A new independent football regulator will have ‘targeted powers’ to step in and resolve how money flows from the Premier League down the pyramid, and to stop clubs from joining breakaway leagues.

The Government will publish its White Paper on football governance today, and has now confirmed it will act on a recommendation from the 2021 fan-led review of football to create a regulator.

The body's main purpose would be to oversee a licensing system to ensure clubs are run sustainably, following the collapse of Bury and Macclesfield in recent years.

However, the regulator will also be able to step in and force arbitration if the Premier League, the EFL and the Football Association are unable to reach a new settlement on how top-flight finances support the game at lower levels.

Discussions between the bodies are ongoing.

The EFL's chairman, Rick Parry, is looking to secure 25 per cent of all pooled broadcast revenues in a new settlement, alongside the introduction of two-to-one merit-based payments in the Premier League and Championship and the abolition of parachute payments in a bid to reduce what he sees as the ‘cliff edge’ between the first and second tiers.

Parry had called for the regulator to be given backstop powers and said earlier this week he would be ‘very negative’ if the Government did not address it in the White Paper.

The Government is confident the regulator's powers will be balanced in such a way that it will not diminish the competitiveness and strength of the Premier League, which in financial terms is streets ahead of even the other 'Big Four' leagues in Europe.

The licensing system will enshrine a power of veto for fans on club heritage matters, preventing owners from changing a club's name, badge or kit without supporter input, and powers to block clubs from joining new competitions which do not meet predetermined criteria, in consultation with the FA and fans.

The formation of the European Super League in April 2021 led to outrage among supporters and prompted the Government to bring forward its plan to commission the fan-led review. It was chaired by former Sports Minister and current Conservative MP Tracey Crouch, and published its recommendations in November 2021.

The regulator will also run an owners' and directors' test, with a focus on the fitness and propriety of new owners and enhanced due diligence.

The review also recommended the introduction of a levy of up to 10 per cent on Premier League transfer deals to support the pyramid and grassroots football.

The review also recommended consultation on a pilot at selected fourth and fifth-tier clubs allowing the sale of alcohol in sight of the pitch, something the UK's football policing lead, Chief Constable Mark Roberts, was vehemently opposed to. The Government sees this as a complex issue requiring further work to be done.

The Government says it will now embark on further consultation with the key stakeholders, with plans to bring forward legislation to be announced as soon as parliamentary time allows.

Prime Minister Rishi Sunak said: "Since its inception over 165 years ago, English football has been bringing people together, providing a source of pride for communities and inspiration to millions of fans across the country.

"Yet despite the success of the sport both at home and abroad, we know that there are real challenges which threaten the stability of clubs both big and small.

"These bold new plans will put fans back at the heart of football, protect the rich heritage and traditions of our much-loved clubs and safeguard the beautiful game for future generations."

The Government also plans to look at the existing visa system for elite footballers in England to examine how the game can continue to attract the best global talent while maintaining strong support for young domestic players to develop from the grassroots level.

Since Brexit, English clubs have been unable to sign under-18 players from overseas.

The Premier League is confident the so-called 'New Deal For Football' can be agreed with the EFL and the Football Association before the end of the season.

The football authorities have been meeting regularly since November last year to discuss a new financial distribution model, enhanced cost control measures, player development and calendar issues, after a mandate was provided to the league by top-flight clubs.

The Premier League is understood to be optimistic that the 'New Deal' discussions will reach a positive conclusion without the need for the regulator to be involved.

It has been encouraged by EFL chairman Rick Parry's comments on Monday that his organisation is keen to come to a football-led solution, even though he had called for the regulator to be given backstop powers.

Even though the top flight still believes Parry's call for a 25 per cent share of pooled broadcast revenues is too much, the concept of net media revenue being the model for distribution is not off the table.

The EFL is seeking the introduction of a new merit-based payment system in the Premier League and the Championship where the team at the top of each league earns twice as much as the team finishing bottom of that same league, and the abolition of parachute payments.

The Premier League's current merit payment model sees the league's top club earn 1.65 times more than the bottom club, which it feels is a key factor in helping to keep the league competitive.

Further discussions will also look at the future format of the Carabao Cup, and also the possibility of scrapping FA Cup replays.