:00:13. > :00:16.Bulls and bears, BRIC and PIIGS, the world struggles to find
:00:16. > :00:22.communal solutions, will 2012 be everyone for himself.
:00:22. > :00:26.The word that scared everyone last year was "contagion", this year add
:00:26. > :00:30."protectionism". Bun BRIC country, Brazil, has already turned itself
:00:30. > :00:35.into a powerhouse of agriculture and mining, now it is spending a
:00:35. > :00:43.fortune building its own oil industry. We are talking about $127
:00:43. > :00:48.billion US dollars, this means $2,000 dollars persecond, 24 hours
:00:48. > :00:52.day. We will ask Jim O'Neill who coined the BRIC phrase, and ask if
:00:52. > :00:56.the world is getting closer together or further apart.
:00:56. > :01:00.Also tonight, after the protests, the PM and his deputy seem to be
:01:00. > :01:05.racing to crackdown on tax avoidance, will anything change?
:01:05. > :01:11.Made to feel like a right tweet, Diane Abbott and the sentence that
:01:11. > :01:19.landed her in hot water. Was it racist or a storm in a tea cup. We
:01:19. > :01:23.will ask our guests if she was right?
:01:23. > :01:27.Good evening, if you are looking for calm markets you generally have
:01:27. > :01:34.to focus on the one that is are shut. The new year has opened as
:01:34. > :01:36.turbulently as the last one ended. Focus is on Hungary, which has seen
:01:36. > :01:39.demonstrations and bond yields through the roof. There are
:01:39. > :01:43.concerns that 2012 could be the year when protectionist sentiment
:01:43. > :01:46.take as grip. With a second slowdown happening all over the
:01:46. > :01:51.world, is a communal solution really possible. Will it soon be
:01:51. > :01:56.every country for itself. Our economics editor, Paul Mason, is
:01:57. > :02:01.here. Talk us through Hungary? year ended on the theme of national
:02:01. > :02:04.parliaments versus the euro, the whole question of democracy, with
:02:04. > :02:08.the imposition of two technocratic Governments in Italy and Greece.
:02:08. > :02:13.This year it has begun with the same issue somewhere else. Hundred
:02:13. > :02:19.gary two years ago was close - Hungary two years ago was close to
:02:19. > :02:23.being bust and had to be bailed out by the IMF. It now has a right-wing
:02:23. > :02:27.nationalist Government,ed headed by this man, he and his two thirds
:02:27. > :02:30.majority in parliament have pushed through a whole number of
:02:30. > :02:34.constitutional amendment and changes in Hungary, which the IMF
:02:34. > :02:38.and the European Union think are really quite dangerous. They
:02:38. > :02:43.threaten the financial stability and democracy itself. So, a stand-
:02:43. > :02:51.off has taken place over the question over whether it gets any
:02:51. > :02:55.more money, patently needs. This is the effect of the stand-off. This
:02:55. > :02:59.is Hungary's borrowing costs. Bubbling along to 7% and just after
:02:59. > :03:02.Christmas it has gone to 10.5% today. That is a sign that people
:03:02. > :03:06.believe there is a crisis coming in Hungary, and they believe the
:03:06. > :03:10.Hungarian Government is quit the prepared to stand up to the IMF and
:03:10. > :03:15.the EU in a way that the Greeks and the Italians weren't.
:03:15. > :03:19.It may end quite badly, we will know in the next few days, how will
:03:19. > :03:23.end. The banks must be incredibly
:03:23. > :03:26.worried. It All comes against the bigger sovereign debt crisis
:03:26. > :03:28.background. There is good news, the worldle central banks have been
:03:28. > :03:33.pumping money into Europe, the European Central Bank has been
:03:33. > :03:37.buying the bonds of striken countries, Italyed today, Greece et
:03:37. > :03:41.cetera. But -- Italy today, Greece, et cetera. The bad news is, what
:03:41. > :03:45.are the banks doing with the money being pumped in. Take a look at
:03:45. > :03:48.this graph. This is the amount of money depos the every night in the
:03:48. > :03:53.European equiff leent -- deposited every night in the European
:03:53. > :04:00.equivalent of a mattress, the safest place, where no harm can
:04:00. > :04:04.come to it. It has gone from not much to a staggering 44 4 billion
:04:04. > :04:09.overnight. Take a look at that, it moves in waves every month. If that
:04:09. > :04:13.were the sea, if those were wave ace proching you, you would say
:04:13. > :04:19.everybody whon't -- approaching you, you can say everybody who can't
:04:19. > :04:23.swim get out of the way. A crunch in Europeing in Europe in the next
:04:23. > :04:27.few weeks. The question Government, economists and the public are
:04:27. > :04:33.asking, what happens when we come to the cathartic moment in Europe.
:04:33. > :04:36.The background is people looking for national exit routes from this
:04:36. > :04:40.crisis. Hungary itself deciding the national parliament will trump the
:04:40. > :04:44.IMF. Another big country on the edge of Europe, that threw its toys
:04:44. > :04:48.out of the pram, that is our's, over the question of the European
:04:48. > :04:51.treaty. We have Canada, walking away from the Kyoto Treaty,
:04:52. > :04:58.essentially on economic grounds, we have the USA and China, sparring
:04:58. > :05:02.with each other over trade. We have got now the question of the breaks,
:05:02. > :05:06.the -- the BRICs, as this crisis goes on, they are exporting their
:05:06. > :05:10.way out of it. Brazil, only this week, stunning trade figures,
:05:10. > :05:13.stunningly good for them, and stunningly good negative for
:05:13. > :05:18.everybody who trades with them. That is the issue I think will
:05:18. > :05:22.overhang 2012. As Paul was saying, the hope for
:05:22. > :05:28.growth in the world economy was meant to be those BRIC countries,
:05:28. > :05:32.Brazil, Russia, India and China. Some critics think it should stand
:05:32. > :05:36.for "ed bloody ridiculous investment concept", we will
:05:36. > :05:39.discuss with a bond trader and economist the issue. First Justin
:05:39. > :05:49.Rowlatt has been to Brazil to see how their economy came to boom and
:05:49. > :05:50.
:05:50. > :05:55.whether it can last. Brazilia, Brazil's remarkable
:05:55. > :05:59.capital city, was built as a statement of intent. Enshrined in
:05:59. > :06:04.cool calm concrete Brazil's ambition to become a dynamic modern
:06:04. > :06:09.nation. But the economic boom in which this city was born, turned to
:06:09. > :06:14.bust. And the prosperous modern future that Brasilia was designed
:06:14. > :06:18.to embody remain tantalisingly out of reach. And then, the starked
:06:18. > :06:26.modernism of this place seemed to give truth to the old joke about
:06:26. > :06:30.Brazil, that Brazil is the country of tomorrow, and always will be.
:06:30. > :06:35.Brazil's tomorrow seems finally to have arrived. The country has been
:06:35. > :06:42.booming, and the seeds of its new success were zone quite literally,
:06:42. > :06:46.out in the country's vast interior. We are producing the silos here.
:06:46. > :06:49.Pedro is an economist turned agricultural businessman, who runs
:06:49. > :06:54.one of the largest farming enterprise, not just in Brazil, but
:06:54. > :06:59.the world. Brazil has the capacity to feed
:06:59. > :07:04.everyone in the world. Everyone in the world. A modest ambition?
:07:05. > :07:14.Because Brazil leads the world in soya? Second in produce. First in
:07:15. > :07:15.
:07:15. > :07:20.could have he fee, first in sugar cane. First in orange juice. First
:07:20. > :07:24.in cocoa. Beef? You are not just the bread bast ket, but the grocery
:07:24. > :07:28.store of the world. He has good reason to feel cocky,
:07:29. > :07:33.40 years ago Brazil was a net importer of food, and much of the
:07:33. > :07:38.country was considered unfit for farming. Now it is an agricultural
:07:38. > :07:48.superpower. The key to this transformation, something very
:07:48. > :07:51.unfashionable, state planning. Brazil -- TRANSLATION: Brazil's
:07:51. > :07:55.secret is not something that happened overnight, it is the
:07:55. > :08:05.result of planning. It began 40 years ago when Brazil's Government
:08:05. > :08:09.createded a state enterprise in BRAPA.
:08:09. > :08:13.This man has been dub the King of Soya, because of his dominance of
:08:13. > :08:22.this key Brazilian export. He's in politics now, an influential
:08:22. > :08:25.senator, which, say insiders, presidential ambitions.
:08:25. > :08:29.TRANSLATION: That state organisation was born with the
:08:29. > :08:33.mission of sending abroad hundreds of technicians, men and women, to
:08:33. > :08:37.be trained in universities in the United States, in Britain, and
:08:37. > :08:47.other places. They returned with a large body of scientific knowledge,
:08:47. > :08:51.and from that base, we in Brazil, began to develop our own systems of
:08:51. > :08:54.tropical agricultureure. Government planning may have create --
:08:54. > :09:01.culture. Government planning may have createded the tropical miracle,
:09:01. > :09:06.but it doesn't sustain it. Brazilian farms prosper without
:09:06. > :09:10.virtually any subsidy. They didn't put in place the bricks from
:09:11. > :09:14.agriculture alone. It has vast reserves of iron ore and countless
:09:14. > :09:18.other minerals. Recently discovered huge oil reserves too, and is
:09:19. > :09:27.spending record amounts to get the stuff out. We are talking about a
:09:27. > :09:34.programme that is $224.7 billion US dollars over the next 20 years,
:09:34. > :09:38.this is $,000 per second, every 24 hours a day. Of investment? Yes.
:09:38. > :09:42.The real game changer for Brazil is the prices it has been getting for
:09:42. > :09:47.all the commodities it has in such abundance. They have been at
:09:47. > :09:52.historic highs for the last decade, thanks to the huge demand createded
:09:52. > :10:00.by the rapid industrialisation of fellow BRICs, China and India.
:10:01. > :10:07.We know that the infrastructure...Charles Tang is a
:10:07. > :10:12.Chinese-born Brazilian, and the lynch pin between much co-operation
:10:12. > :10:18.between Brazil and China? The two economies are complimentry, Brazil
:10:18. > :10:22.needs capital to grow its economy and create jobs. China needs the
:10:22. > :10:26.strategic resources for a sustained growth and to feed its people.
:10:26. > :10:29.Countries such as Brazil can provide that.
:10:29. > :10:34.This vision of harmonious economies neatly complimenting each other
:10:34. > :10:39.doesn't quite hold. In the past year growth has slowed to just 3.5%.
:10:39. > :10:48.Half the average for the last decade, and half of what China and
:10:48. > :10:55.India achieved last year. One reason is what Brazilians call
:10:55. > :11:00.the "costo Brazil", the hidden costs of doing business here. They
:11:00. > :11:06.cite unyielding bureaucracy and state distortion, but top of the
:11:06. > :11:13.list is infrastructure. This is the main high road, the state at the
:11:13. > :11:19.very heart of Brazil's agricultural bonanza, it is a single highway,
:11:19. > :11:25.millions of tonnes of soya, beef, maize, are shipped down this road
:11:25. > :11:35.every single year. Locals say that during harvest time, this becomes
:11:35. > :11:35.
:11:35. > :11:39.one slow traffic jam. Hundreds and hundreds of kilometres long.
:11:40. > :11:44.But complaint about the roads pale into incision beside the other
:11:44. > :11:49.Brazilian bug bear, the currency. Brazil's success exporting
:11:49. > :11:54.commodities has push the value of the currency through the roof. That
:11:54. > :11:59.is hitting the country's manufacturers. TRANSLATION:
:11:59. > :12:07.we're not careful China will eat us up. Then there will be India as
:12:07. > :12:11.well. The Brazilian Government needs to watch out for this. By all
:12:11. > :12:16.means sit around the table with the BRICs and negotiate, but know how
:12:16. > :12:21.far to go, at which point to step in and come to the defence of
:12:21. > :12:24.Brazilian industry. So there arele challenges ahad he, but Brazil has
:12:24. > :12:28.weathered the current financial gloom far better than most
:12:28. > :12:35.developed economies. It is now a creditor, not a debtor nation, the
:12:35. > :12:42.country that once depended on IMF loans, now lends money to the IMF.
:12:43. > :12:46.While the vision of modernity that inspired Oscar Nimirye, the
:12:46. > :12:51.architect of Brasilia, there is no question that Brazil, with its
:12:51. > :12:58.trillion dollar a year economy, is now very much a modern nation.
:12:58. > :13:03.Let's take some those thoughts to Jim O'Neill, and our other guests.
:13:03. > :13:08.Great to have you all here, thank you very much.
:13:08. > :13:15.BRICs, that phrase coined by you a decade or more ago. When you look
:13:15. > :13:18.at the kind of success of they have had. Want to say Europe should be
:13:18. > :13:22.trying to emulate what they are doing, without declaring economic
:13:22. > :13:26.war, can it? I think you should try to do what is right for Europe.
:13:26. > :13:33.There is certain things going on with each of the BRIC countries,
:13:33. > :13:36.which is impossible for other countries to replicate, in
:13:36. > :13:40.particular two, all four of them have a lot more people than
:13:40. > :13:44.anywhere in Europe. You can't just magically create people. Secondly,
:13:44. > :13:47.importantly, and shouldn't be lost by any of your viewers, all of
:13:47. > :13:51.these countries are coming from a much lower base of wealth. And are
:13:51. > :13:57.at various stages of development. So the growth statistics look
:13:57. > :14:02.bigger any way. As big as they are getting they are not anywhere near
:14:02. > :14:04.as wealthy as we are yet, including Brazil, the wealthiest of the four.
:14:05. > :14:08.They were thought to be the countries that save the world
:14:08. > :14:11.economy, they can't shoulder that, can they? I don't know about save,
:14:11. > :14:17.but they are the countries that are driving the world economy. As I'm
:14:17. > :14:21.sure we will get into in a second, the decade we are now in, the world,
:14:21. > :14:25.the true world, not a jaundiced western view of it, will probably
:14:25. > :14:29.grow by more than 4% on average, because of these countries. But it
:14:29. > :14:32.is not what many western people think, because they see it purely
:14:32. > :14:36.from the world in which the west being the premier driver of the
:14:36. > :14:42.world, is the only think thing that should really be the status quo.
:14:42. > :14:46.There is the issue people have to get their heads around.
:14:46. > :14:50.When you look at the BRICs do you think that is the only driver now,
:14:50. > :14:54.realistically of the world? What people have been exciteded about
:14:54. > :14:59.BRICs, as Jim as said, the number people, number one, but Russia and
:14:59. > :15:04.China have appalling demographic, the demo of graphic dividend in
:15:04. > :15:08.China turns negative from 2015. The second point about base of
:15:08. > :15:12.cheapness, everything in China has been done on the base of cheapness,
:15:12. > :15:18.low wage costs, increasing now, companies have to of move further
:15:18. > :15:21.unland. No paying any social welfare, net net, no heed paid to
:15:21. > :15:28.the massive solution, most of the standing water is polluted and so
:15:28. > :15:32.on. What he comists would call negative comebgts d economists
:15:32. > :15:38.would call negative effects coming down. It is not whether China will
:15:38. > :15:43.have a hard landing, it it is one. In 2009 I had a trip to Beijing and
:15:43. > :15:47.was alarmed to what is happening. You see me frowning. Jimmy's story
:15:47. > :15:55.about the BRIC, and I would broaden it, you have another axe nim that
:15:55. > :15:58.you use, the N11, the - acronym that you use, the N11, the poorer
:15:58. > :16:02.countries are catching up. That is the secular story of our generation.
:16:02. > :16:05.You are right, if you look five or ten years ahead, that is where the
:16:05. > :16:09.global growth will come from. We are in ageing societies here, we
:16:09. > :16:13.have really big problems in the western world, we have huge debt
:16:13. > :16:16.overhanging us, we won't grow very fast. If you look at a shorter time
:16:16. > :16:19.frame, this year, for example, we will see less than a boost from
:16:19. > :16:22.these economies than we have in the past couple of years. They bounce
:16:22. > :16:27.back very quickly from the financial crys, they have been
:16:27. > :16:30.booming, they are closing -- crisis, they have been booming, China and
:16:30. > :16:34.Brazil have been slowing. The biggest question is what happens in
:16:34. > :16:40.Europe, maybe we can get into that. The second biggest, equal second,
:16:40. > :16:44.is how fast and how far China going to slow. If China has a hard
:16:44. > :16:52.landing f its growth rate really slows, that hits other emerging
:16:52. > :16:55.economies. Brazil, big exporter. First of all, we all talk about in
:16:55. > :16:59.idiotic simplicity, China is not landing at all. It is still going
:16:59. > :17:03.to be travelling. But, you know. Will its growth rates be sustained?
:17:04. > :17:09.And by the end of this year, it will either have much weaker growth,
:17:09. > :17:13.or a big weaker growth. I would argue that China has deliberately
:17:13. > :17:19.decide to try to slow the he economy down.P much of the things
:17:19. > :17:23.which many of the China bears worry about, they forget that it has been
:17:23. > :17:27.orchestrated, in particular a turn around in property price, has been
:17:27. > :17:31.orchestrated by Chinese policy makers. It is really done because
:17:31. > :17:35.their cha eing last year, contrary to --le challenge last year,
:17:35. > :17:39.contrary to your intro, was rising inflation, not the problems we sit
:17:39. > :17:43.around worrying about in Europe. Once they get inflation back down,
:17:43. > :17:48.they will not timing policy, and if need be, they will support the
:17:48. > :17:54.economy. That depends on them fine tuning as perfectly as they have in
:17:54. > :17:58.the past. In 2008/09 they did it brilliantly. The world economy
:17:58. > :18:02.slumps, the Chinese do a huge stimulus and the economy keeps
:18:02. > :18:04.roaring. Because we know so little of what goes on in the
:18:04. > :18:07.administration, we have this assumption they are totally in
:18:07. > :18:11.control of what their economy is doing? That is complete fallacy,
:18:11. > :18:16.even talking to people off the record in Beijing, working for the
:18:16. > :18:24.larger state-owned enterprise, they will say, if you like, it is not a
:18:24. > :18:29.scalpel, but a large heavy hammer to hit the economy to get it moving.
:18:29. > :18:34.Presub time crisis you have 50% of the bank loans off balance sheet.
:18:34. > :18:40.You have 26 million empty parliaments. I know that --
:18:40. > :18:44.parliamentary partys, I know China bulls -- apartments, I know China
:18:44. > :18:50.bulls say it won't matter. But the cost of apartments are high, and
:18:50. > :18:55.the economy is slowing. There was large parts of China had a have yet
:18:55. > :18:59.to urbanise, the problems which Gillian alludes to, are the ones
:18:59. > :19:03.where most people travel to, and the ones that are most developed.
:19:03. > :19:07.At the high end their property markets things have got out of
:19:07. > :19:13.kilter, that is why they have been deliberately trying to turn it
:19:13. > :19:18.round. If need be. For the whole national economy, they will
:19:18. > :19:21.accelerate already existing plans to stimulate fresh building of
:19:21. > :19:30.properties in parts of China that most of us don't even know how to
:19:30. > :19:35.spell. So this kind of view is relevant in a cyclical sense, in
:19:35. > :19:39.some previously, highly excitable parts of the property market. To
:19:39. > :19:43.simply translate that as a nationwide thing. You need to go
:19:43. > :19:47.back and visit more. I want to get on to one of the
:19:47. > :19:50.points that Paul Mason was raising, we have basically had decades of
:19:50. > :19:55.globalisation. It seems like the only wayer for the world to talk to
:19:55. > :19:58.each other and the economy to move. It is. Are we moving towards a more
:19:58. > :20:02.protectionist model, there are some countries that have protect
:20:02. > :20:07.themselves quite well, insulated themselves against the downturn, by
:20:07. > :20:12.their protxist measures? I'm struck by, -- Protectionist measures?
:20:12. > :20:15.struck by, I come from the Economist, we constantly worry
:20:15. > :20:19.about protectionist all the time.S striking in its absence over the
:20:19. > :20:22.past few years. If you thought in the wake of the financial crisis,
:20:22. > :20:25.in 2008, we were terrified there would be a wave of protectionist
:20:25. > :20:29.pressure, it didn't happen. This year will be a tough year for the
:20:29. > :20:33.world economy. It will grow more slowly, depending on how badly
:20:33. > :20:38.things go in Europe, could be nasty. I don't see it yetment I see spats
:20:38. > :20:42.here and there. If you join up the dots, Paul has given us ten
:20:42. > :20:47.examples in the last year. Paul could have done that for you three
:20:47. > :20:51.years ago. It was a very popular view on the aftermath of the 08
:20:51. > :20:56.severity, that was the end of globalisation. It is not even close
:20:56. > :20:59.to it. I would argue, in the aftermath of 08, people thought the
:20:59. > :21:02.Governments had all the solutions, and all that is happening is the
:21:02. > :21:06.debt has been passed from the private sector to Government sector.
:21:06. > :21:10.Now that is going bad. Now it is an accident of history that 2012 sees
:21:10. > :21:15.so many changes andle challenges to Government around the world, China,
:21:15. > :21:20.Russia, US, frapbts, the list goes on. The temptation of protectionism
:21:20. > :21:24.goes ever higher. I wo agree with both of you to argue from a ration
:21:24. > :21:29.-- I would agree with bolt of you to argue from the ration -- both of
:21:29. > :21:35.you to argue from the rational point of view of an economist.
:21:35. > :21:39.Tomorrow will be a a figures list of employment and unemployment
:21:39. > :21:47.picture in the US T will show in the US that the picture is
:21:47. > :21:50.improving. The whole push for protectionism in the US is losing
:21:50. > :21:53.the impetuous. You remain very bullish? I worry about the European
:21:53. > :22:00.thing. We will talk about about this. We saw Paul's crest of waves
:22:00. > :22:05.on the graphic. Is it possible that crisis won't hit? Won't hit where?
:22:05. > :22:09.Europe? Europe is already being hit, what we have talked about so far,
:22:09. > :22:14.is whether that is, or on the edge of, or what is implicit, that is
:22:14. > :22:17.going to, by definition. Will it hang together? Drag down the rest
:22:17. > :22:21.the world. The most interesting news in the past few weeks about
:22:21. > :22:28.Europe is that Europe's biggest economy, Germany, itself, seems to
:22:28. > :22:32.be reasonably coping with it. Which I myself am surprise with about. I
:22:32. > :22:38.thought Germany would be weaker than it is. I think the p best case
:22:38. > :22:44.scenario is Europe has a short, Europe has a short and sharp resgs.
:22:44. > :22:50.I don't see why it should be short, I don't think see growth in Italy
:22:50. > :22:55.or Spain, they have massive austerity feeding on bank
:22:55. > :22:59.contraction. That is the best case scenario, the worst is the eurozone
:22:59. > :23:04.falls apart with a real cat it is a trough he fee. I think it will have
:23:04. > :23:09.a real -- catastrophy, I think it will have a real effect on the rest
:23:09. > :23:13.of the world. Everyone is framing the question, how to keep the
:23:13. > :23:17.eurozone together in its current guise, I don't think Germany is
:23:17. > :23:20.plated in gold, the Germany constitution court ruling shows a
:23:20. > :23:23.lack of economic clout and political will. Also the frame, can
:23:23. > :23:33.we hold the eurozone together, it is such a disaster, that perhaps
:23:33. > :23:36.taking it apart now will save a greater disaster down the line.
:23:36. > :23:39.Prime Minister has signalled he wants to crack down on large
:23:39. > :23:43.companies and their Francy corporate lawyers who endlessly
:23:43. > :23:49.reduce their tax bills. He seems to be in a competition with his deputy,
:23:49. > :23:53.Nick Clegg, in rhetoric on tax avoidance, which unlike tax evasion
:23:53. > :24:01.is legal. What will a crackdown look like, and will it do anything.
:24:01. > :24:04.Here is a guide to avoid tax. Navigating the maze of British tax
:24:04. > :24:10.legislation to advantage, exploiting every loophole is what
:24:10. > :24:13.legal tax avoidance is all about. Tackling those greedy capitalists
:24:13. > :24:18.who minimise their bills is a populist campaign. Something must
:24:18. > :24:22.be done, said the Prime Minister, addressing hard-pushed leaders of
:24:22. > :24:26.smaller and medium-sized businesses today. We need a tougher approach.
:24:26. > :24:30.One of the things we will look at this year is whether there should
:24:30. > :24:33.be a more general anti-avoidance power, that HMRC can use,
:24:33. > :24:39.particularly on very wealthy individuals and on the bigger
:24:39. > :24:43.companies, to make sure they pay their fair share.
:24:43. > :24:47.No less keen to talk tough was the Deputy Prime Minister, speaking on
:24:47. > :24:50.Radio 4 this morning. He sees an attack on corporate greed as a
:24:50. > :24:56.defining issuer for the Liberal Democrats. Millions of people, and
:24:56. > :25:01.these are millions of people who I feel Liberal Democrats and politics
:25:01. > :25:05.are for, who pay by the rules, who pay their tax, who work hard, to
:25:05. > :25:09.aspire to do the right thing for themselves and their families, who
:25:09. > :25:14.are angered when they feel there is a wealthy elite, or big business,
:25:14. > :25:18.who pay an army of accountants to get out of paying their fair share
:25:18. > :25:21.of tax. How do companies avoid paying tax, these are the five most
:25:21. > :25:25.popular ways, they can decide the location the transactions take
:25:25. > :25:30.place. Ireland has an attractively low rate of corporation tax. Then
:25:30. > :25:36.there is the timing of payment. Deferring it for a period allows
:25:36. > :25:40.you to bank the interest. The identity of who is doing it is
:25:40. > :25:45.important. Some multinationals shift debt on to UK-based companies,
:25:45. > :25:49.and recording big profits in countries where taxes are lower.
:25:49. > :25:53.The type of transaction can be changed, capital gains tax is lower
:25:53. > :25:57.than income tax. Finally it is possible to obscure the way the
:25:57. > :26:05.information is disclose. Many offshore tax havens have rules much
:26:05. > :26:11.less stringent than the UK. I say cutback, you say fightback.
:26:11. > :26:16.London October 2010, protestors gather outside a Vodaphone shop,
:26:16. > :26:23.complaining about what they say is an unpaid tax bill of billions. The
:26:23. > :26:27.company says it has never owed that sum. But the dispute over revenue
:26:27. > :26:33.has cost millions over nine years. This attrition of war ended last
:26:33. > :26:36.year, when the company agreed to pay �1.25 billion in a final
:26:36. > :26:39.settlement. Tax avoidance is not working within the law. Listen to
:26:39. > :26:44.the description. It is avoiding. You getting round the law. What
:26:44. > :26:47.these people -- companies do is find ways to get around the UK law
:26:47. > :26:50.and trade it off with the law of other countries. They trade of off
:26:50. > :26:55.different accounting systems between the UK and other countries.
:26:55. > :26:59.They are really trying to get round the law. It is legal, no-one is
:26:59. > :27:05.disputing that. But it is unethical. Parliament has been critical of
:27:05. > :27:08.Vodaphone, but the firm says it has been unfairly ma lined. Here at the
:27:08. > :27:13.Treasury Select Committee, another bigp company was under fire over
:27:13. > :27:21.the -- another big company was under fire over the amount of tax
:27:21. > :27:27.paid over to the revenue. We paid �2 billion in tax to HMRC, over the
:27:27. > :27:31.last six years we have paid �12.5 billion. Of that �2 billion, what
:27:31. > :27:35.percentage was non-payroll taxes?Off The periodsages. Most
:27:35. > :27:39.that could be the payroll tax paid by employees, in terms of corporate
:27:39. > :27:44.tax we don't know. That is the payment from Barclays to HMRC.
:27:45. > :27:50.Barclays later wrote to the committee confirming it paid just
:27:50. > :27:53.�113 million corporation tax in 209. That low figure was blamed on UK
:27:53. > :27:59.losses. Newsnight asked the amount of UK corporation tax paid in other
:27:59. > :28:02.years, the firm said it never gives out these figures. Many of the
:28:02. > :28:05.small and medium sized businesss in this country, struggling in the
:28:06. > :28:10.current economic climate, do not have access to the army of tax
:28:10. > :28:15.experts. Wr talking about big rich companies? We are. But what does
:28:15. > :28:20.that mean we do, do we kind of give up and walk away from the piste,
:28:20. > :28:24.and give up trying to ensure people make a fair contribution, or do we
:28:24. > :28:28.do absolutely everything we can to ensure that we clampdown on the
:28:28. > :28:32.loopholes. But for that to happen, the revenue
:28:32. > :28:37.must be firing on all cylinders, there is precious little sign of
:28:37. > :28:40.that. The top man, Dave Hartnett left recently after negotiating a
:28:40. > :28:44.series of controversial tax settlements with powerful firms.
:28:44. > :28:48.Cosy deals, according to MPs. And the service is facing severe cuts.
:28:48. > :28:53.You you have a real problem, it is a real dilemma in that over the
:28:53. > :28:59.last few years a lot of their experience in this area has just
:29:00. > :29:06.gone. And for the revenue to try and recruit and get people in place,
:29:06. > :29:09.who are capable of dealing with matters where it is large
:29:09. > :29:14.corporates, who have good solid advisers, it is hard to imagine
:29:14. > :29:19.that it is going to be an easy one for the revenue to win.
:29:19. > :29:23.In reality, then, it is easy to talk tough about tackling loopholes,
:29:23. > :29:27.but those with money have access to elite, legal and financial advice.
:29:27. > :29:30.Victory in court is not assured, and naming a and shaming is tricky,
:29:30. > :29:35.because allegations will be denied. In the short-term, then, this
:29:35. > :29:41.becomes an ethical, rather than a legal debate.
:29:41. > :29:45.With me now, representatives of the two parties in coalition, the Lib
:29:45. > :29:50.Dem deputy leader, Simon Hughes, a the Conservativep MP, Jesse Norman.
:29:50. > :29:54.This was always a central tenet of theed Liberal Democrat position on
:29:54. > :29:57.tax, wasn't it. How successful, truly, do you think you have been
:29:57. > :30:01.in pushing had to the top of the agenda, in the coalition
:30:01. > :30:07.Government? Firstly, happy new year, the answer is we have, the argument
:30:07. > :30:12.has been won. Across the coalition. Before the last general election,
:30:12. > :30:16.we had proposals that suggest that there should be a general anti-
:30:16. > :30:21.avoidance provision. There was a commitment in our fest toe, the
:30:21. > :30:27.coalition agreement he spe -- manifesto, the coalition agreement
:30:27. > :30:32.specifically made a commitment to it with the proposal West came
:30:32. > :30:35.forward with. From Danny Alexander there was a speech talking about
:30:35. > :30:41.action happening. In the first speech it was the Government
:30:41. > :30:46.spending a billion to get in �7 billion, the extra that was avoided.
:30:46. > :30:51.The feeble 5,000 top earners that Labour targeteded, we were going to
:30:51. > :30:55.look at the top 350,000 top earners, driven by �2.5 million a year.
:30:55. > :30:58.were forced to look at this because of pressure on you from the Liberal
:30:58. > :31:01.Democrats? I wouldn't think that is right at all. What has happened is
:31:01. > :31:05.actually there has been an argument, a discussion has been had within
:31:05. > :31:07.the coalition, and I think the Chancellor's actually leading it as
:31:07. > :31:12.much as anyone, actually. If you lock at the decisions he has made
:31:12. > :31:17.in terms of cracking down on this crony capitalism. He has had a non-
:31:17. > :31:19.dom tarrif. That was his idea, we have had a bank levy out of that.
:31:19. > :31:23.It is interesting the two sides have come together, and the
:31:23. > :31:31.Chancellor has commissioned this new review on anti-abuse. That is
:31:31. > :31:36.what we are coming up now. In that report, the quote that it is
:31:36. > :31:40.concluded to be introducing a broad spectrum anti-avoidance rule would
:31:40. > :31:46.not be beneficial for the UK tax system. He says there is a real
:31:46. > :31:49.risk of undermining business being table to carry out sensible
:31:49. > :31:53.business. Of this thrown it Alawites together? They haven't
:31:53. > :32:00.done that. They are saying there are two kinds of things to separate,
:32:00. > :32:04.legitimate, proper, tax planning, from abnormal and abusing tax
:32:04. > :32:12.evasion and avoidance. That is what they are targeting. Not evasion, we
:32:12. > :32:15.are talking anti-avoidance. What is an Antwiity avoidance rule? -- an
:32:15. > :32:22.anti-avoidance rule? It is an anti- abuse regulation. What that
:32:22. > :32:25.regulation is looking at is all the grey areas in which the tax law is
:32:25. > :32:30.being manipulated in favour of companies with rich lawyers, as
:32:30. > :32:32.described, and being pushed from legitimate avoidance into evasion.
:32:33. > :32:36.What is fascinating about the review, there is a lot of
:32:36. > :32:40.consultation withm sol of the key industrial and other groups around
:32:40. > :32:46.it. -- some of the key industrial and other groups around it. And it
:32:46. > :32:49.has the provisions in the back of it which we can discuss. Can you
:32:49. > :32:54.understand what it involves, Nick Clegg says the report shows it is
:32:54. > :32:57.feasible? Let me put it to you clearly and hopefully to viewers as
:32:57. > :33:02.well. Most common law jurisdictions, Australia and Hong Kong have such a
:33:02. > :33:06.provision. It changes the way we would do tax arrangements and
:33:06. > :33:10.collection, are from the old system which is you would try to avoid it,
:33:10. > :33:13.the that was the presumption. Ever year the Finance Bill would close a
:33:14. > :33:18.loophole somebody had found. To putting in place provision that is
:33:18. > :33:24.say, we are asueing, we the state, through the tax collectors, are
:33:24. > :33:29.assuming it is wrong it avoid tax. An anti-avoidance rule would not be
:33:29. > :33:34.beneficial for the UK tax system, that is what it says? Please let me
:33:34. > :33:39.explain. The proposition that was reject there was a general
:33:39. > :33:42.provision across all taxes, because, for some taxes that wouldn't be
:33:42. > :33:47.clever.S an incentive for people who investment in ISAs, he was
:33:47. > :33:51.clear that you take sectors, corporation tax, capital gains tax,
:33:51. > :33:57.income tax, petroleum tax, and you have provision that is make sure
:33:57. > :34:03.you don't avoid those liabilities. Corporation tax, he gave the
:34:03. > :34:07.example. Would net �2.1 billion. Are you convince that this will be
:34:07. > :34:12.adapt and you will see anti-tax avoidance rules implemented?
:34:12. > :34:17.answer is yes. I accept that the Tories have signed up to the common
:34:17. > :34:22.agenda. That is very positive. And I am very clear that where as at
:34:22. > :34:25.the moment we miss �7 in �100 that we should collect, Liberal
:34:26. > :34:29.Democrats will be more successful. That was their argument before.
:34:29. > :34:34.will be more successful in this parliament, with Tory partners n
:34:34. > :34:39.dealing with tax avoidance than any other Government sow far in British
:34:39. > :34:43.history. It is very -- So far in British history. This is about
:34:43. > :34:47.perception, the IMF said basically the Tory-led Government cuts would
:34:47. > :34:51.make the poorest families suffer most. This is about trying to say
:34:51. > :34:57.we're all in this together, isn't that what it is about? The truth of
:34:57. > :35:02.it is, that the anti-tax avoidance measure that is have been taken now
:35:02. > :35:05.are ones in which the Tories have been leading, just as much as the
:35:05. > :35:12.Liberal Democrats. There is no suggestion that George Osborne, a
:35:12. > :35:16.man who introduceded the idea of a non-dom tarrif, before becoming --
:35:16. > :35:20.introduced the idea of non-dom tarrif before becoming Chancellor
:35:20. > :35:30.would not be on board with this. The same on the tax levy and the
:35:30. > :35:34.other elements to combat the Crowny capitalism Judge the outcome in
:35:35. > :35:38.five years. Many people have fallen foul of
:35:38. > :35:42.Twitter, Diane Abbott, Labour's shadow Health Minister, is the
:35:42. > :35:47.latest. She wrote "white people love playing divide and rule".
:35:47. > :35:50.Today she ale poll guise, after an apparent dressing -- apologiseded
:35:50. > :35:58.after an apparent dressing down from Ed Milliband.
:35:58. > :36:02.After a week where two were jailed for the murder of Stephen Lawrence,
:36:02. > :36:07.issues of race have never been far from the sent. She spent most her
:36:07. > :36:11.life on the backbenches, but Diane Abbott has built the profile of a
:36:11. > :36:15.political A-Lister. Apparently glued to the TV sofas.
:36:15. > :36:20.The straight talking she has brought tom campaigns against
:36:20. > :36:29.racism and poverty, has, once again, caused a mighty storm, sent raging
:36:29. > :36:39.by a little tweet. A freelance journalists, had tweet in reference
:36:39. > :36:56.
:36:56. > :37:00.There was a furious reaction on- line, and off it in Westminster.
:37:00. > :37:04.think what Diane Abbott said was just stupid and crass
:37:04. > :37:10.generalisation. He she should explain and apologise for what she
:37:10. > :37:16.said. Let as call it the 140 character defence. Diane Abbott use
:37:16. > :37:20.to claim her remarks were taken out of context. A thesis on 19th
:37:20. > :37:23.century European Colonialism, far too great for the truncated medium
:37:23. > :37:27.she had had chosen. There will continue to be
:37:27. > :37:31.discussion about it. But certainly, from the Labour Party's point view,
:37:31. > :37:35.her position is secure, as the shadow health minister. And she has
:37:35. > :37:38.ale poll guiseed for causing offence. Which should be --
:37:38. > :37:41.apologised for causing offence, that should be enough. Do you know
:37:41. > :37:47.from Ed Milliband her position is secure? I hope her position is
:37:47. > :37:50.secure. Ed Milliband becomes the latest Labour leader to call Miss
:37:50. > :37:54.Abbott to orderment she stood against him for the leadship,
:37:54. > :38:02.coming last. During the contest she made much of being the outsider,
:38:02. > :38:06.opposed to the Iraq war, and apart from the Blair-Brown cliques. Some
:38:06. > :38:11.her issues with senior colleagues from personal, she criticiseded
:38:11. > :38:15.Tony Blair and Harriet Harmen for sending children to selective
:38:15. > :38:22.schools, then she sent her own son to a fee-paying school. The double
:38:22. > :38:26.standard led to a bust-up on her own TV programme. You said "West
:38:26. > :38:30.Indian mums will go to the wall for their children", so black mothers
:38:30. > :38:34.love their children more than white. Andrew, we have just had one of the
:38:34. > :38:39.most important budgets in a generation, I have said everything
:38:39. > :38:43.I will say about where I send my son to school. No understand the
:38:43. > :38:46.quote. Supposing Michael had said "white mums will go to the wall for
:38:46. > :38:53.their children". Andrew I have nothing more to say. So Britain's
:38:54. > :38:56.first black womanp MP found herself accuse of -- woman MP found herself
:38:56. > :39:00.abused of racism. This was her description of the coalition
:39:00. > :39:08.leaders a month ago. One of the things about this new leadership.
:39:08. > :39:12.This new leadership is how post meritocratic it is, two posh white
:39:12. > :39:16.boys from the home counties. spent her adult life in the
:39:16. > :39:20.spotlight, people already know exactly what they think of Diane
:39:20. > :39:25.Abbott, this flare up tells us not much about her. But the reaction to
:39:25. > :39:30.it reveals plenty about the ever- sensitive issues of race relations
:39:30. > :39:36.in this country. This, afterall, is the week in
:39:36. > :39:39.which two white men were jailed for the murder, 18 years ago, of the
:39:39. > :39:45.black teenager Stephen Lawrence. It was but a partial settlement of the
:39:45. > :39:48.case. Other suspects remain free. But the trial has revived some of
:39:48. > :39:52.the intercommunity tensions felt at the time.
:39:52. > :40:00.It appears to me there is a bit of a backlash, and it is something we
:40:00. > :40:09.have seen before, we have seen it when the racial relations acts was
:40:09. > :40:17.publish as well. It seems we get a very entrenched views coming across
:40:17. > :40:22.and people going too far in enforcing race relations act and
:40:22. > :40:25.now white communities won't be supported.Le This burn us alive.
:40:26. > :40:29.The feeling of unfair abandonment by white working-class communities,
:40:29. > :40:34.was identified in a report about race relations for Bradford City
:40:34. > :40:40.Council, shortly before riots broke out there in 2001.
:40:40. > :40:45.Over a period of time, there has been a neglect of those who are
:40:45. > :40:49.poor and white in our urban areas, and rural areas. And I think
:40:49. > :40:56.because we haven't given sufficient attention to that, there is an
:40:56. > :41:01.inclination for resentment to build, and for people to be resentleful of
:41:01. > :41:06.initiatives aimed at -- resentful of initiatives aimed at dealing
:41:06. > :41:09.with black communities. The fast flowing nature of Twitter ensures
:41:09. > :41:13.the spark caused by Diane Abbott's comments will fade. In its wake,
:41:13. > :41:18.this week especially, the tough questions about how we all live
:41:18. > :41:24.together and treat each other, will not be so lightly set aside.
:41:24. > :41:31.With me now the broadcaster and civil rights activist Darcus Howe,
:41:31. > :41:36.and the director of British further, a new think-tank. Was Diane Abbott
:41:37. > :41:42.right to apologise? I got about ten phone calls from friends, activists,
:41:42. > :41:47.non-activists, and all them black, they said what is she apologising
:41:47. > :41:54.with about? That is what surpriseded me. Who is she ale poll
:41:54. > :41:58.guiseing to? Miliband is nowhere and doesn't have the experience of
:41:58. > :42:02.organising working people as Diane Abbott. You don't think she should
:42:02. > :42:07.have apologised? I don't know for what, I will meet her and she will
:42:07. > :42:11.explain it to me. She said divide and rule is part the strategy of
:42:11. > :42:17.political whites, and I tell you how it happens the to this.
:42:17. > :42:23.didn't say political whites? Whites, she will say they like their own
:42:23. > :42:27.type of black. You understand that? I think she's right, I'm glad she
:42:27. > :42:33.has apologised, it is crass and offensive, it was a crude
:42:33. > :42:37.stereotype white people. She didn't mean to that, I'm sure as she said,
:42:37. > :42:40.stereotype all white people, as that was the natural reading of it,
:42:40. > :42:46.she should withdraw. She said it was out context, I think it is
:42:46. > :42:49.worse in context. She was talking to a black journalist who made a
:42:49. > :42:52.cogent point. This issue of community leaders I have some
:42:52. > :42:56.problems with that, who is representing who, who he decides it.
:42:56. > :42:59.It it is a policing of debate within black communities about
:42:59. > :43:06.black communities that says you can't say that in public, that is
:43:06. > :43:11.divide and rule, you are plauge into a white agenda -- playing into
:43:11. > :43:14.a white agenda. Of course not All Black people think the same as
:43:15. > :43:21.everything, that is because, you were campaigning against racism
:43:21. > :43:25.before the -- I was born, the games you played before were more diverse,
:43:25. > :43:28.we should welcome the process as well as seeing it is not complete.
:43:28. > :43:33.I like when somebody tells me something nice about myselfment
:43:33. > :43:36.you turn it around, if it was a white MP and they made a sweeping
:43:36. > :43:41.generalisation about black people, they would almost certainly be out
:43:41. > :43:46.of a job? Why if it was a white person, no white person ever said
:43:46. > :43:51.it. If they say it, I have to wait and see it who says it where and
:43:51. > :43:57.why and when the you can't just say if it was a white person. It it is
:43:57. > :44:03.not logical. I find that Diane Abbott, at this time, is crucial,
:44:03. > :44:10.at the time when Doreen Lawrence and they and us have won that
:44:10. > :44:14.campaign, Diane is itching to speak, but she has to...It Sound like you
:44:14. > :44:18.are excusing what was bluntly a stupid thing to friend? She is my
:44:18. > :44:22.comrade and French, I would have said the same thing. I would have
:44:22. > :44:27.told Miliband to go to hell. Do you think this is basically a storm in
:44:27. > :44:30.a tea cup, on a fairly slow news day, with somebody who has had form
:44:30. > :44:35.before? It is a question of think before you tweet. I love twittwiter
:44:35. > :44:40.to bits, it is not the place to have nuanced discussions. The
:44:40. > :44:44.outrage goes tooer far asle well, apologise, withdraw, move on and
:44:44. > :44:47.have -- as well, apologise, withdraw, and move on and have a
:44:47. > :44:51.serious discussion. The big serious issues we have seen with Stephen
:44:51. > :44:57.Lawrence. We are having a shouting match where people are outraged.
:44:57. > :45:00.Let's have a conversation. We saw in the report there was talk about
:45:00. > :45:05.the sense of poor, white isolation as being one of the reasons,
:45:05. > :45:09.possibly in the backlash from the Lawrence laorn conviction, do you
:45:09. > :45:12.buy that this week? -- Stephen Lawrence conviction this week, do
:45:12. > :45:17.you buy that this week? There is a problem, but the real problem is
:45:17. > :45:21.you don't have to choose. You can either deal with the racism
:45:21. > :45:25.affecting the black community or the exchugs of the white community,
:45:25. > :45:31.we want fair communities. You were probably the first person
:45:31. > :45:41.to say a multiculturalism where white people have no role except as
:45:41. > :45:42.
:45:42. > :45:46.oppressors won't get us to good society. Nobody heard me say that,
:45:46. > :45:49.Diane came into the Labour Party under black sections because the
:45:49. > :45:53.Labour Party couldn't have black MPs. They fought and campaigned,
:45:53. > :45:57.she became, on that issue alonement the black community, for the first
:45:57. > :46:03.time in human history in this country could rely on someone who
:46:03. > :46:13.knew them, where they came from, who didn't have to go...What Do you
:46:13. > :46:19.make of the reaction, the response to her tweet, do you think this is
:46:19. > :46:23.a febrile of Twitter? It will go away. What concerns me Diane is in
:46:23. > :46:27.a Shadow Cabinet with people who are very inferior to her
:46:27. > :46:32.politically, she is minister of public health, and they go out and
:46:32. > :46:37.speak about blacks, and she has to sit there, waiting to listen, to
:46:37. > :46:40.what the rest of them have to say, which amounts to nothing.
:46:40. > :46:45.I have to leave it there. Just before we go. Let me take you
:46:45. > :46:51.through the front pages of thep papers.
:46:52. > :47:01.The picture of Marylin Monroe, which I will show you later, the
:47:02. > :47:16.
:47:16. > :47:21.which I will show you later, the The American photo journalist died
:47:21. > :47:31.at the age of 99. This is a reminder of some of her most iconic
:47:31. > :47:57.
:47:58. > :48:02.Good news. The worst of the storms dying down now. Much lighter winds
:48:02. > :48:06.to end the week, it will be a pleasant start to the day, a bit
:48:06. > :48:10.chilly. Sunshine becoming more confined to
:48:10. > :48:14.the eastern half. Further west cloudier with outbreaks of rain.
:48:14. > :48:20.Mid-afternoon across parts of the Midlands, brightness hanging on.
:48:20. > :48:24.Cloudy, not spoiling things. In the south-east a fine day.
:48:24. > :48:28.Temperatures struggling up to seven or eight. Cloudier across parts of
:48:28. > :48:32.South-West England, the odd spot rain in the breeze. For walls as
:48:32. > :48:36.well. After a bright start will tend to cloud over with dampness 0
:48:36. > :48:41.toen the day. The wind, as I say, nothing like -- to end the day. The
:48:41. > :48:45.wind nothing like we have seen. In Northern Ireland we will see
:48:45. > :48:49.outbreaks of rain turning up, wet across the western Highlands and
:48:49. > :48:53.island. To the east some dry and brighter weather will hang on for a
:48:53. > :48:57.good part of the day. Further ahead into the weekend. Some hours across
:48:57. > :49:01.the North West. But the emphasis on bright and breezeyo conditions
:49:01. > :49:05.through this weekend. Both -- breezy conditions through the
:49:05. > :49:08.weekend. The winds not as strong. One or two showers around, many
:49:08. > :49:12.places having a fine weekend, plenty of sunshine from time to
:49:12. > :49:16.time the The picture on Saturday, a chilly start to the day. The