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Football regulator will have power to reduce relegation parachute payments
The independent football regulator has been given the authority to crack down on parachute payments, a victory for the EFL in its long-running battle with the Premier League.
According to the football governance bill, which was published by the government on Thursday and has begun its progress through parliament, the English regulator has the power to adjust the levels of parachute payments downwards in the event that they are found to cause “significant sustainability issues”.
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The secretary of state for culture, media and sport, Lisa Nandy, this week promised Premier League clubs that parachute payments would not be abolished after they were brought into the regulator’s scope in the new bill. It was a view reiterated by the sports minister Stephanie Peacock, who said on Thursday: “Although we had a position in opposition that they shouldn’t be excluded from the bill … one of the changes we’ve made to that is to add some wording that makes it very clear that they can’t be abolished.”
The bill gives the regulator the right to assess the impact of parachute payments as part of its state of the game review, which it is obliged to undertake at least once every five years. If the regulator finds that payments distort financial stability, they can be challenged as part of a process where the regulator activates its backstop powers.
Those powers come into effect should the Premier League and EFL fail to agree on the distribution of “relevant” financial resources across the pyramid. This relates to a lengthy standoff that has led, for more than three years, to a failure to agree a deal, despite the insistence of the government. A regulator could break that impasse and impose a settlement. That settlement could reduce parachute payments provided that “advanced the IFR’s objectives” of financial stability.
The Premier League argues that parachute payments are a cornerstone of the competition’s success. It says the money, paid to relegated clubs over three seasons to help them adjust with much lower television income, allows promoted clubs to spend on players without fearing the consequences should they go down. The EFL has long been opposed to the payments, with its chair, Rick Parry, describing them in 2020 as “an evil that must be eradicated”. It believes the payments distort the competitiveness of the Championship and encourage other clubs to overspend in an attempt to compete.
The EFL has recently shifted its position, no longer calling for parachute payments to be removed, only reformed. The Premier League voluntarily shares 16% of its revenues with the football pyramid – including for youth development – and good causes. In 2020, the amount redistributed annually in parachute payments amounted to £233m, while solidarity payments to the EFL’s other 69 clubs totalled £79m.
