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10 July 2008 : Column 1610

I commend the Isle of Man for its involvement within the Commonwealth of Nations, through its active participation in the Commonwealth Parliamentary Association. I hope that one day, the Chief Minister of the Isle of Man, along with the Heads of Government of all the other Crown dependencies—Jersey, Guernsey, Alderney and Sark—and of the British overseas territories will be afforded greater recognition within the Commonwealth by being allowed to represent their countries officially at Heads of Government meetings. Small countries and territories should always be given a voice and be able to speak up strongly to defend their rights, freedoms, traditions and common interests. I hope that the Government will begin by allowing the Isle of Man and all the Crown dependencies and overseas territories the opportunity to lay a wreath on Remembrance Sunday every year in Whitehall, and to have their flags displayed at the trooping of the colour, the Queen’s official birthday parade. Currently, their flags are not flown, which is unfair, and the time has come to change that rule.

Freedom is cherished by each and every Manx person, and as a UK parliamentarian, I believe passionately in defending their freedoms. The bond between the UK and the Isle of Man goes substantially deeper than merely sharing the same telephone country code. It is a product of many historical twists and turns over the centuries that form the basis of the very special relationship that we enjoy today. It is a bond composed of deeply entrenched shared values and culture, the will for democracy and a passion for freedom, backed up by a robust legal system.

Given our geographical and historical proximity, a strong business culture is also shared by the UK and the Isle of Man, which in recent years has succeeded in becoming a gateway to the City of London in ways that are highly beneficial to both. Of course, the Isle of Man is not a member of the European Union [ Interruption.]

There is also a constant flow of tourists across the Irish sea in both directions, and many people from Britain use the excellent financial services industry that the Isle of Man offers. There is a tie through citizenship, as Manx people are also British citizens, and through currency, because the Isle of Man pound is aligned to British sterling. Although the Manx language is still used today, there is of course a shared and common usage of the English language.

Our military ties with the Isle of Man are also very close indeed. The United Kingdom is responsible for the island’s defences, and I pay tribute to the many Manx men and women who have proudly served both Queen and country in the British armed forces over many years, and who continue to do so today.

All the things that I have spoken of in this debate—the special relationship, the shared heritage, and the close links between the Isle of Man and the United Kingdom of Great Britain and Northern Ireland—have helped to strengthen the exceptionally strong bond between the peoples on both sides of the Irish sea. It is, I believe, an unbreakable bond and one to be treasured. The national motto of the Isle of Man, referring to the three legs of Mann, is:

To many, this represents the stability and robustness of the Manx character. I hope that, whithersoever the Isle
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of Man stands, it will be standing shoulder to shoulder with the United Kingdom as a part of our great British family, together in our shared and beloved British Isles, and that together, the United Kingdom and the Isle of Man will continue to flourish under the Crown for a further thousand years to come.

3.36 pm

The Minister of State, Ministry of Justice (Mr. Michael Wills): I congratulate the hon. Member for Romford (Andrew Rosindell) on securing this debate. He has long been known for his championing of the virtues of Essex, and it is good to hear him championing those of the Isle of Man in this way. He paid tribute to its long and varied history, and it is indeed true that the island has had an extraordinary rich last 1,000 years or so. It is, as the House knows, one of the UK’s Crown dependencies, along with the bailiwicks of Jersey and Guernsey, all of which came under the British Crown by different routes.

The Isle of Man had a particularly interesting history, as I am sure the hon. Gentleman is aware. It first came under the English Crown in the 14th century. In 1405, the island was granted to Sir John Stanley—a relation, I assume, of the current Member of this House by that name—and from then until 1765 it was ruled by the Earls of Derby and, later, the Dukes of Atholl or Lords of Mann. Acts of Parliament were then passed in 1765 and 1825, and the rights of the Lords of Mann reverted to the Crown. For a long time, the island was governed largely from London.

Since then, the Isle of Man’s constitution has evolved to become a parliamentary democracy, as the hon. Gentleman outlined. The Isle of Man introduced a system of ministerial government just over 20 years ago. There are no political parties on the island, however, and the Head of Government on the island is the Chief Minister. The Tynwald, whose day we celebrate in this debate, was actually founded more than 1,000 years ago by Viking ancestors and is generally considered to be the world’s oldest continuous legislative assembly—something that I think we can all celebrate.

The Isle of Man is precious to this country, and the hon. Gentleman set out cogently and eloquently the reasons why. This is not just a matter of historical links. As he said, the island has proved itself remarkably resilient, flexible and entrepreneurial in responding to the challenges of the modern economy. I have been in this job, which involves responsibility for the Crown dependencies, for about a year now, but I previously occupied a ministerial position in which I was responsible for the island. I visited it in that capacity, and I remember being extremely impressed by the way in which a film industry had been developed there. It is not an obvious place to develop such an industry, but with a great deal of ingenuity, creativity and hard work, a basis was developed for film crews to film in what is actually a very beautiful island. That is just one indication of how entrepreneurial and flexible the Isle of Man is as an economy.

Of course, the Isle of Man has the advantage of being a highly competitive, low-tax jurisdiction, although it has recently developed growth areas in e-commerce as
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well as in the film industry, aerospace manufacturing, international shipping, and the space and satellite business. The traditional tourism sector, which is based in part on the TT motorcycle races, is still important. I am sure that the hon. Gentleman will correct me if I am wrong, but I believe that the Isle of Man became one of the UK’s first areas of mass tourism after the war. People were becoming wealthier and recovering from the travails of war, and the Isle of Man was one of the first places that they went to for their annual holiday. That tourism remains very important.

Value added tax is another important source of income. The 1979 agreement between the Governments of the UK and the Isle of Man set out a framework for the relations in respect of customs, excise and VAT matters. By virtue of the agreement, the island is brought within the fiscal territory of the EU, and as a result has to comply with EU legislation governing customs and indirect taxation. It must also align almost all of its tax and duty rates with those of the UK.

The agreement also provides for a unique indirect tax—mainly VAT—revenue sharing arrangement, under which the revenue of the two jurisdictions is pooled and shared according to an agreed formula. Formerly, that was on the basis of the relative populations of the two jurisdictions, as a proxy for consumption. However, following a joint review, it is based now on relative changes in national income—the so-called GNP growth model. Either party can review the terms of the agreement, or even end it, provided that they give a specified period of notice.

As an offshore finance centre, the Isle of Man has engaged vigorously with various inquiries into such centres, including those conducted by the Treasury Committee. They have examined the extent to which offshore centres are important to worldwide financial markets and are committed to meeting international standards on co-operation and transparency. There is still some progress to be made in those areas, but the Isle of Man was commended by the OECD in October 2007 for its leading role in that organisation’s initiative to improve transparency and openness in tax matters and so eliminate harmful tax practices. The way in which the island and its Government have engaged with that agenda deserves tribute. That approach is very much in everyone’s interest, but that is especially true for the Isle of Man because, unless jurisdictions engage with the agenda of transparency and openness, their own competitiveness will be damaged in the medium and long term.

The OECD campaign to eliminate harmful tax practices relies on the automatic exchange of information to prevent cross-border tax evasion. That is achieved through the negotiation of tax information exchange agreements. To date, the Isle of Man has negotiated agreements with the US, the Netherlands, Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway, Sweden and Ireland. Negotiations continue with other jurisdictions, and that is very much to the credit of the Isle of Man.

The hon. Member for Romford asked about the Commonwealth, and I understand his concerns. It may be helpful if I set out how the Commonwealth is defined. The “Declaration of Commonwealth Principles” of 1971 states that the Commonwealth is

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The Channel Islands are Crown dependencies and not independent sovereign states and so are not eligible for Commonwealth membership, although Crown dependencies do have access to some Commonwealth meetings. The Isle of Man has not expressed any intention to push for full Commonwealth membership at this time, but these matters are under constant review. We will look at whether there are ways for the island to participate in Commonwealth meetings.

The hon. Gentleman noted that the Isle of Man is not a member of the EU, and the hon. Member for Wellingborough (Mr. Bone) seemed to find that a source of congratulation. However, the island does have a relationship with the EU that is provided by protocol 3 of the treaty governing the UK’s accession to the European Community. Under that protocol, the Isle of Man is part of the customs territory of the Community, and there is free movement of goods and trade between the Isle of Man and member states. However, other Community rules generally do not apply. It is also within the fiscal territory of the European Union, unlike other Crown dependencies such as Jersey and Guernsey. Inevitably, there is a close working relationship with the EU, and in practice the Isle of Man deals closely with it in a number of ways.

The Ministry of Justice, in which I am the Minister responsible for the Crown dependencies, plays a crucial role in Whitehall in mediating between the Government
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of the Isle of Man and other Government Departments that have an interest in these matters. Sometimes, that can be quite important. When I was last in this job, the tragic events of 9/11 took place in New York. As I am sure the hon. Gentleman will recall, there was a significant cessation of air travel throughout the world, as Governments tried to assess the full implications of those tragic events. That cut a life-line to the Isle of Man. He will know how important the air link is to the island. In that job, I was able to help the Isle of Man get that air link established very quickly by liaising with the various Whitehall Departments responsible. I was able to press the case for the essential nature of that air link.

I hope that the country as a whole, the Government and the Department that I represent can all play our part in making sure that the relationship works to the mutual benefit of all. The hon. Gentleman referred eloquently to the deep bonds between the Isle of Man and the United Kingdom, and spoke about shared values of democracy and freedom. I very much agree with him on that. Those bonds are precious, and I hope that this debate reflects the importance that the House attaches to them. The Government certainly share the hon. Gentleman’s views on the importance of those bonds, and I hope that together all Members of the House will work to develop that relationship.

Question put and agreed to.

Adjourned accordingly at thirteen minutes to Four o’clock.

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