Financial Fair Play

Despite reports to the contrary, Financial Fair Play is to be introduced in the Championship next season, meaning that clubs will be forced to moderate their spending to an extent – eventually.

Initially, clubs will be permitted to lose £4m in the 2012/3 season, with an extra £8m of equity investment permitted, giving a total ‘Permitted Allowance’ loss of £12m.  This acceptable total loss will reduce in steps, to £5m by 2015/6.

Any losses and shareholder cash injections in excess of the cap will trigger a fine if the club is promoted, which will rise as the excessive spending rises.  Clubs who fail to buy promotion by overspending will be placed under a transfer embargo until they get their spending back within the permitted loss ceiling.

However, it’s worth noting that there will be no penalties for the next two seasons – the League say this is to allow clubs to plan for the transition.  When the penalties kick in (2014/5), the Allowance level for losses will be £6m per year.

That hiatus essentially gives the monstrously debt-financed likes of Leicester City two years to get out of the division and avoid the sanctions, or get their house in order.  It would seem more likely that they will continue to pursue the former path.

GSE loaned Derby £7m last year, interest free.  That would have led to the Rams being placed under a transfer embargo if FFP was active already, which explains why Glick has been moving Derby towards a ‘break-even’ (or near enough) model ahead of the 2014/5 deadline.

Clubs coming down from the Premier League are exempt from FFP for their first season in the Championship, unless they are promoted straight back up that season with a loss above the Permitted Allowance – in which case, they will be fined.  That fine, or Fair Play Tax, is added to a pot and the money redistributed to the clubs who kept to the FFP limits during that season.

FFP’s effects will not be felt straight away, but within a few years, hopefully it will have deterred ‘casino’ owners like King Power from using clubs as their vehicle to try to buy their way into the Premier League.  In the same way, a situation like Nottingham Forest’s, in which the late venture capitalist Nigel Doughty simply wrote off a portion of his fortune to indulge his beloved club, without any thoughts of sustainability, will not be permitted.  Forest have indicated that they intend to stop losing money hand over fist and as such, will have to cut their wagebill dramatically next season.

However, if a ‘sugar daddy’ wants to build his team a new youth academy, that’s fine.  Under FFP rules, investment in youth development is exempt from the Permitted Allowance figures.  This means that benevolent owners can pour money into their academies without limit.

As long as the Elite Player Performance Plan doesn’t end up shafting us by allowing Premier League clubs to snatch away the best talent at an early age, the academy exemption allows clubs to plan for a future whereby they develop their own players, creating a conveyor belt of talent.  If an out-and-out star comes through, like a Bale, Oxlade-Chamberlain or (hopefully) a Mason Bennett, that’s when a windfall comes your way and you get a nice, fat cheque from a Premier League club, which you can then reinvest in your squad.

***

Three clubs voted against FFP – and I bet that two of them were Leicester and West Ham United.

West Ham blogger The Game’s Gone Crazy (TGGC) gives an staggeringly ill-informed view of FFP here, in which he equates FFP with ‘Football Socialism’, before betraying just how panic-stricken about his club’s future he really is in the last line of his post.

TGGC’s first objection – ‘how do clubs expect to make the jump to the Premiership [sic] in future… Now any team that gets up will be hopelessly out of their depth’ is blown out of the water by the examples of Norwich City and Swansea City this season.

There is no reason why a well-run Championship club can’t hold their own in the Premier League.  Look how bad the bottom six have been this season and of those six, only one – QPR – was promoted last term.  And guess how QPR got promoted?  Yep, by spending miles and miles beyond their means, in just the sort of manner which will be heavily penalised under FFP.

Norwich went up with a £4m loss in 2010/11 – well within the boundaries permitted by FFP.  Swansea’s loss last season – £8.4m – would have triggered a Fair Play Tax of around £1.5m.  Not ideal, but something the club could have swallowed, given the huge injection of TV money which accompanies promotion.

QPR, on the other hand, lost £25.7m through buying promotion, £19.7m more than the FFP cap.  Under the new regulations, that would have saddled them with a fine of 100% of the excess – £19.7m.  A fine of that magnitude would be a huge problem for any newly promoted club, but what Norwich and Swansea have managed to demonstrate is that extreme debt-financing your way to the promised land à la QPR is not the only way you can possibly do it.  Neither club have been at all out of their depth, let alone hopelessly so.

On to TGGC’s bizarre, Thatcherite accusation of ‘Football Socialism’*.  In his opinion, FFP will stop the ‘bigger boys who enjoy a degree of financial clout’ from wielding their rightful advantage.  Our West Ham chum ignores or is blind to the reality that half of the current Premier League clubs are not actually significantly bigger than a lot of second tier clubs – Fulham, Wigan, Blackburn, Bolton, West Brom, Stoke, Wolves, for example.  These PL clubs only enjoy extra ‘clout’ because of Rupert Murdoch’s largesse – not because they are particularly big clubs in terms of actual attendances.

West Ham’s average attendance this season is 30,738 – less than 5,000 more than Derby’s.  Do they have a divine right to run a wagebill which absolutely dwarfs ours?  Of course not.

There is nothing the Football League can do about Premier League TV rights money or parachute payments.  What it can and has done is to protect its member clubs against those who are blind to the history and local importance of the ‘asset’ they purchase with the sole intention of getting a slice of the Sky wonga bonanza.

TGGC’s headline prediction – that FFP is the precursor to a Premier League ‘closed shop’, with no promotion or relegation – is ridiculous.  Apart from the fact that fans of all 92 clubs would swiftly rebel if any such plan was ever floated, Sky wouldn’t want it – how boring would the Premier League become without the relegation scrap to report on?  With the same tiny cabal of clubs sharing the title between them every season, the answer is ‘very’.

*Isn’t football supposed to be the game of the people?

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