British politicians were told on Tuesday that the much-awaited overhaul of how English football’s finances are shared out is being held up by a dispute over parachute payments.

Last month, the UK government published a white paper on reforming club football’s governance, with the main proposal being the creation of an independent regulator for the professional game.

But the document, which outlines future legislation, also called on the English Football League, Football Association and Premier League to agree on a fairer distribution of the game’s broadcast income among themselves, or have one imposed on them by the regulator.

Ideas about what that might look like have been circulating for several years and talks between the EFL and Premier League began in earnest in December, with the latter making its first formal proposal to the former earlier this month.

But there is still a significant gap between what the EFL says it needs to wean its clubs off owner handouts and write-offs, and what the Premier League wants in return for increased support to the rest of the pyramid. And it has now become clear that parachute payments — the extra support the Premier League gives to relegated clubs — are the main bone of contention.

Speaking to members of parliament on the Digital, Culture, Media and Sport select committee, EFL chairman Rick Parry and Premier League chief executive Richard Masters outlined their hopes and fears for what the regulator can do and updated them on the state of their talks over the financial split.

Parry, who did Masters’ job between 1992 and 1997, explained that the Premier League’s exponential growth since its formation 31 years ago had left the EFL behind, creating a chasm between the leagues that had several damaging effects in the Championship.

Parry told the committee that clubs in the second tier spend 125 per cent of their total revenue on wages and require a combined £400million ($492m) a year in shareholder-funding to survive. He said that one of the contributing factors to this overspending was the existence of at least half a dozen recently relegated teams having a big advantage over the rest because they receive parachute payments.

Teams that are relegated after one season in the Premier League currently get £44million in their first season back in the EFL and £35million in year two. If they had spent more than a season in the top flight, they get a year-three top-up of £15million.

These payments were designed to encourage clubs to invest in playing talent on the way up, as they will be cushioned from the drastic fall in income if relegated. They have ballooned in value as the Premier League’s overseas broadcast revenues have grown and there is now considerable evidence to suggest they act more like trampolines than parachutes, as relegated clubs increasingly bounce straight back.

GO DEEPER

Parachute payments? They are more like rocket boosters – why EFL clubs want them scrapped

Having heard Parry’s case for scrapping parachute payments and using that money to close the gap between the Premier League and Championship, MPs asked Masters for his thoughts.

Masters said he agreed with Parry on the need to pool their broadcast income, increase the amount of money the Premier League shares with the rest of the pyramid in solidarity payments, introduce a merit-based approach to distribution in the Championship and copy European football’s revamp of its financial fair play regime to ensure that clubs spend no more than 70 per cent of their total revenues on their players and coaches.

But he categorically refused to scrap parachute payments, describing them as “vital” and “one of the few sustainability instruments that exist within football, albeit for a small group of clubs”, and warned that there would be “significant difficulties” for promoted and relegated clubs without them.

“Our proposal is clear,” he said. “When you have increased funding on a merit rake, parachute clubs get topped up, so it’s a different system but it doesn’t involve the abolition of parachute payments.”

GO DEEPER

EFL chairman wants government to back plans to fix ‘broken system’

Labour MP Clive Efford, a former shadow sports minister, asked Parry what he thought of Masters’ defence of parachute payments.

“We’re not in the same place, it would be fair to say,” the EFL boss said. “Parachute clubs are three times as likely now to get promoted as other clubs.”

Efford then jumped in to point out that the Premier League disputes that statistic.

“Well, put it to the researchers at Sheffield Hallam University who produced it — class-leading statisticians,” said Parry. “We didn’t produce it or ask them to do it, they did it independently. It’s a pure analysis of the numbers, it’s an assessment of the facts.

“And what we’re not prepared to countenance is a system that makes it even more difficult for clubs to compete with the parachute clubs.

“If we put financial restrictions on the other clubs and the parachute clubs have an open goal in terms of what they want to spend to get back up again, that’s not sustainability. And it’s hard to see how parachute payments contribute to sustainability in any way shape or form, frankly.”

Masters then interrupted him.

“They do for the clubs that receive them,” he said. “The Sheffield Hallam research does say that but it also says the Championship is the most competitive league in Europe.”

He pointed out that eight of the current Premier League crop of 20 were promoted without being in receipt of parachute payments and added “there are lots of data points and the situation isn’t always straightforward”.

GO DEEPER

Bury, Macclesfield, Derby and whether a regulator would have saved crisis clubs

Overall, the Premier League currently shares about 15 per cent of its income with the EFL, non-League and the grassroots game, but the biggest chunk of that goes in parachute payments. The EFL believes a fairer distribution would be 25 per cent of the combined media income.

The Premier League is willing to offer more — and is believed to have offered an additional £125 million a year — but only if Championship clubs agree to a salary cap, the EFL and FA scrap cup replays and the FA relaxes the work-permit rules for overseas players.

When asked by the committee if he thought a deal on the financial distribution could be done in time for next season, Masters said: “I very much hope so, that’s our intention.”

Parry said: “We live in hope.”

Masters pressed here by @JulieElliottMP over whether the Premier League ‘tried to frustrate the process’ (the fan-led review and football governance White Paper) as suggested by ex Sports Minister @tracey_crouch who headed up the review ⬇️ pic.twitter.com/Tqofvy80AY

— Dan Roan (@danroan) March 28, 2023

Masters, however, was less confident when speaking about his overall feelings about the arrival of independent regulation.

He was repeatedly asked by members of the committee if he welcomed it, something he found very hard to agree with until he finally settled on, “I’m getting to a yes”, having listed several caveats and warnings about unintended consequences.

Earlier on in the session, the MPs had heard from Tracey Crouch, the former sports minister who had chaired the fan-led review of football governance on which the white paper is based.

She told them how “challenging” and “disappointing” she had found the Premier League’s response to her work, and agreed with the suggestion from committee member June Elliott, the Labour MP for Sunderland Central, that some Premier League clubs wanted to “kick (the idea of independent regulation) into the long grass”.

Masters said he did not “recognise” that interpretation of the Premier League’s stance, denied trying to stall the process and said he could not remember anyone ever making such a suggestion in one of the league’s shareholder meetings with club bosses.

However, the committee chairman Damian Green, a former Conservative minister, asked Masters to check the minutes of those meetings and clarify in writing if any of the clubs ever made such a suggestion.

(Photo: Getty Images)