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There is a story going round the many lawyers, accountants and other professionals who advise football clubs. The story goes as follows. Some years ago, when Leicester City were in financial trouble and being hounded by the Revenue for non payment of taxes, Keith Vaz, the local MP, rang Gordon Brown then Chancellor of the Exchequer.

Vaz persuaded Brown to call off the Revenue hounds and helped save the club.

Now this story may well be apocryphal but it is one of those stories which you want to believe is true. The point about it is that today such a call would have no effect. Not because Alistair Darling’s interest in football is not as great as that of Brown, but because the Revenue’s tune has changed. Now the Revenue would be loath to let a club get away without paying the tax it owed.

This explains why so many football clubs are rushing to the High Court to fight off winding up petitions presented by the Revenue. In the past the Revenue has accepted that, when a football club goes into administration, the tax man will lose out. So, in 2007 when Luton went into administration, the club paid back only £275,000 of the £2.5 million owed to the Revenue. In the case of Leeds United, the Revenue received a tenth of the £7 million due in back taxes. The best estimates are that the country’s tax collectors have lost £30 million from football clubs which have defaulted on their taxes.

You may well say that all creditors lose out when a business goes into administration. That is the risk of business. That would be fine if we had a level playing field. In that scenario, all creditors other than preferential creditors, are ranked equally. Creditors take what is known as a haircut losing some if not all of the money owed to them.

But this is where we have a problem with football. Football has been allowed by our law makers to get away with a very peculiar system when it comes to paying its debts. Here the playing field isn’t level. It is skewed because of what is called the “football creditors’ rule”. This states that a club which cannot pay its debts can default on the money it owes all types of creditors. However one lot of creditors rank above everyone including the taxman and must be paid. These are payments to players, coaching staff and any transfer fees due to other clubs.

Note that I say wages to players and coaching staff. Wages to a club’s administrative staff, the tea lady, or the coach driver are not covered. The football authorities say that, if a club does not pay its football creditors, it cannot play football. This applies to all football in this country organised by the FA, the Football League and the Premier League.

The rule is not a new one and goes back to the time when there was little money in football and when the maximum wage still applied to footballers. I can appreciate the reason why the rule came in. It was not only meant to make sure that the game goes on, it was meant to protect players who, at that time, were not paid a lot of money. It was also intended to make sure that well managed clubs did not suffer as a result of mismanagement by a few club directors and owners.

However the present situation is very different. Now we have footballers, admittedly not all of them but a good number, who are paid wages that would be the envy of rock stars. Yet, under the football creditors’ rule, even if they are on £150,000 a week, their salaries must be paid before the man who supplies let us say pies to the club.

Consider what this means. Go back to 2002 and the collapse of Bradford City. The club owed £2.5 million in taxes, money was also due to the local authority and the St John Ambulance. They all had to go without but their great star player Benito Carbone, on a mere £40,000 a week, was entitled to full payment of his salary.

In the case of Portsmouth the situation is not very different. They may not have anybody on John Terry’s reputed £170,000 a week but they do have players who are paid high enough salaries: between £30,000 and £50,000 a week. For Portsmouth to continue playing football, these wages must be met. Yet the builder who did work at the ground goes unpaid.

Yes, a football club trades in a very specialised world. Its work practices are regulated by the FA and the two leagues: the Football League and Premier League. These organisations are in effect trade associations and nobody would deny them the right to set the rules for their “trade” – football.

But football is not played in a vacuum. The playing of football means players and clubs interact with society and the rules of football must not go against the laws of the land. In effect football makes a few people very special – they enjoy the sort of rights that have been taboo in the rest of society since the days of serfdom and medieval lords.

So why have we allowed such a situation to develop and what can be done about it? It has happened because, for all the talk by our lawmakers, they have a horror of intervening in football and, barring the odd individual, the football authorities do not have an appetite for reforming their rules.

The result is that football is allowed to get away with behaviour which would not be acceptable in any other walk of life.

Take Manchester City. There a disgraced Thai Prime Minister Thaksin Shinawatra, (pictured) convicted of corruption in Thailand and currently in self imposed exile in the Middle East, walked away with a profit of £100 million when he sold the club. Not bad for a year’s ownership. Fair enough, Thaksin is a clever man.

But consider how public money helped him and still helps Manchester City. The club play in the City of Manchester stadium which was constructed with public money provided by Sport England and Manchester Council for the 2002 Commonwealth Games. With the authorities struggling to find use for it after the Games, a deal was done by Manchester City which was then playing in Maine Road. The club gave Maine Road to the council and paid £15 million to rip off the running track and convert the Commonwealth Games arena for football. But the best part was the outrageously favourable deal on the rent: a small yearly rent which only becomes substantial if more than 36,000 turn up for a match. Had City’s owners been forced to build a new stadium, it would have cost upwards of £300 million. While Manchester is not London, remember Arsenal’s Emirates stadium cost £440 million and landed the Gunners with debts of £250 million.

In other words, Thaksin’s ability to sell the club and profit from it was assisted enormously by the fact that the new owners, unlike the ones at Liverpool, did not have to worry about finding money for a new stadium. I am sure that, in making his sales pitch, Thaksin made much of the fact that the club he was selling was playing in a new ground which, in effect, was given to the club by the taxpayer.

Of course, when the stadium deal was done, Manchester City was not owned by Thaksin but the point is, given that public money was involved, why were restrictions not put on any future sale of the club?

For me it illustrates a profound truth about our national game. Partly because the government is afraid of the football lobby and partly because of a certain casual attitude to football rule-making, we have allowed football to go beyond the law.

The present economic recession is a good time to look at football and its peculiar laws. If one of football’s rules does not fit with the rest of society or gives certain people in the game an unfair advantage, it must go. Football will not like it but it needs to be done.

      

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