Manx Heritage Foundation: TIME TO REMEMBER: David Cannan
MANX HERITAGE FOUNDATION ORAL HISTORY PROJECT ORAL HISTORY TRANSCRIPT
‘TIME TO REMEMBER’
Interviewee(s): Mr David Cannan MHK
Date of birth:
Place of birth:
Interviewer(s): Roger Rawcliffe
Recorded by:
Date recorded: 23rd April 2007
Topic(s): Collapse of Savings & Investment Bank [SIB] Introduction of Ministerial system Elected as Treasury Minister The 1986 Budget and income tax allowances Government reserves Manx Telecom franchise Fo Halloo Isle of Man Bank mortgages Major overhaul in Social Security UK Financial Services Act Government House Purchase Scheme FSC [Financial Supervision Commission] IOM Bank of Savings Charles Cain’s Writ for Libel Collapse of Bank of Credit & Commerce [BCCI] Replacement by Donald Gelling as new Treasury Minister Customs & Excise Agreement
David Cannan - Mr C Roger Rawcliffe - RR Unidentified Male - UM 1
Manx Heritage Foundation: TIME TO REMEMBER: David Cannan
UM ... so it’s an interview with David Cannan, Legislative Buildings on the 23rd April 2007.
Mr C Are you going to introduce me as an MHK or anything?
RR Yes, David Cannan is MHK, previously Treasury Minister, been an MHK since 1982. I was going to ask you, in other words (laughter) ... and so he has covered the whole of the period of the second half of the growth of the finance sector. Well, David, now it was a By-Election in 1982, wasn’t it?
Mr C It was a By-Election in October ’82.
RR So you came in after the Savings & Investment Bank?
Mr C The Savings & Investment Bank went down in April.
RR Went down in June.
Mr C June, was it? Sorry.
RR Hmmm, hmmm.
Mr C But it was being seriously talked about in the April of that year.
RR April – the problems had been noticed, of that year …
Mr C And were being commented on in the then, Isle of Man Times, because I referred them to Charles Cain who’d been elected in ’81 and felt that there was something seriously wrong.
RR That’s right ... hmmm ... Charles Cain was rather of the opinion that it was all a lot of talk. And he sat in the Millennium Room when I was present ...
Mr C Yea?
RR ... at a meeting after Pannells had done their report, which we did, in two weeks to see whether it was really bust or not, and Charles opened the meeting and said, ‘Of course, this bank isn’t really bust at all.’ So by the time Jim Cain had 2
Manx Heritage Foundation: TIME TO REMEMBER: David Cannan
presented all the facts….
Mr C Yes.
RR ... he said ... Charles piped up again and said, ‘Of course this bank is clearly bust!’ (laughter) Wonderful! It was!
Mr C But the stories appearing in March …
RR Oh they’d seen it.
Mr C ... of that – indicated to anybody of any knowledge of these things – that the bank was bust …
RR Yes.
Mr C ... because people were suing the bank for vast sums of money and loans were not being repaid.
RR That was ... that was that awful man Draper and Gasco [sp ???] ...
Mr C They were suing – they were, they were …
RR ... owed them £5,000,000 and he was trying to sue them for £5,000,000.
Mr C Yea, yea – I know. Well, banks don’t normally – banks behave like that unless there’s something wrong.
RR Well …
Mr C So that was the background when I came in in 1982. I was a back bencher for four years, and then after the election in ’86.
RR Weren’t you on a Board at all?
Mr C Yes.
RR Well, not a Chairman of any Board? 3
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Mr C No. I can tell you some stories but I daren’t, not with a microphone – they might be libellous. I haven’t got parliamentary privilege here.
RR Ummm.
Mr C You haven’t risen to that one, Roger. (laughter)
RR Ummm.
Mr C So – but after the ’86 election ...
RR Now that’s when the ministerial system started, wasn’t it?
Mr C Came in – it started there and I was appointed Minister for the Treasury.
RR From nowhere to being second most important job.
Mr C If you say so!
RR Obviously someone recognised your …
Mr C If you say so.
RR ... well, it is, isn’t it?
Mr C If you say so.
RR (laughter) I say so – it has to be.
Mr C The Island, then, was in very severe state, which I recognised, because the budget of ’86 there were …
RR That’s the one before your one, wasn’t it?
Mr C Yea – the budget of ’86 – it must have been ’86 – yes, ’86. The Island was so short of money, there were nearly 3,000 unemployed, and at the private meeting of the House of Keys when the budget is presented, as it is now – over a week in advance, the then Chairman of the Board of Finance could not get … 4
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RR Who was that then?
Mr C David Moore.
RR David Moore.
Mr C ... could not get a vote that it would be supported or carried through. And so he went away and reinstated some of the cuts ...
RR Hmmm.
Mr C ... and came back and the House of Keys agreed to support him. But the cuts were drastic ...
RR Hmmm.
Mr C ... so I took over when the Island was exceptionally – it was exceptionally ummm, exceptional financial straits – put it that way – it was in financial straits.
RR But it had been, more or less, since the 1950s.
Mr C Well, I, I left for National Service in October ’56, at the end of October ’56 I had to stay on for an extra two weeks because of the Suez crisis – no, ’54 I went for National Service ...
RR Oh yes.
Mr C ... and stayed on for an extra – at the end of ’54 and stayed on for an extra two weeks because of that and didn’t get released until the beginning of November ’56. And I had obtained an appointment – a management trainee with Harrison & Crossfield at 104 Great Tower Street.
RR Well lots of people were getting their jobs abroad at that time.
Mr C Well, there was no alternative.
RR Even qualified people like lawyers – qualified advocates were actually going and doing their law in Africa. 5
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Mr C Yea ... well, Colin Fick did.
RR Colin Fick did and Barry Stanley and someone else who did it in England.
Mr C Yea, yea – well, there were the usual heavy adverts for colonial service which there had been through the ages. I had an uncle, Ted Qualtrough, who after qualifying at the Middle Temple, became a stipendiary magistrate at the Gambia.
RR That’s where he went to, was it?
Mr C Hmmm.
RR Did he find someone we know?
Mr C Pardon?
RR (laughter) Did he find some lady friends there?
Mr C This is ...
RR (laughter) They’re laughing … two thousand one hundred.
Mr C ... so errr – no, Ted Qualtrough was a stipendiary magistrate in the Gambia …
RR Yes, I mean, we’d known it was then, and we know that ...
Mr C ... and so I didn’t come home until 1980.
RR But when we saw Edgar Mann last week, who said that when SIB – when he took over the Finance Board there was £1,000,000 in reserves only ...
Mr C Yea.
RR ... and when SIB went wrong and people started talking about compensation he said he had no money.
Mr C That’s right. 6
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RR So he couldn’t have done it even if he’d wanted.
Mr C I took over ... there were ... there was £5,000,000 in reserves and, at that time, the contract had been given to Manx Telecom to open tender between Cable & Wireless and British Telecom and the British Telecom tender included the provisions for the upgrading of the telephone system, but also a lump – a cash sum of £7,000,000. So, in fact …
RR So they bought the rights to operate.
Mr C For a monopoly for twenty years.
RR That is about – that’s passed, isn’t it?
Mr C Pardon?
RR That twenty years is up?
Mr C Yea, it’s past. And that’s why Cable & Wireless are coming in and all sorts of things are happening now. It’s been a new –a new deal has been struck.
RR Hmm, hmmm, hmmm.
Mr C Interestingly, the franchise given to Manx Telecom made no mention of mobile phones. And, of course, when the – so there was mobile phones came in as they are now.
RR Were there any mobile phones then?
Mr C They had been invented ...
RR Hmmm.
Mr C ... so when mobile phones became what they are today, there was no conditional restriction on their use or charging ...
RR Hmmm, hmmm.
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Mr C ... and it is only now, under the new agreement with Manx Telecom ... errr ... that other operators are allowed to come in, and Cable & Wireless are starting in July – operating a mobile phone service, which, of course, has led to the revision of phone charges by Manx Telecom.
RR Hmmm, hmmm.
Mr C The surprise is that they couldn’t manage it before.
RR That’s always the way. Now tell me – going back to when you came here. I remember meeting you – it must have been when you returned from – near Reading ...
Mr C Yea.
RR ... and you came to see me. I think it must have been 1980 or 1981 ...
Mr C Yea, I came to see you, yea.
RR ... and you ... you were talking about the Manx Mafia. Now who were the Manx Mafia?
Mr C The Manx Mafia ...
RR This was before you were in politics.
Mr C Yea. The Manx Mafia were well known, it’s true. It was a term of those who controlled the economy of the Isle of Man.
RR These are similar to the people that the Fo Halloo were getting at, in a way, I suppose.
Mr C Yes. The Manx Mafia were seen by the populous of the Isle of Man – not in the way that Fo Halloo were opposed, but the Mafia were – well, if you wanted a bank loan, you had to go to the Isle of Man Bank because there was nobody else there to give a bank loan and …
RR Wouldn’t Barclays give you a bank loan? 8
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Mr C Ummm – well, no, not bank loan – I mean mortgages.
RR Mortgages.
Mr C Yea, sorry. Isle of Man Bank had the monopoly of mortgages and you were sent there and – it was – it was a closed circle.
RR Well I know …
Mr C And it was seen – and it was seen, if I can … there was one gentleman who was Chairman of the Steam Packet, Chairman of the Isle of Man Bank, and Chairman of the Palace & Derby Castle – he was head of all three. And this is at the height of the tourist season, and this is apocryphal of course – except it’s true. So he was Chairman of the Steam Packet that brought the half million visitors to the Island, he was Chairman of Palace & Derby Castle where the half million visitor spent their entertainment money and the whole of the entertainment complexes, and he was Chairman of the bank which everybody – all these in the hotel trade and so on went and did their banking.
RR Hmmm – who was that? He’s deceased – you can’t libel him.
Mr C John Frissell Crellin. Member of the Legislation … well, he had been a member of J F Crellin.
RR Was he – is he …
Mr C He was a Member of the Legislative Council, he had in his time been – when Michael had two seats he had been one of the two seats on the – a Member for Michael, he had also been a Member for Ayre for some time and was Member of the Legislative Council.
RR Was he on Leg Co at the time of the SIB collapse?
Mr C No, he’d gone – gone by then. But I give that as an illustration. He’d gone in the early seventies, but I’ve given an illustration.
RR Yea, yea, I know.
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Mr C This is not a personal thing when I mention the Manx Mafia.
RR No, no.
Mr C This was how it was seen – that there was a small coterie of powerful business men who controlled the Island. And you must have been aware of that when you came here.
RR Well, to some extent, Pannells was, (laughter) was on one side of it all, because we weren’t a party to any of that – we were being rather ‘stuffy’ and just auditing things.
Mr C Mind you, you’d had the government audit since 1910.
RR Well, we had – we had been auditing for the government since 1885.
Mr C Oh, right – I thought it was 1910.
RR So when you sacked us ...
Mr C I didn’t, I didn’t ‘sacked us’ – I asked for a presentation during my period as Treasury Minister ...
RR (laughter) I know you did.
Mr C ... because I felt it was wrong to continually appoint the same people on the basis that the only car you could buy was a black Ford T.
RR Yea, that is reasonable to have it.
Mr C It is!
RR But anyway, that’s another matter, to have a tender to …
Mr C We had a tender, and as in all these matters, Pannells made a first class presentation – their partner, Mr Scott, but he fell down when he was asked by the then Treasury Minister – I’ve forgotten his name now (laughter)...
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RR One of his more [unclear]. (laughter)
Mr C ….why he hadn’t introduced all this previously.
RR Because we were doing a different job. Because we were actually doing a lot of the accounting which we shouldn’t have been doing ...
Mr C That’s right.
RR ... because nobody else would do it. And the same with a lot of the places like Ramsey Town Commissioners – I had to put their accounts together for five years because until David Evans came, they were incompetent. But we shouldn’t have been doing it, but what do you do?
Mr C Well, and nothing’s changed.
RR And that was the dilemma that we were in.
Mr C And nothing has changed, because only two years ago Port St Mary Commissioners ...
RR I know – and it should have changed!
Mr C And it should have changed and they were totally incompetent.
RR Correct.
Mr C And yet they had a professional lawyer – qualified solicitor as …
RR Well, solicitors are not very good at accounting, anyway. That’s one of the things one learns.
Mr C Hmmm. Anyway, going back to taking over the Treasury …
RR Can I just ask one other thing, ‘cos it’s the thing that we talked to Dr Mann? He said that he went, at the time of SIB, to the Chairman of the Isle of Man Bank – who would that have been at that time – do you know?
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Mr C Ummm – Chairman of the Isle of Man Bank …
RR Never mind, we can find it.
Mr C Yea, I can’t think …
RR And there was another thing – before then …
Mr C I know who the General Manager was, and that was John Sayle.
RR Yea, it was John Sayle, but I think it was the Chairman he went to.
Mr C Oh right ... no, I just mentioned I knew ... yea.
RR But they rejected the Isle of Man government’s request for £4,000,000 loan, with whom they had been banking ever since the Isle of Man Bank has existed.
Mr C But it was – it, it was – I’ve forgotten the word now. It, it was covered under taxation, so it wasn’t a risk.
RR No.
Mr C It is like – public borrower – it was public borrowing secured – secured on the taxpayer.
RR And they, they – Edgar Mann sat in the passage while they debated it all and they came out and said, ‘No, we’re not going to give you the money.’
Mr C And he was …
RR So we moved the accounts to Barclays.
Mr C Yea – and he was head of the government.
RR He wasn’t – he was head of the Finance Board, at that time.
Mr C Oh, ’82, sorry – yes he was, yes – it was Percy Radcliffe then.
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RR But also, part of the problem for the Isle of Man from the supervision was, as you will know, that the Isle of Man Bank and the other clearing banks had objected very strongly to any proposal to bring in supervision.
Mr C Yes.
RR And one of the people who objected was also on the Board of the Isle of Man Bank and also on the Executive Council – and I don’t know who that is, either.
Mr C Anderson.
RR Anderson, was it? Well that’s useful to pick up. So that when …
Mr C And this confirms ...
RR Yea – yea, what we were talking about …
Mr C ... my expression, ‘The Mafia’ – about the Mafia.
RR Yea.
Mr C The Mafia.
RR Anyway, coming on to …
Mr C So I took over …
RR You took over …
Mr C ... and I took over with this – the Isle of Man was in a financial straightjacket – £5,000,000 reserves 3,000 unemployed and very little money to provide the public services.
RR Quite!
Mr C I was fortunate to have the advice of William Dawson, who was Chief Financial Officer. And he and I, as far as I was concerned, had a very positive and amicable working relationship. 13
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RR Well I – all my dealings with him have always been very good and he was always very open-minded.
Mr C And he was very supportive. And it occurred to me, not through any professional qualification, but through – quoting Ernest Bevan, one time Foreign Secretary of the UK, and probably one of the best.
RR He was good.
Mr C He said he’d acquired the knowledge that he had from the hedgerows of experience, and I would like to think that ummm … so I decided that the economy, and of course, reading the business sections of the newspapers, that we had to make radical changes – fundamental and radical changes. I was very lucky to have to support of Mr Dawson, other senior officials in the Treasury were very, very sceptical. Cautious, perhaps, is the word, and conservative.
RR Right. So what was the changes – I mean I do remember a lot of these budgets, but …
Mr C Well … during …
RR In order to solve the problem of …
Mr C ... during the – if I could say, of the achievements over a three year period, from December ’86 to October ’89, the income tax allowances for a single person had been increased from £3,200 to £4,000 and for a married couple from £4,800 to £800 – fully transferable between husband and wife. And this was very, very radical.
RR £800?
Mr C £8,000, sorry.
RR £8,000.
Mr C So it was the single person being increased from …
RR I remember that. 14
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Mr C ... £3,200 to £4,000 for a single person and a married couple from £4,800 to £8,000, fully transferable between husband and wife. And I recall that the then financial correspondent – a very prominent financial correspondent of the Financial FT – said that we were virtually giving an income to unemployed wives because the allowance was fully transferable.
RR Hmmm.
Mr C And he commended it – it was absolutely …
RR Well, it was – it was the right thing to do.
Mr C Well, it was complete … well, nobody else had actually done it – within the English speaking world. But it was a very, very rad … ummm, err – radical proposal by increasing the allowance to £8,000 meant that – and this is at a time when unemployment that was rapidly – people were rapidly becoming employed – that vast numbers were taken out of the tax bracket …
RR Absolutely.
Mr C ... because the husband, from before – if he earned over – if the – earned more than £4,800 was having to pay tax …
RR Hmmm.
Mr C ... because of his wife not working, now he was required to earn £8,000 before he – so thousands – thousands of Manx workers were taken out of the tax bracket.
RR Yep.
Mr C At the same time, reduction of income tax from 20% to 15% on the first £8,000 of taxable income for a single person …
RR £17,000 for two people.
Mr C ... and for a couple – fully transferable between husband and wife. These were very – Roger … 15
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RR I remember – and I remember saying to myself when I heard you talking, ‘That would seem to me a very sensible thing.’ The only thing I quarrelled with is that you called that the Standard Rate, which it was obviously another rate.
Mr C It would change later on. The – what was significant was that I had the support of Mr Dawson – I did not have the support of lesser …
RR You presumably had the support of Council of Ministers, who, by this time existed?
Mr C Ummm – I had the support of Council of Ministers.
RR That was Miles, was it?
Mr C Yea – wasn’t completely whole hearted …
RR With those elections?
Mr C With, in some cases …
RR Well, that’s anxiety, I suppose.
Mr C ... reservations and anxiety because they had been briefed by the lesser officials in the Treasury that I was on a dangerous course.
RR Tell me where you got the funds from, bearing in mind what our income was – there be no doubt, if I look in there, I shall see it.
Mr C Yea.
RR I know that in 1987 there was a big surge in business and in new residents.
Mr C Yea – there was that – in ’87 I had signalled, and I didn’t realise at the time that the signals I’d given – there was a great burst of activity. But there was the commencement of Douglas urban regeneration – planning applications were going in, banks were – old buildings were being demolished, new substantial buildings begun during this three year period. The Ragland Hotel became The Chartered Bank, the old site next to the Nat West – desperately derelict site – 16
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was demolished and is now HSBC.
RR Oh, that would be later, though, wasn’t it?
Mr C Sorry?
RR That was later than that.
Mr C No, it was all during this time.
RR Oh, that that building was built?
Mr C Well, it was required.
RR Oh, it may have been.
Mr C Planning, planning ...
RR And The Ragland – what?
Mr C The Fort Anne Hotel was required – all these buildings, and I will go forward to let you know so I’ll just read out this …
RR Okay.
Mr C ... ‘so, Council of Ministers had reservations, but by 1989 they didn’t have reservations. It – from ’87 they had reservations, ’88 perhaps less reservations, by ’89 they were fully supportive.’
RR The finances had been turned round, because I remember one other thing you did, was start ... err ... putting some into reserve.
Mr C And – oh yes, I put a lot of it into reserve, and by the time I left in December ’89 there was £50,000,000 in reserve. The – there was also, during this period, the increase in the additional income tax allowance in respect of blind persons from £420 to £1,000, the increase in additional personal allowance for single parent from £670 to £2,750, and this was a major social benefit introduced enhanced child benefit for young people who remain in full time education 17
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beyond the statutory school leaving age. So the increased child benefit by £70 per week per child attending school, in order to offset travel costs, introduced free bus transport for pensioners and abolished the earnings rule. And by abolishing the earnings rule on pensions, you suddenly had vast numbers of men, who had reached the age of 65 who were fit, could get the pension and get part time or ...
RR Did that happen also in England at the same time?
Mr C Pardon? No.
RR They hadn’t done it? They remained the same?
Mr C No ... and introduced free bus transport for pensioners and increased the Christmas bonus. And increased the amount in the reserve fund from £17.26 million to in excess of £50 million over the three years.
RR But obviously – I mean I remember at the time – that the government revenues themselves were in a much healthier state.
Mr C The government revenues were in a much healthier state because my philosophy had been, by vastly reducing the income tax, I had created large amounts of disposable income. And that disposable income was being spent in the Isle of Man which boosted – permeated right through the economy – from the smallest village to Douglas itself, because working people suddenly didn’t have to pay tax – or working families, until they earned more than £8,000.
RR Which, as you rightly said, at that time, a good many didn’t.
Mr C Vast numbers!
RR I don’t know what the proportion would have been then ...
Mr C Yea!
RR ... but even now, only a number of people pay 18% - something like 15%, isn’t it?
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Mr C Yea. So, here was a vast number of people …
RR And almost everybody would be paying 10% under this dispensation of yours.
Mr C No.
RR But for a married couple …
Mr C Yea. The errr ... to suddenly jump it from £4,800 to £8,000, you were giving every – what shall I say – middle income and below family in the land an extra £3,200 a year tax free.
RR And that reserve you got invested, didn’t you?
Mr C Pardon?
RR Those reserves?
Mr C Oh yes, I started …
RR You put out to investment management.
Mr C Yes. And we put it under Walberg’s, who had been, previously been fiddling around with five, ten million, suddenly found they had an investment portfolio of £50 million …
RR Hmmm.
Mr C ... which is …
RR Singer & Friedlander had some too, didn’t they?
Mr C Pardon?
RR Singer & Friedlander had some.
Mr C Only small ...
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RR Yea.
Mr C ... ‘cos they – I don’t know, they didn’t seem to go along with my strategy, somehow. So ummm, another major thing, because I was also – not only was I Treasury Minister, but I was Chairman of the Financial Supervision Commission …
RR Hmmm, hmmm.
Mr C ... and one of the big achievements was, we obtained designated countries status in terms of the United Kingdom Financial Services Act, and strengthened the supervision of the Island’s finance industry through FSC. And we also amended the house purchase scheme to assist first time buyers by the introduction of reduced interest rates and increased loan and grant available to the lower income levels. So we introduced it. Suddenly house loan and …
RR How did the British Building Societies come in, then? Or was that in your time?
Mr C I brought the Building Societies in. I brought them in during – we issued – as Chairman of the Financial Supervision Commission, on realising there was a sole monopoly of – almost a sole monopoly of mortgages by the Isle of Man Bank, and the first time buyers – people on low incomes – couldn’t buy a house anyway, so we introduced, as I’ve just said, the government house purchase assistance, and I – or rather, the commission, of which I was fortunately Chairman, decided to issue six Building Society licences ...
RR I know.
Mr C ... and they were taken up. And …
RR They had to amend the English legislation to permit them to have certificates.
Mr C That’s right. And they established them, and of course, they prospered immediately.
RR Hmmm, hmmm.
Mr C A little interesting tale about that – prior to introducing the Building Societies, 20
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the Directors of the Isle of Man Bank gave me lunch on – perhaps once every two months. Following the introduction of the Building Societies and their monopoly on home mortgages ceased, the lunches with the directors ceased as well (laughter) and I’ve never been invited back!
RR Hmmm. They – I’m going back before then when I had the estates that actually an old lady had lent money to my mother-in-law – Maud – had lots of money that she – you’d go along to the Isle of Man Bank and they’d say, ‘Oh I know somebody who’d like to [unclear].’
Mr C Yea – they were private mortgages.
RR Maud would lend them £2,000, I think, for the house.
Mr C Hmmm, yea. Mother had one, too – a little ‘doo dah’ – then, when – the people couldn’t pay the rent on them – well, not the rent, the mortgage.
RR The interest, the interest rates were low because of the [unclear].
Mr C Yea. So errr …
RR Tell me about the FSC.
Mr C Ummm ...
RR You – it had already split from the pensions, hadn’t it?
Mr C I took over when – just when it had split, when Duncan Kneale, who was the Pension Supervisor, established the pension, and I was on the interview board that made Hastings the – his deputy.
RR Made?
Mr C Hastings.
RR Oh, Hastings.
Mr C You know Hastings as much as I do. 21
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RR I do, yes.
Mr C He followed Duncan Kneale …
RR I know Bill Hastings perfectly well.
Mr C Bill Hastings …
RR Yes – that’s when Duncan retired.
Mr C Yea.
RR Yea, but they did a split, I think.
Mr C So we had to, so we had to split the FCS. I took over at the time of split.
RR So you, then, inherited Mark …
Mr C Mark Solly and Noakes.
RR ... and Noakes. Now Mark then went. Why did Mark go?
Mr C They were joint Chief Executive.
RR But it was funny – one was Banking Supervisor and was – and member of the FSC, and one was the Chief Executive, wasn’t he?
Mr C Ummm – yes, Noakes was a member of the FSC and Chief Executive – Joint Chief Executive, and Solly was the other Joint Chief Executive. And at that time the FSC was established in a garret room with five staff (laughter) in Finch Road – that really was an upstairs garret room.
RR Hmmm ... up the street here, wasn’t it?
Mr C Ummm.
RR Round the corner.
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Mr C Ummm.
RR Wasn’t up the hill?
Mr C Oh no, that was Goldie House, afterwards, down Finch Road here.
RR Oh, is that Finch Road, is it?
Mr C Yea!
RR I thought it was up by ummm …
Mr C Oh no. And then it went by opposite St George’s Church.
RR Oh, I knew it when it was there, yes.
Mr C No, but first, it was …
RR It was down here, was it?
Mr C Down here – in Finch Road, up some rickety stairs, to a garret – it was dreadful, just five staff.
RR It was awful.
Mr C And it was a time when the finance sector itself was operating at the low – at some pretty low standards.
RR Well there were certainly a lot of cowboys in there.
Mr C Well, that’s the same thing.
RR ‘Cos I remember you referring to them.
Mr C Ummm ... there were, I think, during our time, five bank managers were prosecuted for – four or five …
RR Well, Noakes was sorting out the banks, wasn’t he? 23
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Mr C Hmmm? We were sorting out the banks, but even one of those bank managers was in – was in one of the major banks. We had the Mercantile Bank – I can’t remember now – other banks had to be removed. The one that I gave the Isle of Man a fright was when we moved into Isle of Man Bank of Savings. Now people began to, when the news broke, mixed up the Isle of Man Bank with the Isle of Man Bank of Savings. Now the Isle of Man Bank of Savings, as you know, was a small – just a savings bank.
RR Almost like a ‘Mutual’, wasn’t it? I mean, old fashioned.
Mr C Yea, old fashioned, and money had been – where people put in two shillings a week, or whatever, and started way back at the turn of the 20th – 19th - 20th century. And many of the depositors were found later to have been soldiers from the First World War – unknown to their families – sending back a shilling a week out of their pay, or whatever, and then, of course, they were killed on the Somme or whatever – nobody ever knew the money was there. And of course, it accrued compound interest over the years. There were others accounts in there where people had become elderly – mentally ill and so on and so forth, and relatives didn’t even know of the existence of their accounts. And it was during the time that I was Chairman. An elderly person at Ballamona [Hospital] told – a nephew came to see her from England – and she told him she had some money in the Bank of Savings. And the then manager, Mr Skillicorn, had misjudged that account, because he thought that there were no known relatives ...
RR I knew there was somebody who’d been …
Mr C ... and he came and asked to draw the money and he was told that there was no money there – which he then reported to the FSC. We moved in and we found that the manager had been self-funding the dead accounts. There’d been no proper directors – well, there had been directors who had failed to take any action or to supervise the accounts.
RR Hmmm.
Mr C They had failed to supervise the accounts, so we dismissed – we removed the licence, dismissed them, and it was interesting, at that time, queues suddenly formed outside the savings banks – people thought this … 24
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RR The Isle of Man Bank?!!
Mr C Well, not only the Isle of Man Bank, but they’d seen the Bank of Savings go down …
RR The SIB….
Mr C ... the SIB – Savings & Investment Bank …
RR Hmmm.
Mr C ... they’d seen that go down and thought, ‘My God …’ You know …
RR Another one!
Mr C ... another one. There had been others, which were – you’ve got Mercantile Bank and others.
RR Well, I know … Chartered Finances.
Mr C And so we made an agreement with the Isle of Man Bank that they would take over – as you do – administration, if you like – that they would put in their staff …
RR And sort it out.
Mr C ... and sort it out and the licence was withdrawn – they objected – the directors objected very strongly to the high handed action of the Financial Supervision Commission and they appealed to the Commission, and this is one of the anecdotes that I like to recall – their appeal to the Commission. In came the four gentlemen with their lawyer – a well-known representative from – a member of the legal community in Athol Street – proceeded to address the Commission with a long winded rant – if I may use that word. Fortunately, the Commission had, as its Vice Chairman, Mr Rory Watson, QC, who’s an able …
RR Oh I know!
Mr C ... outstandingly able. And while the Board of the Commission sat in silence 25
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listening to this harangue from this well-known lawyer – which contained a lot of irrelevances ... the err ... Rory Watterson said to the Chairman, myself, ‘Excuse me, Chairman, could I interpose?’ And I said, ‘Certainly.’ And I said to the lawyer that Mr Watterson wanted to speak and Rory said, ‘I don’t whether you are aware that during the Second World War I was in the Royal Navy …’ Passing through my mind was, ‘Well, what on earth has this got to do ...? (laughter) and Rory Watterson, ‘and do you know, Mr X, some of the finest traditions of the Royal Navy are, when in difficulty, make smoke. And I suggest this afternoon, Mr X, you are making a lot of smoke.’ Whereupon the lawyer closed his book, nodded to the Foreman …
RR (laughter) And went!
Mr C … to the directors and took his departure. (laughter) That’s one of the many anecdotes, well, you know – it really was, it was …
RR Rory was super, wasn’t he? Tell me …
Mr C But there were many cases – we had Barlow Klaus [sp ???] trying to establish in the Isle of Man.
RR Now, did they ever?
Mr C No, but he sent in nominees and fortunately, and I give Jim Noakes credit in this, he made the – he traced these nominees back to Barlow Klaus [sp ???]. And I remember in one particular case it was a Kenyan who was applying and had a lot of credentials and all the rest of it. And we were warned that he was a Barlow Klaus [sp ???] man. So we didn’t have Barlow Klaus [sp ???] here. In fact it was a very strict regime. It was not terribly – in today’s culture it would not be acceptable because the Financial Supervision Commission which is chaired by the Treasury Minister, and if you wish to appeal against a decision of the Financial Supervision Commission you appeal to the Treasury (laughter), in other words the Treasury’s [unclear]. (laughter)
RR Tell me about Mark’s departure.
Mr C There was constant friction between the two Chief Executives. And it was – the meetings were difficult. They both lived at either end of the office, and it was 26
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not a happy situation. The Board of the FSC, with Mr Noakes excluded, sat in private session on several occasions, to determine which of the – it was no longer tenable to have two Chief Executives, so to decide which Chief Executive had to go. There was also a perceived problem with Mark Solly in that his brother was running a business of a non-Island company – what do you call it – a non-resident company over which investigations were constantly being required.
RR Do you know, I went – well, a whole lot of us – went to Jim Noakes – did you see our paper?
Mr C I probably – I mean, it’s some time ago, yea.
RR In about that time. It was marvellous ‘til then. We had Mark and Jim Noakes – presented it to them. It had been – Charles Cain had drafted the thing which con … as in the Charles Cain manner contained one or two rather sweeping observations. But, broadly speaking it was a sound paper saying, the only way you’re going to solve this problem is to introduce a licensing system for the people who administer companies in the Island.
Mr C Yea.
RR More or less exactly what we’ve got.
Mr C Twenty years later.
RR Twenty years later.
Mr C Well, we got it a lot less than twenty years.
RR Fifteen.
Mr C No, no, ten – come on, come on, no!
RR Ten, ten – it’s ten or twelve
Mr C No – ten – it’s early nineties.
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RR Late nineties ‘til it came in – 1998 or something.
Mr C Was it?
RR Yep – I think so.
Mr C Ten years – ten years after.
RR Call it ten years – because this was before Mark Solly went.
Mr C Mark Solly didn’t go until ‘88
RR All I got was a Writ for Libel for Charles Cain having suggested that some members of the FSC didn’t know anything about trusts – which was true of all of them except for Rory, of course.
Mr C Hmmm.
RR But that was not a very helpful reaction, nor was it received well by either Mark or – the idea was – they said, ‘Oh, we’ve got this other control – we’ve got this other control.’ But they clearly hadn’t …
Mr C No, it was …
RR ... and Mark said to me, ‘It’s people like you who should jolly well be keeping these people out!’ And I said, ‘What! Just like your brother?’ And there’s no answer to that …
Mr C No.
RR ... and they would not countenance it.
Mr C Well, it was – it’s a very strong statement – we realised that something had to be – had to be done.
RR Well, it wasn’t, was it – at that time?
Mr C It wasn’t done then because there were many other more pressing matters, and 28
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life is full of priorities and I’m coming to one.
RR Anyway, no, I think they just rejected the idea – they didn’t say, ‘Well, we’d like to assist you but we can’t fit it in.’
Mr C Hmmmm, yea.
RR However, that’s beside the point.
Mr C So anyway, it was determined, that partly because of Mark Solly’s brother and various other matters, which was causing an embarrassment.
RR It was, I’m not surprised – it was embarrassing to him and to the Island.
Mr C And not withstanding everything, the options opened to us, we decided that Mark should be suitably – well, made redundant – put it that way.
RR Well, it was very difficult and curious arrangement that had been set up, which was before you came in, I mean, this was there, wasn’t it?
Mr C Well, it was there …
RR When Martin [unclear] went – well, it goes to Martin [unclear] because this was the way in which he appeared as financial – whatever it was – in September 1982, taking over from Peter Duncan who had gone a few months earlier.
Mr C Yea.
RR A Financial Relations Officer, wasn’t he? And he was well in when these other two arrived.
Mr C Two arrived – well, and then …
RR And then, he replaced in a way … Martin.
Mr C Yea – well, Noakes, you realise, was appointed because he was being appointed by the Bank of England to do the investigation of the SIB.
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RR No, it was Farrant who was appointed.
Mr C Pardon?
RR Farrant was appointed to do the investigation.
Mr C But Noakes was part of it.
RR Hmmm ... not according to Noakes ... not according to my recollection. It was Farrant and a woman. I’ve got them somewhere …
Mr C But I understood …
RR I don’t know – he may have been aware of what was going on – he wasn’t over here doing it. He said he applied in an ordinary way from whatever he was doing at the time.
Mr C Oh right, maybe I’m wrong.
RR ‘Cos he thought it would just fit his stage of life …
Mr C Oh, right.
RR ... and it fitted his experience.
Mr C Hmmm.
RR And I think that was perfectly true.
Mr C Yea.
RR I think he was – apart from being a little severe in some ways in him – in the way he put himself out – he did a very good job.
Mr C There was one item that was probably the cause of my downfall in the Treasury …
RR Hmmm, hmmm. 30
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Mr C ... ummm – and that was dealing with the BCCI.
RR Which, at that time, hadn’t gone bust, had it?
Mr C No. And the BCCI, in about – in the summer of ’89, in America there were reports that it couldn’t meet its obligations etc. And Bill Dawson – I recall this vividly – Bill came into my room and said, ‘Had I seen the news last night?’ Which had only been a sub heading – you know, that there had been this trouble with the BCCI in America. And Bill said, ‘I don’t want any trouble here.’
RR Hmmm, okay.
Mr C And we immediately removed the government deposits that there were – because government had spread their deposits around the banks in the Isle of Man – well, the head officers immediately removed the deposit from the BCCI. This caused consternation with the local management of the BCCI and London – their offices in London. And, if I recall it, Mr Noakes told me I had a conflict of interest because I ... I suppose on Bill’s advice ... removed government deposits from the BCCI, and the BCCI were hammering at the FSC that they were being treated unfairly when nothing was proven apart from some little local difficulty in the United States. The – we were not ...
RR So Noakes was more or less saying that you should – you had – you were not in a position to do that.
Mr C We had exceeded our ...
RR Well that’s being Chairman – that’s a good example of why being Chairman of the FSC and Treasury Minister gives difficulties.
Mr C Yes, but even so, had it not been that way, the Treasury Minister of the day had the right without to withdraw the funds.
RR Yep – and I can’t see …
Mr C So, anyway …
RR … what Noakes is complaining about, except to discuss it – say, ‘Well, you 31
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know...’
Mr C Well, we did. So we discussed it at depth. And by then there were things coming to light, beginning worldwide about the problems with BCCI. So we made a policy, and the policy was that the BCCI in the Isle of Man was to deposit in the clearing banks in the Isle of Man a sum equal to their deposits. The money to be ring-fenced and – there was a third condition. If I just tell you here, I was searching last night for the BCCI file amongst my conglomeration of papers and I haven’t actually found it. But if I do, I’ll give it to you. There were three conditions: the money was to be ring-fenced, but there was to be a deposit equal to their deposit within the banks, the money to be – the money was to be ring-fenced; and one other condition. And by doing that, if the bank collapsed, the investments in the Isle of Man would not be – you know, they wouldn’t … are you with me Roger? ...
RR Hmmm, hmmm.
Mr C ... and further, that this was all conditional on the renewal of their licence on the first of January 1990.
RR Hmmm, hmmm.
Mr C Mr Noakes was not entirely happy with the situation. In September ’89 Mr Noakes advised me that a director, a Pakistani gentleman, a director of BBCI from London, was coming to the Isle of Man to see the Chief Minister – which he did – behind my back. And the Chief Minister did not consult me in any way. That evening, at The Sefton Hotel, there were drinks and canapé at which the gentleman met some of the finance sector hierarchy, including myself, but I was then totally marginalised in this affair. The – I was removed from office in December.
RR That was three months later.
Mr C Yes. The new Treasury Minister was …
RR Gelling.
Mr C ... appointed, and his first action under the direction of Mr Noakes was to 32
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rescind the – on the BCCI and give them their licence. Seven months later, on the 5 July 1990, BCCI went – collapsed worldwide. And, of course, repercussions in the Isle of Man and we then brought in the – I’ve forgotten the word – you know, the investors protection scheme.
RR Yep.
Mr C And following that, which cost the banks …
RR Hadn’t it already been brought in – before the collapse, wasn’t it?
Mr C No, no.
RR Well we all …
Mr C No, you all had to put into, then …
RR Because of that crash?
Mr C Yea.
RR I thought it was already – had just come in.
Mr C No. It is, it is of my, it …
RR Why ... why didn’t Mr Noakes tell me all that?
Mr C It is of my opinion – it is my opinion that an assurance was given to the BCCI director from London, that I would not be in post by the first November and the instruction for the renewal of the licence would therefore – and the licence would therefore be renewed without the conditions which we had imposed.
RR That’s very interesting. Does anybody know that ...
Mr C And at the time …
RR ... besides you?
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Mr C Yes, because I’ve got a tape of my broadcast on Manx Radio and that’s why I was looking for the file, and when I’ve got the file, I’ll hand it to you.
RR Yea. So this is, this is – I can ‘out’ all this?
Mr C Yea.
RR Yea, good.
Mr C Make sure that it is my – is my political opinion about that, because Walker might try and sue me.
RR Yes.
Mr C It is my political opinion – you can’t sue somebody for a political opinion. It is my political opinion that an agreement was made. You know that last bit?
RR Oh yes – political. (laughter)
Mr C It’s just a political opinion, but it is fact, and it was broadcast and there Tynwald debates, and I can get the library to look up the debates in 1990 when it was all debated and all this was exposed.
RR Yea.
Mr C All this was exposed, because investors in the BCCI were very, very angry. Whereas their money would have been protected had the conditions, laid down, which we gave six months’ notice for in July, in July, in July ’89, we gave the …
RR And, BCCI was, I think by this time, the only one that was not a limited company but a branch …
Mr C Yea – that’s right.
RR So that you were in with the generality …
Mr C Oh that’s right – they had to authorised capital … 34
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RR Authorised – yes.
Mr C ... authorised capital, their investments were to be ring-fenced, and [unclear].
RR That was the other condition – that was the third thing, was it?
Mr C Yea, yea … they had to become – because, otherwise, that was the only way to prevent the ring-fenced money going out.
RR Yes, yes … that’s right.
Mr C Yea – those were the three conditions. And we laid down those three conditions and I had the full support of Rory, and it was …
RR What did Rory say when all this happened?
Mr C Rory shrugged his shoulders, unfortunately. Well, I wasn’t there – I wasn’t there when it went bust, you see?
RR No, no.
Mr C But I was there, and I’ll give you the evidence in the papers, that the Minutes which I’m entitled, which I was entitled and I’ve got a complete file, and I can’t find it – I’ve found every other damn thing. The setting out, the conditions and which they were notified on the first July, that they had to – they had to have three million, I think it was, authorised capital, but don’t put it in, Roger, you’ll get the file – I’ll send you the whole file.
RR Yep, okay.
Mr C Authorised capital, ring-fenced, and I don’t know what the third one is now … anyway, there were three.
RR You said, ‘And that the sum equal to the deposit should be …’
Mr C Well, that was the ring-fence.
RR That was – I thought that was – yes. There was a quantum under – that should 35
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have been ring-fenced, as well. Anyway, you’ll let me have the file.
Mr C Yea – I’ll let you have the file. What it was, was – I think it was thirty million they had, and they had deposit it in Isle of Man – Manx banks – thirty million pounds so that the deposits in the Isle of Man were ring-fenced, you see …
RR Yea.
Mr C ... and they had to have a company that protected them because they were only a branch and not a …
RR That’s right.
Mr C ... authorised capital and so on and so forth. And that condition was rescinded. When I asked Mr Noakes about it his excuse – and you must bear in mind that, when this director came in the September ’89, he was met by Mr Noakes, under Mr Noakes’s wing and Mr Noakes took him to see the Chief Minister, but without the Chairman of the FSC or the Treasury Minister who was me. It was all behind my back which gave the political – suspected – suspected – that whatever you like, a deal was done. And an assurance given that I would not be in office when the licence came to be renewed. Mr Noakes’s – Gelling’s answers in Tynwald – I’ll just send you the file, Roger, you will read from the Hansard, that, had the licence been withdrawn, it would have caused international repercussions worldwide – this was Noakes’s view, etc, etc, etc … and therefore it was not in the Isle of Man’s interests to provoke the collapse of BCCI.
RR Hm! It did them that harm – bearing in mind – whatever.
Mr C Well …
RR Hm!
Mr C I couldn’t see – I couldn’t see – but then I’m only humble and lowly and in from Kirk Michael.
RR Now why didn’t Noakes tell me any of all that?
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Mr C Pardon?
RR Why did Jim Noakes tell me any of all that? It doesn’t require an answer. (laughter)
Mr C It doesn’t require an answer, no.
RR Tell me something quite different. We’ll move to the present. How do you see things, ‘cos we’re getting on and time is passing.
Mr C Hmmm, it is.
RR How do you see where we are going now? I mean, you like – you and the Chief Minister, you and the Chief Minister are the two long serving MHKs.
Mr C Yes. I see the Island – first of all there is a new condition within the Customs and Excise Agreement …
RR Yes, I heard you on that subject, too.
Mr C ... ummm, which unfortunately …
RR You don’t know what they are?
Mr C Well, I do know, but not allowed to tell anybody or discuss it with anybody or to take any advice because Members have been told in confidence – in strict confidence.
RR Right.
Mr C Therefore I cannot obtain a second opinion on whether they’re doing the right thing or the wrong thing. And I object to that. All we will be given is the fait accompli and asked to ratify it. As I said in Tynwald …
RR The point that you made was that ...
Mr C ... you cannot.
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RR Absolutely right – got to be!
Mr C It’s got to be ratified, therefore we’ve had no input into it. The second thing is that – which I raised the other day was regarding the – an amended Treaty of Rome. Now, the Chief Minister confused his answer with a new constitution for the European Union. But then both matters are relevant. But there is, as you will be aware now, since I asked the question – certainly in all the newspapers have got that Blair is seeking to have an amended constitution that does not need a referendum in the UK etc, etc …
RR Hmmm.
Mr C ... so that’s one part of it. The other part that is coming out of Europe – so I am told – is that there is a desire to have a new Treaty of Rome, because the Treaty of Rome as it stood, was for, I think, nine members?
RR Six. Benelux, France, Germany …
Mr C Oh yes – whatever.
RR Six.
Mr C Yea – it started with six. By the time Britain joined it became nine, I think.
RR That’s right. It was us, Ireland and Denmark or somebody ...
Mr C Yep! It became nine, anyway …
RR It became nine.
Mr C ... became nine. There are now twenty-four …
RR I think there are now twenty-seven, aren’t there – twenty-six?
Mr C I beg your pardon?
RR (laughter) It’s okay!
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Mr C I beg your pardon – inflation of numbers …
RR At this time, I think it’s twenty-seven …
Mr C Anyway, whatever. And there is a move in Brussels as I understand it …
RR Hmmm.
Mr C ... and you must realise I’m a very insignificant cog in politics …
RR I understand that emphasis.
Mr C ... and that there are moves ahead to renegotiate the Treaty of Rome. Now that, to me, is very important, because there are many jurisdictions within the greater European Union who would love to have the privileges that we have. So I asked the Chief Minister, only last week in the House of Keys, had he any contingency arrangements for an amended Treaty of Rome. Sadly he waffled on about, ‘There may be a new constitution.’ But that is entirely different, Roger. The new constitution is, as you well know, is about the consolidation of the EU executive.
RR Hmmm.
Mr C Whether they have a new Foreign Minister, and an EU etc., etc., so it’s about executive government. The Treaty of Rome is about the legislature of the Treaty …
RR Hmmm.
Mr C ... of the component parts.
RR It’s the whole basis of it and the mechanics of it.
Mr C Yea. The executive is the constitutions executive. So this is the – yea – the whole, the whole EU. The EU is not founded on the constitution; it’s founded on the Treaty of Rome. And they are seeking, because of all these new members, to have a new Treaty. Just like the new – modern 2009, just like the Customs and Excise Agreement has been renegotiated – the terms of it – the 39
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agreement is still the Customs and Excise Agreement – this is the terms of it. Our Chief Minster, two weeks ago when I asked him about it, said that the Customs and Excise Agreement was not being re … there wouldn’t be a new Customs and Excise Agreement and dismissed my question until I pointed out to him that it wasn’t worthy of a Chief Minister …
RR I listened to the exchange.
Mr C You listened to that, did you Roger?
RR It was not a good answer. I mean, in a way that’s true, but in a way that there are changes which could be …
Mr C But it’s unbecoming – as I said, Roger, it was unbecoming a Chief Minister to treat it in that cavalier manner.
RR Yea, yea … right, sir, many thanks – that’s some very interesting stuff, in a way. I look forward to having those bits to do with SIB.
Mr C And this is …
RR Not SIB – BCCI.
Mr C BCCI – and this is the speech that got up the noses of the Council of Minsters when they did the policy debate in October ’89, but by then …
RR Which was shortly before your demise. (laughter)
Mr C Shortly before my demise.
RR Your demise was already predictable.
Mr C Predictable because of the BCCI problems.
RR Yea, marvellous. Well, you’ve been most kind.
END OF INTERVIEW
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