Championship FFP rules ‘undermined’ by Premier League

May 26, 2014


Last week, the Championship clubs voted on a number of potential changes to the existing FFP rules. However, as none of the tabled amendments could muster the required 75% of the vote, the rules will remain as they are.  Huddersfield issued an excellent summary of the proposed changes and outlined their disappointment that ‘real-time’ monitoring of finances was not approved.

Under the current rules a ‘Fair Play Tax’ is levied on all clubs that gain promotion to the Premier  League but make excessive losses in the process. When the rules were originally voted in, the 'Tax' was intended to be divided up between the Championship clubs that had complied with the rules. Crucially, the collection of the Fair Play Tax was subject to approval by the Premier League. This was because any club subject  to the Tax would be in Premier League when their accounts were scrutinised and the overspending confirmed. Consequently the Football needed to rely on the Premier League to approve the concept.  Some time after the rules were introduced, the Premier League advised that they did not support the intended redistribution of funds under the Fair Play Tax proposal; the Premier League decided that the Tax would go to charity rather than the clubs.

The Premier League have never formally announced why they decided to overrule the Football League. However at an FFP Forum last week, the Premier League Finance Director Javed Khan was asked why the Premier League had made the change. His answer was less than convincing and he explained that there is a system of carefully constructed ‘Solidarity’ payments in place with the Championship which would be disturbed and undermined if the Fair Play Tax were to be re-allocated to the member clubs.  Like much of the audience, the Championship representative at the Forum didn’t appear to be entirely won over by Khan’s rather vague response.

The Premier League head Richard Scudamore has publicly stated that he believes the Championship FFP rules are ‘unsustainable’. Scudamore’s comments were made in March when the proposed rule-changes were first being discussed; they appear to have been designed at appeal to the clubs near the relegation-zone rather than attempt to influence the voting. However, one can’t help but feel that the rules are more likely to be truly ‘unsustainable’ if the powerful PL Head describes them as such.

If the situation wasn’t bad enough, the BBC recently reported that the Premier League will now not even help the Football League collect the Fair Play Tax. Rather than deduct the funds from the TV payments, it seems the Football League will be required to send QPR and Leicester a bill and simply hope that they pay-up.  Although QPR will probably end up with a bill for around £30m-£35m, owner Tony Fernandes told the GuardianWill we fight the fine? What do you think? After all we’ve been through, it’s my middle name: ‘Fight it’ Fernandes”.  It seems that the Football League will now have to embark on a costly legal battle to collect the ‘Tax’ – and all so that they can pay it over to charity (at the insistence of the Premier League). It remains to be seen whether the Football League feel it is worth the effort.

This affair illustrates the difficult relationship that clubs and many football organisations outside the Premier League have with their wealthy benefactor.  In what is often a rather feudal relationship, the Premier League controls the way cash ‘trickles-down’. Essentially, if the Premier League want something, then we can be fairly sure that it is going to happen. This was well illustrated by the introduction of the Elite Player Performance Plan – a system which the Guardian maintained was only introduced via ‘blackmail’ of the Football League. 

The Premier League is hugely powerful and controls the purse-strings of English Football to such an extent that few individuals or organisations feel secure enough to challenge them. The silence from clubs and the Football League and its member clubs over the Premier League’s handling of the Fair Play Tax has been particularly telling.  

The PL introduced their own spending constraints model only following governmental pressure. The 2012/13 Commons Select Committee on Football Governance threatened to impose club licensing and reported ”Most fundamentally, the financial proposals were hugely disappointing, with the only real positive development being the eventual introduction of Financial Fair Play rules despite the football authorities’ reluctance’. It will be interesting to see whether the government takes a position on the Premier League’s lack of support for the Football League’s attempts to control overspending.

 

Reports of record €60m (£49m) fine for PSG and Man City

May 6, 2014

Following recent press reports, we now have a much better idea about the sanctions that are reportedly being offered to Manchester City and PSG. It is now up to the clubs to decide whether to accept the terms or risk a potentially more severe punishment. The punishment reported in the press raises a number of interesting questions:


Why is City’s fine so large?

When City filed their accounts, on the face of it they looked to have nominally passed the FFP Break Even test (after permitted exclus...


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Man City failure of FFP test - a matter of choice

April 30, 2014

So, now we know that Man City (and PSG) failed the FFP Break Even test. However, this was no accident. Man City didn't fail the test because of an oversight - they failed because they chose to fail. The following analogy is helpful: 

I recently handed my son £5 to buy some sweets, telling him to spend no more than £1. Inevitably, he came back with quite a lot of sweets having spent about the £1.50. He didn't exceed the budget because he wasn't able to count - he just evaluated the pros and ...


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The Benefactor Model - permitted in League 1 and 2

April 23, 2014

The Football League has clarified an important aspect of how their FFP rules operate within League and League 2. Interestingly, the FL have confirmed that their Salary Cost Management Protocol (SCMP) rules permit 'benefactor' owners to finance a club's ongoing losses (something that is restricted within UEFA, the Premier League and Championship rules). 

The League 1 and League 2 rules require clubs to submit regular financial forecasts to the Football League. Only if a club is operating within...


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Would Hull City be allowed into the Europa League next season?

March 9, 2014

 Following today’s FA Cup semi-final draw, supporters of Hull and Sheffield United must feel there is every chance that they could secure a Europa League place next season. This could be achieved either by getting through to the final and beating Wigan, or simply by getting through to a final against Arsenal. Unlike the League Cup, the losing FA Cup Finalist will be rewarded with a Europa League place if the winners have already qualified for UEFA competition.  Arsenal would need to finish ...


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Will Liverpool face any FFP punishment?

March 6, 2014

Since Tuesday's release of Liverpool’s annual accounts for last season (2012/13), fans have been asking whether they will receive a punishment for breaching the Break Even rules.  Unfortunately the FFP rules aren’t straight-forward and it is only when you produce a projection of this season’s finances that you can see how the land lies.

As I advised a couple of days ago, Liverpool will be assessed for FFP compliance over three footballing seasons - they will be able to compete in the Cha...


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Liverpool’s accounts raise interesing question of ‘fairness’ of FFP

March 4, 2014

Last Friday UEFA held an FFP update in Nyon which provided some excellent information about the current process – however it also gave rise to a number of interesting questions.

UEFA explained that the teams that potentially faced punished for an overspend during the first Monitoring Period are those professional teams that qualified for UEFA competition in 2012/13 and had a Break Even deficit in the 2011/12 season. Although the Monitoring Period looks at accounting performance over two seas...


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UEFA Financial Fair Play update – Nyon 28 Feb 2014

March 2, 2014

On Friday UEFA held an FFP press briefing in Nyon. The 2 hour session provided number of interesting updates - only a few of which have been reported in the British press.

76 clubs referred for Break Even Deficit

As has been widely reported, 76 clubs were required to provide additional financial information to UEFA. Some media outlets probably not at the session seemed to sensationalise what UEFA were saying in respect to the 76. Essentially the 76 clubs are those that met all the following cri...


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Manchester United unable to spend their way out of trouble

February 12, 2014

In December Martyn Ziegler wrote an interesting piece outlining the financial implications for Manchester United if they don’t secure a Champions League place at the end of the current 2013/14 season. As Ziegler pointed out, the club’s CL income will be reduced next season by around £35m, with the club missing out on a further £10m in gate-receipts. 

Given this probable fall in income, it is interesting to overlay the new Premier League spending constraints and see what impact this fairl...


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Man City release controversial accounts

February 3, 2014

Manchester City's long-awaited financial results were released last week. In many ways they raise more questions than they answer. 

As a number of journalists have pointed out, there are a host of Related Party Transactions, Inter-company transactions as well as a sale of Image Rights to a company that the City Press Office insists is outside the club. These obscure transactions have been designed to generate one-off income for the club during the final accounting year that will be covered by ...


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