T
he 2008 FA Cup final was scripted as a romantic Wembley journey for two solid clubs from football's provinces but today, only 21 months on,
Portsmouth
and Cardiff?City meet again in a more sobering London setting: the companies' winding?up court.
Both Pompey and Cardiff were hopeful yesterday that after making down-payments on tax bills of ￡7.5m and ￡2.6m respectively, Her Majesty's Revenue and Customs would agree adjournments and accept plans to pay the rest in instalments.
Yet the very appearance of two of football's bigger clubs ? and Southend United ? who continue to receive millions of pounds in TV and other income, in a court where scores of small, hard-hit businesses will be wound up today, has concentrated minds again on the game's inability to balance the books, even in this boom time.
Since 1992, the year the Football League's First Division clubs broke away to form the Premier League, and therefore not share their TV rights bonanza with the other three divisions, Football League clubs have fallen into insolvency a staggering 53 times.
For three of them ? Aldershot, Maidstone and, later, Scarborough ? the histories of the original clubs did truly end, in liquidation before subsequently being re-established. For others, administration meant they could be bought by new owners, who paid a fraction of the debts that were owed ? except at Southampton, where last year Markus Liebherr paid Saints' debts in full. Since 2002, when ITV Digital's collapse helped push 10 clubs over the edge, an estimated ￡200m due to creditors has been left unpaid, including sums owed to the police, local councils, hospitals, universities and other public bodies, a Yellow Pages-worth of small businesses and, most unforgivably, St?John Ambulance.
The charity does not charge to tend sick and injured fans at matches, but asks only for expenses, for supplying bandages, equipment, an ambulance if needed. Clubs overspending on players' wages in the push for success have let St?John's bill fall into arrears with all the others; Darlington's ￡9,040.79, in 2003, was the largest amount left unpaid.
St?John is careful not to cry outrage, stressing instead the valuable work its volunteers do. But this week Sue Killen, the chief executive, did venture to say: "We understand that we are not clubs' only creditor, but as a charity we can't afford to provide this service without some support. Generally clubs appreciate that."
Compounding this embarrassment is football's insistence that when a club is bought out of administration while "ordinary" creditors have to accept a fraction, often a 10th, of what they are owed, other clubs, and players, must be paid in full.
Both the Premier and Football leagues justify this, the "football-creditors rule", by arguing that it preserves competition by preventing a club signing players from other clubs then not paying for them. The priority given to football debts explains why the Premier League withheld Portsmouth's ￡7m January TV payment and some of the ￡5m fee from selling Younes Kaboul to Tottenham, then used the money to pay other clubs, while Pompey's ￡7.5m tax and VAT bill was left unpaid.
HMRC's tougher stance, hitting eight clubs with winding-up petitions this season, reflects deep frustration with the historic trail of clubs going into administration and the football-creditors rule. While all football debts have been paid in full for?the clubs who have continued in business, since 2003 HMRC has been left with about ￡30m of outstanding taxes unpaid. The tax debt is directly linked to overspending on players; huge wages carry tax at 40%, which is deducted from pay packets but not passed on to HMRC by clubs which have plunged into difficulties.
HMRC challenged the football-creditors rule in 2004, when Wimbledon went into administration after relegation from the Premier League, but lost; the court effectively decided that the Football League was entitled to set its own rules for its members.
An HMRC spokesman acknowledged this week that the rule still rankles. "We?want to secure our fair share of any funds available when a debtor gets into difficulty. Just like any other creditor, we do indeed frown on any arrangements that seek to prevent that," he said. "We expect football clubs to be in line with other responsible businesses."
While several clubs struggle with the new hard line adopted by HMRC, privately some in football are pleased that clubs are no longer being indulged to run up large tax bills. Both leagues introduced regulations this summer to tighten up payments to HMRC; the Premier League will receive financial reports from all its clubs in March and can take action if they are in arrears with tax. The Football League now constantly receives tax information direct from HMRC on all its clubs, and has already imposed transfer embargoes on those which are not up to date.
Lord Mawhinney, the Football League chairman who retires next month after seven years in the job, oversaw the introduction of that measure, as well as the points penalties for clubs falling into administration. Rotherham, Luton, Bournemouth and Leeds also received further penalties for failing to agree Company Voluntary Arrangements with 75% of their creditors about the amounts they were being paid. HMRC voted against the CVA proposal in each case,
refusing to accept part payment while clubs and players were paid in full. Mawhinney maintains the football-creditors rule "remains the league's position", but refuses to accept any justification for clubs overspending.
"People try to find excuses about why clubs have had to go into administration," Mawhinney said yesterday. "One of the sadnesses is that there is never enough recognition of the small businesses, the taxpayer, and worthy groups like St?John Ambulance who are left owed money after?doing business in good faith."
Mawhinney has publicly backed a salary cap for many years, but the clubs have rejected it because they want the freedom to push for promotion. He added: "A number of clubs over the years have effectively used HMRC as another banking facility. I'm pleased that our new arrangement with HMRC makes that much less likely in the future."
In the Conference, for which the Football Association, the game's overall governing body, has direct responsibility, clubs who fall into administration must pay all their debts in full, not favour football creditors, or are thrown out.
Yet on the wider financial problems convulsing the game, from the combined ￡1bn debts ladled on to Manchester United and Liverpool by their US owners, to Portsmouth's meltdown, Crystal Palace going into administration, Peter Ridsdale's struggles at Cardiff and the other clubs consulting the A?Z for directions to the winding-up court, the FA has been silent.
Lord Triesman, the FA chairman, can feel vindicated about his warning in October 2008 of the "debt mountain" threatening clubs' stability, but since the attacks he suffered for saying it he has been confining his discussions privately to the detail of Uefa's "financial fair play initiative", which will require top clubs to be breaking even by 2012?13.
In England, the trails of creditors left unpaid, including a mountain of public money, represent the flipside of football's financial feast, since the Premier League clubs broke away, for the money, in 1992.