How islands drew the short Straw

Offshore centres are angry with the Home Secretary. Philip Jeune explains why. Philip Jeune is a freelance journalist.

Channel Island politicians are still reeling from the news of the Home Office review of their financial laws and regulations not so much because of the review itself but rather the manner in which it was announced by Jack Straw.

Centuries of protocol were, in their view, swept aside by the Home Secretary when he chose to inform the House of Commons about the six-month review (which covers the Isle of Man as well as Jersey and Guernsey) without consulting with the respective islands' parliaments.

While the offshore centres believe they will emerge relatively unscathed from the review, they find it harder to predict the long-term constitutional implications of their new relationship with the Home Office (the department traditionally entrusted with responsibility for liaising with the Crown dependencies).

When they learnt at the last minute of Straw's impending Commons statement, the Bailiffs of Guernsey and Jersey immediately contacted the Home Secretary urging him to delay his announcement and warning him that to go ahead without consultation would deeply upset island politicians.

“To announce without consultation a review… represents in my view a serious breach of the mutual obligation of respect which should characterise our relations,” wrote Sir Philip Bailhache, the Bailiff of Jersey, who heads the island's legislature and judiciary.

Meanwhile, Sir Graham Dorey, Bailiff of Guernsey wrote: “The announcement of any such review… without full prior consultation… would impact detrimentally upon reciprocal respect… and would be a profound breach of constitutional convention.”

Straw ignored these warnings and did not even respond to them. He informed the Commons about the review 48 hours later, saying it would examine the way the islands regulate their banking, insurance and financial services, investigate financial crime (especially money laundering and fiscal offences) and register companies.

Of all the islands, Jersey reacted the most strongly to the Home Secretary's stance, calling an emergency meeting of its parliament, the States of Jersey, at which a resolution was passed expressing “deep concern” at the lack of consultation. Bailhache wrote once again to Straw, this time advising him formally of the States' resolution and stressing the island's right to self-determination.

“While the States recognise the international dimension of money laundering and financial crime, the regulation of financial business falls without doubt within the sphere of government activity which, in accordance with the constitutional relationship between the UK and Jersey, is the island's responsibility,” wrote Bailhache.

He described the lack of consultation as “a regrettable failure” which was exacerbated by Straw's decision to ignore his plea for a delay in the review's announcement. He concluded: “I have therefore to protest in strong terms at this breach of the long-established constitutional conventions.”

Straw was not impressed, his blunt reply making it clear that he was not swayed by the strength of Bailhache's diplomatic language and that the British government was well within its rights to make the decision.

Bailhache's reply was equally blunt, saying that he noted the contents of Straw's letter “with regret”, adding: “I fear that we shall have to agree to differ on the constitutional implications of your statement in the House of Commons.”

Since this exchange there may have been a silence on the diplomatic front but at least one Jersey politician is determined not to let the matter rest. Senator Dick Shenton, the longest-serving member of the States of Jersey, thinks the island's relationship with the Home Office will continue to decline unless action is taken now.

“I was astonished at the bluntness of Mr Straw's reply to the Bailiff,” says Shenton. “I would have thought that a Home Secretary would have recognised in his ministerial role that there were certain protocols to deal with this.”

Meanwhile Andrew Edwards, the former senior Whitehall mandarin charged with carrying out the review, has begun his task by visiting both Jersey and Guernsey to talk with politicians and civil servants. Edwards is a former Treasury director who worked on a variety of issues including the European Union, NHS finances and financial forecasting before leaving the department in 1995. He should not expect the red-carpet treatment in his latest assignment.