Why the Premier League's proposed 'luxury tax' would be an absolute disaster for football

Football’s power brokers have never been short of bad ideas as they work to fiddle about with the fabric of the game. But the latest idea floated by the Premier League, of abolishing points deductions in favour of a so-called ‘luxury tax’ as a punishment for financial breaches, may be the worst idea yet.

Like most of the worst ideas floated by football’s various governing bodies, it’s all about making and spending more money, and protecting the position of the biggest and most powerful clubs - and it would cause irreparable damage to the competitive fabric of the English league ladder.

The idea, as first reported by The Daily Mail, is that instead of being docked points when teams break spending limits, clubs would be fined, with the money being split between the remaining Premier League sides – and there has been some mentioned of putting some of the money towards a pot to help struggling EFL sides, which would be a pitiable sop offering after top flight clubs roundly rejected a new, broader financial deal with the rest of the league ladder.

The problems are pretty obvious, as are the reasons that the biggest sides would be keen. Such punishments would allow the truly wealthy clubs to simply keep spending far more than those below them, greatly inflating the competitive advantage that they already enjoy from having much higher commercial revenue. In return, those who stick to the rules and keep a lid on their finances would get, at best, less than 5% of a fine which would probably not be proportionate to the size of the breach itself.

Let’s say a club, backed by an inconceivably wealthy petrostate or a billionaire American investor, decide to spend £100m more than they were “allowed” to. Even if they were fined 100% of their overspend – and it seems unlikely that the clubs would vote to make the punishment so substantial – then the remaining 19 clubs of the league would only get just over £5m, less any money patronisingly offered to the EFL. In other words, the mega-rich club would have a £95m financial edge.

There are several clubs who can comfortably afford to spend £100m and pay a fine of the same amount with a shrug. Manchester City and Newcastle United could, if they were so mined, spend vastly more than that without blinking an eye. Manchester United, Chelsea and others have vast dollar amounts behind them and could be tempted very easily to throw some money about, because they will be able to afford to buy a massive advantage by spending huge amounts on wages and transfer fees, while only giving their rivals a small amount to catch up with in comparison.

There is, and always will be, a disparity between the biggest and most historically successful teams and the rest. They have more fans, more commercial clout, more cachet when it comes to attracting the best players. But allowing them to spend as they wish with a shrug would turn that gap into a colossal chasm very quickly. Do you think Saudi Arabia, whose public investment fund own a majority share in Newcastle, would blink at spending billions on the club? Or Abu Dhabi, who own Manchester City?

Of course, the creation of a vast gap between haves and have-nots is precisely why some clubs – we don’t know whose brainchild this is, but we can guess the candidates – have pitched this luxury tax in the first place. As neatly demonstrated by the rejection of the proposed EFL deal, which would have served to level the playing field between the elite and the rest somewhat, the top Premier League clubs are utterly self-interested, concerned with maintaining their investments and bringing in profits rather than helping the English football pyramid to retain its competitive nature.

There are essentially three tiers within the top two divisions at this point – the elite clubs, who have a financial stranglehold which all but guarantees continued success, the yo-yo teams who risk relegation in any given year but have the benefits of parachute payments if they go down, and the rest of the EFL, who are far poorer and need either immense luck or tremendous skill to bridge the divide. As long as the same teams stay in the same places, which will broadly be the case as long as the current system persists, then the unpredictability that underpins a successful and exciting league system will continue to decline, and the hope and ambition that fuels many supporters of smaller clubs will all but vanish.

But that favours the biggest teams, who have the money and want more of it. The people who lose out are the supporters of every other team in Britain. The luxury tax would serve to embed that order of things even further, widening the gap between rich and (relatively) poor.

There will clearly be a handful of teams who are highly enthusiastic about the concept, and several more who will be persuadable, either because they fancy themselves as potential long-term financial big dogs, or because their owners love to spend at a rate of knots and will appreciate the opportunity to free up the purse strings. A few might even accept second-class status in return for some inevitable extra millions when bigger teams blow the lid off the spending ‘limits’. 14 Premier League teams need to vote in favour of any change to league rules – it could be a close-run thing if the deal reaches the table.

Football needs genuine competition to retain the excitement. Relegation needs to be a genuine threat, promotion a potential stepping stone to something bigger. As it stands, the playing field is so lop-sided that a move between the top two divisions is often no more than a temporary glitch. The luxury tax would only make things worse, only tilt the playing field close to ninety degrees, and football would be far, far worse for it.