05/01/2012 Newsnight


05/01/2012

With Emily Maitlis. As economic bears point to cracks in the economy, Jim O'Neill of Goldman Sachs puts the case for the bulls. Justin Rowlatt sees the booming economy in Brazil.


Similar Content

Browse content similar to 05/01/2012. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

Bulls and bears, BRIC and PIIGS, the world struggles to find

:00:13.:00:16.

communal solutions, will 2012 be everyone for himself.

:00:16.:00:22.

The word that scared everyone last year was "contagion", this year add

:00:22.:00:26.

"protectionism". Bun BRIC country, Brazil, has already turned itself

:00:26.:00:30.

into a powerhouse of agriculture and mining, now it is spending a

:00:30.:00:35.

fortune building its own oil industry. We are talking about $127

:00:35.:00:43.

billion US dollars, this means $2,000 dollars persecond, 24 hours

:00:43.:00:48.

day. We will ask Jim O'Neill who coined the BRIC phrase, and ask if

:00:48.:00:52.

the world is getting closer together or further apart.

:00:52.:00:56.

Also tonight, after the protests, the PM and his deputy seem to be

:00:56.:01:00.

racing to crackdown on tax avoidance, will anything change?

:01:00.:01:05.

Made to feel like a right tweet, Diane Abbott and the sentence that

:01:05.:01:11.

landed her in hot water. Was it racist or a storm in a tea cup. We

:01:11.:01:19.

will ask our guests if she was right?

:01:19.:01:23.

Good evening, if you are looking for calm markets you generally have

:01:23.:01:27.

to focus on the one that is are shut. The new year has opened as

:01:27.:01:34.

turbulently as the last one ended. Focus is on Hungary, which has seen

:01:34.:01:36.

demonstrations and bond yields through the roof. There are

:01:36.:01:39.

concerns that 2012 could be the year when protectionist sentiment

:01:39.:01:43.

take as grip. With a second slowdown happening all over the

:01:43.:01:46.

world, is a communal solution really possible. Will it soon be

:01:46.:01:51.

every country for itself. Our economics editor, Paul Mason, is

:01:51.:01:56.

here. Talk us through Hungary? year ended on the theme of national

:01:57.:02:01.

parliaments versus the euro, the whole question of democracy, with

:02:01.:02:04.

the imposition of two technocratic Governments in Italy and Greece.

:02:04.:02:08.

This year it has begun with the same issue somewhere else. Hundred

:02:08.:02:13.

gary two years ago was close - Hungary two years ago was close to

:02:13.:02:19.

being bust and had to be bailed out by the IMF. It now has a right-wing

:02:19.:02:23.

nationalist Government,ed headed by this man, he and his two thirds

:02:23.:02:27.

majority in parliament have pushed through a whole number of

:02:27.:02:30.

constitutional amendment and changes in Hungary, which the IMF

:02:30.:02:34.

and the European Union think are really quite dangerous. They

:02:34.:02:38.

threaten the financial stability and democracy itself. So, a stand-

:02:38.:02:43.

off has taken place over the question over whether it gets any

:02:43.:02:51.

more money, patently needs. This is the effect of the stand-off. This

:02:51.:02:55.

is Hungary's borrowing costs. Bubbling along to 7% and just after

:02:55.:02:59.

Christmas it has gone to 10.5% today. That is a sign that people

:02:59.:03:02.

believe there is a crisis coming in Hungary, and they believe the

:03:02.:03:06.

Hungarian Government is quit the prepared to stand up to the IMF and

:03:06.:03:10.

the EU in a way that the Greeks and the Italians weren't.

:03:10.:03:15.

It may end quite badly, we will know in the next few days, how will

:03:15.:03:19.

end. The banks must be incredibly

:03:19.:03:23.

worried. It All comes against the bigger sovereign debt crisis

:03:23.:03:26.

background. There is good news, the worldle central banks have been

:03:26.:03:28.

pumping money into Europe, the European Central Bank has been

:03:28.:03:33.

buying the bonds of striken countries, Italyed today, Greece et

:03:33.:03:37.

cetera. But -- Italy today, Greece, et cetera. The bad news is, what

:03:37.:03:41.

are the banks doing with the money being pumped in. Take a look at

:03:41.:03:45.

this graph. This is the amount of money depos the every night in the

:03:45.:03:48.

European equiff leent -- deposited every night in the European

:03:48.:03:53.

equivalent of a mattress, the safest place, where no harm can

:03:53.:04:00.

come to it. It has gone from not much to a staggering 44 4 billion

:04:00.:04:04.

overnight. Take a look at that, it moves in waves every month. If that

:04:04.:04:09.

were the sea, if those were wave ace proching you, you would say

:04:09.:04:13.

everybody whon't -- approaching you, you can say everybody who can't

:04:13.:04:19.

swim get out of the way. A crunch in Europeing in Europe in the next

:04:19.:04:23.

few weeks. The question Government, economists and the public are

:04:23.:04:27.

asking, what happens when we come to the cathartic moment in Europe.

:04:27.:04:33.

The background is people looking for national exit routes from this

:04:33.:04:36.

crisis. Hungary itself deciding the national parliament will trump the

:04:36.:04:40.

IMF. Another big country on the edge of Europe, that threw its toys

:04:40.:04:44.

out of the pram, that is our's, over the question of the European

:04:44.:04:48.

treaty. We have Canada, walking away from the Kyoto Treaty,

:04:48.:04:51.

essentially on economic grounds, we have the USA and China, sparring

:04:52.:04:58.

with each other over trade. We have got now the question of the breaks,

:04:58.:05:02.

the -- the BRICs, as this crisis goes on, they are exporting their

:05:02.:05:06.

way out of it. Brazil, only this week, stunning trade figures,

:05:06.:05:10.

stunningly good for them, and stunningly good negative for

:05:10.:05:13.

everybody who trades with them. That is the issue I think will

:05:13.:05:18.

overhang 2012. As Paul was saying, the hope for

:05:18.:05:22.

growth in the world economy was meant to be those BRIC countries,

:05:22.:05:28.

Brazil, Russia, India and China. Some critics think it should stand

:05:28.:05:32.

for "ed bloody ridiculous investment concept", we will

:05:32.:05:36.

discuss with a bond trader and economist the issue. First Justin

:05:36.:05:39.

Rowlatt has been to Brazil to see how their economy came to boom and

:05:39.:05:49.
:05:49.:05:50.

whether it can last. Brazilia, Brazil's remarkable

:05:50.:05:55.

capital city, was built as a statement of intent. Enshrined in

:05:55.:05:59.

cool calm concrete Brazil's ambition to become a dynamic modern

:05:59.:06:04.

nation. But the economic boom in which this city was born, turned to

:06:04.:06:09.

bust. And the prosperous modern future that Brasilia was designed

:06:09.:06:14.

to embody remain tantalisingly out of reach. And then, the starked

:06:14.:06:18.

modernism of this place seemed to give truth to the old joke about

:06:18.:06:26.

Brazil, that Brazil is the country of tomorrow, and always will be.

:06:26.:06:30.

Brazil's tomorrow seems finally to have arrived. The country has been

:06:30.:06:35.

booming, and the seeds of its new success were zone quite literally,

:06:35.:06:42.

out in the country's vast interior. We are producing the silos here.

:06:42.:06:46.

Pedro is an economist turned agricultural businessman, who runs

:06:46.:06:49.

one of the largest farming enterprise, not just in Brazil, but

:06:49.:06:54.

the world. Brazil has the capacity to feed

:06:54.:06:59.

everyone in the world. Everyone in the world. A modest ambition?

:06:59.:07:04.

Because Brazil leads the world in soya? Second in produce. First in

:07:05.:07:14.
:07:15.:07:15.

could have he fee, first in sugar cane. First in orange juice. First

:07:15.:07:20.

in cocoa. Beef? You are not just the bread bast ket, but the grocery

:07:20.:07:24.

store of the world. He has good reason to feel cocky,

:07:24.:07:28.

40 years ago Brazil was a net importer of food, and much of the

:07:29.:07:33.

country was considered unfit for farming. Now it is an agricultural

:07:33.:07:38.

superpower. The key to this transformation, something very

:07:38.:07:48.

unfashionable, state planning. Brazil -- TRANSLATION: Brazil's

:07:48.:07:51.

secret is not something that happened overnight, it is the

:07:51.:07:55.

result of planning. It began 40 years ago when Brazil's Government

:07:55.:08:05.

createded a state enterprise in BRAPA.

:08:05.:08:09.

This man has been dub the King of Soya, because of his dominance of

:08:09.:08:13.

this key Brazilian export. He's in politics now, an influential

:08:13.:08:22.

senator, which, say insiders, presidential ambitions.

:08:22.:08:25.

TRANSLATION: That state organisation was born with the

:08:25.:08:29.

mission of sending abroad hundreds of technicians, men and women, to

:08:29.:08:33.

be trained in universities in the United States, in Britain, and

:08:33.:08:37.

other places. They returned with a large body of scientific knowledge,

:08:37.:08:47.

and from that base, we in Brazil, began to develop our own systems of

:08:47.:08:51.

tropical agricultureure. Government planning may have create --

:08:51.:08:54.

culture. Government planning may have createded the tropical miracle,

:08:54.:09:01.

but it doesn't sustain it. Brazilian farms prosper without

:09:01.:09:06.

virtually any subsidy. They didn't put in place the bricks from

:09:06.:09:10.

agriculture alone. It has vast reserves of iron ore and countless

:09:11.:09:14.

other minerals. Recently discovered huge oil reserves too, and is

:09:14.:09:18.

spending record amounts to get the stuff out. We are talking about a

:09:19.:09:27.

programme that is $224.7 billion US dollars over the next 20 years,

:09:27.:09:34.

this is $,000 per second, every 24 hours a day. Of investment? Yes.

:09:34.:09:38.

The real game changer for Brazil is the prices it has been getting for

:09:38.:09:42.

all the commodities it has in such abundance. They have been at

:09:42.:09:47.

historic highs for the last decade, thanks to the huge demand createded

:09:47.:09:52.

by the rapid industrialisation of fellow BRICs, China and India.

:09:52.:10:00.

We know that the infrastructure...Charles Tang is a

:10:01.:10:07.

Chinese-born Brazilian, and the lynch pin between much co-operation

:10:07.:10:12.

between Brazil and China? The two economies are complimentry, Brazil

:10:12.:10:18.

needs capital to grow its economy and create jobs. China needs the

:10:18.:10:22.

strategic resources for a sustained growth and to feed its people.

:10:22.:10:26.

Countries such as Brazil can provide that.

:10:26.:10:29.

This vision of harmonious economies neatly complimenting each other

:10:29.:10:34.

doesn't quite hold. In the past year growth has slowed to just 3.5%.

:10:34.:10:39.

Half the average for the last decade, and half of what China and

:10:39.:10:48.

India achieved last year. One reason is what Brazilians call

:10:48.:10:55.

the "costo Brazil", the hidden costs of doing business here. They

:10:55.:11:00.

cite unyielding bureaucracy and state distortion, but top of the

:11:00.:11:06.

list is infrastructure. This is the main high road, the state at the

:11:06.:11:13.

very heart of Brazil's agricultural bonanza, it is a single highway,

:11:13.:11:19.

millions of tonnes of soya, beef, maize, are shipped down this road

:11:19.:11:25.

every single year. Locals say that during harvest time, this becomes

:11:25.:11:35.
:11:35.:11:35.

one slow traffic jam. Hundreds and hundreds of kilometres long.

:11:35.:11:39.

But complaint about the roads pale into incision beside the other

:11:40.:11:44.

Brazilian bug bear, the currency. Brazil's success exporting

:11:44.:11:49.

commodities has push the value of the currency through the roof. That

:11:49.:11:54.

is hitting the country's manufacturers. TRANSLATION:

:11:54.:11:59.

we're not careful China will eat us up. Then there will be India as

:11:59.:12:07.

well. The Brazilian Government needs to watch out for this. By all

:12:07.:12:11.

means sit around the table with the BRICs and negotiate, but know how

:12:11.:12:16.

far to go, at which point to step in and come to the defence of

:12:16.:12:21.

Brazilian industry. So there arele challenges ahad he, but Brazil has

:12:21.:12:24.

weathered the current financial gloom far better than most

:12:24.:12:28.

developed economies. It is now a creditor, not a debtor nation, the

:12:28.:12:35.

country that once depended on IMF loans, now lends money to the IMF.

:12:35.:12:42.

While the vision of modernity that inspired Oscar Nimirye, the

:12:43.:12:46.

architect of Brasilia, there is no question that Brazil, with its

:12:46.:12:51.

trillion dollar a year economy, is now very much a modern nation.

:12:51.:12:58.

Let's take some those thoughts to Jim O'Neill, and our other guests.

:12:58.:13:03.

Great to have you all here, thank you very much.

:13:03.:13:08.

BRICs, that phrase coined by you a decade or more ago. When you look

:13:08.:13:15.

at the kind of success of they have had. Want to say Europe should be

:13:15.:13:18.

trying to emulate what they are doing, without declaring economic

:13:18.:13:22.

war, can it? I think you should try to do what is right for Europe.

:13:22.:13:26.

There is certain things going on with each of the BRIC countries,

:13:26.:13:33.

which is impossible for other countries to replicate, in

:13:33.:13:36.

particular two, all four of them have a lot more people than

:13:36.:13:40.

anywhere in Europe. You can't just magically create people. Secondly,

:13:40.:13:44.

importantly, and shouldn't be lost by any of your viewers, all of

:13:44.:13:47.

these countries are coming from a much lower base of wealth. And are

:13:47.:13:51.

at various stages of development. So the growth statistics look

:13:51.:13:57.

bigger any way. As big as they are getting they are not anywhere near

:13:57.:14:02.

as wealthy as we are yet, including Brazil, the wealthiest of the four.

:14:02.:14:04.

They were thought to be the countries that save the world

:14:05.:14:08.

economy, they can't shoulder that, can they? I don't know about save,

:14:08.:14:11.

but they are the countries that are driving the world economy. As I'm

:14:11.:14:17.

sure we will get into in a second, the decade we are now in, the world,

:14:17.:14:21.

the true world, not a jaundiced western view of it, will probably

:14:21.:14:25.

grow by more than 4% on average, because of these countries. But it

:14:25.:14:29.

is not what many western people think, because they see it purely

:14:29.:14:32.

from the world in which the west being the premier driver of the

:14:32.:14:36.

world, is the only think thing that should really be the status quo.

:14:36.:14:42.

There is the issue people have to get their heads around.

:14:42.:14:46.

When you look at the BRICs do you think that is the only driver now,

:14:46.:14:50.

realistically of the world? What people have been exciteded about

:14:50.:14:54.

BRICs, as Jim as said, the number people, number one, but Russia and

:14:54.:14:59.

China have appalling demographic, the demo of graphic dividend in

:14:59.:15:04.

China turns negative from 2015. The second point about base of

:15:04.:15:08.

cheapness, everything in China has been done on the base of cheapness,

:15:08.:15:12.

low wage costs, increasing now, companies have to of move further

:15:12.:15:18.

unland. No paying any social welfare, net net, no heed paid to

:15:18.:15:21.

the massive solution, most of the standing water is polluted and so

:15:21.:15:28.

on. What he comists would call negative comebgts d economists

:15:28.:15:32.

would call negative effects coming down. It is not whether China will

:15:32.:15:38.

have a hard landing, it it is one. In 2009 I had a trip to Beijing and

:15:38.:15:43.

was alarmed to what is happening. You see me frowning. Jimmy's story

:15:43.:15:47.

about the BRIC, and I would broaden it, you have another axe nim that

:15:47.:15:55.

you use, the N11, the - acronym that you use, the N11, the poorer

:15:55.:15:58.

countries are catching up. That is the secular story of our generation.

:15:58.:16:02.

You are right, if you look five or ten years ahead, that is where the

:16:02.:16:05.

global growth will come from. We are in ageing societies here, we

:16:05.:16:09.

have really big problems in the western world, we have huge debt

:16:09.:16:13.

overhanging us, we won't grow very fast. If you look at a shorter time

:16:13.:16:16.

frame, this year, for example, we will see less than a boost from

:16:16.:16:19.

these economies than we have in the past couple of years. They bounce

:16:19.:16:22.

back very quickly from the financial crys, they have been

:16:22.:16:27.

booming, they are closing -- crisis, they have been booming, China and

:16:27.:16:30.

Brazil have been slowing. The biggest question is what happens in

:16:30.:16:34.

Europe, maybe we can get into that. The second biggest, equal second,

:16:34.:16:40.

is how fast and how far China going to slow. If China has a hard

:16:40.:16:44.

landing f its growth rate really slows, that hits other emerging

:16:44.:16:52.

economies. Brazil, big exporter. First of all, we all talk about in

:16:52.:16:55.

idiotic simplicity, China is not landing at all. It is still going

:16:55.:16:59.

to be travelling. But, you know. Will its growth rates be sustained?

:16:59.:17:03.

And by the end of this year, it will either have much weaker growth,

:17:04.:17:09.

or a big weaker growth. I would argue that China has deliberately

:17:09.:17:13.

decide to try to slow the he economy down.P much of the things

:17:13.:17:19.

which many of the China bears worry about, they forget that it has been

:17:19.:17:23.

orchestrated, in particular a turn around in property price, has been

:17:23.:17:27.

orchestrated by Chinese policy makers. It is really done because

:17:27.:17:31.

their cha eing last year, contrary to --le challenge last year,

:17:31.:17:35.

contrary to your intro, was rising inflation, not the problems we sit

:17:35.:17:39.

around worrying about in Europe. Once they get inflation back down,

:17:39.:17:43.

they will not timing policy, and if need be, they will support the

:17:43.:17:48.

economy. That depends on them fine tuning as perfectly as they have in

:17:48.:17:54.

the past. In 2008/09 they did it brilliantly. The world economy

:17:54.:17:58.

slumps, the Chinese do a huge stimulus and the economy keeps

:17:58.:18:02.

roaring. Because we know so little of what goes on in the

:18:02.:18:04.

administration, we have this assumption they are totally in

:18:04.:18:07.

control of what their economy is doing? That is complete fallacy,

:18:07.:18:11.

even talking to people off the record in Beijing, working for the

:18:11.:18:16.

larger state-owned enterprise, they will say, if you like, it is not a

:18:16.:18:24.

scalpel, but a large heavy hammer to hit the economy to get it moving.

:18:24.:18:29.

Presub time crisis you have 50% of the bank loans off balance sheet.

:18:29.:18:34.

You have 26 million empty parliaments. I know that --

:18:34.:18:40.

parliamentary partys, I know China bulls -- apartments, I know China

:18:40.:18:44.

bulls say it won't matter. But the cost of apartments are high, and

:18:44.:18:50.

the economy is slowing. There was large parts of China had a have yet

:18:50.:18:55.

to urbanise, the problems which Gillian alludes to, are the ones

:18:55.:18:59.

where most people travel to, and the ones that are most developed.

:18:59.:19:03.

At the high end their property markets things have got out of

:19:03.:19:07.

kilter, that is why they have been deliberately trying to turn it

:19:07.:19:13.

round. If need be. For the whole national economy, they will

:19:13.:19:18.

accelerate already existing plans to stimulate fresh building of

:19:18.:19:21.

properties in parts of China that most of us don't even know how to

:19:21.:19:30.

spell. So this kind of view is relevant in a cyclical sense, in

:19:30.:19:35.

some previously, highly excitable parts of the property market. To

:19:35.:19:39.

simply translate that as a nationwide thing. You need to go

:19:39.:19:43.

back and visit more. I want to get on to one of the

:19:43.:19:47.

points that Paul Mason was raising, we have basically had decades of

:19:47.:19:50.

globalisation. It seems like the only wayer for the world to talk to

:19:50.:19:55.

each other and the economy to move. It is. Are we moving towards a more

:19:55.:19:58.

protectionist model, there are some countries that have protect

:19:58.:20:02.

themselves quite well, insulated themselves against the downturn, by

:20:02.:20:07.

their protxist measures? I'm struck by, -- Protectionist measures?

:20:07.:20:12.

struck by, I come from the Economist, we constantly worry

:20:12.:20:15.

about protectionist all the time.S striking in its absence over the

:20:15.:20:19.

past few years. If you thought in the wake of the financial crisis,

:20:19.:20:22.

in 2008, we were terrified there would be a wave of protectionist

:20:22.:20:25.

pressure, it didn't happen. This year will be a tough year for the

:20:25.:20:29.

world economy. It will grow more slowly, depending on how badly

:20:29.:20:33.

things go in Europe, could be nasty. I don't see it yetment I see spats

:20:33.:20:38.

here and there. If you join up the dots, Paul has given us ten

:20:38.:20:42.

examples in the last year. Paul could have done that for you three

:20:42.:20:47.

years ago. It was a very popular view on the aftermath of the 08

:20:47.:20:51.

severity, that was the end of globalisation. It is not even close

:20:51.:20:56.

to it. I would argue, in the aftermath of 08, people thought the

:20:56.:20:59.

Governments had all the solutions, and all that is happening is the

:20:59.:21:02.

debt has been passed from the private sector to Government sector.

:21:02.:21:06.

Now that is going bad. Now it is an accident of history that 2012 sees

:21:06.:21:10.

so many changes andle challenges to Government around the world, China,

:21:10.:21:15.

Russia, US, frapbts, the list goes on. The temptation of protectionism

:21:15.:21:20.

goes ever higher. I wo agree with both of you to argue from a ration

:21:20.:21:24.

-- I would agree with bolt of you to argue from the ration -- both of

:21:24.:21:29.

you to argue from the rational point of view of an economist.

:21:29.:21:35.

Tomorrow will be a a figures list of employment and unemployment

:21:35.:21:39.

picture in the US T will show in the US that the picture is

:21:39.:21:47.

improving. The whole push for protectionism in the US is losing

:21:47.:21:50.

the impetuous. You remain very bullish? I worry about the European

:21:50.:21:53.

thing. We will talk about about this. We saw Paul's crest of waves

:21:53.:22:00.

on the graphic. Is it possible that crisis won't hit? Won't hit where?

:22:00.:22:05.

Europe? Europe is already being hit, what we have talked about so far,

:22:05.:22:09.

is whether that is, or on the edge of, or what is implicit, that is

:22:09.:22:14.

going to, by definition. Will it hang together? Drag down the rest

:22:14.:22:17.

the world. The most interesting news in the past few weeks about

:22:17.:22:21.

Europe is that Europe's biggest economy, Germany, itself, seems to

:22:21.:22:28.

be reasonably coping with it. Which I myself am surprise with about. I

:22:28.:22:32.

thought Germany would be weaker than it is. I think the p best case

:22:32.:22:38.

scenario is Europe has a short, Europe has a short and sharp resgs.

:22:38.:22:44.

I don't see why it should be short, I don't think see growth in Italy

:22:44.:22:50.

or Spain, they have massive austerity feeding on bank

:22:50.:22:55.

contraction. That is the best case scenario, the worst is the eurozone

:22:55.:22:59.

falls apart with a real cat it is a trough he fee. I think it will have

:22:59.:23:04.

a real -- catastrophy, I think it will have a real effect on the rest

:23:04.:23:09.

of the world. Everyone is framing the question, how to keep the

:23:09.:23:13.

eurozone together in its current guise, I don't think Germany is

:23:13.:23:17.

plated in gold, the Germany constitution court ruling shows a

:23:17.:23:20.

lack of economic clout and political will. Also the frame, can

:23:20.:23:23.

we hold the eurozone together, it is such a disaster, that perhaps

:23:23.:23:33.

taking it apart now will save a greater disaster down the line.

:23:33.:23:36.

Prime Minister has signalled he wants to crack down on large

:23:36.:23:39.

companies and their Francy corporate lawyers who endlessly

:23:39.:23:43.

reduce their tax bills. He seems to be in a competition with his deputy,

:23:43.:23:49.

Nick Clegg, in rhetoric on tax avoidance, which unlike tax evasion

:23:49.:23:53.

is legal. What will a crackdown look like, and will it do anything.

:23:53.:24:01.

Here is a guide to avoid tax. Navigating the maze of British tax

:24:01.:24:04.

legislation to advantage, exploiting every loophole is what

:24:04.:24:10.

legal tax avoidance is all about. Tackling those greedy capitalists

:24:10.:24:13.

who minimise their bills is a populist campaign. Something must

:24:13.:24:18.

be done, said the Prime Minister, addressing hard-pushed leaders of

:24:18.:24:22.

smaller and medium-sized businesses today. We need a tougher approach.

:24:22.:24:26.

One of the things we will look at this year is whether there should

:24:26.:24:30.

be a more general anti-avoidance power, that HMRC can use,

:24:30.:24:33.

particularly on very wealthy individuals and on the bigger

:24:33.:24:39.

companies, to make sure they pay their fair share.

:24:39.:24:43.

No less keen to talk tough was the Deputy Prime Minister, speaking on

:24:43.:24:47.

Radio 4 this morning. He sees an attack on corporate greed as a

:24:47.:24:50.

defining issuer for the Liberal Democrats. Millions of people, and

:24:50.:24:56.

these are millions of people who I feel Liberal Democrats and politics

:24:56.:25:01.

are for, who pay by the rules, who pay their tax, who work hard, to

:25:01.:25:05.

aspire to do the right thing for themselves and their families, who

:25:05.:25:09.

are angered when they feel there is a wealthy elite, or big business,

:25:09.:25:14.

who pay an army of accountants to get out of paying their fair share

:25:14.:25:18.

of tax. How do companies avoid paying tax, these are the five most

:25:18.:25:21.

popular ways, they can decide the location the transactions take

:25:21.:25:25.

place. Ireland has an attractively low rate of corporation tax. Then

:25:25.:25:30.

there is the timing of payment. Deferring it for a period allows

:25:30.:25:36.

you to bank the interest. The identity of who is doing it is

:25:36.:25:40.

important. Some multinationals shift debt on to UK-based companies,

:25:40.:25:45.

and recording big profits in countries where taxes are lower.

:25:45.:25:49.

The type of transaction can be changed, capital gains tax is lower

:25:49.:25:53.

than income tax. Finally it is possible to obscure the way the

:25:53.:25:57.

information is disclose. Many offshore tax havens have rules much

:25:57.:26:05.

less stringent than the UK. I say cutback, you say fightback.

:26:05.:26:11.

London October 2010, protestors gather outside a Vodaphone shop,

:26:11.:26:16.

complaining about what they say is an unpaid tax bill of billions. The

:26:16.:26:23.

company says it has never owed that sum. But the dispute over revenue

:26:23.:26:27.

has cost millions over nine years. This attrition of war ended last

:26:27.:26:33.

year, when the company agreed to pay �1.25 billion in a final

:26:33.:26:36.

settlement. Tax avoidance is not working within the law. Listen to

:26:36.:26:39.

the description. It is avoiding. You getting round the law. What

:26:39.:26:44.

these people -- companies do is find ways to get around the UK law

:26:44.:26:47.

and trade it off with the law of other countries. They trade of off

:26:47.:26:50.

different accounting systems between the UK and other countries.

:26:50.:26:55.

They are really trying to get round the law. It is legal, no-one is

:26:55.:26:59.

disputing that. But it is unethical. Parliament has been critical of

:26:59.:27:05.

Vodaphone, but the firm says it has been unfairly ma lined. Here at the

:27:05.:27:08.

Treasury Select Committee, another bigp company was under fire over

:27:08.:27:13.

the -- another big company was under fire over the amount of tax

:27:13.:27:21.

paid over to the revenue. We paid �2 billion in tax to HMRC, over the

:27:21.:27:27.

last six years we have paid �12.5 billion. Of that �2 billion, what

:27:27.:27:31.

percentage was non-payroll taxes?Off The periodsages. Most

:27:31.:27:35.

that could be the payroll tax paid by employees, in terms of corporate

:27:35.:27:39.

tax we don't know. That is the payment from Barclays to HMRC.

:27:39.:27:44.

Barclays later wrote to the committee confirming it paid just

:27:45.:27:50.

�113 million corporation tax in 209. That low figure was blamed on UK

:27:50.:27:53.

losses. Newsnight asked the amount of UK corporation tax paid in other

:27:53.:27:59.

years, the firm said it never gives out these figures. Many of the

:27:59.:28:02.

small and medium sized businesss in this country, struggling in the

:28:02.:28:05.

current economic climate, do not have access to the army of tax

:28:06.:28:10.

experts. Wr talking about big rich companies? We are. But what does

:28:10.:28:15.

that mean we do, do we kind of give up and walk away from the piste,

:28:15.:28:20.

and give up trying to ensure people make a fair contribution, or do we

:28:20.:28:24.

do absolutely everything we can to ensure that we clampdown on the

:28:24.:28:28.

loopholes. But for that to happen, the revenue

:28:28.:28:32.

must be firing on all cylinders, there is precious little sign of

:28:32.:28:37.

that. The top man, Dave Hartnett left recently after negotiating a

:28:37.:28:40.

series of controversial tax settlements with powerful firms.

:28:40.:28:44.

Cosy deals, according to MPs. And the service is facing severe cuts.

:28:44.:28:48.

You you have a real problem, it is a real dilemma in that over the

:28:48.:28:53.

last few years a lot of their experience in this area has just

:28:53.:28:59.

gone. And for the revenue to try and recruit and get people in place,

:29:00.:29:06.

who are capable of dealing with matters where it is large

:29:06.:29:09.

corporates, who have good solid advisers, it is hard to imagine

:29:09.:29:14.

that it is going to be an easy one for the revenue to win.

:29:14.:29:19.

In reality, then, it is easy to talk tough about tackling loopholes,

:29:19.:29:23.

but those with money have access to elite, legal and financial advice.

:29:23.:29:27.

Victory in court is not assured, and naming a and shaming is tricky,

:29:27.:29:30.

because allegations will be denied. In the short-term, then, this

:29:30.:29:35.

becomes an ethical, rather than a legal debate.

:29:35.:29:41.

With me now, representatives of the two parties in coalition, the Lib

:29:41.:29:45.

Dem deputy leader, Simon Hughes, a the Conservativep MP, Jesse Norman.

:29:45.:29:50.

This was always a central tenet of theed Liberal Democrat position on

:29:50.:29:54.

tax, wasn't it. How successful, truly, do you think you have been

:29:54.:29:57.

in pushing had to the top of the agenda, in the coalition

:29:57.:30:01.

Government? Firstly, happy new year, the answer is we have, the argument

:30:01.:30:07.

has been won. Across the coalition. Before the last general election,

:30:07.:30:12.

we had proposals that suggest that there should be a general anti-

:30:12.:30:16.

avoidance provision. There was a commitment in our fest toe, the

:30:16.:30:21.

coalition agreement he spe -- manifesto, the coalition agreement

:30:21.:30:27.

specifically made a commitment to it with the proposal West came

:30:27.:30:32.

forward with. From Danny Alexander there was a speech talking about

:30:32.:30:35.

action happening. In the first speech it was the Government

:30:35.:30:41.

spending a billion to get in �7 billion, the extra that was avoided.

:30:41.:30:46.

The feeble 5,000 top earners that Labour targeteded, we were going to

:30:46.:30:51.

look at the top 350,000 top earners, driven by �2.5 million a year.

:30:51.:30:55.

were forced to look at this because of pressure on you from the Liberal

:30:55.:30:58.

Democrats? I wouldn't think that is right at all. What has happened is

:30:58.:31:01.

actually there has been an argument, a discussion has been had within

:31:01.:31:05.

the coalition, and I think the Chancellor's actually leading it as

:31:05.:31:07.

much as anyone, actually. If you lock at the decisions he has made

:31:07.:31:12.

in terms of cracking down on this crony capitalism. He has had a non-

:31:12.:31:17.

dom tarrif. That was his idea, we have had a bank levy out of that.

:31:17.:31:19.

It is interesting the two sides have come together, and the

:31:19.:31:23.

Chancellor has commissioned this new review on anti-abuse. That is

:31:23.:31:31.

what we are coming up now. In that report, the quote that it is

:31:31.:31:36.

concluded to be introducing a broad spectrum anti-avoidance rule would

:31:36.:31:40.

not be beneficial for the UK tax system. He says there is a real

:31:40.:31:46.

risk of undermining business being table to carry out sensible

:31:46.:31:49.

business. Of this thrown it Alawites together? They haven't

:31:49.:31:53.

done that. They are saying there are two kinds of things to separate,

:31:53.:32:00.

legitimate, proper, tax planning, from abnormal and abusing tax

:32:00.:32:04.

evasion and avoidance. That is what they are targeting. Not evasion, we

:32:04.:32:12.

are talking anti-avoidance. What is an Antwiity avoidance rule? -- an

:32:12.:32:15.

anti-avoidance rule? It is an anti- abuse regulation. What that

:32:15.:32:22.

regulation is looking at is all the grey areas in which the tax law is

:32:22.:32:25.

being manipulated in favour of companies with rich lawyers, as

:32:25.:32:30.

described, and being pushed from legitimate avoidance into evasion.

:32:30.:32:32.

What is fascinating about the review, there is a lot of

:32:33.:32:36.

consultation withm sol of the key industrial and other groups around

:32:36.:32:40.

it. -- some of the key industrial and other groups around it. And it

:32:40.:32:46.

has the provisions in the back of it which we can discuss. Can you

:32:46.:32:49.

understand what it involves, Nick Clegg says the report shows it is

:32:49.:32:54.

feasible? Let me put it to you clearly and hopefully to viewers as

:32:54.:32:57.

well. Most common law jurisdictions, Australia and Hong Kong have such a

:32:57.:33:02.

provision. It changes the way we would do tax arrangements and

:33:02.:33:06.

collection, are from the old system which is you would try to avoid it,

:33:06.:33:10.

the that was the presumption. Ever year the Finance Bill would close a

:33:10.:33:13.

loophole somebody had found. To putting in place provision that is

:33:14.:33:18.

say, we are asueing, we the state, through the tax collectors, are

:33:18.:33:24.

assuming it is wrong it avoid tax. An anti-avoidance rule would not be

:33:24.:33:29.

beneficial for the UK tax system, that is what it says? Please let me

:33:29.:33:34.

explain. The proposition that was reject there was a general

:33:34.:33:39.

provision across all taxes, because, for some taxes that wouldn't be

:33:39.:33:42.

clever.S an incentive for people who investment in ISAs, he was

:33:42.:33:47.

clear that you take sectors, corporation tax, capital gains tax,

:33:47.:33:51.

income tax, petroleum tax, and you have provision that is make sure

:33:51.:33:57.

you don't avoid those liabilities. Corporation tax, he gave the

:33:57.:34:03.

example. Would net �2.1 billion. Are you convince that this will be

:34:03.:34:07.

adapt and you will see anti-tax avoidance rules implemented?

:34:07.:34:12.

answer is yes. I accept that the Tories have signed up to the common

:34:12.:34:17.

agenda. That is very positive. And I am very clear that where as at

:34:17.:34:22.

the moment we miss �7 in �100 that we should collect, Liberal

:34:22.:34:25.

Democrats will be more successful. That was their argument before.

:34:26.:34:29.

will be more successful in this parliament, with Tory partners n

:34:29.:34:34.

dealing with tax avoidance than any other Government sow far in British

:34:34.:34:39.

history. It is very -- So far in British history. This is about

:34:39.:34:43.

perception, the IMF said basically the Tory-led Government cuts would

:34:43.:34:47.

make the poorest families suffer most. This is about trying to say

:34:47.:34:51.

we're all in this together, isn't that what it is about? The truth of

:34:51.:34:57.

it is, that the anti-tax avoidance measure that is have been taken now

:34:57.:35:02.

are ones in which the Tories have been leading, just as much as the

:35:02.:35:05.

Liberal Democrats. There is no suggestion that George Osborne, a

:35:05.:35:12.

man who introduceded the idea of a non-dom tarrif, before becoming --

:35:12.:35:16.

introduced the idea of non-dom tarrif before becoming Chancellor

:35:16.:35:20.

would not be on board with this. The same on the tax levy and the

:35:20.:35:30.

other elements to combat the Crowny capitalism Judge the outcome in

:35:30.:35:34.

five years. Many people have fallen foul of

:35:35.:35:38.

Twitter, Diane Abbott, Labour's shadow Health Minister, is the

:35:38.:35:42.

latest. She wrote "white people love playing divide and rule".

:35:42.:35:47.

Today she ale poll guise, after an apparent dressing -- apologiseded

:35:47.:35:50.

after an apparent dressing down from Ed Milliband.

:35:50.:35:58.

After a week where two were jailed for the murder of Stephen Lawrence,

:35:58.:36:02.

issues of race have never been far from the sent. She spent most her

:36:02.:36:07.

life on the backbenches, but Diane Abbott has built the profile of a

:36:07.:36:11.

political A-Lister. Apparently glued to the TV sofas.

:36:11.:36:15.

The straight talking she has brought tom campaigns against

:36:15.:36:20.

racism and poverty, has, once again, caused a mighty storm, sent raging

:36:20.:36:29.

by a little tweet. A freelance journalists, had tweet in reference

:36:29.:36:39.
:36:39.:36:56.

There was a furious reaction on- line, and off it in Westminster.

:36:56.:37:00.

think what Diane Abbott said was just stupid and crass

:37:00.:37:04.

generalisation. He she should explain and apologise for what she

:37:04.:37:10.

said. Let as call it the 140 character defence. Diane Abbott use

:37:10.:37:16.

to claim her remarks were taken out of context. A thesis on 19th

:37:16.:37:20.

century European Colonialism, far too great for the truncated medium

:37:20.:37:23.

she had had chosen. There will continue to be

:37:23.:37:27.

discussion about it. But certainly, from the Labour Party's point view,

:37:27.:37:31.

her position is secure, as the shadow health minister. And she has

:37:31.:37:35.

ale poll guiseed for causing offence. Which should be --

:37:35.:37:38.

apologised for causing offence, that should be enough. Do you know

:37:38.:37:41.

from Ed Milliband her position is secure? I hope her position is

:37:41.:37:47.

secure. Ed Milliband becomes the latest Labour leader to call Miss

:37:47.:37:50.

Abbott to orderment she stood against him for the leadship,

:37:50.:37:54.

coming last. During the contest she made much of being the outsider,

:37:54.:38:02.

opposed to the Iraq war, and apart from the Blair-Brown cliques. Some

:38:02.:38:06.

her issues with senior colleagues from personal, she criticiseded

:38:06.:38:11.

Tony Blair and Harriet Harmen for sending children to selective

:38:11.:38:15.

schools, then she sent her own son to a fee-paying school. The double

:38:15.:38:22.

standard led to a bust-up on her own TV programme. You said "West

:38:22.:38:26.

Indian mums will go to the wall for their children", so black mothers

:38:26.:38:30.

love their children more than white. Andrew, we have just had one of the

:38:30.:38:34.

most important budgets in a generation, I have said everything

:38:34.:38:39.

I will say about where I send my son to school. No understand the

:38:39.:38:43.

quote. Supposing Michael had said "white mums will go to the wall for

:38:43.:38:46.

their children". Andrew I have nothing more to say. So Britain's

:38:46.:38:53.

first black womanp MP found herself accuse of -- woman MP found herself

:38:54.:38:56.

abused of racism. This was her description of the coalition

:38:56.:39:00.

leaders a month ago. One of the things about this new leadership.

:39:00.:39:08.

This new leadership is how post meritocratic it is, two posh white

:39:08.:39:12.

boys from the home counties. spent her adult life in the

:39:12.:39:16.

spotlight, people already know exactly what they think of Diane

:39:16.:39:20.

Abbott, this flare up tells us not much about her. But the reaction to

:39:20.:39:25.

it reveals plenty about the ever- sensitive issues of race relations

:39:25.:39:30.

in this country. This, afterall, is the week in

:39:30.:39:36.

which two white men were jailed for the murder, 18 years ago, of the

:39:36.:39:39.

black teenager Stephen Lawrence. It was but a partial settlement of the

:39:39.:39:45.

case. Other suspects remain free. But the trial has revived some of

:39:45.:39:48.

the intercommunity tensions felt at the time.

:39:48.:39:52.

It appears to me there is a bit of a backlash, and it is something we

:39:52.:40:00.

have seen before, we have seen it when the racial relations acts was

:40:00.:40:09.

publish as well. It seems we get a very entrenched views coming across

:40:09.:40:17.

and people going too far in enforcing race relations act and

:40:17.:40:22.

now white communities won't be supported.Le This burn us alive.

:40:22.:40:25.

The feeling of unfair abandonment by white working-class communities,

:40:26.:40:29.

was identified in a report about race relations for Bradford City

:40:29.:40:34.

Council, shortly before riots broke out there in 2001.

:40:34.:40:40.

Over a period of time, there has been a neglect of those who are

:40:40.:40:45.

poor and white in our urban areas, and rural areas. And I think

:40:45.:40:49.

because we haven't given sufficient attention to that, there is an

:40:49.:40:56.

inclination for resentment to build, and for people to be resentleful of

:40:56.:41:01.

initiatives aimed at -- resentful of initiatives aimed at dealing

:41:01.:41:06.

with black communities. The fast flowing nature of Twitter ensures

:41:06.:41:09.

the spark caused by Diane Abbott's comments will fade. In its wake,

:41:09.:41:13.

this week especially, the tough questions about how we all live

:41:13.:41:18.

together and treat each other, will not be so lightly set aside.

:41:18.:41:24.

With me now the broadcaster and civil rights activist Darcus Howe,

:41:24.:41:31.

and the director of British further, a new think-tank. Was Diane Abbott

:41:31.:41:36.

right to apologise? I got about ten phone calls from friends, activists,

:41:37.:41:42.

non-activists, and all them black, they said what is she apologising

:41:42.:41:47.

with about? That is what surpriseded me. Who is she ale poll

:41:47.:41:54.

guiseing to? Miliband is nowhere and doesn't have the experience of

:41:54.:41:58.

organising working people as Diane Abbott. You don't think she should

:41:58.:42:02.

have apologised? I don't know for what, I will meet her and she will

:42:02.:42:07.

explain it to me. She said divide and rule is part the strategy of

:42:07.:42:11.

political whites, and I tell you how it happens the to this.

:42:11.:42:17.

didn't say political whites? Whites, she will say they like their own

:42:17.:42:23.

type of black. You understand that? I think she's right, I'm glad she

:42:23.:42:27.

has apologised, it is crass and offensive, it was a crude

:42:27.:42:33.

stereotype white people. She didn't mean to that, I'm sure as she said,

:42:33.:42:37.

stereotype all white people, as that was the natural reading of it,

:42:37.:42:40.

she should withdraw. She said it was out context, I think it is

:42:40.:42:46.

worse in context. She was talking to a black journalist who made a

:42:46.:42:49.

cogent point. This issue of community leaders I have some

:42:49.:42:52.

problems with that, who is representing who, who he decides it.

:42:52.:42:56.

It it is a policing of debate within black communities about

:42:56.:42:59.

black communities that says you can't say that in public, that is

:42:59.:43:06.

divide and rule, you are plauge into a white agenda -- playing into

:43:06.:43:11.

a white agenda. Of course not All Black people think the same as

:43:11.:43:14.

everything, that is because, you were campaigning against racism

:43:15.:43:21.

before the -- I was born, the games you played before were more diverse,

:43:21.:43:25.

we should welcome the process as well as seeing it is not complete.

:43:25.:43:28.

I like when somebody tells me something nice about myselfment

:43:28.:43:33.

you turn it around, if it was a white MP and they made a sweeping

:43:33.:43:36.

generalisation about black people, they would almost certainly be out

:43:36.:43:41.

of a job? Why if it was a white person, no white person ever said

:43:41.:43:46.

it. If they say it, I have to wait and see it who says it where and

:43:46.:43:51.

why and when the you can't just say if it was a white person. It it is

:43:51.:43:57.

not logical. I find that Diane Abbott, at this time, is crucial,

:43:57.:44:03.

at the time when Doreen Lawrence and they and us have won that

:44:03.:44:10.

campaign, Diane is itching to speak, but she has to...It Sound like you

:44:10.:44:14.

are excusing what was bluntly a stupid thing to friend? She is my

:44:14.:44:18.

comrade and French, I would have said the same thing. I would have

:44:18.:44:22.

told Miliband to go to hell. Do you think this is basically a storm in

:44:22.:44:27.

a tea cup, on a fairly slow news day, with somebody who has had form

:44:27.:44:30.

before? It is a question of think before you tweet. I love twittwiter

:44:30.:44:35.

to bits, it is not the place to have nuanced discussions. The

:44:35.:44:40.

outrage goes tooer far asle well, apologise, withdraw, move on and

:44:40.:44:44.

have -- as well, apologise, withdraw, and move on and have a

:44:44.:44:47.

serious discussion. The big serious issues we have seen with Stephen

:44:47.:44:51.

Lawrence. We are having a shouting match where people are outraged.

:44:51.:44:57.

Let's have a conversation. We saw in the report there was talk about

:44:57.:45:00.

the sense of poor, white isolation as being one of the reasons,

:45:00.:45:05.

possibly in the backlash from the Lawrence laorn conviction, do you

:45:05.:45:09.

buy that this week? -- Stephen Lawrence conviction this week, do

:45:09.:45:12.

you buy that this week? There is a problem, but the real problem is

:45:12.:45:17.

you don't have to choose. You can either deal with the racism

:45:17.:45:21.

affecting the black community or the exchugs of the white community,

:45:21.:45:25.

we want fair communities. You were probably the first person

:45:25.:45:31.

to say a multiculturalism where white people have no role except as

:45:31.:45:41.
:45:41.:45:42.

oppressors won't get us to good society. Nobody heard me say that,

:45:42.:45:46.

Diane came into the Labour Party under black sections because the

:45:46.:45:49.

Labour Party couldn't have black MPs. They fought and campaigned,

:45:49.:45:53.

she became, on that issue alonement the black community, for the first

:45:53.:45:57.

time in human history in this country could rely on someone who

:45:57.:46:03.

knew them, where they came from, who didn't have to go...What Do you

:46:03.:46:13.

make of the reaction, the response to her tweet, do you think this is

:46:13.:46:19.

a febrile of Twitter? It will go away. What concerns me Diane is in

:46:19.:46:23.

a Shadow Cabinet with people who are very inferior to her

:46:23.:46:27.

politically, she is minister of public health, and they go out and

:46:27.:46:32.

speak about blacks, and she has to sit there, waiting to listen, to

:46:32.:46:37.

what the rest of them have to say, which amounts to nothing.

:46:37.:46:40.

I have to leave it there. Just before we go. Let me take you

:46:40.:46:45.

through the front pages of thep papers.

:46:45.:46:51.

The picture of Marylin Monroe, which I will show you later, the

:46:52.:47:01.
:47:02.:47:16.

which I will show you later, the The American photo journalist died

:47:16.:47:21.

at the age of 99. This is a reminder of some of her most iconic

:47:21.:47:31.
:47:31.:47:57.

Good news. The worst of the storms dying down now. Much lighter winds

:47:58.:48:02.

to end the week, it will be a pleasant start to the day, a bit

:48:02.:48:06.

chilly. Sunshine becoming more confined to

:48:06.:48:10.

the eastern half. Further west cloudier with outbreaks of rain.

:48:10.:48:14.

Mid-afternoon across parts of the Midlands, brightness hanging on.

:48:14.:48:20.

Cloudy, not spoiling things. In the south-east a fine day.

:48:20.:48:24.

Temperatures struggling up to seven or eight. Cloudier across parts of

:48:24.:48:28.

South-West England, the odd spot rain in the breeze. For walls as

:48:28.:48:32.

well. After a bright start will tend to cloud over with dampness 0

:48:32.:48:36.

toen the day. The wind, as I say, nothing like -- to end the day. The

:48:36.:48:41.

wind nothing like we have seen. In Northern Ireland we will see

:48:41.:48:45.

outbreaks of rain turning up, wet across the western Highlands and

:48:45.:48:49.

island. To the east some dry and brighter weather will hang on for a

:48:49.:48:53.

good part of the day. Further ahead into the weekend. Some hours across

:48:53.:48:57.

the North West. But the emphasis on bright and breezeyo conditions

:48:57.:49:01.

through this weekend. Both -- breezy conditions through the

:49:01.:49:05.

weekend. The winds not as strong. One or two showers around, many

:49:05.:49:08.

places having a fine weekend, plenty of sunshine from time to

:49:08.:49:12.

time the The picture on Saturday, a chilly start to the day. The

:49:12.:49:16.

With Emily Maitlis. As economic bears point to cracks in the economy, Jim O'Neill of Goldman Sachs puts the case for the bulls. Justin Rowlatt sees the booming economy in Brazil.


Download Subtitles

SRT

ASS