Premiership Rugby club finances are “clearly unsustainable”, a damning parliamentary report has concluded.

The committee heard from leading figures in rugby after the two clubs went into administration in the autumn.

Damian Green MP said elite club rugby “is in disarray”.

Green, who is acting chair of the committee, added: “Inert leadership from the Rugby Football Union [RFU] and Premiership Rugby [PRL] has allowed mismanagement to collapse two of English rugby’s top teams.

“Thousands of loyal fans have been deprived of their clubs and hundreds of jobs have been lost.”

The committee was told that annual losses average £4m per Premiership club and its report pointed to a “lack of safeguards” at the highest level.

A joint RFU and PRL statement in response to the report said the organisations are “working hard” to “create a sustainable league”.

The DCMS committee added that Worcester Warriors’ “unscrupulous owners mismanaged club finances while attempting to strip the club of its assets”, and that they had gone more than a year without filing accounts, with players paid late for several months.

The committee said “one of the most striking facets of the problems at Worcester Warriors was the lack of due diligence undertaken regarding its owners, particularly Colin Goldring”.

Last May, the club’s co-owner Goldring was banned from working in the legal profession without the permission of the Solicitors Regulation Authority.

“This was seemingly not enough for the Rugby Football Union (RFU) to intervene and end Mr Goldring’s ownership of Worcester Warriors,” the DCMS committee added.

At that time, the club issued a statement saying: “All regulatory bodies expressed to Goldring that they were satisfied he was fit and proper to own and be director of a sports club.”

Goldring, who was a trainee solicitor at the time the incident occurred, said then that he had been cleared of “any allegations of dishonesty or lack of integrity”.

In response to the DCMS report, which Goldring said he had not seen, he denied claims of asset stripping.

Goldring added that the committee “wasted the opportunity of having a constructive assessment of what really caused Warriors to go into administration and in doing so understand and address the challenges still faced by other clubs”.

Meanwhile, the committee said Wasps had experienced mounting problems for several years, linked to debt from what it called a “disastrous and ill-thought-through relocation to Coventry”.

The report concluded that the “debacle” at both clubs could have been avoided with “better governance structures, financial monitoring and proactive intervention from the RFU and PRL”.

While Green welcomed planned reforms, including a “new and fuller” owners’ and directors’ test, he said “the root of the problem remains”.

Both RFU chief executive Bill Sweeney and PRL’s chief executive Simon Massie-Taylor spoke of their ambitions to boost revenues within English domestic club rugby.

However, these did not appear to allay the concerns of the committee, which said it had seen “precious little evidence” that an increase in collaboration between PRL, the RFU and other key stakeholders would significantly increase revenues.

“The financial situation of Premiership clubs is clearly unsustainable, and we are surprised by the very complacent belief of Bill Sweeney and Simon Massie-Taylor that further growth in club revenues will solve these problems,” the report said.

“The demise during the playing season of two Premiership clubs is a stain on the reputation of the RFU and PRL. It is not indicative of a healthy professional setup.”

Once its annual report has been published, the RFU has been asked to provide “a detailed commentary of its financial position and what steps it will be taking to prevent further clubs collapsing, with consequent damage done to players, staff and local communities”.

A “lack of attention” to the welfare of Worcester Warriors and Wasps players was another area criticised by the committee.

The report said the “introduction of a form of benevolent fund [is] a pressing need” and recommended that the RFU should adopt measures “to give players a stronger say in all matters relating to their welfare”.

The RFU and PRL said player welfare “is an absolute priority” and added that plans are in place for a financial monitoring panel which would include a third-party financial review of all clubs.