Focus: Welcome to Wall Street-on-Sea
Britain's tax havens are under scrutiny. But in the strange little world that is Jersey, warnings are going unheeded
Sunday 22 November 1998
"That year everyone went home in September rather than October," he says. "I remember the sackings." Since the 1950s, Jersey had been able to rely on British tourists. In 1976 it faced the slow death of so many small islands and the gradual diaspora of its young.
Today its fortunes have come full circle. The capital St Helier bustles, and there is none of the decay of the fallen seaside town. It was off- shore banking that saved Jersey. Take away tax haven status and Jersey falls apart. That is why, says Mr Glendinning, who jettisoned discos for insurance brokering, there was so much hanging on the publication last week of a report by a retired British Treasury official, Andrew Edwards, into off-shore finance in the Channel Islands and the Isle of Man, on the orders of the British government.
Leaks of an early draft of the report had seemed to reinforce the on- shore notion of Jersey as an island of crooks and dirty money. In the end the report was more positive, concluding that, generally, Britain's off-shore industry was clean.
But in St Helier one could be forgiven for thinking there were two Edwards reports - one for on-shore and the other for off-shore. While the British press focused on recommendations that special fraud units be established on the Channel Islands and the Isle of Man to stem the flow of laundered drug money and end a "significant amount" of tax evasion, a triumphant Jersey Evening Post presented it as vindication of the island's financial sector. But for those who offer dire assessments of Jersey's "feudal" political system and its long-term economic prospects, Mr Edwards's report has been a bitter pill.
The seeds of Jersey's transformation were sown in the 1960s when its lower tax rate began to catch the attention of the British mainland. But it was in the mid-1970s, as more businesses began to look off-shore, that it really began to fly. Today the island, just 45 square miles, is home to more than 32,000 companies and 80 banks, with an estimated pounds 200bn bobbing off-shore.
The financial sector now accounts for more than 60 per cent of Jersey's GDP. But St Helier is no Wall Street. The Ernst and Youngs sit rather quietly on the corners of little streets, their near-invisibility reflecting some of the secrecy which surrounds off-shore operation. But no one here doubts their power.
Despite widespread prosperity, not everyone is happy that their island has come to rely so much on off-shore banking. Dissenters are shy of going public. For despite its pivotal role in international finance, Jersey retains its island mentality. Complaining to outsiders is seen as washing dirty linen in public.
But the criticism is that Jersey is run by a small oligarchy which has overseen its transformation into a one-economy state. The political elite, it is argued, has become a "legislature for hire", prepared to do almost anything to keep the off-shore sector from deserting it for another island offering better terms.
John Christensen, a Jerseyman and economist, returned to the island 11 years ago to become one of the Jersey government's (known as the States) advisers. He left in disgust this summer after his warnings about the Jersey economy were ignored. The Edwards report, and the media's handling of it at home, has dismayed him. "This dependence on a single industry leaves Jersey dangerously vulnerable," he says.
Concerns about unfettered globalisation and off-shore havens are growing, and Mr Christensen believes Jersey's days as a tax haven are numbered. Nations will eventually join to halt the off-shore march because it is robbing mainland countries of tax revenue - the most conservative estimate is pounds 50bn annually - and distorting market competition.
Economic concerns are almost inseparable from accusations of antiquated government. Mr Christensen says the Edwards report ducked the issue of constitutional reform despite complaints of overlapping business and political interests and a lack of separation between the legislature, executive and judiciary.
The young radical Jersey senator Stuart Syvret, 33, is also disappointed with the report. His accusations of conflict of business and political interests among the States' members led to a six-month expulsion from the legislature in 1996.
Mr Syvret irritates the establishment. The cabinet-maker and self-taught intellectual comes from outside the elite and runs rings round an assembly served by small businessmen and farmers. While many in Jersey want Britain to butt out of its affairs, Mr Syvret is taking the British government to the European Court for failing to protect his rights to free speech in one of its crown dependencies. "For over a century Jersey's ruling elite has had an unchallenged monopoly of power," says Mr Syvret. "With no clear division between the legislature, judiciary and executive there is an absence of checks and balances."
He points out that finance has not made everyone in Jersey rich. Its population has doubled in just a generation to 90,000. The States operates strict rules on who can settle on the island, but multi-millionaires - with at least pounds 25m - are allowed to move in. It is a little galling for the locals. High finance means high-earning incomers, and many Jersey families have been squeezed out of a housing market where starter homes now cost pounds 170,000.
Artist Andre Ferrari jokes that on the island of affluence, he has the name but not the car. He was evicted eight years ago from his rented flat because his landlady wanted to sell the building to a speculator for luxury apartments. Every boom, he says, brings a similar squeeze. Now he runs an association to protect the rights of rental tenants who feel "betrayed" by their own government.
Senator Frank Walker, a leading government figure, is irritated by the complaints. He is annoyed at suggestions that it is inappropriate that he also chairs the parent company of the Jersey Evening Post. He hints, however, that he may resign as head of the island's new Financial Services Commission, set up to register and regulate companies, after Edwards pointed out the conflict in his occupying this position along with the chairmanship of the States' Finance and Economics Committee.
Mr Walker rejects all notions of oligarchy and legislature for hire. "The credibility of our critics has been shattered by the report," he says. In 10 years, he insists, Jersey will still be thriving on its finance sector. But his critics insist that without a radical rethink, a sad old seaside has-been may re-emerge.
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