Premiership salary cap: how would rugby union look without it?

http://www.theguardian.com/sport/blog/2014/dec/22/premiership-salary-cap-rugby-union

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A day after Saracens sent a shock wave through Premiership Rugby by saying they were going to propose at a shareholders’ meeting in February that the salary cap be abolished, they showed the difference money can make by romping to a 71-point victory over London Welsh.

Never mind the salary cap, London Welsh, as a promoted team with only one previous season in the Premiership, receive roughly one-third of the income from central funds that habitués such as Saracens enjoy.

That discrepancy has been raised in parliament by the Harrow West MP, Gareth Thomas, who argues it is the discriminatory act of a cartel, but opponents of the move to abolish the cap argue that Saturday’s one-sided encounter at Allianz Park would become more the norm than the exception.

“Having a small number of clubs going off into the distance and beyond the means of others would be a bad move for English rugby,” said Stephen Vaughan, the Gloucester chief executive. “I am an Aston Villa supporter: six years ago we could look forward to beating Manchester City but now, thanks to their very rich owner, they are on a different plane. Money buys silverware, as Chelsea have also proved, but the strength of the salary cap in the Premiership is that we do not have two or three leagues in one. It is about growing your business and being self-sustaining.”

The concern of clubs such as Gloucester, Northampton, Harlequins and Leicester, long established and based at grounds they have been playing at for years, is that their business models would be wrecked if there were no salary cap. Leicester, Northampton and Gloucester operate at a profit but fear they would be forced into debt, or need a very rich owner, to keep up with clubs who were bankrolled to the extent that losses were incidental. Two years ago Saracens lost £5.9m and Bath more than £3m, but they are backed by wealthy individuals.

“The danger of a system which allowed clubs to spend limitless amounts of money on players is that, assuming those who rely on what they earn continue to do so, you would have two or three clubs challenging for the title and Europe and the rest battling it out for the Champions Cup places,” said Vaughan. “That would have a knock-on effect on attendances and would create a tournament that had less appeal to broadcasters. It would also raise the issue of regulation: would there be financial fair play or would it be acceptable for clubs to live well beyond their means, begging the question of what would happen if a backer suddenly pulled out?”

Saracens claim to have the support of six other clubs in their move to end the salary cap, although not one has come forward in public to confirm their backing. Bath, whose owner, Bruce Craig, is worth a reported £300m, would be a likely one, although their head coach, Mike Ford, said the club is in favour of the cap, and most of their first‑choice side has been recruited rather than reared.

To succeed at the shareholders’ meeting, Saracens would need to get 75% to vote in favour, which would mean 12 clubs agreeing to end the cap after the end of next season. There are 15 shareholders: the teams in this season’s tournament along with past members of the Premiership, Bristol Worcester and Leeds. Bristol’s owner, Steve Lansdown, is estimated to be worth nearly £1.5bn, which would leave them in a far stronger financial position than London Welsh should they replace the Exiles in the top flight next season.

While the majority of the clubs in the Premiership operate at a loss, most of them now own their own grounds with Sale and, this month, Wasps, no longer tenants. London Irish, who play at Reading FC’s ground, were taken over last season and had their debts wiped out, while Newcastle, who sold their ground three years ago but continue to play at Kingston Park, lost £3m in their last published accounts.

Dave Thompson, the former Newcastle owner, believes that the Premiership and the Championship should become ring-fenced to replicate the two divisions in cricket’s County Championship, with promotion and relegation only from one to the other. “Initially clubs would lose some money because of revenue-sharing but I think over five to 10 years you would have a lot of clubs making a profit,” he said earlier this year. “Owning a rugby club is not as stupid commercially as it was 10 years ago and if there is an upsurge in interest after the World Cup, a few more clubs will reach the break‑even point.”

Saracens argue that the salary cap stunts growth but it was introduced in 1999 to provide stability after clubs fell on hard times when their owners suddenly pulled out, Richmond being the prime example. “The emphasis is on the club, not any individual,” Vaughan said. “The cap is regularly reviewed and it is going up next season to reflect extra income. Clubs who want to bid for the likes of Dan Carter are able to do so under the two marquee players provision, but what we have to strive to keep is the intensely competitive nature of our league and not turn it into a tournament only a small few can win.”