Everton received an immediate 10-point deduction after being found to have breached the Premier League’s profit and sustainability rules (PSR).
The decision was announced on November 17, 2023. It left the Toffees, who only confirmed their top-flight safety on the final day of last season, in the relegation zone.
The Premier League acted in March to refer Everton to an independent commission, which made a decision on the case following a five-day hearing in October. Immediately after the sanction was confirmed, Everton announced they would be appealing against the decision.
This is the third time a Premier League club has received a points penalty, but it is the biggest punishment handed out in the history of the competition.
The Sporting News explains why Everton have lost points, what the charges are and how the club has responded.
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Essentially, Everton were deducted points because they were found to have broken Premier League rules regarding how much clubs are allowed to spend relative to their levels of income and expenditure.
Premier League regulations regarding acceptable financial losses, known as the competition’s profit and sustainability rules, make it clear that clubs are allowed to lose a maximum of £105 million ($128.4 million) across a three-year period.
The Premier League referred the Toffees to an independent commission after deciding that the club had broken its rules. The league’s argument was that Everton had gone over the permitted losses for 2021/22 by £19.5m; Everton insisted the figure was closer to £9.7m and that there were mitigating circumstances.
Acknowledging that the case was “complicated”, the commission found in favour of the Premier League. It dismissed the suggestion that Everton’s “difficulties” were attributable to interest on the costs of their new stadium at Bramley Dock, which owner Farhad Moshiri has said will cost around £760m ($945m).
Instead, it said the breach was because of overspending on players while failing to offset transfer fees with the required level of outgoing sales, as well as a £21m ($26.1m) loss for the 2022 financial year caused by a projected sixth-placed finish in the Premier League. The club finished 10 places lower, ensuring a significantly lower amount of prize money.
“The position that Everton finds itself in is of its own making,” the commission said in their findings, concluding that a points deduction was the only appropriate punishment.
“It is Everton’s responsibility to ensure that it complies with the PSR regime. The excess over the threshold is significant. The consequence is that Everton’s culpability is great.
“We take into account the fact that Everton’s PSR trend over the relevant four years is positive, but cannot ignore the fact that the failure to comply with the PSR regime was the result of Everton irresponsibly taking a chance that things would turn out positively.
“Further, Everton was less than frank in its dealings with the Premier League over the stadium interest issue. The reality is that Everton failed to manage its finances so as to operate within the generous threshold of £105 million. Its mismanagement led to that threshold being exceeded by £19.5 million.”
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The league had asked for a 12-point deduction for the Merseyside club, according to a Daily Telegraph report in October. However, a 10-point deduction was deemed sufficient by the commission.
The commission said it had “relied” on the case involving Sheffield Wednesday, which ended in the Owls being deducted 12 points for the 2020/21 season after being found to have breached the English Football League’s equivalent of PSR.
Everton declared estimated losses of around £370m ($457m) from 2018 to 2021, which exceeded the permitted limit set by the profit and sustainability rules.
The Premier League said in a statement on March 24: “In accordance with Rule W.82.1, the Premier League confirms that it has today referred an alleged breach of the league’s profitability and sustainability rules by Everton Football Club to a commission under Premier League Rule W.3.4.”
The club was required to provide proof of justification for why its three-year loss total was more than triple the Premier League allowance.
The club denied any allegation of financial impropriety and fought its case in front of the independent commission. “The club strongly contests the allegation of non-compliance and, together with its independent team of experts, is entirely confident that it remains compliant with all financial rules and regulations,” they said at the time.
Everton called the ruling “a wholly disproportionate and unjust sporting sanction” and said they had been “open and transparent” while “respecting the integrity of the process”.
“The club does not recognise the finding that it failed to act with the utmost good faith and it does not understand this to have been an allegation made by the Premier League during the course of proceedings,” they added.
“Both the harshness and severity of the sanction imposed by the commission are neither a fair nor a reasonable reflection of the evidence submitted.
“The club will also monitor with great interest the decisions made in any other cases concerning the Premier League’s Profit and Sustainability Rules. Everton cannot comment on this matter any further until the appeal process has concluded.”
Everton said their appeal would be heard in due course by a board appointed “pursuant to the Premier League’s rules”.
Dame Caroline Dinenage MP, the Chair of the UK government’s Culture, Media and Sport Committee, responded to the news shortly afterwards.
“Today’s announcement will be deeply disappointing for Everton fans and for everyone who wants to see the English game thrive in a fair and sustainable way,” she said.
“It is clear that the status quo cannot continue, and so I repeat my call for the government to urgently introduce the Football Governance Bill, as announced in the King’s Speech, to enable a statutory independent regulator to be in place as soon as possible.”
Steve Rotheram, the mayor of the Liverpool City Region, described the punishment as “excessive and grossly unfair” and said he would back Everton in their appeal.
“This is about fairness, not partisan rivalry,” he posted on X (formerly Twitter).
The 2023/24 season started with mixed results for Sean Dyche’s side, and their off-field issues continue to grow, with a potential buyout from USA private investment company 777 Partners also stalling.
A run of three wins and only one defeat in five games, though, had propelled Everton to 14th in the table, leaving them a healthy nine points above the relegation zone and only two off the top half of the standings.
The deduction leaves them two points from safety and five behind fifth-bottom Bournemouth. But they have reason to feel confident of escaping the bottom three, having won three more games than any of the other teams in the bottom four at the time of their deduction.