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A Position of its Own Making: Independent Commission Decides on 10-Point Deduction for Everton following PSR hearing

Historically “irresponsible behaviour” and inaccurate dealings with the Premier League put Toffees’ season in jeopardy

The start of the 2023/24 season had already been a slow one for Everton, but the release of the 41-page dossier outlining the process behind and evidence for their immediate 10-point deduction slammed the brakes on any momentum they may have been building. 


Between October 16th and October 20th, 2023, an independent panel formed of David Phillips, Alan Greenwood and Nick Igoe heard evidence and testimony pertaining to an alleged breach of the Premier League’s Profitability and Sustainability Rules (PSR). The league was accusing Everton of having exceeded the regulations’ £105 million threshold for three-year losses by the sum of £19.5m. Everton acknowledged the breach, but disputed the sum, instead calculating a breach of only £9.7m. The ‘complicated case’, with over 40,000 evidential documents assessed, has seen Everton hit with the Premier League’s largest sporting penalty in its history, surpassing Portsmouth’s 2009/10 9-point deduction for entering administration. 


The inquiry explored all aspects of Everton’s financial situation, examining both mitigating and aggravating factors that led to the current state of an organization formally nicknamed ‘The Bank of England Club’. Central to the hearing was the role of the majority shareholder, Iranian-British businessman Farhad Moshiri. Moshiri, who increased his 49.9% stake in the club to 94% in 2018, had acquired the club with high ambitions, aiming to bridge the seemingly surmountable gap between the Toffees and the Premier League’s top teams. He had intended to spend heavily in the first ‘three or four years’, before reducing his investment in the hopes the team would have ‘little or no need’ for his continued bankrolling. 


Moshiri envisioned that high spending on facilities and recruitment to strengthen what he termed as a ‘non-existent midfield’ would be sufficient to return Everton to its historic heights as European competitors, but those aspirations soon faltered. From 2017 to 2021, Everton doubled their wage spending and racked up the fifth-highest transfer bill in the league, amounting to £359m. This in itself is not a serious problem; speculating to accumulate may be seen as essential, and intelligent signings can quickly improve a team’s performance. Sadly, for Everton, this was not the case. The Athletic has suggested that, at a push, only a quarter of players brought in were a net positive for the Merseyside club. Additionally, a Watford-esque high turnover of managers - seven in total during Moshiri’s tenure - has led to inconsistency on the pitch and repeated ‘exceptional’ expenditure paying off incomplete contracts. 


Central to Moshiri’s spending was the development of Everton’s new, multimillion pound stadium at Bramley-Moore Dock. The new stadium has been central to Everton’s legal defence, being positioned as an anomalous feature of the accounts since 2019, and its finances have been in discussion constantly with the Premier League. Regulations stipulated that no spending on the project could be capitalised until planning permission had been granted, meaning all costs attributed to Bramley-Moore Dock prior to February 2021 could not be excluded from the accounts. In 2021, former Everton Chief Executive Denise Barrett-Baxendale presented to the Premier League on the ‘c.£54m’ spent leading up to 2021 and its ability to be capitalised. In August of that year, it was agreed that this ‘non-capitalised expenditure’ could be excluded, provided that Everton remain below the £105m threshold and consult the league for approval on all players purchased. This agreement was a bright spark in a darkening situation as it became increasingly clear that adhering to PSR regulations ‘would be a challenge.’ 


In March of 2023, Everton’s accounts reported losses of only £87.1m, well below the threshold thanks to a variety of exclusions. Upon seeing this, the Premier League reassessed the club’s losses and placed them closer to £120.8m, a figure that saw Everton referred to the independent commission. Later calculations put losses at closer to £124.5m.


Everton’s defence centred around four key justificatory aspects: expenditure on the Bramley-Moore Dock stadium; the 4% transfer levy on English clubs; the decision not to sue an anonymised Player X for breach of contract; and finally, the impact of the Covid-19 pandemic on income and an attempted sale of an unnamed Player Y.


On the first mitigation, Everton suggested that £14.5m ‘in respect of interest incurred on inter-company loans’ surrounding the funding of the new stadium was excludable. The Premier League countered this by arguing that the interest was in fact not attributable to the stadium, but rather to personal ‘interest-free loans made by Mr. Moshiri’ for ‘working capital’ and not the stadium’s construction. Although the commission took a more balanced view, it determined that ‘the pre-planning stadium interest on the commercial loans (could not) be excluded from the PSR calculation’.


The other points are simpler to explore. The 4% transfer levy goes towards a footballer’s pension scheme and various youth and grass-roots funds. Thus, Everton argued £7.6m of their surplus went towards youth development and was therefore excludable, an exclusion the Premier League stated was ‘wrong in principle’. The commission agreed.


Player X, an Everton employee who was arrested and dismissed from the club in mid-2021, was also seen as a financial loss. Everton had chosen not to pursue him for a ‘£10m employment claim’ out of concern for his mental health and excluded this figure from PSR calculations.


Regarding the losses incurred during the seasons affected by the pandemic, Everton calculated that £43.9m was foregone due to a lack of matchday revenue, the collapsed transfer market and the rebate paid to broadcasters, and as such could be excluded from PSR accounting. Additionally, they suggested that their inability to sell Player Y for an adequate sum contributed to the losses. The league disagreed, citing that Everton had decided not to sell Player Y at all, and had even negotiated a new contract contemporaneously. The commission itself took a relatively dismissive view of the pandemic argument proffered by Everton. 


In the face of the Premier League’s rebuttal, which stated that Everton had ‘deliberately misled it about the source of funds used for the stadium development’ with ‘materially inaccurate’ accounting information, the club focused on the issues posed by the stadium’s interest charges, as well as those of Player X and the impact of the Russia-Ukraine conflict. The conflict had affected Everton particularly severely due to Farhad Moshiri’s connections to the now sanctioned oligarch Alisher Usmanov and his company USM Services Limited, which owned a naming rights agreement due to bring the club £10m in 2025/6. 


It was clear that there were a range of mitigating factors in the case for Everton, but the commission sided with the Premier League. The position that Everton had put itself in, through irresponsible spending, poor financial planning, and inaccurate accounting, had only acted to worsen the impacts of the Covid-19 pandemic and the Russian invasion of Ukraine. By the summer of 2021, Everton had lost £373m within the PSR period, £150m more than their nearest counterpart, Chelsea. Although they planned to sell players to make back some of the money, the estimations made by the Director of Football at the time, Marcel Brands, were optimistic to say the least, and the sale of Richarlison to Tottenham brought in £20m less than anticipated. Having budgeted to finish within European qualification places in the 2021/22 season, they instead finished 16th, being dragged out of the relegation places by their current manager, Sean Dyche. 


The league and the commission saw fit to impose a sporting penalty on Everton, rather than a financial one, a point the club fruitlessly opposed. The dossier concluded by saying that ‘(t)his was a serious breach that requires a significant penalty. The commission considers that it should order an immediate deduction of 10 points.’ The size of the deduction is a clear indication that the commission believes the culpability lies squarely at Everton’s doorstep. It is difficult to argue with their reasoning. The Toffees currently find themselves in very real danger of being relegated, something that hasn’t happened to the Merseyside club in over 70 years.


It is hard to see how the hearing will not have wider consequences within English football. There will be an asterisk seared onto the team’s permanent record, and it will take a monumental effort to lift the team out of the relegation spots for a second season running, despite positive signs on the pitch. Though the club is appealing due to what it has termed a ‘deficiency’ in the Premier League’s rules, it is now facing yet further inquiries into PSR breaches for seasons that fall under the 10-point deduction ruling. Final verdicts are set to be released in April of this year.


One must now look beyond Liverpool. Fellow strugglers Nottingham Forest, just a position above Everton, are also in the process of a PSR breach investigation. Reigning champions Manchester City have 115 outstanding charges regarding breaches of Financial Fair Play regulations hanging over their heads, and various leaks have revealed some unsavoury, if perhaps expected, elements of Chelsea’s Abramovich-era dealings. Questions will now be asked about whether the league intends to investigate these with a similar speed and vigour as it did with Everton.

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