Rangers won the Scottish Premier League five times between 2003 and 2011, as well as reaching
the final of the UEFA Cup in 2008, which on the face of it was an impressive achievement
as the club went toe to toe with a resurgent Celtic during that period.
To compete with Celtic the club was however prepare d to take steps that would ultimately
lead to the liquidation of the club and its demotion to the Scottish Third Division. It
would take four years out of the top flight before the club was once again able to face
its rivals in a league match. The high profile recruitment of Steven Gerrard
as manager in the summer of 2018 has whetted the appetite of fans and pundits, but is the
club a phoenix from the ashes, or are its new foundations made of sand?
During the 1990’s Rangers were the dominant force in Scottish football, the wealth of
owner David Murray allowed the club to recruit the likes of Paul Gascoigne, Tore Andre Flo,
Brian Laudrup and Mo Johnston, and the club won nine titles in a row. Murray claimed ‘for
every five pounds we will spend ten’ and the dynasty seemed unstoppable, but it was
built on debt. Celtic were however improving their finances
thanks to the backing of Irish billionaire Dermot Desmond, with managers such as Wim
Jansen and Martin O’Neill the battle for supremacy in the Scottish game became more
balanced on the field, and the investment in infrastructure at Celtic Park plus more
regular progress in UEFA competitions meant that the club’s income was ahead of that
of their rivals.
Because Celtic were generating more money in the early 2000’s, it meant they could
sign better players to compete with their rivals in terms of recruitment. Rangers were
during this period generating large losses as they had a smaller capacity stadium and
were generating less matchday income.
The only way to underwrite these losses was to borrow money, which the club did with enthusiasm
such that by June 2004 Rangers owed £74 million to financial institutions.
Behind the scenes Rangers were also trying to compete with Celtic by some creative tax
activities. This involved the creation of Employee Benefit Trusts (EBTs) where the club
paid money into a trust. The EBT then ‘lent’ money to players who in theory promised to
pay it back, but there was no or little effort to ask for that money back from the players,
who effectively therefore treated it as regular income.
The advantage to Rangers in taking this approach was that the club did not pay National Insurance
contributions on the payments to the players, who also did not pay income tax on these loans
from the trusts. The players were happy because they ended
up with the net pay they were seeking, so everyone was a winner…apart from the government.
This policy worked to the extent that Rangers won the Scottish Premier League five times
from 2003 to 2011, but critics will argue they were abusing the tax system in the process
and those titles were at best tainted and at worst should have been stripped from the
club’s list of trophies. The global financial crash of 2007, created
by the financial community who lent money to people and businesses who had no ability
to repay the sums advanced, hit Rangers in two ways.
Owner David Murray’s business struggled and so was unable to provide the club with
further financial support, and the main bank lender, Royal Bank of Scotland, effectively
went into public ownership following its own financial meltdown, and there was a far less
relaxed approach towards Rangers from the bank’s new senior management as a result.
Furthermore the UK tax authorities became increasingly unhappy with Rangers’ use of
EBTs, which had been originally sanctioned for non-employees, which was not the case
in respect of the club and its players. The tax authorities saw the approach taken by
the club as a form of tax evasion and pursued the club for a tax bill of up to £49 million.
An increasingly desperate David Murray therefore sold the club to Craig Whyte for just £1
who promised to settle the tax issues and the bank loans, but Whyte did neither, and
as more and more creditors were issuing writs for unpaid debts the club appointed administrators
in February 2012. This angered HMRC, who had wanted to appoint their own administrators
to investigate Rangers’ affairs, and so HMRC refused to agree to a deal with the administrators,
leading to Rangers going into liquidation, provoking a constitutional crisis in Scottish
football. A new company, Sevco Scotland, was set up
and bought Rangers’ assets from the liquidator, although players were allowed to leave the
club for free as their contracts were with the old club.
Other SPL voted that SevCo, now called Rangers Football Club Limited, was not allowed to
take the place of Rangers in the top flight, and instead the newly formed company was allowed
instead to join the Scottish Third Division. Rangers had income of £19 million in 2012/13
in the Scottish Third division, which was more than double than that of the other nine
teams in the division combined, and Rangers had similar success in the Scottish Second
division the following season.
During this time Rangers was falling further and further behind Celtic in terms of generating
income and signing players, which meant that when Rangers were finally promoted to the
SPFL and had their first season there in 2016/17 they generated only a third of the revenue
of Celtic. Rangers have also returned to using debt as
a means of funding the club, although as there is great suspicion from banks towards the
club, the lending is almost exclusively from directors.
At the last count Rangers owed lenders £21 million in June 2018, although subsequently
some of this has been written off as lenders converted the IOU’s from the club, which
some consider to be worthless, into shares instead.
The arrival of Steven Gerrard has introduced a feel good factor to the club, and there
were million pound plus signings such as Barisic, Goldson and Murphy, along with loans from
Liverpool as Stevie G used his contact book to try and improve the quality of the playing
squad. The club is now competing with their rivals
in an SPFL that has greater uncertainty than has been seen for many years. For this to
be achieved the board has admitted it will need a further £4.6 million to survive this
season and has gone cap in hand to investors for extra funds.
The recent elimination from the Europa Cup will not have helped Rangers’ financial
woes, and in addition largest shareholder Dave King seems to spend more time in court
arguing with the likes of Mike Ashley and The Takeover Panel, who believe he should
buy out remaining shareholders, than focussing on issues on the pitch. Whether King has the
wealth that he claims to buy the shares from these shareholders is as yet unproven, as
are many issues in relation to the club’s activities.
Furthermore there are squabbles and threats of litigation between the administrators,
liquidators, former owners, HMRC and former players, which could result in large sums
being payable by some of them, but the only guarantee is that the lawyers, as always,
will be rich on the pickings between the disputes between these parties.
One of Rangers’ fans most popular songs is ‘Follow Follow’, but given the club’s
present predicament, perhaps this should be renamed ‘Borrow Borrow’.