Why the hell not? Here it is:
HEADING: It’s time to stand on our own three legs.
It’s time to stand on our own three legs.
This is potentially the most important election in which you will ever vote.
The certainties on which the Isle of Man could once rely – a VAT-sharing agreement massively weighted in our favour; the UK acting as a bulwark against international bodies such as the European Union and the OECD; international acceptance of an economy built on tax avoidance – are gone forever.
Unless we take radical decisions now, we face disaster tomorrow, with the imposition of corporate tax harmonisation by a backdoor route, a massive structural deficit and – as I write – the likelihood of a further renegotiation of the Customs & Excise Agreement.
I believe that to address all these issues and secure a sustainable future, we must sever our constitutional links with the United Kingdom whilst being ruthless in our approach to cutting costs and generating revenues. If you, like me, believe that this election must be about the big picture and not about dogs’ messes and bus timetables, I urge you to lend me your support on Thursday 29th September.
SUBHEADING: It’s independence or bust.
To say that relations between the Isle of Man and the United Kingdom have soured in recent years would be an understatement. We have had to contend with the renegotiation of the Customs & Excise Agreement, reducing our revenues by around £140 million or approximately 25% of total spending, the attempted cancellation of the Reciprocal Health Agreement and the effective sequestration of £550 million of investors’ funds in Kaupthing Singer & Friedlander (Isle of Man) causing the collapse of an otherwise solvent bank.
More seriously, the United Kingdom, whom we pay to represent our interests internationally, has at best failed to do so effectively and at worst has actively been briefing against us. In contrast, the OECD has proved entirely reasonable in its campaign against harmful tax competition, having immediately whitelisted the Isle of Man as a transparent and responsible international jurisdiction equivalent in status to the UK itself. Contrast this with the former Chancellor Alistair Darling’s sneering comments about us being “a tax haven sitting in the Irish Sea” and it becomes clear that our traditional view of the world has been reversed.
Whilst the economic growth of the United Kingdom in the last decade was built on lightly regulated financial services, with much of the incoming investment being gathered through a network of Overseas Territories and Crown Dependencies, the UK has now had its fingers burnt through bank collapses and changed direction. The present viewpoint appears to be that the Crown Dependencies are competitors to be hampered rather than colleagues to be supported.
In short, I believe that we no longer need the UK to protect us from the EU and the OECD; but we could very soon need the EU and the OECD to protect us from the UK.
The first step has to be independence, and once elected I will campaign for a referendum on the matter to be held as soon as possible, but in any case not later than the next general election in September 2016.
SUBHEADING: Regulation without representation.
Our position in relation to the European Union borders on the surreal. We are subject to many of their regulations, including those on corporate taxation, without enjoying any of the benefits of membership or full access to their financial services markets. Further, our ability to make direct representation to the EU is severely constrained by our relationship with the United Kingdom, which retains responsibility for our international relations as well as defence and ultimate good governance. As I have already indicated, I do not believe that the UK has discharged these responsibilities well, and has in fact been leading the hue and cry against “tax havens”.
This is particularly disturbing in the present climate, when the EU may be attempting to interfere with our right to set corporate tax levels as we please. It is hardly surprising that they found the Attribution Regime for Individuals unacceptable, since this was a clear attempt to reconstitute our former ring-fenced regime (zero corporate tax for non-resident companies but taxation for resident businesses) by moving the ring-fence into the area of personal taxation. However, some sources now suggest that they will attempt to outlaw the 0/10 regime itself, arguing that it is an artificial tax incentive designed to promote the relocation of profits without the economic substance of business actually moving to the island.
This, in short, is an attempt to introduce corporate tax harmonisation by the back door, and without the proper democratic consultation that the EU is required to conduct among its members. I believe that we should be free to make our case directly to the EU, rather than relying on the UK which itself appears to have an agenda to eliminate 0/10.
SUBHEADING: The Customs & Excise Agreement: a millstone
around our necks.
For decades, the Customs & Excise Agreement with the UK served the island extremely well, with favourable terms enabling us to collect tens of millions of pounds a year more than we actually generated in VAT revenues and duties. That advantage ended at a stroke when the agreement was changed in 2009.
Whilst that renegotiation merely reflected the UK’s understandable desire not to subsidise a nation with a higher GDP per capita than itself, the change they are proposing now is more sinister. The UK’s position is that the Isle of Man should receive the same VAT revenue as if we were an independent nation, but their interpretation of these words amounts to sleight of hand. In short, the UK wishes to treat us as though we were another EU nation, meaning that the vast amount of money we spend there would be reflected in their VAT income and not ours. If we allow this to happen, we are facing a further massive drop in our indirect tax revenues that will leave us unable to provide effective public services.
In contrast, if we terminate the Customs & Excise Agreement and implement our own form of VAT outside the EU VAT area, we can ensure a steady flow of revenue. All goods imported from the United Kingdom and Europe will have VAT deducted at the point they leave the EU VAT area and then reapplied when they enter the Isle of Man, capturing the revenue here. We will also levy VAT on all items produced, and all services rendered, within the island.
The difference in revenues will not merely amount to tens of millions of pounds a year; it will be the difference between proper healthcare, social security, policing and transport or the absence of all those things.
SUBHEADING: A fiscal policy that’s right for us, not for our
The other disturbing aspect of the Customs & Excise Agreement is that it places half our fiscal policy – all aspects of indirect taxation as well as levels of certain social security benefits – outside our control. This was graphically demonstrated when the last UK Government decided to cut VAT to 15% on a temporary basis in a desperate attempt to stimulate consumer demand.
With VAT under our control, we can raise rates to address shortfalls in government revenues or reduce them to enhance consumption as we please. We could also adopt a more modern flat-rate VAT system without exemptions or a de minimis waiver, which would vastly reduce the possibility of non-compliance by individuals or businesses.
My discussions with a leading international tax expert suggest that a 14% flat rate would be appropriate in the first instance. The introduction of VAT on essentials such as food will of course have an impact on people’s day-to-day expenditure, although research conducted for the introduction of the Goods & Services Tax in Jersey suggests that a lower-income family with a typical spending pattern would only be around £10 a month worse off compared to a standard rate of 20% and several zero-rated categories. We would of course need to make sure that those in need were protected against this rise through adjustments in the personal allowance and/or social security benefits.
At the same time, abrogating the Customs & Excise Agreement will allow us to simplify the national insurance, pensions and benefits systems should we wish. We might, for instance, find that the introduction of a combined tax and national insurance payment could reduce collection costs significantly and eliminate avoidance through the reclassification of income (for example, earned income to investment income).
SUBHEADING: An independent Isle of Man in a changing world.
Of course, it must be stressed that independence is not a magic bullet that will solve all the problems we face. Even as an independent nation, we would still be subject to the requirements of the European Union, which is able and willing to introduce sanctions against smaller nations that oppose its will.
However, we would be able to make our case directly to the EU and the OECD and to work with them on any necessary reforms to our financial services sector and tax structures. We would also, subject to the agreement of the 27 EU nations, be able to decide on our own status in the world: as a wholly separate jurisdiction; as a member of the European Free Trade Association; as a member of the European Economic Community (effectively “associate membership” of the EU, being subject to its laws but not making any financial contribution or returning an MEP); or eventually joining the EU itself.
In the same way, we could choose to adopt an executive presidency, opt for the combination of a non-executive president and an executive prime minister, or decide upon Dominion status to retain the Crown as our Head of State whilst safeguarding ourselves against any possibility of harmful political interference from the UK Government.
SUBHEADING: It’s time to cut costs – starting with Government
Whilst independence will help to safeguard our VAT revenues and protect us from the UK Government, it will not by itself address our ongoing structural deficit. Our headroom to raise taxes is limited, and it is vital that we remain closely aligned to competitor jurisdictions such as Jersey and Guernsey if we are to remain a destination of choice for major corporations and high net worth individuals.
In short, we must cure our government’s addiction to spending and tailor policies to meet our reduced circumstances. It goes without saying that I will vote against all but the most necessary capital expenditure during the next Parliament: there will be no more grandiose sewage schemes or road works, let alone massive subventions to private businesses such as Manx Gas, if I can prevent it. Similarly, the hulking white elephant that is the Manx Electricity Authority is long overdue for privatisation: the enormous borrowing incurred by the previous management would never have taken place within a private business, and the notion that the Government should subsidise a retail chain that not only loses money every year but undermines private sector competitors is nothing short of obscene.
However it is our bloated administration itself that consumes a large part of our dwindling reserves. It is quite astonishing that a community of 80,000 people should be governed by the world’s only tricameral parliament, no fewer than 24 local authorities and an army of civil servants at both local and national level.
My first proposal would be to disband all local authorities and have every service delivered centrally by Tynwald. This will not only ensure consistent service delivery in all parts of the island, but also put a stop to the nonsensical situation whereby a “Clerk” serving a population of some 3500 people can take home around £85,000 a year plus wide-ranging benefits.
In addition to realising massive economies of scale, this new approach will also be good for democracy. The vast majority of local authority seats are uncontested as, shamefully, are some in the Keys; there are simply not enough aspirant politicians to provide meaningful competition for 200-odd offices of state. In return for a modest increase in MHKs’ workloads, we should see more competition for each seat as well as saving many millions of pounds a year in funding a plethora of tiny councils as well as a large government department to oversee them all. We can also eliminate the payment of rates – a nuisance tax that is arbitrary, expensive to collect and far from lucrative.
Finally, it goes without saying that I wish to see extensive modernisation of the civil service, including a reduction in headcount and the closure of the final salary pension scheme. This does not represent an ideological opposition to the public sector, but is simply based on practicality: large government was affordable when we were receiving a £140 million a year subvention from the Customs & Excise Agreement, but has now become a serious obstacle to balancing the books. In short, I believe that if we do not undertake some judicious pruning now then the whole edifice of government could crumble, with disastrous consequences for the public services upon which we all rely.
SUBHEADING: Building a democratic Government that really works.
It’s vital that an independent Isle of Man should have a government of all the talents, since we would need to draft much of our legislation from scratch rather than simply adopting UK law (which is often inappropriate for our needs in any case). Yet our present system actually works against attracting the highest calibre candidates to the Keys, since the working hours make it impossible for people with other commitments to become MHKs.
By abolishing the three-month summer recess, we could eliminate the need for multi-day sittings; and by moving the start time for Keys sittings from the morning to early afternoon, it would become possible for backbench MHKs to hold a seat while continuing with another career. This would not mean that we would move to a system of part-time politicians: MHKs would still need to deal with a significant constituency caseload and a great deal of background reading, and would have to give up their evenings and weekends to achieve this. However, this would mean that we would no longer have a parliament mainly made up of the retired, self-employed and those for whom an MHK’s salary represents a considerable step up. These amended working hours would also help to end the culture of career politicians that we have developed, enabling MHKs to take courageous decisions without the fear of being unable to pay their mortgages should the voters decide against re-electing them.
At the same time, I would like to see MHKs forge closer links with their constituents by moving to a system of much smaller, single-member seats. In an ideal world, I would advocate for forty such seats, each representing around 2000 constituents: this would also prevent sitting members from huddling together for warmth when seeking re-election and remove the inequity whereby some electors have three votes, some two and some one. Of course, a forty-member Keys as well as the Legislative Council would leave the Isle of Man over-governed, so I would recommend the abolition of LegCo (although I have no objection in principle to an indirectly elected second chamber).
The biggest advantage of an expanded House of Keys, of course, would be the significant reduction of the government block vote. At present, the principle of collective responsibility and the presence of two political members in each department means that the government automatically commands twelve votes out of twenty-four in any debate. By moving to the constitution I have suggested, and by replacing the two political members with a single Assistant Minister, we could reduce this block vote to eleven out of forty, allowing for much more stimulating debate and far more unpredictable outcomes.
SUBHEADING: The Chief Minister: let the people have their say.
One of the major criticisms many voters have of our present system is that the Chief Minister is elected by a narrow franchise of just over thirty people. This is particularly concerning given the Chief Minister’s wide powers, which include hiring and firing Ministers and thus setting the overall direction of government; in effect, electors have little idea of the composition or policy of the next government when they go to the polls.
Yet I do not find the idea of a directly elected Chief Minister appealing. Studying election results demonstrates that it is often high-profile populists, rather than capable politicians, who top the polls, and allowing the general public the sole say could easily result in a Chief Minister who did not command the confidence of the Keys. I would therefore advocate a compromise via an electoral college system that gave equal weighting to the votes of the public and the Keys.
At the same time, I would like to see the Chief Minister’s powers reduced, by moving to the system utilised in Jersey and Guernsey whereby Ministers are voted into office by their fellow Members rather than being appointed by the Chief Minister. This would largely eliminate the Chief Minister’s patronage and help to prevent self-interested voting when appointing a new leader, as I think we witnessed after the last election.
SUBHEADING: Let’s think like a country, not a county.
Political and taxation changes alone will not bring about a successful and sustainable independent island; we also need to start thinking as a country rather than as a possession of our larger neighbour. In particular, we should establish a clear Manx nationality in law, with a defined pathway for those who arrive in the island and wish to achieve it. This would enable us to limit immigration to those who can make a positive economic contribution to the island, whilst avoiding a massive influx of English pensioners seeking to dodge death duties whilst using our medical services. Subject to negotiations on our future status relating to the EU, we can also establish our own border controls, ending the nonsense whereby sea travellers are routinely searched when leaving the island but not when embarking in Liverpool or Heysham.
On a more specific matter, I intend to campaign for the abolition of the licence fee: a nuisance tax that is expensive to collect and is largely funnelled off-island in return for a few token mentions during news broadcasts focusing on North West England. The saving of more than £150 a year will come as welcome relief to low income families in particular, and a single year’s saving would in many cases fund the installation of Freeview as a superior substitute. This change would also put a stop to the dangerous precedent of Isle of Man residents paying a UK tax, since the TV licence was reclassified from being a charge some years back.
In the longer term, we should consider the introduction of our own TV station, including live debates between MHKs and phone-in shows where Ministers may be quizzed on policy. Aside from being good for democracy, and helping to expose flaws in Members’ arguments, this would increase our sense of self-reliance and self-determination. Our own TV station could also provide broadcasting in Manx as well as shows focusing on the local arts and cultural scene, giving the wealth of talent we have here the exposure it deserves.
For anyone who imagines this is fanciful or prohibitively expensive, I should point out that both Bermuda (population around 65,000) and Gibraltar (population under 30,000) have their own TV networks, so this is more about changing our mindset than securing massive funding.
Equally importantly, we will need to leave the UK telephone numbering plan and have our own country code. Were we, for example, to adopt the currently unissued +424, then number 600000 would change from 01624 600000 to 00424 600000 when dialled from the UK, and from 0044 1624 60000 to 00424 60000 when dialled from any other nation.
Finally, returning to fiscal matters, we would be able to peg our currency to any other currency of our choosing – the pound, the euro, the US dollar or even the yen – depending on our international trade needs. In the short term, I believe it would almost certainly be advantageous for us to keep the Isle of Man Pound.
SUBHEADING: Better regulation of business is in everyone’s
Irrespective of whether the Isle of Man is independent or retains Crown Dependency Status, it is vital that we focus on fast, responsive regulation of the finance sector (as practised in Malta, for example) as opposed to the disastrous “light-touch” regulation that saw toxic debt build up in the United Kingdom and Ireland.
In particular, the Financial Supervision Commission must cease to become a toothless watchdog and exercise real control over the sector it regulates, particularly in the areas of deposit-taking and high-risk investments. With a more assertive FSC, I believe we could have avoided serious issues with KSF Isle of Man and the Premier Low Risk Fund, both of which have garnered considerable negative publicity for the island.
Regulation extends far beyond the finance sector, however, and it is important that we have an Office of Fair Trading worthy of its name. Whilst my view is that the Isle of Man now enjoys competitively priced telecommunications services (with the notable exception of broadband), the same cannot be said for the other major utilities. I would like to see a Keys working party consider whether there is scope to introduce competition in electricity or gas provision using the current infrastructure, and I have already stated that I believe the MEA should be privatised forthwith. Additionally, I would like to see water consumption charged on a per capita basis rather than via the water rates, which is a rather arbitrary and unfair way of doing things. If it were practical, I would prefer to see the introduction of water meters, as I believe these discourage the wastage of water and encourage consumers to use this valuable natural resource more judiciously.