The Independent Football Regulator WILL have ultimate control over parachute payments - in a seismic blow for the Premier League.
Officials at the top-flight had hoped that the controversial system, which the EFL believe effectively creates a closed shop and distorts competition, would not fall under the incoming ombudsman’s remit.
However, the new Labour administration have released more details on how the Regulator will look, ahead of the introduction of the Football Governance Bill to the House of Lords on Thursday.
Culture secretary Lisa Nandy met with the Premier League and subsequently all 20 clubs on Wednesday. Insiders said she told them that parachute payments ‘would not be abolished’.
A Premier League spokesperson said that while it recognised elements of the Bill ‘can help make the game stronger’ it ‘remained concerned about the regulatory framework’.
They added: ‘Specifically, we believe rigid banking-style regulation, and the Regulator’s unprecedented and untested powers to intervene in the distribution of the Premier League’s revenues, could have a negative impact on the League’s continued competitiveness, clubs’ investment in world-class talent and, above all, the aspiration that drives our global appeal and growth.’
The previous Conservative government had deliberately excluded the payments – which total £49m for those relegated to the Championship last season – from their draft proposals.
However, in a move that will anger the Premier League, they have now been included - which means the regulator will have the power to impose a financial settlement should the top flight and EFL not reach an agreement on distribution of money thanks to a ‘back-stop’ power.
EFL chairman Rick Parry said the EFL ‘welcomed’ the development and a state of the game report, which will form the basis for the Regulator’s work and be completed within 18 months.
‘We have always been clear throughout this process that our intention is not to harm or hinder the strength of the Premier League, and the value which it generates for the wider pyramid, including the EFL and our competitions,’ he added. ‘Rather, this is about creating a framework for a sustainable and competitive pyramid which fosters sporting jeopardy without financial catastrophe, underpinned by better regulation and fairer redistribution.’
In another marked shift from the previous administration, a clause which required the Regulator to take into account the government’s ‘foreign and trade policy’ when making decisions about club owners and directors has been dumped.
Boris Johnson’s government pressured the Premier League to green light the proposed takeover of Newcastle United by Saudi Arabia’s Public Investment Fund in 2021.
But the Tory-led proposal had triggered serious concerns at UEFA, who warned that such a clause could be seen as government interference in football and suggested that it could result in England being banned from the next European Championship, much of which will be held on home soil.
However, Labour say the move will ‘ensure the Regulator will be fully independent of government and industry’.
Parachute payments were introduced in 2006 after a succession of sides relegated from the top flight ended up in financial difficulty. Parry, who was chief executive when the Premier League was founded, described them in 2020 as ‘an evil which must be eradicated’.
This season they have risen 10 per cent, which had done little to change the belief within the EFL that they create an unfair advantage and prompt other clubs to overspend in an attempt to compete.
The Department for Culture, Media and Sport (DCMS) say the Regulator will ‘tackle rogue owners and directors, implement a club licensing regime to help ensure a more consistent approach in how clubs are run, monitor club finances and improve fan engagement throughout the football pyramid’.
They added: ‘It will also have a backstop measure to mediate a fair financial distribution down the Leagues should the Premier League and EFL not be able to come to an agreement.’
Elsewhere, the regulator will demand that clubs engage with supporters on ticket prices and any plans to relocate their home ground.
Culture Secretary Nandy said: ‘English football is one of our greatest exports and a source of national pride which this Government wants to see thrive for generations to come.
‘But for too long, financial instability has meant loyal fans and whole communities have risked losing their cherished clubs as a result of mismanagement and reckless spending.
‘This Bill seeks to properly redress the balance, putting fans back at the heart of the game, taking on rogue owners and crucially helping to put clubs up and down the country on a sound financial footing.’