:00:08. > :00:12.Tonight, the Government has promised to crack down on tax
:00:12. > :00:16.avoidance, yet Newsnight can reveal how it hired a senior public
:00:16. > :00:22.servant on a deal toe minimise his tax bill.
:00:22. > :00:28.-- to minimise his tax bill. Students are already annoyed about
:00:28. > :00:32.the massive increase in fees, but the man who runs the Student Loans
:00:32. > :00:36.Company, had been given a deal by the Government, to avoid tax
:00:36. > :00:41.liability. It is serious, a public servant, perhaps more than anyone
:00:41. > :00:46.else, an employee of the state and Government, ought to be paying all
:00:46. > :00:51.their taxes. How could the Government endorse
:00:51. > :00:54.such an arrangement, where now all that talk of how we're all in it
:00:54. > :01:00.together. Gooden God may have lost his
:01:00. > :01:04.Knighthood, but why should the buck stop there?
:01:04. > :01:08.Pakistan spent the day trying to shake off accusations in a NATO
:01:08. > :01:12.report that it supports the Taliban. What do you think is the most
:01:12. > :01:16.striking ref laugs in the report? It is based -- revelation in the
:01:16. > :01:19.report? This is based on interviews with 4,000 captured Taliban
:01:19. > :01:22.fighters. They think they are winning, of course, there are some
:01:22. > :01:26.signs they might be right. They call this batting for Britain, when
:01:26. > :01:36.the Prime Minister went to India saying aid would generate trade.
:01:36. > :01:39.
:01:39. > :01:44.Has his strategy now been shown to We are, as we have been repeatedly
:01:44. > :01:48.told by this Government, all in this together. Unless, apparently,
:01:48. > :01:51.the Government thinks you're not in it with everyone else. A Newsnight
:01:51. > :01:55.investigation has discovered that cabinet ministers agreed to an
:01:55. > :01:58.arrangement by which one of the country's best paid public servants
:01:58. > :02:02.was able to reduce his tax liability by tens of thousands of
:02:02. > :02:06.pounds. The Government is now trying to
:02:06. > :02:10.find out how many other people it might have agreed similar terms for.
:02:10. > :02:16.The official in question is the boss of the Student Loans Company,
:02:16. > :02:23.whose job, of course, involves making sure others pay their fair
:02:23. > :02:27.share. Richard Watson reports now. There are some people who seem to
:02:27. > :02:31.believe that not paying their fair share of tax is a lifestyle choice,
:02:31. > :02:36.not true. At a time of acute national
:02:36. > :02:42.austerity, the issue of tax avoidance has never been more
:02:42. > :02:46.charged. Millions of people are angered when they feel there is a
:02:46. > :02:50.wealthy group who can pay an army of tax accountants to get out of
:02:51. > :02:54.paying their fair share of tax. Government wants to take action.
:02:54. > :02:59.need to take a tough approach on wealthy individuals and individual
:02:59. > :03:02.companies, to make sure they pay their fair share. Newsnight has
:03:02. > :03:06.discovered that Government officials have helped one of the
:03:06. > :03:10.most senior public servants in the land to avoid paying tax.
:03:10. > :03:14.The man in question is Mr Ed Lester, who was brought in a couple of
:03:14. > :03:23.years ago to bail out the crisis- striken Student Loans Company. He's
:03:23. > :03:28.now one of the country's top public servants, paid by the taxpayer. His
:03:28. > :03:33.salary is worth �200,000 a year. He has struck an extraordinary deal,
:03:33. > :03:36.it is not paid into a bank account, like any other employee, minus tax
:03:36. > :03:42.and national insurance, it is paid into a private service company,
:03:42. > :03:46.based at his home address, here on the River Thames. On our kal
:03:46. > :03:50.layings he would be tens of thousands -- calculation, he would
:03:50. > :03:55.be tens of thousands pounds better off. There is no the Civil Service
:03:55. > :04:00.can act in a way that doesn't set an example for the rest of the
:04:00. > :04:06.world. So you will investigate? the allegations are true we will
:04:06. > :04:10.need to investigate. What is extraordinary is the customs and
:04:11. > :04:15.revenue officials agreed the deal. Why would a public body working
:04:15. > :04:18.directly for a Government department enter into such a deal.
:04:18. > :04:21.In 2009, the Student Loans Company was in crisis, they needed someone
:04:21. > :04:25.to tackle the crisis. Thousands of telephone calls were going
:04:25. > :04:29.unanswered, grants hadn't been paid. It was a complete mess, students
:04:29. > :04:34.weren't getting their money on time. There was a huge backlog of
:04:34. > :04:39.applications. There were a lot of calculation that were wrong. It was
:04:39. > :04:44.a complete mess. We were looking to the organisation, the Student Loans
:04:44. > :04:49.Company, to very quickly sort it out. Ed Lester seemed just the man
:04:49. > :04:54.for the job. He had a strong track record in both the private and
:04:54. > :04:57.public sectors. Here he is, to the left of the universities minister,
:04:57. > :05:01.David Willetts, after a spell as a consultant to Government, he was
:05:01. > :05:04.approached to lead the Student Loans Company in 2010, via a
:05:04. > :05:09.specialist recruitment company. It was David Willetts who was
:05:09. > :05:13.ultimately responsible for his appointment.
:05:13. > :05:16.This correspondent for the investigative journalism website,
:05:16. > :05:20.obtained a dossier of documents under the Freedom of Information
:05:20. > :05:29.Act. They reveal every twist and turn of negotiations to recruit Ed
:05:29. > :05:33.Lester for the job. What was really amazing was, he does not pay any
:05:33. > :05:37.tax or national insurance at source, yet, he is the chief executive, he
:05:37. > :05:40.is the accounting officer to parliament, he's the top man who
:05:40. > :05:45.chases hundreds of thousands, if not millions of students to pay
:05:45. > :05:50.back their loans. But some how he's not got a full-time job.
:05:50. > :05:54.The scanning was, as I described, freezing and not working.
:05:54. > :05:56.months into the job as interim chief executive, Ed Lester appeared
:05:56. > :06:01.before the Public Accounts Committee to explain to MPs how he
:06:01. > :06:09.was reforming the organisation. He also fielded questions about his
:06:09. > :06:16.pay. How much are you costing the taxpayer? My daily charge is �900 a
:06:16. > :06:19.day. That's on a normal working week of five days a week. Yes.
:06:19. > :06:25.But there was no mention of precisely how Mr Lester was being
:06:25. > :06:28.paid, or the cost of his 400-mile commute to the Student Loans
:06:28. > :06:32.Company office in Glasgow. While he shutled from Buckinghamshire to
:06:32. > :06:36.Scotland and back, his pay was transferred to the recruitment firm
:06:36. > :06:40.who hired him, they sent it on to his private service company, the
:06:40. > :06:43.one he runs from his house on the Thames. The arrangement isn't
:06:43. > :06:49.illegal, but the tax savings could be huge. With reduced national
:06:49. > :06:54.insurance payments, and other perks to. Government officials knew the
:06:54. > :06:59.deal was all about saving Ed Lester tax. In one e-mail, a senior civil
:06:59. > :07:06.servant at business innovation and skills, notes his deal is tax
:07:06. > :07:10.efficient. It was -- It was a good deal for Mr
:07:10. > :07:14.Lester, but was it within the tax rules. Some awkward questions
:07:14. > :07:19.emerged about his tax status. Could he be full-time chief executive, in
:07:19. > :07:23.charge of billions of public money, and not an employee, paying tax in
:07:23. > :07:28.the usual way. The Student Loans Company sought
:07:28. > :07:34.advice from their auditors, KPMG, they said Ed Lester should be an
:07:34. > :07:37.employee, an awkward conclusion. The senior civil servant handling
:07:37. > :07:41.Ed Lester's employment said he thought it needed to be challenged.
:07:41. > :07:45.The Student Loans Company went back to the auditors, and KPMG offered a
:07:45. > :07:48.second piece of advice. This time they said it might be possible to
:07:49. > :07:51.persuade Revenue & Customs to grant a special concession, permitting Ed
:07:51. > :07:54.Lester to be paid through his personal service company. Sure
:07:54. > :07:59.enough, the revenue wrote to the Student Loans Company, confirming
:07:59. > :08:04.the deal had been approved. The tax inspector wrote, he's happy to
:08:04. > :08:07.accept the fees paid in respect of Mr Lester's duties may be paid
:08:07. > :08:12.gross. In other words, without tax deducted at source.
:08:12. > :08:16.I think it is very odd. You would expect a civil servant, who is
:08:16. > :08:22.doing a full-time job, appointed to an office, and indeed an accounting
:08:22. > :08:27.officer, which is an anorackish, technical term, but a person who
:08:27. > :08:31.has legal responsibility for how money is spent in the body, to be
:08:31. > :08:35.paid normally with PAYE like anybody else. This story gets more
:08:36. > :08:38.intriguing, three months after the revenue approved the deal, the
:08:38. > :08:42.Student Loans Company decided they liked Ed Lester so much theyn't
:08:42. > :08:46.waed to take him on full-time. Surely as -- wanted to take him on
:08:46. > :08:50.full-time. Surely as full-time chief executive he would have to go
:08:50. > :08:58.on the books as a tax-paying member of staff.
:08:58. > :09:03.His total pay pact, including po news, would be �200,000 a year,
:09:03. > :09:06.with �28,000 on top for commuting to Glasgow and hotel stays. For the
:09:06. > :09:13.second time they agreed to pay him through the company he runs, from
:09:13. > :09:17.his home on the Thames. We asked the former Inland Revenue tax
:09:17. > :09:22.inspector, now a tax accountant, to model how much Ed Lester will be
:09:22. > :09:28.saving in tax. If he's employed he's taking a salary of �182,000,
:09:28. > :09:38.against that he has income tax of �69,000, and employees' national
:09:38. > :09:42.insurance of �7,021. His take home pay is �105,979. A lot of money,
:09:42. > :09:52.but how much better off would he be paid through his private company?
:09:52. > :09:57.So, in his pocket, he would have had �144,987. Quite a difference?
:09:57. > :10:01.significant difference. That's a difference of �40,000.
:10:01. > :10:05.These figures are based on the assumption that Ed Lester is
:10:05. > :10:10.seeking to minimise his tax bill. We can't be sure of the precise
:10:10. > :10:14.figures, because he declined to ask any of our specific questions. We
:10:14. > :10:17.asked whether he disputes that the arrangements were to minimise tax.
:10:17. > :10:22.We asked if it was appropriate for him to be paid through his own
:10:22. > :10:27.company and not PAYE, again, no answer. We asked him how much his
:10:27. > :10:37.personal service company pays in tax, no many to that either. The
:10:37. > :10:39.
:10:39. > :10:43.So how much did ministers really know about Ed Lester's pay deal? A
:10:43. > :10:46.letter from the Student Loans Company to the minister for
:10:46. > :10:56.universities suggests that David Willetts was well informed. The
:10:56. > :11:08.
:11:08. > :11:12.The following week, David Willetts So Government ministers had, in
:11:12. > :11:17.effect, rubber stamped a deal to help a senior civil servant with
:11:17. > :11:21.his tax efficiency. The Department of Disinnovation and
:11:21. > :11:31.skills told us, personal -- Department of Business innovation
:11:31. > :11:41.They emphasised that the deal had been approved by-election Election.
:11:41. > :11:44.
:11:44. > :11:47.The Treasury is clearly concerned by our evidence. In a detailed
:11:47. > :11:52.statement, Danny Alexander has confirmed he's called for an urgent
:11:52. > :11:57.review, and his written to every single a second across Government,
:11:57. > :12:00.asking whether similar deals exist. There is to be an urgent internal
:12:00. > :12:04.audit of such appointments completed by the end of March. It
:12:04. > :12:08.will consider the appropriateness of these deals, and consider the
:12:08. > :12:12.wider costs of lost revenue to the Exchequer, when considering value
:12:12. > :12:17.for money. If such deals are uncovered, the Treasury says it
:12:17. > :12:21.will seek to unwind them. What we would want to see is whether there
:12:21. > :12:24.was a deliberate attempt to set up a tax avoidance scheme. The Public
:12:24. > :12:29.Accounts Committee will scrutinise the evidence. The chair was shocked
:12:29. > :12:34.when we showed her our dossier. is very serious. A public servant,
:12:35. > :12:40.perhaps more than anybody else, an employee of the state, and an
:12:40. > :12:46.employee of the Government, ought to be paying all their taxes in an
:12:46. > :12:52.open, proper and transparent way. Any engagment in tax avoidance by
:12:52. > :12:57.full-time, civil servants, is not acceptable.
:12:57. > :13:02.There is no sign that Mr Lester will be forced to pay income tax as
:13:02. > :13:05.a normal employee, the Treasury seems unable to change his contract,
:13:05. > :13:09.which runs until 2013. But at a time when Government is urging we
:13:10. > :13:13.are all in this together, these revelations are causing
:13:13. > :13:17.considerable unease, the question now is how many other Ed Lester's
:13:17. > :13:21.will be uncovered by the Danny Alexander review.
:13:21. > :13:25.No-one from either the Government or the Student Loans Company wanted
:13:25. > :13:28.to come and tell us why this was the best way of doing things. But
:13:28. > :13:33.joining us now to look at what was going on, we do have Richard Bacon,
:13:33. > :13:35.the Conservative MP, who sits on the Public Accounts Committee, Liam
:13:35. > :13:38.Burns, the President of the National Union of students and
:13:39. > :13:41.Nicola Preston who is a tax barrister from number five chambers.
:13:41. > :13:45.You have written to the Prime Minister, what do you want him to
:13:45. > :13:49.do? I want him to launch a full investigation toe get to the bottom
:13:49. > :13:55.of this, and to answer -- to get to the bottom of this, and answer the
:13:55. > :14:01.question at the end of your report, how many Ed Lesters are there. I
:14:01. > :14:04.saw there was a chief executive officer getting twice the salaries
:14:04. > :14:08.normally, and paid through a personal company. One wonders how
:14:08. > :14:11.much more is going on in the public sector. It is plainly unsuitable
:14:11. > :14:15.and inappropriate, it shouldn't be happening, we have to stamp it out.
:14:15. > :14:18.Even before we aired this report tonight, we have had two e-mails
:14:18. > :14:21.from people suggesting both that it was going on in a particular area
:14:21. > :14:25.of local Government, and it was going on in another area of
:14:25. > :14:28.national Government, so we don't know, but we must assume if there
:14:28. > :14:32.is an investigation no-one else in Government is quite sure? Indeed,
:14:32. > :14:36.we have a very large public sector, it is a �700 billion organisation,
:14:36. > :14:42.we have the health service, local Government, hundreds of quangos of
:14:42. > :14:46.various kinds, one fears this could be more widespread. It has been
:14:46. > :14:51.done in each case on a localised I would sis, and we need to get to
:14:51. > :14:56.the both bottom of it. Are you surprised -- to the bottom of it.
:14:56. > :15:02.Are you surprised by this? What surprises me is the HMRC gave the
:15:02. > :15:07.concession sought, in order to pay Mr Lester gross. It is unusual?
:15:07. > :15:13.is unusual in the first instance, the concession was first applied
:15:13. > :15:16.for when he was on the temporary, the interim appointment. That
:15:16. > :15:20.concession was when extended when he entered into the two-year
:15:20. > :15:26.appointment. It is unusual in someone working full-time, is that
:15:26. > :15:30.the idea? The idea behind the concession was to cover
:15:30. > :15:35.circumstances, such as directors, where trust companies might need,
:15:35. > :15:42.or trust directors might needing to in and sit on a board for a certain
:15:42. > :15:46.period of time. But they weren't employed by the company as such.
:15:46. > :15:54.Certainly the concession that does apply in wider circumstances, but
:15:54. > :15:58.in a case such as this, Mr Lester and his duties and the requirements
:15:58. > :16:05.of his appointment, all seem very consistent with him being an
:16:05. > :16:12.employee of the SLC rather than anyone else. Liam Byrne, whatever
:16:12. > :16:15.you may think of his personal tax arrangement, he did sort out the
:16:15. > :16:19.Student Loans Company, people got their loans? I don't think I'm
:16:19. > :16:24.being too demanding to think it is OK to have someone that is both
:16:24. > :16:27.competent and pays their taxes. I don't think the two are mutually
:16:27. > :16:32.exclusive concepts. There is three things from our point of view. At a
:16:32. > :16:36.time when the Government are saying they don't have the money to pay
:16:36. > :16:41.for state education, and retracting fees. The irony that the person
:16:41. > :16:44.taking our fees is purposely avoiding taxation is a kick in the
:16:44. > :16:47.teeth. Personal stewardship, we have David Willetts, minister for
:16:47. > :16:51.universities, actively trying to get, for profits, into the
:16:51. > :16:58.university sector. If you can't spot something that I think is a
:16:58. > :17:01.scam, so obvious is this, I have no confidence about you bringing for
:17:01. > :17:04.profits in. This is wider than students, this is a generational
:17:04. > :17:07.thing. When we are told the state can't afford to pay your education
:17:07. > :17:14.any more, your education maintenance allowance, that went on
:17:14. > :17:19.beer and CDs, didn't it. The fact we are all some benefit scroungers,
:17:19. > :17:23.don't look to our sector of society, there is somewhere else in society
:17:23. > :17:28.you should look. You used the word "scam", there is nothing wrong
:17:28. > :17:32.necessarily, it was agreed? I'm not calling it illegal, I don't think
:17:32. > :17:37.many people sitting at home would think, hang on, someone appointed
:17:37. > :17:41.on an interim basis, kept on long- term, on a tax efficient basis. No,
:17:41. > :17:45.I'm sorry, that is a scam of public money. I agree with that, it might
:17:45. > :17:53.not be unlawful. It could be, we will look at that. All the people
:17:53. > :17:58.in the film working in the Student Loan Company, as employee for that
:17:58. > :18:02.company, have to pay their taxes. My employees pay tax and do it to
:18:02. > :18:06.have schools and hospitals, I don't think they do it so civil servants
:18:06. > :18:10.can strive to make tax efficient arrangements for a small number of
:18:10. > :18:13.senior civil servants. This was a mistake on the part of David
:18:13. > :18:18.Willetts and Danny Alexander? was certainly a mistake on the part
:18:18. > :18:26.of whoever made the decision. Not having had the chance to know how
:18:26. > :18:30.much they genuinely knew about the, tent of their involvement. That is
:18:30. > :18:33.an important question, the public scrutiny, who was looking at the
:18:33. > :18:37.decisions, a lot of difficult questions will come David
:18:37. > :18:40.Willetts's way on this question. goes to how serious your leader was
:18:41. > :18:43.when talking about cracking down on companies that seek to avoid tax?
:18:43. > :18:47.The fact of the matter is there have been a lot of arrangements,
:18:47. > :18:51.over many years, under Governments of both parties to create
:18:51. > :18:57.situations that are tax efficient for certain individuals. It is very
:18:57. > :19:03.disful, we want a situation, I'm in favour -- distasteful, I'm in
:19:03. > :19:07.favour of lower tax, but we should all apply to the same rules. I made
:19:07. > :19:13.a cheque last week to HMRC, I didn't want to, but it is a law.
:19:13. > :19:16.You as a tax practitioner share that view? The rules are there so
:19:16. > :19:22.that people can organise their affairs to pay as little tax as
:19:22. > :19:26.possible, but it is clear in this case, firstly, that there has been
:19:26. > :19:32.no transparency about what has happened, and secondly, as I have
:19:32. > :19:37.already said, the concession that HMRC have given the SLRC, has been
:19:37. > :19:39.extended over a two-year contract. Is this the sort of thing the
:19:39. > :19:44.Public Accounts Committee ought to investigate? I agree with the
:19:44. > :19:48.chairman in the clip, that should the facts prove as they appear to
:19:48. > :19:52.be, we will need to take a look at it. I can't speak for the whole
:19:52. > :19:56.committee. Would you like to haul David Willetts before you? We don't
:19:56. > :20:00.normally have ministers in front of us, this may be an occasion we need
:20:00. > :20:05.to talk wider than the normal officials. We will want to talk to
:20:05. > :20:08.the officials writing the e-mails saying this isn't good enough, I
:20:08. > :20:12.disagree with the opinion from the accounting firm, we should try
:20:12. > :20:17.harder. It is obvious that a number of people were striving hard to
:20:17. > :20:21.create a tax efficient arrangement, that would have seemed odd toe most
:20:21. > :20:24.people. He may have lost his reputation as a banker, now he may
:20:24. > :20:28.have lost his Knighthood. But Fred Goodwin is experiencing a new
:20:28. > :20:32.career, as a football. He was booted around Westminster like an
:20:32. > :20:37.inflated pig's bladder today, as one person after another tried to
:20:37. > :20:42.use him to score points. Labour MPs who once fawned on him and his pals,
:20:42. > :20:50.wonder how many more should be simply dishonoured. Accusations of
:20:50. > :20:54.hypocrisy flew back and forth in the Commons. We were in the stands.
:20:54. > :20:57.Fred's been shredded, who's next? There are plenty more candidates.
:20:57. > :21:01.At Westminster today some senior voices were warning that the
:21:01. > :21:05.Government has created a mess. I'm concerned that there doesn't
:21:05. > :21:09.seem to have been much process here. I understand why people are angry
:21:09. > :21:13.with Gooden good, I'm not here to defend him -- Fred Goodwin, I'm not
:21:13. > :21:17.here to defend him, he was the author of his own misfortunes. But
:21:17. > :21:23.you go after one individual, and there was more than one person
:21:23. > :21:26.involved in this, there is a process that is obscure, many of us
:21:26. > :21:30.hadn't heard of the Forfeiture Committee, and it meets a week
:21:30. > :21:33.after the announcement, and he's striped of the Knighthood. It is a
:21:33. > :21:36.similar thing the Government is doing at RBS, going after one
:21:36. > :21:41.individual. There doesn't seem to be principles against which we can
:21:41. > :21:45.judge people N a country like our's, where we pride ourselves in the
:21:45. > :21:50.rule of law and due process, that is big problem for us. The point is,
:21:50. > :21:53.of course, the former Sir Fred, was not alone in his mistakes. The
:21:53. > :21:59.Business Secretary today says the case is useful as a beginning, a
:21:59. > :22:05.start of the differenciation between good and bad dankers?
:22:06. > :22:12.does help to establish the point that there were some bankers who
:22:12. > :22:15.were highly cupable, he was one of them, and they need to make a
:22:15. > :22:22.contribution. If we were in the business of
:22:22. > :22:25.degonging people, who might we start with? What about Sir tomorrow
:22:25. > :22:32.McKillop, knighted for contributions to the drug industry,
:22:32. > :22:35.he was chairman of RBS when the bank went bust. Sir kl lum
:22:36. > :22:38.McCartney knighted for services to the finance industry, he was in
:22:38. > :22:44.charge of the Financial Services Authority when all of those banks
:22:44. > :22:49.went bust. And while we're on the subject, what about Alan Greenspan,
:22:49. > :22:53.given an honourary Knighthood in 2002, the former Fed chairman was
:22:53. > :22:56.given his for contribution to global economic stability. You
:22:56. > :23:01.might have noticed that ain't looking so clever any more.
:23:01. > :23:05.The only way you can ever guarantee that you won't make mistakes is not
:23:05. > :23:11.to try anything. If that is what we want to engineer in people it is a
:23:11. > :23:14.very bad idea. You need people who will make decisions that involve
:23:14. > :23:19.risk as they all do. In those circumstances you would have to
:23:19. > :23:22.hand back your pay in the past, in some cases, or your honours n this
:23:22. > :23:25.particular case, then I would suggest they start giving out
:23:25. > :23:28.honours on elastic rather than ribbon, they will be pulling an
:23:28. > :23:32.awful lot back, people do make mistakes. It says something about
:23:32. > :23:36.where the politicians think the public is on the Goodwin Knighthood,
:23:36. > :23:40.that at Prime Minister's Questions today, not one opposition MP
:23:40. > :23:44.accused the Government of using Gooden God as a smoke screen.
:23:44. > :23:49.Although that's what many of -- Fred Goodwin as a smoke screen.
:23:50. > :23:55.Although that is what many of them think. His name wasn't even
:23:55. > :23:58.mentioned, instead the Labour leader pushed for more transparency
:23:58. > :24:03.on pay. Why is the gentleman in favour of things now in opposition
:24:03. > :24:07.of things he never did in Government, some might call it
:24:07. > :24:11.opposition, others hypocrisy. will tell him what hypocrisy is, it
:24:11. > :24:16.is saying he will stop a million pound bonus to Stephen Hester, and
:24:16. > :24:22.then nodding it through. I have to say to him, I think we
:24:22. > :24:25.have now heard it all. Because he says that the class war against the
:24:25. > :24:29.bankers is going to be led by him and his cabinet of millionaires, I
:24:29. > :24:33.don't think it is going to wash, frankly. All of this is being
:24:33. > :24:37.watched with concern in the City. Today there was a conference on the
:24:37. > :24:41.subject of rebranding banking. If you came along as an outsider, you
:24:41. > :24:44.had to be ready with a face. Because, sooner or later, someone
:24:45. > :24:49.was going to tell you that, you know, a million pounds isn't
:24:49. > :24:52.actually that much for a bonus. And you have to decide whether to nod
:24:52. > :24:57.like an unshockable man of the world, or stair at them like they
:24:57. > :25:01.are a lunatic. We have to accept the fact that we are living in a
:25:01. > :25:06.free, global market, that is not saying pay them all football-star
:25:06. > :25:11.salaries, but they have to be well paid. It has just gone too far,
:25:11. > :25:17.with the whole crisis being blamed entirely on the bankers, because a
:25:17. > :25:20.few behaved wrongly. The reality is that regulateers, central banks and
:25:20. > :25:26.politicians, were at least as much to blame for the banking crisis as
:25:26. > :25:30.the banks were. The Government has, undoubtedly, felt the pressure from
:25:30. > :25:33.this "why only Sir Fred's Knighthood in question". This
:25:33. > :25:37.afternoon they promised to do something about the fact, that
:25:37. > :25:41.Lords who are convicted criminals can keep their peerages. Get ready
:25:41. > :25:45.for a few more candidates for the shredder.
:25:45. > :25:49.David Miliband, the former Foreign Secretary, beaten by his brother
:25:49. > :25:52.for the leadership of the Labour Party, has decided his party needs,
:25:52. > :25:57.what he calls, restless re-thinking of what it is about, if it is going
:25:57. > :26:02.to win power again. He's careful, obviously, not to criticise his
:26:02. > :26:08.Government, but his contribution got, inevitably, political
:26:08. > :26:15.correspondents like David Grosseto, in a mild lather -- Grossman, in a
:26:15. > :26:19.mild lather. This is a an argument of a seven-point piece in a small
:26:19. > :26:24.circulation magazine, 7,000 copies sold. Why the fuss? I hesitate to
:26:24. > :26:29.say this with such large pictures of the Milibands over your shoulder,
:26:29. > :26:35.but not everyone in Westminster thinks that Ed Milliband is doing
:26:35. > :26:39.such a bang-up job as leader. In that context, anything his brother
:26:39. > :26:44.says except that Ed is a genius and can't help to lead us to victory in
:26:44. > :26:48.the general, has to be interpreted. In this densely-argued article for
:26:48. > :26:53.the New Statesman, there is plenty to interpret. Mr Miliband senior
:26:53. > :26:57.says Labour has a tendency to go towards reassurance in opposition,
:26:57. > :26:59.reassurance about our purpose, relevance and position, even our
:26:59. > :27:03.morals, reassurance Labour feels good, but feeling good is not the
:27:03. > :27:07.same as doing good. He says his brother gets this, that is why
:27:08. > :27:11.there is a policy review. He gives his brother credit for keeping the
:27:11. > :27:15.party together, for unity, but he says you cannot come away from
:27:15. > :27:18.reading this article without getting the impression that he
:27:18. > :27:21.doesn't think, David Miliband doesn't think the party is going in
:27:21. > :27:25.the right direction. He says this towards the end, that it is a
:27:25. > :27:29.massive risk to say there isn't much to worry about in our approach,
:27:29. > :27:34.history is coming in our direction. But the reassurance tendency
:27:34. > :27:39.suggests anyone who disagrees has abandoned principle for power. The
:27:39. > :27:43.final thing that David Brand is saying in all of this, we shouldn't
:27:43. > :27:48.under-- David Miliband is saying, in all of this, is we
:27:48. > :27:51.underunderestimate him, he hasn't gone away, he hasn't given up on
:27:51. > :27:55.winning the next election. The Government in Pakistan has
:27:55. > :27:58.spent the day blustering it is not true its Intelligence Services are
:27:58. > :28:04.helping the Taliban. You can believe them or the NATO report in
:28:04. > :28:07.which the claim is made, which is based on 27,000 interrogations of
:28:07. > :28:10.Taliban, Al-Qaeda and other prisoners. The report wasn't
:28:10. > :28:15.intended for publication, because it is not only the Pakistan
:28:15. > :28:19.Government that faces embarrassment from the findings, the report also
:28:19. > :28:23.discloses that the low you are level of violence may not be, as
:28:23. > :28:26.claipltd, the result of NATO operations -- claimed, the result
:28:26. > :28:30.of NATO operations and Government resolutions. Is the fuss justified?
:28:30. > :28:34.It is in the sense this is this highly classified survey of the
:28:34. > :28:39.Taliban, what they think they have been doing, what they think they
:28:39. > :28:44.have been achieving over the past couple of years. The material on
:28:44. > :28:49.Pakistan, yes it is important and embarrassing, we have seen some
:28:49. > :28:52.very important disclosures of this kind before. High level ones from
:28:52. > :28:57.the US, I don't think that is where the meat is. The fascinating stuff
:28:58. > :29:01.is to do with the end game. The shifting tides of poir, the way the
:29:01. > :29:07.captured Taliban suggests people are looks towards NATO's exit,
:29:07. > :29:13.trying to cut deals, that comes across clearly in the report. They
:29:13. > :29:18.are talking to the Taliban, their resilience is evident, but also the
:29:18. > :29:28.flakiness of President Karzai's administration, as NATO forces draw
:29:28. > :29:30.
:29:30. > :29:40.Violence is dropping in much of the Afghan countryside, that may be
:29:40. > :29:42.
:29:42. > :29:46.These deals, suggest the report, show that Afghan Government
:29:46. > :29:49.officials are already working with the Taliban in much of the country.
:29:49. > :29:54.There is not much comfort for British or American field
:29:54. > :30:00.commanders either, because it looks at one or two areas, where they
:30:00. > :30:06.have been put anything a huge effort and concludes...$$NEWLINE
:30:06. > :30:11.Taliban governance appears to remain in effect. As for what
:30:11. > :30:21.happens after 2014, when ISAF, NATO's foreign troops are no longer
:30:21. > :30:25.
:30:25. > :30:30.fighting, the detainee interviews How does the disclosure of this
:30:30. > :30:33.report damage NATO? It is a classified assessment based on the
:30:33. > :30:39.intimate knowledge gained in the interrogation room. The fascinating
:30:39. > :30:43.thing, in terms of the border narrative, we have had for the last
:30:43. > :30:49.couple of years reports of progress, from the counter insurgency effort
:30:49. > :30:53.that NATO has been making. We hear violence has fallen by 40%, the
:30:53. > :30:57.British casualties have fall bin a bigger margin than that. NATO
:30:57. > :31:02.people have been saying this is due to our better counter insurgency,
:31:02. > :31:05.our more joined-up approach, our resource. From the Taliban
:31:05. > :31:10.prisoners you get a sense that in many areas they have turned down
:31:10. > :31:14.the violence, because they are also looking to a governance-based
:31:14. > :31:18.approach. They arele cooling things down and building relationships --
:31:18. > :31:24.they are cooling things down and building relationships with local
:31:24. > :31:30.tribesmen. They have had a stake in toning down the violence themselves.
:31:30. > :31:35.NATO responded vociferously. insurgency is on the back foot. We
:31:35. > :31:41.have pressurised them over the summer and taken vast amounts of
:31:41. > :31:46.land out of their hands. We have detained a number of them, and the
:31:46. > :31:51.interviews are an element of this report. We don't see any reason to
:31:51. > :31:57.take these findings of the investigation to reconsider or
:31:57. > :32:01.readjust our findings. Joining us now is Michael Semple, a former
:32:01. > :32:06.deputy EU envoy to Afghanistan, who was expelled from the country for
:32:06. > :32:11.talking to the Taliban. He's now at Harvard from where he joins us.
:32:11. > :32:15.Were you surprise bid anything in this report, Mr Semple -- surprised
:32:15. > :32:20.by anything in this report? I was pleased rather than surprised.
:32:20. > :32:23.Pleased that NATO is taking the trouble to listen to what these
:32:24. > :32:28.gentlemen are saying. They will have learned lots more useful
:32:28. > :32:33.things out of this, rather than the strange opinion polls they finance.
:32:33. > :32:42.Do you think the Taliban, to any extent, deluding themselves in what
:32:42. > :32:45.they are telling interrogators? That is a good question, when the
:32:45. > :32:49.fighters talk, of course there is an awful lot of bluster there. The
:32:49. > :32:54.position is not as rosy on the battlefield as they describe.
:32:54. > :32:58.However, if some of them actually believe this, this is what
:32:58. > :33:03.motivates them to go on and fight and be prepared to die. It does
:33:03. > :33:06.count what they think and say. assumption that is made on reading
:33:06. > :33:14.this accumulation of material, is that there is, in the way there is
:33:14. > :33:19.with the political parties, a coherence of view, and one ideology,
:33:19. > :33:28.and one agreed means of proceeding, is that actually true in the
:33:28. > :33:32.Taliban? Yes, and no. Of course people fight for various different
:33:32. > :33:36.reasons, and there are different factions inside the Taliban, but
:33:36. > :33:39.one important point to come out of this, is that these thousands of
:33:39. > :33:43.fighters have made it absolutely clear they anticipate that there
:33:43. > :33:47.will be a struggle for power. This is not just about fighting to get
:33:47. > :33:50.foreign troops to leave Afghanistan, this is about a struggle for power,
:33:51. > :33:59.which some of them perhaps deluding themselves, expect they can win,
:33:59. > :34:05.when NATO is off the scene. So what do you imagine to be the
:34:05. > :34:08.outcome, what will happen? Broadly, there are two scenarios as we go
:34:08. > :34:13.forward in Afghanistan over the next two or three years. Either
:34:13. > :34:16.there is the happy scenario, where the political process which is now
:34:16. > :34:22.tentatively getting under way, it leads to some kind of a deal,
:34:22. > :34:27.Taliban coming into the political system. And you have some kind of
:34:27. > :34:31.stability, as NATO draws down, or the other scenario, there isn't a
:34:32. > :34:35.deal, that NATO does draw down, the Taliban stay in the fight, and
:34:35. > :34:41.Afghanistan deteriorates in into civil war which could last for many
:34:41. > :34:45.years to come. Do you want to call it one way or the other? Well, I
:34:45. > :34:49.think, frankly, the continued conflict, the civil war is rather
:34:49. > :34:53.more likely than the happy outcome. There are still various levers that
:34:53. > :34:57.people in power can pull to increase the chances of getting a
:34:57. > :35:00.happenyo outcome and an end to the conflict in Afghanistan that people
:35:00. > :35:08.so desire. I'm sorry for the delay on the
:35:08. > :35:12.satellite there. We and many others have asked before why the
:35:12. > :35:22.Government takes hundreds of millions from British tax-payers to
:35:22. > :35:22.
:35:22. > :35:26.give India aid each year, when the country has a enviable growth and a
:35:26. > :35:29.space programme. It is thought to be good for British business. The
:35:29. > :35:33.example the Prime Minister gave was was attempts to sell warplanes to
:35:33. > :35:37.the Indian air force. Today's discovery that the Indians are
:35:37. > :35:43.showing their gratitude by buying French aircraft instead, is not
:35:43. > :35:45.what you would call a ringing endorsement of the strategy. Just
:35:45. > :35:53.after becoming Prime Minister, David Cameron went to India. The
:35:53. > :36:03.aim was to drum up trade. He went mobhanded, Dave's pos
:36:03. > :36:09.secluded George. What what Vince went along too? Companies operating
:36:09. > :36:12.out of Britain need to do so. Cabinet ministers included Andy,
:36:12. > :36:18.Andrew Mitchell, the development secretary. The aim of the trip was
:36:18. > :36:21.to boost exports, chiefly to sell the Indians Typhoon fighter planes,
:36:21. > :36:31.for his part, Mr Mitchell spoke of the significance of Britain's aid
:36:31. > :36:31.
:36:31. > :36:36.programme to India, reportedly adding:
:36:36. > :36:40.The meaning was fairly explicit, buy our aircraft and we will
:36:40. > :36:47.continue to provide you with aid. I think it was, as I said, it was not
:36:47. > :36:52.a very subtle way of saying that. Would deny that emphatically,
:36:52. > :36:55.saying there was not that leakage there? I don't expect anything else.
:36:55. > :37:01.In parliamentary select committee last week, Mr Mitchell explained
:37:01. > :37:06.how he saw his role. The specific point you make about Typhoon, is
:37:06. > :37:10.when I travel, I regard myself as a cabinet minister, batting for the
:37:10. > :37:16.whole range of British interests, not just development. And certain
:37:16. > :37:20.low, wherever I go I seek to promote British interests, in
:37:20. > :37:24.whatever form they come. The issue here is aid is supposed to be for
:37:24. > :37:28.the relief of poverty, and by law, it should not be used to gain
:37:28. > :37:32.commercial advantage. When Andrew Mitchell talks of aid and trade and
:37:32. > :37:36.relationships in the round, others say it shows you just doesn't get
:37:36. > :37:39.it. There is no round, and shouldn't be any round. We are
:37:39. > :37:42.extremely worried as to how the Government has been behaving on
:37:42. > :37:46.this. Over the last few years you have seen a perversion of British
:37:46. > :37:51.aid, it has been drawn away from the needs of recipient companies
:37:51. > :37:55.and the needs of the poor. Instead it is used more and more to serve
:37:55. > :38:00.the needs of British interest or strategic interests. In Afghanistan,
:38:00. > :38:04.Pakistan, the aid is needed in those countries, increasingly it
:38:04. > :38:11.has been used to back up British strategic and security interests,
:38:11. > :38:17.rather than the needs of the poor. What is wrong with that? It is the
:38:18. > :38:22.beginning of a slippery slope. There were questions raised as
:38:22. > :38:30.India's position as the leading recipient of British aid. With more
:38:30. > :38:36.billionares than Britain, and high GDP, they do they need millions in
:38:36. > :38:40.development cash? It is a controversial topic, India needs
:38:40. > :38:46.the aid because it is doing well economically. You have a lot of
:38:46. > :38:51.people surviving on less than �1 a day, very, very poor people?
:38:51. > :38:56.have people living on less than a dollar a day, the pound is
:38:56. > :39:03.ambitious. Out of every rupee, only 15% of it actually reaches the
:39:03. > :39:08.people it is meant to reach. The 85% is syphoned off by officials.
:39:08. > :39:12.Corruption is the problem. It is not that there is not enough money
:39:12. > :39:21.going around, or not enough food, or grain going around. It is just
:39:21. > :39:25.that it disappears into corrupt pockets.
:39:25. > :39:29.Mr Cameron may have batted for Britain with Mr Mitchell as his
:39:29. > :39:35.partner, but it seems the Indians want to buy their jets from France
:39:35. > :39:39.instead. It is just not cricket. With us in the studio is Alpesh
:39:39. > :39:44.Patel, a board member of the UK India Business Council, we're
:39:44. > :39:50.joined from Paris by Ian Birrell, a former speechwriter to David
:39:50. > :39:54.Cameron, and contributing editor. At first sight this outcome with
:39:54. > :40:00.the planes doesn't look a strategic success, does it? I think to
:40:00. > :40:05.continue the cricket metaphor, I think that Andrew Mitchell has been
:40:05. > :40:11.caught off. Britain's aid policies now look absurd, and no more so in
:40:11. > :40:15.India, we are giving �1.2 billion to a country that gives away �1.7
:40:15. > :40:19.billion in aid itself, which in decade will be bigger than the
:40:19. > :40:24.British economy. And there is a fantastic record of aid going
:40:24. > :40:28.missing. Take one recent example, Britain funded the 8,000
:40:28. > :40:31.televisions in Indian schools, none of them turned up. Even if they had,
:40:31. > :40:36.most of the schools didn't have electricity. You don't support
:40:36. > :40:40.thised aid policy do you? I do, the reason for it is, not because India
:40:40. > :40:43.can't afford to look after its own people. It chooses not to through
:40:43. > :40:48.incompetence and corruption, which is why Britain and countries like
:40:48. > :40:51.Britain have to step in. To protect them from their own Government?
:40:51. > :40:54.to look after Indian citizens. That is the problem. The Indian
:40:54. > :40:58.Government does not look after, for instance, children under five, half
:40:58. > :41:02.of them are malnourished in India. If you could get the Indian
:41:02. > :41:07.Government to do something, Britain wouldn't need to provide. It is an
:41:07. > :41:11.Indian problem? It is, but it becomes our problem when a global
:41:11. > :41:14.player and looking for countries to assist. Be India is one of those,
:41:14. > :41:19.which sadly needs help because its own Government doesn't provide it.
:41:19. > :41:23.What do you make of Andrew Mitchell's argument that some how
:41:24. > :41:27.there is self-interest in this, that some how if we give India aid,
:41:27. > :41:33.they will reciprocate by buying our goods? I think we have seen their
:41:33. > :41:38.response to that today. The looming decision over the fighter planes.
:41:38. > :41:41.But to pick up Mr Patel's point. The problem with aid is it does the
:41:41. > :41:45.exact opposite, it undermines the accountability of Governments. It
:41:46. > :41:49.has been shown time and again to encourage corruption, and also to
:41:49. > :41:55.ensure that Governments rely on money abroad, rather than decent
:41:55. > :42:00.public services. One Harvard medical school study found
:42:00. > :42:04.countries when given more aid for their health services spent less.
:42:04. > :42:08.The Indians don't feel any great obligation toe us, when it comes to
:42:08. > :42:11.the great decision about warplanes today and yesterday. They don't
:42:11. > :42:14.feel any obligations as a consequence of the aid they have
:42:14. > :42:20.been given from this country? look at the two things separately.
:42:20. > :42:23.The aid goes to children who are malnourished, it doesn't go to the
:42:23. > :42:27.politicians. The politicians...Andrew Mitchell was
:42:27. > :42:32.the man that said the two things were linked? You would like to
:42:32. > :42:39.think a Government does look on you favourably. The Government has shot
:42:39. > :42:46.itself in the foot. It makes no odds to British
:42:46. > :42:53.Aerospace losing or winning this BAe contract. India has chosen a
:42:53. > :42:58.plane that has no deterrent, so the ones cheering is the Pakistani air
:42:58. > :43:02.force. In the round there is some relationship? What I would defend,
:43:02. > :43:06.if I'm doing something good by providing aid to people who need it.
:43:06. > :43:10.And as a result of which, a Government may hopefully look
:43:10. > :43:15.favourably upon me, then that is an added benefit of aid. I'm not
:43:15. > :43:19.saying that I am able to make the direct payment. It is irrelevant to
:43:19. > :43:23.the initial judgment as to whether a country deserves aid? The initial
:43:23. > :43:26.and most important thing is whether or not those people on the ground
:43:26. > :43:30.deserve and need the aid. They do, because their own Government isn't
:43:30. > :43:34.looking after them. As a result of that aid, you can lean on the
:43:34. > :43:37.Government and say we are helping your people and expect to be looked
:43:37. > :43:41.on favourably. That is an addition tkwral benefit, I wish it was
:43:41. > :43:45.direct, where I could both look after the people and buy my planes.
:43:45. > :43:50.It is the Indian Government which has led down its own country by
:43:50. > :43:56.buying a worse product than the Typhoon. What is wrong with Mr
:43:56. > :43:59.Patel's argument? The trouble is Britain's aid policies are looking
:43:59. > :44:05.increase league threadbare, we are increasing the budget so far and so
:44:05. > :44:08.fast, they are running out of ideas to defend T it is poured out there,
:44:08. > :44:13.encouraging corruption, breaching accountability of Governments. Not
:44:13. > :44:17.get to go the sources it is meant to be doing. Increasing low you are
:44:17. > :44:22.hearing voices in Africa and Asia saying please don't give us this
:44:22. > :44:25.aid and stop these patronising and outdated policies. The future
:44:25. > :44:29.belongs to trade and issues like that, and Britain tackling
:44:29. > :44:34.corruption at home, and stopping the flow of money coming out,
:44:34. > :44:38.stolen from some developing nations, and ending up in British bank
:44:38. > :44:41.accounts and handled by British legal firms, and being turned into
:44:41. > :44:46.British property. This is where the Government could do more good,
:44:46. > :44:52.rather than these very old fashioned patronising approach
:44:52. > :44:56.saying we can save your countries. Do you think there is a vanity in a
:44:56. > :45:02.country like our's, thinking this is some responsibility we have in
:45:02. > :45:08.the world, when in fact we are shortly going to be outpaced by a
:45:08. > :45:13.country India? It looks ludicrously outdated, if it worked there would
:45:13. > :45:16.be wrong with it. A doesn't work, this is the legacy of live aid,
:45:16. > :45:19.that we have a generation of politicians that believe some how
:45:19. > :45:24.the west is the saviour of the world, and here we are stagnating
:45:25. > :45:30.in the west. While there is rampent economic growth in Africa, Latin
:45:30. > :45:33.America and much of Asia. We look increasingly ridiculous with old
:45:33. > :45:39.fashioned aid policies. What do you make of that argument? It is wrong,
:45:39. > :45:45.when I go there every two months I do to India, and look and see how
:45:45. > :45:49.the aid is doing through the NGOs today, for people. We are not
:45:49. > :45:53.looking at changing corruption over decades, by stopping aid today, it
:45:53. > :45:56.impacts those kids today. It doesn't make a jot of difference to
:45:56. > :46:06.the politicians whether or not we give 5, they are already not
:46:06. > :46:09.looking after the people on the ground -- aid, they are already not
:46:09. > :46:14.looking after the people on the ground. When you look into
:46:14. > :46:18.countries like India, they are a very poor nation.
:46:18. > :46:22.They are shortly going to have a bigger economy than us? Sadly, if
:46:22. > :46:31.only they would manage it to look after their own people. If we could
:46:31. > :46:41.use that money to tell politicians to better use that aid. But sadly
:46:41. > :46:59.
:46:59. > :47:09.it is going to those who don't need That's all from Newsnight tonight,
:47:09. > :47:35.
:47:35. > :47:39.tomorrow emlow will be here. Compared to some parts of Europe we
:47:39. > :47:44.can't complain, the cold isn't as extreme. It will be a frosty start
:47:44. > :47:49.for many of us. Bright and sunny for most, cloud towards even parts
:47:49. > :47:56.of England. A light flurry of snow for east Yorkshire, and
:47:56. > :47:59.Lincolnshire around the wash. East Anglia as well. More southern
:48:00. > :48:03.counties will be dry and bright with sunshine as we start the day.
:48:03. > :48:08.That is where they will stay through the afternoon as well. Over
:48:08. > :48:12.the high ground it will probably stay cold throughout the day.
:48:12. > :48:16.Subzero for South-West of England, high ground of Wales too. Lots of
:48:16. > :48:21.sunshine to compensate. Cloud floating into eastern parts of
:48:21. > :48:24.Northern Ireland at times, and for south western parts of Scotland
:48:24. > :48:27.cloudier, dry and more sunshine, across the north and east of
:48:27. > :48:34.Scotland, barely above freezing. It stays that way through the rest of
:48:34. > :48:39.the week, across northern areas, dry and bright, crisp and sunny. In
:48:39. > :48:43.the south predominantly dry and bright. Snow showers across the
:48:43. > :48:47.south-east. Light covering for the likes of north Kent. The weekend,
:48:47. > :48:51.which continues to give us forecasters a bit of a headache. As