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 One of the stories attracting most attention from fans this month on footballeconomy.com has been the 30 points deduction imposed on Luton Town by the Football League. The club faces likely relegation to the Blue Square Conference and possible extinction: they would probably have to get 80 points next season to survive, as many as Rochdale got to reach the play offs. Many fans thinking that the penalty is harsh, but the League is insisting that ‘rules is rules’.
The Hatters were handed an initial ten-point deduction by the FA after they were found guilty of 15 misconduct charges involving payment to agents. They received a further 20 point deduction for failing to agree a Company Voluntary Arrangement. Revenue and Customs refused to accept a cut in the money they were owed while ‘football creditors’ – the players and other clubs – are paid in full, as Football League rules require.
Moreover, the club has been asked to sign a letter relinquishing its right of appeal (surely a denial of natural justice?) and was ordered to give an undertaking that it would budget to spend an extra £500,000 so that unsecured creditors would receive 16 pence in the pound. One of the Luton directors, Stephen Browne, accused the Football League of punishing the club for mistakes made by previous owners. ‘They are trying to push Luton Town out of existence.’
The Football League has followed the precedent it set with Leeds United by increasing the ten point deduction for going into administration. Football League chairman Lord Mawhinney said, ‘When a club goes into administration it sheds its debts and gets a competitive advantage over the other clubs who are playing in its division. They clear their debts while other clubs have to pay their bills. We have to send out a message to all clubs that they have to be run in a sensible and prudent way. You have to bear in mind that this is the third time that Luton have gone into administration in the past ten years.’
It is entirely conceivable that there will be no competitive relegations from League 2 this season. Bournemouth now have new owners in the shape of Merseyside-based marketing group Sport-6, but it is not clear at this stage what sanctions the Football League will apply in terms of point deductions.
The situation is even more serious at Rotherham United. They will certainly start the season with a twenty point deduction. The Millers have been in administration since March and have not yet settled with their creditors via a Company Voluntary Arrangement as is required under League rules. They have to quit Millmoor as they have been unable to reach an agreement with landlord Ken Booth and move to the Don Valley Stadium in Sheffield. There is some uncertainty about whether they will start the season at all. The Football League has written to the club requesting an urgent meeting to clear up issues that will affect their membership.
When clubs get into financial trouble, they often fall behind with their payments to the taxman. Half the clubs in the top four divisions are significantly behind in such payments. About 46 clubs, including some in the Premiership, owe £15m in tax that should have been paid on players’ salaries, including national insurance. Some of the debts stretch back nearly two years.
At the other end of the football spectrum, Chelsea are bracing themselves for another huge increase in player salaries that could take their annual wage bill close to £150m. Chelsea’s wage bill for 2006-7 was £133m, £40m higher than the Barclays Premier League’s second biggest spenders, Manchester United. Even that sum, which represents 71 per cent of their turnover, is likely to be dwarfed when their latest results are released early next year. Chelsea’s largesse may be unsustainable and makes a mockery of the aim of breaking even by 2010. But they are the ultimate benefactor club.
The plan for a 39th game in the Premiership is still very much on. Premiership chief executive Richard Scudamore argues that the only reason that the model of distribution of half the domestic rights income and all the foreign rights income equally manages to survive is that ‘the revenues are so large, enabling us to divide the income without the top clubs crying foul. If the centrally generated revenues were to plummet, the big clubs would start looking across at what is happening with their competitors in Italy and Spain who get far more in relative terms through individual selling.’
There is certainly no lack of big money interest in Premiership clubs with the possibility being mooted of more investors being brought in at Newcastle, or even a takeover, while Blackburn Rovers were reported to be a target for an American consortium. In terms of transfer spending or other indicators, the credit crunch has not hit the more prosperous clubs, although those with substantial bank overdrafts may find themselves under pressures.
Football Economy is a monthly article about the business of football by Wyn Grant, the publisher of footballeconomy.com. |
