01/02/2012 Newsnight

Tonight, the Government has promised to crack down on tax

avoidance, yet Newsnight can reveal how it hired a senior public

servant on a deal toe minimise his tax bill.

-- to minimise his tax bill. Students are already annoyed about

the massive increase in fees, but the man who runs the Student Loans

Company, had been given a deal by the Government, to avoid tax

liability. It is serious, a public servant, perhaps more than anyone

else, an employee of the state and Government, ought to be paying all

their taxes. How could the Government endorse

such an arrangement, where now all that talk of how we're all in it

together. Gooden God may have lost his

Knighthood, but why should the buck stop there?

Pakistan spent the day trying to shake off accusations in a NATO

report that it supports the Taliban. What do you think is the most

striking ref laugs in the report? It is based -- revelation in the

report? This is based on interviews with 4,000 captured Taliban

fighters. They think they are winning, of course, there are some

signs they might be right. They call this batting for Britain, when

the Prime Minister went to India saying aid would generate trade.

Has his strategy now been shown to We are, as we have been repeatedly

told by this Government, all in this together. Unless, apparently,

the Government thinks you're not in it with everyone else. A Newsnight

investigation has discovered that cabinet ministers agreed to an

arrangement by which one of the country's best paid public servants

was able to reduce his tax liability by tens of thousands of

pounds. The Government is now trying to

find out how many other people it might have agreed similar terms for.

The official in question is the boss of the Student Loans Company,

whose job, of course, involves making sure others pay their fair

share. Richard Watson reports now. There are some people who seem to

believe that not paying their fair share of tax is a lifestyle choice,

not true. At a time of acute national

austerity, the issue of tax avoidance has never been more

charged. Millions of people are angered when they feel there is a

wealthy group who can pay an army of tax accountants to get out of

paying their fair share of tax. Government wants to take action.

need to take a tough approach on wealthy individuals and individual

companies, to make sure they pay their fair share. Newsnight has

discovered that Government officials have helped one of the

most senior public servants in the land to avoid paying tax.

The man in question is Mr Ed Lester, who was brought in a couple of

years ago to bail out the crisis- striken Student Loans Company. He's

now one of the country's top public servants, paid by the taxpayer. His

salary is worth �200,000 a year. He has struck an extraordinary deal,

it is not paid into a bank account, like any other employee, minus tax

and national insurance, it is paid into a private service company,

based at his home address, here on the River Thames. On our kal

layings he would be tens of thousands -- calculation, he would

be tens of thousands pounds better off. There is no the Civil Service

can act in a way that doesn't set an example for the rest of the

world. So you will investigate? the allegations are true we will

need to investigate. What is extraordinary is the customs and

revenue officials agreed the deal. Why would a public body working

directly for a Government department enter into such a deal.

In 2009, the Student Loans Company was in crisis, they needed someone

to tackle the crisis. Thousands of telephone calls were going

unanswered, grants hadn't been paid. It was a complete mess, students

weren't getting their money on time. There was a huge backlog of

applications. There were a lot of calculation that were wrong. It was

a complete mess. We were looking to the organisation, the Student Loans

Company, to very quickly sort it out. Ed Lester seemed just the man

for the job. He had a strong track record in both the private and

public sectors. Here he is, to the left of the universities minister,

David Willetts, after a spell as a consultant to Government, he was

approached to lead the Student Loans Company in 2010, via a

specialist recruitment company. It was David Willetts who was

ultimately responsible for his appointment.

This correspondent for the investigative journalism website,

obtained a dossier of documents under the Freedom of Information

Act. They reveal every twist and turn of negotiations to recruit Ed

Lester for the job. What was really amazing was, he does not pay any

tax or national insurance at source, yet, he is the chief executive, he

is the accounting officer to parliament, he's the top man who

chases hundreds of thousands, if not millions of students to pay

back their loans. But some how he's not got a full-time job.

The scanning was, as I described, freezing and not working.

months into the job as interim chief executive, Ed Lester appeared

before the Public Accounts Committee to explain to MPs how he

was reforming the organisation. He also fielded questions about his

pay. How much are you costing the taxpayer? My daily charge is �900 a

day. That's on a normal working week of five days a week. Yes.

But there was no mention of precisely how Mr Lester was being

paid, or the cost of his 400-mile commute to the Student Loans

Company office in Glasgow. While he shutled from Buckinghamshire to

Scotland and back, his pay was transferred to the recruitment firm

who hired him, they sent it on to his private service company, the

one he runs from his house on the Thames. The arrangement isn't

illegal, but the tax savings could be huge. With reduced national

insurance payments, and other perks to. Government officials knew the

deal was all about saving Ed Lester tax. In one e-mail, a senior civil

servant at business innovation and skills, notes his deal is tax

efficient. It was -- It was a good deal for Mr

Lester, but was it within the tax rules. Some awkward questions

emerged about his tax status. Could he be full-time chief executive, in

charge of billions of public money, and not an employee, paying tax in

the usual way. The Student Loans Company sought

advice from their auditors, KPMG, they said Ed Lester should be an

employee, an awkward conclusion. The senior civil servant handling

Ed Lester's employment said he thought it needed to be challenged.

The Student Loans Company went back to the auditors, and KPMG offered a

second piece of advice. This time they said it might be possible to

persuade Revenue & Customs to grant a special concession, permitting Ed

Lester to be paid through his personal service company. Sure

enough, the revenue wrote to the Student Loans Company, confirming

the deal had been approved. The tax inspector wrote, he's happy to

accept the fees paid in respect of Mr Lester's duties may be paid

gross. In other words, without tax deducted at source.

I think it is very odd. You would expect a civil servant, who is

doing a full-time job, appointed to an office, and indeed an accounting

officer, which is an anorackish, technical term, but a person who

has legal responsibility for how money is spent in the body, to be

paid normally with PAYE like anybody else. This story gets more

intriguing, three months after the revenue approved the deal, the

Student Loans Company decided they liked Ed Lester so much theyn't

waed to take him on full-time. Surely as -- wanted to take him on

full-time. Surely as full-time chief executive he would have to go

on the books as a tax-paying member of staff.

His total pay pact, including po news, would be �200,000 a year,

with �28,000 on top for commuting to Glasgow and hotel stays. For the

second time they agreed to pay him through the company he runs, from

his home on the Thames. We asked the former Inland Revenue tax

inspector, now a tax accountant, to model how much Ed Lester will be

saving in tax. If he's employed he's taking a salary of �182,000,

against that he has income tax of �69,000, and employees' national

insurance of �7,021. His take home pay is �105,979. A lot of money,

but how much better off would he be paid through his private company?

So, in his pocket, he would have had �144,987. Quite a difference?

significant difference. That's a difference of �40,000.

These figures are based on the assumption that Ed Lester is

seeking to minimise his tax bill. We can't be sure of the precise

figures, because he declined to ask any of our specific questions. We

asked whether he disputes that the arrangements were to minimise tax.

We asked if it was appropriate for him to be paid through his own

company and not PAYE, again, no answer. We asked him how much his

personal service company pays in tax, no many to that either. The

So how much did ministers really know about Ed Lester's pay deal? A

letter from the Student Loans Company to the minister for

universities suggests that David Willetts was well informed. The

The following week, David Willetts So Government ministers had, in

effect, rubber stamped a deal to help a senior civil servant with

his tax efficiency. The Department of Disinnovation and

skills told us, personal -- Department of Business innovation

They emphasised that the deal had been approved by-election Election.

The Treasury is clearly concerned by our evidence. In a detailed

statement, Danny Alexander has confirmed he's called for an urgent

review, and his written to every single a second across Government,

asking whether similar deals exist. There is to be an urgent internal

audit of such appointments completed by the end of March. It

will consider the appropriateness of these deals, and consider the

wider costs of lost revenue to the Exchequer, when considering value

for money. If such deals are uncovered, the Treasury says it

will seek to unwind them. What we would want to see is whether there

was a deliberate attempt to set up a tax avoidance scheme. The Public

Accounts Committee will scrutinise the evidence. The chair was shocked

when we showed her our dossier. is very serious. A public servant,

perhaps more than anybody else, an employee of the state, and an

employee of the Government, ought to be paying all their taxes in an

open, proper and transparent way. Any engagment in tax avoidance by

full-time, civil servants, is not acceptable.

There is no sign that Mr Lester will be forced to pay income tax as

a normal employee, the Treasury seems unable to change his contract,

which runs until 2013. But at a time when Government is urging we

are all in this together, these revelations are causing

considerable unease, the question now is how many other Ed Lester's

will be uncovered by the Danny Alexander review.

No-one from either the Government or the Student Loans Company wanted

to come and tell us why this was the best way of doing things. But

joining us now to look at what was going on, we do have Richard Bacon,

the Conservative MP, who sits on the Public Accounts Committee, Liam

Burns, the President of the National Union of students and

Nicola Preston who is a tax barrister from number five chambers.

You have written to the Prime Minister, what do you want him to

do? I want him to launch a full investigation toe get to the bottom

of this, and to answer -- to get to the bottom of this, and answer the

question at the end of your report, how many Ed Lesters are there. I

saw there was a chief executive officer getting twice the salaries

normally, and paid through a personal company. One wonders how

much more is going on in the public sector. It is plainly unsuitable

and inappropriate, it shouldn't be happening, we have to stamp it out.

Even before we aired this report tonight, we have had two e-mails

from people suggesting both that it was going on in a particular area

of local Government, and it was going on in another area of

national Government, so we don't know, but we must assume if there

is an investigation no-one else in Government is quite sure? Indeed,

we have a very large public sector, it is a �700 billion organisation,

we have the health service, local Government, hundreds of quangos of

various kinds, one fears this could be more widespread. It has been

done in each case on a localised I would sis, and we need to get to

the both bottom of it. Are you surprised -- to the bottom of it.

Are you surprised by this? What surprises me is the HMRC gave the

concession sought, in order to pay Mr Lester gross. It is unusual?

is unusual in the first instance, the concession was first applied

for when he was on the temporary, the interim appointment. That

concession was when extended when he entered into the two-year

appointment. It is unusual in someone working full-time, is that

the idea? The idea behind the concession was to cover

circumstances, such as directors, where trust companies might need,

or trust directors might needing to in and sit on a board for a certain

period of time. But they weren't employed by the company as such.

Certainly the concession that does apply in wider circumstances, but

in a case such as this, Mr Lester and his duties and the requirements

of his appointment, all seem very consistent with him being an

employee of the SLC rather than anyone else. Liam Byrne, whatever

you may think of his personal tax arrangement, he did sort out the

Student Loans Company, people got their loans? I don't think I'm

being too demanding to think it is OK to have someone that is both

competent and pays their taxes. I don't think the two are mutually

exclusive concepts. There is three things from our point of view. At a

time when the Government are saying they don't have the money to pay

for state education, and retracting fees. The irony that the person

taking our fees is purposely avoiding taxation is a kick in the

teeth. Personal stewardship, we have David Willetts, minister for

universities, actively trying to get, for profits, into the

university sector. If you can't spot something that I think is a

scam, so obvious is this, I have no confidence about you bringing for

profits in. This is wider than students, this is a generational

thing. When we are told the state can't afford to pay your education

any more, your education maintenance allowance, that went on

beer and CDs, didn't it. The fact we are all some benefit scroungers,

don't look to our sector of society, there is somewhere else in society

you should look. You used the word "scam", there is nothing wrong

necessarily, it was agreed? I'm not calling it illegal, I don't think

many people sitting at home would think, hang on, someone appointed

on an interim basis, kept on long- term, on a tax efficient basis. No,

I'm sorry, that is a scam of public money. I agree with that, it might

not be unlawful. It could be, we will look at that. All the people

in the film working in the Student Loan Company, as employee for that

company, have to pay their taxes. My employees pay tax and do it to

have schools and hospitals, I don't think they do it so civil servants

can strive to make tax efficient arrangements for a small number of

senior civil servants. This was a mistake on the part of David

Willetts and Danny Alexander? was certainly a mistake on the part

of whoever made the decision. Not having had the chance to know how

much they genuinely knew about the, tent of their involvement. That is

an important question, the public scrutiny, who was looking at the

decisions, a lot of difficult questions will come David

Willetts's way on this question. goes to how serious your leader was

when talking about cracking down on companies that seek to avoid tax?

The fact of the matter is there have been a lot of arrangements,

over many years, under Governments of both parties to create

situations that are tax efficient for certain individuals. It is very

disful, we want a situation, I'm in favour -- distasteful, I'm in

favour of lower tax, but we should all apply to the same rules. I made

a cheque last week to HMRC, I didn't want to, but it is a law.

You as a tax practitioner share that view? The rules are there so

that people can organise their affairs to pay as little tax as

possible, but it is clear in this case, firstly, that there has been

no transparency about what has happened, and secondly, as I have

already said, the concession that HMRC have given the SLRC, has been

extended over a two-year contract. Is this the sort of thing the

Public Accounts Committee ought to investigate? I agree with the

chairman in the clip, that should the facts prove as they appear to

be, we will need to take a look at it. I can't speak for the whole

committee. Would you like to haul David Willetts before you? We don't

normally have ministers in front of us, this may be an occasion we need

to talk wider than the normal officials. We will want to talk to

the officials writing the e-mails saying this isn't good enough, I

disagree with the opinion from the accounting firm, we should try

harder. It is obvious that a number of people were striving hard to

create a tax efficient arrangement, that would have seemed odd toe most

people. He may have lost his reputation as a banker, now he may

have lost his Knighthood. But Fred Goodwin is experiencing a new

career, as a football. He was booted around Westminster like an

inflated pig's bladder today, as one person after another tried to

use him to score points. Labour MPs who once fawned on him and his pals,

wonder how many more should be simply dishonoured. Accusations of

hypocrisy flew back and forth in the Commons. We were in the stands.

Fred's been shredded, who's next? There are plenty more candidates.

At Westminster today some senior voices were warning that the

Government has created a mess. I'm concerned that there doesn't

seem to have been much process here. I understand why people are angry

with Gooden good, I'm not here to defend him -- Fred Goodwin, I'm not

here to defend him, he was the author of his own misfortunes. But

you go after one individual, and there was more than one person

involved in this, there is a process that is obscure, many of us

hadn't heard of the Forfeiture Committee, and it meets a week

after the announcement, and he's striped of the Knighthood. It is a

similar thing the Government is doing at RBS, going after one

individual. There doesn't seem to be principles against which we can

judge people N a country like our's, where we pride ourselves in the

rule of law and due process, that is big problem for us. The point is,

of course, the former Sir Fred, was not alone in his mistakes. The

Business Secretary today says the case is useful as a beginning, a

start of the differenciation between good and bad dankers?

does help to establish the point that there were some bankers who

were highly cupable, he was one of them, and they need to make a

contribution. If we were in the business of

degonging people, who might we start with? What about Sir tomorrow

McKillop, knighted for contributions to the drug industry,

he was chairman of RBS when the bank went bust. Sir kl lum

McCartney knighted for services to the finance industry, he was in

charge of the Financial Services Authority when all of those banks

went bust. And while we're on the subject, what about Alan Greenspan,

given an honourary Knighthood in 2002, the former Fed chairman was

given his for contribution to global economic stability. You

might have noticed that ain't looking so clever any more.

The only way you can ever guarantee that you won't make mistakes is not

to try anything. If that is what we want to engineer in people it is a

very bad idea. You need people who will make decisions that involve

risk as they all do. In those circumstances you would have to

hand back your pay in the past, in some cases, or your honours n this

particular case, then I would suggest they start giving out

honours on elastic rather than ribbon, they will be pulling an

awful lot back, people do make mistakes. It says something about

where the politicians think the public is on the Goodwin Knighthood,

that at Prime Minister's Questions today, not one opposition MP

accused the Government of using Gooden God as a smoke screen.

Although that's what many of -- Fred Goodwin as a smoke screen.

Although that is what many of them think. His name wasn't even

mentioned, instead the Labour leader pushed for more transparency

on pay. Why is the gentleman in favour of things now in opposition

of things he never did in Government, some might call it

opposition, others hypocrisy. will tell him what hypocrisy is, it

is saying he will stop a million pound bonus to Stephen Hester, and

then nodding it through. I have to say to him, I think we

have now heard it all. Because he says that the class war against the

bankers is going to be led by him and his cabinet of millionaires, I

don't think it is going to wash, frankly. All of this is being

watched with concern in the City. Today there was a conference on the

subject of rebranding banking. If you came along as an outsider, you

had to be ready with a face. Because, sooner or later, someone

was going to tell you that, you know, a million pounds isn't

actually that much for a bonus. And you have to decide whether to nod

like an unshockable man of the world, or stair at them like they

are a lunatic. We have to accept the fact that we are living in a

free, global market, that is not saying pay them all football-star

salaries, but they have to be well paid. It has just gone too far,

with the whole crisis being blamed entirely on the bankers, because a

few behaved wrongly. The reality is that regulateers, central banks and

politicians, were at least as much to blame for the banking crisis as

the banks were. The Government has, undoubtedly, felt the pressure from

this "why only Sir Fred's Knighthood in question". This

afternoon they promised to do something about the fact, that

Lords who are convicted criminals can keep their peerages. Get ready

for a few more candidates for the shredder.

David Miliband, the former Foreign Secretary, beaten by his brother

for the leadership of the Labour Party, has decided his party needs,

what he calls, restless re-thinking of what it is about, if it is going

to win power again. He's careful, obviously, not to criticise his

Government, but his contribution got, inevitably, political

correspondents like David Grosseto, in a mild lather -- Grossman, in a

mild lather. This is a an argument of a seven-point piece in a small

circulation magazine, 7,000 copies sold. Why the fuss? I hesitate to

say this with such large pictures of the Milibands over your shoulder,

but not everyone in Westminster thinks that Ed Milliband is doing

such a bang-up job as leader. In that context, anything his brother

says except that Ed is a genius and can't help to lead us to victory in

the general, has to be interpreted. In this densely-argued article for

the New Statesman, there is plenty to interpret. Mr Miliband senior

says Labour has a tendency to go towards reassurance in opposition,

reassurance about our purpose, relevance and position, even our

morals, reassurance Labour feels good, but feeling good is not the

same as doing good. He says his brother gets this, that is why

there is a policy review. He gives his brother credit for keeping the

party together, for unity, but he says you cannot come away from

reading this article without getting the impression that he

doesn't think, David Miliband doesn't think the party is going in

the right direction. He says this towards the end, that it is a

massive risk to say there isn't much to worry about in our approach,

history is coming in our direction. But the reassurance tendency

suggests anyone who disagrees has abandoned principle for power. The

final thing that David Brand is saying in all of this, we shouldn't

under-- David Miliband is saying, in all of this, is we

underunderestimate him, he hasn't gone away, he hasn't given up on

winning the next election. The Government in Pakistan has

spent the day blustering it is not true its Intelligence Services are

helping the Taliban. You can believe them or the NATO report in

which the claim is made, which is based on 27,000 interrogations of

Taliban, Al-Qaeda and other prisoners. The report wasn't

intended for publication, because it is not only the Pakistan

Government that faces embarrassment from the findings, the report also

discloses that the low you are level of violence may not be, as

claipltd, the result of NATO operations -- claimed, the result

of NATO operations and Government resolutions. Is the fuss justified?

It is in the sense this is this highly classified survey of the

Taliban, what they think they have been doing, what they think they

have been achieving over the past couple of years. The material on

Pakistan, yes it is important and embarrassing, we have seen some

very important disclosures of this kind before. High level ones from

the US, I don't think that is where the meat is. The fascinating stuff

is to do with the end game. The shifting tides of poir, the way the

captured Taliban suggests people are looks towards NATO's exit,

trying to cut deals, that comes across clearly in the report. They

are talking to the Taliban, their resilience is evident, but also the

flakiness of President Karzai's administration, as NATO forces draw

Violence is dropping in much of the Afghan countryside, that may be

These deals, suggest the report, show that Afghan Government

officials are already working with the Taliban in much of the country.

There is not much comfort for British or American field

commanders either, because it looks at one or two areas, where they

have been put anything a huge effort and concludes...$$NEWLINE

Taliban governance appears to remain in effect. As for what

happens after 2014, when ISAF, NATO's foreign troops are no longer

fighting, the detainee interviews How does the disclosure of this

report damage NATO? It is a classified assessment based on the

intimate knowledge gained in the interrogation room. The fascinating

thing, in terms of the border narrative, we have had for the last

couple of years reports of progress, from the counter insurgency effort

that NATO has been making. We hear violence has fallen by 40%, the

British casualties have fall bin a bigger margin than that. NATO

people have been saying this is due to our better counter insurgency,

our more joined-up approach, our resource. From the Taliban

prisoners you get a sense that in many areas they have turned down

the violence, because they are also looking to a governance-based

approach. They arele cooling things down and building relationships --

they are cooling things down and building relationships with local

tribesmen. They have had a stake in toning down the violence themselves.

NATO responded vociferously. insurgency is on the back foot. We

have pressurised them over the summer and taken vast amounts of

land out of their hands. We have detained a number of them, and the

interviews are an element of this report. We don't see any reason to

take these findings of the investigation to reconsider or

readjust our findings. Joining us now is Michael Semple, a former

deputy EU envoy to Afghanistan, who was expelled from the country for

talking to the Taliban. He's now at Harvard from where he joins us.

Were you surprise bid anything in this report, Mr Semple -- surprised

by anything in this report? I was pleased rather than surprised.

Pleased that NATO is taking the trouble to listen to what these

gentlemen are saying. They will have learned lots more useful

things out of this, rather than the strange opinion polls they finance.

Do you think the Taliban, to any extent, deluding themselves in what

they are telling interrogators? That is a good question, when the

fighters talk, of course there is an awful lot of bluster there. The

position is not as rosy on the battlefield as they describe.

However, if some of them actually believe this, this is what

motivates them to go on and fight and be prepared to die. It does

count what they think and say. assumption that is made on reading

this accumulation of material, is that there is, in the way there is

with the political parties, a coherence of view, and one ideology,

and one agreed means of proceeding, is that actually true in the

Taliban? Yes, and no. Of course people fight for various different

reasons, and there are different factions inside the Taliban, but

one important point to come out of this, is that these thousands of

fighters have made it absolutely clear they anticipate that there

will be a struggle for power. This is not just about fighting to get

foreign troops to leave Afghanistan, this is about a struggle for power,

which some of them perhaps deluding themselves, expect they can win,

when NATO is off the scene. So what do you imagine to be the

outcome, what will happen? Broadly, there are two scenarios as we go

forward in Afghanistan over the next two or three years. Either

there is the happy scenario, where the political process which is now

tentatively getting under way, it leads to some kind of a deal,

Taliban coming into the political system. And you have some kind of

stability, as NATO draws down, or the other scenario, there isn't a

deal, that NATO does draw down, the Taliban stay in the fight, and

Afghanistan deteriorates in into civil war which could last for many

years to come. Do you want to call it one way or the other? Well, I

think, frankly, the continued conflict, the civil war is rather

more likely than the happy outcome. There are still various levers that

people in power can pull to increase the chances of getting a

happenyo outcome and an end to the conflict in Afghanistan that people

so desire. I'm sorry for the delay on the

satellite there. We and many others have asked before why the

Government takes hundreds of millions from British tax-payers to

give India aid each year, when the country has a enviable growth and a

space programme. It is thought to be good for British business. The

example the Prime Minister gave was was attempts to sell warplanes to

the Indian air force. Today's discovery that the Indians are

showing their gratitude by buying French aircraft instead, is not

what you would call a ringing endorsement of the strategy. Just

after becoming Prime Minister, David Cameron went to India. The

aim was to drum up trade. He went mobhanded, Dave's pos

secluded George. What what Vince went along too? Companies operating

out of Britain need to do so. Cabinet ministers included Andy,

Andrew Mitchell, the development secretary. The aim of the trip was

to boost exports, chiefly to sell the Indians Typhoon fighter planes,

for his part, Mr Mitchell spoke of the significance of Britain's aid

programme to India, reportedly adding:

The meaning was fairly explicit, buy our aircraft and we will

continue to provide you with aid. I think it was, as I said, it was not

a very subtle way of saying that. Would deny that emphatically,

saying there was not that leakage there? I don't expect anything else.

In parliamentary select committee last week, Mr Mitchell explained

how he saw his role. The specific point you make about Typhoon, is

when I travel, I regard myself as a cabinet minister, batting for the

whole range of British interests, not just development. And certain

low, wherever I go I seek to promote British interests, in

whatever form they come. The issue here is aid is supposed to be for

the relief of poverty, and by law, it should not be used to gain

commercial advantage. When Andrew Mitchell talks of aid and trade and

relationships in the round, others say it shows you just doesn't get

it. There is no round, and shouldn't be any round. We are

extremely worried as to how the Government has been behaving on

this. Over the last few years you have seen a perversion of British

aid, it has been drawn away from the needs of recipient companies

and the needs of the poor. Instead it is used more and more to serve

the needs of British interest or strategic interests. In Afghanistan,

Pakistan, the aid is needed in those countries, increasingly it

has been used to back up British strategic and security interests,

rather than the needs of the poor. What is wrong with that? It is the

beginning of a slippery slope. There were questions raised as

India's position as the leading recipient of British aid. With more

billionares than Britain, and high GDP, they do they need millions in

development cash? It is a controversial topic, India needs

the aid because it is doing well economically. You have a lot of

people surviving on less than �1 a day, very, very poor people?

have people living on less than a dollar a day, the pound is

ambitious. Out of every rupee, only 15% of it actually reaches the

people it is meant to reach. The 85% is syphoned off by officials.

Corruption is the problem. It is not that there is not enough money

going around, or not enough food, or grain going around. It is just

that it disappears into corrupt pockets.

Mr Cameron may have batted for Britain with Mr Mitchell as his

partner, but it seems the Indians want to buy their jets from France

instead. It is just not cricket. With us in the studio is Alpesh

Patel, a board member of the UK India Business Council, we're

joined from Paris by Ian Birrell, a former speechwriter to David

Cameron, and contributing editor. At first sight this outcome with

the planes doesn't look a strategic success, does it? I think to

continue the cricket metaphor, I think that Andrew Mitchell has been

caught off. Britain's aid policies now look absurd, and no more so in

India, we are giving �1.2 billion to a country that gives away �1.7

billion in aid itself, which in decade will be bigger than the

British economy. And there is a fantastic record of aid going

missing. Take one recent example, Britain funded the 8,000

televisions in Indian schools, none of them turned up. Even if they had,

most of the schools didn't have electricity. You don't support

thised aid policy do you? I do, the reason for it is, not because India

can't afford to look after its own people. It chooses not to through

incompetence and corruption, which is why Britain and countries like

Britain have to step in. To protect them from their own Government?

to look after Indian citizens. That is the problem. The Indian

Government does not look after, for instance, children under five, half

of them are malnourished in India. If you could get the Indian

Government to do something, Britain wouldn't need to provide. It is an

Indian problem? It is, but it becomes our problem when a global

player and looking for countries to assist. Be India is one of those,

which sadly needs help because its own Government doesn't provide it.

What do you make of Andrew Mitchell's argument that some how

there is self-interest in this, that some how if we give India aid,

they will reciprocate by buying our goods? I think we have seen their

response to that today. The looming decision over the fighter planes.

But to pick up Mr Patel's point. The problem with aid is it does the

exact opposite, it undermines the accountability of Governments. It

has been shown time and again to encourage corruption, and also to

ensure that Governments rely on money abroad, rather than decent

public services. One Harvard medical school study found

countries when given more aid for their health services spent less.

The Indians don't feel any great obligation toe us, when it comes to

the great decision about warplanes today and yesterday. They don't

feel any obligations as a consequence of the aid they have

been given from this country? look at the two things separately.

The aid goes to children who are malnourished, it doesn't go to the

politicians. The politicians...Andrew Mitchell was

the man that said the two things were linked? You would like to

think a Government does look on you favourably. The Government has shot

itself in the foot. It makes no odds to British

Aerospace losing or winning this BAe contract. India has chosen a

plane that has no deterrent, so the ones cheering is the Pakistani air

force. In the round there is some relationship? What I would defend,

if I'm doing something good by providing aid to people who need it.

And as a result of which, a Government may hopefully look

favourably upon me, then that is an added benefit of aid. I'm not

saying that I am able to make the direct payment. It is irrelevant to

the initial judgment as to whether a country deserves aid? The initial

and most important thing is whether or not those people on the ground

deserve and need the aid. They do, because their own Government isn't

looking after them. As a result of that aid, you can lean on the

Government and say we are helping your people and expect to be looked

on favourably. That is an addition tkwral benefit, I wish it was

direct, where I could both look after the people and buy my planes.

It is the Indian Government which has led down its own country by

buying a worse product than the Typhoon. What is wrong with Mr

Patel's argument? The trouble is Britain's aid policies are looking

increase league threadbare, we are increasing the budget so far and so

fast, they are running out of ideas to defend T it is poured out there,

encouraging corruption, breaching accountability of Governments. Not

get to go the sources it is meant to be doing. Increasing low you are

hearing voices in Africa and Asia saying please don't give us this

aid and stop these patronising and outdated policies. The future

belongs to trade and issues like that, and Britain tackling

corruption at home, and stopping the flow of money coming out,

stolen from some developing nations, and ending up in British bank

accounts and handled by British legal firms, and being turned into

British property. This is where the Government could do more good,

rather than these very old fashioned patronising approach

saying we can save your countries. Do you think there is a vanity in a

country like our's, thinking this is some responsibility we have in

the world, when in fact we are shortly going to be outpaced by a

country India? It looks ludicrously outdated, if it worked there would

be wrong with it. A doesn't work, this is the legacy of live aid,

that we have a generation of politicians that believe some how

the west is the saviour of the world, and here we are stagnating

in the west. While there is rampent economic growth in Africa, Latin

America and much of Asia. We look increasingly ridiculous with old

fashioned aid policies. What do you make of that argument? It is wrong,

when I go there every two months I do to India, and look and see how

the aid is doing through the NGOs today, for people. We are not

looking at changing corruption over decades, by stopping aid today, it

impacts those kids today. It doesn't make a jot of difference to

the politicians whether or not we give 5, they are already not

looking after the people on the ground -- aid, they are already not

looking after the people on the ground. When you look into

countries like India, they are a very poor nation.

They are shortly going to have a bigger economy than us? Sadly, if

only they would manage it to look after their own people. If we could

use that money to tell politicians to better use that aid. But sadly

it is going to those who don't need That's all from Newsnight tonight,

tomorrow emlow will be here. Compared to some parts of Europe we

can't complain, the cold isn't as extreme. It will be a frosty start

for many of us. Bright and sunny for most, cloud towards even parts

of England. A light flurry of snow for east Yorkshire, and

Lincolnshire around the wash. East Anglia as well. More southern

counties will be dry and bright with sunshine as we start the day.

That is where they will stay through the afternoon as well. Over

the high ground it will probably stay cold throughout the day.

Subzero for South-West of England, high ground of Wales too. Lots of

sunshine to compensate. Cloud floating into eastern parts of

Northern Ireland at times, and for south western parts of Scotland

cloudier, dry and more sunshine, across the north and east of

Scotland, barely above freezing. It stays that way through the rest of

the week, across northern areas, dry and bright, crisp and sunny. In

the south predominantly dry and bright. Snow showers across the

south-east. Light covering for the likes of north Kent. The weekend,

which continues to give us forecasters a bit of a headache. As