Commentary: No excuse for limiting payout

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The Independent Online
The Isle of Man has 27,000 taxpayers. Their government's proposed ex gratia award to depositors in the failed Savings & Investment Bank amounts to pounds 4.4m, a cost to each one of them of pounds 163, which may not sound much. But when you consider what a fuss similar sized additions to poll tax bills have caused, it is clear why islanders are unenthusiastic about paying more.

The award has already been held up for two years, blocked by politicians who wanted the Chadwick report on the SIB scandal (see page 28) published before they released the money. It was kept under wraps during a series of fraud trials in the Isle of Man and Manchester.

A number of arguments can be put forward for limiting the payout. Depositors have failed in court attempts to prove that the Isle of Man government had a duty of care in the SIB case. Neither was there a deposit protection scheme in the island at the time.

Depositors should have taken more care, too, and not used a small offshore bank for the sake of an extra percentage point of interest. Furthermore, some depositors were using the bank for tax evasion.

It is accepted practice in most countries for depositors to receive only a proportion of their losses if a bank fails, to avoid a blanket guarantee that would encourage reckless banking.

But the Chadwick report should demolish these arguments. It is quite clear that there was gross negligence in supervising SIB. The liquidators have made a 22 per cent payment to depositors. But the Isle of Man government has no excuse for limiting the award to pounds 5,000 a head given that there has been a 10-year delay, which much devalues the cash.