Scottish Football (Tax Liabilities)

(Limited Text - Ministerial Extracts only)

Wednesday 29th February 2012 Westminster Hall

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

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

I congratulate the hon. Member for Dunfermline and West Fife (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.

[Thomas Docherty]

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?

[Mr Gauke]

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.

[Thomas Docherty]

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?

[Mr Gauke]

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.

[Owen Smith]

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.

[Mr Gauke]

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.

[Thomas Docherty]

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?

[Mr Gauke]

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.

[Pete Wishart]

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?

--- Later in debate ---

[Mr Gauke]

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.

[Owen Smith]

Will the Minister give way?

[Mr Gauke]

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

[Owen Smith]

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.

[Mr Gauke]

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.

[Damian Collins]

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?

[Mr Gauke]

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.