MPs question exclusion of Premier League parachute payments ...
MPs have urged the UK government to clear up “confusion” over why parachute payments are excluded as a factor that English soccer’s independent regulator can consider should it have to intervene in the financial row between the Premier League and the English Football League (EFL).
The Football Governance Bill, which has the creation of an independent regulator at its heart, had its second reading in Parliament on 23rd April.
Shadow culture secretary Thangam Debbonaire urged the government to clarify why parachute payments were explicitly not counted as “relevant revenue” in the bill should the regulator need to use its backstop powers to impose a settlement.
The Premier League makes parachute payments when clubs are relegated from the top flight. It believes they are vital to encourage clubs to invest with confidence in order to compete in the league, while giving those clubs the assurance they will be supported in the event of relegation. The EFL believes they have distorted competition in the Championship – a view the government’s own white paper on soccer governance agreed with.
The Premier League and EFL have so far failed to reach a new agreement on distribution, with top-flight clubs currently focusing on first agreeing new financial rules for the division.
“I think the confusion on parachute payments is one that is worthy of further attention, because there is so much money involved here but there’s also the distorting effect that the government’s own white paper identified – and rightly so,” Debbonaire said in the debate on the bill in the House of Commons.
“If we don’t look at this, we risk distorted competition in the Championship by encouraging greater financial risk-taking by the clubs that don’t receive those payments. And we know then that this can result in an over-reliance on owner funding.
“Clause 55 subsection two of the bill excludes the parachute payments from any order by the regulator on revenue distribution. So I gently say to the government, as there seems to be some contradictions here or possibly confusion, we would like that cleared up.”
Culture secretary Lucy Frazer said parachute payments had “a role to play” and that their impact would be assessed as part of the regulator’s ‘State of the Game’ review.
Sir Mark Hendrick, the Labour MP for Preston, also expressed surprise that parachute payments had been excluded from the backstop mechanism.
“This cannot be fair, and deliberately excludes the Football League from making its case that the parachute payments are disadvantaging and distorting the revenues of Championship clubs as a whole,” he said.
“The payments are not just a parachute for a soft landing, they are a ladder back to the Premier League for most of those clubs that have already been relegated.”
Conservative former minister Damian Green said parachute payments were “the absolute key as to why the Championship is a very skewed league”.
He told the Commons: “Currently for every UK£1,000 of the broadcasting deal, UK£882 goes to the Premier League, each Premier League club, UK£73.48 to Championship clubs in receipt of parachute payments, and UK£32.85 to Championship clubs not in receipt of parachute payments.
“So more than twice as much goes to the clubs with parachute payments as the clubs without parachute payments, that’s how you get a skewed league.”
Premier League chief executive Richard Masters called for “light touch, proportionate” regulation on Monday.
“We have been negotiating with the EFL for over a year with a generous package on top of what we already do – and that remains in place,” he said.
“We heard the EFL indicate if we did a deal they would want to unwind that and our clubs are very worried about there being a baseline for a renegotiation. We are now prioritising new financial regulation for the Premier League.
“I don’t want this backstop power to ever be used, it is unnecessary. Since 2007, we have been bilaterally agreeing more generous deals with the EFL and I would love that to continue. That’s my aspiration and hope.”
Frazer said in the Commons on Tuesday: “We do not want to do anything at all to damage the Premier League – it is world-leading, it’s worth UK£7 billion, people look to it across the world.
“What we are doing in this legislation, we have worked very, very closely with the Premier League, with the EFL and others, to try and get this balance right.”
