Brexit: The Crown Dependencies (European Union Committee Report)

Earl of Kinnoull Excerpts

Tuesday 23rd January 2018 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, it is a pleasure to follow the noble Lord, Lord Shutt of Greetland, with his customary clarity and directness. I envy him that—we are not as direct as that in Scotland.

I declare my interests as set out in the register of the House, particularly those in respect of financial services. I begin by congratulating the noble Lord, Lord Boswell of Aynho, on three things: first, securing this long-overdue debate on this important subject; secondly, the thorough way in which he introduced the debate—I agree with the noble Lord, Lord Shutt, that it is difficult to say anything extra after that; and, thirdly, his being back. On the EU Select Committee we always enjoy the bon mot which inevitably comes as our spirits are low at the end of a meeting. It is nice to see him back and on good form. I envy him his new slimness—something I have been working on in January with a total lack of success.

I also pay tribute to our staff. On the EU Select Committee as a whole we have 24 staff. They have worked blooming hard over the last 18 months or so and have produced 24 reports so far—there are three more in the pipeline, loaded and ready to come out. Of those, 22 are sectoral reports. This was one of those, and it was reserved for the main committee of the EU Select Committee structure. It is of course self-evident why, with the ties of history and blood and the very substantial mutual economic interest between the UK and the Crown dependencies. I will make only one general comment and will put two points to the Minister.

In comment terms, on 5 December last year, the EU adopted Council conclusions concerning non-co-operative tax jurisdictions. The conclusions amounted to 38 careful pages. On page 5 the EU Council affirms that,

“these actions collectively taken by the EU Member States are in line with the agenda promoted by the G20, the OECD and other international fora”.

None of the Crown dependencies is on the blacklist in that EU document. Annexe 2 of the adopted conclusions lists countries in various categories which have agreed to make changes by the end of this year. It is a long list. In so many words, providing the changes are made, in the EU Council’s view the countries will be fully compliant with the EU, G20 and OECD thinking in this area. Some 23 countries are making changes to improve transparency, but none of the Crown dependencies is listed. Some 22 countries are making changes in anti-BEPS measures—a sophisticated corporate tax dodge. None of the Crown dependencies is listed. Some 26 countries—including Switzerland and Hong Kong—are making changes to amend or abolish what are called “harmful tax regimes”, but none of the Crown dependencies is listed. Some six countries, including Guernsey, Jersey and the Isle of Man, have agreed to address,

“concerns relating to economic substance”.

This is the only place the Crown dependencies appear in the annexe.

Pierre Moscovici and his team have carried out an exhaustive process of work which is aligned with that of the G20 and OECD, and the Crown dependencies have agreed to take what is a small amount of corrective action so that by year end they will be deemed fully compliant by the EU and aligned with G20 and OECD practice on matters of tax. The timing of this is clearly a great help in allowing the UK to represent the interests of the Crown dependencies with clarity in the Brexit negotiations. I commend the Crown dependencies on all their hard work in ensuring that they are well set up, work in which Hong Kong and Switzerland are playing catch-up.

On my two questions, the Secretary of State David Davis wrote in his response to our report in October, over three months ago,

“We will work with the Governments of the Crown Dependencies to take into account their priorities, including discussing with them their potential participation in future free trade agreements with countries beyond the EU and working with them on the issues around extending the UK’s WTO membership”.


I should say that Jersey and Guernsey are not part of our WTO membership but the Isle of Man is. My questions for the Minister are, first, to ask for an update as to how the Crown dependencies are being involved in the fresh trade deals that the UK is seeking to make, and secondly, to ask for an update on the progress in extending the UK’s WTO membership to Jersey and Guernsey. I very much look forward to the responses to those questions.