Issue #135 Budgets / Transparency

As told by Michael Wood

As one set of owners left and another arrived something of interest emerged in dispatches when it was revealed that Phil Parkinson’s Bradford City had the fourth biggest wage budget in League One last season.

Parkinson’s side finished fifth in the division and probably at least two of the teams above City in spending were above in the table too (Millwall and Wigan Athletic, Sheffield United probably being the third) but the question is poised as to how one would know these relative positions.

The Salary Cost Management Protocol (SCMP) is the answer. It is a series of documents which completed for the Football League by the clubs in League One and League Two which gives an overview of the spending on wages.

Football League rules denote that only a certain amount of a club’s turnover can be spent on wages. That is 60% in League One, 55% in League Two. A club that spends more than that percentage will have a Football League transfer embargo.

And this is possible because the figures looked by the SCMP are based on projections rather than actual amounts. The clubs project the spending and the income they have and update the Football League monthly with changes to those projections.

The Football League collate them into the SCMP which is distributed in a fashion around the FL clubs in the interests of Financial Fair Play but is better than nothing. This is distributed once a month leaving City knowing that they were ranked fourth in spenders in League One.

So a club will tell the FL how much it is spending on wages in August and then any loan signings in or out can be added or subtracted. Youth loans and a club’s players under twenty are not included in the calculation. Transfer fees are included.

All clubs will update the FL on any changes in turnover which could see a projected 54% become a 56% while remaining the same absolute outgoing expenditure. If a club can increase its turnover from, for example, additional gate receipts from added cup ties then the same absolute outgoing expenditure would represent less of a percentage of turnover.

Injections of funds from the directors to the club add to the turnover figure but not loans from those directors. This is not the case in The Championship of the Premier League where injections are excluded leading to former champions Manchester City being punished by UEFA and current champions Leicester City being punished for spending too much in The Championship. I suspect both sleep well at night.

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Bradford City’s fourth position last season, and the sale of players for cash like Devante Cole and Gary Liddle, could paint an interesting narrative as the season progressed. Filipe Morais – one of the longer contracts at the club – was injured in pre-season and still had to be paid taking up a percentage of the SCMP. Paul Anderson was also injured long term and took a percentage.

Let us assume that – for the sake of this first argument – of the 55% of turnover that Parkinson was allowed to spend on players Anderson and Morais accounted for a 10% of that figure. That Kyel Reid came in to add to the squad may have added another 5% but that would have (assuming City were operating at the full 55%) seen City spending 60% of turnover and running into problems.

City’s James Mason stated last season “(City’s) turnover has fluctuated between £4 million and £7.5 million in recent years, depending on our success on the field.”

This also illustrates the difference between a club’s ranking in the SCMP and the value they are able to put on the field.

For practical reasons then it seems that it is probably a good idea to not run a club spending 55% of turnover on wages. Indeed if a club goes within 5% of the maximum the Football League send men in suits to investigate.

To be prudent think of City spending 45% before Reid, and 50% after, and being on the margin before the Football League investigates which is – I would imagine – the last thing one wants in a club one is trying to sell.

When Gary Liddle left his wage was removed, his transfer added and Josh Cullen’s wage was not solving a potential problem. I reiterate that this is just an example of what could have happened, not a statement of what did.

As supporters we do not get to find that out. The opacity of the Football League transparency is not what it could be.

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With new owners able to inject funds how much 55% of City’s turnover will be on playing wages is pure guesswork. Having bought a Football League One club, and not a Championship club, were Stefan Rupp want to put his entire €100m fortune in to buy and fund a squad he could do.

He could not do this following promotion to the Championship which perhaps goes some way to explaining the ceiling which is starting to appear in the middle of second tier of English football.

However we do know that if one is looking to maximise the amount allowed under SCMP then signing – and paying for the signings of – players like Reece Burke and Josh Cullen is a way to sign players while keeping the 55% of turnover untouched.

Assuming a squad of around twenty professional players were a club to bring in four Josh Cullens on loan then it would be able to use (and the figure here is a low average based on Mason’s figure) 55% of the £5m turnover on the other 16 players which equates to allowing an average of about £3,300 a week. Spreading the same money over twenty players gives an average wage of £3,650 a week.

If Mr. Rupp and Mr. Rahic were to throw in an extra £1m then an average of £4,000 a week for a sixteen professional squad. For a twenty man squad it would be £3,175 a week. An extra £2m brings that to £3,750 a week for twenty men and if £7m were split between £4,650 a week for a sixteen man squad with four Josh Cullens.

Finding four loan players who play like Josh Cullen – play off first leg choke excluded – is a different matter.

To put this in some context City’s highest paid player is believed to be on around £8,000 a week at the moment. That that player has stepped down from The Championship has not guaranteed success. (There is little way of avoiding the fact it is Paul Anderson, but apologies for saying it)

All of which illustrates two things.

First how slight the returns are for investment. Were Rupp and Rahic throw £10m at the club then not only would they be in the position of having to find something at Valley Parade to invest the £4.5m which could not be spent on players on but only then would they be able to pay a twenty man squad the current highest wage of £8,000. But £10m for a team of twenty Paul Andersons is not the sort of thing anyone wants.

Second the efficiencies of developing squad players from the youth ranks who allow for an increased average expenditure on the senior professionals. Too often football clubs have an attitude that a young player has to be either in the starting eleven, or nowhere near the team. Like lottery tickets they are either winners or waste.

SCMP gives them a usefulness. If a team can have a half dozen trusted young players that might not make the grade long term but can fill in at left back on a Tuesday night in Scunthorpe in case of injury then it is able to focus more resources on the senior professionals. This has not been a problem in the past because resources have been throttled at Valley Parade but going forward it may become more pressing a problem.

Phil Parkinson’s has seldom shown an interest in youth development. It might be time that he started to.