ISLE OF MAN BILL (Hansard, 29 November 1979)

§ The PARLIAMENTARY UNDERSECRETARY of STATE, HOME OFFICE (Lord Belstead)
My Lords, I beg to move that this Bill be now read a second time. This short Bill and the related agreement between the Governments of the United Kingdom and the Isle of Man on Customs and Excise and associated matters represent the outcome of several months of formal negotiations between our two Governments on the establishment of an Isle of Man Customs and Excise service. The Customs and Excise arrangement between the United Kingdom and the Isle of Man typifies the longstanding and close co-operation that exists between our two territories on matters of common interest.
United Kingdom customs officers have been employed in the Isle of Man since 1765. The general principle of the present Customs and Excise arrangement with the Island had its origin in the last century, with the passing of the Isle of Man (Customs) Act 1887, which gave Tynwald the power to impose, alter or abolish customs duties, subject to Act of Parliament. Confirmation by Order-in-Council was substituted later, by the Isle of Man 496 (Customs) Act 1955, and this was followed, in 1957, by the making of a formal agreement regarding Customs and other matters with the Isle of Man and, in 1958, by the passing of the Isle of Man Act.
Twenty years have elapsed since then, and it is understandable that the Island Government should have wished to reassess the position, to take account of developments and have regard to any wishes of the Manx people to assume responsibility for the management of this aspect of the Island's own affairs, and to review, in consultation with the United Kingdom Government, the operation of the Customs and Excise arrangement. It is against this background that the Isle of Man Government put forward this one proposal for change: that the Island should have its own Customs and Excise service instead of the existing agency arrangement, whereby officials of Her Majesty's Customs and Excise collect the customs and excise duties and indirect taxes in the Island on behalf of the Island Government.
Accordingly, the primary purpose of the Bill before your Lordships is to give effect to this proposal, by repealing and replacing the statute of 1958 and introducing the measures which the United Kingdom Government consider to be necessary in the United Kingdom to implement, on 1st April 1980, the new Customs and Excise Agreement, which was formally approved by both Governments and signed on 15th October, and which has been laid before your Lordships.
The measure now before the House, while meeting the wish of the Isle of Man to run its own Customs and Excise service, maintains all the essential features of the previous arrangement. This means, in particular, the continuation of the common customs area of the United Kingdom and the Isle of Man and the absence of a customs barrier between the two territories; and the maintenance of the previous arrangements for the allocation of the Customs and Excise revenue to the two territories. Under the new agreement, all the duties and indirect taxes, except the excise duty on beer, the general betting duty and value added tax on takings of gaming machines, which are already different under the previous agreement, will continue to be kept at the same levels as those of the United King- 497 dom; and any future proposal by the Island Government to vary the rates or coverage of a duty or tax, which is in harmony with that in the United Kingdom, will be subject to prior notice and to agreement by both Governments.
This Bill, in its primary, Customs and Excise, purpose, is concerned therefore purely to ensure the proper joint administration of indirect taxation under this customs union. Its purpose is to introduce the arrangements and procedures that are necessary in the United Kingdom to permit the Island to run its own service, and to enable the functions of the Commissioners of Her Majesty's Customs and Excise in the Island to be transferred to officials of the Island Government.
The secondary purpose of the Bill is contained in Clause 11, which enables the transfer to the Manx by Order-in-Council of functions conferred on the Lieutenant Governor under United Kingdom legislation. United Kingdom statutes on matters relating to the Isle of Man are, as your Lordships will know, comparatively rare, and the opportunity afforded by the present Bill has been taken to include this provision enabling the Isle of Man to continue the process, which has been under way for some years, of transferring, with the agreement of Her Majesty's Government, certain of the functions of the Lieutenant Governor to appropriate bodies of the Island Government.
It is, I feel, a happy association of events that the preparation and presentation of this Bill to Parliament should have occurred in the same year as the people of the Isle of Man have celebrated the millennium of Tynwald, the Island's legislature. The establishment of an Isle of Man Customs and Excise service has called for the enactment of parallel Isle of Man legislation, the Customs and Excise (Transfer of Functions) Bill, which has recently completed all its stages in the Isle of Man and has been submitted with a view to its being recommended for Royal Assent. The people of the Isle of Man will, understandably, be most happy to assume the responsibility envisaged in the present Bill before the House, and I feel sure that your Lordships will wish to join me in welcoming the Bill and in giving it a Second Reading. I beg 498 to move that the Bill be now read a second time.

§ Lord BOSTON of FAVERSHAM
My Lords, the House will be grateful to the noble Lord, Lord Belstead, for having explained the purpose of this Bill to your Lordships. It is not often that we have the chance to discuss the Isle of Man in your Lordships' House, and even though this particular measure does not really provide an opportunity for a wide-ranging debate it is a particular pleasure—and the noble Lord alluded to this in his speech—that this rather rare opportunity to consider the Island's affairs comes this year when Tynwald is celebrating its millennium. I am sure that we all join again in offering our warm congratulations on this historic event.
In view of this it is a relief to me, and it will probably come as no surprise to the noble Lord the Minister, that I am able to avoid introducing a jarring note this afternoon about the aims of this Bill. In fact, I ought perhaps to mention to your Lordships that while I was at the Home Office my right honourable friend the then Home Secretary, Mr. Merlyn Rees, and I approved in March of this year the opening of formal negotiations with the Government of the Isle of Man on establishing an Isle of Man Customs and Excise service. So that although I cannot claim a proprietary interest in either the agreement or the Bill, nevertheless one has had something to do with the preliminary moves in that direction.
Those negotiations, which I believe went on over several months, led to the agreement, as the noble Lord said, on Customs and Excise and associated matters between the two Governments, which was signed last month, on 15th October, and presented to this Parliament earlier this month on, I think, 6th November. The negotiations led, too, to the preparation of this Bill. The agreement itself, as the Minister has mentioned, replaces the agreement of 1957 on the same subject, otherwise known as the Common Purse Agreement. As the Minister explained, the purpose of the Bill is to implement the agreement which reflects the wish of the Isle of Man 499 Government to set up its own Customs and Excise service, and to have transferred to it duties at present carried out by the Commissioners of Her Majesty's Customs and Excise. I would join him in agreeing that that wish is indeed a perfectly understandable one.
It is important to emphasise, however—and I was pleased to hear the Minister confirm this today—that the Bill and the agreement do not seek to alter the other basic arrangements concerning Customs and Excise matters of the two Governments, and between our two territories. That is to say, under the Bill, as I understand it, the advantages to the Isle of Man and the United Kingdom of a customs union between the two territories would be retained, and the arrangements for sharing the Customs and Excise revenue would continue as before; and also there will continue to be in general, subject to some exceptions which the Minister referred to, common Customs and Excise duties with certain common tax rates, such as the preponderance of the value added tax rates. Those arrangements, I submit, are of benefit to both territories. Therefore, this is just one of the spheres in which the long-standing close co-operation and association between the Isle of Man and the United Kingdom are being continued.
Before turning to one other aspect of this matter, there is only one query that I would raise with the Minister. I see from the agreement that there is provision for the United Kingdom, through the Commissioners of Her Majesty's Customs and Excise, to provide an inspection service—this is dealt with in paragraph 10 of the agreement—for the Isle of Man Customs and Excise service, if this Bill is passed and the parallel legislation from Tynwald goes through, and also to provide training facilities for the Island's officers. That is a matter which is referred to in paragraph 18.
I think that there is some reference, too, for day-to-day advice to be provided. That is mentioned in paragraphs 18 and 19 of the agreement. These certainly seem to be useful for everybody concerned in both territories, but I wonder whether the noble Lord, Lord Belstead, is able to give any idea of the cost involved. I ask purely for information. I imagine that 500 the overall sum would be quite small, and, as I say, the three purposes mentioned arc wholly desirable to everybody concerned.
I do not need to dwell in detail on the background to these negotiations and to this Bill, but there is just a brief reference I would make to the background. Before it sought to engage in negotiations with the United Kingdom Government, the Isle of Man Government in 1976 commissioned PA International Management Consultants Limited— and your Lordships will he grateful to the noble Lord the Minister for having had a copy of the PA company's report placed in the Library of the House—to make a review of the Common Purse Agreement. That report by the company contained a number of recommendations in favour of ending the Common Purse Agreement.
Then in 1977 Tynwald appointed a Select Committee of Tynwald to inquire further into the matter. Again, it was helpful that copies of documents arising from those investigations were made available in the Library of your Lordships' House. In its first interim report last year the committee—that is, the Select Committee—put forward a proposal that the Isle of Man should have its own Customs and Excise service. It is perhaps significant that, although the Select Committee did not actually dismiss the possibility of seeking to abrogate altogether the Common Purse Agreement, it did not in fact embrace that idea. Indeed, it stopped a long way short of that rather extreme position. What it did was to recommend the sort of step we are debating now, and which is contained in this Bill.
I mention this because concern has been expressed, for instance, in another place in the debate on the Second Reading of this Bill—and elsewhere, including, I believe, some quarters on the Isle of Man—about what might happen if the Common Purse Agreement itself were abrogated; if the customs union, the common customs area, were ended. Fears have been expressed, for instance, that some people and interests might take advantage of the Isle of Man and seek to turn it into an undesirable tax haven, to the detriment, I believe, of the Island and the United Kingdom.
There is certainly nothing in the Bill which would give comfort or encourage- 501 ment to those who take the rather extreme view. What is I believe particularly noteworthy is that the Isle of Man Government and legislature have clearly not been prepared to be rushed into a course advocated by some interests. We on this Bench regard the Bill and the agreement as satisfactory to both territories, and we should be happy to see the Bill proceed and look forward to continuing close associations with the Isle of Man.

§ Lord LLOYD of KILGERRAN
My Lords, I rise briefly to support the words of the noble Lord, Lord Boston of Faversham, in thanking the noble Lord, Lord Belstead, for the succinct and clear way in which he explained this small Bill which covers a small but important area in the history of the association between the Isle of Man and this country. I presume to intervene because I wish to take this opportunity of saying how grateful and privileged I was to have been a guest of Tynwald on the occasion of their millennium which was attended by Her Majesty the Queen. I echo Lord Beistead's words, that it is a happy association of events that the Bill should have come to light in the same year in which the Isle of Man was holding its millennium; and with those words I warmly support the Bill's Second Reading.

§ Lord LEATHERLAND
My Lords, I shall be very brief indeed. The object of the Bill is to transfer some of the functions of the present Lieutenant Governor to other authorities, and I completely agree with that. I would only add that I am rather glad this was not done 400 years ago because in the year 1611 the Lieutenant Governor of the Isle of Man then bore the very honoured name of Leatherland. I understand he was a very worthy person, but that was a long time ago, and in the traditions of the present day, the Bill seems to be doing the right thing.

§ Lord BELSTEAD
My Lords, I am grateful to noble Lords for the welcome they have given the Bill and in particular to the noble Lord, Lord Boston of Faversham, for his welcome to it because although it is true, as he said, that he is unable to claim propriety for this legislation, he can certainly claim parentage 502 because it was during his time as Minister of State at the Home Office, that, together with the Home Secretary, the beginnings of formal negotiations with the Isle of Man Government were established by the noble Lord's right honourable friend.
The one question I need to answer is that put to me by the noble Lord as to the costs of the training facilities which we offer to the Isle of Man Government in respect of Customs and Excise staff. The situation is that under the existing arrangement the United Kingdom provides all the training facilities necessary for its Customs and Excise officers and will continue to make these facilities available to the new Island service. No addition to existing provision will therefore be required and any marginal cost involved in training Island service officials will be more than compensated for by achieving the common approach to the management of the joint administration of the Customs and Excise revenues envisaged in paragraph 18 of the new agreement. Although therefore I cannot tell the noble Lord the actual costs, certainly any increased costs are really not there or, if they are, they are marginal.
I wish finally to make it clear that what we are talking about in the Bill is indirect taxation and the setting up in respect of indirect taxation of the new Customs and Excise service for the Isle of Man. I am grateful to your Lordships for the welcome you have given to the Bill.