Scottish Football (Tax Liabilities)

– in Westminster Hall at 11:30 am on 29th February 2012.

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[Mr Clive Betts in the Chair]

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife 2:30 pm, 29th February 2012

It is a pleasure, Mr Betts, to serve under your chairmanship for the second time during this Session. I have been asked to give the apologies of some hon. Friends who are detained in the Scottish Affairs Committee and the Treasury Committee. I am sure that many of them would otherwise have been here to discuss their take on what has happened in the Scottish game in recent weeks.

Hon. Members need no reminding of the importance that football clubs play in our communities north and south of the border. I am privileged to have two senior football clubs in West Fife. Dunfermline Athletic is in my constituency, and Cowdenbeath is some 800 metres over the border in the constituency of my right hon. Friend Mr Brown, the former Prime Minister. I want to say a little about the role of those clubs, and clubs like them, throughout Scotland and the rest of the United Kingdom.

On Saturday, I was lucky to be taken to Cowdenbeath’s home game against Brechin City football club as the guest of a local law practice, Stenhouse Husband & Irvine. While sitting with the club’s board of directors over lunch, I was able to talk about the state of the Scottish game as a whole, and the way in which clubs operate in the lower divisions. People give up their time and money to support clubs such as Cowdenbeath and Brechin City, and I was struck that they do so not for financial gain, or the glamour, or even the company of Members of Parliament, but because of their deep affection for the clubs in their communities, their love of football, and because they want to give something back to their home towns.

On Saturday afternoon, I had the opportunity to spend some time with the chairman of Cowdenbeath football club, Donald Finlay QC. You may not be familiar with that name, Mr Betts, but he is one of Scotland’s highest profile Queen’s Counsel, a former vice-chairman of Rangers football club, twice rector of the University of St Andrews, and someone who has enjoyed a colourful and entertaining history of involvement with Scottish football. While chatting to him on Saturday afternoon, I asked him why, having been involved with Rangers during their most successful period, highlights of which included narrowly missing out on a European cup, and achieving nine league titles in a row, he provided so much time and energy to support one of the lesser lights of Scottish football. I hope that Mr Finlay does not mind me sharing his answer. He said that he was Cowdenbeath born and bred, and was always proud of his home town. He simply wanted to put back a little into the community that he loves so much.

The second thing that struck me was that clubs in the lower leagues operate with far more fiscal responsibility than some of the clubs in the top two flights of Scottish football. Perhaps it is because those involved in the running of lower league clubs are local business men and lawyers that they have a healthier respect for a balance sheet, and recognise that a club’s expenditure must not exceed its income. It is undoubtedly a source of frustration to many smaller clubs that every month they must account for every penny while the so-called big boys of Scottish football are able to rack up debts of hundreds of thousands, if not millions of pounds, with no obvious means of repayment.

Thirdly, it is worth noting that those who work behind the scenes at our smaller clubs often do so for little or no recompense, and would normally have no expectation of receiving any praise or credit. For example, on Saturday, I discovered that the tannoy announcer at Cowdenbeath FC is Mr Jim Stark, who was editor of the Central Fife Times. Behind the scenes, one of the key cogs in the functioning of a successful match day is Mr Alex Haddow, chairman of the local community council. Without the tireless support of such individuals, and hundreds of other community heroes, clubs such as Cowdenbeath and Brechin City would not function. The strength of feeling in clubs further up the Scottish leagues is equally strong, and due to the full-time nature of their clubs, arguably their roots go even deeper into their local communities.

For the sake of probity, perhaps I should declare an interest at this stage. I am not only a Dunfermline Athletic season ticket holder, but my constituency office is located within the club. Dunfermline Athletic—or the Pars—like many other clubs, has invested heavily in supporting youth and grass-roots football. Indeed, the club offers classes for children from 18 months and through primary school to introduce them to the game, and to build their confidence and interpersonal skills. Those classes, with the support of their parents, help to develop children’s motor skills, and they provide a fun and safe environment so that children can integrate and develop their characters. The emphasis is, rightly, on fun and enjoyment, but it is a crucial role, for which clubs receive no financial recompense, and fills a vital role in society—some might say the big society, which the Minister is so keen on. Beyond primary school, football clubs, like those south of the border, have successful youth academies. Dunfermline’s under-14s and under-15s recently visited the city academy in Manchester, and were able to take part in a contest against players from the likes of Manchester City.

The financial situation in Scottish football clubs in recent years has been dwarfed by their counterparts in the English leagues. I shall provide some context for the finances of Scottish football. The television sponsorship deal in Scotland is only approximately 1% of that south of the border. Outside the old firm, players’ wages in the Scottish premier league are typically only £1,000 to £3,000 a week, which is a fraction of that paid to players in the premiership, the championship, or even league one. To put it simply, the annual wage of a Dunfermline player is less than the weekly salary of a Manchester City, Chelsea, or Manchester United squad player. None the less, clubs such as Dunfermline are expected to compete with the giants of Scottish football.

The recent financial events at Rangers football club cannot be seen in isolation. Before I talk about the impact on other clubs of Rangers going into administration, it is worth recapping the saga at Ibrox. The origins of Rangers’ problems date back over two decades. In 1988, David Murray bought a majority shareholding in the club for approximately £6 million. Mr Murray invested heavily in building a team that could not only dominate the Scottish league, but compete with the best of Europe. Something that is often forgotten is that when Rangers, under Murray and Graeme Souness, were building their successful side, which would go on to win nine league titles in a row, English clubs were banned from competing in Europe, so Rangers were able to attract players from England who, to play in Europe, either had to move to Europe or travel north of the border to play for the old firm. The list of players at Rangers during the late ’80s and early ’90s was a “Who’s Who” of Bobby Robson’s England team. The names will be familiar to every English fan: Chris Woods, Terry Butcher, Trevor Sinclair, Gary Stevens, Trevor Steven, Ray Wilkins and Trevor Francis. They were great players in a great team.

Rangers were able to use their dominance and ongoing success to attract some of Europe’s best players, such as Brian Laudrup and Paul Gascoigne. Unfortunately for the club, their ambitions were never matched by their income, and in 2004 those debts peaked at a staggering £72 million. However, in the next few years, Rangers reduced their debt to some £30 million by the end of the decade, according to their annual accounts. In 2010, Mr Craig Whyte confirmed to the stock exchange that he was in talks with Rangers’ owners about a takeover. In 2011, Mr Whyte formally bought the club for a notional £1, having agreed to take on the club’s debts. He promised Rangers fans that he would be able to service those debts.

Photo of Nigel Dodds Nigel Dodds Shadow Spokesperson (Justice), Shadow Spokesperson (Foreign and Commonwealth Affairs), DUP Westminster Leader

I congratulate the hon. Gentleman on securing this debate. He referred to the history and the debts racked up by Rangers, but does he agree that that is commonplace today? Manchester City and Chelsea have massive debts, far in excess of what Rangers ever racked up. The only difference is that they have someone to stand behind those debts. The phenomenon is not new, and sadly it has not gone away, but it is not unique to Rangers.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

The right hon. Gentleman is correct. What is appalling about the Rangers situation, and has come to light in recent weeks, is that Mr Whyte did not have the money to service the debt. It has now transpired that in what I would regard as a most disgraceful act, Mr Whyte and cohorts borrowed money from Ticketus on the future sale of season tickets. In effect, Rangers fans paid for Mr Whyte’s ill-fated takeover; they are the losers, and I am sure that disgraceful situation will be recognised across the House.

Photo of Gregory Campbell Gregory Campbell Shadow Minister (International Development)

I, too, congratulate the hon. Gentleman on securing the debate. He has raised an important issue about Craig Whyte and the apparently underhand way in which he acquired a controlling influence at Rangers football club. Does he agree that if football clubs could allow fans a greater degree of controlling influence, à la Barcelona model or perhaps in the way alluded to earlier in respect of Cowdenbeath, it might move us away from the insidious controlling influences of multi-billionaires who appear to use football clubs as playthings?

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

The hon. Gentleman is absolutely right. I see that Penny Mordaunt is in the Chamber. She has championed that model for Portsmouth FC, so perhaps she will be tempted to contribute to the debate. There are some good examples of that model in Scotland. I referred earlier to Brechin City which, as hon. Members may know, had on its board Mr David Will, the FIFA vice-president for the British Isles, and a local lawyer, steeped in Brechin City. There are successful models of clubs, both large and small, where the shareholders are the fans. I hope that the Treasury will look at ways of trying to ensure that a fit and proper person test means not only that liars such as Mr Whyte are not put in charge of clubs, but that we can all have comfort in club finances for the future.

Photo of Penny Mordaunt Penny Mordaunt Conservative, Portsmouth North

I congratulate the hon. Gentleman on securing the debate, which I am attending as a Pompey supporter, so I share his pain and that of other hon. Members. We too have been badly let down, but I hope that the supporters’ trust will soon have a financial stake in the club.

Does the hon. Gentleman agree that when HMRC deals with clubs in such situations, it is important that it considers the club as a distinct entity, and does not tar it with the sins of the whole football community going back over many years? That has been my experience of the way that HMRC dealt with Portsmouth, and I would like to put on the record my thanks to HMRC staff, and to the Minister for facilitating dialogue. I hope that Rangers and other clubs have similar success.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

I am grateful to the hon. Lady for those comments. She has been a staunch champion of Pompey’s interests, and I know that she badgered the Minister on more than one occasion to ensure that the club got a fair hearing. She is right to say that each club needs to be considered on its own merits, and I will perhaps return to that point during my remarks.

Thanks to the Scottish press, which has been assiduous in trying to get to the truth of this sorry affair, it has been particularly disturbing to discover in recent weeks that HMRC has been engaged in a long-standing battle with Rangers over what the Treasury believes, and I believe, is a tax-avoidance scam instigated by David Murray. If Rangers lose this ongoing court case, it has been estimated that the club will owe HMRC somewhere in the region of £45 million in unpaid taxes from over the past decade.

On 9 January 2012, shares in Rangers were suspended from trading on the PLUS stock exchange for failure to submit audited accounts—alarm bells should have rung at that point. Mr Whyte, however, dismissed it as unimportant because he was by then, he argued, the dominant shareholder. On 5 February, Rangers were knocked out of the Scottish cup by Dundee United at Ibrox. On 11 February, Dunfermline hosted Rangers in the Scottish premier league. Finally, after months of speculation, on Monday 13 February, Rangers lodged their intention to enter administration at the Court of Session. Mr Whyte told reporters that, in his estimation, the club’s final tax bill could amount to £75 million—an astonishing amount. The following day, the club appointed Duff and Phelps as administrators. The SPL deducted 10 points from Rangers, which left them 14 points behind Celtic.

Rangers entering administration has not simply changed the dynamic of the title race but has had a devastating impact on three groups of people: first, the staff—both playing and non-playing—of Rangers FC; secondly, the companies that are owed money by Rangers as creditors; and thirdly, the other 11 members of the Scottish premier league, which is the group that I wish to raise with the Minister today.

No one should have anything other than sympathy for those who face losing their jobs at Ibrox, in particular those who work behind the scenes and are not millionaires, and who will not easily find employment in the current economic climate.

There are two distinct yet equally important categories of club. Two clubs in the SPL have claimed that they are owed money by Rangers for ticket sales, and I will explain their situation for the benefit of the House. Under the rules of the Scottish Football Association and the SPL, the total gate receipt for a league game belongs to the home club. It is standard operating practice for the away club to sell tickets for their end of the ground, but under the rules of the league, that money must be paid to the home team within seven days of the fixture taking place, minus any pre-agreed handling fee. The money is not the property of the away team, which is merely the handling agent.

For games in the Scottish cup, however, ticket sales for the whole ground are split equally between the two clubs, minus any operating costs, and the home team get to keep any proceeds from hospitality, refreshments, or programme sales. Under SFA rules, the two teams that have sold tickets do not have any right to count those ticket sales on their balance sheets, as they are merely holding agents and the money is to be put into the pool of gate receipts for the cup tie as a whole. In other words, the two clubs are merely acting as agents; it is not their money.

When Rangers entered administration, the club and its administrators, Duff and Phelps, refused point blank to hand either amount of money to Dundee United or Dunfermline, arguing that it should go into the pot of credited money. Let me be clear and send a message to Rangers’ administrators: that money does not belong—and has never belonged—to Rangers. Holding on to it is not only morally wrong, it is nothing short of theft.

What makes matters worse is that members of the Rangers board of directors were in the directors lounge at East End Park on the Saturday in question. They looked their counterparts in the eye, and told them that on Monday the money would be transferred to Dunfermline Athletic by BACS payment. It is utterly inconceivable that on that Saturday afternoon, the board of directors, which included Mr Ali Russell, did not know that on Monday afternoon they would be filing papers with the Court of Session. For the two clubs involved, despite the support of the SPL and the SFA, it will probably take months to recover the money to which they are legally and morally entitled from Duff and Phelps.

The second category of club involves any club in Scotland—or elsewhere—that has entered into financial transactions with Rangers, for example over the transfer of players. We know that at least one club, Heart of Midlothian, stated that it is owed close to £1 million for the transfer of a player to Rangers. It is in a more complicated situation—one that you will be familiar with, Mr Betts—concerning the rule of football first creditors. As I understand it, Scotland does not have the same rules as England about football first creditors, but that is an issue of ongoing legal dispute between the clubs, HMRC and the creditors.

It is more than likely—in fact, I have been led to believe—that other clubs, which I will not name because they have not asked to be named, are also owed money for various transactions and are in a similar situation to Hearts. As you will see, Mr Betts, these are not insignificant sums, particularly given the parlous state of Scottish football as a whole. Scottish football faces several months of uncertainty and disruption while the financial affairs of Rangers are sorted out.

Before I set out what HMRC should be doing going forward, it is worth reflecting on its role in allowing the situation to occur in the first place. In recent months, every Member of the House will have been visited by the owners of local businesses, asking for assistance in working with HMRC to deal with short-term cash flow challenges. The sums involved are often not large. However, HMRC is not exactly known for adopting a sympathetic or flexible approach to assisting local companies with problems.

Indeed, the Minister will probably recall correspondence between him and me before Christmas about one of my local businesses, which despite many years without a single missed or late payment, had experienced a short-term problem and found HMRC to be unbending and—dare I say it?—uninterested in its problem. People can imagine the surprise felt by those businesses, many of which have contacted me in recent days, when we learnt that HMRC had not received any payment from Rangers for pay-as-you-earn or, apparently, VAT since last May and that the sums for PAYE and VAT have now reached, according to the Scottish press, some £15 million.

I am not criticising HMRC per se for the decision not to require payment from Rangers. I do, however, believe that it is wrong that the club has been treated differently from not only any other club in the league, but thousands of small and medium-sized businesses in Scotland. There are serious questions that require proper answers, and I hope that the Minister can provide some of them today.

First, it is inconceivable to everyone, frankly, given the sums and the time period involved, that HMRC allowed this situation to develop unilaterally. Can the Minister confirm to the House whether any UK Ministers were aware of the size and severity of the non-payment by Rangers, and whether any discussions took place among UK Ministers and between Ministers and HMRC about possible courses of action? Will the Minister also confirm whether any representations have been received from the Scottish Government, either before or after Rangers went into administration, on the issue of its tax liabilities?

As I said, I do not criticise the decision of HMRC not to force payment of moneys due. However, I believe that given the knock-on effects on the other 11 clubs and the fact that the integrity of the Scottish premier league season itself is now at risk, HMRC must take proactive steps to support the other 11 clubs. In short, I would like HMRC to carry out the following actions, and I would be grateful for the Minister’s confirmation that HMRC will indeed do so. HMRC should now proactively contact the other 11 clubs to establish what financial liabilities they have as a result of Rangers going into administration. HMRC should then work constructively and sensitively with the clubs and the SPL to ensure that none of the other clubs is unable temporarily to meet their obligations to the taxpayer.

To be clear, I believe that it is right and proper that by the end of the season, all 12 clubs should meet all their financial obligations to HMRC and the taxpayer, but they need to be given the breathing space to sort out the sorry mess created by Mr Craig Whyte. I urge the Government to ensure that all the other 11 clubs pay in full the sums owed to HMRC by the time of the last whistle at the end of the season, but that individual packages of payments can be tailored so that financial penalties are not incurred by them as a result of the actions of another—indeed, the largest—club.

I would be grateful if the Minister could also set out what contact he has had, if any, from the Scottish Government since Rangers went into administration to offer assistance to the clubs or to the SPL to meet their obligations. I would be grateful if the Minister could meet me in the coming days if there are any questions that he feels unable to answer in a public forum, so that we can further discuss the crisis in Scottish football.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe 2:54 pm, 29th February 2012

I just want to make a few comments on this important subject. I will not claim to share other hon. Members’ expertise in Scottish football. No doubt, other hon. Members, particularly from Scotland, will speak with a great deal of insight about the situation at Glasgow Rangers football club. However, I think that Thomas Docherty, in opening the debate, touched on a number of important points that are relevant to football in Scotland and in England and relate to the financial administration of the game—in particular, the football first creditors rule.

There is no doubt that, in the case of Rangers, the losers are the fans of the club and other clubs and businesses to which it owes money. They are the people who have lost out as a result of what has happened. The failure of a club of its size has an impact in destabilising the structure of the league, so in some ways everyone involved in football in Scotland is affected, whether or not they are directly employed by or associated with Rangers football club. The hon. Gentleman set that out very clearly.

I think that there is a big issue to do with the football creditors rule. The caution that I would express about it in relation to Scotland is that it has had a damaging and destabilising effect on the game in England. It cannot be right that when a club fails and goes into administration, its creditors, if they are not within football, might get a penny in the pound. We might be talking about a local business that prints the club’s programmes or a local builder who had worked on its ground. When Leeds United went into administration, the West Yorkshire ambulance service got pennies in the pound or a penny in the pound. However, footballers who are owed salaries and football clubs in different parts of the country that are owed transfer money get their money in full.

The hon. Gentleman made a very good point about ticket sales—money that is supposed to pass directly from one club to the other. He highlighted that particularly well. It is unfair to other creditors of football clubs—community businesses working alongside a club, perhaps employing fans of that club—that they lose out massively.

It would be a good thing for football if clubs had to take a stronger interest in each other’s financial performance when they entered into financial transactions with each other. A club would really have to think, when it sold a player to another football club, “Can this club afford to pay us?” At the moment, clubs know that that risk is guaranteed by the football first creditors rule, so they are more likely to sell players to clubs that cannot really afford them.

The type of discipline that I have described would be good. It might help to bring about something that is badly needed in football in England and Scotland—some deflationary pressure on players’ salaries and transfer fees. That is where the money is going. There has never been more money in football than there is today, yet there have never been so many football clubs failing financially.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

The hon. Gentleman has been a big champion of football reform. Does he not accept, though, that the sums of money in Scotland are very different from those in England? The reality is that two clubs in Scotland hold 90% of the revenue and, in effect, bully the other clubs in Scotland.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

The hon. Gentleman makes a very important point. The failure of Rangers in Scotland has a much bigger market-distorting impact on Scottish football than the failure of Leeds United, Portsmouth or another large club in the English premier league would have, so it is a much more acute problem. That is an area where greater transparency on financial performance and disclosure between clubs would help. However, that is not something that the clubs should be allowed to do on their own. They require help from the governing bodies and, where necessary, from HMRC as well, so that that can be properly policed. I agree that it would be very difficult for smaller clubs in Scottish football to start calling the shots with the old firm. That is a problem, but it is one where the competitions have a role to play.

Where clubs owe money to the taxman, that is a serious matter, as it is for any other business. The hon. Gentleman made that clear in his speech. Businesses in our constituencies—we have all had such experiences in the past year or two—have problems because they are in arrears; HMRC is coming after them for the money; and they ask for help. It is a very difficult situation to be in. Businesses understand that if they owe money to the taxman, it is a serious issue, so how is it that football clubs have been allowed to build up large debts?

When Leeds United went into administration, the taxpayers of the United Kingdom lost £6 million in unpaid taxes. Why was it allowed to get to that stage and to get that bad? HMRC should intervene, but the competition organisers should be keeping an eye on the tax payments and how up to date they are for their clubs. The Premier League in England has made some progress with that. It even has a system where clubs can have television money or prize money withheld from them if they owe money to the taxman. That money might go straight to the taxman. The clubs have to understand that they have to pay their bills just like any other business.

It is unfair for the clubs to subsidise spending that they cannot afford by securitising their ticket sales, selling their future gate receipts, borrowing money from their banks until they cannot borrow any more, borrowing money from the local businesses that they engage with and owe money to and borrowing money from the taxman. They cannot keep on borrowing money at every opportunity until there is none left. That has to be stopped, and the tax authorities have a big role in doing so, with the support of the competition organisers. That is one of the reasons why the Culture, Media and Sport Committee, of which I am a member, has recommended that there should be a licensing scheme for football, so that the football authorities can keep an eye on the financial performance of clubs and ensure that they are not getting into too much debt.

There is also the introduction by UEFA of the financial fair play rules. In Scotland, just as in England, there will be many clubs playing in the top division that will have a chance of qualifying for European competitions—certainly the Europa league, if not the champions league—that will want that licence. They will understand that they have to be able to balance their books in the medium term. That will be an incentive to clubs to ensure that their financial performance is better in the long run. We should be putting our own house in order, however, and the competition organisers have a big role to play in ensuring that that happens.

There is a great role for HMRC in ensuring that tax liabilities are paid. There is a role in getting rid of the football first creditors rule.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

The hon. Gentleman is making a compelling argument, but perhaps I could tempt him to say something about clarity of ownership as well. Part of the issue with Leeds United in particular was the uncertainty over who owned which assets. Will he speak about that?

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

The hon. Gentleman pre-empts the final thing that I wanted to touch on in my remarks and the subject of my ten-minute rule Bill, which I will introduce on 13 March and which is about the ownership of clubs and assets. It is an important area and one where HMRC could be prevailed upon to help. When Leeds United failed, there was uncertainty over who took over the club’s liabilities. It was taken over by a beneficial trust and the investors in that trust were never made known. There were allegations of a relationship perhaps between FSF, which took over control of the club, and some of the club’s other creditors. That was never known, because we never knew the identity of those investors. It would help football a lot if there was transparency over the ownership of clubs and clubs’ major assets, such as training grounds and stadiums, so that we can see who controls them and where the money comes from.

There have been allegations that certain people who represent the brass plaque of the ownership of the club are not the source of finance for the real ownership of the club. I do not understand how the fit and proper person test can be applied to a club’s ownership if no one knows who that person is in the first place. We do not know who owns Coventry City, who currently play in the second tier of English football. Until last summer, we did not know who the owners of Leeds United were either. That cannot be allowed to continue. Certainly, if clubs are failing and the taxman is losing millions of pounds in revenue, businesses and local communities are losing money because the clubs owe them money and the obscurity of the clubs’ ownership causes further concern and a lack of confidence, that needs to be resolved.

The ultimate way to resolve who owns football clubs—again, HMRC may be able to help us on this—is to understand the source of the finance. People might assume ownership or the ownership might be from a fund that is registered in Nevis and operated in Switzerland. Where does the money come from? HMRC has to look at that routinely. HMRC and football clubs’ banks have to be satisfied that football clubs are not being bought or injected with cash that may have come from uncertain or dubious sources, so that needs to be followed.

I feel that HMRC should launch a retrospective investigation to determine what the source of finance was for Leeds United and who owned the club, so that if there was any uncertainty about the club’s ownership and who was involved in putting in money to take it out of administration, that might be pursued. We have a right to know what happened in that case and the tax authorities may be the only body that can pursue that.

Poor administration of football clubs creates a big debt to society, which communities around the country are paying. We should send a lesson out that we want greater transparency over ownership and greater transparency of finances between clubs and a more responsible attitude from clubs in their transactions with each other, to avoid the big impact that we feel at the time and that we see with Rangers currently of the cost of failure. That is the cost to fans, local businesses and the competitions in which they compete.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution) 3:04 pm, 29th February 2012

I congratulate Thomas Docherty on securing this important debate. He will know that I have spent many a fine afternoon on the terraces of East End Park as a native of Dunfermline, supporting the mighty Pars. My affections have now transferred to the mighty Saintees of McDiarmid Park in Perth. I know that it is very much to the hon. Gentleman’s disappointment that almost the entire length of the Scottish premier league separates Dunfermline from St Johnstone just now.

The hon. Gentleman mentioned two other clubs in his contribution. It was a bit remiss of him, when talking about Cowdenbeath, not to give their nickname, which I am sure that you, Mr Betts, are bursting to know. They are known as the Blue Brazil, a nickname that could never be more deserved. I remember when my grandfather used to take me to watch the cup games against Cowdenbeath, being a native and resident of West Fife, where the league support was for Dunfermline. I went to Central Park to watch the cup games when Cowdenbeath were competing. That was a forlorn activity back in the 1970s, because on only a couple of occasions did Cowdenbeath manage to get past the second round. He also mentioned Brechin City, which used to be in my constituency, in north Tayside. What is notable and significant about Brechin City is that it is the only professional football ground with a beech hedge as its border. A lot of Scottish football fans liked to go along. There were the bridies at Forfar Athletic and the beech hedge at Brechin City.

Enough of my tour around the football grounds of Scotland; let us get on to business. I think that everybody here is a football fan, but where on earth are the rest of my Scottish colleagues? There is only the hon. Member for Dunfermline and West Fife. We get so few opportunities to discuss Scottish issues, particularly important Scottish issues about football. We are all proud that we represent football clubs in our constituencies. I have St Johnstone, a fantastic team doing well in the premier league, but where are my Scottish colleagues this afternoon? It is not as if they get loads and loads of Scottish business in this House. Not one of them could be bothered to turn up today to discuss the biggest crisis that is facing our national game. That is a disgrace, which says a lot about my Scottish colleagues when it comes to debating these important issues.

We have never had a crisis like this one. It is totally unprecedented and how it will end is anyone’s guess, but the nature and the face of Scottish football will probably change dynamically because of what is going on.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

First, some colleagues have been detained at Select Committees this afternoon. Secondly, does he agree that many colleagues are nervous about discussing what has happened with Rangers, because it is difficult to have a rational, sensible debate about the Scottish game without many of our constituents taking umbrage at us?

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

I do not know that that is true. I know that there is a bit of interest in this debate: one only has to look across the corridor from here. That does not excuse anything, however. This is important and it is unfortunate that there are not more Scottish colleagues here to debate what is probably the biggest crisis that we have seen in our game. This deserves and requires proper debate and it is unfortunate that we will not have that today, because this crisis deserves to be dealt with as sensitively as possible.

I listened carefully and closely to the remarks of the hon. Member for Dunfermline and West Fife. Where I can go along some way with him is that there is a real desire for a solution to this problem. There has to be a solution, because it is almost inconceivable to imagine Scottish football without Glasgow Rangers. They have 130 years of history and tradition. They have huge support—some 50,000 home fans go to watch Glasgow Rangers at a home game every second week in the city of Glasgow. To have that taken out of our game would have a significant and deep impact on the ability of the SPL to continue to produce a platform that will engage and encourage people and ensure their support.

It is not just about ticket receipts. When Rangers come to St Johnstone, it is the biggest weekend that we have in Perth. It is not just the inflated gate that we get by playing one of the old firm; it is also some of the activity spin-offs for Perth. It is not just about the pubs on match day. Glasgow Rangers supporters may choose to take a day either side of the game—the Friday night or the Saturday evening—so our hotels and restaurants are busy. There are also the other activities that go on within the city. To lose that would be to lose a significant amount of income and economic activity, which would be very much missed.

There is also the issue of television rights. As the hon. Member for Dunfermline and West Fife said, they involve a fraction of the sums for television rights in England, but they represent a massive income for the Scottish game. If there were no Rangers, what impact would that have on the television rights sold to ESPN, Sky and the BBC, which play a massive part in the incomes of so many other Scottish football clubs? We would also miss the drama and spectacle of old firm games, which are enjoyed and appreciated not only in Scotland and the rest of the United Kingdom, but throughout the world.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

Just for the sake of clarity, it might help to reiterate that if either half of the old firm is not in the SPL, the contract with the TV companies falls. It is therefore in the SPL’s interests to treat Rangers as a special case because of those knock-on effects.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

I am glad the hon. Gentleman mentioned that. He is absolutely right that that is one possible consequence of losing Rangers. That is why we should do all we can to ensure the ongoing survival of Glasgow Rangers football club.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

Glasgow Rangers is too big to fail, and they will find a way of restructuring their debts and coming back, but does the hon. Gentleman share my concern that the real long-term losers will be small businesses and other football clubs?

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

The hon. Gentleman is spot on. There is, of course, talk and speculation about what happens if Rangers are unable to come out of administration. Indeed, the Scottish press, particularly the sporting press, have a fascination with the old firm, and we read about it almost every day. However, the hon. Gentleman is right that some of the small businesses that are expecting payment from the administrators will suffer a massive loss. That is a real issue, and I am grateful to him for bringing it up.

Football is our national game. All our football clubs play an enormous part in our economic activity and make a real contribution to our communities and constituencies. The Fraser of Allander Institute estimates that the old firm’s economic importance to Glasgow and the rest of the Scottish economy amounts to £190 million. More than 3,000 full-time jobs depend on SPL football, and £200 million is spent on related commercial activities in Glasgow alone. According to the Rangers annual report, the direct economic activity generated by the club is in the region of £56 million.

Most importantly, there is also the issue of what happens to the 331 people directly employed by Rangers. They must be absolutely paramount in our considerations, and I hope some solution is found so that they can continue to serve in their jobs.

This is not, however, just about clubs’ contribution to our economy, important and significant though it is. There is also the value professional clubs have for our communities, and the hon. Member for Dunfermline and West Fife mentioned that. We can all see the infrastructure that exists and the clubs our young people are encouraged to participate in. We know that our football clubs make an immense contribution to our communities. According to the SPL’s 2011 community report, 20,000 people participate in community projects weekly, and SPL clubs spent £8 million on community activity, which is no small sum.

There are also the fans in Scotland. I know the audience for SPL football has diminished, but 3.2 million people still attend SPL games each season, and a further 76 million watch them on ESPN, the BBC or Sky. Football is therefore a big business, which contributes much to our economy and our communities, and we must ensure that we respond to the current crisis with the sensitivity it deserves and requires. Scottish football is in a precarious state, and it remains a fragile product, so it can ill afford to lose one of its major protagonists.

Of course, this is not just about Rangers. Several of our clubs are teetering on the brink of financial collapse and ruin. I just wish they could all be like St Johnstone, which is run so perfectly and effectively by Geoff Brown, its chair. It never gets into debt, it always ensures it looks after its liabilities and it never has a problem with HMRC, but that is not the case with many of the clubs in the SPL. I am thinking not just about Rangers, but I will not mention the other clubs, because we all know which ones are experiencing real difficulties and pressures.

We have seen what happens when clubs cannot meet their responsibilities and liabilities. Dundee and Livingston went into administration. We have also seen one SPL club—Gretna—go to the wall in the past 10 years. It was not a particularly great example, and I doubt whether other clubs would like to replicate its business model.

These are tough times, and gates are falling. We have heard from Damian Collins about the pressure of football wage inflation and how it must be brought under control. The hon. Member for Dunfermline and West Fife was of course right to mention that SPL football is totally different from the English premier league or first division, and only the wages in the old firm are similar. However, some clubs have tried to replicate what we have seen elsewhere and to buy success by buying expensive players. They have tried to compete with the old firm and they have got into all sorts of difficulties. That is probably one of the reasons why Dundee football club, in particular, experienced the difficulties that led to its going into administration. There is a demand all the time to buy more expensive players, because that is what the market dictates, and clubs are encouraged to fork out money. However, gates are falling, and there is any amount of competition from other activities for the time of constituents, who might otherwise go to watch football games.

We all accept that our football clubs must meet their financial obligations. Everybody in every business must pay their tax—it is as simple as that. They must pay it on time and they must ensure that any business plan is totally predicated on meeting their tax liabilities. However, I am sure I am not the only Member in the Chamber who will have put the case for businesses and individuals in his constituency who have got into trouble over their tax liabilities. I do not know how many letters I have sent to HMRC on behalf of small businesses and people who have got themselves into difficulties. It is absolutely right that people also make representations on behalf of Glasgow Rangers because of its significance to Scottish football and the number of jobs that depend on it, as well as its history and tradition, its success and its value to the SPL.

The club is in a mess. The hon. Gentleman mentioned the current regime, which has been a total disaster—we cannot call it anything other than that. Once Craig Whyte took over its debts, something was always going to happen. He did not have the money to ensure the club could get out of its difficulties. What he did with Ticketus was appalling, and there will now be an SFA investigation into the Ticketus deal. There will also be an investigation to see whether Craig Whyte is a fit and proper person to run a football club, and we will have to see the details. Again, it is the fans who suffer, and the people who work in the club have been the major recipients of all the bad news and all the doom and the gloom.

Right now, the administrator is responsible for running the club. In the next few days, Duff and Phelps expect to announce the first round of job losses, which will first impact on the playing staff. There are outstanding issues of payments to other clubs, and I have heard the representations from Dunfermline football club that it should be paid. The hon. Member for Dunfermline and West Fife is right that money should be paid to clubs that are owed it, and Rangers have no right whatever to retain it. However, the job losses show the real impact that going into administration has on people’s careers and jobs.

The hon. Gentleman talked about the Scottish Government’s role, and they stand ready to offer assistance to anyone affected by job losses. They have said they will do all they can to keep in contact with the administrator and to be available to provide support and assistance if there are job losses. In addition, there is the PACE—partnership action for continuing employment—programme in Glasgow, which has offered to provide any assistance it can if there are job losses. PACE has offered Duff and Phelps assistance almost daily to take things forward, and there have been several conversations to that effect. This is a developing and emerging situation, and Scottish Ministers and PACE are keeping their eye on it.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

Perhaps the hon. Gentleman can provide some clarity, because he speaks on sport for the Scottish National party. He will be aware of reports in this morning’s newspapers that the Scottish Government are apparently offering all the assistance they can to the Scottish open, and the assumption is that financial assistance may be forthcoming. Does the hon. Gentleman agree that if the Scottish Government are going to put money into the Scottish open, they should also see what financial assistance they can provide to the SPL?

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

The hon. Gentleman is right, and I am grateful for that assistance for the Scottish open. I am sure that he will be the first to recognise that the input that the Scottish Government have made to Scottish football is significant—the £25 million that was announced towards the national performance centre, for example, the £8 million through CashBack for Communities and the £4 million going into the refreshed youth action plan for the next four years. That shows the Scottish Government’s support for Scottish football and their commitment to ensuring that it will continue to develop in the next few years. That will be welcomed in football throughout Scotland.

I want to mention a couple of initiatives. Unfortunately there was some appalling behaviour two weeks ago at Glasgow Rangers, in the home game against Kilmarnock, which shows that there is still a massive problem with sectarian chanting. I am delighted that for the first time the Scottish Government have put in place legislation to tackle that effectively. It was not supported by the rest of the parties in the Scottish Parliament, but at last something will be done to try to get rid of that curse from the national game.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

I regret the fact that at the end of a good speech the hon. Gentleman is trying to bring in party politics. I went to the Dunfermline and Rangers game as a guest of the police, early in the season; the procurator fiscal was there. The PF, the clubs and the police were clear about the fact that that legislation, which no one else in the Scottish Parliament supported, was unnecessary, and unworkable.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

It is the police who have been telling the Scottish Government that the legislation is required. We have had that debate in the Scottish Parliament, and thank goodness that behaviour will at last be challenged effectively. I welcome the fact that the SNP Scottish Government are deciding to take on the issue head on, and trying to get that appalling scourge out of the Scottish game.

There are other issues in Scottish football, but the one that we are debating is the big one—the thing that we need to get tackled and sorted out. I hope that HMRC will work sensitively with the administrator, and that we will get a solution that will ensure that it will be paid what it is owed. The main thing is that HMRC should secure the outstanding liabilities that Glasgow Rangers has towards it. Let us hope that we get a solution that will allow Glasgow Rangers to come out of administration—a solution that will mean that as much as possible will be done to retain the staff who work on its behalf; that we will have a Scottish premier league worthy of that title and enjoyed by its supporters; and that we can go on ensuring that that product can be developed, and made entertaining and exciting for people not just in Scotland but worldwide.

Photo of Owen Smith Owen Smith Labour, Pontypridd 3:22 pm, 29th February 2012

I congratulate my hon. Friend Thomas Docherty on securing an important debate, which has touched on a much wider set of issues than just Scottish football. It covered the importance of football, and football and sporting clubs, as cultural institutions within communities—institutions that help bind communities together. I thought that my hon. Friend’s remarks about Dunfermline, and in particular Cowdenbeath, were deeply informative. I confess I was not aware that Cowdenbeath were known as the Blue Brazil. I assume that that is to do with the shirts, and not the temperature in which they play north of the border; but it could be either, I guess.

Two broad sets of remarks have been made in the debate, and I want to frame mine against that context. I have already mentioned one of the areas covered: the importance of football clubs as cultural and community institutions that are integral parts of communities—aspects of communities that inspire pride, loyalty, aspiration and ambition in individuals, but which also act as standard bearers for those communities in the wider world. I do not think that anyone could deny that Rangers, Celtic—their great rival—and all the great clubs of Scotland have been standard bearers for Scotland in the world of sport and beyond.

Rangers, of course, are a great Scottish club, and the one that prompted today’s debate. We heard a bit of their 140-year history, and about the nine great championships that they won on the trot in Scotland, equalling, I believe, the Celtic record. I was not aware, until I started looking at this subject, that they are also the club that has won more national championships than any club in any national football league in the world. That is a measure of the club’s success. However, what we cannot understand by looking at the names inscribed on trophies and trophy walls in such clubs is the wider, deeper, historical, cultural and sporting significance of the club. Anyone who has been to Ibrox, as I have, as a great sports fan—though a Welshman, of course—knows the importance that the community attaches to it. It is right that we should be discussing the issue today, and framing our remarks in that context.

The other broad set of remarks on the sporting front was about the role of money in sport, and football in particular, as well as about ownership, the transparency of football club financing, and the sustainability of clubs in a world where money seems to be the prime driver, despite all those other—in many respects far more important— cultural, historical and community values associated with the role of the club. That is something that I, as a Welshman and a sports fan, feel is significant for a different code of football—rugby football. We have similar issues with the game in Wales. I agree with Damian Collins, who made some remarks about the necessity for greater transparency about finances. He also said some things, to which I hope the Minister will pay attention, about the role of HMRC and the Government in seeking greater transparency in finances, ownership structure and the potential pitfalls and difficulties that clubs may encounter, in rugby and of course football. Clubs are businesses, yes; but they are more than just businesses.

However, in that context of clubs as businesses the role of HMRC is simple. Its job is to collect the taxes that are due in the appropriate volume and at the appropriate time. It is not often that I or other hon. Members quote judges; perhaps judges would feel that we do not do so approvingly. However, Lord Justice Mummery, in a recent tax case at the Court of Appeal, said rather appositely that

“tax is a contribution towards the costs of providing community and other benefits for the purposes of life in a civil society”.

That is a phrase that would have fallen, perhaps not as eloquently, but certainly as easily, from my lips. Tax is important to the wider community just as those football clubs are.

It is in those two contexts that I place my remarks. Individuals and businesses, however humble or, in the case of Rangers, mighty they are, need to pay their taxes. Therefore it is a matter of great regret to me that Rangers have not paid the £9 million in taxes that HMRC has said is outstanding for PAYE and VAT.

That is why Rangers have gone into administration, which we deeply regret. As I understand things, HMRC is also looking at whether there may have been instances of tax avoidance. I am sure that the Minister will take great care over that, given his and my deep and continuing concern about tax avoidance. I know, in particular, that HMRC is interested, in the Rangers context, in the use of employee benefit trusts. There are several investigations in progress about EBTs, and, as I understand the matter, their use for payment of individuals working for Rangers, including players, plays a part in the non-transparency of the financial affairs. I will not go into further detail because I cannot: we do not have the detail that would make further comment possible. However, I should like assurances that the Minister is making himself certain that he understands, to the extent that he can, given the arm’s length nature of HMRC, the detail and complexity of the issues involved. I also ask him to consider the wider cultural set of understandings and sensitivities that HMRC needs to bring to bear in this case.

One of the other issues that has clearly come out of this debate is the importance of local knowledge and local understanding—the rootedness of Rangers in the local community. Under the current Government, in particular, and under the last Government, there has been a reduction in numbers of local HMRC staff. That reduction is being sped up under the current Government, with 10,000 more HMRC staff due to go before the end of the spending period; it was announced in January that 4,000 or so staff would go. Given that reduction and the potential loss of local knowledge, is the Minister certain that those people in HMRC who are dealing with Rangers in Scotland will understand the cultural context and have the requisite sensitivity to appreciate both the financial nexus locally—the interconnectedness of clubs and businesses that surround Rangers, and of course the connection between Rangers and the wider Scottish professional football league, which, as we have heard from hon. Members, is a crucial connection—and the cultural significance of Rangers for the local community?

Given the Minister’s slightly arm’s-length relationship with Revenue and Customs, has he been briefed in detail about Rangers, to the extent that he can be briefed about the issue? Does he feel that he is fully on top of the issue? Does he understand—I am sure he must—the importance of Rangers to the wider community and the wider sporting fraternity in Scotland? Is he certain that the HMRC people dealing with Rangers have the requisite expertise?

In closing, I will say a few things about the issue that I think is at the root of many of the problems that we have in football; there may be particularities around Rangers connected with the takeover of the club by Craig Whyte and the way that the club’s business has been managed since May 2011, but Rangers are not a unique case. The root cause of the problems that football clubs, rugby clubs and other sporting institutions across the length and breadth of this land are facing is to do with the role of money and the commercialisation—the commodification—of sport, whereby players and clubs are bought, sold and traded in a global marketplace that Governments in this country and elsewhere seem to have little control over, and perhaps they also have too little insight into the financial machinations and the rationale for the changes that happen. But if those changes come about, especially if they come about as dramatically as they have done with Rangers, and if they lead to the potential loss of great institutions that are of such cultural and financial importance to their local communities, Governments need to think about the extent to which they must improve their insight into those sporting institutions and those businesses, and consider their particularities. I hope that the Minister will comment on that issue too.

Finally, I will make what is perhaps a personal point. I echo the plea made by the hon. Member for Folkestone and Hythe that we should look at alternative models of ownership for football clubs and that the Government should also become engaged in a discussion about those alternative models. In my capacity as a constituency MP, I have been working with Pontypridd rugby football club and other Welsh rugby clubs to look at FC United of Manchester, which is a fan-owned football club with extremely transparent structures and financial arrangements. Those sorts of arrangements may provide the key for the Government when they think about how to frame policy, not only at HMRC but more widely across government, that will help to ensure there is a greater degree of transparency in ownership, management and—crucially—sustainability for institutions that are not simply sporting institutions or businesses but, of course, a vital part of their local community.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

I am grateful to the hon. Gentleman for picking up on something that I said. I wanted to clarify that although there is a role for HMRC, before HMRC becomes involved there is a role for the competition organisers to act as whistleblowers and bring in the relevant authorities if they think there is a problem. The competition organisers should be the first port of call and then there should be recourse to a higher authority if they cannot sort out the problem themselves.

Photo of Owen Smith Owen Smith Labour, Pontypridd

Again, I agree with the hon. Gentleman on that point. Clearly, there is a role not only for the authorities but for the clubs themselves—indeed, for the sport itself—to think about both the sport’s sustainability in the long term and the extent to which money is quite often eroding the ability of local clubs to represent a local community, whether that community is in Leeds, Pontypridd or, as in the case of Rangers, Glasgow. These clubs were not created for professional or financial benefit; they were created as part of community representation.

HMRC needs to reflect on that point when it deals reasonably, sensibly and even-handedly with those clubs, as it professes to do with all of the individuals and institutions with which it works. We have all encountered instances of individuals feeling that HMRC is not dealing with them even-handedly. I am sure that the Minister will want to assure us in a moment that HMRC always deals even-handedly with institutions and individuals. However, in this instance—a case in the public eye that is of such enormous importance, not only to Glasgow but to Scottish life in general and indeed to the representation of the UK on a wider, even global stage—I am also sure that he will want to make certain that HMRC painstakingly looks at the wider financial and cultural disbenefits of Rangers ever collapsing, and ensure that in collecting the tax, as it must indeed do, it understands that it must also make sure that that situation does not happen.

Photo of David Gauke David Gauke The Exchequer Secretary 3:36 pm, 29th February 2012

Thank you, Mr Betts, for calling me to speak. It is a very great pleasure to serve under your chairmanship this afternoon.

I congratulate Thomas Docherty on securing the debate. It has not been heavily attended, but it has been of good quality. It has also been wide ranging; we have heard a little about the history of Scottish football and we have had a bit of a geographical tour of a number of Scottish football clubs. We have heard about a number of issues relating to football in Scotland and we have also heard from my hon. Friends the Members for Portsmouth North (Penny Mordaunt) and for Folkestone and Hythe (Damian Collins) about issues relating to football in England.

There is no doubt that the issue brought into focus by the administration of Glasgow Rangers is a significant one. That administration is clearly crucial to football in Scotland and, as we have heard, football in Scotland is crucial to Scotland much more broadly, including to the various communities in which football clubs exist.

The importance of football to a local community is self-evident, first because it provides jobs and stimulus to that community. We have heard about the impact when Rangers play against St Johnstone in Perth and we all know how football can contribute to the feel-good factor if a team is successful. Any football supporter can testify to that, as well as testifying—to be fair—to the feel-bad factor when a side does badly. I speak as an Ipswich Town supporter who has experience of both the feel-good and the feel-bad factors.

Secondly, the football industry in the UK contributes significant sums to the Exchequer by way of PAYE, national insurance and VAT. The debate about football and taxation obviously tends to focus on sums that have not been paid, but it is worth pointing out that last year the contribution to the Exchequer from football amounted to well over £1 billion, and clearly that money is vital to the provision of public services.

Of course, football is always in the spotlight. Recently, there seem to have been as many column inches about football clubs in the business pages as on the back pages, and I am acutely aware of the wider impact that the administration of Glasgow Rangers football club will have on other football clubs and businesses. However, the difficulties of one business cannot mask the significant support that the Government and HMRC have provided to help and support businesses across the country, including football clubs, to grow and to meet their tax obligations, even when they encounter temporary difficulties.

Of course, the debate has demonstrated the particular and intense passion that is involved with the business of football, but I hope that the hon. Member for Dunfermline and West Fife will appreciate that, due to confidentiality obligations, I cannot share specific information about Rangers with him. I know that he will be disappointed with the constraints that exist for all of us, but it is important that HMRC protects customer confidentiality. However, I can comment on the importance that the Government place on supporting businesses, whatever their size or fame, and on the position of football debt generally, and particularly at this time, on the importance of ensuring that where public revenues are due, they are paid on time and in full.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

While I appreciate the fact that the Minister cannot talk about the specific tax structure of Rangers, can he confirm whether UK Ministers, of whatever Department, were aware that Rangers had not paid since last May?

Photo of David Gauke David Gauke The Exchequer Secretary

There are a couple of assumptions in the hon. Gentleman’s question. I was going to deal with those points later, but I will do so now. First, there is an assumption in his question that, as has been reported, Rangers has not paid PAYE since May. There is taxpayer confidentiality and there are limits to what can be said to Ministers, as well as what can be said publicly. All I can say is that HMRC has assured me that in cases of this kind, it gives debts very close attention at all times. I would therefore be very surprised indeed if there had been no ongoing discussions or action by HMRC to secure payment over that time period.

On the hon. Gentleman’s question about ministerial involvement—in his speech he raised the point about the involvement of Scottish Ministers as well—Ministers were kept informed of significant developments such as the timing of court proceedings, but HMRC did not seek or take advice from Ministers on how to handle matters that were entirely within HMRC’s responsibility. Equally, with regard to the Scottish Government, there were discussions. HMRC was entitled to inform the Scottish Minister, because there were issues relating to devolved powers, and it was right that the Scottish First Minister was informed. At his request, HMRC explained its general policy for customers who were having difficulties paying their tax debt, and it gave him an idea of the likely time scale of its initiating administration proceedings if tax debts were not paid. Although HMRC listened to representations that he wished to make, it neither sought nor took advice from him or other Scottish Ministers. I hope that provides some clarity.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

I am grateful to the Minister; he has been quite candid. He will probably be aware that the First Minister does not normally wait to be asked to give advice, so can he tell us what advice the First Minister offered without being asked?

Photo of David Gauke David Gauke The Exchequer Secretary

I do not know what advice the Scottish First Minister provided, if indeed he provided any. I know that there were discussions informing him of the issues, as was appropriate; for example, whether there were going to be any public order issues that could be related to progress on this particular matter. There was nothing in any way improper about a discussion with the First Minister in broad terms. Similarly, I assume that the discussions with Ministers of the UK Government were not about specific tax information, but in the broadest of terms.

Photo of Owen Smith Owen Smith Labour, Pontypridd

I appreciate what the Minister has said about the limited nature of the advice that he has been given by HMRC, given the nature of his relationship with HMRC. Can he tell us whether he in turn has impressed on HMRC that it needs to think of the wider financial nexus around Rangers, and of course the cultural significance of the club? It is a business, but it is not just a business.

Photo of David Gauke David Gauke The Exchequer Secretary

HMRC is well aware of the significance of Rangers football club and its importance in Scotland. I have no doubt that HMRC is aware of that sensitivity. I am sure the hon. Gentleman is not suggesting that

Rangers should receive special treatment, but HMRC is aware of the importance of Rangers to Glasgow and to Scotland, and indeed to the UK more widely. I have no doubt about that.

I return to the issue of the support that businesses receive from HMRC, both generally and in respect of football. Of course, facing tough conditions, many businesses can stumble upon difficult times. That is why HMRC invests so much time and energy to support those businesses, whether they are start-ups or established large businesses, when they encounter difficulties.

I will focus on the support that is provided for the many thousands of businesses, large and small, through the time to pay arrangements, which allow them to spread the payment of their liabilities beyond the due date. That facility took on a more prominent role in November 2008 when the Business Payment Support Service was launched. Its purpose is to provide speedy access to quick decisions from HMRC for businesses facing short-term financial difficulties and who wish to discuss time to pay arrangements.

Many hundreds of thousands of businesses have accessed the service since its launch. The time to pay arrangements have helped hundreds of thousands of individual taxpayers and businesses suffering short-term financial difficulties. This has been particularly helpful during the past four years, given the economic challenges that the UK has faced. HMRC will continue to offer that support service where it is appropriate to do so, although I make it clear that the facility is not there to prop up an insolvent business whose existence is dependent on not paying the taxes for which it is liable. That is why HMRC will probe deeper when a business comes back repeatedly to seek time to pay. Such repeat requests can indicate a more deep-rooted financial difficulty, which can mean a time to pay arrangement is unlikely to be the appropriate outcome.

At a time when the public finances are as they are, it is crucial that businesses and individuals pay the tax that is due. That is a point that every speaker has made this afternoon. Businesses and individuals who do not pay their taxes are restricting growth and getting an unfair advantage over those who follow the rules. The Government are committed to levelling the playing field for the compliant majority. Even as HMRC puts in place services to support businesses, small and large, to realise that ambition, it also expects all businesses, be they football clubs or not, to be run effectively from a tax management point of view.

As reported in the media, it is true that in recent years some football clubs have had poor compliance records for the payment of tax liabilities. I am not talking about the payment of tax on profits; I am referring to the PAYE and national insurance that the clubs have deducted from their players and other employees and the VAT that they have charged their customers. Too often some football clubs have used those moneys, which were never theirs, to fund their business, because they have overstretched themselves in other areas. Many hon. Members will doubtless have views on why that situation has arisen, and why clubs so often apparently spend more than they can afford. I think all hon. Members will agree that it would not be right for taxpayers to fund such shortfalls.

However, things have begun to change. One practical way was when the previous chairman of the English football league, Lord Mawhinney, approached HMRC to explore how they—the football league authorities and HMRC—could work together to reduce the levels of tax debts in the football league.

From those initial discussions emerged a working arrangement that remains in place today. All English football league clubs consented to HMRC sharing information with the football league on their payment compliance in respect of PAYE and national insurance. Not only does any club that withholds those taxes face decisive action by HMRC, it will also encounter sanctions from the football league.

However, the issue is not always about sticks. The carrot is that eventually, all clubs will compete on an even basis. No club should benefit over another simply because it retains taxpayers’ money to fund its operation. That is an absurd proposition, with which I know hon. Members will disagree.

The decisive action taken by HMRC and collaboration with the football league authority has paid dividends. Similar arrangements are now in place with the Irish Football Association and the football conference, which is the tier immediately below the football league.

In addition, some months ago HMRC met the Scottish premier league and the Scottish football league authorities to explore whether similar arrangements could be put in place for the top four divisions of football in Scotland. Further discussions are scheduled soon on that proposal. HMRC will meet the Scottish leagues next week to monitor the payment of taxes, which addresses one of the specific points raised by the hon. Member for Dunfermline and West Fife.

Photo of Thomas Docherty Thomas Docherty Labour, Dunfermline and West Fife

That was hugely informative and I am sure that it will be welcomed. If only we had heard it before now.

I have two specific questions. Will the Minister confirm that HMRC will contact all 11 other clubs to see what assistance they require as a result of the situation with Rangers? Also, can I tempt him to say a little about the potential introduction of a bond, which I know the Treasury has previously considered, to protect HMRC, so that if a club finds itself in administration, HMRC will have a guarantee that it will get some of its money back?

Photo of David Gauke David Gauke The Exchequer Secretary

I will deal with the hon. Gentleman’s second point first, which he is absolutely right to raise. From April 2012, HMRC will be able to seek securities where PAYE is at risk. That mirrors existing powers for VAT, which are already in place. If a taxpayer does not pay the security, they will commit a criminal offence. There are, of course, safeguards to ensure that the power is not abused by HMRC—it is not to be used widely—but where there is concern about repeated failure, that is an additional tool available to HMRC. That, in itself, will have a deterrent effect, which I hope will be helpful in such circumstances.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Culture and Sport), Shadow SNP Spokesperson (Constitution)

The Minister has mentioned some of the sticks available to HMRC to secure its liabilities, but what about the carrots? What about incentivising the clubs that meet HMRC requirements on time? I mentioned the example of my football club, St Johnstone, which has never gone into the red. Does HMRC want clubs to behave and be able to balance their books on that basis?

Photo of David Gauke David Gauke The Exchequer Secretary

There would be a problem with HMRC rewarding clubs for paying their taxes; after all, it should be taken as a given that businesses pay their taxes. I return to my point on the work that is being done with the football league in England, with Lord Mawhinney, where football gets to grip with the issue, and works in conjunction with HMRC to ensure that clubs would face difficulties within the leagues if they fail to comply with their obligations. I would look at it that way.

The first point made by the hon. Member for Dunfermline and West Fife in his intervention was about whether HMRC will proactively contact the 11 other clubs in the Scottish premier league. Rangers going into administration is a huge event, not just for Rangers, but for all the other clubs in the Scottish premier league and some other clubs as well. HMRC is conscious of that and will—I am assured—listen sympathetically to any approach where that event causes serious short-term financial difficulties. The onus is on other clubs to get in contact with HMRC if they have a difficulty. The debt lines are open seven days a week, and there is no reason to delay discussions with HMRC, which I know will be happy to engage with clubs if they have particular issues. It is for the clubs to contact HMRC, rather than for HMRC to initiate communications. I hope that I have adequately addressed the issues about HMRC’s involvement, within the constraints that I and HMRC have in relation to taxpayer confidentiality, and about what communications there have been between Ministers of the UK and Scottish Governments.

Regarding HMRC’s capability in terms of the local issues, I am assured and confident that it is deploying the right skills and the right amount of urgency to the investigation of avoidance schemes. I am also confident that HMRC has the right skills to understand fully local factors. The hon. Member for Pontypridd raised a point about reductions of local staff in HMRC, which he described as having increased and accelerated under this Government. We have debated that point once or twice in recent days, including in television studios. In 2005, the number of HMRC staff, following the merger, was around 96,000. When this Government came into office, it was 66,000. By the end of the spending review, it is likely to be around 56,000. It is difficult to argue that there has been an acceleration in job reduction under this Government, and I will happily debate how and why we have been making changes in employment on another occasion. We are strengthening the capability for tackling evasion.

Photo of David Gauke David Gauke The Exchequer Secretary

I have provoked the hon. Gentleman. Before we go too far off the topic, I will let him come in.

Photo of Owen Smith Owen Smith Labour, Pontypridd

I want to confirm that the Minister is saying that there will be 10,000 further jobs going under this Government over the spending period, as well as the 4,000 job losses announced in January.

Photo of David Gauke David Gauke The Exchequer Secretary

The working assumption is as I have said, and as is in the public domain. The hon. Gentleman will be aware that there is redeployment within that, so that there are additional staff dealing with tax evasion. There is capability to reduce the number of staff working in processing, where the use of new technology can substantially reduce the need for manual work.

I cannot comment on the case of Rangers specifically, but I assure the hon. Member for Dunfermline and West Fife that HMRC is working with the administrators, alongside other creditors, to reach the best solution for the public purse and the club. We have heard how Rangers going out of business would be a disaster for Scottish football. The purpose of administration is to save the club and to ensure that creditors get as much as possible.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

On a point of principle, does my hon. Friend agree that it is wrong, when a football club goes into administration, for HMRC and other creditors to get paid only after all football debts have been settled?

Photo of David Gauke David Gauke The Exchequer Secretary

As we have heard in the debate, that is a matter more for the English arrangement. There is currently a court case on the issue. I have a lot of sympathy with my hon. Friend’s view. There seems to be unfairness, and as I said, there is litigation on the matter.

The debate has been valuable, and I thank the hon. Member for Dunfermline and West Fife for securing it and raising the issues. There are constraints on what I can say, both publicly and privately, although I will always be happy to have a discussion with the hon. Gentleman. However, the constraints of taxpayer confidentially apply to me as much as anyone else, so I am not given all the information. The debate has been useful, and I thank the House for allowing us to hold it.