FFP was brought with the intention to promote financial responsibility; to stop the large number of football clubs who are run by people who spend more than they earn. The result is a classic example of how poorly designed financial incentives can have unintended, sometimes totally counter‑productive, effects.FFP contains such an ill considered clause; something that looked, at the time, harmless, but helped in creating the situation where very few academy graduates at top clubs are making it into first teams.
It works like this: FFP mandates that clubs must break even, and at the same time it exempts a number of costs from the calculation. These include infrastructure spending (like the finance costs of building a new stadium), investment in community schemes (school outreach programmes etc.) and women’s football as well as the full cost of youth development. These expenditures were believed to not be the kind of things that clubs should be penalised for. In the case of youth development, though, what it means is that Premier League clubs can spend as much as they like on their academies without having pressure to cut costs – like transfer fees or player wages – to be FFP‑compliant. And, to add to this incentive, while academy costs are excluded from the FFP calculation, income from sales of academy graduates is included in the profit calculation. It means that not only are significant operating costs excluded from the FFP calculation – meaning there’s no constraint on the number of youngsters in the academy – but the club can also boost their total FFP‑relevant income with player sales. The club is winning in both cases. They can spend as much as they can afford on player development, scooping up young players from around the world, and, if they can then sell them on, they can spend the extra on paying your first team. The more they spend scouting and improving players, then, the more they can get back into the club’s performance on the pitch, even if those youngsters never actually play for the club.
