The Football League is to introduce a scheme to cut spending on wages from the 2012-13 season. Called the Salary Costs Management Protocol, it is effectively a version of Uefa’s Financial Fair Play scheme which already applies to Premier League clubs.
The Football League is to introduce a scheme to cut spending on wages from the 2012-13 season. Called the Salary Costs Management Protocol, it is effectively a version of Uefa’s Financial Fair Play scheme which already applies to Premier League clubs.
The Football League scheme is already operating in League 2 and the permissible spend on wages there is to be reduced from the current 60 per cent of turnover to 55 per cent and will also apply to League 1. Championship clubs will not be able to spend more than they earn.
There is a strong temptation in the Championship to gamble on reaching the promised land of the Premiership, an even stronger temptation now that just one season in the top flight brings a substantial financial reward over a five year period (one year up there and four years of parachute payments). League 1 clubs have also been tempted to splash out to reach the Championship given the higher revenues that can be earned there.
However, there will be a 26 per cent drop in the Football League’s television deal from 2012-13. Football League clubs have a total debt of £700m.
The conventional view is to engage in hand wringing about clubs over spending and the high level of wages and there are certainly good grounds for concern. As far as high wages are concerned, some see them as obscene, particularly at a time when the standard of living of median income workers is being squeezed as an economic policy objective. However, very high salaries are paid in the entertainment industry (of which football is essentially a part) and in financial services. It’s what happens in a globalised market economy.
As far as debt is concerned, what is important is whether you can service it rather than the actual amount, although clearly one has to have some regard to how far it is backed by assets which in a football club often lack tangible value or cannot be disposed of without destroying the business.
Clubs that break the new rules which suffer penalties including transfer bans and ultimately points deductions, the latter weapon having been used quite extensively in the Blue Square Premiership. Of course, if you push that too far the table becomes determined by the application of financial rules rather than the outcome of matches. Admittedly, the table is also significantly affected by incompetent decisions by officials, but they are almost like an act of god and to some extent at least are random in their effect.
One should also not underestimate the ability of clubs to evade rules of this kind. Creative accounting is a well known and long established art.
Nevertheless, Middlesbrough are one club that have welcomed the move and judging by fans’ comments they also see it as a welcome development.