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The future of Financial Fair Play is at a critical crossroads
Financial Fair Play (FFP) is, in essence, a fairly simple concept. It is designed to stop football clubs spending beyond their means and running up huge losses. Sounds straightforward enough?
However, when it comes to football teams and money, it inevitably becomes convoluted and FFP has been heavily scrutinised by clubs, media and almost everyone involved in the sport. Many believe it will not be enforceable.
This season is the first where clubs’ accounts will be scrutinised and they could face sanctions for breaching the regulations.
Those punishments will not be implemented until December 2014 but clubs have already started challenging possible sanctions.
But why is FFP deemed necessary? Cash-rich owners are willing to plunder millions of pounds into clubs to try to reach the Premier League and then stay in the top tier once they have reached the so-called promise land.
After all, promotion to the Premier League is believed to be worth £120m, including parachute payments.
It means sides like Cardiff City and Hull City achieved promotion despite loses of £31m and £26m respectively.
FFP, which Championship clubs voted 21 to three in favour of after two years of discussion, attempts to stop that lavish spending.
So how do they plan to do it?
FFP came into force at the start of the 2012/2013 campaign, with clubs submitting their accounts from the previous season. The loss accepted was £8m with another £4m guaranteed by an owner. However, there were no sanctions in place at that point if the £12m total figure was breached.
Clubs again faced no punishment if their accounts from the 2012/2013 campaign showed a loss of more than £6m, with an owner again putting in £4m.
This season was supposed to be the first when teams could face sanctions. If a side makes a loss of more than £3m, with another £5m guaranteed by an owner, and remains in the Championship, then under current regulations they would be barred from signing players from the 2015 January transfer window.
It’s an embargo that is only lifted once a club shows their spending has been brought down within the Football League FFP limits, which reduces yearly until 2016/2017.
Teams who breach that total yet secure promotion to the Premier League would face ‘fair play tax’, ranging from one per cent on the first £100,000 to 100 per cent on anything over £10m.
For the first £10m above the £8m permitted loss, clubs are fined on a sliding scale up to £6.68m. Any further loss above that initial £10m, would have to be paid back in full.
Originally the money was going to be shared out equally amongst Championships clubs but any fines will now be paid to charity.
But, unsurprisingly, clubs want to challenge the suggested fines and transfer embargoes. Leicester City are currently top of the Championship table and look on course to secure promotion to the top flight.
The Foxes were bought in 2010 by the Thai duty free company owned by Aiyawatt Raksriaksorn. Since then around £120m has been spent by the club and in 2011/2012 they made a £30m loss.
So far their losses have been not been penalised but, should the club achieve promotion yet make a loss of more than £8m, they would face the ‘fair play tax’.
QPR made a reported loss of £65.4m for the 2012/13 campaign. As an example, if they were to lose the same sum once again, their fair play tax would be £54.08m.
But, according to David Conn at The Guardian, several clubs have instructed solicitors, Brabners, to make a legal threat to the financial fair play rules.
Leicester City, Queens Park Rangers, Blackburn Rovers and Bolton Wanderers are believed to be among the teams, whilst Watford refused to state if they were one of them.
The six-page letter to the Football League argued Championship clubs believe they suffer from the FFP rules not being the same as those of the Premier League, that it will prevent clubs competing, restrict investment by owners and reduce players’ wages.
The Guardian reports that the Brabners letter warned: “It is likely that, unless the FFP rules are modified, the Football League should expect a challenge from any number of clubs and/or players or agents suffering sanctions or the consequences of sanctions.”
The Watford Observer understands clubs want two main alterations made to the current regulations. They are that the loss threshold is increased beyond the current £8m and they would like real-time testing used rather than relying solely on just annual accounts.
It has been argued for FFP to work in the Football League, it must follow the Premier League’s model – although the sums involved will almost certainly be different.
In March 2016, Premier League sides have to submit accounts from the last three years.
Clubs in the top flight, from this season, will not be allowed to make a loss of more than £105m over three years.. Player wages are capped at £52m with an increase of only £4m for the next three seasons.
For losses of more than £15m over the three-year period, teams must provide the Premier League with future financial information as well as evidence of secure funding of up to £90m. Loans can’t be used as evidence of secure funding, according to the rules.
For certain clubs, it will be easier to conform to the Championship’s FFP rules. Watford’s chief executive Scott Duxbury has stated the club will be compliant under the current regulations and those being discussed.
For others though, they will inevitably struggle to adhere to the current FFP restrictions.
Football League chief executive Shaun Harvey has pledged to “vigorously defend” the FFP rules. How easy that will be remains to be seen.
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