A correction and statement to fans of Rangers

The Offshore Game has been approached by an anonymous fan of Rangers Football Club who raised a couple of issues with the language used in our report. After considering the issues raised we have made a couple of non-material corrections to our report.

We would like to stress that we approach this subject from the view that regulatory failure is bad for all fans of all teams. In order to ensure a level playing field regulators must act in a way that puts them beyond criticism. Where a regulator has failed, it is vital that faith is restored in the system through remedial action being taken. As far as we are concerned that hasn’t happened in this case and Scottish football as a whole is poorer for it.

For this reason we are happy to change our report in order that no unnecessary offence is caused to fans of Rangers Football Club. And to be clear, that’s not because we want to avoid abuse (although we do!). It’s because this is an issue that should be at least as important for Rangers fans as for others. If there’s no level playing field in Scotland, there’s no beautiful game.

Every fan and every club loses out, ultimately. Victories are bitter, titles become tainted; and clubs whose financial stability should be guaranteed by the effective oversight of the SFA are instead allowed to run themselves onto the rocks. Owners can walk away, often entirely unscathed - but the fans are left to pick up the pieces. Nobody has a clearer sight of this than Rangers fans - and so we hope that our call for an independent inquiry into the SFA could become a rallying point for fans of all clubs, rather than a divisive issue between fans of different clubs.

Rangers in Liquidation

The first point raised was that that Rangers were not liquidated, but put into liquidation in 2012, a process which has not yet come to a conclusion. Therefore to put in our report, as we did, that Rangers ‘were liquidated’ was not accurate. We accept this and have changed the report accordingly.

We don’t see this as a material issue. Rangers in liquidation has no income, its assets having been transferred to a newco. The history and the spirit of the club remain with the fans, not with any company. There seems little reason to take oldco out of liquidation given it has no independent means of paying off its debt; and that its primary function, the running of a football club, is now conducted by another company (and one which has successfully brought it to the Premier League). It seems to us that all taking oldco out of liquidation would achieve would be to load up the new company with the club’s historic financial debt; so it therefore seems to us that liquidation of oldco is inevitable.  While it would certainly be welcome in principle for the new company to pay off that historic debt, it is not legally required and does not seem a likely outcome.

Rangers Oldco/Newco

The second point was about the use of the title “Death (of Rangers) and Taxes”. This is a difficult and complex issue, and we accept that the language used may have been unnecessarily provocative, particularly in the light of the fact that the entire oldco/newco issue really has very little to do with the substance of the report. We have therefore changed that title in the report to “a taxing issue”.

Since starting our research into the issue of football finance one thing that has struck us is that fans from throughout the country can sometimes let their loyalty to the club blind them from legitimate criticism of the people and the corporate structures behind their clubs, even when those structures are fundamentally damaging to the interests of the fans. We all find it easier, sometimes, to see the splinter in our brother’s eye rather than the beam in our own. It is striking that when journalists in the past have raised legitimate issues with the governance of some clubs, some supporters, rather than seeing the obvious problems those issues cause for their club, would rather accuse the journalist for supporting a rival team than engage with the problems facing theirs.

Here at the Offshore Game we have consistently made the argument that the club is bigger than the company that owns the club. If the supermarket down the road goes bust, you just use another; but ties to a club are normally for life: ‘Nobody ever asked to have their ashes scattered at Tesco’. The history, the culture and the supporters are far more important that any corporate body that may have control over a club at any particular moment.

However, that is not to say that corporate body is not important. It is obvious that the health and success of club depends to a large extent on the health of the corporate body that holds it, and when a company becomes insolvent that clearly has a devastating impact on the club.

If we look at a non-football example, the banking crisis of 2008, the government intervened to stop some banks from death by transferring all of their toxic assets to a ‘bad bank’ whilst allowing the banks to keep all their profitable assets. There was an acceptance by government and policy makers that the solution was not perfect, it meant the public picked up the tab for the bad decisions of bankers who largely walked away with little consequence. The solutions led to bad incentives being created and a message being sent out that accountability is weak. Without coupling this solution with serious regulatory tightening, it leads to an increased possibility that further corporate failures will happen in the future. However, it was also considered that the consequences of not doing anything were so dire that the imperfect solution was the best available option.

In Rangers’ case the oldco/newco arrangement looks remarkably similar to the bad bank/good bank solution.

Were regulators right to go down this route in the crisis that was emerging at the club? This is not an issue we want to get into at all, and do not cover in the report. We do not pass any judgement on the rights or wrongs of this decision. However, there are clearly arguments on both sides. On the one hand there is an argument to say that the total destruction of such a great, historic club of world renown with a huge international fan base would have been bad for all Scottish football. To regulators it represented the kind of systemic risk that faced the banking regulators.

On the other hand, when a regulator prevents the full result of bad financial management, it risks creating an incentive to repeat that poor behaviour. While many Scottish clubs are on a sounder financial footing since Rangers entered liquidation and Hearts went into administration, it is also true - for example - that the financial management of newco still leaves much to be desired.

Newco should have been the opportunity to turn new leaf and to rebuild the club around sound and responsible financial management and above all a new level of transparency and accountability. Instead last year the club once again found itself in serious financial difficulty. We wrote about this here: http://www.theoffshoregame.net/241/

The people that have suffered most from this? The fans of Rangers Football Club. This in itself highlights the importance and general benefit to the fans of the rigorous enforcement of financial fair play rules.

That said, we do understand that the really important thing is that in the hearts and minds of the fans, Rangers is Rangers. We accept that the language used in that instance was unhelpful in advancing the points we want to make, and the cause of unnecessary offence, and have changed that. Just as the heart of Wimbledon FC lives with AFC Wimbledon and not with MK Dons, the heart of Rangers will live with the new company.

The  report link has been updated on our original blog post and can be accessed here.

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