Everton FC was docked ten points for violating financial regulations, but football fans may finally consider it a win.

Everton FC fans may have been pretty pleased with way the football season was shaping out on November 16, 2023. They were 14th in the English Premier League, having just defeated West Ham and Crystal Palace.

Everything changed on November 17th. The team received a ten-point deduction for violating the league’s “profitability and sustainability” standards, dropping them to 19th position and into the relegation zone.

The guidelines that Everton violated are intended to force clubs to become financially sustainable enterprises by permitting them to accumulate footballing losses (not including spending on infrastructure or community programs) of no more than £105 million over a three-year period.

Everton was judged to have exceeded this limit by £19.5 million, with relevant losses totaling £124.5 million until the 2021-2022 season. Everton had the highest salary bill in the Premier League in relation to revenue at the time and had failed to get the desired returns while attempting to transfer undesired players.

Everton first reported losses of £87 million, well under the maximum. An independent panel, however, determined that this figure was lower than the genuine worth.

Everton also claimed that there were mitigating circumstances, such as losses on “player X” who was arrested in 2021 and ultimately had his contract terminated, additional losses due to an inability to sell players due to COVID-19, and the club’s sponsorship deals with Russian companies being affected by the war in Ukraine. The commission, however, rejected the reasons, stating that the breach was of Everton’s “own making” and resulted from “mismanagement.”

Everton is apparently “fuming” over the “unprecedented and disproportionate” ruling, which they want to challenge.

In a statement, Everton said, “The club believes that the commission has imposed a wholly disproportionate and unjust sporting sanction.”

According to the report, “Both the harshness and severity of the sanction imposed by the commission are neither a fair nor a reasonable reflection of the evidence submitted.” Parliament has even questioned the severity of the sentence.

However, others believe Everton were fortunate. If the points reduction had been implemented last season, when Everton was fighting for survival, they would very probably have been relegated to the Championship. Despite the points deduction, they still have a good chance of staying in the Premier League this season under new manager Sean Dyche.

However, if Everton are relegated, the financial ramifications might be severe. The club’s annual revenue, which was recently recorded as £181 million, would plummet due to drastically reduced television money (despite the so-called “parachute prepayments” that clubs ousted from the first division get).

Then there’s the expense of the new £760 million 53,000-seater stadium, which is set to open in 2024, and potential legal claims for up to £300 million in damages from six clubs, including Burnley, Leeds, and Leicester, who were recently demoted from the Premier League while Everton clung on.

Toffees are in a difficult condition.

In consequence, Everton’s rule-breaking loss of £19.5 million above the maximum could lead to considerably larger losses in the future. This may serve as a powerful deterrence to other clubs considering stretching football’s financial boundaries.

It might also be a show of force by the Premier League to try to limit the scope of the soon-to-be appointed independent football regulator, which some in the league see as meddling too much in football business. Perhaps the Premier League is attempting to show that regulatory powers should be limited and that the league is perfectly capable of governing itself.

Of course, the fan-led evaluation of English football came to a totally different conclusion, which is why the UK government is considering a regulator. Its goals are to prevent breakaway leagues, limit unattractive club owners, and further minimize financial unsustainable in English football, particularly making clubs more resilient to financial shocks like COVID.

The harshness of Everton’s punishment, according to one MP, is a clear signal that an independent regulator is required, feelings shared by the Football Supporters Association. It is entirely possible to argue that if an independent regulator had been in place for the previous five years, Everton would not have ended up in this situation in the first place. The future regulator may, for example, implement a licensing system in which clubs must demonstrate that they are operating within specified financial parameters – or risk having their license revoked.

For the time being, the precise scope of the regulator’s mandate is unknown. However, a floodgate of financial sustainability restrictions appears to have opened, with fines and deterrents becoming an important component of the sport’s future ethos. It may not be what Everton wants, but it could be exactly what English football requires.