Justice Committee
Oral evidence: Crown Dependencies: developments since 2010, HC 726
[Tuesday 5 November 2013]
Ordered by the House of Commons to be published on 5 November 2013
Members present: Rt Hon Sir Alan Beith (Chair); Steve Brine, Jeremy Corbyn, Nick de Bois, Gareth Johnson, and Andy McDonald
Questions 1–42
Witness[es]: Rt Hon Lord McNally, Minister of State, and Cathryn Hannah, Head of Crown Dependencies, Overseas Territories and Visits Team, Ministry of Justice
Q1 Chair: Lord McNally and Cathryn Hannah, welcome to our session this morning. I am going to do something unusual by saying that, in our discussions with all the Crown Dependencies, we have had many favourable reports of the way in which the Ministry of Justice has implemented our previous report and in particular the way in which both you, Lord McNally, as Minister, and you, Ms Hannah, as the civil servant in charge, have been helpful and co‑operative to the Dependencies. It does not mean that there are not issues and grievances, but in many fields remarks are not prefaced with friendly tributes to Ministers and civil servants of the kind that we have heard on quite a few occasions. What resources are the Department devoting to this, bearing in mind that our previous report indicated that you were going to have problems with the resources and, therefore, you should trim the activity to fit the resource?
Lord McNally: Cathryn runs a very small department. 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. I do not know whether Cathryn would like to say anything.
Cathryn Hannah: That is right. 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. That has meant that, as you have noted, the relationships with the Crown Dependencies have improved and at the same time so has the quality of the service we provide. We have a small team, but it is a team that works well and is adequately resourced for what we are doing. We also have access to lawyers, some of whom are here today, who work on Crown Dependency issues and are able to provide a quick and efficient service.
Lord McNally: We took up one of the key recommendations of your 2010 report, which was to not make the MOJ the solver of every problem and the dealer with every issue. 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. 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.
Q2 Chair: We will explore that in more detail, but perhaps I could ask what you feel you have done which guarantees that this kind of relationship can continue with future changes of office holder, both ministerial and civil service?
Lord McNally: I always emphasise that all Ministers are birds of passage and, of course, sometimes lead officials in Departments have other priorities, but 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. I have been assiduous in my visits to all the Dependencies. I have made sure that, when Ministers from the Dependencies have been in London, my door is always open as far as they are concerned. As I said before, we have also put in place with the Cabinet Office a guidance note for Departments on how they should treat the Dependencies. If points have arisen where they seem to be overlooked, I have 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.
Q3 Jeremy Corbyn: Going back to the point that Sir Alan raised a moment ago, how are you prioritising constitutional issues over day‑to‑day issues and how are you going to make sure that continues in the future, because clearly that is your direction of travel at the moment?
Lord McNally: With regard to the constitutional issues, such as they are, one of the problems was that I discovered that a goodly number of Members of both Houses thought that the Crown Dependencies were colonies and—
Q4 Jeremy Corbyn: It shows the need for constitutional education, does it not?
Lord McNally: It certainly does. They thought that I was somehow Governor-General and I could issue orders, and the orders had to be obeyed and so on. One of the points that I constantly made when meeting parliamentary colleagues was that both the Kilbrandon Report over 50 years ago and this Committee three years ago were very careful in pointing out that our constitutional responsibilities were supportive; they were not dictatorial. That I have tried to do. In the main, the constitutional relationship is in good shape and it is a matter of seeing where issues arise in the case of some of the bigger Dependencies, their desire for an international profile, representation at major conferences and so on. We are looking at that and working with them on that.
The other is much more, as you say, the bread-and-butter, day‑to‑day problems of dealing with Whitehall. Those we try to deal with on a case-by-case basis—as I say, not getting embroiled as the MOJ but using our knowledge of the Whitehall machine to help the Dependencies to get to the right desk and the right decision maker.
Q5 Jeremy Corbyn: Is that working?
Lord McNally: I think so. Sir Alan made the point that, certainly, the relations we have had over the last three and a half years have been very constructive, but, as with all these things, it is like a good marriage; it has to be worked at. It is not a finished product; it is work in progress. Therefore, if ever I leave a note for my successor, it will be to keep working at the relationship and make sure the lines of communication are open. It is not a fixed settlement. It is, as I say, work in progress.
Q6 Jeremy Corbyn: Cathryn, do you feel the same on this?
Cathryn Hannah: Absolutely. On the constitutional day‑to‑day business such as the legislation, because now we have established processes in place that we have worked very hard to agree with the Crown Dependencies, it is something that is quite stable. For example, there is no backlog of Crown Dependency legislation any more. Legislation is dealt with in an average of 20 working days and usually for the next Privy Council sitting, and that is something that the team and lawyers and Ministers are very keen to continue, so we have that kind of process that works. Because there is no backlog, it is a lot easier to deal with legislation as and when it comes in. By focusing on what really counts and streamlining the relationship, we have been able to make progress that is sustainable and will continue.
Lord McNally: That is the key, though, Sir Alan. When we came in, I found that within the Ministry of Justice we had lawyers second‑guessing Crown Dependency lawyers. One of the things that has struck me is the very high quality of lawyers and civil servants within the Crown Dependencies. In reality, second‑guessing them was paternalistic and unnecessary.
Chair: It was an explicit recommendation of ours that you should not do that. We will return to the legislative timetable in just a moment.
Q7 Andy McDonald: Could I ask a question about the generic relationship between the UK and the CDs? As I understand it, your task is twofold: on the one hand, it is to mediate directly between the UK and the Crown Dependencies, and, on the other, it is to facilitate direct contact with other Departments. Do you think you have the balance of those dual imperatives right?
Lord McNally: Yes, I think so. When I first thought through what the job entailed, I did think that part of my job was going to be to make sure that they got the right kind of access to the benefit of both. I appreciate that, if a Department is working on a massive piece of legislation such as a 180-clause Bill dealing with all of the UK or even England and Wales, the priority it gives to how that legislation may affect the Crown Dependencies will not be at the top of their list or at the top of ministerial lists, but in the Crown Dependencies it is at the top of their list. Therefore, it is about how we get them both together without the Department saying, “Who are these people? Why are they bothering us?”, making them understand that part of their key core responsibilities is to make sure that that legislation works with the Crown Dependencies and has a point of entry early enough in the development of policy to have awareness.
Has that always worked? No, it has not, but, as I say, this is why it is work in progress. We have had the odd slip—there was a great deal of concern about value added tax being applied to certain products from the Crown Dependencies with little or no notice. It is that kind of surprise and shock that I have been trying to iron out of the system. I also see, as well, my responsibility as a candid friend. I have consistently said to the Crown Dependencies that they have to meet their critics—and they have their critics—by running a tight ship, acting with transparency and in accordance with all the rules and regulations of whatever field of endeavour that they are working in. Again, my impression is that that ambition is shared by the Crown Dependencies. I have said consistently to them that there is no advantage in them pushing the envelope and getting involved in areas of activity that cause them reputational damage.
Q8 Andy McDonald: When we visited the Dependencies, they felt a little bit hurt at some of the comments that came out of No. 10 and the Treasury about taxation issues. Do you think they were justified in feeling aggrieved?
Lord McNally: A little bit. Again, that was an example where we have made rapid progress. I have worked with No. 10, and I know it is highly unlikely that in planning some statement by the Prime Minister someone around the table is going to say, “Is this going to affect the Crown Dependencies, Prime Minister?” Somehow we have to build that in. 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. There has been a lot more communication with them about the determination of the Government to address weaknesses in global governance of the financial sector.
I have also said to them—pushing at an open door—that they are now living in a world where the world community is looking at tightening financial regulations and it is in their best interests to be part of that process of transparency and accountability. That is the right thing: we are aware of their concerns, but they see themselves playing a constructive and positive part in a direction of travel to which all the major countries are now committed in terms of transparency and accountability and financial services.
Q9 Andy McDonald: In the light of the fact that there were those discussions, if these remarks were careless or inaccurate, do you think that that has damaged the relationship between the UK and the Crown Dependencies, or has that been overcome by these discussions?
Lord McNally: I hope not. The Crown Dependencies have certainly expressed thanks for the way that the Prime Minister has handled recent multinational G8 and G20 meetings. The nature of the relationship is that sometimes they will say things or do things that upset us, and, dealing with Whitehall, some Department will drop the ball or do something that is high‑handed. What I hope we have established is a basis of trust between us so that if something does happen we can quickly move to repair it without any lasting damage. Cathryn has worked extremely hard at that, 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. Of course, if Whitehall civil servants have somebody come over from Jersey, Guernsey or the Isle of Man, it sticks in their mind that there is that administration with those issues that they have to keep in sight when they are developing policy.
Q10 Andy McDonald: Finally, has anything arisen since the 2010 report that would cause you to think we need a review of the constitutional relationship, or are we as we were?
Lord McNally: No, I do not think so. The constitutional relationship is 800 years old. I was just checking that it was King John, who usually gets a bad press, who gave the seal to the Channel Islands relationship. 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.
Q11 Steve Brine: We have touched on some of this but maybe we can just explore it a bit more with Cathryn. Initiatives have been undertaken recently to look at the consultation on UK legislative initiatives and how they affect the Dependencies. Lord McNally, you mentioned people being seconded and we know that somebody was seconded from Jersey to the MOJ over the turn of the last year, but what recent initiatives can you expand on for us that have sought to improve the mutual understanding between the Dependencies and the UK Departments? I notice there is this legislative checklist, which you would think is a bit of an obvious no-brainer, but clearly it has been falling down somewhere. Could you expand on that?
Cathryn Hannah: Sure. The Cabinet Office have their legislative checklist—the most recent one was published in July of this year. It is a useful starting point because it shows Departments what their obligations are to Crown Dependencies in relation to consulting on UK legislation. That seems to work quite well. There is an obligation, therefore, to show that they have consulted the Crown Dependencies before a bit of legislation can go through Parliament.
We have tried to help that along by creating “how‑to” notes for other Departments that explain what their role is, how they can perform it and what support they can get both in terms of UK legislation that may affect the Crown Dependencies and also the extension of international instruments. We have had feedback both from the Crown Dependencies and from Government Departments that they find that really useful. We are trying to make it as easy as possible for another Government Department to understand what they need to do and how they need to do it. If it is complicated, it gets put to the bottom of the pile. If it is easy and it is explained, it is a lot easier for them to know who to contact. Again, it is about building these direct official-to-official conversations between the Crown Dependencies and the Departments.
Q12 Steve Brine: Jersey said it was better than it used to be, which is as good a ringing endorsement as you get with an official term. Anecdotally, from your point of view working in it, how often is that step still missed out? Why is it not a lot better than it used to be?
Cathryn Hannah: It seems to be a lot better. We do have occasions where, for legacy issues, they are something we have been working on for a long time. Then, as Lord McNally said, there we are trying to ensure that remedies happen as quickly as possible so, if a mistake has been made, you deal with it and make sure that it does not have any lasting damage. A good example of where it has worked well, for example, is the Home Office Bill at the moment on immigration, which obviously is being done to a tight time scale. The Home Office officials met very early with the Crown Dependencies, explained what they are doing, explained how it is going to work and explained what time scale they had to engage with the Crown Dependencies, which was tight, but at least the Crown Dependencies knew about it, knew it was coming, and knew who to engage with. Again, the feedback we had from the Crown Dependencies is they really appreciated that kind of direct engagement. So we are getting a lot more Departments proactively coming to us asking how they engage with the Crown Dependencies on these things.
Q13 Steve Brine: Maybe this is a question for you, Lord McNally. What scope is there for Ministers when they go into a Department new? Far be it for me to suggest that a Minister is merely reshuffled into his or her new Department without a full knowledge of that Department and what goes on in that Department, but what scope is there for Ministers to be better informed on that, because, ultimately, it is up to Ministers to ask civil servants questions as well as the other way round, is it not?
Lord McNally: It is indeed, but you have described exactly the British system.
Steve Brine: I know.
Lord McNally: First of all, you are briefed, as I was in 2010, about the relationship. I was probably as ignorant as most Members of Parliament in either House about the precise relationship and the difference between the Crown Dependencies and the Overseas Territories. For the first few weeks I had colleagues in both Houses congratulating me on being able to visit all those tropical islands that we have dotted around the world. I had to explain to them, no, no, those are overseas territories. The Crown Dependencies are the Channel Islands and the Isle of Man.
Steve Brine: New members to this Committee usually ask the Chairman that same question.
Lord McNally: When are we going? My greatest insult to the Isle of Man was when I said to them that they were all right in their relationship with me because I always considered them a little bit of Lancashire in the Irish sea. I then got a history lesson on their Viking past and how they had nothing to do with Lancashire.
Chair: I am surprised you have managed to live that down.
Lord McNally: Hopefully, any Minister who does follow me will take the same decision as me: that this is not a peripheral part of their responsibilities. It is a key part, and I saw it from day one, to try and understand the issues and to take both sides of the job as I saw it. One was to make sure, where they were running into problems in dealing with Government, in Whitehall or Brussels, that I would try and be a facilitator in making sure that they had access to the right people, to the right Department, at the appropriate time. The second was to be the candid friend, to make it so that this was not a one‑way street; if they were going to have good relations with the Westminster Government and with this Parliament, then they had to show that they were aware and alert to their responsibilities in this world community. I have been willing to do that at times to make sure that, mostly willingly, they responded to a realisation that in a globalised world you have to be able to play constructively and to guard your representation if you are going to succeed.
Q14 Gareth Johnson: Could I ask you a couple of questions surrounding the issue of Royal Assent for legislation? I took part in the trip to the Isle of Man and they were very pleased with the progress that had been made in expediting legislation. What is the current timetable that you have for achieving Royal Assent and does it differ between the various different Crown Dependencies?
Cathryn Hannah: Our part in the process does not differ in terms of the time scales. As I mentioned earlier, the average is very much that legislation is dealt with within a month and usually for the next Privy Council. What does delay it and where there is a slight difference is the fact that for a lot of Jersey and Guernsey legislation it has to go through the Privy Council time scales, which are roughly nine a year, and over the summer and the winter period there can be quite a gap between the Privy Councils, which is one of the reasons we have suggested to Jersey and Guernsey that they might want to look at the Isle of Man model, which is that by prerogative order the Lieutenant‑Governor of the Isle of Man can sign off certain legislation that does not affect the constitutional relationship for Royal Assent. So the same process in the MOJ is followed, but the end part of it is quicker because there is not the delay brought about by Privy Councils. We understand this is something that Jersey and Guernsey are considering, but it is ultimately down to them whether they want to take this forward or not.
Q15 Andy McDonald: Moving to that timetable, do you think that there is room for improvement still, even with the Isle of Man system, which seems to be the most expeditious system of the Crown Dependencies? Do you think there is any room for improvement still further?
Cathryn Hannah: In terms of our role, we have streamlined it as far as it can go. Our lawyers do need to review the legislation. The Royal Assent memorandums are incredibly useful for them in terms of showing how the legislation is compatible with ECHR requirements and also how it fits in with constitutional relationships, which enables an effective review from our lawyers, but that process still needs to happen. As I said, to be honest, it is fairly quick now anyway. Most legislation is submitted up to Ministers and so forth in a matter of weeks, so it is probably as quick as it can be.
Lord McNally: In 2010 there was a backlog, and that was a really serious reason for criticism. We have cleared the backlog; we have the 20-day target; and they are looking at a move to the Isle of Man procedure, which I think makes sense. I would think it worth this Committee looking again in three years’ time—I would not like to start pulling up the plant to see if the roots are growing too soon. We are on a good trajectory as far as dealing with these matters is concerned and I do not see any obvious further initiatives. 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.
Q16 Andy McDonald: It seems it has been quite a success story thus far. I know when we were speaking with the legislature in the Isle of Man that they were very frustrated. In the past there had been delays of 12 to 18 months or so, and I understand that, when this Committee previously visited the Isle of Man, this problem was flagged up to that Committee and recommendations were made to your Department that this be sorted out. It seems as though, by and large, that has happened. It does, I suppose, give an example of where, if there are good communications taking place, you can actually make sure that there is benefit for all.
Lord McNally: I am not going to be accused of flattering this Committee, which I know is far too mature to be flattered, but, for students of Government and governance, the interrelationship between the Department and this Committee is a good case study. Your 2010 report set a number of tasks, which, to answer your question, made it easier for me to know where my priorities should be. If you look at your 2010 report and see where we have addressed our emphasis and work, it is a good way of working, as far as the Department is concerned, to take a Select Committee report and to go through it in terms of implementation.
Q17 Chair: One of the things we did pick up, though, is that sometimes delay occurs in the legislative timetable and it is not clear why the delay is occurring. Bearing in mind past experience of delays that have been effectively caused by a bargaining situation, where the UK Government are not approving legislation because they want something else to be agreed to, that experience leads people to wonder what is happening this time. If they are able to pick up the phone and talk to officials it has been much easier to resolve those questions, but is it not important to make sure that if there is a reason for delay everybody knows what the reason is?
Cathryn Hannah: Absolutely. I hope there are not too many cases where that is not the case. We definitely encourage them. In fact our lawyers—Ruth is behind me—are in contact with lawyers in the Crown Dependencies and, if we do have an issue with a law, the first step is to pick up the phone to the law offices in the Crown Dependencies and get them to talk through and explain where they are coming from on the law. So, rather than going through formal letters and e‑mails that can take time, it is picking up the phone, one official to another or one lawyer to another, to try and resolve an issue.
Lord McNally: I have to say that I am not aware of any delay that has been because of that kind of bargaining—certainly not in the last three and a half years. I would not support such a way of going about business.
Q18 Chair: Would it make much practical difference if Jersey, Guernsey, Sark and Alderney moved to the Isle of Man system, where the Lieutenant‑Governor in most cases, as it were, delivers the Assent, or would that be more a difference of perception than reality in the process that has to take place?
Cathryn Hannah: It depends. Over the summer it could well. For example, the last Privy Council is in July and, by the time we have organised papers and everything, you are looking a few weeks before then and then the next one is not until October. If something comes to us at the end of June, it might not get to a Privy Council until October, whereas, if you had the option of going to the Lieutenant‑Governor, the authorities on the island could then prioritise the last part of it in terms of it getting Royal Assent. So it could make a difference of a couple of months in the summer period.
Lord McNally: If Jersey and Guernsey came to us and said, “We would like to go over to the Isle of Man system,” they would not have any objections at our end. Just instinctively, it sounds like it would work better.
Chair: Turning to another area in which there are delays, Mr de Bois.
Q19 Nick de Bois: I just want to touch on the extension of international instruments to Crown Dependencies. Basically, if I am reading what they are saying so far, the Crown Dependencies seem broadly content with the processes for our insular legislation, but for treaty extensions do you first of all accept that there are delays before we examine what they may be?
Cathryn Hannah: Yes.
Nick de Bois: Good. Okay, that is easy. That is the shortest answer.
Chair: It is a good short answer. We will stick with that.
Q20 Nick de Bois: We will now flatter our witnesses. One of the reasons I want to explore this is that the Ministry of Justice seem to have accepted that the Crown Dependencies are fundamentally capable of carrying out, shall we say, relevant legal scrutiny, but, it is suggested, the Foreign Office do not and therefore that is a precursor to delay. Is that a fair assessment?
Cathryn Hannah: It is not the Foreign Office so much as the fact that treaties are owned by different Departments, so a treaty on intellectual property would be IPO and BIS. One of the things we are doing at the moment is working with the Crown Dependencies to try and work out what information they need to provide to Departments to make sure it is consistent in terms of their legislation—it makes them compliant with international treaties so it can be extended. Salma in my team ran a workshop over the summer with the Crown Dependencies to look at this issue and work out what information Departments need and how the Crown Dependencies can best give their Departments that information. We are trying to take a very collaborative approach with the Crown Dependencies so that we can agree a process that the Departments will be happy with and that gives them that important ability to check that the Crown Dependencies are compliant with an international treaty, but, equally, does not second‑guess and does not end up being a forensic redoing of the work that the law offices within the Crown Dependencies have done.
Q21 Nick de Bois: Is there any chance of an overlap here? It might be something that goes to another Department, another Ministry, but because it is international does it then have to go through the FCO? Do they always want right of oversight because it is international? Is that perhaps where there is—
Cathryn Hannah: It has to go through the FCO to get the formal extension of the treaty, which is part of the process. We are obviously working with the FCO and looking at the whole process, but it will always need to go to the Department which owns the subject matter to check compliance because they will be the expert in that area.
Q22 Nick de Bois: Sorry to press you; it is just my understanding. You think that maybe it is other Departments not accepting that they would have had the ability to do the legal scrutiny as well as, for example, the MOJ do.
Cathryn Hannah: It is about them understanding what their obligation is and how they can best go about doing the scrutiny. There is an onus on the Crown Dependencies as well to provide the right kind of information to the Department to make it as easy as possible for them to understand how their laws are compliant. As I said, this is something that we are working with the Crown Dependencies on to try and make sure the process is effective and we are doing it in a collaborative way. The feedback we have had thus far from the Crown Dependencies is that they really appreciate that collaborative working to try and resolve the issue, rather than us coming up with a solution in the MOJ and then we foist it on to them.
Q23 Nick de Bois: Absolutely, and that seems very constructive. I understand that Guernsey have recommended, if you like, presumption of consent to extension of treaties. Their argument is that that will vastly improve the process without, if you like, upsetting any constitutional arrangements. Do you share that view or are you working on that view? Is there an acceptance of that?
Cathryn Hannah: The UK is ultimately responsible for any treaty that is entered into and then extended to the Crown Dependencies. So we, as the UK Government, need to satisfy ourselves that the Crown Dependency concerned is suitably compliant. We might not be fully satisfying ourselves with a presumption of consent, but we want to ensure that it is a risk-based proportionate response to that compliance check and it is not redoing the work that very competent law officers within the Crown Dependencies have done.
Lord McNally: There is a point here that what the Crown Dependencies do and how they do it, particularly in the international sphere, carries a reputational risk for the United Kingdom as a whole. Therefore, I suspect that in the international dimension there will always be a little bit of time delay as opposed to the purely insular legislation that we do. We can do it very quickly in relation to Government Departments and the Crown Dependencies, but this is where I am the candid friend the other way. We, the United Kingdom, have a reputation and responsibilities to safeguard and we will need time to make sure that where the Crown Dependencies are acting on the international stage we will want to—
Q24 Nick de Bois: I totally understand that point and where you are coming from. You think that extending this to international instruments, by definition, is going to have a default delay that the insular legislation won’t have. It is just a question of trying to reduce that.
Lord McNally: That is it exactly, but, again, judge us by our actions. I positively encouraged them to open an office in Brussels so that they could keep apace. Indeed, I have encouraged them to open an office in the City of London.
Q25 Nick de Bois: I think we will be coming on to that a little later. I have just one final question. Have you given any consideration to granting the same status to the matrix of compliance prepared by law officers in the case for treaty extension to the explanatory memorandum proposed to accompany insular legislation? Again, it is another parallel with the insular legislation.
Cathryn Hannah: The compliance matrix, like the Royal Assent amendment, is the most important starting point for the Department reviewing the compliance to the treaty. This is why we are working with the Crown Dependencies at the moment to make sure we get that right and it has the kind of information the Departments need to make those kinds of decisions so that they are not second-guessing. So, yes, the compliance matrix could be a useful mechanism for that.
Q26 Nick de Bois: Will it be a dynamic document? I know for years, before I came into this place, compliance matrices, once started, are great but they can be very poor finishers if they are not adapted and developed. I am sure it is good practice to review that.
Cathryn Hannah: It cannot be a “one size fits all” because all treaties are very different.
Nick de Bois: Exactly.
Cathryn Hannah: It is a case of having a rough idea of what needs to be included and that the law officers in the Crown Dependencies feel confident enough to know that what information they put in will suit the Department. This, again, comes back to the most important part of this process, which is the engagement between the Crown Dependency and the Department that owns the treaty so that they can have that dialogue and discussion and, also, forewarn Departments that they may wish in a few months’ time to have a certain treaty extended to them, they are doing the work on this treaty and this is what they are looking at. That can be factored in as well to the Department’s resources so that they know in three months’ time that they are going to get this request for an extension of the treaty and they can prepare for it in terms of resources. This is part of the process we are looking at at the moment to try and make it as useful as possible.
Q27 Chair: One of the problem areas seems to be bilateral investment treaties where the United Kingdom has ceded competence to the EU under the Lisbon Treaty but the Dependencies have to replace old treaties in those areas. My suspicion is—tell me if I am wrong—that it is not any nefarious plot anywhere; it is just that a Jersey bilateral investment treaty is low down the in‑tray of some busy official somewhere. These are things that appear very minor to the United Kingdom but are central to the trading activities of the Dependencies.
Cathryn Hannah: Actually, in BIS this is really quite prioritised. An official from BIS who is working on this issue came, probably about a year ago now, to one of our Crown Dependencies’ officials meetings to discuss bilateral investment treaties and the changes that were happening, as you say, with the ceding of competency. They are now in a very close working relationship with the Crown Dependencies on what can happen after this and whether the Crown Dependencies might need to be entrusted to enter into bilateral treaties in their own right. It is a three‑way discussion between BIS, the Crown Dependencies and the EU Commission. It is something that I know is prioritised by BIS, and my understanding is they have a very good working relationship with the Crown Dependency officials in order to try and resolve this.
Lord McNally: That is a good example. Only recently I wrote one of my little billets‑doux to Vince Cable, just to ensure that he was making sure that BIS had enough alertness on these matters, because the point you make is very valid—which I made earlier—that what is the No. 1 priority for the Crown Dependencies may not be very high on the list of priorities in a particular Government Department.
I would also say, just listening to Cathryn there, that one of the good things to come out of the kind of financial cosh that we have been under is that it is massively, massively in the interests of the MOJ to make sure that this machinery is working and that we are constantly looking to make sure that it is working, because we do not want massive entanglements that we then have to deal with.
Q28 Chair: You said earlier that you did not know of a case where legislation had been delayed as a bargaining issue. That does not appear to have been the case recently at all of there being such things, but in the area of entrustment it does happen, because essentially what happened over the FATCA agreement with the United States—can I put it to you this way?—is that, when entrustment was sought for this agreement, the UK Government effectively said, “We rather like this idea. You can’t have entrustment until you have a treaty with us on the same lines.” Is bargaining still a feature of entrustment?
Lord McNally: I would say yes. Is that short enough as well?
Q29 Chair: Should it be?
Lord McNally: Yes. Again, in my candid friend role, I said to the Dependencies that it really would be intolerable if a foreign Government—in this case the United States—was given access to information that was being denied to the United Kingdom Government. In the FATCA case it was a perfectly legitimate stand-off to say that we wanted equality of treatment. That is the grown-up world. The FATCA was another example where the Crown Dependencies are going to have to be alert to being compliant with global demands on transparency in financial services.
Q30 Chair: Which is what they were doing by reaching that agreement, was it not?
Lord McNally: It was indeed. They did even better by concluding a similar agreement with our Government.
Q31 Chair: While I have the opportunity, could I pick up a couple of issues where consultation on matters does not seem to have worked very well? One of them refers to HM Revenue and Customs, which issued new directions on passenger information that imposed a 12-hour notice period for flights into the UK from the Channel Islands, which is a shorter notice period than applies to EU countries; they have 24 hours. Another one was consultation about transferring the cost of investigating air accidents in their airspace to them under the Chicago Convention. Those are a couple of issues where decisions appear to have been taken without enough time for a proper consultation.
Cathryn Hannah: Absolutely. First, I do not know much about the second issue so we can write to you on that one, if that would be helpful.
Chair: We may have written to you about it, actually.
Cathryn Hannah: On the first issue, I have spoken to the Home Office and HMRC about this. What seems to have happened is that the policy on this was agreed several years ago and then what they were doing was then putting it into practice. The consultation should have happened several years ago. The officials assumed that it had, and then when things came into place we realised that the Crown Dependencies had not been engaged and were not happy that the practices that were currently happening in the Channel Islands were different from the policy. What has been really positive about this one is how quickly the Home Office and HMRC realised the issue and engaged with the Crown Dependencies. There has been regular contact now between officials in the Home Office and the Crown Dependencies to try and resolve it. My understanding is that they are getting to the point of finding a resolution that will keep all parties happy. It shows how important at the earliest stage of policy formation it is that the Crown Dependencies are engaged.
Q32 Chair: On a final international point before we move on to good government, of course in our previous report we reflected on a situation that had arisen and probably has not had a parallel since then in the Icelandic banking crisis, where the interests of the Dependencies were not the same as those of the UK Government but the UK Government had a duty to represent those interests. It seemed to us that there is no mechanism for ensuring that in this case conflicting interests could be advanced and be seen to be advanced in the negotiating process. That was the one recommendation, as I recall it, that was not accepted by the Government, but, so far, you have not come up with an alternative way of dealing with the situation in which the assumption that the Dependencies will make, if there is a conflict of interest and an international negotiation about it, is that the UK will look after its own interests and forget about the Dependencies.
Lord McNally: I would hope that, in forming a United Kingdom view, it would take on board the interests of the Dependencies. What I do not think we could do and what we could concede is that in major international negotiations the Crown Dependencies had a separate role. I think that would cause considerable confusion in terms of what are often very crucial international negotiations. You are going down a very dangerous road, in my opinion, if you are going to say that the Crown Dependencies are going to be separately represented in such talks. The Government would resist that, but the counter to that is to make sure that their interests are taken on board by those undertaking those negotiations. This is not unusual in all kinds of countries and federations and the rest, but in the end there has to be only one message from the United Kingdom.
Q33 Chair: The United Kingdom is the United Kingdom: it is not the Crown Dependencies. Does that mean you go into negotiations saying, “The United Kingdom thinks this,” and say nothing at all about the Crown Dependencies in an issue where they are a central player, as in the Icelandic banking crisis?
Lord McNally: Where they are a central player then it is obvious and I would hope that we would take fully on board their interests, expertise and experience, but I do not think you could go into such negotiations with the Crown Dependencies arguing a different route than the British Government, unless, as I say, that takes you down a road which clearly the Crown Dependencies do not want to go. There are responsibilities to the relationship with the Crown and the United Kingdom, as well as benefits for them. I can go no further than to say I think it will be very dangerous to follow your advice on that particular aspect, and that remains the view of the Government.
Cathryn Hannah: Can I just add that we do it on a case-by-case basis? There are certain things where the Crown Dependencies are able to represent their views. I know, for example, the recent MONEYVAL—
Chair: For example?
Cathryn Hannah: MONEYVAL is an anti‑money laundering and terrorist finance organisation which HMT have engaged in and got a status in so that the Crown Dependencies can voice their opinions and engage as the Crown Dependencies. It is about a case-by-case situation and an understanding where the Crown Dependencies’ priorities are, getting them engaging with policy officials early, particularly on those interests that really do matter, and then working with them to find out the best way that their perspectives can be heard. But, as Lord McNally says, it might not necessarily be that several views are put at the negotiating table at one time.
Lord McNally: I am all in favour, if some specialists are gathering and they are looking at an area where the Crown Dependencies have specialist knowledge, that we make room for them in the teams that go to that gathering, but in the G20, G8 and the European Council it is not possible.
Q34 Chair: The European Council is a different case because they are not members of the EU.
Lord McNally: No.
Q35 Andy McDonald: Can I turn your attention to issues of good government, because the independence and the powers of self‑determination of the CDs are, the previous Committee concluded, only to be set aside in the most extreme and serious circumstances—effectively where the rule of law has broken down? We have had lots of written representations from residents of Jersey and the Isle of Man asking for the UK to intervene on the grounds of good government. Do you think we have the level of intervention at the right level, and is it of any benefit to try to describe exactly what that might look like, where the UK may intervene? Would that assist us in any way to attempt to be more clear about that?
Lord McNally: As I said in my opening remarks, both this Committee and Kilbrandon set out a very high line to clear before the British Government would intervene. Tempting as it sometimes is to say, “We will go in and put them right,” I would say this Committee has been very wise and the Government will still hold to the fact that, unless there is real evidence of a breakdown either in the policing or the integrity of the judiciary or general law and order, we would not. The Islands are self‑governing. By any criteria they are governed well, but there will always be criticisms of governance and we would have to take them on board in deciding our own relations.
When I say the Dependencies are governed well, I make an exception in terms of Sark. I do not give Sark a clean bill of health and we may go on to that, but I do give Jersey, Guernsey and the Isle of Man such a clean bill of health—
Q36 Chair: For the record, you had better say whether you include Alderney in that list.
Lord McNally: Alderney as well. Alderney has other problems but I do not think they are ones of governance. When attacks are made on any particular institution in the Crown Dependencies, there are already in existence machineries to test those accusations and to make judgment on them. I do not think it is a good idea for the Minister of the day, as it were, to be making subjective judgments on problems. If you have confidence, and I do, in policing, and if you have confidence, and I do, in the judiciary, then they should be able to handle any problems that arise in a proper and tested way—and I think they do.
Q37 Andy McDonald: Can I just ask you to revisit the issue of Sark? You specifically mentioned that. Perhaps we could deal with that in a little bit more detail because there have been some issues that have arisen there with the separation of powers with the dual role of the Seneschal and then the suggestion that there should be an observer in place for the 2012 elections. I believe, Sir Alan, when we visited they were about to appoint somebody to assist the chief administrator. Perhaps you might comment about that. We have previously said that the MOJ should maintain a watching brief on Sark. Perhaps you might be able to say a little bit more about how that is going.
Lord McNally: Yes. By any standards I have kept a watching brief on Sark, whilst being conscious of the high hurdle that has to be cleared in terms of direct intervention. It is worth remembering that Sark has only had democracy since the 2008 reforms. It has only had two elections. The turnout in those two elections would make us in Westminster envious in that it was 78%/79%. In their own evidence to you, they say that we do not fully appreciate how wedded at least some people are on Sark to the old ways. Up to 2008 it was a feudal regime. That is true. My experience is that there are people who long for the good old days of feudal rule and the certainty that it provided, but the world has moved on. They have to operate to 21st century standards, and for some on Sark that has been a painful process.
My only interest in Sark is good governance. I have no missionary zeal to push them one way or the other, other than the fact that, for example, on the question of the Seneschal, the Supreme Court told them that the combination of judge and presiding officer was incompatible with a functioning democracy. To say that we had rushed them when it took them three years to implement it may be “rushing” in Sark terms, but it was a reasonable time to expect action to be taken.
On the election observer, we had had talks for a number of months and I did twist arms a little towards the end, partly because I wanted to avoid having an election where immediately afterwards there would be cries of foul. If they reflect, the fact that they had an external observer avoided that. I feel some sense of failure in a way in regard to an island of 600 people that in many ways is idyllic. I can see the attractions of going back to the quieter, more leisurely, more certain age it has, but it also has to provide a living for people. It has to have some economic future other than for retirees who have pensions that they have already made. It has to give a future for young people and for a working population.
I just feel at the moment that there is not enough empathy in the community of people clinging to the old ways, who fear change, who oppose investments and ideas. They just see everybody as an enemy and the others just see the others as barriers to progress. We have made considerable efforts to find common ground, to encourage dialogue and to work towards some kind of settled future for Sark.
Cathryn has given an enormous amount of her time to try and help Sark manage its own way forward.
Q38 Chair: Before we hand over to Ms Hannah, anyone listening to the issue who is not familiar with the situation on Sark would wonder what on earth you are talking about when you talked about one group of people and the others. Let us be clear what we are talking about. Those who represent the majority view in the Chief Pleas, which is the Parliament of Sark, and the Barclay Brothers and their management of their economic interests on the island, tend to express their dissatisfaction in extremely strident terms or, of course, to take court action, which led to some of the democratic changes.
Lord McNally: Yes. I was almost tempted to bring two guides to you. One is the Sark Scribe and the other is the Sark Newsletter. In the Sark Scribe, Sark is a bucolic land of people, sheep racing, maypole dancing and having tea at the vicarage. In the Sark Newsletter, Sark is a fascist 1930s state. Let me be clear and I say again, as I have said to the Barclay Brothers and to their representative, that I wish they would cease publication of the Sark Newsletter because it impedes getting the kind of empathetic relationships in Sark that would take the island forward.
I also equally say to those who think that the future of Sark is in the past that that is not possible. They are going to have to adapt so that they can have the machinery. At the moment it is very difficult to look to somebody who properly gives leadership in Sark. We have had two external individuals who have looked at it and both have given suggestions of how to improve good governance, which are now the property of the Chief Pleas of Sark. I am not there to draw up solutions for them, but they do have, to my mind, good suggestions for taking this forward and they would be sensible to do so. I am very grateful that they have recently appointed a chief officer, who I hope will give some structure to the governance.
I understand it is going to be a slow process, but I think it would be better if we could take some of the poison on both sides out as well, because, as well as the Sark Newsletter, I also see some of the blogs that are alive in the island, which are equally intolerant of the other point of view. In such a small community, these things hurt, they cause resentment and they make progress more difficult.
Cathryn Hannah: What we have tried to do, really, is help Sark as it takes the governance issues forward, as Lord McNally says. We helped them administer a perception survey of the local population last year, which helped identify some of the issues that the local population feel on Sark—for example, people being really worried about the economic situation or wishing to see more land reform. We have also tried to run a series of workshops with the Chief Pleas, looking at things such as corporate governance and how you create a strategic plan to give them those tools so that they can progress things.
In October, with colleagues from Guernsey and Jersey, we helped organise some economic development workshops, again so that they can start planning for the future. There is a lot of impetus from some people within the Chief Pleas to take these bits of work forward and to strengthen Sark for the future, and a recognition that in order to keep what is special about Sark it needs to have these governance arrangements in place so that it can function effectively.
Q39 Chair: Can we leave Sark behind and turn to the more general issue? I want to have in mind a situation that has arisen in the Isle of Man without particularly discussing it because it is not a good thing for pending court matters, even when they are beyond the reach of our sub judice rule, to be discussed in the legislature. One of the things that that kind of experience indicates is that, if people are to have confidence that the smallness of a jurisdiction is not going to weaken its ability to deal with difficult situations, it needs to be clear that they can get outside assistance, whether it is in the judiciary or among the prosecutorial team when a case arises that involves someone at a senior level in the local structure. It is a problem that can arise in any of the jurisdictions. As far as I understand it, they all have the practice of bringing in experienced judicial figures or lawyers from the United Kingdom when this kind of thing happens. Is the Ministry of Justice involved in that process, and are you happy that it is in place and used when it needs to be?
Lord McNally: Yes. Again, Cathryn can comment in any detail that she wants, but my feeling is that in all the jurisdictions that has worked extremely well. When the Isle of Man had an issue they informed me very early. They took advice from an external legal opinion and they brought in an acting law officer to cover. We have also suggested, for what may be a slight weakness in the Isle of Man set-up, that they have a Solicitor-General as well as an Attorney-General, which we think gives a good back-up.
Q40 Chair: In other words, there should be a deputy.
Lord McNally: Yes. The Isle of Man have dealt with the problem well and that shows the system works. From my own experience in terms of visiting the other Dependencies, there is a regular habit of bringing in expert judicial and policing expertise, which, as you say, gives confidence to the operation of both the judiciary and the police in the Dependencies.
Q41 Chair: Can I raise one fairly technical issue, which, if you do not have the answer with you, you can write to us about? It was raised with us by Guernsey because of a dispute between them and HM Revenue and Customs about the constitutional position. In the past they were able to refer such disputes to the Cabinet Office legal advisers for an opinion, which has generally enabled things to move forward. They made such a request in July, but it was suggested that the Cabinet Office may be unable to assist. When we last heard from them, Guernsey’s legal advisers were waiting to hear whether the Cabinet Office legal advisers would in the event consider giving the advice. It looks as though a relatively straightforward way of dealing with a problem that can arise is no longer available to them.
Lord McNally: I am tempted to say that this is the first example I have had of the Cabinet Office not being willing to give an opinion on anything, but, actually, Cathryn has a more judicial answer.
Chair: A judicious answer.
Cathryn Hannah: The Cabinet Office has never been the only port of call for these kinds of issues. At the MOJ we try and look at the specific issue and work out who is the most appropriate part of HMG to deal with it, but, rather than going into too much detail here, if you are happy, we can write to you about the background of this and also explain what we are doing to help Guernsey try and resolve this particular issue.
Q42 Jeremy Corbyn: Is this sort of shadow-boxing around the fundamental issue of the massive tax imbalance between the taxation regime in the rest of the UK and the taxation regime on all of the Dependencies?
Cathryn Hannah: I do not think so. This is more a specific issue in the way that HMRC operates in relation to Customs and the information it shares more broadly, and ensuring that Guernsey and HMRC have a sensible way of sharing information that is constitutionally sound but also allows for the information to be shared. I do not think it is anything more wide than that.
Chair: Thank you very much indeed. We are grateful to you both. We wish you well, Ms Hannah, on your maternity leave, and we are grateful for your help this morning.
Lord McNally: We are grateful to the Committee. I understand today is your 40 years and one day as a Member of Parliament.
Jeremy Corbyn: Life begins at 40!
Chair: Thank you, Mr Corbyn.
Oral evidence: Crown Dependencies: developments since 2010 HC 726 17