Darling orders review of Britain’s offshore centres
Tuesday 25th November 2008, 2:30PM GMT.
THE UK Government has ordered a review of the Crown Dependencies and offshore territories as finance centres.
Chancellor Alistair Darling (pictured) made the shock announcement yesterday as part of his pre-Budget statement to the Commons.
Chief Minister Lyndon Trott reacted to the news by saying that Guernsey would play a full and constructive role in the review.
‘Financial services in Guernsey are well regulated and transparent and have been recognised as such by the OECD, the Financial Task Force and the Financial Stability Forum,’ he said. The review would complement the IMF assessment due to be carried out in January, he added.
‘We will be looking to the review to improve cross-border cooperation and support in the context of financial crises involving financial services firms operating in more than one jurisdiction.’
Deputy Trott and States Chief Executive Mike Brown will meet the UK Treasury later this week to discuss the mechanics of the review, including its terms of reference and timescale.
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Will Richard Murphy defend the threats that we have heard from Europe, America, OECD, Vince Cable. I did email Richard and he promised to debate with us soon but did make the point he is flat out at the moment. Let us see if the PC brigade agrees that all our futures should come under threat from the outside World. I wonder if Richard Digard could conduct an interview with R M and let us have a serious debate about our futures in a small part of a recent email RM said “In the light of comments Alistair Darling made about the Isle of Man a week or so ago I do not think there is anyone who can doubt his intentions: the mood of Barack Obama has reached Whitehall”.
Did anybody hear Richard Murphy’s broadcast this morning on BBC Jersey when Murphy said Jersey was bust with two years of reserves left this is really shock and awe and Lawrence be careful you might get what you wish for. Anybody going to get indignant about what Alistair Darling said yesterday?
What is the worst thing that can happen to Guernsey?
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It was interesting that Alistair Darling cited as his reason for the review of offshore centres the fact that Guernsey (among others) had asked the UK Treasury to guarantee funds lost by Landesbanki’s Channel Island customers. He argues, perhaps rightly, that when things go wrong we look to the UK for support but at the same time we contribute nothing to the exchequer. The States should never have gone cap in hand to the Treasury in the first place – if we want to be perceived as an independent financial centre we need to act like one and take responsibility for our own problems.
That however is history – we have given Mr Darling the excuse he needed to attack our finance industry and now we need to think about how we are going to deal with it.
I no longer think it is sufficient for our Chief Minister to bow and grovel to the UK and to keep banging on about what a good job we have done in complying with global demands for greater transparency. Alistair Darling (and for that matter Barak Obama, Angela Merkel et al) really don’t give a monkeys. As far as they are concerned offshore finance centres are a potential source of desperately needed tax revenue. The fact that we have always played by the rules is immaterial – they are almost certainly going to change those rules in ways which may seriously undermine (if not destroy) our primary business sector.
No doubt the army of Socialists, tree huggers and disgruntled Guerns who regularly queue up on this blog to disparage our finance industry will be delighted. Justice will be done, the greedy will be driven from our shores, the poor will become wealthy and Guernsey will once more become a tranquil oasis of civility.
Well guess what – it might not actually work out like that. Hundreds of locals would be likely to lose their jobs – and not just in the finance industry. Guernsey tax revenues will fall so there will be less money to spend on schools and fixing our roads and caring for our elderly. People will stop buying new cars and putting up those conservatories and eating at local restaurants and having a new kitchen fitted, which in turn means that tradesmen and workers in all sorts of businesses will find the work drying up.
And will any of the revenue stolen by the UK Treasury be redistributed to the less well off -well no – because Alistair darling is going to need every penny to pay off the mind-bogglingly massive debts he has run up.
This is no time for our States to pussy foot around trying to persuade Mr Darling that we are all thoroughly reputable people, like I say, he really doesn’t care. Now is the time for Lyndon Trott and the rest of the States to prepare for the forthcoming fight to defend our finance sector. Sadly, I fear that the haven’t got the backbone.
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A very good and thought provoking article by CD.
However, I think he is being less than generous to state that there is a lack of backbone.
Trott and Parkinson both have the ability to negotiate strongly.
Also, Is it not possible for the GFSC heavyweights to be involved? There is a significant amount of all round experience and indeed talent within this team.
This attack on the Channel Islands has been coming for a long time so people should not be surprised but prepared.
Regulation is strong in Guernsey, so hopefully with some equally strong determination the Islands will battle through.
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Hello Dominic
To begin with, no one wishes for disaster. This is the ultimate fallacy put forward by those that defend privately accumulated wealth using morally dubious practices. I am positive that Murphy or any organisation or government would not want to see people suffer.
Quite the contrary. If you look at the work done by those that decry the excesses caused by capital concentration in financial loopholes/instruments/jurisdictions then you would raise your hat in salutation. It is only work done by the selfless that drives ideological equality, to the extent that our decadent leaders of our ‘Christian’ western ‘values’ use those qualities within as a raison d’etre for perpetuating the rotten framework they and their friends profit from.
Sorry Dominic, but your repeated nonsense about ‘the death of the Channel islands as we know it’ rings so hollow that what you really mean is ‘Oh my gosh I’m going to have to move my funds about to mitigate my tax expense’. That is how rubbish the argument sounds.
Guernsey has done very well in exploiting the rules as they are. These rules have chiefly come to our aid with the expansion of globalised financial trading. Globalised financial trading has caught itself in a knot. Suddenly the rule makers have themselves a quandary. What do we do? We berate the rule makers that have made us rich. Unbelievable.
Then we get to the CD line of argument. Our infrastructure will collapse if tax abuse is abused. There is hardship in any recession. Does CD really believe that any Government who has rich friends in powerful places would undermine their profit stream? That is how these weird rules have survived for so long. This UK Chancellor is in the unenviable position of justifying why a certain few should enjoy not paying much tax on his watch. Why not focus a bit of scrutiny on the facilitators of this muddle? Why are we above such higher matters? Do we really believe that our tiny island is a Master of the Universe? Are we not a Crown Dependency?
What right do we have to fight against the Crown?
It would seem that peoples priorities are askew. It is not the want of the few that should drive current affairs, but the need of the many. The boom has boomed and we should use the last thirty years of financial industry nous to protect what we have as an industry to propogate then diversify, not for the whims of the rich, and much worse, not for those that profit from exploitation.
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CD I don’t share your concerns although its clearly going to be a period of uncertainty. On the other hand I wouldn’t go so far as to call it an opportunity. However, like the Edwards Report in 1998 and the various IMF inspections, together with what the OECD has concluded about us, we are far better-placed than the vast majority of offshore jurisdictions who are also facing a UK government review, including the likes of Cayman and the BVI.
It was inevitable that we would be facing this review after President Obama’s various statements but it reinforces the need to ensure that we are and are seen to be whiter than white and that we remain something which is acceptable to the US, the UK and the EU. We have made all the right progress over the past decade despite passing the Edwards Report and entering into various tax exchange agreements. Is that enough? We will no doubt find out. Personally I would expect us to perhaps have to sign up to additional and/or enhanced tax information exchange agreements, possibly so that information exchange is more pro-active than re-active and the European Savings Tax Directive seems likely to be extended on scope. But beyond that we are already doing everything that has been asked of us, unlike several other jurisdictions.
I was not under the impression that we had asked the UK government to bail us out financially re Landsbanki. My understanding was that we asked the UK government to assist us in pressuring Iceland to deliver on its guarantee, not an unreasonable request giving the UK’s role on freezing the Heritable Bank assets and also that seemingly the Chancellor knew rather more about the fragility of the Icelandic banks than was being shared with bank regulators. o
It doesn’t help of course that Landsbanki depositors themselves lobbied the UK government to pay up in respect of the Guernsey bank, in the process showing a fundamental misunderstanding of the constitutional relationship and possibly giving the Chancellor the foot on the door that he needed.
Nevertheless we are now where we are and we have to deal with it. We don’t know the full terms of reference of the review but we should be confident of meeting every challenge from a position of strength. Maybe we will have to sacrifice retail banking deposits but given our compensation risk exposure relative to the modest revenues that retail deposits bring us, that may be a tiny price to pay. Even assuming that that the review was to result in us losing 10 or cent of the finance industry (and I don’t see that happening) then that merely puts us back to where we were a year or so ago, from which we can quickly recover. The equity Market falls can produce such a fall in a very short of space of time so such volatility is present anyway. Timing is of course not ideal given recent and imminent effects of the recession buy such economic will always be there regardless of any review.
Of course it certainly does not help Guernsey to fill its black hole as growth is some way off, but that is another subject altogether and there is no easy answer.
Our finance industry is built on very firm foundations and is extremely diverse. That strength and diversity is invaluable and will hold us in good stead. But we must not be complacent and if indeed there is still any business here of a type that could compromise all the positives that the review will highlight, then we had better be very pro-active indeed about weeding it out. A couple of bad apples could have a disproportionate effect on the entire future of the island and the stakes really are that high. Let’s make sure that we don’t give the review any ammunition whatsoever. I have the utmost confidence that we are capable of surviving this review.
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Oh that wicked Mr Darling not using British taxpayers money to bailout those people who put their money into Guernsey Banks to avoid paying British tax.
If everything is is being done right and above board what do you have to worry about. If not then perhaps you should have listened to those people who for years have been warning about Guernsey putting all their eggs in the Finance Industry basket.
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Excellent posting CD you really do have a grasp of the complexities and issues that face this Island. Apart from Lawrence you will not hear too many people voicing their views but secretly take delight in knocking the hand that feeds them.
You are right for years the civil servants of Guernsey have been subservient appeasers that have jumped always to the tune of anybody that says boo and the Politicians jumped to.
Richard Murphy was on Radio Jersey yesterday and below are the comments made by him on his blog.
The future of Jersey
25-Nov-08
I was on BBC Radio Jersey this morning (no link yet) – replying to deputy Chief Minister Terry le Sueur, who was welcoming the government’s planned new review and saying things like this, included in a press release they put out yesterday:
The Review will give us a further opportunity to show the strength of Jersey’s regulatory system and the extent of our international co-operation and transparency. We are confident it will also provide us with further third party endorsement of our continuing compliance with international standards, of our preparedness to cope with the present economic climate and withstand future shocks, and also of our ability to sustain the long term stability of our economy.
Unsurprisingly, I disagreed. I had planned my comments in advance, as I often do, using a MindMap. When you’re live at 7am that’s especially important! It looked like this:
That last one should have been ‘will’, I note.
And this is why I could say with confidence on air that Jersey’s days as a haven are numbered. It is playing by the rules, but it’s playing the wrong game. The game has changed, and theirs is now over.
OK, it will take time, but Senator le Sueur is leading the people of Jersey up a garden path if he really thinks that this plan is good for them. It won’t be. This time the new anti-haven alliance of Washington, Brussels and London means business, and this time they will be dragging the OECD and IMF behind them.
PS: The MindMap took a minute or two using MindGenius. I strongly recommend it as a productivity tool.
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CD is right: “The States should never have gone cap in hand to the Treasury in the first place”.
No, they should have pledged to repay LGL savers with public funds, thereby salvaging the shattered reputation of their international finance centre and attracting more revenue in the future to pay for health and social services.
The UK, the Isle of Man and even near-bankrupt Iceland (EEA deposits) have come to the aid of stricken savers.
Even the tiny Faroe Islands, with a smaller population than Guernsey, have contributed $50m as a loan to Iceland.
Why on earth is Guernsey letting savers down so badly? It’s incomprehensible.
If the States cannot afford to take the honourable course then they shouldn’t be in the business of running international finance centres in the first place.
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Some good points being made I agree Trott and Parkinson look to be a strong team but time will tell. David if we have investors or companies that are based outside the EU or America why would we go down the dangerous road to sign up to additional and/or enhanced tax information exchange agreements many of our competitors would not adhere to this. The route we have at present goes far enough and much further than any British or European Banks. I believe if the information is on file on every client that is enough and information given outside should only be open when proven concern about a particular entity is raised by external interest.
I feel if you go to far business will just move to areas that people trust will not acquiesce to the slightest pressure.
Many Accountants are advising people to put their money in other areas even in Europe as opposed to the Channel Islands.
Richard Murphy has often made the point many countries including the OECD would want to see every company on Public records so anybody in the World can access every detail.
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The thirst to “improve cross-border cooperation” means Guernsey’s banks spilling their guts so the UK can collect more tax.
They are too late, Guernsey is finished as a retail financial center anyway if the Landsbanki Savers lose their cash.
See what we think here: http://landsbankiguernseysavers.co.uk/BanksInGuernsey.html
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CD = Good post! Excellent in fact.
This whole situation which has come about as a result of Guernseys failure to properly supervise and oversee the operations of the Landsbanki Branch of Landsbanki reminds me of the old tale which goes something like this -
The boy who sits by the hearth and warms himself while his fellows feed the fire with logs until the time approaches when it is his turn to go out and chop some wood in order that the fire may be fed… the boy instead, hearing the approach of his fellows who shall ask him to take his turn slips out the back and heads over to the neighbours house to seek warmth by the hearth there…
Guernsey! For goodess sake.. Nothing in life is free and now that you have benfitted so much from the financial industry .. dont try to avoid doing the right thing.
Instead, pay back the landsbanki depositors.. keep the fire of financial security for yourselves burning well into the future and bask in the heat of it.
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Why is it you keep removing the most important issues off of your shoutwhen it only went in the paper on tuesday.
Some people might not be able to find it and you will get more informed people talking about this issue than some silly joke
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You may see it as those nasty people poking their noses into your business, but on the other hand they may see it as you putting your hands in their pockets!.
If there is nothing wrong for those nose’s to sniff out then they’ll see that your hands are not in their pockets. Problem solved.
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Trott and Parkison make a good team?
Like Laurel and Hardy made a good team?
Or Hale and Pace?
Please tell me you are not serious?
The Govt of Guersney has very limited intelligence in respect of international law, taxation, and compliance. This is not to say they are trying to address these matters, but in respect of taxation policy, civil forfeiture, Govt Policy, etc Guernsey is still as much as a decade behind other European companies.
What is boils down to are two things:
1 – offshore terrorist funded monies will have to be identified
2 – tax avoiders and evaders will have to be identified.
Take those two out of the equation and I’m not sure where that will leave Guernsey – there might only be £20 here, then again maybe not.
It would be good if the IMF used an external audit firm from say Jersey, or the UK, someone of independence who has no insider information to assist them with their assessment.
All I can say is lets hope they don’t look at the cap ex of the States and how that is managed. . . .
Alistair, I could save you a trip and some money and just suggest to advise us to drop any offshore investors not based on the EEC, raise our offshore tax incentives to match the EEC OECD guidelines, and further raise income tac to 30p on the island and finally abolish ‘brass plaque’ trading – companies who exist on a piece of metal on a door in an office, but are actually in Barbados getting a nice tan.
Have a nice weekend.
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Mr Paul – The ‘Your Shout’ page is generated automatically and shows those stories that have received recent comments.
Since you have commented on this article, it will return to the Your Shout page.
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Landsbanki Saver says “See what we think here: http://landsbankiguernseysavers.co.uk/BanksInGuernsey.html”
Who really cares what they think?
No one seems to falling over themselves to help those who made financial decisions that included no depositor protection, and now blame everyone expcept themselves.
Harsh, but it seems to be reality.
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The issue here is what is the British Govts policy on Guernsey and its ilk. Under Labour we’ve seen a huge increase in taxation to afford huge spending sprees on nothing that appears to benefit those same taxpayers.
From whatever angle you care to take Labour is a cancerous parasite that siphons huge amounts of money into businesses and bearuacracies that deliver no value which is either complete incompetance or total corruption.
The question is do Labour think offshore funds are taxable and are worth (the cost of) chasing down for that tax?
Or would doing so shoot themselves in the foot regards funds invested in Londons stock markets?
Labour are set to lose the next election by either a big beating or a landslide so maybe it’s time to ignore Labour and start working on the Tories.
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With the exception of Terrorists/Organised Crime I feel that Guernsey will go back to cow herding if they have to cooperate with the hypocrites in Whitehall.
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