Jersey's assistant chief minister has threatened to break with the UK, but the island's clients need the stability of that relationship
In the wake of the Jimmy Carr tax avoidance scandal, Jersey's assistant chief minister, Philip Bailhache, threatened to rupture the tax haven's half-in, half-out relationship with the UK and go it alone. Jersey is "ready to become independent if it were necessary", he said.
Bailhache's threat is not new, and it is pure bluff: he merely wants to take the heat off a jurisdiction that has been caught red-handed, yet again, facilitating abusive tax schemes.
A bit of history helps put this in context. In 1972, Carl Gerstacker, chairman of the Dow Chemical Company, said he dreamed of buying an island "owned by no nation, and of establishing the world headquarters of the Dow company on the truly neutral ground of such an island, beholden to no nation or society". That same year, some American libertarians dumped a large pile of sand on a reef near Tonga in the South Pacific, proclaiming the Republic of Minerva as a tax haven with no taxes, and a society based on "rugged individualism", where "nothing will be illegal". Soon afterwards, the Tonga defence force tore down the Minerva flag and destroyed the sand platform.
Since then, several efforts have been made – usually led by white, male libertarians, gun nuts, drug-runners, Klansmen, arms dealers, mobsters, former CIA agents or ex-Nazis – to set up free-standing, self-governed tax havens in enclaves in the Bahamas, Costa Rica, the Azores, Haiti, Dominica, the Dominican Republic, Anguilla, Vanuatu, and even Libya.
Every attempt failed. What these adventurers did not understand is that successful tax havens are created, nurtured and protected by large, powerful nation-states and their rich and powerful elites, who wish to use these offshore zones to escape the rules, laws and taxes that they resent.
The world's financial actors come to Jersey because of the rock-like stability and predictability that stems from its umbilical relationship with the UK. While Britain's crown dependencies (such as Jersey) and overseas territories (such as the Cayman Islands) do have their own quasi-independent politics, their governors and some other officials are appointed by the Queen, Britain is responsible for their (supposedly) good governance and defence, and no laws can be passed in Jersey without final assent from the privy council in London. Has the Duke of Normandy – that is, our dear Queen – even been asked if Jersey may become independent?
If this reassuring bedrock were removed Jersey could still be a tax haven, but a more marginal one. When the Bahamas won full independence from Britain in 1973, its (then mostly criminal) financial sector decamped almost wholesale to the Cayman Islands, which remained a British overseas territory. If Jersey went it alone, its financial industry would be similarly devastated.
The people of Jersey wouldn't wear it either. Most Jerseyfolk want to be British. At a conference in Jersey in 2010 to discuss Jersey's constitutional options, there was, in the words of the Jersey Evening Post, a "total lack of participation by politicians" because "there is no groundswell of public opinion in favour of any kind of break with the status quo and no sign of any political momentum in that direction".
Statements like Bailhache's are not driven by Jersey's people, but by its financial sector – a sector with which Bailhache's family law firm has had a very profitable relationship over the years. If Jersey lost all the protections provided to it by the British establishment, it is likely that the seething and widespread corruption on the island – which I am not seeking to link to Bailhache – will be vulnerable to greater exposure.
Lenny Harper, an outsider appointed to be Jersey's deputy police chief until his retirement in 2008, gave a flavour of the small island's mouldy governance in an affidavit in 2009, following a high-profile child abuse investigation. "There are no checks and balances on power and the abuse of it," he wrote. "It was like nowhere else in the British Isles … this is obvious each time one tries to make a complaint against any member of the government … With such an absence of controls, such an absence of accountability, the ordinary decent people of Jersey are helpless."
The controversial former Jersey senator Stuart Syvret summarises clearly: "There is a kind of tatty credibility that clings to the public administration here, which comes from operating under the skirts of the establishment in London," he says. "If Jersey became independent as a quasi-banana republic in Europe, there would soon be serious doubts in the minds of offshore clients."
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