Call for UDI on the Isle of Man

THE FLAG of independence was brandished yesterday in the home of the Tourist Trophy races and tail-less cats.

More than 200 years after the British government bought the Isle of Man for pounds 70,000, a move was afoot to sever the ties.

David Cannan, a former Manx treasury minister, tabled a motion calling for contingency plans to be drawn up for independence if Britain moved towards European economic and monetary union (EMU).

Fearing that tax harmonisation proposals would jeopardise the thriving financial industry in the cosy tax haven, Mr Cannan also called for draft arrangements for the Manx pound to be linked to the United States dollar. "If the UK joins the EMU then the Isle of Man has three years to protect its future. The financial sector has to be protected at all costs," he said.

But Honourable Donald Gelling, the island's chief minister, urged caution. Such action would be precipitate, he said. Evolution, not revolution, was required. "An ill-advised and ill-informed debate in public is extremely dangerous, because businesses thrive on consistency and stability," he said.

Under a European protocol, the Isle of Man has access to European markets for its goods but is not a member of the European Union and receives no grant from it. If Britain adopted the euro, the island would follow suit for practical reasons, not because it had to, Mr Gelling said.

The resolution was political, he suggested. In an island where nearly all the members stand as independents, the division is tricky to explain. But Mr Cannan has been portrayed as a type of Manx John Redwood, a right- wing Eurosceptic. Mr Gelling sees himself more as a middle-ground conservative.

The problem with any move to independence was that the Manx people could lose more than they gained. They have no university of their own and for some health matters, they have to travel to nearby Liverpool. If Britain used the euro and the Isle of Man retained the Manx pound, businesses could end up paying charges every time they wanted to pay a bill to a United Kingdom supplier.

Mr Gelling said: "I maintain we should be moving towards greater autonomy. But ... we would have to be very, very sure that it was right for the Isle of Man to become independent before we could sever our links."

He successfully proposed an amendment. The government, which has two elected chambers, the Legislative Council and the House of Keys, has already arranged a seminar this month to inform members on the issues. Mr Gelling suggested everyone should learn more and report back by June.

Yet independent tax experts suggested Mr Cannan might have a point. John Whiting, tax partner at Pricewaterhouse-Coopers, said the Germans had stepped up the pressure towards tax harmonisation and the next step would be pressure on the "semi-detached" members such as the Isle of Man to come "into the link", he said.

But the island's lower taxes were part of its selling point and Mr Whiting could see why they might want to keep the freedom to set their own rates. The financial sector accounts for about one-third of its business.