SALARY CAP GONE: AN ACCOUNTANT’S ANALYSIS



So, the Salary Cap has been withdrawn, but ALS’ resident accountant, Giles Mooney, argues that just because we can now spend more on players doesn’t mean we necessarily should…


The salary cap, when announced, caused uproar in many parts of the footballing world with the PFA immediately launching legal action against it. Legal action that, it appears, has had the desired result.


Restricting all League One clubs to a salary cost of £2.5m a year was unquestionably a ‘leveller’ but was considered deeply unfair by clubs who could afford to pay more and players unhappy about anything which potentially restricted their earning potential. As far as I could see, the only benefit of a salary cap to those clubs who voted for it was it was likely to keep better supported clubs down in League One and two longer and would prevent a Salford City Class of 92 type of ownership trying to blast through the lower leagues with personal wealth.


The news today that the cap will not go ahead leaves all clubs tearing up plans and looking at what might happen instead. And it’s worth appreciating that something will happen instead.


The EFL announcement confirms a return to the rules that were there prior to the cap – the Salary Cost Management Protocols (SCMP) – and the promise of immediate discussions with clubs about what else can be done to secure clubs’ futures.

SCMP restricts salaries to 60% of turnover (in League One and 55% in League Two). Sunderland are hopeful of having a turnover in a non-Covid world of approximately £20m so SCMP would allow salaries of £12m rather than the £2.5m under the salary cap – an obvious advantage over clubs with far lower ticket and commercial potential. Add in the fact that turnover includes money paid into the club by owners (not loans) and fans will inevitably start looking at KLD’s Trust fund as a quick route to Messi, Ronaldo and promotion, but it’s important to remember that anything the EFL invents or applies shouldn’t be the only focus of a club when balancing the books.


The key is that the club is run sensibly, sustainably and with the view to promotion and long term success within that sustainability model.


I’ve previously written about the need for the club to be run as a business. A business that makes money (to be reinvested), not one which simply spends what it wants and then gets the owner to chip in the losses. If KLD is looking to invest within the club, and I’m sure he is, his business plan was prepared assuming that the salary cap would restrict first team expenditure. His planned expenses are presumably on the academy, the stadium and the infrastructure of the club. In my opinion, that must go ahead for the long term of the club. The fact we CAN now spend more on players doesn’t mean we SHOULD. Our club’s recent history is littered with examples of us throwing money at players who we thought could get us from A to B only to regret it and move further into debt.

The relaxation means that (within a budget) we shouldn’t be forced to lose a Grigg to get a Stewart or bin Dobson to bring in Winchester, but I’d hope we’d still be looking for that sort of balancing to happen in a well run structure. The goal of the EFL to restrict the expenditure of clubs to protect them is sensible but the salary cap was not the right answer. It was too arbitrary. £2.5m was far too low for us and yet still too high for some clubs. The SCMP makes more sense as it’s based on individual club profits and I’d expect any new structures to be based on that system.


As far as Sunderland are concerned, this is a great piece of news as it allows us, on a sustainable basis, to invest far more in our playing wage bill than would otherwise have been possible and should allow us to tie up contract negotiations with players Speakman and Johnson want to be part of the Sunderland story over the next few years. It means that Luke O’Nien and Charlie Wyke (for example) can be offered contracts appropriate for players of their talent, not contracts restricted because of a need to average them out with Power or Matthews. It allows us to try and sign players with the potential to play in the Championship and be able to afford their wage expectations rather than waiting for promotion and then needing to sign 20 new players under an amended wage structure. But, anyone hoping today’s news frees us up to go wild in the aisles needs to think longer term and what the best is for the club. We should still be looking to strengthen the development of youth and looking to sign players with something to prove and a goal for their future, not players on big money wanting one last season in professional football. As I said before, the fact we can doesn’t mean we should.