Wednesday, October 04, 2006

Après moi le deluge

Earlier this year Richard Murphy and I met with senior European Commission officials to discuss - amongst other things - the EU Code of Conduct on Business Taxation. During the course of these discussions, we raised various concerns that the tax changes proposed by Jersey's government(generally referred to as the Zero/Ten proposals) were not compliant with the spirit of the Code, which is based on principles rather than rules, and would therefore fail. We were told, emphatically, that the proposals of the Jersey government, had not been referred to ECOFIN either in broad principle or in their detailed provisions.

Returning from Brussels we alerted colleagues in Jersey to our concerns that fiscal reforms which will shape the island's destiny for years if not decades, were uncertain and could fall foul of the Commission. Our concerns were strongly refuted by the island's chief minister, Frank Walker, and the finance minister, Terry le Sueur, both of whom sought to reassure the local finance industry that ECOFIN had been advised of the policy proposals and - via the UK Treasury - had agreed the principle and detail.

Mr Walker declared on BBC Radio Jersey that he had received confirmation in 'black and white from the UK Treasury that our commitments have been agreed by ECOFIN.'

He has not produced the black and white evidence, and it is clear from his subsequent statements to the Island's Corporate Services Scrutiny Sub-Panel that he lied (I feel under no obligation to give him the benefit of the doubt since I have known him for many years and know his weaknesses in this respect). The Scrutiny Panel confirms this in its report when it states: "that the general approach of zero/ten had been accepted by Rt Hon Dawn Primarolo MP, (who as well as being the UK’s Paymaster General is also Chair of the EU Code of Conduct Group), but that the more detailed provisions had not been discussed in any detail."

The problem with the Zero / Ten proposals arises in the detail. And the fact that Terry le Sueur has had to implicitly concede our critique by radically reshaping the proposals in their original form, confirms our analysis.

Which still leaves open the question of how large the budget deficit will be once the proposals come into force within just a very few years. Walker will retire shortly. Ditto Le Sueur. Both seem to have adopted the classic political stance of 'après moi le deluge.'

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