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09:15 am: the problem with Jersey
Jimmy Carr is not the problem. Why does this always have to come down to personalities? Perhaps Jersey is the problem. Jersey has a strange constitutional relationship with the UK - it is another territory of the Queen, not part of the UK and not subject to Parliament's laws 1, and is not in the European Union, even. It gets the benefit of relying upon the UK's defence and foreign affairs networks 2. And there's an implicit guarantee of rule of law that the UK provides. It's used this pseudo-sovereignty to reduce taxes to attract corporations, to provide employment and revenue.

You'd, therefore, think that the States of Jersey were rolling in it from all the foreign companies having nameplates there, right? It turns out that it's a bit more complicated than that. Supposedly, the UK exchequer subsidises Man, which has therefore been able to put its corporation tax to nil. Consequently Jersey and Guernsey have had to put their taxes down to match, and their public finances are running at a deficit! I had assumed Jersey was actually getting some benefit out of this arrangement. But no, they're being screwed as well. They even had to introduce a new VAT-like tax in 2007 - at the height of the bubble, to cover the gap, and then had to raise it from 3% to 5%, while looking at cutting spending by several millions still.

Ultimately, it doesn't matter whether this is the result of subsidy from the UK to Man - either way, it's a dangerous game for Jersey to be in. The only reason they're competing against Man in terms of tax rates is to be the best English-speaking northwest European tax haven. It's not like you'd decide to put your business in either Man or Jersey on some other criteria and then pick the lower taxed one as a second factor. So presumably they must see some benefit in playing that game in the first place? A non-tax haven Jersey might be more like the Isle of Wight than the Isle of Dogs. It could be better off like that in the long run, but that would be a fairly revolutionary change, and the current state is probably a local maxima. If they raise corporate taxes slightly, then everyone goes to Man, and revenue declines.

In short, this is a classic race-to-the-bottom situation. There's a simple solution, though. Give it (and Guernsey and the Isle of Man) a choice: incorporation into the United Kingdom (presumably as additional home nations with devolution akin to Scotland's, or greater), or full independence. If you want to be part of our polity to the extent that you are, you have to pay our taxes. If you don't, that's cool, you can go off and become a Commonwealth Realm or republic or whatever you like. No business of ours. If you chose annexation, we'd hope to raise so much extra revenue as a result that we can afford to offer subsidy to you, for improvements in people's lives there, that you can't afford because of being trapped in this tax-haven rut. We'll even guarantee that subsidy if the revenues don't materialise. I see both options as better than the status quo for everyone, and there's also the extra bonus of addressing the undemocratic nature of the crown dependencies status.

1. Parliament still claims the right to legislate for Jersey, but it would be pretty undemocratic considering there isn't an MP for Jersey
2. which it does, in fairness, pay a contribution toward
3. an earlier version of this said, rhetorically, "protected by our Navy". Of course, the last time this came into question, the Navy wasn't much use.

This entry was originally posted at http://morwen.dreamwidth.org/388874.html. Please comment there using OpenID.


[User Picture]
Date:June 21st, 2012 08:26 am (UTC)
There isn't a good reason for the UK government to allow the British tax havens to continue, other than most of the UK political elite and donors using them ..
[User Picture]
Date:June 21st, 2012 10:37 am (UTC)
My cousins worked in Jersey in the boom years for offshore banking, managing an hotel.

Even with paid-for accommodation, it was a struggle to save money: everything's expensive, everything - healthcare, schools, services we take for granted (or used to) cost them money - and it is clear to them that Jersey's yet another place that's great if you're a millionaire, acceptable for well-paid professionals, and horrible for working people.

I'll let you guess who's hit the worst by cutbacks in services provided by the state, and rising charges for the services they still provide. My cousins left the place, and they tell me there's no way that any foreigner would work there for a basic wage - and cleaning, catering and retail wages are *way* below the cost of living -unless they're keeping gastarbeiters from Somalia in indentured servitude in dormitories and prison barges, Jersey's got a major labour problem.

There's a lesson for London there. Jersey's got some of London's economic problems; only, so much worse its almost like a parody.
[User Picture]
Date:June 21st, 2012 11:07 am (UTC)
Jersey is particularly screwed in that regard because its residents have UK citizenship and can just leave. It hasn't released the full 2011 census data yet - it'd be very interesting to find out how many people have left Jersey between 2001 and 2011. Apparently the total population went up by 10,000 - 10%!

Edited at 2012-06-21 11:08 am (UTC)
[User Picture]
Date:June 21st, 2012 11:15 am (UTC)
Needs year-on-year statistics: 2001-2011 covers most of the boom years, and not the worst of 2011-2012.

Also: the official census might omit a lot of workers in the lower quartile. Bankers and their professional advisers fill in census forms: undocumented migrants and casual workers (even native-born ones), might be less inclined.
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