In an impassioned speech to the European Parliament last week, UEFA president Michel Platini pushed his plans for salary and transfer limits at a time when players’ wages at some clubs have reached a monstrous and obscene level.
Insisting he is driven by a philosophy of creating fairer competition to give everyone a chance to win, and warning that the game is in danger from the worst financial crisis in nearly 80 years, the Frenchman plans to prevent clubs spending above their income and limiting spending on wages to a percentage of their revenue.
Whether the motivation is to reduce costs or to promote a more level playing field between clubs, the use of salary caps is no new concept in team sports and leagues across the world. From Australia to America to European rugby, salary caps come in many guises.
Although completely different from the European model of sport in a number of fundamental ways, monsieur Platini is looking to the United States where salary caps are the norm in sports and cash is rigorously redistributed among successful and unsuccessful clubs alike.
The National Football League (NFL) employs what is known as a ‘hard-cap’ system. This means there is an absolute limit on the amount of cash each team can spend on player salaries in any season. It is equal for each club and there are strict penalties for breaking the barriers, either by fines or the cancellation of player contracts. There is also an absolute lower limit on salaries, so that the club owners must spend at least 85 per cent of the salary cap figure on wages. This gives protection in the system to players, whose overall earnings cannot be driven down.
In the hugely popular NBA basketball domain they operate a ‘soft cap’ system. Teams are allowed to break the salary limit in cases when it allows them to retain the rights to a player already in their squad. If a young player develops into a hot property the club can increase his wages and keep him without having to lose another star. In the NBA there is also a maximum individual salary a player can earn, which helps to limit costs.
Baseball has another twist to the system. The teams agree a wise amount that should be spent by clubs each season on player wages, but there is no formal salary cap. Instead, they institute a so-called ‘luxury tax’, which is levied on any club spending more on wages than has been mutually agreed. The tax on excess expenditure is redistributed to rival teams that have stayed within the agreed limits.
This is a possible model that European football could follow to mitigate the effect of billionaire owners such as Abramovich or the Abu Dhabi United Group, whose massive expenditures on wages have been funded by their private wealth, rather than business profits.
The European Club Association (ECA), which represents some 150 leading teams such as Manchester United and Real Madrid, does not support salary caps. The Premier League also opposes ant Europe-wide financial regulation. Clearly, the giant clubs have most to lose from the way a salary cap would make competition more equal and diminish, to whatever degree, their prospects of success.
They might be more responsive to a compromise system proposed by Bayern Munich chairman Karl-Heinz Rummenigge where the level of wages is based on a percentage of revenue. UEFA has previously been understood to have considered a limit between 47 and 63 per cent.
But how much can such a system allow many more teams a realistic chance of winning trophies? Clubs with larger stadia and larger incomes (such as Man United) would still be able to pay higher salaries to players than clubs (such as Aston Villa) with a lesser turnover.
Club turnover, not personal generosity, will determine how much they can spend. By turnover, UEFA means revenues from gate receipts, television income, sponsorship, merchandising and transfer activity. If the owners want to invest beyond the limits, they can do so only by putting money into the club’s infrastructure – building or renovating the stadium, training grounds or the youth academy. But even without a wealthy patron, it would be extremely problematic for clubs to nurture youngsters and overachieve. Clubs with a restricted budget to pay on wages, will be unable to accommodate emerging young stars, demanding new contracts.
The fact that accounting practices and fiscal regimes vary vastly across the continent is another reason why this notion might be a non starter. Any salary cap system in Europe would also have to be adjusted according to every different tax system for every nation. This would be a complex matter but not insurmountable if the voluntary will to make the overall scheme work is there.
A less convincing objection to the salary cap idea comes from critics who say it will result in corruption because clubs will try to cheat by making undisclosed payments to players.
This is a false argument. If football decides it wants to reduce costs and wants to improve competitive balance, then it should not be dissuaded by the possibility of cheating. Rigorous and transparent accounting practices can be set up and strong punishments imposed to deter any wrong doing.
In a swiftly changing world, it is hard to predict whether salary caps will happen.
Michel Platini himself acknowledged that this will not be easy with the need to satisfy European law.
According to the UEFA president, the refusal to recognise the specificity of sport unfortunately still exists in certain circles, in certain sectors, which consider competition law to be the fundamental law of Europe.
But Platini is refusing categorically to be held in a straitjacket or tied to prefabricated models that are based on the false equation that professional sport equals a purely economic activity. He has warned cash rich clubs to curb excess spending and he will be implementing his plans to bring them in line with UEFA standards. Will he ever realise his dream?