Salary caps don't really create a level playing field. Here is an article I wrote on the subject for the Charlton fanzine Voice of the Valley:
There is a continuous search for new ways of regulating football so as to
create more of a level playing field between clubs. Unfortunately, some of the proposals create
more problems than they solve and this applies to the introduction of salary
caps. Charlton have, of course, been restricted to
£1,200 a week because of the salary embargo.
Formerly, clubs in the
League 1 and League 2 operated within a spending constraint framework termed
the Salary Cost Management Protocol (SCNP). SCMP limited spending on player
wages to a percentage of a club’s turnover. In League 1 clubs could spend a
maximum of 60 per cent of their turnover on wages, in League 2, the limit was
55 per cent. The wages of coaching
staff were not included. There were no restrictions (in themselves) on the
amount a club could lose or spend on transfer fees. Initially introduced into League 2 in 2004/5
for guidance purposes, sanctions for breaching the SCMP thresholds were
introduced during the 2011/12 season, with Swindon the first club to be
sanctioned under the rules.
Crucially, a club
didn’t have to overspend to incur the embargo, it only needed to be shown to be
heading for an overspend. This interactive approach enabled clubs to increase
their wage bill if their circumstances improved - a successful cup run will
generate increased income and the Football League may be able to sanction
additional wage spend. Because SCMP didn’t rely on the retrospective scrutiny
of club accounts, it was also extremely effective at stopping overspend before
the spending actually occurs (something that has been a problem for the
Championship's version of FFP).
Salary cap proposals were brought forward for Leagues One and Two as an
alternative, but were opposed by some of the stronger clubs such as Portsmouth,
Plymouth Argyle and Sunderland. They
argued with some force that they would be better established as a percentage of
a club’s turnover.
Sunderland will have
a grace period to cut their wage bill, with the wages of players already signed
for the upcoming season been counted as an agreed divisional average, rather
than their average wage. That will last until the end of the current contract. In the future Sunderland will be capped at
the same level as clubs like Accrington Stanley and AFC Wimbledon, who are able
to generate far less than the Wearsiders and who would be effectively running
beyond their means were they to hit the maximum wage cap allowance.
Portsmouth’s chief
executive commented: ‘All the salary cap will achieve is a levelling of the
playing field, enabling the smallest club in the league to compete with the
largest for the same players – it has nothing to do with sustainability in its
current form. A
club like Portsmouth can afford, approximately, double [the permitted] figure
and can’t even spend the money on players we are self-generating. It makes no
sense. How can it be right that a club
with an average attendance of, say, 2,000 can have the same player budget as
one with 30,000?’
Nevertheless, League One and League Two clubs voted in favour of squad
salary caps to replace the Salary Cap Management Protocol in August 2020,
doubtless because smaller clubs saw it as a way of constraining their bigger
competitors. There was overwhelming
support in League Two, but in League One the vote was 16 for, seven against and
one abstention.
The cap takes the form of a total limit of £2.5m in League One and £1m in
League Two. This averages out at around £1,700 per player
per week in League One (just over £88k a year) and £1,000 per player per week
in League Two. To solve the issue of
clubs currently paying in excess of the caps, the EFL will not account for any
wages players earn over each league’s average salary. So, if a player currently earns £3,000, then
only £1,700 of his wage would be recorded for the cap.
When calculating
total salary spending, the ‘cap’ includes: basic wages; taxes; bonuses; image rights;
agents’ fees; and other fees and expenses paid directly and indirectly to
registered players. There are financial
penalties for overspending of up to five per cent which would amount to
£125,000 in League One and £75,000 in League Two. Above five per cent and clubs will be
referred to a disciplinary commission that will be able to dock points.
The Championship is
reported to be considering a salary cap of £18m which says something about the
financial gulf between the second tier and the lower divisions. Their introduction in the Championship is being
resisted, though arguably they are needed more there given the extent to which
clubs overspend in an effort to reach the top flight. In the Premier League,
they would risk undermining the global attraction of the competition because of
its ability to attract world class players.
The Professional Footballers’ Association set out a substantial critique
of the salary cap proposals which they described as illegal and
unenforceable. They considered that the
proposed rules lacked clear objectives.
They claimed, ‘there is no evidence e.g. supported by financial
modelling, of how the regulations will aid future financial sustainability or
why they are the appropriate mechanism to achieve the overall objectives (which
do not appear to have been defined).’
It was unclear how the salary cap had been determined. The issue of an allowance for marquee
players appeared not to have been considered.
‘ The proposed salary caps, if implemented, could potentially reduce the
ability of clubs to generate commercial revenue with sponsors and commercial
partners now fully aware that clubs wage obligations will in some cases be
significantly reduced. This effectively represents a potential loss of revenue
to EFL clubs.’
The rules appear to be based on the Premiership Rugby Salary Regulations,
but there were a number of differences between the two competitions, not least
in the range and disparity of clubs. The PFA noted, ‘The financial performance
of clubs in League One and League Two has remained relatively consistent in the
last ten years with revenue growth being matched by increases in staff costs.
Financial disparity is prevalent with the average ratio of top to bottom
revenue generators being 7:1 in League One and 3:1 in League Two between
2014/15 and 2018/19.’ They pointed out
that there were more important disparities between League One and League Two
with a much higher ratio of highest to lowest revenue generating clubs (7: 1)
in League One compared with League Two (3: 1).
They were concerned that the process of developing the new regulations
had been rushed through without proper consultation, arguing that it typically
took between 11 and 25 months to devise new sporting regulations.
Evasion and securing compliance has been a characteristic difficulty with
salary caps elsewhere, notably in the US.
The PFA noted, ‘The ultimate goal of the draft rules should be to ensure
compliance and we believe it is necessary for the EFL to demonstrate further
how they shall monitor and enforce these regulations, before the Clubs carry
out a vote on their adoption.’ It was
unclear whether the rules would satisfy competition law scrutiny.
Leading sports writer Gabriele Marcoti has commented: ‘U.S.-style caps only work if revenues are
roughly equal throughout the league like they are in the NFL, where
broadcasting and sponsorship income is equally distributed and the only
variance come from matchday receipts and sponsorships.’ He continued, ‘In the
long run, there are better ways to ensure the stability and solidity of clubs,
such as having tougher rules on cash reserve requirements and ensuring there's
enough oversight and legal muscle there to enforce them.’
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