Shortly after leaving Hartlepool, he was appointed manager of Luton Town by controversial chairman John Gurney, who, having just purchased the club, sacked the popular management team of Joe Kinnear and Mick Harford. It was reported that Newell won a Pop Idol-style poll to become manager but he was offered and signed a contract before the "results" were announced. Shortly after taking over, the club went into administrative receivership which saw several players leave the club. Despite this, Newell succeeded in taking the club near the play-offs of Division Two.