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Salary cap or financial fair play within the league. Which clubs will vote for such moves?

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The club that changed football

Making the Arsenal

By Tony Attwood

When football got its first whiff of the money Sky could offer Alan Sugar apparently made a statement to the effect that the League should put aside some of the new money into a fund, the purpose of which could be determined later.  “Otherwise,” he said (at least according to a much later report of his) “we’ll just piss all that money up against the wall in higher salaries.”

Lord Sugar has told that story a few times since leaving football, perhaps as a way of showing how clever he was at the time.  Although I think those of us around at the time also remember that he was the only representative of what was then known at the time as the “Big Five” (Arsenal, Everton, Liverpool, Man U, Tottenham) to support Sky’s takeover of televised football.   But then his firm were making Sky dishes so maybe they had a vested interest.

But the ex-Tottenham owner was right – the money has all gone on ever higher salaries.  Clubs earn more and then spend more on salaries.   Sometimes we get better stadia and very rarely a wonderful youth system and fantastic training ground, but mostly it is salaries.

The next big leap in TV money is next year and again there is some talk about stopping all of it going into salaries.    This time it is not Lord Sugar who is doing the business, but Richard  Scudamore who fancies a cap on earnings.

This is presented as the alternative to an English version of the financial fair play rules, and if you have followed the debate on both topics you’ll know some people do argue that this won’t ever come because of EU regulations about freedom of negotiation of salaries, and anti-competitive behaviour.

But, as the correspondence here has pointed out several times, the EU already recognises sport in general and football in particular as a special case and thus works its ways around these matters, which would be illegal in other areas.

£3bn has been offered by Sky for the rights to show live football in the UK from next season.  But to confirm another point that came up recently – if 14 of the 20 clubs have to say yes to any change then Premier League football could become something quite different from that which we know today.

With the issue of clubs spending more than they earn, again it is 14 out of 20 votes needed to get reform, and we might guess from a distance that the big loss making clubs of recent years such as Chelsea and Man City might vote against.  All it needs is for them to find three other loss makers.  The problem is that they might find such clubs who are also supported by benefactors, even if they are not operating at the level that Chelsea and Man C are.

Manchester United and Arsenal seem likely to support any such change – Man U after all does make a profit before Glazer out-takes, and could easily make more if only the Glazers didn’t keep loading them with debt.  Liverpool look to be heading that way although painfully.  Everton however have made losses much of the time recently, and I am not sure if they are ready to go down that route – but they remain a possible convert.

Newcastle made a profit too and might support the move, but the fact is only 8 out of 20 actually did deliver a profit last time around and would presumably support Arsène Wenger’s comment that, “You should just get the resources you generate, that will determine the real size of the club.”

There is also something of an inward looking feeling in some clubs where big time owners are not used to being subjected to group controlled regulations.  Reports looking at this issue suggest that Newcastle might not support the change after all.  Fulham also might not support the change.  The West Ham, Stoke City, Sunderland and Wigan owners however have spoken in favour, although obviously there are significant differences in the detail.

In 2001/02, clubs spent £1.1bn of their total income in the Premier League on players.  That was 62%.  A bit high but not utterly insane.   By 2010/11, income had more than doubled to £2.5bn but players’ wages went up to 70% of’ turnover.    One thing is for sure, we can’t go on like this unless every club finds itself a billionaire.

The issue comes up again in the Premier League later this month, and then we’ll see if there is any way forwards.  As I make it we now have a reformist camp and a conservative camp: the reformists are in the majority, but I suspect not a big enough majority to stop five voting against.

I must admit I was utterly surprised when the clubs voted for the “25” rule – and that did benefit clubs which had a number of up and coming under 21 year olds on their books.  Could it happen again?  I suspect there are too many vested interests this time around, simply because a salary cap or a limit on losses is just too big a step.  But…

In the reform camp we have (I think),  Arsenal, Tottenham, Man U, West Ham, Stoke, Sunderland, Wigan, Liverpool, Southampton, Swansea, Aston Villa, Norwich City.  That’s 12, and we need four more.  West Brom seem to be talking against such changes, for reason’s I can’t understand, but QPR’s latest regime might just be with reform.  That’s 13.    Everton might, at a pinch.  14.

Man C and Chelsea I take as obvious antis.  Reading have a powerful new foreign owner and I guess he is against but I don’t know.  Newcastle, as I say could go either way also.  West Brom again, as I said, have spoken against.   It could be very tight.

But we can live in hope.

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21 comments to Salary cap or financial fair play within the league. Which clubs will vote for such moves?

  • Wolfgang

    It’s obvious to all but the most blikered that clubs have used money to buy the epl.Mu are a classic eample and find that they could be easily outspent and their domination under threat.
    I believe that unless clubs cap the salary at around a maximum of say 65% of income,the game could turn on its head and many could go bust.The problem is getting common ground which aint easy because it will prevent Chelsea,MC and other clubs from buying success. MU had their day.
    A compromise is the only outcome otherwise a day will come when fans realise they have been suckers for far too long.Rangers is a prime example the present model aint sustainable.

  • goonercharlie

    Reading are actually for it. Madjeski only sold it to that guy as he held the same values. Reading havent spent money they dont have, look at their buys this season , they’ll support FFP 100%

  • @babakrdaemi

    I agree – it has to be % of income. However, the rules need to be set with a measure of flexibility.

    By this I mean a change to the rules should be quick and easy to implement. For example, City washed £400m or so through the club as a “stadium sponsor”. I think in this case the fa, uefa etc should be aloud to review any large injection of cash to a club and block it if it seams irregular. In addition, as city have done this. Why can Roman sponser Stamford bridge for £800m and clear Chelsea of all problems?

    The authorities mus have the ability to stop this type of activity. A simple rule like the new owner rule would do.

    No shareholder or associated party may invest in a club for player acquisition.

    It’s going to be hard to implement but the only way to keep football at the top.

    Without these changes other sports will take advantage and grow in customer base. How long before a rugby team gets 35,000 a week? Not long if football continues down this predictable and moraless stance

    Come on the gunners

  • Shevo

    Like you I don’t believe the present policy of trying to buy rather than build success is sustainable long term. A number of clubs opposing this may soon find themselves trying to fight off bankruptcy just like Portsmouth, Leeds, Rangers to name but a few have done in recent years. This could have a long term and detrimental effect on the English Premier League just like it will do in Scotland if one or maybe two big clubs find themselves in that position. All Clubs and fans need to realise that this is about the future of our game and not just each individual club. The sooner we all realise that the sooner clubs think twice about selling out to mega-rich owners whose only interest in reality is how much they can milk out of the premier league before moving on to their next plaything. So when the time comes to vote I hope all clubs back this to ensure we all have a League we can continue to be proud of for years to come

  • RobL

    Hi Tony, good read.

    I would possibly disagree on Newcastle – Ashley has done everything he thinks possible to make Newcastle an attractive buy – even changing the name of St James so the first real sponsor doesn’t get the grief for doing it.

    I think it would maximize the selling price in a “fairer” league instead of a 2-3 horse race every year – so it may be that he would support such a proposal.

  • The use of the money flowing into the support is a major problem. Proper investment in the game would do wonders for our league and also the England team. Just look at the Olympics – yes that old chestnut! Lottery money has been invested in sponsorship of athletes and individual sports as well as a dramatic improvement in both facilities and access tot hose facilities. It has worked wonders.

    Our medal count, in both Olympics since we won the games, has been astounding when you consider what we achieved before.

    Just think what could be done if some of the vast amounts of cash generated by football was put back into the game to develop facilities, find talent, and sponsor the best so that they could dedicate their lives to football…

    As it is the vast wealth is being shoveled straight into the pockets of greedy senior players – already rich from football – agents and greedy owners.

    Something has to be done, or football will continue to die in this country. Many have not noticed that football is in fact dying off here as the gulf between players and fans grows wider and wider, but it is. It will never die completely of course because it is very much part of our culture, but there is a major implosion on the way for sure.

  • robl

    @Jayram I’m with you – I was sickened by the £100m spent on the new national acadamy, and the idiots who thought it was great, when we have a non existant grass roots coaching system with a vastly inferior number of coaches to Germany, France, Spain and the Netherlands. How many coaches would that money have trained?

  • Stuart

    I think the cap would benefit all clubs (including Man City & Chelsea) however it doesn’t really matter to those two.

    Everton for example, although they could probably do without he money, they surely realise that with the teams above getting a higher proportion of the money than themselves, costs for them will increase exponentially again. What teams like Everton really need is for there to be less money in football so the gulf is not so wide.

  • Stuart

    * That should read Although Everton could do with the extra money

  • colario

    1) As we know Chelski and mancs can pay want ever they want to a player therefore they can get the best players in Europe. This of course the advantage they have over other English clubs.

    2) Because the Premier league has offered the best salaries (especially to less skillful players) in Europe this has resulted in many believing that the Premier league is the best league to watch.

    3) In the last 5 – 10 years (with point 2 in mind, and aided by TV and the Internet the top Premier league clubs have been able to go world wide on a scale hither to never imagined. The top clubs (even if they can’t pay the chelski/mancs inflated salaries) of the PL would not want to change this situation.

    If salaries were capped in England below the going rate of the billionaire clubs in the rest of Europe then the Premier League would find it difficult to attract the best players.

    Here we are not only talking about players from outside the UK but also managers. The best managers go where the best players are or have the possibility of buying them.

    English clubs are already handicapped with having the highest tax deduction made on salaries. This means that a player earning 100 000 a week in England gets 50 000. In Spain he might (I don’t know the tax system so cannot be exact)might get 80 000 out of the 100 000. Therefore to compete with Spain – (basically Barca and RM) the English club must pay at least 160 000 a week.

    I know my example (figure wise) is not exact but you can see I think the point I am making. A salary cap must take into account the going rate not paid by Europe billionaire clubs but the salary the player actually receives after tax from the club. English clubs must be allowed to compete the salary after tax not before tax if there is to be a salary cap.

  • colario

    Continuing my post above.
    If we have a salary cap that allows chels/mancs to compete with the other billionaire funded clubs only chelski/mancs of the English clubs could pay the salary. This of course would defeat the purpose of a salary cap in England.

    If we go ahead with a salary cap and and manc/chelski refuse to accept it then there is the possibility of them joining up with the other billionaire clubs and forming their own BBC (Billionaire Boys Clubs) league. It would be independent of any self appointed governing body like Platini’s brigade or uafa.

    Also if this was to happen then English Premier league would lose its place as the league the world watches.

    The BBC clubs would get richer and the rest would downsize.

  • Domhuaille MacMathghamhna

    Colario….the tax system in Europe favours the players and in Britain, favours the government…so a very good insight. That said, the rich Clubs compensate by paying higher weekly salaries but that isn’t working as the case of Modric, Song, Cesc and company have proven. Spain has two advantages; a very low tax rate for millionaires(Football players)and two excellent teams offering beautiful Football and world-wide exposure. Star players go to Real or Barca to sit on the bench and get a high salary knowing that their resale value has risen simply because they are there. This doesn’t work for substars like Hleb, Flamini, Owen and others but is good business for the top stars like Henry, Benezema etc.

  • walter

    If I’m not mistaken the government in Spain has brought the tax on high salaries to a higher level. Or at least talk has been doing the rounds about it

  • victor

    Good read but I cannot see a salary cap doing much difference as any club could just pay a lower salary but bigger bonuses and greater percentage of image rights etc in other words creative accounting. The only way I can see the oilers going down is by implosion or if arsenal frequently beat them to the title.

  • Gerry Lennon

    I have an alternative way, not fully thought through, but it looks at what advantages that the big money secures for the rich teams? They can buy whoever they whoever they want as it stands. Which is not necessarily who they need?
    How about as a possible alternative to the 25 rule, players are classified into different categories. Bit like Speedway does, or as category options go, horse racing. In the latter you have ‘Group Class’ for the big prestige races, which equal to top international footballers who play for the top dozen countries in the FIFA pecking order. This would require a minimum number of games played, just to maintain the quality of the elite. This would be followed by Class 2 to equate to very good players that may be have made the bench but not starters for Internatiol games, or who have play a high number of games for teams in the top tier. Below that level you your regular team players.
    The restrictions come in, like Speedway, on the number of players any one club can sign from the top two categories, but unlike Speedway where all the riders do the same job, in football, within that classification you would have sub divisions of striker, midfield, defence, and goalkeepers. The latter is probably the easiest to see how the scheme might work, e.g. One from the top group, one from the second or two from the third. Similar to the ‘Rule 25’, youth and home grown players under 23 would be excluded from the limits.
    What this would do is restrict the likes of Man City stockpiling strikers, or Chelsea stockpiling midfielders, or Tottenham stockpiling goalkeepers, espcially if really tight limits were placed on the numbers. This would have to be implimented across Europe naturally, and players might be moved around to clubs who have available positions to fill as a consequence, even at a lower salary … Unless less money is paid to the ‘big’ clubs and spread more evenly/fairly across the board?? It would certainly make the league less predictable, and as in Speedway, if any club has a gem or two in their youth ranks – oh dear, that sort of favours Arsenal doesn’t it? But then again, Southampton, Everton and possiblby Reading could also gain – or more likely, having unearthed a player or two worthy of a higher classification would make them strong contenders.
    Like I say, not fully thought through, but it could be worth more than a second thought?

  • elkieno

    I reckon we are sitting pretty so should forget all this FFP crap and let every club in trouble or soon to be in trouble, to just go the way of Rangers, Pompey and Leeds. What does it matter if utd, Chelsea or city go bankrupt and into administration how are we affected?
    If that happens the next few clubs will step up and challenge, right?
    Just like Celtics current ‘free run’ in the league, minus the other lower down clubs. Basically if it ruins these oil clubs, then good, right?
    Oh and Spain raised their tax rate for big earners to sane as uk I thought.

  • Sammy The Snake

    EPL teams need to be saved from themselves. “Debt” is dragging clubs down. EPL should put a debt ceiling on each club (as a % of the equity of the club). No club should be allowed to have a debt to equity ratio higher than 1 (as an example).

  • Woolwich Peripatetic

    The problem with all these measures is that random chances can still wreck everything. Newcastle survived by the skin of their teeth when they got relegated as none of their players had relegation clauses in their contract, the club was simply too successful in its own eyes to need them. Clubs go into administration by desperately trying to avoid administration!
    For instance, if you cap wages to 66% of turnover, what happens if you fall out of a cup competition at the first hurdle, the year after you signed massive pay rises for your players? You can’t cut their pay, employment law doesn’t allow it. But you get a points deduction or a fine for violating he 66% rule, which reduces your turnover even more.
    FFP can easily be circumvented by issuing more shares in a holding company but I suspect most owners would like to see a way of getting their money back if needed.

  • Gunz

    Btw, Spain brought in a temporary income tax raise (temporary surcharge). Taking its rate, for persons annual income over 300,000.20 euros, from 45% to 52%. Uk is >£150,000 @ 50%.

  • Mike T

    As I have posted on other threads I personally don’t believe there should be restrictions on allowing clubs to spend whatever they want but I do believe that a clubs debt should not be allowed to exceed a % of its turnover.
    Woolwich Peripatetic make some valid points and in particular the point about cutting wages. If you expand that point further you can’t, if cash flow is tight or a player is not performing you can’t make players redundant or lay them off.
    Before the abolition of the maximum wage clubs easily got around the rules. Cash was left in player’s boots or often by the players wife being employed (well being paid through the books but never actually doing a day’s work) by a company owned by one of the clubs directors. If you fast forward that to today many players, particularly the Africans, use a significant amount of their to fund projects in their own country. I believe for instance that Drogba has put millions into building a hospital in the Ivory Coast. How easy would it have been to understate his wages at Chelsea by say £1 million a year and a company owned by the owner or indeed an associate to make a charitable donation? If regulations are introduced that will drive certain deals underground. As they say if it can happen it will.
    I don’t doubt for one moment that with all the linked and cross linked contracts between clubs, players and say boot manufactures there aren’t numerous opportunities to compensate players in various creative ways without the need for the whole package to be paid directly by the club to the player. Image rights spring to mind in that some of the monies being paid to players, not through the PAYE system but to the players offshore companies and as a consequence avoided the UK tax regime, never significantly inflates the real value of the image.
    As I have said a clubs debt should be regulated not it’s also I believe that two further major things need to change.
    The first is that the football creditor rule needs to be abolished and the other is that any club experiencing 2 insolvency events in say a 10 year period should be relegated two leagues. It’s too easy to go into administration, take a 10 point deduction shaft trade suppliers and the taxpayer to the tune of millions and then carry on almost as if nothing has happened. Harsh on the supporters you might say but to an extent automatic relegation would in some way compensate those other clubs that have kept within their budget and paid their bills.