26/01/2017 BBC Business Live


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26/01/2017

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This is Business Live from BBC News, with Aaron Heslehurst

:00:00.:00:00.

Tax wars - can Brexit Britain and Trump's United States beat

:00:00.:00:10.

the likes of Ireland at their own game and lure

:00:11.:00:12.

back the multinationals and their billions?

:00:13.:00:16.

Live from London, that's our top story on Thursday 26th January.

:00:17.:00:35.

Can the President force through the tax cuts he says

:00:36.:00:38.

will help boost and fuel the world's biggest economy?

:00:39.:00:42.

Another big fine - Royal Bank of Scotland

:00:43.:00:44.

says its mis-selling in America's sub-prime crisis will now

:00:45.:00:48.

It is the Trump pump, the Dow on Wall Street passing through the

:00:49.:01:06.

20,000 mark on its first time in history. We'll bring you the latest

:01:07.:01:08.

on the markets. And we'll be getting

:01:09.:01:10.

the inside track on life in the fast lane with the boss of London's City

:01:11.:01:13.

Airport. Just how do you grow a business

:01:14.:01:15.

that's hemmed in on all sides? Scientists say smart devices or is

:01:16.:01:24.

good at doctors as spotting skin cancer. What would you like your

:01:25.:01:26.

phone to warn you about? We're talking about

:01:27.:01:28.

corporate tax cuts. It's a central part

:01:29.:01:39.

of President Trump's strategy to boost the US economy,

:01:40.:01:44.

and is on the agenda today at the Republican Party's annual

:01:45.:01:46.

retreat in Philadelphia. President Trump will be

:01:47.:01:50.

there to give an address, as will British Prime Minister Theresa May -

:01:51.:01:52.

a first for a foreign leader. Before winning the election,

:01:53.:02:04.

Mr Trump promised he'd tax rate from 35% to around 15%

:02:05.:02:06.

to try and keep more He's targeting the billions

:02:07.:02:11.

that US multinationals - like Starbucks, Google and Microsoft

:02:12.:02:15.

- make overseas. Mr Trump says he'll allow

:02:16.:02:21.

them to repatriate those But Britain's Prime Minister Theresa

:02:22.:02:23.

May has pledged to deliver the "lowest corporation rate

:02:24.:02:32.

in the G20," as the UK tries to make itself attractive to big companies

:02:33.:02:35.

once it leaves the European Union. And next door is Ireland,

:02:36.:02:40.

which is in the European Union and has successfully attracted

:02:41.:02:48.

multinationals like Apple, It has corporation

:02:49.:02:50.

tax of just 12.5%. Did demystify all of this and talk

:02:51.:03:08.

through the issues I'm joined by a guest.

:03:09.:03:09.

John Cullinane is Tax Policy Director at the UK's Chartered

:03:10.:03:12.

Aaron outlining where we are at at the moment. Interesting what Donald

:03:13.:03:23.

Trump has promised. The question is, can he deliver on those promises? It

:03:24.:03:28.

is included in the US, isn't it? It is, because the government is not

:03:29.:03:32.

all powerful, having a majority in parliament. Both houses of Congress

:03:33.:03:37.

have two agree. Obviously they are all now Republican, but in the

:03:38.:03:40.

American system they still have very different ideas and proposals as to

:03:41.:03:44.

how to go about these things. That the key difference. In the UK we

:03:45.:03:49.

have a budget, they announced tax changes that can come into affect

:03:50.:03:52.

almost immediately if not the next day. In the US, it's so difficult to

:03:53.:03:56.

change the tax laws. They just getting to the round the edges.

:03:57.:04:00.

There hasn't ever been a real reform of the. That's right. 35% is quite

:04:01.:04:06.

high on wild white terms now. Most countries have a lower tax rate. --

:04:07.:04:13.

or worldwide terms. They change the rules, the UK is pretty much taking

:04:14.:04:17.

what it was before in cash terms and it is taking vastly more than it

:04:18.:04:22.

used to take in the 1970s with a tax rate of 52%, because as it has

:04:23.:04:26.

driven down the rate it has broadened the base. One of the big

:04:27.:04:30.

on the US, will they broaden the on the US, will they broaden the

:04:31.:04:33.

base or will they just use it to pump money in? That is partly the

:04:34.:04:42.

difference between Congress and President Trump. John, we constantly

:04:43.:04:44.

hear that if President Trump is successful and get that tax rate

:04:45.:04:47.

down to around 15% mark, that's always good news for big

:04:48.:04:50.

corporations. But I'm wondering about, in the US you can imagine

:04:51.:04:55.

there is millions of them, millions of small to medium-size businesses,

:04:56.:04:59.

we know that as the bloodline of any economy, does that also benefit the

:05:00.:05:03.

smaller guys? Well, it can do. In the US, a lot of small businesses,

:05:04.:05:08.

even if they are incorporated, they look through it for tax purposes,

:05:09.:05:12.

they are still packs against the individual and the individuals have

:05:13.:05:16.

higher rates. In the UK it is becoming a problem that does the

:05:17.:05:19.

Corporation Tax rate is going down, any small business is tempted to

:05:20.:05:23.

incorporate that it otherwise wouldn't and pay the lower rates. On

:05:24.:05:28.

an international level, organisations like the OECD and

:05:29.:05:31.

others are trying to come up with an international tax system to make it

:05:32.:05:35.

simpler and also to avoid loopholes and tax evasion. If Donald Trump

:05:36.:05:38.

ploughs ahead with his plans, that will make it more, located, won't

:05:39.:05:43.

it? If Donald Trump's plans go through, ironically it will be a

:05:44.:05:48.

very low rate. The UK would arguably already be undercutting it because

:05:49.:05:56.

we are going to rate of 17%. His of 15% to have the white and state

:05:57.:05:59.

taxes, when you add on those they would be about 20%. We would be

:06:00.:06:01.

undercutting Donald Trump and his tax system would not be recognisably

:06:02.:06:05.

like ours or the rest of the world. Ironically it is the Republican

:06:06.:06:08.

leadership in Congress that want to change the nature of the tax system

:06:09.:06:12.

to make it a hybrid between Corporation Tax and VAT, that would

:06:13.:06:16.

make it a very different system to other countries, opening up the

:06:17.:06:21.

polls and double tax and so on. It's very complicated and the devil is in

:06:22.:06:22.

the detail -- opening up loopholes. The other big story that is just

:06:23.:06:32.

around, and news coming out about it this morning.

:06:33.:06:33.

Britain's Royal Bank of Scotland says its set aside another further

:06:34.:06:39.

$3.8 billion to cover fines in the United States.

:06:40.:06:41.

It's all linked to the mis-selling of financial products linked

:06:42.:06:43.

to risky mortgages in the build up to the 2008 financial crisis.

:06:44.:06:46.

Simon Jack is our Business Editor and he's been following the story.

:06:47.:06:49.

Simon, you were digging out this detail late yesterday, what can you

:06:50.:06:55.

tell us? This is another big financial body blow for RBS. They

:06:56.:07:00.

have put in nearly $4 billion to one side. This is just into a kitty they

:07:01.:07:04.

are putting together to have a monster find they are expecting for

:07:05.:07:08.

their role in the sub-prime crisis. The kitty is that $9 billion at the

:07:09.:07:13.

moment. They are saying this is not a settlement and it is not final,

:07:14.:07:17.

because it's very likely they will have to put more money in this kitty

:07:18.:07:22.

next year. Now, fine could be anywhere in the region of 10- $20

:07:23.:07:26.

billion, we just don't know yet. What it means that this charge they

:07:27.:07:30.

are taking today will guarantee another losing year for RBS. That

:07:31.:07:33.

will be the ninth year in a row that they have lost money. This is the

:07:34.:07:39.

bank that the UK public owns 72%. This is another big body blow. Is it

:07:40.:07:44.

yet? No, it's not. Management hope this is one step closer to the end

:07:45.:07:54.

of a very dark and very long tunnel. But I think we've got some way to go

:07:55.:07:57.

yet. Thanks, Simon. More detail on that, website as well. More stories

:07:58.:08:01.

making headlines all around the world... The broadcaster Sky has

:08:02.:08:08.

reported a 9% fall in profits, because of the rights of Premier

:08:09.:08:11.

League football matches. They reported a 9% fall in operating

:08:12.:08:16.

profits to just a pinch under $18 million. Rupert Murdoch's company

:08:17.:08:23.

offered to buy up the remaining 61% of the business.

:08:24.:08:25.

Facebook's push into virtual reality has a new boss.

:08:26.:08:27.

Hugo Barra's appointment was announced with this

:08:28.:08:29.

He'll lead the team which includes the Oculus unit

:08:30.:08:32.

which Mark Zuckerburg's company bought for $2bn some

:08:33.:08:34.

Barra has formerly worked at Google and Chinese phone maker Xiaomi.

:08:35.:08:41.

He just left, I think, didn't he? That was the news story. That is for

:08:42.:08:46.

a quick. -- very quick. Shares of Mattel -

:08:47.:08:50.

the largest US toymaker - slumped around 9% after its

:08:51.:08:53.

sales over the holiday period fell well short

:08:54.:08:55.

of analysts' estimates. Mattel - whose brands include Barbie

:08:56.:08:57.

dolls and Fisher Price toys - lost the contract to make

:08:58.:09:00.

Disney Princess figures Meanwhile, the wider toy industry

:09:01.:09:02.

grew by some 5% in 2016, led by Hasbro's Star Wars toys

:09:03.:09:08.

franchise. It's all about linking it up, isn't

:09:09.:09:16.

it, the Tory with the movie franchise. Big bucks. -- that we

:09:17.:09:18.

eat. Asian markets are keeping

:09:19.:09:20.

the momentum going after yesterday's record breaking session

:09:21.:09:22.

on the Dow Jones - hitting 20,000 Closing above it for the first time

:09:23.:09:36.

in history. History wise, in years... 131 years!

:09:37.:09:38.

At the moment, the Asian markets are just riding that optimistic wave

:09:39.:09:49.

coming from Wall Street? Absolutely. And I love some of the headlines

:09:50.:09:54.

that we're seeing about it. The FT says that the stocks are basking in

:09:55.:10:00.

the glow of the doubt going above 20,000. -- the Dow Jones. According

:10:01.:10:06.

to Bloomberg data, we have seen Asian stocks rise the highest level

:10:07.:10:13.

since 2015. We have seen a very solid earnings season on Wall

:10:14.:10:17.

Street. Good numbers from companies like Boeing. Of course as you

:10:18.:10:21.

mentioned, the Donald Trump effect. Some people call it the Trump train.

:10:22.:10:27.

We have seen stocks rising since November on optimism that his

:10:28.:10:33.

economic plans are going to be used. -- are going to boost stocks. Asian

:10:34.:10:38.

stocks are mostly higher today. Australia and India are closed. We

:10:39.:10:40.

will talk to you soon, thank you. The wow on the Dow from that Trump

:10:41.:10:43.

pump rippling around the world. Traders in the region telling us

:10:44.:10:59.

today's excitement not just from the hoorah on Wall Street,

:11:00.:11:05.

but also people being positive Not much more to say

:11:06.:11:08.

really except how long can Talking of the US - let's find out

:11:09.:11:18.

what's in store today. It's a big day, and here

:11:19.:11:23.

she is - here's Samira. More companies will be

:11:24.:11:26.

reporting earnings Thursday, including Google's parent company,

:11:27.:11:28.

Alphabet. Now, Google has been focusing

:11:29.:11:29.

on improving search advertising. So things like expanded text ads

:11:30.:11:32.

and little adjustments Microsoft will also be

:11:33.:11:35.

reporting earnings. And it seems cloud computing will

:11:36.:11:41.

continue to be a big moneymaker. Especially as more people move

:11:42.:11:45.

toward cloud services. Analysts will be asking

:11:46.:11:49.

questions about LinkedIn's That $26 billion deal to purchase

:11:50.:11:51.

the professional network And finally, the world's largest

:11:52.:11:56.

coffee chain, Starbucks, Cafes continue to drive sales,

:11:57.:12:03.

especially in its biggest market, That's Samira Khaleghi who has had a

:12:04.:12:26.

really busy couple of days. Haven't we all?! OK, OK, you are as busy as

:12:27.:12:30.

she, it out the! Joining us is Mike Amey

:12:31.:12:33.

is Managing Director and Portfolio Manager

:12:34.:12:35.

at the investment Nice to see you, Mike. Let's get

:12:36.:12:45.

your take on the 20,000 moment, were you popping the champagne or was it

:12:46.:12:49.

just one of those things? It was a celebratory cup of coffee, to be

:12:50.:12:53.

honest. Where you were expecting it? We had a couple of cracks at it, at

:12:54.:12:58.

some point it was going to happen. The two questions as to why we had

:12:59.:13:01.

such a big rally and how sustainable it is. I think, as you were talking

:13:02.:13:06.

about earlier, you know, I think tax is broadly the main reason. What you

:13:07.:13:11.

have done, if you cut Corporation Tax from 35 to 15, then corporate

:13:12.:13:17.

earnings goes up. So you have got this... It is going to get better as

:13:18.:13:21.

you get more of the money? If they get more of the money they should

:13:22.:13:26.

pay more for the stock. They are buying on the room and they can sell

:13:27.:13:29.

on the news, possibly? That's what we are a bit more worried about. You

:13:30.:13:34.

have had this big move up in markets and tax, and of course they are

:13:35.:13:38.

going to be the stimulus package through. And the markets continue to

:13:39.:13:42.

focus on that. Yesterday was a classic example. You have the tweet

:13:43.:13:47.

about building the wall, and the stock it's a new high. The markets

:13:48.:13:51.

get are looking for the good news. At some point you have got to

:13:52.:13:56.

recognise we are going to get a bubble. But I think it would be

:13:57.:14:00.

reasonable to be a bit more cautious, given the size of the

:14:01.:14:04.

movement, 10% last year. Momentum at the moment, maybe going forward just

:14:05.:14:11.

watch for a bit of... There could be some profit-taking as well, right?

:14:12.:14:15.

Don't get too carried away, we've had a decent run. Captain cautious!

:14:16.:14:24.

I like it! Might you are coming back to take us through some of the

:14:25.:14:26.

papers. We'll see you shortly. You're with Business

:14:27.:14:29.

Live from BBC News. We are just churning out the cars in

:14:30.:14:34.

the UK! The number of cars made in the UK

:14:35.:14:38.

reached a 17-year high last year, according

:14:39.:14:41.

to the industry's trade body. About 1.7 million cars rolled off

:14:42.:14:42.

production lines in 2016, Theo Leggett has been

:14:43.:14:45.

looking at the numbers. He is our internal Motorhead, a

:14:46.:15:02.

petrol head! Is he a petrol head? He loves it! Before I get in trouble,

:15:03.:15:09.

let me move on! Sio, we do well. When you're doing well in the UK

:15:10.:15:14.

making cars, a lot of them, 50 cents, they don't stay here in the

:15:15.:15:18.

UK, we ship them out, don't we? We ship out about eight out of ten of

:15:19.:15:24.

all cars made here. If those 1.7 million cars, more than 1.3 million

:15:25.:15:28.

go to 160 countries around the world. Most of them go to the

:15:29.:15:32.

European Union. More than half of them go to the European Union. This

:15:33.:15:36.

is a very successful industry in Britain. Part of the reason is that

:15:37.:15:41.

we specialise in hiring cars. And we have a very efficient manufacturing

:15:42.:15:46.

process for those cars -- hi end cars. This is not entirely a

:15:47.:15:51.

positive story. The Society of motor Manufacturers and radar putting the

:15:52.:15:54.

story out today, they are pointing out that investment in cars, new

:15:55.:16:02.

production lines and so on, went down to ?1.7 billion last year. They

:16:03.:16:08.

say that this high level of production, 17 year high level of

:16:09.:16:11.

production and record exports, is due to decisions that were taken a

:16:12.:16:15.

few years ago. It's very emphatic that this is not any sort of a

:16:16.:16:19.

Brexit bounce. And they are making the point here that what they want

:16:20.:16:25.

to see is the Government having a fairly soft attitude towards its

:16:26.:16:28.

negotiations with the EU, making sure that the car industry at least

:16:29.:16:33.

has some kind of access to the EU's Single Market and that tariffs are

:16:34.:16:36.

not paid either on cars that we export of the European Union or the

:16:37.:16:40.

parts that they are made of, a lot of which come the other way, because

:16:41.:16:43.

it says that if that happens it could be severely damaging for what

:16:44.:16:46.

is at the moment a rather successful industry.

:16:47.:16:50.

What do you drive? I drive a 1972 nanograms. From the great age of

:16:51.:17:00.

motoring. Wow! As US Republican party leaders lay

:17:01.:17:10.

out plans for tax cuts, will the big multinationals bring their profits

:17:11.:17:16.

back on shore, or can Brexit Britain A quick look at how

:17:17.:17:18.

markets are faring... Everything in green again, coming

:17:19.:17:34.

from the big jump, over 20,000 for the first time in history, the Dow

:17:35.:17:39.

Jones. And that ripple effect circulating around the world.

:17:40.:17:46.

Let's get the inside track on the airport at the heart

:17:47.:17:48.

of Canary Wharf which plays a vital role in bringing business leaders

:17:49.:17:51.

This year London City Airport is marking it's 30th anniversary.

:17:52.:17:55.

It currently handles 4.5m passengers a year flying to 48 destinations.

:17:56.:18:02.

71% of the flights link to a European Union destination -

:18:03.:18:07.

something which may change once the UK leaves the EU

:18:08.:18:16.

As with Heathrow, it's bigger rival on the other side of London,

:18:17.:18:19.

City Airport is looking to expand with more room for aircraft

:18:20.:18:25.

We have Declan collier with us. We just talked about the fact that you

:18:26.:18:36.

are planning to expand, but how do you do that given where you are? You

:18:37.:18:41.

are completely surrounded, so you can't add runways or anything of

:18:42.:18:45.

that nature. We have just received planning permission for doing that

:18:46.:18:49.

and we are about to spend ?350 million... A runway or a taxiway? We

:18:50.:19:01.

are building a parallel taxiway, make the runway more efficient in

:19:02.:19:06.

getting aircraft up and down. We are building more and bigger parking

:19:07.:19:11.

stands to take the next generation of jets. We were talking about the

:19:12.:19:18.

number of destinations. The people around the world watching, you have

:19:19.:19:22.

a limited size of runway because it is surrounded by skyscrapers, so you

:19:23.:19:28.

can only use a certain size of aircraft. 95% of your

:19:29.:19:38.

destinations... When Brexit came along, did you hold your breath?

:19:39.:19:46.

Once the UK does leave, and if there are travel restrictions or you need

:19:47.:19:50.

visas and passports, could that impact you, the airport, people

:19:51.:19:55.

travelling? I don't think so. Look, we say we are the only London

:19:56.:19:59.

airport actually in London. We are three miles from Canary Wharf, six

:20:00.:20:04.

miles from the City of London. We can and will develop, and you are

:20:05.:20:09.

right - we are focused today on Europe. 95% of our destinations are

:20:10.:20:13.

into Europe. With this development plan, we get the new generation of

:20:14.:20:17.

aircraft coming in with longer range, so we will open up

:20:18.:20:21.

destinations beyond Europe, to the Middle East and the Gulf, into

:20:22.:20:26.

India, Africa and hopefully expanding the destinations in

:20:27.:20:31.

America. How soon? If you look at Heathrow and what will happen now,

:20:32.:20:36.

the go-ahead there will take at least till 2030 before you see

:20:37.:20:40.

anything happening with increased capacity. We can increase our

:20:41.:20:49.

capacity in the next two, three years. What might you are Irish. I

:20:50.:20:54.

want to know - what is it with the Irish and aviation? Willie Walsh,

:20:55.:21:03.

Michael O'Leary, the boss of the biggest airline in the world in

:21:04.:21:07.

terms of bums on seats. Is it in your blood?

:21:08.:21:14.

I think we woke up one day and realised we are a small island off

:21:15.:21:17.

another island off the shores of Europe and the only way we can get

:21:18.:21:23.

around is to fly. We have been doing it for a long time. The invention of

:21:24.:21:28.

Irish coffee was at Shannon airport in the 1940s. We had the growth of

:21:29.:21:32.

duty-free coming out of the same place. And then in aircraft leasing,

:21:33.:21:38.

Ireland is the home for the vast bulk of the war's aviation fleets

:21:39.:21:42.

because of the financing. It must be in the blood. Must be! Thank you for

:21:43.:21:46.

coming in. Alcoholic drinks,

:21:47.:22:05.

talking of the Irish! - giant Diageo has

:22:06.:22:06.

just released results The maker of Smirnoff Vodka,

:22:07.:22:08.

Johnnie Walker whisky and Guinness stout says net sales were up more

:22:09.:22:12.

than 14 per cent, and operating The company says its spirits

:22:13.:22:15.

business in the US is doing much better, and in particular

:22:16.:22:20.

its scotch whiskey brands. The chief executive of Diageo,

:22:21.:22:22.

Ivan Menezes, spoke to us earlier. Our performance across

:22:23.:22:24.

the US, Latin America, Europe, Africa and Asia

:22:25.:22:26.

was And our categories and

:22:27.:22:27.

brands performed well. Johnnie Walker, our

:22:28.:22:31.

biggest brand, was up Our whisky brands in North America,

:22:32.:22:33.

like Crown Royal and The business is healthy, and it's

:22:34.:22:42.

a function of the strategy we been implementing in the last few years

:22:43.:22:46.

is really paying off. People around the world

:22:47.:22:49.

are drinking better, and Diageo does better when that

:22:50.:22:51.

happens, because our brand of premium, and we benefit

:22:52.:22:53.

from the trade up that happens I spoke to Ivan Minev is earlier. He

:22:54.:23:22.

is on our website. -- Menezes. I am wondering what he is drinking there.

:23:23.:23:28.

Martini. I should have asked what his

:23:29.:23:37.

favourite tipple is. I like beer and wine.

:23:38.:23:42.

I like champagne. I am an Aussie but I am not a big

:23:43.:23:51.

beer drinker. Shall we start on the newspapers.

:23:52.:23:58.

Our viewers have sent us tweets about the story in The Times about

:23:59.:24:02.

the smartphone. Doctors are saying it is as good if not better at

:24:03.:24:08.

detecting skin cancer than perhaps going to your GP. Amazing, isn't it?

:24:09.:24:16.

As we were saying earlier, one does not think about detection of cancer

:24:17.:24:21.

with smartphones. The clear thing is the computing power of smartphones

:24:22.:24:24.

is becoming phenomenal, and the number of things you can do is

:24:25.:24:28.

growing ever higher. And the demand for that kind of thing. When it

:24:29.:24:33.

comes to applications and wearable technology, a lot of it is to do

:24:34.:24:36.

with health, isn't it? Making us healthier or figuring out what is

:24:37.:24:45.

wrong, that sort of stuff. Can you go over your body with it?

:24:46.:24:50.

One in three people in Australia get melanoma.

:24:51.:24:57.

Let's hear what you had to say about this.

:24:58.:25:04.

One viewer says colon I would like my phone to tell me if I am getting

:25:05.:25:07.

too stressed and to calm me down. Colleagues can do that!

:25:08.:25:19.

We have had some CEOs start-ups who are coming up with wearable

:25:20.:25:26.

technology. We will cover that. We have got twice the supply is

:25:27.:25:31.

compared to what we will use in the next 40 years, so the price

:25:32.:25:37.

shouldn't go up much. The price of $100 a barrel that we saw in 2014

:25:38.:25:43.

will not come back? No. It will stay around the level it is at now. Spot

:25:44.:25:48.

on, mate. Thanks for joining us. Wrap it up, Sal.

:25:49.:25:57.

Cold is the theme through the day-to-day. Particularly so when you

:25:58.:26:20.

factor in the wind, which is quite a bitter wind. That is coming in from

:26:21.:26:21.