Crown Dependencies: developments since 2010 - Justice Committee Contents

2  Relationship between the UK Government and the Crown Dependencies

Role of the Ministry of Justice
2010 Recommendation: Given that the Crown Dependencies team at the Ministry of Justice appears to struggle with the resources it has, we suggest that a reappraisal of the constitutional duties of the Ministry of Justice might be a timely step in the right direction. The Ministry of Justice should prioritise those duties and restrain itself from engaging in areas of work which are outwith its constitutional remit. (Paragraph 17)

2010 Government Response: We agree with the Committee's recommendation that the Ministry of Justice should prioritise its core constitutional duties and should disengage from areas of work which do not directly engage this primary role.

5. The Ministry of Justice is responsible for administering formal contact between each of the Crown Dependencies and the UK Government.[7] At the time of the 2009-10 inquiry, the team in the Ministry of Justice dedicated to the Crown Dependencies comprised three operational staff dealing with Island legislation, Crown appointments and honours; three policy officials dealing with policy issues and providing advice and support to the Crown Dependencies; and four lawyers, who advised the policy team and other UK Government Departments. The authorities in the Crown Dependencies believed the team to be under-resourced, causing it to be reactive, rather than proactive, and to create bottlenecks.[8] However, the team was also engaging in activity which duplicated work done by the Island authorities themselves, and in our predecessors' view, went beyond constitutional requirements. Therefore rather than recommending an increase in team capacity, the Committee recommended more effective use of existing resources.

6. Such an approach was given added impetus by the requirement on Government Departments to make spending cuts. Lord McNally told us that:

    Since 2010 the Ministry of Justice has had to cut back, initially, in the first spending review by 23%, and in a subsequent review by 10%. That has meant that we have had to employ a leaner team, able, we hope, to deliver more for less, but I do not think that there have been pressures on delivery that have affected our performance.[9]

The Crown Dependencies team now consists of four policy officials, supplemented by three lawyers who work on the Crown Dependencies and other policy areas.[10] Cathryn Hannah explained that:

    We have tried to streamline our focus on the areas where we, as the Ministry of Justice, demonstrably add value and are the core of the constitutional relationship. It is a team that works well and is adequately resourced for what we are doing.[11]

    This view was supported by the Crown Dependencies.[12]

7. As part of this process, and in line with the direction suggested in the 2010 Report, the MoJ has encouraged the development of direct relationships between the Crown Dependencies and other UK Government Departments.[13] According to the Policy Council of the States of Guernsey, this has "reduced its reliance on the MoJ acting as an intermediary", although the MoJ remains the channel of formal communication and assists when relationships with Departments become strained;[14] the Jersey and Isle of Man Governments reported similarly positive experiences.[15] Lord McNally explained that:

    We have become very adept at identifying the individual and the Department where the solution to a problem is, directing the Crown Dependency there, and making sure that the response is a positive one.[16]

8. These new ways of managing the relationship appear to have been successful. Elected representatives and officials in all the Crown Dependencies described a considerable improvement in the relationship and we explore the various manifestations of this elsewhere in this Report. The Jersey Government, for example, said that its relationship with the MoJ is "strong, due to good communications between the Minister and officials in the MoJ and their counterparts in the Island."[17] The Crown Dependencies gave credit to our predecessor Committee's recommendations for this improvement.[18] Lord McNally considered that our work in this area provided a good model for interaction between select committees and the departments they scrutinise and told us that:

    Your 2010 report set a number of tasks [and] made it easier for me to know where my priorities should be.[19]

9. This improvement was also to a large extent attributed to the personal commitment of Lord McNally and Cathryn Hannah. We sought assurance that the success or otherwise of the relationship was not too dependent on personalities, with the potential for back-sliding in the future. Lord McNally reassured us that:

    I do think that we have set in place contacts and relationships and a template for working, which anybody following me or following Cathryn will be able to take forward.[20]

10. We welcome the general improvement in the relationship between the UK and the Crown Dependencies, as attested to in this follow-up inquiry. We are pleased that the conclusions and recommendations of the previous Committee's Report provided the basis for this shift, and we pay tribute to the way in which they have been implemented by the Ministry of Justice, with particular credit due to Lord McNally and Cathryn Hannah. The Ministry team dedicated to dealing with the Crown Dependencies is operating with fewer resources than in the past. However, in our estimation it is using them more effectively, in line with the Committee's recommendation that the Ministry limit its activities to key constitutional duties, and the Department's reduced budget has not caused tangible difficulties.

Parliamentary Questions

2010 Recommendation: We believe that, in agreeing to answer Parliamentary Questions on topics which are essentially domestic matters for the Crown Dependencies, the Justice Secretary is clouding the issue of what, constitutionally speaking, is properly the responsibility of the UK Government and what should properly be left to the Island governments. The Justice Secretary should make explicit in his answers to Parliamentary Questions whether or not he considers the matter addressed falls within his constitutional responsibilities. (Paragraph 15)

2010 Government Response: The Ministry of Justice will restrict its responses to those questions which relate to the Ministry of Justice's constitutional responsibilities in respect of the Crown Dependencies. For domestic matters that are the responsibility of the governments of the Crown Dependencies, the Ministry of Justice will now simply state the matters are outside the Department's remit.

11. We did not receive any evidence expressly on this point. However, analysis of the answers to questions tabled under the current Government indicates that it appears to be acting in line with the recommendation. Where questions have concerned the relationship or actions of the UK Government in respect of the Crown Dependencies, they have been answered substantively; where questions relate to internal matters for the Crown Dependencies and are therefore not the responsibility of UK Government Ministers, they have not. The following example demonstrates this dual approach:

    Channel Islands: Dietary Supplements

    Jim Dobbin: To ask the Secretary of State for Justice (1) when Ministers in his Department next plan to discuss the implementation of the Food Supplements Directive and the Nutrition and Health Claims regulation with the (a) Chief Minister of Guernsey and (b) Chief Minister of Jersey; [113785] (2) what his policy is on the desirability of Crown Dependencies implementing EU legislation that applies to the rest of the UK. [113786]

    Mr Kenneth Clarke: The Minister of State (Lord McNally) and officials are in regular contact with the Jersey and Guernsey authorities on a range of matters, including the implementation of EU legislation in general and this directive and regulation in particular. Both Crown Dependencies have confirmed they are taking steps to implement these specific measures at the earliest opportunity.

    The Crown Dependencies' relationship with the EU is governed by Protocol 3 of the UK's Treaty of Accession to the European Community. The Crown Dependencies use their domestic legislation to implement EU legislation falling within the parameters of this Protocol. Under Protocol 3, the Islands are part of the customs territory of the Community and the common customs tariff, levies and agricultural import measures apply to trade between the Islands and non-member countries.

    However, other EU legislation does not generally apply. The Crown Dependencies are not part of the UK and it is for their own Governments to decide whether they wish to introduce such measures within their jurisdictions.[21]

12. We welcome the fact that, as a general rule, the Ministry of Justice is no longer providing substantive answers to Parliamentary Questions on issues pertaining to the Crown Dependencies for which their own governments are responsible, in line with the Committee's recommendation. This more accurately reflects the constitutional relationship.

Relationship with other UK Government departments
2010 Recommendation: [UK Government Departments] should be left in no doubt about the limits of legitimate intervention in Island policy and legislation and about their duties in considering [the Crown Dependencies'] interests. In achieving these aims, we believe that it would be helpful if more use were made of secondments of officials between UK Government Departments and the Crown Dependencies in order to increase mutual understanding. (Paragraph 27)

2010 Government Response: We agree that secondments by Crown Dependencies staff to central Government Departments could bring benefits in terms of increased mutual understanding and would be happy to help facilitate these.

13. As noted above, the MoJ now facilitates direct contact between the Crown Dependencies and UK Government Departments more frequently and this is judged to be a success. The MoJ has also taken steps to remind Departments of their responsibilities to the Crown Dependencies. Lord McNally advised that:

    Within a few weeks of taking office as the Minister in 2010, the Prime Minister gave me clearance to write to every ministerial lead to say that it was expected that they should have cognisance of the problems or issues relating to the Crown Dependencies and should be expecting to give them access. In the main that has worked.[22]

14. There have been various initiatives since 2010 aimed at improving mutual understanding between the Crown Dependencies and UK Departments, including the use of "road shows", whereby officials from the Crown Dependencies explain who they are and how they work to UK civil servants, and secondments between the MoJ and the Islands, as recommended by the Committee. The first "road show" was held in December 2012 at the FCO and was judged to have been a success.[23] The first full secondment—from Jersey to the MoJ—took place between October 2012 and April 2013. The MoJ has said it is open to further secondments.[24] Lord McNally said that:

    Cathryn [Hannah] has worked extremely hard at [...] making sure that there have been seminars and workshops with the Crown Dependency civil servants and civil servants coming into Whitehall to get a better understanding of how Whitehall works. That is a process that I would like to see continue and develop, because the more they have civil servants who understand how the Whitehall machine works the better.[25]

15. However, there have been a number of occasions since 2010 where the UK has acted in ways which the Crown Dependencies judged to be inappropriate, wrong or unfair, and which have strained the relationship. These include instances where the UK has made decisions which impacted on the Islands without prior consultation (explored in more detail in chapter four); the decision by HM Treasury to disapply Low Value Consignment Relief;[26] the refusal of HMG to allow the Crown Dependencies to sign up to the US Foreign Account Tax Compliance Act (FATCA) unless they concluded a similar agreement with the UK (see chapter five); rhetoric from 10 Downing Street and HM Treasury about the Islands' financial services and taxation regimes which they claim had seriously misrepresented them; and pressure applied to the Crown Dependencies to sign up to taxation-related agreements in the lead-up to the G8 summit. The Channel Islands and the Isle of Man are quite different from UK Overseas Territories not only in being part of the British Isles but also in their distinct constitutional status as Crown Dependencies, and the high rating accorded to their compliance with international regulatory standards.

16. Lord McNally agreed that the Crown Dependencies feel justifiably aggrieved in relation to some of these cases. However, he added that:

    What has been good is that, since we had a couple of incidences where the Prime Minister was showing you his determination to address financial service regulation globally and the Crown Dependencies thought that they were being unnecessarily fingered, No. 10 and the Treasury have become much more aware and the Chief Ministers of the Crown Dependencies were invited over for discussions.[27]

Lord McNally described the relationship as "like a good marriage; it has to be worked at. It is not a finished product; it is work in progress."[28] He also explained the MoJ's mediation role. Where the Crown Dependencies seem to be overlooked, he has intervened "either by phoning or writing to Ministers concerned, saying, "Can I remind you that the Prime Minister has asked that you give this priority?" Usually, that little nudge has been enough to get the wheels turning."[29] This chimed with what we were told by the Crown Dependencies themselves.

17. The Ministry of Justice, in partnership with the Crown Dependencies, has taken a number of initiatives aimed at improving mutual understanding amongst officials in UK Government Departments and the Crown Dependencies about their respective roles and responsibilities, the impact of which we explore further in the following chapters. Although there have continued to be occasions where the Crown Dependencies have felt poorly treated by the UK, often with some justification, we are content that the Ministry of Justice has mechanisms in place to fix the relationship.

18. Owing to the general rate of turnover in the civil service, the Ministry of Justice must ensure that efforts to raise awareness of the Crown Dependencies across Government are ongoing, and we would like to be kept updated on this point. In our view, Lord McNally's communication with Ministers across Government after the last election to remind them of their obligations in relation to the Crown Dependencies, as sanctioned by the Prime Minister, has proved particularly helpful and we hope that this process will be replicated by future Governments.

The constitutional relationship going forward

2010 Recommendation: We recommend that the Ministry of Justice redoubles its efforts to produce a simple account of the constitutional position of the three Crown Dependencies. This should highlight their essential independence from the UK, their independence from each other, and the fact that their interests need to be considered routinely by all UK Government Departments. (Paragraph 27)

2010 Government Response: The Ministerial foreword to this response answers the Committee's recommendation that we produce a simple account of the constitutional position. We intend it to be a blueprint for UK engagement with the Crown Dependencies and to bolster the recognition of their separate identities.

19. The Ministerial foreword is appended to this Report. It sets out "how the Government believes the relationship between the Crown Dependencies and the United Kingdom should operate to meet current needs, taking into account the growing ability of the Islands to represent their own interests within the UK and abroad", but "is not intended to change or challenge the existing constitutional relationship". Guernsey's Policy Council described it as one of the "helpful reference documents" available to assist them "when explaining the constitutional relationship" and which are "regularly used when dealing with UK Government officials".[30]

20. The relationship has evolved over time; most recently the Crown Dependencies have each been pursuing a greater international presence and the MoJ said that their desire "to develop a more mature, arm's length relationship on some aspects of their business with the UK [...] fits well with our own position."[31] However, certain changes affecting the relationship—such as the UK's membership of the EU, to which the Crown Dependencies do not belong—as well as the unhappiness alluded to in paragraph 15, have led to calls by some groups in the Crown Dependencies for a more radical re-evaluation. There has been public debate in Jersey about the potential for independence, promoted by Sir Philip Bailhache, previously Assistant Chief Minister and now the Island's first External Relations Minister; and the States of Guernsey resolved in September 2013 to form a Constitutional Investigation Committee to examine the relationship with the UK.

21. The Ministry of Justice has been clear that the extent to which it can apply a lighter touch approach is limited, and that it has to take its responsibilities seriously. For example, speaking in reference to scrutiny of insular legislation, which is carried out by the Ministry of Justice and which we explore in the next chapter, Lord McNally said that:

    We also have to remember that, if we had got this wrong in terms of UK terms, in Westminster terms, you would have the relevant Minister down here immediately to ask why this was not spotted or why we allowed this to go through. It is a mutually dependent relationship and what happens in the Crown Dependencies does splash over into our reputation, so we have a responsibility to make sure that their legislation passes muster but with as light a touch as we possibly can.[32]

When asked if he saw the need for a review of the constitutional relationship, Lord McNally replied:

    No, it works, and I believe it is as strong as or stronger than it ever was. As long as the Westminster Government appreciate and understand the nature of that relationship—that they are not colonies and cannot be browbeaten and bullied but have to be taken into account and discussed with—and as long as they realise that they have responsibilities both to the United Kingdom and the global community in the observance of treaties, agreements and such, it is a solid relationship and one that I do not see needs any tinkering with in any fundamental way.[33]

22. We note the pressure from some groups in the Crown Dependencies towards re-defining the constitutional relationship in a way that allows the Islands even greater independence from the UK. While the relationship has evolved over time and will rightly continue to do so, its very nature imposes certain responsibilities on the UK which it cannot ignore. We are therefore not convinced that any attempt to achieve a fundamental re-balancing would be fruitful. We welcome the Ministry of Justice's response to our recommendation that it produce a simple account of the constitutional position of the three Crown Dependencies by publishing such an account in the Ministerial foreword to the Government's response to the 2010 report. The Ministry's exposition generally reflects our understanding of the position both in theory and in practice, although we consider that the final paragraph on international representation should place a stronger onus on the Government to consult the Crown Dependencies, as we discuss in chapter five.

7   See paragraph 11 of the Committee's 2010 Report for a more detailed explanation of what this entails. Back

8   Justice Committee, Eighth Report of Session 2009-10, Crown Dependencies, HC 56, paras 12, 16 Back

9   Q 1 Back

10   Further written evidence from the Ministry of Justice Back

11   Q 1 Back

12   Policy Council of the States of Guernsey (CDF 06), Government of Jersey (CDF 09), Isle of Man Government (CDF 11), Policy Council of the States of Alderney (CDF 23) Back

13   Ministry of Justice (CDF 01) Back

14   Policy Council of the States of Guernsey (CDF 06) Back

15   Government of Jersey (CDF 09), Isle of Man Government (CDF 11)  Back

16   Q 1 Back

17   Government of Jersey (CDF 09)  Back

18   See, for example, Policy Council of the States of Guernsey (CDF 06) Back

19   Q 16 Back

20   Q 2 Back

21   HC Deb, 25 June 2012, Col 56-57W Back

22   Q 1 Back

23   Policy Council of the States of Guernsey (CDF 06)  Back

24   Government of Jersey (CDF 09), MoJ (CDF 01)  Back

25   Q 9 Back

26   Jersey and Guernsey judicially reviewed this decision. In 2012 the court ruled that use of LVCR was a legitimate trading opportunity and that selective disapplication was discriminatory against the Islands, however its application was within the discretion of the UK. The Channel Islands argue this has had a negative impact on genuinely local businesses, such as flower growers, as well as those businesses which took advantage of the regime to offer goods to the UK market without the tax which UK retailers had to levy. Back

27   Q 8 Back

28   Q 5 Back

29   Q 2 Back

30   Policy Council of the States of Guernsey (CDF 06) Back

31   MoJ (CDF 01)  Back

32   Q 15 Back

33   Q 10 Back

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Prepared 16 January 2014