Regulator won’t abolish parachute payments – sports minister

Parachute payments will not be abolished by the independent football regulator, the sports minister has pledged.

The payments, which are made by the Premier League to relegated clubs, have been heavily criticised by the likes of EFL chairman Rick Parry, who says they distort competition in the Championship and encourage reckless behaviour among clubs not in receipt of them.

A strengthened Football Governance Bill published on Thursday does now allow the regulator to take them into account if it is asked to use its backstop powers to impose a distribution order on the revenue split between the Premier League and EFL.

However, it will only be able to consider them if the regulator’s own State of the Game Review – due to be completed within 18 months – finds there is evidence the payments affect the financial sustainability of clubs.

Even then, both leagues must set out in mediation how they would protect relegated clubs from financial difficulties. There is also still the possibility of the Bill being amended again on its passage through Parliament, though that seems unlikely.

“We absolutely don’t want (parachute payments) to be abolished,” sports minister Stephanie 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. How any order then ensures the size of those payments does not have an impact on the wider financial sustainability of clubs remains to be seen.

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.

Responding to the updated Bill on Wednesday evening, the Premier League expressed concern at the regulator having “unprecedented and untested” powers to intervene in the distribution of top-flight revenue and said this “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 Premier League was also upset by a clause in the original Bill introduced by the Conservatives earlier this year that said decisions on approving takeovers and directorships should have regard to the Government’s trade and foreign policy.

The new Labour Government has removed that clause, which was also singled out in a letter from UEFA to Culture Secretary Lisa Nandy earlier this year reminding the Government of sanctions that could be brought to bear if UEFA deemed there was political interference in the running of one of its member associations.

Peacock said she was meeting with UEFA and FIFA in the coming weeks.

The regulator’s primary purpose remains to ensure clubs are financially sustainable and accountable to their fans.

The Bill still does not block state ownership of clubs, even though some argue these contribute to financial instability within the game.

Peacock was asked about the regulator’s legal budget, after the Premier League told its clubs last month that it had spent close to £50million fighting to enforce its rules across the 2023-24 season.

Peacock said the regulator’s overall budget would be set by the chair, with licensing fees proportionate to a club’s size and status.

It is understood any fines levied by the regulator could go into its reserves to fight legal cases. Sources with detailed knowledge of the regulator’s remit believe it is unlikely to face the same high legal costs as the leagues, because it will be less prescriptive.

The new Bill is more explicit on how clubs must engage with supporters, Peacock said, including around ticket pricing. However, Peacock said ticket pricing was ultimately a commercial decision for clubs, and there would be no veto for fans.

Peacock is set to relaunch the advert for a regulator chair on Friday, with a new two-week application window intended to add further candidates to the list already drawn up.