Saturday, 20 October 2012

The Boat that Rocked

STATES Deputies who suggest that Island institutions are corrupt or grossly incompetent risk damaging Jersey's reputation way beyond our shores, Senator Sir Philip Bailhache has warned.

In a speech to business leaders, the Assistant Chief Minister with responsibility for foreign affairs rounded on detractors - both in and outside of Jersey - as part of a drive to combat what he called the destructive ignorance fuelling negative views of the Island.

He said that much of the criticism directed at Jersey and its label as a tax haven which was harmful to UK, EU and third world countries were the result of 'the green-eyed monster of envy and ignorance'.

Senator Bailhache told members of the Jersey Association of Trust Companies that a huge amount of work was being done both very publicly and behind the scenes to promote the Island as a well regulated finance centre around the world. (1)

Is Sir Philip Bailhache making silly statements again? As Matthew Price pointed out on BBC Radio Jersey, I think to Senator Philip Ozouf, it is not much use promoting the Island overseas as a " well regulated finance centre" when one case - very public and splashed all over the newspapers - comes along and smashes that image - namely the Jimmy Carr tax evasion scheme, which used a Jersey registered company to work. As the Guardian noted at the time:

The comedian Jimmy Carr apologised for making a "terrible error of judgment" by investing in a Jersey-based tax avoidance scheme, after facing a torrent of criticism.

On Tuesday, the PM described Carr's tax arrangements as "straightforward tax avoidance". He said it was unfair on the people who pay to see Carr perform that he is not paying his taxes in the same way that they do. The K2 tax-avoidance scheme Carr is said to have used enables members to pay income tax rates as low as 1%.

The comic, who has famously lampooned fat cat bankers, reportedly protects some £3.3m a year by channelling cash through the Jersey-based company. (2)

The inability of regulation to deal with this, or indeed the States to promote an ethos in which this is seen as inacceptable use of Jersey companies weakens the case for "well regulated finance centre". There was a Jimmy Carr tax avoidance joke ion Have I Got News for You last night. This kind of reputational damage is not, as Sir Philip claims, the result of "the green-eyed monster of envy and ignorance". On the contrary, it damages the Island because it shows it is a place where grossly unjust tax schemes can operate. Jersey Finance somewhat blasé attitude - it's perfectly legal, we can do nothing about it, it's not our fault - actually does more reputational damage than some States Members speaking their minds.

What does improve matters is serious legislation like the one that Chief Minister Ian Gorst is proposing to stop Vulture Funds using Jersey Courts. That's an example of how to really improve Jersey's image, because it is not just PR - it is making real changes. Apart from the UK Jersey is the only other jurisdiction in the world to take on board this legislation, so that information needs to get out into the media. It's not verbal fluff, it is a real example of how to be "well regulated".

And speaking of speaking their minds, why didn't Sir Philip think before giving out that clarion call about Jersey Independence? Hasn't he any streetwise knowledge of how Fleet Street operates, or did he think this would be a fairly innocuous feature? If he had only taken the lesson to heart of "Yes Minister", he would have seen how the newspapers operate. To my mind, that's just as much "destructive ignorance", and what makes it worse is that it is not some local maverick politician (and many jurisdictions have those), but as the papers were keen to point out, a former Bailiff of Jersey. In those circumstances, a Minister with "responsibility for foreign affairs" has, in my opinion, acted unwisely and even - dare one say it - a bit irresponsibly!

Senator Frank Walker on Newsnight, of course, seen using language such as "You're trying to shaft Jersey, internationally" by millions of listeners also did not help Jersey's reputation overseas. That certainly was "fuelling negative views of the Island". One expects that kind of language from perhaps someone of the ilk of John Prescott, or back in time, Dennis Skinner. Coming from a Chief Minister, it gives the impression that Jersey is being run by an uncouth thug who shouts his mouth off behind the scenes when he believes no one is listening.

Jersey, is not, of course, the only jurisdiction where this can happen. I had an email round robin (goodness knows why) extolling the virtues (!) of creating a limited liability company in Wyoming, USA.

Few people know this little fact, but it was Wyoming that first created the American LLC in 1977, as it was modeled after the 1892 German company law known as Gesellschaft mit beschrnkter Haftung (GmbH).  Nevada and Delaware then copied Wyoming's LLC and went on to experience profits through better marketing techniques.

There are several USA States which blatantly advertise their products as ideal for legal tax avoidance, but they don't get the big headlines that Jersey does, probably because Jimmy Carr isn't involved. Changing the image of Jersey abroad is not best achieved by suggesting that everyone should toe a party line and keep silent about their opinions. There are countries where that happens. Putin's Russia, for example, but I don't seriously think Sir Philip wants to go down that road, although some of his critics might.

But what is I suppose most damaging about Sir Philip Bailhache's suggestions is that he is trying to stifle free speech. I can think of many instances where the States have been "grossly incompetent". That is a matter of degree, and opinion, but lots of overspends would be a good start, giving the MD of the Waterfront Enterprise Board a salary almost "beyond the dreams of avarice" wiuld be another, the golden handshake contract and pay off for Bill Ogley, the reputational damage around the loss of the Auditor General, the stockpiles of ash and asbestos that no one has yet managed to deal, the incompetence of the tendering process around the new bus service, delays of six months with the airport control tower because the implementation had not been properly planned, the Fort regent cavern that was supposed to solve all flooding in St Helier (but now needs additional draining pipes to it), a marina whose gates didn't work properly, the mess over the Verita / Williamson reports over Haut de La Garenne, the James Reed schools fiasco and U-Turn,  Lime Grove saga, the inability to hedge the incinerator costs etc etc. And the case of Roger Holland, of course, which Sir Philip would know only too well. Where to start?

Jersey's not alone in that - Private Eye is littered with cases of grossly incompetence by government and county councils. But to say that States members should not bring it to the public because it rocks the boat is wrong. I have some sympathy with Sir Philip - some States members do seem to shout their mouths off without engaging their brains (on all sides of the political spectrum, let it be known) - but what would be better would be to ask them to think carefully and choose their words carefully before speaking. There is no need to give hostages to fortune in terms of the UK media if we don't have to, because they are often happy to latch onto any disaffection as a stick, and sell more papers.

As for corruption, a number of States Members, such as Terry le Main, seem to have flouted Data Protection, and got away with it. Guy de Faye seems to have issued a Ministerial directive, when in office, for the benefit of one developer. The suspension of the Chief of Police strayed into some very murky waters, and the "in camera" debate in which Andrew Lewis stated "I have read an alarming report from the Metropolitan Police which led me to this decision in the first place. I can do no more", when he later stated he had not in fact read the report, etc etc. None of this may be strictly speaking legal corruption, but it is, I believe, illustrative of a mindset which regards nothing as inadmissible providing it is not illegal. That inability to see that the ethos behind these situations is "corrupt" is a blind spot  which Sir Philip seems unable or unwilling to see. I suggest a reading of C.S. Lewis on "The Inner Ring".

And the inability of the States to keep away from "in camera" sessions is also extremely damaging. It gives out a reputation that we are a place of secrets, where the government have to discuss matters and keep them away from the public who elected them. The inability to see this and how it feeds the narrative of corruption shows how out of touch the States are in this respect. So that the leaking of a transcript is criticised by PPC, but the practice of so many secret debates outside the public forum is not the subject of review. Of course people think - they've got something to hide, there's something nasty in the woodshed. Wouldn't you? It's not corruption in the technical, legal sense, but government in secret sessions is a very corrupting practice in terms of weakening democracy in the Island. The mother of Parliaments manages without it, and so should we!

I imagine that if the UK media pick up Sir Philip's speech, they will give it a very different slant, and the words "free speech" will probably be mentioned, and perhaps even Jimmy Carr. What price reputational damage then?



Anonymous said...

An excellent piece Tony. Thank you.

I admire you for being able to (at least on the surface) remain calm and objective.

My normally calm and objective demeanor is slipping badly, particularly in relation to the three juxtaposed pieces in yesterday's JEP - the Bailhache reputation mantra, the Crowcroft keep secrets at all costs view and Le Main's typical "How could you possibly think that I would do such a thing" complaint.

Add to this the Leah Goodman business and the refusal of the media and our government to respond coherently to the Savile scandal and the wider abuse issue and I feel a visit to the Doctor to up my hypertension medication is in order!

Please carry on the good work.

Nick Palmer said...

Sir Philip's excuse that the Jimmy Carr avoidance wasn't set up by Jersey but by a UK firm - we only administered it and many other places could have done that - doesn't really make us look whiter than white ethically, even though we are, as they keep on telling us ad nauseam, a well regulated finance centre.

As pointed out on the CTV comments section, our position of being one of many that could have administered the scheme is an embarrassingly poor defence of the Island and is reminiscent of the drug dealer who sees nothing wrong with supplying all and sundry because there is a demand and because someone else would supply if it wasn't them. Apart from the legalities, what's the difference if we are looking at the ethics of the industry?