The sun is shining as Mark Catlin drives to work but the Portsmouth chief executive is still in a gloomy mood after last week’s vote to introduce hard salary caps in Leagues One and Two.
“It’s an absolute disgrace — they’ve introduced communism to the English Football League,” Catlin tells
The Athletic.
“I have now got to tell a player, in the prime of his career, he can’t have the new contract of £4,500 a week he deserves, and that we can afford, because we’ve got to squeeze everyone into this cap.
“It’s very unfair. Most of the players at this level are earning about £2,500 a week and their careers are short. They are not finishing their playing careers and retiring.
“I’ll respect the vote, and we’ll just have to get on with it, but this isn’t about financial sustainability — we run a very sustainable model at Pompey — it’s anti-competitive and a clear restraint of trade. The (Professional Footballers’ Association) are right to challenge it and they’ve got a good chance of overturning it.
“I’ll say it again: it’s a disgrace and it shows huge disrespect to the players.”
Accrington Stanley are based almost 300 miles north of Portsmouth and there are similar gaps between the two League One clubs’ attendances, income and views on salary caps.
“The EFL had no option but to pursue this or the government may have got involved,” says Accrington Stanley owner Andy Holt.
“Lower budgets will result in fewer failures. The existing free-market system failed miserably because some owners can’t be trusted to be sensible.
“
The EFL has turned a corner in my view. There’s a long way to go but the direction of travel is towards a more stable structure. I applaud this.”
The Athletic did not tell Holt it had spoken to Catlin but Holt has clearly heard some of Catlin’s complaints before, as the following sounds like a reference to Portsmouth’s financial problems between 2010 and 2013.
“It’s alright club owners whining but the clubs they represent have not long ago been on their arses,” Holt says.
“Football ownership can’t be a lottery with clubs’ survival at stake. (Former EFL chief executive)
Shaun Harvey’s reign was too light a touch — fans were walking around with placards outside his office. It had to change. No system will be perfect because of the diversity in revenues and fanbases but the EFL had to opt for a model that best protects all clubs.
“There has to be stringent regulation for the benefit of the entire EFL collective.”
And the regulation would certainly appear to be stringent, so much so that the aforementioned PFA has served “notice of arbitration” on the EFL and appointed Nick De Marco QC, a persistent thorn in the League’s side, to argue its case.
The PFA issued a short statement after Friday’s vote to express its disappointment and claim the EFL had “ignored its legal obligation” to consult with the union.
But on the eve of the vote, it published a 17-page document outlining its objections to the proposals. Chief amongst those was the claim this process has been unduly rushed.
According to the document, cost-control measures introduced by Formula One, European football’s governing body UEFA and Premiership Rugby in recent years took between 18 months and three years to move from the consultation phase to first sanctions. The EFL could be dishing out fines and points penalties within a year.
However, a source says, “The EFL has agreed to meet and engage in talks on this issue this week — better late than never.”
But the PFA also highlighted the relative stability of the wage-to-turnover ratios and income gaps in Leagues One and Two over the past decade, presumably to suggest there is no need for such dramatic intervention.
This, of course, brushes over the fact Bury were expelled from the Football League last summer because of their dire finances, with Bolton Wanderers nearly following them. It also completely ignores the pandemic-induced cash crisis all clubs have been in for the last five months, when only the government’s furlough scheme, a tax holiday and advances of future broadcast income have prevented a dozen or more teams following Bury down the plughole.
Tranmere Rovers chairman Mark Palios is in the “something had to be done” camp, and believes the salary cap is a useful “short-term fix”, but he is not particularly impressed with either the league or the union.
“The way it’s been handled is abysmal and it’s a wasted opportunity,” Palios explains.
“The big issue with COVID has always been fixed contractual liabilities to players at a time when there is no income. That should have been addressed from day one.
“Instead the EFL has blundered from one can to the next, miskicking it down the road to the next cash crisis. For its part, the PFA has sat in its bunker and then protested that it’s always approached things in good faith.”
With the matter now heading to arbitration, the League is reluctant to add anything to the comments its chief executive David Baldwin made after the vote. He admitted “the term ‘salary cap’ is an emotive one, creating the impression of a restrictive measure but we are clear in our view that this is neither the objective nor the likely effect of these changes” to the regulations, before reminding everyone that the “financial impact of COVID-19 will be profound”.
But
The Athletic understands the League believes the unique challenge presented by an extended period without fans in grounds meant it had to act fast. Some senior voices had initially argued for a tightening up of the “salary cost management protocol rules” introduced in 2014, which linked playing budgets to club turnover. But having set up a working group to come up with ideas, the League soon realised the clubs wanted something easier to implement and police.
The hard caps, which come into force immediately, apply only to players in first-team squads and the wages of players under the age of 21 are exempt. League One clubs will be allowed to spend £2.5 million on their squads, with League Two clubs capped at £1.5 million. This will include all basic salaries, agents’ fees,
image-rights payments, taxes, accommodation and relocation costs, plus bonuses, apart from those related to promotions or cup runs.
Furthermore, squads will be limited to 22 players next season, with this falling to 20 in the 2021-22 season.
Transition arrangements have also been made for relegated clubs and for players on contracts signed before August 8. In both of these situations, the contracts will be capped at the divisional average until they expire. What this means in practice is hugely significant for both the gap between the leagues, particularly the chasm between the Championship and League One, and any club that has been brave enough to do most of its squad-building work already this summer.
The simplest way to think about this is to divide the divisional caps by 22 next season and 20 for the following season. This gives an average amount each player can cost a club: just under £114,000 a year next season in League One, or £2,185 a week; and just over £68,000 a year in League Two, or £1,311 a week. The annual figures move to £125,000 and £75,000, respectively, when the squads are reduced to 20 in 2021-22.
But these figures include taxes, bonuses, image rights and all those other player-related benefits that come under the cap, so they are only rough averages as contracts vary from player to player and club to club.
Portsmouth, for example, say their average “gross base salary” under the cap will be £1,350 a week, as they put lots of incentives in their contracts for the team remaining in the top six or top two. They also point out that they have higher accommodation costs than others in the division. Other League One clubs are talking about average gross base salaries of £1,700 a week.
Either way, relegated clubs, or clubs with lots of players under contract before Friday, should be able to meet the cap relatively comfortably next season, as their big earners will be treated as average earners. The sums, and choices involved, will be much trickier for those with shirts still to fill.
Anyone breaching the cap will be subject to the League’s “overrun” policy, which will act like the luxury taxes that exist in North American sport. Clubs will pay £1 into a central pot (which will be distributed amongst the law-abiding) for every £1 they go over the cap by, up to five per cent. Go beyond that limit and clubs will find themselves before an independent disciplinary commission, facing a range of sanctions.
The League needed two-thirds majorities in each division to introduce all of this and that was comfortably achieved in League Two, where only the Uniteds of Scunthorpe and Southend were against it.
The Athletic understands Salford City were initially opposed to any further restraints on their famous owners’ appetite for investment but one of those owners, Gary Neville, took part in the working-group discussions and was persuaded to change his mind.
Minds were changed in League One, too, where the vote was much closer.
Needing 16 votes for approval, the League got exactly that, with Sunderland, Portsmouth and Ipswich, the clubs with the biggest average attendances in the division last season, leading the opposition. They were joined by two of the relegated sides, Charlton Athletic and
Hull City, as well as Oxford United and Plymouth Argyle, just up from League Two. Wigan Athletic, perhaps distracted by their own financial crisis and unlucky relegation, abstained.
