Portsmouth Evade The Taxman’s Net
So, Portsmouth won at the High Court yesterday, then. It’s worth taking a moment to consider what that means, exactly. It means that their unsecured debt has been reduced by 80%, and that the overwhelming majority of creditors will lose, cumulatively, a massive amount of money into a black hole. It means, effectively, that the only punishment that the club has suffered over the period time that they have been mismanaged is a total unsecured debt of just over £16m. They were relegated, yes, but it was a relegation that, considering the size of the club, may well have happened anyway and the nine point deduction that they incurred for entering into administration didn’t even end up being the deciding factor in their relegation.
The consequences of yesterday’s decision don’t just put the past into focus – they affect the future, as well. It has been reported that Balram Chainrai will be given ownership of the club free of charge in return for paying off the amount agreed by the CVA. We shall have to wait and see whether he chooses to take this up and, if he does, whether he will pay off the club’s CVA debt in one go or not, but it would mean that a newly-debt free Portsmouth would not even have their parachute payments from the Premier League affected by their misbehaviour. They would, in this scenario, have got away with it and such is the size of those parachute payments that the club may even consider starting to spend money again to get back into the Premier League at the first attempt.
There was a feeble attempt at contrition on behalf of the club after the hearing yesterday. One of Portsmouth’s co-administrators, Peter Kubik, stated that, “”I am sympathetic to all people who won’t get paid in full. Unfortunately, that’s not my battle to fight”. He is right in one respect. He is the administrator, and nothing more. However, it was Portsmouth’s battle to fight and it was a battle that has left an extremely sour taste in the mouth. The question of exactly how a football club could be allowed to take on this level of debt has never satisfactorily answered. A quick look into the archives shows their debt in around October 2008 as being in the region of £50m-£60m. How did this rise to £130m (including secured creditors and football debts) in a year and a half or so? No-one has ever been brought to account for what has happened at Portsmouth, and it is highly likely that no-one ever will be.
This, of course, is where Portsmouth’s supporters come in. They must ensure that the wretched cretins that ran their club to the point of extinction are never forgotten. That their incompetence and avarice doesn’t get swept to one side is now primarily the responsibility of Portsmouth supporters, however easy it might be to cast aside such concerns now that they are out of any serious danger. No-one with any sense would seek to blame the club’s supporters for anything that has happened at Fratton Park over the last couple of years, but they remain the vocal face of their club. They have a duty, for the sake of decency if nothing else, to not start campaigning for tens of millions of pounds to be poured into the team in the pursuit of some perceived notion of “glory” and to continue to agitate for responsible ownership of football clubs. They are very, very lucky to still have their club and they are fooling themselves if they believe otherwise.
Moving away from the issue of Portsmouth specifically, football has had a bad week. Recent events have largely undermined any sense of the logic behind football clubs’ continued status as “preferred creditors” in the case of insolvency events occurring. The stated reasoning behind this rule, that it protects football clubs from each other’s financial shenanigans, looks morally untenable when lined up against the wider issues that the collapse of a football club causes. Indeed, it starts to feel like something of a straw man, when we consider that many of the authorities that make these rules are the same people that benefit from action their status as “protected” creditors. Voting to abolish it would be the morally right thing to do, but it would also be like very plump turkeys voting for Christmas. They’re welcome to prove us wrong, but holding one’s breath in anticipation of it coming to pass feels as if it will be a fruitless exercise. Football, however, remains in its bubble of unreality. Consider Sam Allardyce’s comments in a recent interview:
Most of the time it boils down to net salaries that people are asking for and the 50% tax bracket in this country. If Cameron is listening, drop the tax bracket will you? Then we can get the best players in the world to play in the best league in the world.
It’s probably for the best not to dwell for too long upon how moronic this statement is, but it does demonstrate just how out of touch Allardyce is with the real world, and it is unlikely that there would be many people in football that would disagree with him. Similarly, no-one within the game seems to be questioning the moral aspect of whether it is right to use image rights payments as a means of tax avoidance. When faced with such a moral vacuum, we are left with little alternative but to shrug our shoulders when they get into trouble. As for the supporters of those clubs, well, it’s a shame for them but it has happened before and it will happen again. Ultimately, they are the club, and they will find a way to start again if the worst ever comes to the worst.
Not that serious trouble is likely to be an issue for that many clubs in the near future. If buy-now-pay-never Portsmouth can survive all of this, then just about anyone can. Without the will to change from within the game (and, for all of the fine talk about reform, the game hasn’t really reformed anywhere near as much as it should do), it will require a change in the law to grant HMRC preferred creditor status again. We can bet a pound to a penny that, should any such move be made, bodies within the game will start lobbying for it to not happen. Again, whether there would be any will on the part of the new government to change the law in this respect is very much open to question. The result of this inertia is that little will change and the narrow shaves will continue.
To an extent, Portsmouth are merely one of the most extreme representations of the craziness and moral vacuum of twenty-first century British football. However, their reputation is tarnished and how they will be perceived from now on will depend on how they – and that means everybody associated with the club, from the owners to the supporters – act from now on. Meanwhile, some sort of resolution to the issue of how to save British football from itself feels further away than ever. All we can do is keep stating the case and hope that somebody is listening.