It was the best of time; it was the worst of times…
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Rangers Football Club PLC (in administration) employs 177 staff, according to the BBC.
The company owes HMRC vast sums, accrued through its operation of the EBT schemes in an effort to reduce tax. Whether, in the famous words of the former First Minister, Henry McLeish, it was a “muddle, not a fiddle” is neither here nor there. Rangers will be found liable for many millions of pounds in unpaid tax, to which will be added interest and penalties.
The Court of Session was told on Tuesday that Rangers’ unpaid tax bill has gone up by over £9 million since Craig Whyte took over. This is not because of some complicated scheme being unravelled, but simply because he has refused to pay over the HMRC the funds he had collected and deducted for them.
Rangers have a £10 million a year shortfall in its income, and Mr Whyte dealt with this by increasing wages significantly in the summer, and turning down a reported £9 million bid for a man later sold for a rumoured £5.5 million.
Rangers do not make profits (thus avoiding legitimately the need to pay Corporation Tax).
In the last two days we have seen various politicians asked about Rangers, and giving answers which seem to miss totally the reality of the situation.
This is not a shipyard facing closure because an order for construction of a cruise ship or naval vessel has been cancelled at the last minute, due to the order being undercut by a foreign yard, for example, or a business owned abroad suddenly having its Scottish operation closed because pen-pushers in the USA, for example, need to cut the budgets.
This is a company placed in financial peril by the open-eyed actions of its successive owners, and by deliberate attempts to get round the tax laws, to the company’s competitive advantage.
The Scottish Sports Minister, Shona Robison, said on Wednesday:–
“In a telephone conversation this morning with the administrator, I explained that we want to see an outcome in the best interests of Rangers staff, supporters and the game of football in Scotland as a whole, whilst enabling the club to meet its obligations.
“A key concern for us is the future of those employed by the club and the potential economic impact of administration.
“The Government stands ready to offer assistance to anyone affected by implications for jobs and we will stay in contact with the administrator throughout the process to ensure we are informed of any developments.”
Margaret Curran, the Shadow Scottish Secretary, has also written to the Treasury, urging it to act “in a reasonable way” with the club.
She wrote: “The ongoing discussions between HMRC and Rangers are key to reaching a sustainable outcome for the club.“
Deputy First Minister Nicola Sturgeon said she hoped a solution could be found to allow the club to continue trading and meet its employment obligations.
She added: “Now that an administrator has been appointed, I very much hope that a way forward can be found that allows Rangers to meet its obligations, continue in business, and save jobs.”
Meanwhile, First Minister Alex Salmond admitted he was “very concerned” about the future of Rangers.
I posted a transcript of what Mr Salmond told the BBC on Wednesday here.
In particular, he said:-
“I contacted both Rangers and HMRC, whose record in court is not particularly good at the present moment and I said once this Tribunal which is adjudicating on what genuinely owed – once that Inland Revenue Tribunal sets a sum – can’t that not be agreed as the sum that has to be paid and a time scale agreed to allow the club to pay it without going out of business.”
Mr Salmond also said in a separate interview “Obviously HMRC have got to pursue in the public interest, taxation. Equally, they’ve got to have cognisance of the fact that we’re talking about a huge institution, part of the fabric of the Scottish nation as well as Scottish football, and everybody realises that.
“The most diehard Celtic supporter understands that Celtic can’t prosper unless Rangers are there. The rest of the clubs understand that as well. Therefore you have to have cognisance of these things when you’re pursuing public policy.”
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Earlier this week another business, also based in Govan, went into liquidation with the immediate loss of 175 jobs, and with the final 10 employees kept on to oversee the last rites of the company.
No politicians demanded that the creditors behaved “reasonably” and allowed the company to pay off its debt over a “reasonable” time.
This was not a business which had lost many millions of pounds over recent years in a desperate bid to be “simply the best”. It had not entered into complex, but ham-fisted, tax reduction schemes in an effort to deprive HMRC of its rightful dues.
This was not a business where the owner had publicly stated that income was £10 million less than expenditure, nor was it a business where the owner, at the same time as deciding that administration was almost inevitable turned down a huge offer for a business asset, and significantly increased the earnings of some of his staff.
The owners did not allow outstanding tax bills to increase by £1 million per month each and every month for the last nine, through a deliberate policy of non-payment.
It was even a profitable business, but as we know in the recent economic climate, profit without necessary cash flow is not always enough.
As the liquidator, Blair Nimmo, said “Regrettably, we had no option but to close the business and to make most of the employees redundant. We will now be working with the relevant government authorities to ensure staff can claim outstanding sums due to them.”
Donaghy Ltd is in liquidation, the owners have lost what they spent nearly 13 years building up, and 175 families have had their breadwinner suddenly and brutally put out of work.
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Have any of these politicians realised what they are talking about? None of them has said a word about Donaghy and the job losses there, as far as I can see.
Instead politicians of all hues are clearly looking at what suits them best in the eyes of the electorate (which is not surprising of course).
If Rangers become Rangers Football Club PLC (in liquidation) and all the jobs there are lost, that will be no great hardship for the players, most of whom are paid in a month more than the average worker gets in a year. Many “ordinary” workers will lose their jobs too, and there will be knock on effects for part time stewards etc.
However, Donaghy would have had sub-contractors depending on money coming through from that company.
This is the reality of the disaster wrought at Rangers by both Sir David Murray’s ownership and that of Craig Whyte.
Politicians are looking to justify massive non-payment of tax, which would be well used if actually in the public coffers.
Is the true answer that the politicians are, as they often do, more concerned about the “bread and circuses”? Why otherwise should they be supporting a loss-making football industry?
Do they fear what reaction there would be if the public was not distracted by football, and able to focus on the political failings, on all sides, which have led both Scotland and the UK to where it is now?
It would have been good to see a politician follow the example of Sydney Carton, at the end of Dickens’ masterpiece, and tell the truth about the situation, even at risk to their career, with the words of Carton on his lips:-
“It is a far, far better thing that I do, than I have ever done.”
NB Edited as referred to in comments
Random Thoughts Re Scots Law by Paul McConville 