I agree with most of what he said, but some important parts of the story were left out. Here is how I would answer the frequently asked questions, but I stress that I am not speaking on behalf of the Government or its Financial Services Council (FSC):

Why have the OECD put us on their grey list?

We have made more than the required minimum number of 12 tax information arrangements - 20 in fact. However, twelve of these were made under our unilateral mechanism, and the OECD are now saying that this mechanism must be formally approved by a decision-making body of member states.

When the OECD announced the rules of this game last year, they said explicitly that unilateral arrangements would count and this approach was also endorsed to the Overseas Territories by the UK Treasury as an appropriate compliance method. And our unilateral mechanism has been publicly praised by the OECD Secretariat. Indeed the OECD's post G20 report, issued 21 April, confirmed that states may implement their undertakings by unilateral arrangements. So we have a legitimate expectation that the OECD will shortly remove us from the grey list. The decision-making body in the OECD meets later this month.

It is important to note that the grey list covers a wide range of compliance: from mere promises (and no actual compliance) by certain OECD states, to substantial actual compliance by other states, and over-compliance by Cayman beyond the minimum requirement (subject to formal approval of our unilateral mechanism). Further, there are G20 countries conspicuously absent from the lists altogether and rather obvious accommodations made for certain powerful states.

Why did CIG not make bilateral tax information agreements so as to be sure of white-listing?

There was insufficient time. However quickly CIG might want to move, it cannot force other countries to sign up.

In the beginning the OECD initiative was to develop a "green list" of jurisdictions making good progress with tax information arrangements. The green list was to be published in June 2009 at the earliest.

Recognising that CIG could not by itself control the pace of bilateral agreements, and recognizing also that goal posts have a tendency to move, CIG adopted a 2-track approach: press on with bilateral talks, but establish the unilateral mechanism (done at the end of 2008) to enable us to make up any shortfall in the number of bilaterals.

Then the G20 process intervened. This changed the nature of the initiative and gave it an aggressively accelerated timetable, allowing no time, realistically, for states to make more bilateral agreements. So this new OECD/G20 exercise was an ambush for nearly all OFCs (excluding only those with powerful protection) and also for a number of larger countries such as Switzerland. Of those ambushed only Cayman had positioned itself, with the unilateral mechanism, to meet the required standard in time.

There are several very troubling features in this OECD/G20 approach. It is obviously not an appropriate way to handle international relations. My guess is that it is attributable to the extraordinary political pressures that the global economic crisis has put on the leaders of the large countries, to be seen to take immediate action to cure the world's ills - or perceived ills.

But should we not have been making tax information arrangements years ago, given that we gave the OECD a formal undertaking to do so in 2000? The undertakings given by non-OECD countries to the OECD were predicated on the level playing field principle, which the OECD eventually accepted formally in 2003. Further, the technical standards for exchange of information (the development of which Cayman participated actively in) were not established until 2002, with the publication of the OECD model bilateral agreement.

Among other things, the level playing field principle meant that the OECD could not insist on OFCs making these tax information arrangements until, at the least, the OECD countries had themselves done so. Then, in the negotiations between the EU and Switzerland concerning the EU Savings Directive, it became clear that neither Switzerland nor several of the EU countries were willing to exchange information in the way proposed by the OECD, and this was accepted by the EU.

At that point some in the OFCs felt that the wheels had come off the OECD bandwagon and we should forget about tax information arrangements. But wiser heads prevailed, and most of the larger OFCs, Cayman included, decided to press on with negotiations for satisfactory agreements, and at the same time to work within the OECD sub-group established for the purpose of achieving a level playing field. The work of this sub-group was ongoing through 2008; the OECD is currently assessing the impact of the G20 process on this work.

I believe that all OFCs were seeking essentially the same things from their tax information agreements: acceptance as legitimate components of the global financial structure, protection against blacklisting and other forms of discrimination, some specific tax breaks of the kind often included in tax agreements (though the difference in our tax regimes meant that we could not set our sights too high in this respect).

This policy was supported by the private sectors in the OFCs. No one imagined it would be easy or quick, but there were good reasons to be optimistic about the eventual outcome. I believe CIG commenced discussions with most or all of the countries that had expressed interest.

Should CIG and its advisers have recognized sooner that the policy was not making much progress and that the OECD was likely to lower the boom on us?

There was no secret about the slow progress, but no suggestion that CIG should give up its attempt to obtain the objectives. There was no sign that the OECD would return to the charge, and the playing field was still not level. The OECD approach changed quite recently as a result of the global economic crisis, presumably because the huge sums being spent by large countries on stimulus and rescue measures must eventually be paid for out of tax revenues. As noted already, the G20 then intervened to turn a relatively benign OECD process into an ambush.

Should CIG continue with the policy of trying to obtain international acceptance and protection against discrimination? Yes, of course. But it must also take all reasonable measures to keep us off bad lists, because that erodes confidence in us as a financial centre. The longer we are ensnared in the G20 ambush, the more harm is likely to be done.

The reader will have gathered from these remarks that I think Mr Ridley short-changed the country on the reasons for the current situation. He attributes it to a failure by Government and the private sector to learn from past experience that we must be proactive rather than reactive. But past experience does not teach proactiveness.

This whole exercise of keeping up with changing international standards and demands is by its nature reactive - except on the rare occasions that we are in a position to exert some influence on these changes.

Mr Ridley says that the need for pro-activity was demonstrated when we found ourselves on the FATF blacklist in 2000. But in that case the FATF made a demand and CIG did not take it seriously, believing that we already met the FATF Recommendations and that the demand was not warranted by the Recommendations. That demonstrated the danger of failing to react, not the need to pro-act.

He gives our staying off the previous OECD list as an example of the proactive approach succeeding. But in that case the OECD demanded an undertaking, the UK gave strong encouragement, and after consultation with the private sector, CIG decided to give the undertaking. In what sense was that proactive, not reactive?

As regards the present OECD/G20 exercise, I would have thought CIG had earned good marks for pro activity in its decision to establish the unilateral mechanism.

I presume Mr Ridley means that CIG and the private sector should try to predict what the next demand will be, and take steps to meet it before it is made. He does not say whether or when he predicted this latest OECD initiative or the G20 intervention, or how we might have predicted the minimum number of tax information arrangements that would be required.

In the past I think most people have felt cautious about a predictive approach, because if the prediction proved wrong, we would likely have done ourselves damage. Our aim is to keep pace with changing standards, not to run ahead of them. But perhaps we should think again - if there really has been a deliberate change in the tactics of international bodies to include ambush.

Under the headings "So What Should Cayman Do - Specific Actions". Mr Ridley provides a list which I think is mostly uncontroversial, except that it implies that none of these things have been done, tried or planned.

Those interested in what the Government proposes should take note of the PPM Manifesto - and, I hope, vote "yes" to the proposed new Constitution, without which some of the most important proposals will not get off the ground.

Of all the points made by Mr Ridley with which I agree, I think the most important is the need for closer interaction between Government and the financial community. One reason is to ensure that the financial community informs Government policy in the most effective way. Another is to maintain confidence within the financial community.

It has been noticeable how quickly some people in the financial community seemed to lose confidence in the Government over this latest international challenge - a symptom, I think, of understandable worries about what the global crisis and its consequences may do to our financial services business - but also an indication that the considerable efforts made by Government to keep the financial community informed were still not enough to counter negative comments.

In my opinion the Government has interacted well compared to previous Governments, but we are now in an extraordinary and dangerous situation, so we need to look for ways of doing it better - and when I say "we" I mean both Government (including CIMA) and the financial community.

In self-defence, the private sector members of the FSC did recognize the need for greater interaction last year, and we have been holding a series of useful meetings with all the main associations. There were clear signs of renewed interest in working with Government, and a number of good suggestions were made. In the same vein, it is good to see that CIFSA is now getting more serious support from the financial community.

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