Rangers go into Administration

One half of the Old Firm of Scottish football lodged an intention with the Court of Session in Edinburgh to go into administration this lunchtime. They now have five days to appoint an administrator.

We wonder what punishment the Ibrox giants will incur as a result of doing so to relieve debts of £21-75m.

The last time a Scottish League team went into administration without penalty was Livingston then of the SPL on 3 February 2004, just before their CIS Cup Semi-Final the tournament they went on to win that year. They were managed by the preferred consortium for the following season before Lionheart took them out of Administration, but after relegation to the First Division.

Since then there have been three league teams that have entered administration:

Gretna had been allowed up to the SPL without meeting the ground regulations in time. But after living the dream the nightmare was entered on 8 March 2008, when they entered administration with debts of a mere £4m. The team were already bottom of the SPL but were deducted a further 10 points. At the end of the season they faced relegation and the Scottish Football League uncertain if they would fulfill their fixtures relegated them to the lowest tier of League Football into Division 3. The SFL fears were well founded as the team was liquidated on 8 August weeks before the start of the season.

Debt £4m
Crime Entering adminstration, then fear of completing fixtures following season
Penalty 10 point deduction, then later relegation down to bottom tier Division 3

Livingston were again in trouble after the Italian Job turned out to have been some sort of hatchet job. Something those of us in the stands had been growing more aware of all that single season of Massone control. With unpaid bills to the council of £330,000 the Court of Session put the club into administration on 28 July 2009. Two days later despite the fans baying him to sell the club to the administrator Massone refused twice and liquidation proceedings were begun. The new owners who the administrator had been acting on behalf of lodged a surety bond of £720,000 against any loss of earnings should the club fold, were still relegated to Division 3 on 5 August, less than a week before the first league game was scheduled within the period of any appeal. Rules of insolvency was the reason cited for such a harsh penalty, despite the successful bid being in place with the support of the fans even before the entering of administration.

Debt £330,000 minimum (rumours of max £1m)
Crime Entering adminstration, then liquidation in and out less than a week after.
Penalty relegation to bottom tier Division 3

Dundee like Livingston had been in administration before from 25 November 2003 to 6 August 2004. They entered administration on 14 October 2010 with debts of £2m, £420,000 of which was to the tax man. Their penalty was to face a 25 point deduction on 1 November which saw them on -11 points 20 points below the next team. Miraculously with only 11 senior team players left in the squad and a ban on buying players while in admin the team went on a Division one record 23 game unbeaten run to avoid slipping down in the same season that Livingston managed to win their way back up from their penalty.


Debt £2m
Crime entering adminstration for second time in 7 years
Penalty 25 point deduction

RANGERS


Apparently new owner Craig Whyte borrowed against 4 years future season ticket sales to 'reduce' the paper debt from £28m to £14m. This is thought to be a £21m debt to Ticketplus and then £5m VAT on that deal. There is also the issue that Rangers are currently awaiting the final verdict on the £49m Employee Benefit Trust tax case. It is a tangled web for one of the largest supported clubs in Scotland, that may well lead to liquidation proceedings. If it does what then. There has been the precedent set as above for such financial disasters.

Debt At least £21m possibly as much as £75m
Crime So far entering liquidation
Punishment To be decided

Hyslop Announcement Step in the Right Direction

Yesterday the SNP Education Minister Fiona Hyslop announced £30 million of student support of increased grants and loans. Grants of up to £1,000 are to be introduced for independent students – those unsupported by parents and mostly over 25. And she said the maximum level of the income-assessed student loan, which has a current interest rate of 0 per cent, will go up by £442.

Liam Burns the President of the National Union of Students Scotland welcomed the news saying:

"For years, we've been calling for student hardship to be prioritised over graduate debt, getting money into students' pockets when they need it most."

However, he did also caution adding:

"But we still have a long way to go. Even with this money, students will still be living below the poverty line, and we know levels of credit card borrowing and other commercial debt have increased to unprecedented levels."

As I blogged earlier this year there is still a high student reliance on commercial debt. While an extra £442 per year interest free from the Student Loan Company it only goes part of the way to pulling some students out of poverty. Ms Hyslop ignored calls for a comprehensive review on student funding by Sir Andrew Cubie, whose report 10 years ago led to the scrapping of tuition fees in Scotland. The SNP entered Government promising students that they would 'drop the debt' Deputy Conservative leader Murdo Fraser points out that to fulfill that pledge totally the current expenditure required is actually £2bn rather than a £30m drop in the ocean.

Margaret Smith the Lib Dem education spokeswomen added:

"It has taken hard work by the opposition parties and NUS Scotland to drag the SNP kicking and screaming into the best deal for Scotland’s students. Today's decision absolutely vindicates our refusal simply to go along with the government's options and campaign instead for a better option that puts more money into students’ pockets.

"The Education Secretary promised to replace loans with grants, but today's statement is clear. The SNP has abandoned this key election promise."

So maybe this is one small step for the SNP, but we're still awaiting the giant leap for student debt.

Candidate Calls for National Tenancy Deposit Scheme

Students are currently preparing to head to University for the first time or heading back, I've recently been living through some of their travails, some more closely than others.

It is good to see that Katy Gordon, PPC for Glasgow North has been meeting with and listening to students in Glasgow about the issue of housing. In fact I've been doing the same thing on the same issue because it is a big one. She is also campaigning to introduce a National Tenancy Deposit Scheme, an issue that has been raised by Mike Pringle in Holyrood. This is scheme whereby the housing deposit is kept by a third party until the lease expires. Having once as a student lost my deposit for some damage that wasn't present when any of us tenants left the flat I know this has long been an issue that students.

Margaret Smith recently outlined the hardship faced by our student population. If this is aggravated by needless and incorrect retention or delay in returning deposits to students who often rely on it to move on to their next student flat. The values involved are no small amount for most of us living in rented accommodation but for students who are already working part time often as well as studying try to balance the needs of their education with the needs to survive it is even greater.

The SNP may appear to be failing to do anything to alleviate student debt but this is one issue they can make a move on that isn't going to a constraint on their budgeting. They are recently in some forums saying that the achievement of police numbers was something that they didn't need to gain votes on. Yet the battle to end student debt is something that both Labour and the Lib Dems are signed up to and here is an area that the three can work on together to help.

UPDATE @21:28: Just been told off by James Harrison that I forgot to link to the video. Worse than that I also appear to have forgotten the link to my friend Katy's blog. Both will be sorted with a shake of a lambs tale.

Broon's Dunfermline Sacrifice

Just been watch Jim Faulds currently still the Chairman of the Dunfermline Building Society at least for today quite rightly getting angry at the way the Government has dealt with this scenario.

He has accused the Treasury of being economic with the actualité. He said that unlike Northern Rock they did not have a Sub Prime Mortgage issue. That the losses that Dunfermline were going to announce of £26 million were less than the £36 million that the Chelsea Building Society lost in Icelandic institutions alone.

He also said that there was no exposure to the US toxic debt. Stating that KPMG has said they could be supported and sustained as an independent ongoing interest. Something that Jim Murphy then seemed to be very unsure about when challenged that they were.

He also protested at the lack of proportionality, the risk that has been being covered by the government in the banks as opposed to the lack that they have given the the Building Societies such as Brandford and Bingley and now Dunfermline. The mortgage book of Building Societies is back by bricks and mortar, at the end of this recession those assets will still exist and start to recover, unlike many of the risky investments that the Government has been bailing out for over £1 trillion of protection. When challenged on those with a worst situation Murphy only said that each situation was different (possible some of the others exist in Labour held seats).

Faulds also complained that he and the rest of the board were getting their news from the press before the FSA, the Treasury and the Scottish Office.

It appears that the Government is not prepared to stand by the Building Societies. I've even heard Jim Murphy just say that this is a short term problem. Again blaming it on the international situation, taking no blame for 12 years of UK Government mismanagement that has ended up seeing the country so heavily in debt that the worse offenders ended up at the front of the queue and were helped no questions asked in full and now those that managed to survive that bit longer are being left out to dry or being sold off. Like Mr Faulds said in answer to the first question Dunfermline is a sacrifice not a solution.

Willie Rennie MP for Dunfermline and West Fife then came on later to say it was a disgrace what Jim Murphy was saying. There has been a deal on the table from the UK Building Societies for six months and that the Government has been partially responsible and the FSA's levies are exacerbating it.

Where will it all end? Who will be next to be left out to dry?

Update: Moving unto the Euro debate on Scottish Politics and Labour's David Murray again trying to sidle away from the fact, for fact it is, that while there may have been a US element to our recession we are worse off than the rest of equivalent sized Western Europe countries. Struan Stevenson correctly brought him to task in trying to

If Uncle Sam's Top Hat Lands on Chance...

Earlier today James Shaddock asked me the question "Can a governemnt file for bankruptcy?" after I'd posted this. Well it appears I haven't been the only one asking the question.


A games manufacturer founded in Salem, Massachusetts has this to say about Bankruptcy in the rules of a game you may be familiar with:

"You are declared bankrupt if you owe more than you can pay either to
another player or to the Bank. If your debt is to another player, you must turn
over to that player all that you have of value and retire from the game.In
making this settlement, if you own houses or hotels, you must return these to
the Bank in exchange for money to the extent of one-half the amount paid for
them.This cash is given to the creditor. If you have mortgaged property you also
turn this property over to your creditor but the new owner must at once pay the
Bank the amount of interest on the loan, which is 10% of the value of the
property.

"The new owner who does this may then, at their option, pay the principal or
hold the property until some later turn, then lift the mortgage. If they hold
property in this way until a later turn, they must pay the interest again upon
lifting the mortgage.

"Should you owe the Bank, instead of another player, more than you can pay
(because of taxes or penalties) even by selling off buildings and mortgaging
property, you must turn over all assets to the Bank. In this case, the Bank
immediately sells by auction all property so taken, except buildings. A bankrupt
player must immediately retire from the game. The last player left in the game
wins."

So what if Uncle Sam's Top Hat comes to land on a chance square picks up the card and it says you own your debtors X trillion dollars. But who exactly of the other players on the board would the money $9.6 trillion go to?

Well 40% is owed to the USA government or the Federal Reserve. Yeah strange isn't it but by issuing treasury bonds against itself it would owe.

However the other 60% about $6 trillion is owed to , corporations, US states, and foreign governments. It breaks down to about $2.7 trillion (that's $2,700,000,000,000 for those who like their zeroes) of overseas debt and two months ago over $1.3 trillion was owed to just three countries, Japan ($593 billion), China ($519 billon) and the United Kingdom ($291 billion).

Only 4/5 countries had a Gross Domestic Product (GDP) in 2007 higher than the US foreign debt, the USA, Japan, Germany, China and the UK. Which puts the fact that America is struggling financial into startling terms.