Financial fair play: why wage caps aren't the answer

Premier League clubs have been warned that they could face points deductions if they breach new controls on spending.

Although this isn’t financial fair play, it still represents a significant step forward in the battle to bring the astronomical costs of running a top-flight football club under control.

So what’s the deal? Well, fundamentally, no club will be permitted to make a loss of more than £105m over the next three seasons. This in itself shouldn’t be a big issue: of all the sides in the league, only three – Manchester City, Liverpool and Chelsea – have reported losses greater than that over the last three seasons in any case.

More interestingly, clubs with a wage bill of more than £52m will only be allowed to increase that by a total of £4m per season for each of the next three years. This measure is likely to affect many more teams – indeed, all but six.

There is a loophole though: this cap relates only to money received by the club from the Premier League – in other words, TV revenue. If the club is able to generate additional income from commercial activities, it can use this to inflate players’ wages.

So whilst the new regulations are anything but a salary cap, they are certainly indicative of a growing sense amongst the clubs themselves that costs in the sport are getting out of control. This could, perhaps, be down to the influence of the growing number of American owners in the Premier League; in the States, wage caps are commonplace and, let's face it, even billionaires’ pockets are of finite depth.

Some would like to see the league go even further and implement a full salary cap. There are dangers inherent in this route, however. One doesn’t have to look far to see the potential impact of such a move – indeed, just twenty-six miles across the Channel to France, where the cream of rugby union's talent are busily plying their trade, unhampered by the wage cap that exists in the English Premiership.

Unlike many American sports, football is a global commodity; players have ample opportunity to head elsewhere if they feel underpaid. The Premier League, unrivalled for many years as the best in the world, is now facing stiff competition from Spain and Germany as the standard in La Liga and the Bundesliga rises. The likes of Barcelona, Real Madrid and Bayern Munich are vying with Manchester United, Liverpool and Chelsea as the most prestigious - and wealthiest - clubs in Europe.

The danger of introducing a salary cap is that the world's top talent deserts England. Whilst this might be a positive step for home-grown players, the risk is that if the standard falls, so will the TV audiences. The Premier League, the golden goose that has been laying for the last twenty years as far as the broadcasters are concerned, might just dry up enough for them to consider ploughing their cash in to Spain or Germany instead.

Whilst efforts to protect clubs from over-extending themselves financially are to be applauded - no one wins from situations like Portsmouth, Rangers or even Luton Town have found themselves in - the idea of a wage cap is one that needs careful consideration from all involved.