances and competition. The Premier League may pride itself on a much more equitable distribution of revenues but its benevolence clearly does not extend as far as it should to the Football League. A dangerous rift needs to be resolved quickly. David Gold