Desperate times, desperate measures

The Premier League is conducting an increasingly unhinged campaign against the football regulator, and parachute payments are proving to be a key battleground

Imagine a business that operates as a monopoly. It is the sole supplier of a specific product, and as such it has a committed and solid customer base that will not buy an alternative product. Now imagine that business exists alongside a number of similar businesses that operate on the same lines in a marketplace in which those businesses compete not for customers, but success. And that the competition for success itself generates a unique product which TV companies pay large sums of money to show, and other businesses pay significant amounts of money to be associated with.

Imagine too, that many of these businesses over the years have spent more than they earn because doing so enables increases their chances of succeeding in the competitive arena. And they have done so despite, in some cases, receiving generous public subsidies for the premises in which they conduct their business. They operate in a business environment, created by their own decisions, in which spending more than you earn in order to risk being successful is actively incentivised.

Now imagine that those businesses insisted that, in order to reduce the financial impact of their own decisions to spend more than they earn, they should receive payments from the rest of the business to bridge the gap should their gamble not pay off and they be forced to operate in a less lucrative marketplace.

It is a scenario that would be treated with derision in most businesses, even in a capitalist system in which loss is too often socialised while profit is privatised (see the banking system). But this is football.

We are talking, of course, about parachute payments. The payments given to clubs that gambled on spending too much, lost the bet and now must pay the bill. The chance that those payments may come within the ambit of the new football regulator is one of the loudest sounds in the general chorus of gnashing and wailing being raised by the Premier League in its last-ditch effort to neuter the regulator.

What is interesting is that nowhere in the bill does it say parachute payments will be abolished. But you wouldn’t realise that by reading some of the hysterical nonsense being spouted by people within the game who should know better, and by editorials and articles in The Times, a publication I am old enough to remember being a serious newspaper but which now acts as a propaganda mouthpiece for the Premier League and some club owners. (Two of our finest football writers, Tony Evans and Henry Winter, have been casualties of the former paper of record becoming a shill for football’s vested interests). We’re told the regulator means parachute payments will go, which means investors will be put off and current owners will have to cut funding for youth academies and women’s teams and put ticket prices up for fans. And even without withdrawing parachute payments the cost of funding the regulator will lead to the same results. Oh, and no one has really consulted any of the Premier League clubs about this.

Before returning to parachute payments, let’s consider some of the other gripes. When the Premier League clubs say they weren’t consulted, what they really mean is that they haven’t been listened to as much as they feel they are entitled to be, and worse, other people have been listened to. Heaven forfend! Seasoned watchers of the consultation process over the last few years have observed that the Premier League had plenty of share of voice but chose to spend its time first arguing against a regulator, then pretending it wasn’t going to happen, and finally by predicting catastrophic results if it all goes ahead.

But wait. It’s not just me who is refuting the argument that the Premier League has been given little chance to contribute. Who is this telling MP’s last January that “we have had an enormous amount of consultation with the Government on the policies that sit behind the Bill and we have been an active participant in all that, as you expect.” Why, it is Richard Masters, the Premier League chief executive. These people don’t even believe the stuff they come out with themselves.

When clubs say they are going to cut funding and up prices, what they mean is they are going to punish the stupid fans who want this – these are choices clubs are going to make, not inevitabilities. The cost of a regulator will be less than the cost of funding the legal actions the Premier League has found itself embroiled in, and money for executive bonuses seems not to be under threat, for example.

There’s been a sustained assault on the idea of a regulator in the Lords and in the press, with the epitome of desperation being reached in a simply ridiculous article in the Daily Telegraph. Pretty much all you need to know is that it quotes Professor Len Shackleton. Our Len is one of the people behind the Institute of Economic Affairs, the outfit whose crackpot ideas were drawn on by the equally ludicrous Liz Truss when she wrecked the UK economy. He also authored a report the Premier League paid for to rubbish the idea of a regulator. None of this is mentioned in an article which also states as fact that Labour wants to introduce a clause requiring the Foreign Office to ensure any football decisions are in line with government foreign policy. In fact that clause was introduced by the previous Tory government and has been removed by Labour after lobbying by fan groups. If you do subscribe to the Telegraph, you can be sure your money doesn’t pay for basic fact checks. This, too, cannot be considered a serious newspaper.

There was a welcome fightback from Sports Minister Stephanie Peacock to the wave of drivel and the frankly anti-democratic attempts to stymie a policy that was supported by all three major parties (until the Tories decided they hadn’t really supported it at all, despite the original report bearing the name of one of their MPs). There’s clearly a big lobbying operation – however clumsily pursued – in swing so it is important to counter it, especially in age when the absence of facts or basic intelligence and logic is no barrier to ideas being embraced. There’s a worry too that Labour’s noises about sweeping aside regulation in order to encourage growth may be music to the ears of the Premier League, which will have observed the party’s ousting of the chair of the Competition and Markets Authority with interest.

This is a story as old as capitalism itself, nothing more or less. It’s about people with money not liking to be accountable, observed or in any way prevented from doing exactly what they like. But when this attitude comes up against the communal traditions of football, it is challenged. Hence the current wailing.

That parachute payments appear to be the specific issue upon which the let-us-do-what-we-like lobby are fighting is instructive. It reveals the tactical ineptness of much of the Premier League’s campaign to hold back the tide – because the fact that parachute payments were introduced in the first place is one of the most compelling arguments for regulation.

To put it simply, if you have to offset the incentivisation of bad economic management with more bad economic management, creating a death spiral, then you cannot argue the system works well.

Parachute payments not only incentivise poor practice, they actively add to the inequalities in the system which incentivise the use of increasingly desperate gambles to bridge those gaps. Any halfway reasonable system of regulation in football should be looking to eliminate the need for parachute payments as soon as possible.

Photo by Untitled Photo on Unsplash