Premier League parachute payments will NOT be abolished in new Football Governance Bill
Sports Minister Stephanie Peacock has assured fans that parachute payments will not be scrapped by the independent football regulator, despite criticism from figures like EFL chairman Rick Parry. The payments, which are given by the Premier League to relegated clubs, have been a point of contention for allegedly distorting competition in the Championship and prompting reckless spending among clubs not receiving them.
Although the newly strengthened Football Governance Bill, released on Thursday, permits the regulator to consider these payments when potentially exercising its backstop powers to dictate the revenue split between the Premier League and EFL, this can only happen after the regulator's State of the Game Review. This review, expected within 18 months, must first provide evidence that parachute payments impact the financial sustainability of clubs.
Furthermore, both leagues would need to demonstrate during mediation how they plan to shield relegated clubs from financial hardship. While the Bill could still undergo amendments as it progresses through Parliament, changes seem improbable at this stage.
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"We absolutely don’t want (parachute payments) to be abolished," declared Peacock. "We recognise they have an important part to play. We also recognise they can place inflationary pressure (on clubs) but it will be for the regulator, through the work they do, to decide if they are an issue and if they should be looked at through that (backstop) mechanism. But we don’t think it makes sense for them to be excluded."
Last month, Parry highlighted the striking inflation in these payments, from £30million in 2010, accounting for seven per cent of Championship club revenue, to £233m in 2021—standing at 39 per cent. At a Labour Party Conference event last month, Parry even branded them "the cuckoo in the Championship’s nest".
Interestingly, section 62 2 (c) of the Bill seems to prohibit the regulator from slashing the size of parachute payments within any distribution order. Yet, any revised deal that benefits the EFL may reduce their relative share of total distributions to lower-league clubs.
The prospect of a 'New Deal' concerning TV revenue splits between leagues remains stalled since March, and the regulator's power to enforce a distribution order hinges on league request upon meeting specific criteria. The Premier League stands firm on its stance that parachute payments are crucial for giving teams moving up the confidence to spend on their squads for competitive edge in the top flight.
The Premier League has raised concerns over the updated Bill, which was responded to on Wednesday evening, expressing worries about the regulator being granted "unprecedented and untested" powers. These powers could potentially interfere with the distribution of top-flight revenue, which the league fears "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 league also voiced displeasure over an original clause from the Conservatives' Bill earlier this year, which linked takeover and directorship approvals to the Government’s trade and foreign policy—a clause now scrapped by the new Labour Government. UEFA had previously highlighted this clause in a letter to Culture Secretary Lisa Nandy, cautioning of possible sanctions for perceived political interference.
Peacock mentioned upcoming meetings with UEFA and FIFA. Despite debates, the Bill does not prevent state ownership of clubs, which some critics say leads to financial instability in football.
Questions were also raised regarding the regulator’s legal budget after the Premier League revealed nearly £50million in expenses fighting to enforce its rules during the 2023-24 season.
Peacock has stated that the regulator's overall budget will be determined by the chair, with licensing fees being proportionate to a club's size and status. It is believed that any fines imposed by the regulator could be used to bolster its reserves for legal battles.
Insiders with in-depth knowledge of the regulator's remit think it is unlikely to face the same high legal costs as the leagues, due to its less prescriptive nature. The new Bill provides clearer guidelines on how clubs should engage with their supporters, including matters related to ticket pricing, according to Peacock.
However, he emphasised that ticket pricing remains a commercial decision for the clubs, with no veto power given to fans. Peacock plans to reopen the advertisement for a regulator chair this Friday, with a new two-week application period aimed at attracting more candidates to the already compiled list.