Parachute Payments: More Than A Softened Landing?

posted 21 Mar 2013, 16:48 by Richard Brook   [ updated 21 Mar 2013, 16:49 ]
Originally posted here: bit.ly/Ydp0WW

The Football League is to investigate potential ways to mitigate a proposed rise in parachute payments for clubs newly relegated from the Premier League, putting the justness of these payments under the microscope once again. Under the proposals a relegated club will get £23 million in the first year, £18 million in the second year and £9 million for the two seasons thereafter. The solidarity payments to a Championship club, not entitled to parachute payments will reportedly be £2.3 million, by way of contrast. It is not just the level of the payment it is the payment’s very existence, in their current form, which is arguably inequitable.

The Football League is considering withholding its own sponsorship and television revenue from clubs receiving parachute payments, or a salary cap across all clubs. It has been reported that as a last resort the Football League might consider turning its back on the Premier League altogether, although this is thought extremely unlikely and an absolute last resort.

If any other business found themselves in the position of a club facing relegation from the Premier League, that is to say facing a very foreseeable and drastic reduction in revenue streams, they would be expected to reduce expenditure to ensure they remained viable, should the foreseen reduction transpire. In football this is plainly impossible. You cannot expect a club that may or may or may not go down, to wave the white flag and begin off-loading players while they have a chance of survival. Even if this was the expectation, the transfer window system would likely prevent this pre-emptive action.

With this in mind it seems beyond question that a club relegated from the Premier League will take a Premier League squad and therefore Premier League wages down to the Championship. This is unavoidable in the interests of sporting competition. The club must be allowed to end of their Premier League stay, to the absolute best of their ability. Logically it follows that there must be some kind of financial support in place to handle the consequences of this.

The current answer is mumbled and incoherent: parachute payments. The current answer is wrong. It might be seen as a spectacular example of the self-interested, self preservationist attitude of the Premier League and its member clubs. It seems anti-competitive, in a sporting sense at least, and one wonders if it might not be in a business / legal sense also. It creates an unfair field of play in the Championship, providing relegated sides with a spring board towards promotion back to the top flight. It all feels as if it is done with a view to maintaining the status quo. After all if the wrong sides got relegated from the Premiership and the wrong sides got promoted from the Championship the television rights might not be worth quite so much.

So the current system, whether or not with the aim of seeing familiar faces return to the Premier League, makes it a financial option to keep a decent amount of Premier League standard players or to get rid of some or all high earners and spend the parachute payments assembling a stellar line-up, by second tier standards, to provide a shot at an instant return to the Premier League. After all it is increasingly regular for chairman of a relegation threatened club to approach the Premier League with an ‘all or bust’ mentality. The same chairmen are likely to be prepared to gamble the parachute payments on promotion back to the Promised Land. Such attitudes might be considered reckless at a time when many football clubs are facing uncertain financial futures.

In my view parachute payments should be done away with and replaced by discretionary funds for relegated clubs, provided from the Premier League and administered by the Football League. The option to retain players, by choice, that a club’s post-relegation wage structure cannot support, should be removed. The option to purchase players that a club’s post-relegation playing budget cannot accommodate should also disappear. Parachute payments should be about helping cover costs, following the decrease in revenues that accompanies relegation. These payments should and must not be the helping hand towards promotion that they currently are.

The payment should cover player wages as required until the end of the summer transfer window, during which time the relegated clubs should be trying to move on players that they cannot afford to keep. If the Football League are satisfied with the club’s efforts to move the player’s on, wages up until the winter window should come out of the payments. This should continue on a window to window basis until the payments are exhausted, and the same method should be applied to all costs that can no longer be met.

The above method of making the payments should reduce the financial burden of relegation from the Premier League, and the associated loss of revenue, primarily television revenues, without the currently associated tilting of the Football League playing field. This is however only a suggestion of a way to achieve relative fairness in a drastically unfair system.

The best thing for English Football would be for the Football Association to properly assert themselves as the national governing body of the sport and take a good degree of power back from the Premier League. In doing so the FA would be able to distribute television revenues appropriately. Of the 2011/12 Premier League television revenue, which was reportedly £1.2 billion, over 80% (£968 million) remained in the Premier League. A cynical person might suggest that this level of money is retained to inflate Premier League wages to secure top talent, to secure a better TV deal next time. If this money were split more fairly there could be all kinds of benefits such as increased investment in grass roots football and pertinently here, the financial transition from Premier League to Championship, for a relegated club, would be somewhat smoother.

The Football League are sensible and indeed duty bound to act in their own interests on this. Whether deliberate or not the Premier League proposal seems like it can only serve to widen the gap between English football’s top two tiers. A non-competitive league system serves no-one’s best interests, less still those of neutral or supporter.


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