UK faces revolt in Caribbean as islanders demand bailout

Britain is facing a revolt against its rule of a group of Caribbean islands, amidst a gathering political and economic crisis in the country.

The Foreign Office suspended parliamentary democracy in the Turks and Caicos Islands (TCI) last August after a group of visiting MPs uncovered evidence of widespread corruption in the territory, one of 14 colonial outposts for which the UK still has responsibility.

But an investigation by The Independent has found that the economic situation in the country has deteriorated sharply since then, and islanders are demanding a financial bailout of tens of millions of dollars.

Problems facing the British-appointed governor, Gordon Wetherell, include:

*Debts of tens of millions of dollars, which have left the TCI government unable to pay its bills and trying to impose swingeing cuts;

*The collapse of one of the country's leading locally owned banks, which wiped out the savings of thousands of depositors and businesses;

*Doubts over the future of a legal investigation set up last year to prosecute former ministers accused of taking bribes.

Islanders are calling for their future to be made a top priority by the new Foreign Secretary, William Hague. But political calculations in the UK could be complicated because Lord Ashcroft, the Conservative peer who helped bankroll the party's election campaign in marginal seats, is the biggest financier in the TCI and much of his wealth is tied up there.

Asked for Lord Ashcroft's response, his representative told The Independent: "From every standpoint the facts appear to invalidate the entire premise for [this] suggestion being made by The Independent."

In March, hundreds of residents demonstrated against British rule and demanded elections for a new democratic government. A leading TCI politician has warned the country may become "ungovernable" if those elections are not held soon.

Mr Wetherell took over a country that was already tens of millions of dollars in debt and unable to pay its bills, and tax revenues, including import duties, have continued to fall. Unemployment has jumped as work on new tourist developments has ground to a halt and government contracts are axed. Civil servants have also been told to expect a 10 per cent cut in their wages.

TCI benefited from a decade-long development boom which made it one of the fastest-growing islands in the Caribbean, but it collapsed with the global recession and the ousting of former Prime Minister Michael Misick.

A commission of inquiry into the islands last year found that the boom had gone hand in hand with a culture of "political amorality", and it reported that Mr Misick and some senior ministers had enriched themselves through bribes and dodgy land deals.

Lord Ashcroft and his bank were not accused of any wrongdoing by the commission report.

Foreign Office ministers in the last government refused to offer loans or loan guarantees to the islands, insisting that there should be no UK taxpayer bailout for problems caused by the TCI's own politicians and businessmen.

But today, the British lawyer who has been put in charge of bringing corruption charges says she plans to lobby for funds from London. Helen Garlick said she risks losing local support for her work because her budget – $10m (£7m) for the next year – is being paid for by sharp cuts in public spending.

Ms Garlick, who previously headed the overseas corruption unit of the Serious Fraud Office, said her work in the TCI was behind schedule. "We are assured that we will be among the principal calls on the TCI budget," Ms Garlick said.

"But we don't want to put the government here in the position that meeting our demands means other public expenditure affecting the lives and well-being of the TCI people may not be available. These are exceptional circumstances. It's not every day that the British government decides to partially suspend a country's constitution."

While criticism of the governor has been mounting in the TCI and politicians have begun calling for elections earlier than the July 2011 deadline set by the British, Ms Garlick indicated that she might lobby for a postponement, citing the possibility that some of the allegedly corrupt ministers or their sympathisers could be returned to power. "There is no prospect of our having completed trials by that time, because this is a highly complex investigation," she said.

Decisions on the future of the islands now fall to Mr Hague, Lord Ashcroft's closest political ally. And since the peer's bank, British Caribbean Bank (BCB), is the largest lender in the country, those decisions could have significant economic consequences.