The new Premier League Financial Regulations: Good or Bad?

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Yesterday, new financial regulations were agreed by the Premier League, meaning that teams who spend heavily could find themselves facing a points deduction, starting from next season.

Barely scraping the two-thirds majority that it needed, the new regulations were only just passed as 13 of the 19 clubs (due to Reading abstaining) who voted, voted in favour of the new regulations, meaning that all that is left is for the final agreements to be approved in April.

Under these new regulations, clubs who have a wage bill of £52 million or above, will only be allowed to increase their wage bill by £4 million for the next three seasons. However, if the club earns extra money from match-day sales or commercial interests, then this money can be put towards the wage bill, the £4 million only applies to income that is television money. So, this clearly means that some teams will be able to spend more than £4 million over these three seasons because focus will turn to making more out of advertising and possibly a raise in match day prices, in order to have more flexibility in the amount that the wage bill can rise by. So does this not then mean that via these new regulations the fans could actually lose out by even higher prices at some grounds? Yes, because big spending teams will have to produce the extra income from somewhere.

The second part of the new regulations involve putting a ceiling on losses, so clubs who make losses of over £105 million over 3 years, will face points deductions because they will be in breach of the rules. However, there are certain elements that are taken out of this figure, as spending on youth academies and club facilities are not included in the £105 million loss ceiling.

Currently, there are only 4 Premier League teams who would be in breach of these regulations in the shape of Man City, Chelsea, Liverpool and Aston Villa. This is somewhat ironic, because the aim of the policy is to somewhat increase competition to the big four, but if Liverpool and Aston Villa were to be deducted points, surely it would reduce their competitiveness because as it is they are making huge losses and seeing no reward at 7th and 19th in the Premier League respectively.

Furthermore, what this doesn’t stop however, is the vast amounts of money that are being pumped into football, because whilst this means that the huge spending clubs like Chelsea and Man City would no longer be able to go chequebook crazy in the short term, it doesn’t in the long term. This is because you can still put the same amounts in, just over a longer period of time, in order to make sure that the vast flows of capital don’t trigger losses of over 105 million.

Finally, you feel that the penalty for breaking these would surely have to be severe, because a mere 3 or 6 points deficit to the top clubs isn’t going to deter big spending because the top teams would easily be able to make up these points and go on to challenge for the title. As a result, could this mean that we see teams prepared to take the deduction in order to create super squads that can then go on and win the Premier League? This may not be as stupid as it sounds, if the likes of Man City bring in the quality of player that their funds allow them to and so, with this in mind, is it not better to become tougher on teams, with a policy similar to that of UEFA. For instance I’m sure that if a breach of these rules meant issues over entering the Champions League or Europa League then clubs may well be more willing to adhere to the regulations.

Overall, I think that the idea behind the policy is good, because it is encouraging less spending and in turn more competition from the lesser clubs. Furthermore, by capping wage increases over £52 million to £4 million a year then the troubles of wage inflation should be addressed because wages would be limited in their growth. But because there is a way around this, by increasing capital from advertising and match day revenues, I’m not convinced it will have too much effect on club’s wage bills. I do however, think that the £105 million ceiling being imposed on loses will be more successful because it does limit the amount that clubs are able to spend (without making profits to balance this) meaning that it has more chance of making clubs efficient and greater competition occurring. It also doesn’t stop off the field development because it excludes spending on youth academies and facilities, meaning that future talent and stadia can still be developed. However, I feel that if lower clubs run loses, it has the opposite effect and it still means that clubs can run £104 million losses, which is still a very high amount. In reality, the true effect of these will be seen in three years’ time, as if no clubs are punished they were clearly a success, but if teams are taking the deductions, then the Premier League would need further sanctions and regulation to achieve their aims.

By Alex Knight (theknightlyblog)

(image courtesy of www.premierleague.com)

 

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