A well intentioned but completely and utterly flawed proposal.
If the aim is to encourage clubs to make better use of their academies and develop rather than buy players then why on earth should the likes of Glen Johnson, Michael Carrick, Rio Ferdinand, Wayne Rooney, Ashley Cole, etc be counted as home grown. We haven't developed Glen Johnson, we've just bought him for a ludicrous amount of money.
English players will become even more expensive and hotly pursued than they were previously.