20/11/2012 Newsnight

They are known as payway loans, gained at a matter -- payday loans

gained in minutes, agony to repay. The Office of Fair Trading today

puts them on warning, and sides with the customers. You have been

kidnapped and you are so believing that they are helping you, but they

are not, they are living off your misery and low financial status.

Tonight we hear from the industry and the minister.

The Israelis warn the people of Gaza to evacuate their suburbs as a

ceasefire was meant to be imminent. After hours in which Egypt and

Hamas said a truce would come in tonight, it manifestly didn't. So

why did they talk it up in the first place? Is an apprenticeship

like this one, better than a university degree? The Government

wants us to forget snobbery and broaden our mind. I'm already

looking at by the time I'm 25, I can probably have a nice car, a

flashy house and stuff like that. Is Burma open for business? As the

country attempts to reform, the Muslim minority experience a very

unZen attitude from local Buddhist amongst. TRANSLATION: Around the

world there are many Muslim countries, the Muslim countries

should take care of them, they should go to a country with the

same religion. Hello, good evening, it can take

less than 20 minutes for the loan to arrive in your bank account, and

it take a lifetime to pay it back. The payday loan business is one of

the few growth successes in this struggling economy, for reason that

is are not all together to be celebrated. Fuelled by shrinking

incomes, at a time when banks are reluctant to lend, they have become

the lender of last resort, often for those who have no other stream

of credit. Today the Office of Fair Trading has written to all 240

lenders to express concerns about how some of the sector operate.

Young, struggling for money, but still having a good time. This

generation is finding its own way of dealing with the downturn.

My first loan I took out about a month a I used it to pay for going

out and seeing my friends, without that I wouldn't be able to see them

or anything. Keira is celebrating her 21st

birthday, she wouldn't dream of taking out a credit card to pay the

bills, the temptation would be too great. But, like many of her

friends, she is more than comfortable with a new and even

more expensive form of credit. go on to their website and you get

two little slides, telling you how much you want to borrow and how

long for. No filling out forms or meeting the bank manager, all you

need is a smartphone and an internet connection. About an hour

ago I took out a loan for �100, trt on it was just under �18, because I

took it out for 12 days. I clicked apply, it was my bank within 20

minutes. It is like another payday and you

are paying it back and take another one out if you need to. As long as

you are not, you know, using it for ridiculous things.

The payday loan industry first grew out of the cash chequing stores of

small town America, from nowhere, ten years ago, loan shops now seem

to be everywhere on the British high street. And, legitimate

demands for convenient credit, particularly among young consumers

growing, at exactly the time when traditional lenders, like high

street banks, find themselves with less and less to lend.

The payday boom has been fuelled by something else as well, in much of

Europe and some US states, these types of loans have now been

effectively banned. In Japan the rate of interest charged by some

payday lenders could get you ten years in prison. In this country,

regulation is much more relaxed. A large number of competing loan

sites are now operating on the Internet. Tarting a new type of

cuss -- targeting a new type of customer. Internet borrows tend to

be much younger, 65% under the age of 35. Most are single, two thirds

don't have any children. It is a new business that is growing at a

phenomenal speed. A quarter of all under 25s say they are planning to

take out a payday loan in the next six months. Three-times the rate of

the rest of the population. I'm very surprised at how quickly

it has grown. But then, that has come on the back of banks slashing

overdrafts, reducing their lending criteria to people, and the sheer

fact that it is a convience of being able to go on-line via your

computer on your desk, or, phone, to apply for a loan. There is one

name, and one company, that's the driving force behind the on-line

loan industry. Run, not out of a call centre on the edge of an

industrial estate, but out of this Georgian town house on the edge of

Regent's Park. This is the headquarters of what is

fast becoming a household name in finance. The people in the

buildings behind me work for the on-line loan site Wonga, six years

ago this company didn't even exist. Now it is worth hundreds of

millions of pounds. Wonga moments. We all have them. Those times you

need a fast little loan. Much of that growth is thanks to

some very clever marketing. The firm is spending �20 million a year

on quirky daytime TV adverts, aimed at that young, tech-savvy audience.

# Want my holiday to be a bit longer

All that seems to be paying off, profits trebled last year to �46

million. The founders of Wonga hope that one day it will be the UK's

answer to Facebook or Google. The company says 90% of its customers

would recommend its service, it charges at 1% interest per day are

clear and responsible. Its critic, and there are many, say the whole

on-line loan industry is making it far too easy to borrow money at a

rate that many young customer also struggle toll pay back.

This is Plymouth. Unemployment here is running well above the national

average. Half of all under-25s say they have

money worries, one in five has used a payday loan to make ends meet.

The local Citizens Advice Bureau has just won lottery fund, to teach

social tenants about the risks of payday loans. Payday loans, I'm

absolutely horrified by the vast increase in them. It is an

imbalance of arms, if you will. Those people are relatively

inexperienced, they are weak, if you will, or innocent, and like

most of us we can give way to temptation. In the last few

days...27-year-old Seth is one of those customer, he borrowed last

year from on-line loan firms, not from Wonga, or Inant Loans Direct,

soon he found himself bombarded with other loan offers and deep in

debt. Once you start doing it you are in a vicious circle. Say you

borrow �100 and you pay �150 back, that is �50 less you will have the

next month, you have to borrow again. That is what they rely on,

the repeat business of it, you they they are doing you a favour, it is

like Stockholm Syndrome, when you are kidnapped, you so believe they

are helping you, but they are not. Some think the situation is so

serious that the Government and the regulators need to take decisive

action. I would ban them outright. They are so dangerous and toxic,

and create so much detriment for the people who take them and

society at large, I would do away with them. I drew the analogy with

drug dealing, and I do it purposefully, we take a view as a

society that actually, freedom of choice should be trammelled as far

as serious Class A drugs are concerned. I don't see a great deal

of difference between that situation and payday loans.

Regulation in this country is unlikely to go that far. Today the

OFT didn't directly criticise Wonga, or Instant Loans Direct, and it

said there is a role for payday loans in the market. But the

regulator is still very concerned about the practices of some lenders

in the industry. In today's report, it said it

doubts the extent to which some lenders check the affordability of

loans. And it is concerned that borrowers may not always be given

balanced information about the costs and risks involved.

What we would not want to do is paint a single picture of the pay

day centre in saying everybody is equally bad. Not at all, you have

quite a broad spectrum of practice. As I say, from the worst, where we

are taking immediate action, to other areas, where we have real

concerns, but we think it appropriate to give the businesses

an opportunity to put them right, but if they don't put them right,

then they risk enforcement action. Back in the bar, these young

consumers don't look too worried. For many, payday loans are just a

quick, simple way to get hold of cash, when banks just aren't

lending. Some say a crackdown could put the

whole industry out of business, and push some borrowers into the arms

of illegal lenders. But, given the level of concern about the industry,

it is likely that at the very least, this new form of credit will soon

have to carry a significant health warning.

I have been speaking to Russell Hamblin-Boone, the chief executive

of the Consumer Finance Association, which represents around 70% of all

payday loans companies. I began by asking him whether he recognised

the criticisms made by the Office of Fair Trading? I think what the

report is highlighting is that there are some, a small number, of

lenders acting irresponsibly. I represent those who want to be

responsible lenders, they want to introduce self-regulation, on top

of the consumer credit regulation that already exists. The Office of

Fair Trading has written to companies across the board, looking

at lenders across the sector, 240 letters, and they say that they are

concerned that the loans are extended too often, that lend

remembers too aggressive, that they are not checking if borrowers can

afford it pay back the money, that is serious? And our own practice is

that we don't extend loans beyond three-times. We do robust

affordability checks to make sure we are lending to people who can

afford to pay back. We are making sure people aren't getting into

financial difficulty. There is no point in lending to someone...You

Are saying no company who you represents falls the wrong side of

any of the things that the OFT says are across the industry? Our self-

regulation and Code of Practise, that comes into effect next week,

makes sure that sort of thing doesn't happen, absolutely.

Code of Practise, which is the fourth Code of Practise we have

seen for your industry, which makes minute changes from the Code of

Practise that was introduced last year, which made minute changes to

the Code of Practise the year before? It is a young industry and

is evolving and growing. Where we identify issues that need to be

resolved, then we tackle them. This is part of the industry as it

mature, we will start to become more mainstream. In these early

days, of course we are going to come across areas that need to be

addressed. We are absolutely committed to sorting those out.

is not just areas, a Which? Survey found half of users took out loans

they couldn't afford to pay. 70% of users regret taking out the loans.

That is not just a corner of the industry, is it? I don't

acknowledge the Which? Survey of a couple of hundred people. What we

have done is surveyed our customer, 100 people, and found that 85% of

them didn't have any difficulty in paying back the loan. In fact, 71%

of people pay back in full on time. The other 29% extend their loans,

but they can now only do that three times. You are suggesting there is

no problem with your industry, the companies you represent. You can't

accept that self-regulation has demonstrably failed? I didn't say

that I didn't accept there were problems that needed to be resolved.

What I'm saying is the larger lenders I represent are absolutely

committed to solving those through self-regulation and statutory

regulation, if if that is required. Why not put a cap on the amount

lent, most countries have done that? And it has failed in most

countries, you have reduced the availability of credit. That is not

what happened in Japan. Japan introduced measures like that six

years ago and they have cut down the amount of indetectedness that

Japan has? Japan has a very different credit market to ours. We

are a credit-based society, whether credit cards, overdrafts, personal

loans, that is the way we operate. Many people have been cut out of

all of those different options. There isn't another country in the

west that doesn't have some kind of measures, some kind of cap in place.

Are you saying we are fine, we are just a soft target, aren't we?

cap is a blunt instrument, if you set the cap too high, you are not

achieving anything, if you set it too low you are reducing the number,

the amount of lenders there are able to provide to people reducing

the level of competition. I'm going to go back to Steve, who

you heard in the film, Seth, Steve says they are so dangerous I would

ban them outright. So toxic, he used the analogy, with drug dealer,

and he does that purposefully. Your industry is being compared to that

of drug dealing? It is the very emotive issue, I absolutely

understand that. We have to focus. It is emotive because people are

left in dire straits, unable to pay things, getting 60 messages a day

from phones, from people asking do they want to borrow more money?

average salary of one using a payday loan is �17,000, that is

much higher than the minimum wage. People who use payday loans

understand what they are getting into it, because it is a simple and

transparent project. They rely on repeat business, because you think

they are doing you a favour, and you feel like you have been

kidnapped. You end coming back to your kidnapper for more, that was

what one man said? If you are putting a cap on the product, you

are demonstrating this isn't about trying to get people into perpetual

debt. We are not a credit card company. You are not putting a cap

on it, you said you wouldn't? cap the amount of times to extend

the loan. We don't lend to people who can't pay back. It doesn't make

good business sense. There is a cost to collect the debt if you

don't get it back. That have the industry spokesman.

We speak to the minister in a second. We have our economic

editor's take on this. Paul Mason, how significant is this to our

economy? Some of the data we know about this sector, for a sector

that is causing so much angst, is patchy, the OFT doesn't seem to

have many of the details toened happen. What we do know, or we

think we know, is it has doubled in size over the past three years of

the crisis. From about �900 million to �1.8 billion. That is the payday

loan sector specifically. If we put it into the context of the whole

consumer lending situation. This is unsecured lending, not credit cards,

mortgages, but loans. You can see at the height of the boom it peaked

at around �200 billion, it fell back to �150 billion, leaving a �50

billion gap, at the very least. What do we think is happening? If

we extrapolate some of the OFT's figures, it is possible that about

�14 billion a year of lending is coming from the whole high-cost

lending sector, of which this is just part. We talk about the

doorstep lenders, the shops on the high street where you can pay 300%

interest for a fridge. It is beginning to fill a bit of a gap.

How dangerous do you think it could be to the economy? I have to say,

the first problem is, you look at that film, it is like the boom is

over, but nobody wants to tell the poor. That's what it seems. Why do

we know that's a problem? Because if we study what happened before

the Lehman Brothers crash, sub- prime lending, the OFT keeps asking,

how much demand is there for this kind of loan,? What the regulators

asked in hindsight about the crash we went through, is did these

lenders create their own demand. Are there, in fact, a million in

2009, maybe two million now, we don't know the numbers, two million

people, or is it the same million borrowing double the amount. It is

still quite startling that we don't seem to know some of the answers.

Thank you very much. Jo Swinson, the consumer affairs minister joins

me now. One of the points that Paul is getting at there, is the grim

truth that the majority of people who use these services are the

hardest hit. They are hit by your Government's welfare cuts, this is

essentially privatisation, if you like, of the welfare state? I think

it is important just to recognise that most people who are using

payday lenders are working, although not necessarily on very

high income, less than the average. They are on �17,500, on average?

These are people who are it is important that they are looked

after. The Government has already taken action on this issue. We have

a revised and improved Code of Conduct that comes into place next

Monday. It is fair to say that the OFT's interim report today is

pretty damning. Let's get back that-to-that point, your Chancellor

has spent two-and-a-half years saying debt is the problem. The

last crisis was fuelled by debt, and this is making people more

indebted. This is just laying the foundations for another crisis?

Payday loans can work for some people. You saw some of the people

in the film where that was the case. There are concerns when a report

says that the majority of the investigations of companies they

looked into it, they downed practices where customers weren't

treated properly that is raising alarm bells. There is circumstances

where it is a week before payday and the washing machine is on the

blink, and the car needs to be fixed, there is some circumstances

where it is an appropriate form of credit. And it is always working

for some people. Wonga, the one that most people recognise, the

poster child, would you say this is a big British success story, and

you would like to see more of it? don't think it is an area where we

need to see particular loor more of, it plays a particular role --

particularly more of. It plays a particular role in the market.

business has doubled in the last few years s that a good thing?

Where it is used for the purposes of short-term credit and it is

helpful. The short-term credit, where it is filling the gap that

the banks who aren't lending as much? That is fine? There is a

variety of different customers will end up in a situation where they

suddenly need access to �200, for some people that is an earnings

tension to an overdraft or cred -- extension to their overdraft or

credit car, and some people don't have access to those things and it

provides an answer. The issues the OFT outlines are very important,

the lenders shouldn't be lending to those irresponsibly to people who

can't afford it pay it back and will need to role over the loan

multiple times. The cuts are introduced because the households

are massively in debt? The personal debt crisis has been one that

happened many years ago. It is something which my colleague Vince

Cable warned about and asked for previous action from the Government.

These are the figures we have from the last two or three years, since

the cuts have been introduce, since your Government has been banging on

about austerity, and sending people to these loans because they haven't

a feasible stream of income? Government is working hard to make

life easier for those on low and middle incomes. We are giving more

than 20 million people a significant tax cut each year and

that will help. We need to make sure when people go to the lenders,

because they have a general financial sustainability problem,

instead of being offered a payday loan, they are advised to seek

advice about their debt situation, through organisations like the

Citizens Advice, the Money Advice Service, if people seek advice

quickly they can get a grip of the situation. What would you do, the

OFT is confronting the problem now, would you like to see a cap now,

like many other countries do? issue around the cap is not clear

cut. We have issued evidence on this from Bristol University, which

we expect by the end of the year. There is a superficial thing where

you say that is the answer. commissioned it a year-and-a-half

ago, why is it taking so long to answer one question? Primary

research and hundreds of pages of evidence. There is a draft report

put forward, we want to make sure the analysis...What Do you

understand of it now? There is analysis of a cap and a full report

by the end of the year. There are issues where if you set a cap too

low, you could end up with a perverse consequence that you end

up pushing people into the arms of illegal lenders, nobody wants that

to happen. That hasn't happened. The other point to make about the

total cap on credit, is it doesn't address those other issues that we

saw around affordability, and people being lent to where it

shouldn't be happening. The problem is, we have four different codes of

practice, you told parliament there will be a review in 2013 this is an

industry exploding before our eyes, five million people looking at

taking out a loan, and a third won't be able to pay it back?

is a clear shot across the boughs at the industry from the OFT. I

felt frustrated with the response from the industry in your interview,

I don't think there is room for complacency in that industry. The

OFT is taking action today. They said they are starting

investigations into some of the companies who they think could have

to have their credit licenses revoked. We have given additional

powers in next year to suspend credit licenses. We are keen to

make sure vulnerable consumers are protected.

Thank you. There was much anticipation today

that a ceasefire deal between Israel and Hamas could be realised

this evening. As it is, shelling and rocket attacks between the two

sides continue unabated. The appeals for a diplomatic solution

are being urged in their usual way by the international community.

Just before coming on air strikes the US Secretary of State, Hillary

Clinton, arrived for talks in Jerusalem. President Obama asked me

to come to Israel with a very clear message. America's commitment to

Israel's security is rock solid, and unwaviering. That is why we --

unwavering, that is why we believe it is essential to deescalate the

situation in Gaza. The rocket attacks from terrorist

organisations inside Gaza, on Israeli cities and towns, must end.

And a broader calm restored. Hillary Clinton, in Jerusalem. Mark

Urban's here now. After all the toing and froing, and one comment

from one side and contradictions from the other. Why do we think it

didn't happen? Indeed President Morsi from Egypt said it will

happen tonight. Hamas was giving out similar signal, there were

suggestions that a press conference would happen at a certain time. Who

would be on the platform. It hasn't happened for a number of reasons. I

think, in essence, because all that was agreed was ceasefire light, if

you like, stop shooting at one another. Where as we know full well,

that both sides are actually after something more substantial than

that. In the case of Hamas, of an easing of the blockade of the Gaza

strip, more access for their economy. From the Israeli side, of

course, something that deals with more fundamental security issues,

people moving in and out of the Gaza strip to the Sinai Peninsula,

causing them problems there now, the supply of missiles, all these

other factors. There clearly isn't agreement on those things. And the

Middle East is always a place that is full of theories, but I think it

is reasonable to suspect, that the flagging up of the possible truce

by Egypt and Hamas, was designed to put pressure on the Israelis to

agree today something they didn't Right, because at the weekend there

was the threat, it seemed, of a ground war, and an incursion, has

that been averted? I don't think it has. The Israelis have been

threatening it, since early on in this military x a, as you say. In

some -- military action. As you say. In some cases it is patently

incredible, it would be so against what they are trying to achieve

diplomat closed circuit everyone is warning them off, from Hillary

Clinton, who has arrived tonight, the US, the EU, all sorts of people

are saying don't do it. They know from the experience of 2009, that

casualties among civilians and damage to infrastructure could be

heavy if they went in. They risk having soldiers kidnapped, all the

risks there are doing it. So much so the head of Hamas said in Cairo

yesterday, he taunted the Israelis, saying he didn't really believe

they were serious, and come and have a go if you think you are hard

enough, more or less. They do have to make it credible. This is where

I think the crisis has its own dangers and possible momentum.

Today we heard about leaflets being dropped to warn citizens to move

away from certain areas where the Israeli army would, we imagine,

punch in to the Gaza strip. There is an attempt to make it more

credible. It is only fair to say, if there isn't agreement on a

broader peace package, in the next 48 hours, then it may well become

an inevitability. The image of the apprentice tends

to lie at two ends of the spectrum, Alan Sugar's chosen fewer, or the

Dickensian blacksmith. But the Government wants us to believe that

an apprenticeship is the lead to a prosperous career and a cheaper

alternative to university. Will we as a country ever buy into. That

The world of work, and the choices we make to get there? It is a

thorny and emotive set of decisions. Difficult decisions, crystalised by

a civil servant recently speaking to Newsnight. How would a Prime

Minister react if their son or daughter turned around to them and

said that instead of going to university, they wanted to be an

apprentice. What would our Prime Minister, imaginary or otherwise

say, right now, the mandarin predicts, their face would fall.

Out by Heathrow, their attitude at British Airways has already changed.

For the first time in this country, they are training up management

apprentices. I can start planning ahead in life more now, I I'm

already looking at by the Who I Am' 25 I can have a nice -- by the time

I'm 25 I can have a nice car and flashy house. What do you think?

is the same, with money, they will be in debt, where as we are working

for our money and go what we learn. The Business Secretary, Vince Cable,

thinks our chaps, have got the right idea, in a speech tomorrow he

will say by the end of this parliament, he wants an

apprenticeship to be as good a bet as university. Vince Cable has

always already put �1.2 billion into supporting firms taking on

apprentices. Tomorrow he goes Cordell, he's 18, two A-levels and

a B-Tech. This is Tim, he's 19 and has three A-levels. They both have

more drive than a jumbo jet, which is just as well, because though

they are young, their roles see them dragooning their elders in

meetings. What skills could you possibly have got from university

you might be missing, there must be something, otherwise why have

people been going to university for years? They get all the theory

behind it, I suppose we get both, we get the theory and use what we

have just learned in the working environment. I think there is sort

of a thing, I know for me, in my college, it was a lot of, there was

a lot of push behind universities, there wasn't this whole

apprenticeship idea I did on my own, I went out and searched for it, I

researched what project management was, I didn't have the backing.

Down the road, quite a lot of road, to the accounting and management

consultancy firm, PWC, they have been taking non-university recruits

for some time. This year sees the first formal apprentice management

consultant. They believe they can train a young person up in the

skills that are required, as well as any university could.

Cirsity has three A-levels, one of them an A*, they are older brother

became an apprenticeship, and she thought it wasn't for her. I think

traditionally apprenticeships are more vocational, electricity,

plumbing, I didn't realise there were apprenticeships in more

professional services. Especially a higher apprenticeship you can only

do when you leave school. Typically an apprenticeship is for a school

lever at 16, you work for an electrical company and move up.

This is for school leavers who have A-levels. Why was university not

attractive to you? I think the tuition fees put me off. Here in

the City, the aspiration doesn't appear to be that far off. This

month PWC launched the first management consultancy

apprenticeship, and many of their high-flyers don't have degrees at

all. But the problem is one of whether you can roll it out on a

national scale. The Secretary of State for Education, Michael Gove,

is known to love apprenticeship, but his fears are about the scale.

The difference between him and the Business Secretary, Vince Cable, is

not that the aim isn't laudible, it is whether it is plausible.

The Government has struggled in the past with ensuring that all

apprenticeships are of quality, and they do not exploit workers. They

have introduced this, as I have said, this minimum duration of a

year, which is fantastic. We have yet to see that play out. That is

the most important thing, we need to see that is working. As I say,

it is really important that it is real work, that we have employed

people doing apprentices. I think it was a big surprise for many that

some aren't employed. That is the most important thing, it is about

work and training, we hope that is where we are going with this.

Linford points out if measured as an apprenticeship rather than lump

sum, it is set to go down 2%. Recently parliament's business

Select Committee said it could not ignore the perception that quality

may have been damaged, and there must not be a trade off between

number, quality and brand. So back to that offspring of a

future Prime Minister, will they listen to the aspiration to be laid

out tomorrow by the Business Secretary, Vince Cable. The demand

for apprenticeships is there already, the Government still has

to work out how to meet that demand. The most difficult time in any

transition is when we think success is in sight. The words of

opposition lead, Gary Mackay, who has seen her fair -- Aung San Suu

Kyi, who has seen her fair share of disappointments. Burma's problems

as well as progress resurface, one of the biggest challenges facing

the leadership, are the long held ethnic tensions between Buddhists

and Muslims, which are a by-product of reform.

Generations of Muslims worshiped here at the mosque. It took just a

few hours to ensure they would never use it again. But at least

here, there is some trace of the uprooted people. A mile away, the

mosque at Nasri, all the houses around it have been levelled. The

Muslim presence has been erased. Several thousand people lived here,

until last June, when sectarian violence erupted. Buddhist mobs

descended on the area, killing and burning. The destruction here is a

direct consequence of Burma's own history. But it has a universal

resonance. The kind of language that I hear people using, reminds

me of things I have heard in Northern Ireland, in the Balkan, in

central Africa. At its heart, the idea that for one group of people

to survive the others must be driven out.

The refugees from Nasri fled to the another by Muslim neighbourhood.

Close Tory the city centre, it is protected by the army and police.

-- closer to the city centre it is protected by army and police. It

feels like a ghetto. In the mosque, refugees mix with

the older population. Outside, they have begun to use the garden as a

makeshift cemetery. These are the graves of people who have become

sick and died in the past few months, orderly they would be taken

to a cemetery, but the people here tell me they are too afraid to

leave this area, fearing they would be attacked.

A few moments ago a man came out of the crowd and handed me this piece

of paper, it says "good afternoon Sir, please rescue us from the

tyranny of our Government and Rakine, please help us", there is a

sense of isolation and fear here. What would happen if you go

outside? They will kill them and they will beat them, they mean the

Buddhists will kill them and beat them if they go outside.

refugee camps are appearing across the plains outside the city. The

buddists have suffered too, but most of the 100,000-plus displaced

are Muslims. Everywhere we heard testimony of violent attacks.

TRANSLATION: The Rakine surrounded the village, they burned the mosque

and the houses, we tried to put the flames out and they shot, my son

was shot in the neck, he was brought to the hospital. As we were

leaving the hospital they surrounded us, they were killing

Muslims, they killed my husband. The police were just looking on.

TRANSLATION: When they burned the house, my mother was inside, she

was sick and I couldn't lift her. I heard the sound of shooting and ran

away. My mother was burned. On the other side of the barricades,

the buddists have their own narrative of victimhood. They

regard the Muslims as illegal migrants, who really belong in

neighbouring Bangladesh. The buddists themselves are an ethnic

minority in Burma, and see themselves being trapped between

Islam and the majority Burmese population to the south. We are

between the Islamisations and Burmaiesations, so even our own

Government, they are ignore our needs. The people you call Bengali,

where should they go now, should they go back? They are Bengali,

they are not from our own country, they are from Bangladesh, they

should go to their own country, their nations. If somebody is born

here, are they still an illegal immigrant? Their fathers and

forefathers are only illegal immigrants. We can't accept them.

They have to go? Yeah. In this border region, there is unDowning

Streetedly been illegal migration. But there has been a sizeable

Muslim presence here for centuries. Conflict between the two groups has

deep historical roots, but under military rule, divisions were

deepened. The state striped most of these Muslims of citizenship. It

was the politics of discrimination that sowed the seeds of tragedy.

Like here. In the eyes of their Buddhist neighbours the Muslims

were turned into a non-people, when the regime took away their rights

30 years ago. Today the Rakine pick through the ruins of a Muslim

village, which was, until a few weeks ago, home to 1,000 people.

Desperate poverty has exacerbated the divisions between the two.

It is not as if the spiritual leaders of this devoutly Buddhist

community have tried to calm the crisis. Far from it. Across the

troubled areas, Buddhist Clergy have been to the fore, in demanding

the exclusion of the Muslims. TRANSLATION: Around the world there

are many Muslim countries, they should go there. The Muslim

countries should take care of them. They should go to a country with

the same religion. You don't believe that they have the right to

call themselves Burmese? TRANSLATION: No, I do not.

The state has belatedly deployed troops to protect the refugees, it

has promised it will address the crisis over their civil right. In

this overwhelmingly Buddhist country, there is little support

for ending their eggs collision. Even the human rights icon, Aung

San Suu Kyi, has refused to champion their cause.

Last June, as the violence was unfolding here, and thousands of

people were being driven from their homes, Aung San Suu Kyi was in

Europe, to receive the Nobel Peace Prize, there were many of her

western supporters who hoped then that she would make a forceful

intervention. A strong statement, condemning the violence against the

Muslim community. But it never came. She has called for respect for the

rule of law, and in recent week, called the violence an

international tragedy. But the most powerful statement by any public

figure came this week from the President of the United States.

APPLAUSE For too long the people of this

state, including ethnic Rakine have faced crushing poverty and

persecution. But there is no excuse for violence against innocent

people. The Rojinga hold themselves, hold within themselves the same

dignity as you do and I do. Obama framed the Rohinja crisis has

central to Burma's future. Your country will be stronger because of

many different culture, but you have to seize that opportunity,

recognise that strength. Under growing international pressure,

Burma's leaders, Government and opposition, talk of a political

solution. This man, a key ally of Aung San Suu Kyi, listened to the

President's speech. In the past he has denied the Rohinja were a

Burmese group. He seems to be softening. What was the main

message you got from the speech today? The most important point is

the national reconciliation for our country, the different ethnic

groups and religions, we need to maintain the freedom of speech or

worship, so that is the most valuable things today.

There is a change in rhetoric, but the hatred between the groups is so

deep, any big political moves would be met with fierce resistance.

Nobody here believes the crisis is over. And as Burma approaches

elections in 2015, the uncertainty will only increase.

It is the great irony that growing freedom on a national level is

turning this state into a prison for the Rohinja.

From Washington I'm joined by Priscilla Clapp, a former US

diplomat who served in Rangoon, with me in the studio is Zoya Phan,

from buerm had a campaign UK. We heard -- Burma Campaign UK. We

heard in the report there that Obama really framed the Rojihga

crisis as central to Burma's future, do you see that, is any democratic

reform impossible without resolving the ethnic tensions? It won't be a

stable democracy without solving the ethnic tensions. It is not just

the Rohinja but all the other ethnic groups. During 50 years of

military rule, a lot of these differences and problems were

suppressed a. The people have never learned how -- and the people have

never learned how to mitigate and mediate their differences. It is

happening now, and it is happening very dramatically. We saw it in the

Balkans and the caucuses, when dictatorial rule is removed from a

society, very often some of these terrible problems come out. And

this is what they are working through now. Do you see this as a

potential Yugoslavia situation, then? I don't think there will be

"ethnic cleansing" and fighting on the scale that we saw in Yugoslavia,

these are not armed groups. The fighting that is going on is with

fire and spears and knives. The military and the police will

prevent a wide scale violence of the sort that we saw in Yugoslavia.

Zoya Phan, when you reflect on what your country has been through, a

country you left when you were 14, and haven't really been able to

revisit openly. Do you see this as a country now properly on the road

to democratic, economic reform, are you confident? I'm not confident at

all. Given the situations on the ground. So far the reforms that we

have seen in Burma are skin deep and top down. Of course these

positive reforms are welcome, and there have been some civil liberty

in certain parts of Burma. But look at the situations in ethnic areas,

the result is the Government troops are taking civilians and raping

women, including gang rapes, and then displaysing thousands and

thousands of people from their homes. Can Aung San Suu Kyi be the

answer to this, there are critics who say Obama did more in one visit

than she was able to do about this problem? Well, Aung San Suu Kyi is

trying her best, and she is willing to take the risk and then push for

further reforms within the dictatorship system. But she has a

really limited capacity to do that, given human rights and humanitarian

crisis in Burma. Basicically, the Government is dominated by military

person -- basically, the Government is dominated by the military powers.

This is clear, Priscilla Clapp, the photos of Obama and Aung San Suu

Kyi, which go around the world and make everyone feel fuzzy inside,

belie the reality, which is this is a country that is still run by the

military. Is it a country that America is ready to do business

with, do economic business with? don't agree completely with the

statement you just made. The country is run by ex-military, not

"the" military as a force. The uniformed military is, has already

taken a couple of steps back into the barracks. The people in charge

are ex-generals, not sitting generals. They are trying to move

to civilian governance. That is important. And Zoya Phan, when you

see that now, would you like America to be in, would you like it

to be a trade partner and an economic resurgence to begin?

welcome the step up in diplomatic approach from the US Government.

But we think that based in the experience we have in the past,

diplomatic approaches alone doesn't work. Without pressure, we won't

see the reforms that have been taking place so far. Because the

Government knows exactly how to deal with the international

community, and what they care about is trade and investment, but not

about human rights and democracy. Thank you both very much indeed.

As of today, the ZX Spectrum, the Atari and Betamax have gained an

unexpected ally, the last typewriter came off the production

line and went to the mu seem. Good evening, more heavy rain to

come. The Met Office have issued an amber warning, due to the heavy

rain across many southern counties, the risk of localised flooding, and

the rain throughout the day, only slowly clearing eastwards. It is

looking dryer and brighter, in the North West, the North West of

England later on in the afternoon. It is staying cloudy, down towards

the south-east corner with rain still at 3.00 pm. Better prospects

throughout the afternoon, sunshine for south-west England,

temperatures 10, 11 degrees, not as high as they have been so far this

week. A bright finish to the day across Wales, patchy cloud here and

still breezy around the coast. For Northern Ireland much of the day

should be dry, fine and bright, one or two showers scattered around,

highs of eight or nine. For the North West of Scotland, more cloud,

increasing later on in the day. For mainland Scotland after a chilly

start to the day, fine with sunny spells. Sunshine in Edinburgh and

temperatures at nine degrees, down on what we had on Tuesday's value,

you will notice the forecast for Thursday going down hill with heavy

rain around. Throughout much of the day, London is looking cloudy and