David Conn: Barnsley's fall is ominous sign for game at large

The demise of a well-run club paints a bleak picture for future of England's smaller clubs in the post-ITV Digital era

The Football League has for months been warning anybody tiring of the ITV Digital story that the consequences of the refusal of Carlton and Granada to honour their TV contract were yet to be felt, as clubs survived on advance season ticket sales and up-front money from the replacement TV deal with BSkyB. The collapse into administration of Barnsley signals that the money is running out. The League has asked the Premier League and Football Association to "share the pain", but if those with the cash at the top of the game fail to provide rescue measures soon, more clubs are certain to follow Barnsley into insolvency. This week the Professional Footballers' Association chief executive, Gordon Taylor, who refuses to accept that players should take pay cuts, remarked that the Nationwide League was becoming the "National Administration League".

Sympathy for League clubs has been diluted by the perception that many were mismanaged before Carlton and Granada sank them. This is sadly true of many, but Barnsley's administrator, Matthew Dunham, emphasised this week it was not so at Oakwell: "Barnsley has been run responsibly and has gone into administration precisely because the directors acted professionally and were aware, perhaps unlike others, of their legal duty to declare the club insolvent as soon as they recognised they could no longer pay creditors." As Dunham experienced a full-blown, X-rated football financial horror show as the administrator of Bury earlier this year, his is an informed assessment.

Barnsley's is not, as with stricken Watford, imploded Bradford or other debt-laden clubs relegated into the First Division, a story of gambling on reaching the Premier League, or like Leicester, a case of dropping down with a Premiership-sized wage bill. During their single Premiership season in 1997-98, they did not dramatically overspend, and, back in the Football League, balanced most of the books by selling the striker Ashley Ward to Blackburn for a club record £4.25m. And they have planned for the future; spending, between 1992 and 1999, £12m, together with £2m grants from the Football Trust, on rebuilding Oakwell into a proud 23,000 all-seater stadium.

Nor is this a pile-up of years of debt or months of non-payment of tax and VAT, the bleak spectacle at many clubs. Barnsley are mostly up to date with creditors, except for last month, when the money ran out. Barnsley's problem is the future: their commitments to players, a £5m payroll, exceed their expected income this season of £4.5m. Add other costs of £2m, and Barnsley have a shortfall for the season expected to be £2.5m. John Dennis, the chairman, said the board had been budgeting since last November for major cuts after the ITV Digital contract was over in 2004, but could not overcome the loss of the contract, compounded by relegation last season. A fortnight ago, a consortium intending to take over the club failed to secure sufficient bank funding and last week Barnsley called the administrators in.

"Despite being relegated," Dennis said, "we could have managed, although it would have been tight. But the failure of Carlton and Granada, two FTSE listed media companies, to honour the ITV Digital contract, has meant we've lost that money and the transfer market has collapsed. We can't even offload players on free transfers because other clubs can't take on their wages." For Dennis, who felt many fans' anger at relegation, this is personally shattering. He was initiated into the joys of Oakwell by his father, Ernest, who treated him to a 0-0 draw with Derby County in 1958, another relegation season. In 1966, Ernest and a partner, Geoffrey Buckle, put money in to save Barnsley from financial crisis. Both subsequently became chairmen. John succeeded them 13 years ago.

At Barnsley, money has never bought control; the club's articles of association provide that however many shares a person has, he is restricted to one vote, alongside fans who might hold a single share. "It's been more of a mutual association than a company, really," said Dennis.

Founded in 1887 by the Reverend Tiverton Preedy, curate of St Peter's, a church in the hard Yorkshire mining town, Barnsley formed a limited company when they were elected to the old Second Division in 1898. This was done to protect the club's directors from bearing personally the expense of running a professional league side, not to make them money, and the democratic constitution was intended to maintain the culture of a club. Second Division members for longer than any other club, in 1912 they won the FA Cup, 1-0, with a last-minute extra-time winner in a replay at Bramall Lane against West Bromwich Albion, their exhausting Cup run earning them the accolade "Battling Barnsley." Last season they dropped to the third tier for the first time in 21 years.

Dunham said the club's current players are paid between £12,000 a year for youngsters to as much as £20,000 per month to senior professionals. He did not cite individuals, but Barnsley's payroll includes experienced players such as Mike Sheron and Bruce Dyer. Footballers' contracts are protected and have to be paid in full under Football League rules, but Dunham denied reports that he was intending to follow Watford, Leicester and others who are asking players to take voluntary cuts.

"This club needs investors to take on the expected shortfall, and we have had several expressions of interest. Any measures I take may tie their hands in the future. I am looking for the fans to rally round and provide the money to keep the club going, and trying to avoid job cuts or renegotiations with players." The sanctity of players' contracts is under pressure, particularly as it leads to the appalling spectacle at insolvent clubs of millionaire footballers being paid in full while lowly paid secretaries or kit washers are laid off and a depressing range of local businesses left unpaid, which is certain to happen at Barnsley. The rule is designed to protect competition, preventing clubs taking on highly paid players intending to achieve success without having to pay for it. Gordon Taylor has been steadfast in his refusal to discuss pay cuts, arguing that competition must be maintained – and that players must not concede hard-won security even in circumstances as upside-down as these.

"I know the clubs," he said. "Next they will want players to take reductions if the weather turns bad and games are postponed, or for any number of other reasons. Clubs have to manage their finances properly, perhaps not budget to spend every last penny of expected income, and they must honour contracts, as they argue Carlton and Granada should have." The First Division clubs' immediate response to the crisis was to form a "Renewal Committee" which commissioned a report from consultants KPMG. They consulted only First Division clubs, then recommended the First Division should have the bulk of the League's money and effectively all the voting rights. That met predictable scorn at meetings of Second and Third Division clubs recently; the Leyton Orient chairman, Barry Hearn, is said by attendees of the Third Division meeting to have held up the report and said: "We all know there are two Ls in 'bollocks'."

The true context for the crisis is not some imagined millstone represented by the Second and Third Division clubs, themselves financially stretched, but the chasm between the Football League and its breakaway former First Division, the Premier League. Leicester's desperate plight, following relegation after five bountiful seasons in the Premier League, demonstrates the destructiveness of a gap whereby a single Premiership club – or five top players – now reap more television money, £25m, than all 72 Football League clubs put together. The League's board has rallied recently and had meetings with the Premier League, whose £1.5bn TV deals are intact, the FA and the PFA to ask for help. Straightforward cash donations have been asked for to make up the ITV Digital shortfall, or alternatively a soft loan which can be repaid out of the League's TV money after 2004. No response has yet been received, but there is concern that any payments might come out of the Football Foundation, whose money is destined to rebuild grass roots football.

Dunham stressed this week that more equal distribution was required: "Football has a choice. The people with the cash can share some of the pain, or alternatively insolvency practitioners like me will become involved at more clubs and eventually one will not come out the other side." At present football's choice looks abundantly clear, offering no sign yet that those sitting on all the money will mind the gap with the rest. More historic clubs can therefore be expected to go into administration – perhaps as soon as next week.

davidconn@independent.co.uk