01/02/2012 Newsnight


In-depth investigation and analysis of the stories behind the day's headlines with Jeremy Paxman.

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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


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