Sports minister makes parachute payments pledge despite EFL chief criticism

Sports minister Stephanie Peacock has made a commitment that parachute payments won't be scrapped by the incoming independent football regulator. Despite criticisms from figures like EFL chairman Rick Parry, who argues they skew competition in the Championship and urge imprudent spending among clubs not receiving them, the payments given by the Premier League to relegated clubs will continue.

The enhanced Football Governance Bill unveiled on Thursday allows the regulator to consider these payments if required to enforce a distribution order on the earnings split between the Premier League and EFL, but this is only after the regulator's 'State of the Game Review' – scheduled for completion within 18 months – verifies their impact on clubs’ financial stability. Moreover, both leagues would have to discuss in mediation how they plan to shield demoted teams from monetary woes.

While there remains a chance for amendments during the Bill's journey through Parliament, it appears unlikely at this stage.

"We absolutely don’t want (parachute payments) to be abolished," Peacock said. "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."

Parry said last month that in 2010 parachute payments totalled £30million, which equated to seven per cent of the total revenue of Championship clubs. By 2021, Parry said, they had risen to £233m, 39 per cent of the same total.

He described them at a Labour Party Conference event last month as "the cuckoo in the Championship’s nest".

The Bill appears, in section 62 2 (c), to prevent the regulator reducing the size of parachute payments within any distribution order it makes. However, any improved settlement for the EFL could see them become a smaller percentage of the total amount distributed to lower division clubs.

Talks between the leagues on a ‘New Deal’ for splitting television revenue have been on hold since March. The regulator’s backstop powers to ultimately impose a distribution order can only be triggered by one of the leagues, based on certain criteria being met.

The Premier League believes parachute payments are essential to give newly-promoted clubs the confidence to invest in their squads in order to be competitive in the top division.

The Premier League has voiced concerns over the updated Bill, stating on Wednesday evening that the regulator's "unprecedented and untested" powers to intervene in the distribution of top-flight revenue "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 original Bill, introduced by the Conservatives earlier this year, contained a clause that decisions on approving takeovers and directorships should consider the Government’s trade and foreign policy.

This clause, which upset the Premier League, has been removed by the new Labour Government. UEFA had previously highlighted this clause in a letter to Culture Secretary Lisa Nandy, warning of potential sanctions if there was perceived political interference in the running of one of its member associations.

Peacock announced she would be meeting with UEFA and FIFA in the coming weeks. The regulator’s main objective remains ensuring clubs are financially sustainable and accountable to their fans.

Despite some arguing that state ownership of clubs contributes to financial instability within the game, the Bill does not prevent it. Questions were raised about the regulator’s legal budget after the Premier League revealed last month that it had spent nearly £50million enforcing its rules during the 2023-24 season.

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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 incur 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 also noted that ticket pricing ultimately remains a commercial decision for the clubs, with no veto power granted 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.