League One clubs aim for further curbs on spending as budgets continue to spiral

League One clubs want to introduce new spending restrictions to reduce losses by limiting investment from owners.

Clubs in the division voted to tighten the rules last summer by reducing spending limits from 60% to 50% of turnover, and removed a staggered approach to owner investment, so that only 50% of equity injections can be spent on squad costs, with the rest assigned to infrastructure projects. Less than six months later many want to go further.

The Guardian has learned that two proposed models are being considered: a cap on the amount clubs can lose over three years, and the introduction of a luxury tax by which 50% of owner investment above a capped threshold would be redistributed to their rivals – with the former proposal seen as the favoured outcome.

The move to introduce more spending curbs comes despite a legal challenge to the existing rules from the Professional Footballers’ Association, which launched proceedings in August on the grounds that the clubs had failed to abide by the terms of their membership of the professional negotiating and consultative committee.

An attempt by League One and League Two to introduce salary caps of £2.5m and £1.5m respectively was withdrawn in 2021 after the PFA took them to an independent arbitration panel.

Discussions over stricter controls have been taking place for some time, but have been given fresh impetus by last month’s publication of the State of the Game report. The first piece of work by the Independent Football Regulator showed that 94% of clubs in the EFL and National League are loss-making, and that 32 of the 96 would not survive for a month without owner funding.

Last summer’s changes reduced the percentage of clubs’ income that can be spent on wages, with managers’ salaries included for the first time, but there is a renewed move to reduce losses, which averaged £7.5m per club in League One last season, up from £5.3m the previous season.

One owner told the Guardian further regulation was necessary because the clubs had repeatedly shown they could not restrain themselves, pointing out that League One wage bills have increased by 15% this season, and that a top-six budget in the division five years ago would now rank in the bottom three.

Reading and Peterborough have long campaigned for tighter spending controls, but face opposition from clubs such as MK Dons and Wycombe, and it is unclear whether any proposal would gain the two-thirds majority required to be introduced.

A source at another League One club warned that an unintended consequence would be to create a cliff edge in terms of financial resources with the Championship, which loosened its regulations last season by permitting owners an inject up to £33m over three years, an equity allowance that does not count towards the 85% wage spending/revenue limit.

League Two clubs are not formally involved in the discussions at this stage, but sources have indicated they would probably follow the direction of League One.

The EFL declined to comment.