The English Football League has decided to oppose groundbreaking financial proposals from League One clubs that would have introduced a strict salary cap and luxury tax system.
Radical Proposals for Financial Control
Eighteen League One clubs, spearheaded by Reading and Peterborough United, recently wrote to EFL chairman Rick Parry advocating for significant financial reforms. The clubs proposed implementing a fixed squad salary allowance of £4.7 million alongside a 100% luxury tax on any overspending beyond that limit.
This system, commonly used in American sports like Major League Baseball and the NBA, would see clubs that exceed the spending cap pay a penalty equal to their overspend. The collected funds would then be redistributed among clubs that complied with the financial regulations.
The Financial Reality Behind the Proposal
The push for financial reform comes against a backdrop of concerning financial figures in League One. Last season revealed that the median loss among the division's 24 clubs reached £5.2 million, highlighting the unsustainable spending patterns that prompted the proposed changes.
Clubs argue that such measures are necessary to control expenditure and reduce reliance on owner funding. The current financial climate in English football's third tier has created an environment where overspending has become commonplace, threatening the long-term stability of many clubs.
EFL's Position and Legal Concerns
Despite acknowledging the clubs' concerns, Rick Parry has expressed unwillingness to back the proposed changes. The EFL board discussed the matter and concluded it would not support the salary cap and luxury tax system.
The decision stems from several key considerations. The EFL previously attempted to introduce salary caps in Leagues One and Two four years ago following the COVID-19 pandemic, but the move was blocked by a legal challenge from the Professional Footballers' Association.
There are also concerns about the potential for another PFA legal challenge, particularly given the union's current threat to challenge the Premier League's proposed anchoring system. Additionally, the EFL board has reservations about one division pursuing fundamentally different financial regulations from the rest of the league structure.
Alternative Pathways and Current Regulations
While rejecting the specific proposals, the EFL is expected to suggest alternative methods for League One clubs to control their spending. Under current regulations, League One clubs can spend up to 60% of their turnover on player expenditure, while League Two clubs face a stricter 50% limit that also includes spending on managers.
The Championship operates under different financial rules—profitability and sustainability regulations that align with the Premier League—though the underlying principles remain consistent across divisions.
League One clubs could still choose to implement the changes independently, requiring a two-thirds majority vote among themselves to alter financial regulations. However, it remains uncertain whether clubs will proceed against the EFL board's expressed wishes.
The ongoing debate highlights the continuing struggle within English football to balance competitive ambition with financial sustainability, a challenge that affects clubs at every level of the professional game.
