The Arsenal chairman, Peter Hill-Wood, has staunchly defended the running of the club against the vitriolic criticism levelled against the board by the 30% owner, the Uzbek billionaire Alisher Usmanov. Hill-Wood maintained that Arsenal's policy of spending only what they earn is correct, as is the stance that the American majority owner Stan Kroenke, and former shareholders such as Hill-Wood who made millions selling their shares to Kroenke, should not be expected to put money into the club. Hill-Wood described Usmanov's attack on this approach, which Arsenal call a self-financing model, as "not at all helpful".

The chairman, who made £5.5m selling his shares to Kroenke, said the club provides Arsène Wenger with as much money as possible for players, but cannot compete with Manchester City's Abu Dhabi-backed wealth. At the end of a week in which Arsenal's captain, Robin van Persie, announced he will not sign a new contract, citing a lack of ambition for success, Hill-Wood said: "We don't have the same oil wealth that [City's owner] Sheikh Mansour has. He is prepared to pay astronomical figures for players; we cannot pay that sort of money, and we can't compete."

In his open letter to Arsenal's board on Thursday, Usmanov was scathing about the self-financing model, arguing it was, in effect, engineered by the former English shareholders, including Hill-Wood, to make personal fortunes. The owners' policy of not investing their own money in the club, Usmanov argued, meant Arsenal borrowed to build the Emirates Stadium (£260m), charge supporters very expensive ticket prices, yet still leave Wenger short of money to retain and sign star players.

"The self-financing model … allowed the major shareholders of the time … to benefit from [an] increase in the value of their holdings," the letter said. "All of these shareholders and board directors sold 100% of their holdings and cashed out at vast profits."

Alongside Hill-Wood pocketing £5.5m, the longstanding shareholder Richard Carr made more than £40m selling to Kroenke in 2009. Lady Nina Bracewell-Smith, who also inherited her Arsenal shares, made £116m selling them to Kroenke last year. Danny Fiszman, who bought into Arsenal in the 1990s, first with a portion of the former vice-chairman's David Dein's stake, made £160m, the final sale to Kroenke made just before Fiszman died last year.

Hill-Wood said making so much money from selling his shares was "nice", explaining: "You wouldn't say no to a few million pounds." But he rejected as "complete and utter rubbish" the accusation that the club was run deliberately to increase the value of his and the other owners' shares, at the expense of supporters and a robust budget for Wenger.

"It was nice to make that money, but I was never involved in Arsenal for that reason," Hill-Wood said. "I was involved because I have been brought up to love Arsenal and that is my only concern."

Of Usmanov's intervention, the Arsenal chairman said: "I do not know what is trying to do really, I don't think he is right."

Arsenal's summer has been disrupted by Van Persie's public announcement that he does not intend to renew his contract after, he said, being left unconvinced by the club's plans to compete for trophies. The departures of Gaël Clichy and Samir Nasri last summer to City, where they did win the Premier League, and of Cesc Fábregas, the previous captain-talisman, have left Arsenal looking like a selling club in the age of big-spending plutocrat owners. Usmanov argued that the owners should invest by paying off the stadium debt, which was still £98m and cost £15m in interest last year.

However Hill-Wood argued, as does the chief executive, Ivan Gazidis, that the financial penalties due for early repayment make that unviable.

"It's simple to say we should put some money in, but it doesn't make any sense," Hill-Wood said. "We can't pay off the debt without huge penalties, and putting money in for any other reason doesn't make any sense at all. We give the manager as much money as we possibly can, and all we can do is continue. We have run the club sensibly, and we haven't done badly; it's not as if we have been relegated."

Usmanov, with whom Kroenke does not communicate, is also critical of the executive team, who brought in £33m commercial income last year, £70m less than Manchester United. He points to the board too, saying it would benefit from younger people with more football and major sports club experience. Gazidis, 47, is Arsenal's youngest director; Kroenke is 65 this month, Hill-Wood 76, Sir "Chips" Keswick 72, Lord Harris of Peckham 69 and the long-serving administrative stalwart Ken Friar is 78.

Hill-Wood acknowledged: "It would be good to have some young people on the board, but it is not as easy for young people who have full-time jobs to do that now as it was when I was a young man. However I do not think there is anything different we can be doing in the running of Arsenal."