At the end of this season we could be presented with the scenario that the Premier League, the richest and most high-profile league in the world, has two clubs with asterisks and points deductions next to their names because they apparently could not get their finances in order.
How can that be? From the Premier League’s statement – claiming Everton and Nottingham Forest “accept” they breached the Profit and Sustainability rules – there is no doubt that it believes punishment is pending.
In Everton’s case there is even the argument that they are suffering from ‘double jeopardy’ given they are already appealing a 10-point deduction and the fear they are caught in a vicious circle.
The PSR certainly come from a good place. We should all applaud the desire for financial stability and clubs not living beyond their means. Who would not do that?
But there are two thoughts at play here. The first is that the PSR rules as they stand, which are the Premier League’s version of Financial Fair Play, did not appear fit for purpose. The second is that by trying to do the right thing there is a very real danger of undermining the whole thing and killing ambition and competition. It is as if some clubs are in danger of being punished despite having the means to pay.
There is already an expectation that the PSR rules will be changed this summer and while there always needs to be an updating of the system this would suggest there is a recognition that they are not working effectively.
For example, as the football finance expert Kieran Maguire tweeted over the weekend: “If Premier League PSR limits had risen in line with football inflation since 2013 (here I’m using wages but revenues are similar) clubs could lose up to £218 million over three years. Non-adjustment of limits is similar to fiscal drag when government doesn’t raise tax thresholds.”
Currently clubs can lose £105 million so there does seem to be a significant drag, not fully taking into account inflation, higher transfer fees and so on, with Maguire adding: “The non increase of the PSR limits has hit clubs with new owners since 2013 hardest, such as Newcastle, Everton and Villa.”
Current spending rules help maintain the status quo
And there is the rub. The current rules, unfortunately, help preserve the big clubs as the big clubs and maintain the status quo. In other words they stifle a degree of ambition from the likes of Newcastle, Aston Villa, Everton and Forest.
And that cannot be right in sport or in business. We want to see sound, fully-funded investment and we want to see healthy competition and that should not be blocked even if it comes from a good place.
What we certainly do not want is the Villa manager Unai Emery – whose team is one of the positives from this season – declaring he has to sell before he can buy to be PSR compliant. “The owners want to invest more and more but accept the rules and accept financial fair play,” he said.
Similarly there is Newcastle chief executive Darren Eales, whose team was a positive last season, claiming they might have to sell one of their star players to ensure they, too, remain within the PSR rules.
These are two historic clubs who are finally competitive again and, crucially, with the means to go a lot further being hamstrung by the rules. How is that right?
Newcastle could, for example, sell 17-year-old midfielder Lewis Miley who has been one of the successes of this season. Because he is an academy product, Newcastle can bank more pure profit. But, surely, we do not want to see clubs compelled to sell their homegrown talent either? That feels even more wrong.
Forest felt compelled to do that with Brennan Johnson and whose £47.5 million transfer fee on deadline day last summer forms a major element of their defence against breaching the limit on losses although he did play for them this season before he was sold.
The comeback on this is that Forest – as with Chelsea who have also sold homegrown to try and balance the books – should have behaved more prudently and with a sounder strategy and that is clearly fair enough. The rules may not feel right but they have to work within them. They have to be complied with.
A motorist can argue that a road he drives down used to have a speed limit of 30mph but that will not stop him being prosecuted if he carries on driving at 30mph when it is reduced to 20mph – even if it goes back up to 30mph the following year.
Rules prevent clubs like Villa or Newcastle from signing superstars
But it is starting to look messy and the punishment, also, has to start fitting the crime. It feels like the rules do not factor in the level of owner-funded investment that can be tolerated by those who have acquired the clubs.
The rules do not prevent superstars like Jude Bellingham or Kylian Mbappé from coming to the Premier League. But they basically prevent ambitious clubs like Villa or Newcastle being able to sign them.
Ah, but what about rogue owners or those who pull the plug? The English Football League feels like it has become a wild west and within minutes of the Premier League announcement the EFL was castigating Reading owner Dai Yongge who they have demanded either sells the club or makes money available.
There is a way around this – and not least in much more robust tests for proof of funds and full disclosure of business plans to raise any red flags. Clubs should be ordered to deposit money in escrow accounts at the start of every season or they simply cannot spend it.
This is not to say either Everton or Forest should not be punished. They know the rules; they signed up to the rules. The rules were not imposed upon them by the Premier League but were voted for by the clubs in the Premier League; effectively as private members’ club.
But the fact that clubs are being punished and in an apparently draconian way not appear right. It is almost as if they are simply starting to be caught out on accountancy deadlines. Maybe it is just teething trouble and they will work even harder in the future to comply. My hunch is the rules will be changed and be harder to break and that the system is not right. We want to encourage ambition. We want competition. We want sound investment. We do not just want the status quo because that will eventually call into question the Premier League’s claim to be the most competitive in the world.
The PSR rules are certainly having an effect on the January transfer market – with just one cash deal in the Premier League so far, the £26.7 million Tottenham Hotspur are potentially paying for defender Radu Dragusin. While it is absolutely right we should not have the unseemly mad trolley dashes of previous January windows – it does not happen in other European leagues – that is going too far in the other direction. The market has been artificially made to stagnate.