League clubs agree to bring in salary cap

Salary capping will be introduced into English football for the first time next season as part of a wide-ranging reform programme agreed by the Football League's 72 clubs yesterday.

Initially, the salary cap will be experimental and apply only in the Third Division. Clubs will not be allowed to spend more than 60 per cent of their turnover on players' wages and not more than 75 per cent of their turnover on all their staff costs combined.

There will be no punishment for failure to comply although sanctions – as yet unspecified – are possible at some stage in the future. The aim is to force clubs to keep their spending at sustainable levels. If the experiment is successful, it will be expanded across the divisions. The move could help see a landmark shift away from profligacy and towards a healthier, more sustainable future for the game.

Another innovation with the same aim was also agreed in principle yesterday when the clubs gave their approval to "sporting sanctions" for any clubs who go into administration. The details have yet to be thrashed out – a process that could take a year or more – but the sanctions could include a deduction of points or relegation. Serial offenders could be punished with expulsion from the League. The earliest the sanctions will be in place will be the 2004-05 season.

A third major decision yesterday saw the clubs agree to an expansion of the end-of-season play-offs from four clubs to six clubs from next season. The format of the play-offs will also be amended, with the aim of giving an advantage to the sides finishing immediately behind the two automatic promotion places in each division.

Under the new system, the teams finishing eighth in each division will play a one-leg tie away against the teams finishing fifth. The seventh-placed sides will face the teams finishing sixth. The third- and fourth-placed teams will then play one game, at home, against the winners of the fifth v eighth and sixth v seventh games respectively in what will become the semi-finals. The changes need to rubber-stamped at the League's AGM on 5 June, but their adoption is expected to be a formality.

Aside from the reform of the play-offs, yesterday's proposals could prove tricky to implement successfully. The wage capping will effectively be a voluntary process with no disciplinary back-up. The plans for "sporting sanctions" for badly run clubs may yet hit legal hurdles.

The need for an insolvency policy has arisen because of concerns that some clubs have used administration as a means of escaping their debts, thereby securing an unfair advantage over their rivals.

Leicester City – whose Walkers Stadium was the venue for yesterday's meeting – went into administration earlier this season and had 90 per cent of their debts to the Inland Revenue wiped out. The construction firm that built their new home also lost around £7m in outstanding payments. Leicester, meanwhile, have continued in business under the control of a new consortium, headed by Gary Lineker, and will benefit from a £20m windfall when they return to the Premiership next season.

Grimsby, in contrast, tackled their own financial troubles by cutting back on staff and selling players. Their policy of sorting out their problems themselves – and not resorting to administration – saw them relegated.

Leicester say that they had no choice but to go into administration because a creditor forced them to do so. Other clubs claiming the same in the future could lead to a legal minefield for the League.

Sir Brian Mawhinney, the League's chairman, addressed this by saying that "such a major step forward needs to be done properly and defensibly". He said that "detailed work" and "legal proofing" needed to be completed before putting the changes to a vote, probably at an EGM later this year.

Mawhinney's conclusion was optimistic, however. "These are clubs who understand the realities [facing the game] and want to move football forward under the umbrella of good governance."