Bought 200 years ago for pounds 70,000, an ancient island haven feels Britain's greedy gaze again

The Isle of Man's special tax status is under renewed threat, writes Michael Streeter

In 1765 a peeved British Government, worried about the loss of revenue through smuggling and lower customs duties, bought the Isle of Man for pounds 70,000.

Two hundred and thirty years later as the island prepares for its own general election, a future Labour government may attempt similarly drastic action.

Labour front-bencher George Foulkes believes the UK is missing out on hundreds of millions of pounds in tax as companies relocate to the "tax haven" lying just 16 miles west of the Scottish coast.

He told The Independent: "They have had it too easy and the reality is that we have lost a lot of revenue; the time has come for a halt to be called."

His view - to which the shadow Chancellor, Gordon Brown, is claimed to be sympathetic - is treated with equal measures of bafflement and anger on a rugged, often windswept island, fiercely proud of its independent identity, a country where Norwegian was spoken as the main language to the 15th century and where the Gaelic Manx language is undergoing a resurgence.

Chief Minister Miles Walker, who is standing down at the election, puts the island's basic rate tax of 15 per cent, rising to a maximum of 20 per cent, into historical perspective. "We do not have any special status - they have not given us anything they can take away."

David Cretney, until recently leader of the Manx Labour Party, says that to ban British companies operating on the island would "drive away" money from the UK to more remote tax havens abroad - losing the Treasury far more money.

"In any case," he says, "both main parties in the UK have pledged to reduce income tax if they can - what's wrong with us having got there first?"

The finance industry is certainly lucrative for the Douglas-based government, comprising 35 per cent of its near pounds 600m annual national income, and providing scores of jobs. This growth has led to low inflation, an unemployment rate of 3 per cent and a growing government reserve of more than pounds 100m.

Coupled with a crime rate well below the UK's average, a well-funded national health service, temperate climate and scenery of almost savage beauty, there might seem little at stake in the 21 November poll.

In fact, the election of 24 seats of the House of Keys - the elected part of the Tynwald parliament - promises to be bitterly contested, as the two-term administration of Mr Walker is accused of running out of ideas.

Edgar Quine is head of the new Alternative Policy Group, (APG) a diverse coalition of politicians in a system that shuns party politics and where most candidates stand as independents. He says the government has failed to tackle the problem of rising crime and wants the island to renegotiate or end the customs agreement with the UK which ties Man's duties and VAT with those in Whitehall.

Mr Quine, who intends to put himself forward as the next Chief Minister, also wants tougher immigration controls - what he terms "population management" - based on residency. The island has 71,714 residents, of whom only half are Manx-born.

The unspoken agenda is to deter ordinary UK residents from retiring to the island and putting a strain on health care, and instead to encourage younger, more monied newcomers.

His views are shared by many locals. Hairdresser Jackie Wade, 50, from the picturesque fishing port of Peel, says controls are needed to stop the island becoming swamped.

"And they have got to control planning, otherwise developments will creep all over the island." The influx of mainland chains, such as Littlewoods and Boots, is also closing down small businesses unable to compete, she says.

This concern for old world community spirit is noted by one resident British businessman, who asked not to be named. "There is money here but people are more discreet with it than in say Guernsey. You mustn't be flash otherwise people will be a bit funny."

Shop-owner William Crookall, 48, believes politicians are out of touch with people over law and order and wants a return of the birch. "They [the politicians] should get off their backsides and punish people properly, instead of just giving them community service."

Another underpinning issue is the desire of many to loosen their ties with the UK, of which, as a Crown dependency, Man has never been a part. Nor is it a member of the European Union, though it abides by certain EU agreements to ensure free trade with the rest of the continent.

The APG wants to see the British-appointed attorney general become a locally appointed office, and also wants more power for the Tynwald - the oldest continuous parliament in the world - over the appointment of ministers.

Identity is a potential problem for an island with links to Scotland, Wales and Ireland, which regards Liverpool as its nearest large centre of population and receives "imported" television signals from a bewildering mixture of different regional services.

As yet there is no burning desire to sever all links with the Crown. Treasury minister Bernard Gelling, tipped to be the next Chief Minister, who can trace his ancestry back nine generations in local graveyards, welcomes what he sees as a gradual move towards greater autonomy.

He is as proud of the government's achievements in new buildings and creating a fiscal surplus as he is of its traditions, including the annual open air meeting of the Tynwald on 5 July, which traces its ancestry back to the Norsemen.

"That's why I went into politics. I am an island person and I want to do something that guarantees the best quality of life that there is."