Better off alone?
THE fallout from the loss of Low Value Consignment Relief and the crack down on Qrops (qualifying recognised overseas pension schemes) is taking many forms.
THE fallout from the loss of Low Value Consignment Relief and the crack down on Qrops (qualifying recognised overseas pension schemes) is taking many forms.
The human fallout is lots of people losing their jobs at a time when unemployment in Guernsey is already high. The political fallout is searching questions being asked about whether the last States handled these issues as well they should have. Lastly, there's the constitutional fallout, with some questioning whether the actions of the UK, and the perceived discrimination, should lead to Guernsey breaking its formal ties with its big neighbour to the north.
This last suggestion is rather weird because even total independence, with all the problems that would bring, would have done nothing to protect Guernsey from the loss of LVCR or the tightening of rules on Qrops. These economic body blows weren't brought about by the UK interfering with our domestic tax system. Rather, it was the result of HMG reforming its own tax reliefs. Even as a minnow nation state, Guernsey could hardly have insisted that Britain maintained elements of its domestic tax system that were disadvantaging businesses operating in the UK or their own exchequer.
Whether it's fair that the LVCR move singled out the Channel Islands rather than removing the concession for all non-EU territories is a moot point. The local authorities obviously feel it was a kick in the teeth from a country that should have our best interests at heart as British Crown Dependencies. HMG would counter that the move was limited to the Channel Islands for the simple reason that this was where the perceived abuse was concentrated. Constitutionally, the answer is irrelevant. Any decision to change our links with the UK simply in response to being peeved over perceived unfairness would be very bad politics indeed.
'Tell you what, in response to your discrimination we are going to break all ties with you, save you quite a few headaches and cost ourselves dearly.
'There, that showed you.'
Don't underestimate the problems that complete independence would bring. International relationships would have to be handled by ourselves and consular services supplied or bought in from a third party. Guernsey passports would have to be produced and taken seriously around the world. We would have to decide which currency to use – our own, the pound, the euro or the US dollar? Our judicial system would have to be reviewed to see how it still linked in with the UK Court of Appeal. Guernsey students would be charged full overseas rates at British universities. We would have to provide all of our own fisheries protection. The list goes on.
Nor should the benefits of nationhood be overstated. The days where countries could do just as they liked simply because they were 'independent' have long gone. These days, unless they want to pursue a North Korean-style insular existence, nations have to play by international rules.
And (unfairly) the smaller the country, the more they have to toe the line. For example, the UK and the EU had no constitutional right whatsoever to insist we changed our old, pre-zero-10, tax system. But we knew that if we refused and were found non-compliant with the EU tax code, the practical consequences would have been dire.
Talking of economic consequences, it would be unwise to overlook the confidence our present constitutional arrangement gives to outside investors. They like our autonomy but they also know that in the very unlikely circumstances of Guernsey going rouge (a la Turks and Caicos) then that autonomy has boundaries. We know that will never happen, but others may not.
So am I saying that total independence is an option that shouldn't ever be considered?
No, it should be retained as a nuclear option.
If, for example, the UK were to ignore all constitutional conventions and try to legislate to change our tax system to bring it in line with theirs, then breaking all ties could well be the least bad option. I'm almost sure that will never happen, but if it did, then the damage caused by independence may be less extreme than staying as we are.
I do think we will see the UK take several more steps in the months ahead to benefit their ailing exchequer at the cost of ours. That will anger many locally, but cool heads will be needed. As with all nuclear options, the independence button should be pushed only in the most extreme of circumstances.
