The Chancellor turned his fire on the Isle of Man and the Channel Islands yesterday, promising a review of their tax haven status.

“The recent financial turbulence has highlighted potential problems with overseas territories and Crown dependencies, such as the Isle of Man and Channel Islands,” Alistair Darling said. “They attract banking customers with lower taxes, without contributing to the UK Exchequer.”

The Treasury has ordered an independent review of the status of the Isle of Man and the Channel Islands, both of which are currently Crown Protectorates.

The government review will involve the Foreign and Commonwealth Office and the Ministry of Justice, as well as the Treasury, and its interim findings will be reported with the Budget in March.

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Allan Bell, the Isle of Man’s Treasury Minister, hit back at the UK, saying that the Government was orchestrating a campaign to make the Isle of Man a scapegoat for the Icelandic banking crisis, which has cost British local councils with deposits in Icelandic banks millions of pounds in lost savings. The Isle of Man subsidiary of the Icelandic bank Kaupthing collapsed when its parent was nationalised in September. British savers with the offshore bank have called on the Government to refund their deposits in the same way as it has compensated savers with the bank’s onshore UK subsidiary.

But the Chancellor repeated comments that offshore savers could not expect the same bailout. “At times of stress, depositors need to know who will compensate them. The British taxpayer cannot be expected to be the guarantor of last resort,” Mr Darling said.

The Kaupthing Singer & Friedlander Isle of Man Action Group – set up to represent thousands of savers who have lost their money – continued to criticise the Government for failing to protect British savers. The Isle of Man arm of Kaupthing is expected to go into liquidation on Thursday.

Tony Brown, the Isle of Man’s Chief Minister, said that the review was good news, however. “We welcome this exercise as another opportunity to show that the island is well regulated, financially stable and internationally responsible.”

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