:00:07. > :00:10.It's one of the biggest decisions the Government will ever have to
:00:10. > :00:14.make - affecting millions of us - cutting billions in spending and at
:00:14. > :00:17.the heart of their plans for the economy, but nobody yet knows what
:00:17. > :00:21.they will do. Tonight we get a first glimpse of
:00:21. > :00:24.Government thinking on how to cut the �200 billion welfare budget.
:00:24. > :00:26.And we will examine options which could affect almost every home in
:00:26. > :00:34.the country with politicians, an entrepreneur and a think-tank
:00:34. > :00:37.thinker. We know the Government wants to save �10 billion from the
:00:37. > :00:40.Department of Work and Pensions. We investigate some of the options
:00:40. > :00:44.they are looking at. Major falls on stock markets across
:00:44. > :00:51.Europe - it must be yet another last chance to save the euro. Paul
:00:51. > :00:55.Mason is in Brussels. In Brussels, it has been a night of dinner, talk
:00:55. > :00:58.and precious little action and time is running out.
:00:58. > :01:02.More on the Newsnight investigation into how some civil servants avoid
:01:02. > :01:12.income tax. And what really went on behind the
:01:12. > :01:21.
:01:21. > :01:24.scenes as Facebook shares were sold Good evening. With the possible
:01:24. > :01:27.exception of Buckingham Palace the residents of just about every house
:01:27. > :01:30.in the country will be affected by changes to Britain's Welfare Bill.
:01:30. > :01:33.The Chancellor, George Osborne, said in his Budget this year that
:01:33. > :01:35.further cuts of �10 billion or so might be necessary, while a former
:01:35. > :01:39.Downing Street adviser suggested saving �25 billion from the �200
:01:39. > :01:41.billion total. Tonight we are going to get a look at what the
:01:41. > :01:44.Government is considering and we'll debate whether such cuts are really
:01:44. > :01:47.necessary whichever party is in power. We begin with David Grossman
:01:47. > :01:51.who has been figuring out where your money goes and when the cuts
:01:51. > :01:55.which have already been announced will begin to bite.
:01:55. > :01:59.Let's start with that big fat figure - �200 billion - the amount
:01:59. > :02:06.we spend on welfare. Half of that goes to pensioners, half to people
:02:06. > :02:12.of working age. If we look at the graph, you can see it's gone up-
:02:12. > :02:17.and-up until the red line. It's gone up by 55% in real terms since
:02:17. > :02:26.1997. A big part of that growth was the introduction of tax credits. At
:02:26. > :02:36.the moment, the total welfare spend is 13% of GDP, or out of every �8
:02:36. > :02:41.generated in the UK, more than �1 is spent on welfare. It's coming
:02:41. > :02:44.down slightly to 11%. The first thing to say about that is it's a
:02:44. > :02:48.Government projection of savings going forward and we know from past
:02:48. > :02:52.experience they don't always materialise. The Government says it
:02:52. > :02:56.has introduced some big changes that will have effect. The big one,
:02:56. > :03:00.or one of the big ones that we have heard about, is the benefits cap.
:03:00. > :03:07.Now that will mean that in the future someone in a family or a
:03:07. > :03:12.couple will only be able to earn �500 a week in benefits. For a
:03:12. > :03:16.single person, �350 a week. It is part of the universal credit. It is
:03:16. > :03:20.designed to cut the complexity and always, they say, always make work
:03:21. > :03:27.pay more than being on welfare. Another big change - getting rid of
:03:27. > :03:32.child benefit for those on higher incomes. Earn more than �60,000 a
:03:33. > :03:36.year, you won't get any child benefit. Another big change -
:03:36. > :03:40.replacement of the Disability Living Allowance with the Personal
:03:40. > :03:43.Independence Payment. The Government says that should cut
:03:43. > :03:47.500,000 people from the claimant count. Talk to ministers and they
:03:47. > :03:55.will tell you as well as saving money, the guiding philosophy
:03:55. > :04:02.behind the reforms is helping people stop being on benefits. At
:04:02. > :04:06.the moment, more than one in four working-age adults do not work.
:04:06. > :04:12.Around 2.6 million people have spent at least half of the last ten
:04:12. > :04:16.years on some form of out of work benefits, so the cost is human and
:04:16. > :04:22.financial. The Government says it has to save more money than already
:04:22. > :04:27.has been outlined. In his Budget, the Chancellor said that by 2016,
:04:27. > :04:32.we will have to cut �10 billion from the welfare budget. So how
:04:32. > :04:41.might he be thinking of doing it? Well, one option, of course, is
:04:41. > :04:45.Winter Fuel Payments. �2.1 billion a year goes to pensioners. It goes
:04:45. > :04:50.to millionaires as well as those in need. Any meaningful change to get
:04:50. > :04:57.that kind of money they are looking for will have to take into account
:04:57. > :05:01.tax credits and housing benefit. All of that is politically
:05:01. > :05:07.extremely difficult. It is not for nothing that in American politics
:05:07. > :05:09.that welfare reform is known as a third rail issue. Touch it and you
:05:10. > :05:12.die! Well, those are the numbers, but
:05:13. > :05:15.what are the options? And how politically toxic is it for the
:05:15. > :05:18.Government - any Government - to consider cutting the money from
:05:18. > :05:27.some of the poorest among us? Our political editor, Allegra Stratton,
:05:27. > :05:33.has been doing some blue-sky thinking.
:05:33. > :05:40.Asking about someone's welfare was once just looking through a window
:05:40. > :05:48.into someone's life - their health, happiness and good or bad fortune.
:05:48. > :05:53.It came to me how the state looks after us in hard times. Now the
:05:53. > :05:58.word is less clear and it enjoys less unthinking support. It sprawls.
:05:58. > :06:04.Left unchecked by 2016, welfare will become a third of all
:06:04. > :06:07.Government spending peryear so they feel they must cut -- per year so
:06:07. > :06:11.they feel they must cut. If in the next Spending Review we maintain
:06:11. > :06:16.the same rate of reductions in departmental spending as we have
:06:16. > :06:20.done in this Review, we will need to make savings of �10 billion by
:06:20. > :06:24.2016. Welfare is in the dock because the
:06:24. > :06:34.public say they want welfare to be in the dock. The Deputy Prime
:06:34. > :06:37.
:06:37. > :06:40.Minister, nick clebg, -- Nick Clegg, contemplated blocking some of this.
:06:40. > :06:45.Iain Duncan Smith appeared to be unimpressed when the Chancellor
:06:45. > :06:49.announced there would be a further �10 billion worth of cuts to the
:06:49. > :06:52.welfare budget. There's many who think you can't go much deeper in
:06:52. > :07:01.without going painfully into people's lives. There is also an
:07:01. > :07:04.assessment that the public mood is finely balanced that you have
:07:04. > :07:09.support for welfare reforms. Those changes that they could and might
:07:09. > :07:13.make will be about values. There is a feeling in Government that there
:07:13. > :07:23.are lifestyles people can't afford, that goes for them in the city as
:07:23. > :07:28.well as for families. Explain to me - tell me about your situation.
:07:28. > :07:34.You've got a daughter or a son? daughter. She will be three next
:07:34. > :07:37.month. We live together. We live just me and her. I got that
:07:37. > :07:40.accommodation not through the council, but I found it myself and
:07:40. > :07:45.applied for housing benefit separately. You are on housing
:07:45. > :07:49.benefit. You get help from the state for your housing. Don't you
:07:49. > :07:56.think that you should have possibly lived at home until the point at
:07:56. > :08:01.which you could support your own house? Well, I find that living at
:08:01. > :08:06.home with my mum wouldn't be an option, space-wise. There is not
:08:06. > :08:10.enough space for... How big is her flat or house? She does have a two-
:08:10. > :08:15.bedroom flat. It doesn't sound like your house and your mother's house,
:08:15. > :08:18.flat, is a bad police, so it is a choice you are -- bad place, so it
:08:18. > :08:25.a choice you are making and it comes with a price tag attached?
:08:25. > :08:32.Yes, it is a choice. At the same time, I don't think living in my
:08:32. > :08:36.mum's house would have been - it wouldn't have been constructive.
:08:36. > :08:42.both know people that are living with their parents, they don't have
:08:42. > :08:46.a job, and they have fights, that is what happens. They don't have a
:08:46. > :08:50.financial choice? I think that is the difference. I'm asking for help
:08:50. > :08:54.towards, I'm not asking for a free handout. The lesson for officials
:08:54. > :08:59.across Whitehall looking at the last �18 billion worth of cuts is
:08:59. > :09:05.that you can do a lot with flow, but not so much with stock. What do
:09:05. > :09:12.they mean? Flow is a flow on and off unemployment benefit, stock is
:09:12. > :09:15.for those who it is more difficult to get work. If you left home, you
:09:15. > :09:18.will have to go into the housing benefit system and it would mean
:09:18. > :09:22.you would have entered the benefit system and you are more likely to
:09:22. > :09:25.spend "a lifetime on benefits". Equally, what is the messaging
:09:25. > :09:29.around young women and getting pregnant? If you can get pregnant
:09:29. > :09:33.and the state will help you out, you are less worried about the
:09:33. > :09:40.consequences of doing so. These are the kind of things that they are
:09:40. > :09:45.looking at. Tory MPs point across to the US where, in 1996, Bill
:09:45. > :09:50.Clinton allowed American states to impose "family caps" on children
:09:50. > :09:53.born to families on welfare. More recently, though an age ago in the
:09:53. > :09:56.life cycle of the coalition, a Cabinet minister reiterated this
:09:56. > :10:00.could be the direction of travel. The number of children that you
:10:00. > :10:03.have is a choice. What we are saying is that if people are living
:10:03. > :10:06.on benefits, then they make choices but they also have to have
:10:06. > :10:12.responsibility for those choices and it is not going to be the role
:10:12. > :10:15.of the state to finance those choices. Changes to benefits that
:10:15. > :10:18.affect families and children are probably a distraction. The next
:10:19. > :10:25.really big savings will come from somewhere completely different.
:10:25. > :10:30.think when it comes to benefits for people out of work, we do want to
:10:30. > :10:33.reform the system. It shouldn't be driven by fiscal cost. There is
:10:33. > :10:36.good reasons for reforming the housing benefit. It is not going to
:10:36. > :10:44.rescue the public finances. If you want to rescue the public finances,
:10:44. > :10:48.you have to look at pensions and the middle-class benefits. So a
:10:48. > :10:52.debate could end up rebounding on the Tories. The Prime Minister said
:10:52. > :10:55.that he ruled out any movement on Winter Fuel Payments being ended.
:10:55. > :10:59.That is a tiny part of the pot. Now there is a suggestion there could
:10:59. > :11:02.be movement on that in the next Tory manifesto. Other people,
:11:02. > :11:06.including in his own party, think the movement has to be much sooner
:11:06. > :11:10.than that. To those who say that will require an embarrassing about-
:11:10. > :11:13.turn by the Prime Minister, well, Tories say look at Nick Clegg, he
:11:13. > :11:18.did an embarrassing U-turn on tuition fees. Now it is time, Prime
:11:18. > :11:21.Minister, for you to do yours. could reach �10 billion if you
:11:21. > :11:26.focused on the middle-class welfare. Let's not underestimate how hard it
:11:26. > :11:30.will be to get there. Let's start with the winter fuel allowance and
:11:30. > :11:38.the free bus passes and the TV licences and get rid of those
:11:38. > :11:42.benefits and then we can think about making further savings.
:11:42. > :11:45.the coalition leadership wants to go for more cuts to the welfare
:11:46. > :11:48.bill. As they look for options for where to go next, they are already
:11:48. > :11:51.realising the first cut was the deepest.
:11:51. > :11:54.Ken Livingstone is one of those who has, over the years, opposed
:11:54. > :11:57.welfare cuts. Harriet Baldwin is a Tory MP who believes some radical
:11:57. > :12:00.thinking is necessary. Graeme Cooke has been studying the options for
:12:00. > :12:03.the think-tank, IPPR - and he worked as a special adviser to
:12:03. > :12:06.Labour's Secretary of State, James Purnell, at the Department of Work
:12:06. > :12:14.and Pensions - and Kavita Oberoi is a businesswoman who worries that
:12:14. > :12:21.welfare helps some people become more work-shy, not more prosperous.
:12:21. > :12:25.The big picture first. The case for another �10 million or �25 million,
:12:25. > :12:28.sorry �10 billion or �25 billion as some have suggested. What is the
:12:28. > :12:32.case to make those savings? most important thing that we have
:12:32. > :12:37.to focus on is improving the incentives to go into work. As you
:12:37. > :12:41.saw from the package that David presented earlier, with one in four
:12:41. > :12:44.adults in workless households and a doubling of the number of workless
:12:44. > :12:48.households under the previous Government, I think it is
:12:48. > :12:51.incredibly important that we reform the benefits system, bring in
:12:52. > :12:55.universal credit and really create incentives for people... It is to
:12:55. > :12:59.save money, isn't it? The best way to save the welfare bill is to help
:12:59. > :13:04.people into work. Welfare should be there, it should be a safety net.
:13:04. > :13:11.It should be a strong safety net. It shouldn't be a sticky safety net.
:13:11. > :13:15.Could you save �25 billion more? think the �25 billion figure is
:13:15. > :13:19.going to be a myth. I really don't see that happening. �10 billion is
:13:19. > :13:23.doable? I think that there are things that you could look at. The
:13:23. > :13:27.package raised some of them. Although I agree in our manifesto
:13:27. > :13:32.we said we shouldn't do anything with winter fuel allowances, to
:13:32. > :13:36.give it to millionaires doesn't make sense. I think we should
:13:36. > :13:42.perhaps reduce the level at which you get the winter fuel allowance.
:13:42. > :13:46.We will come on to that in a moment. Your position is no cuts to the
:13:46. > :13:50.welfare bill? I can immediately think of some cuts. You had �23
:13:50. > :13:53.billion up there on the wall, housing benefit. You could cut �10
:13:53. > :13:57.billion off that by introducing caps on rents. The Government's
:13:57. > :14:01.gone about it by attacking the tenants and I don't know what it is
:14:01. > :14:05.like in other parts of the country. Here in London to rent a two-
:14:05. > :14:09.bedroomed flat takes 60% of the average take-home pay. Rents have
:14:09. > :14:13.got out of control. You accept the principle that the welfare bill
:14:13. > :14:18.itself is out of control for one reason or another? The strategy has
:14:18. > :14:24.gone wrong. I became an MP in '87. I was stunned to have unemployed
:14:24. > :14:30.people coming to my surgery saying, "I've lost my job, I went to the
:14:30. > :14:33.DHSS and they said why don't you go on disability benefit?" They were
:14:33. > :14:37.trying to massage down the unemployment figures and they
:14:37. > :14:41.created a dependency culture. looked at this and you tried to
:14:41. > :14:44.figure out what was politically possible. Labour in power would
:14:44. > :14:48.have to look for significant welfare cuts. In that sense, there
:14:48. > :14:52.is a political consensus? welfare bill is about a quarter of
:14:52. > :14:56.all public spending. You can't exempt the benefits bill from
:14:56. > :14:59.efforts to reduce the deficit. You have to start by looking at why the
:14:59. > :15:03.benefits bill is rising. One of those reasons is that we have not
:15:03. > :15:06.got growth in the economy, we have unemployment high, that is one of
:15:06. > :15:13.the reasons why so many people are out of work. You also have to have
:15:13. > :15:18.a strategy for how you want to move money... Could you save �25
:15:18. > :15:23.billion? Could you do it? There is an argument for looking at some of
:15:23. > :15:27.the pensioner benefits that go to those on high incomes. You could
:15:27. > :15:31.look at pension tax reliefs. If you restricted pension tax relief to
:15:31. > :15:34.the basic rate and means-tested winter fuel allowance and free TV
:15:34. > :15:37.licences, you would be at �10 billion. The more important thing
:15:37. > :15:40.is to look at what do we want to prioritise in our welfare system?
:15:40. > :15:44.Should we shift from benefits to services? Should we do something
:15:44. > :15:48.along the lines that Ken said which is move from subsidising rents to
:15:48. > :15:52.building homes? My worry is that the Government are lopping bits off
:15:52. > :15:56.the system. Where do you come in on this? Do you take the moral point
:15:56. > :16:02.that we heard earlier, that this is good for people because it will get
:16:02. > :16:09.them to work? I mean, I empathise with people who are on benefits who
:16:09. > :16:14.should be on benefits. A few years ago, I went out to Mumbai. There is
:16:14. > :16:17.no welfare system and begging isn't allowed. So what does that do? That
:16:17. > :16:22.changes people's behaviours and people then start thinking because
:16:23. > :16:29.they need income, they need to earn money, so they start thinking...
:16:29. > :16:33.You don't want Indian conditions of labour here? No. We need to drive
:16:33. > :16:35.different behaviours. People should be responsible for their own
:16:35. > :16:40.behaviours and drive entrepreneurship. I saw there
:16:40. > :16:44.families getting together, it was Valentine's Day, they were selling
:16:44. > :16:49.things. We need to drive entrepreneurship, more start-ups.
:16:49. > :16:54.Right. Aren't there some people who are untouchable in this and some of
:16:54. > :16:58.the people you were talking about, pensioners, you can't touch that?
:16:58. > :17:02.You might be able to do it in theory. Try touching winter fuel
:17:02. > :17:05.allowance and people will not vote for you? Look, pensioners account
:17:05. > :17:09.for over 40% of the benefits. You can't reduce the benefits bill
:17:09. > :17:13.unless you look at some of the pensioner benefits. Capping
:17:13. > :17:17.benefits for the number of children you have - the benefits cap saved
:17:17. > :17:21.�200 million. These are sideshows to the big issues. If you want to
:17:21. > :17:25.save money in the benefits system, you have to look at what is driving
:17:25. > :17:32.the rises - it is higher rent, higher unemployment, it is low
:17:32. > :17:35.wages. Right. You support the idea of a cap on families, don't you?
:17:35. > :17:38.should have - which I understand unusually - is a Labour Party
:17:38. > :17:42.policy. We have a policy from the Labour Party on this which is to
:17:42. > :17:46.have a regional benefit cap. I think that we should have a
:17:46. > :17:51.regionalised cap in terms of benefits. One of the Clinton
:17:51. > :17:54.reforms was that they looked at the different labour markets in
:17:54. > :17:57.different parts of the country. you think if somebody chooses to
:17:57. > :18:03.have six children or seven children, there comes a point where the state
:18:03. > :18:07.should no longer support those extra children? If you have never
:18:07. > :18:10.worked and you continue to increase the size of your family never
:18:10. > :18:14.having worked, we ought to be asking the question is there a
:18:14. > :18:17.better way we can help you to find a better way for you to support
:18:17. > :18:21.your family? By cutting your benefits if you have more than five
:18:21. > :18:25.children? Gordon Brown had an idea of putting perhaps young parents
:18:25. > :18:29.either with their own parents or in a kind of foyer and helping them
:18:29. > :18:33.with training and education. It was another of the Clinton reforms to
:18:33. > :18:37.make the increase in welfare, when you increase the size of your
:18:37. > :18:42.family dependent on training and education. I think it is obscene
:18:42. > :18:46.that somebody who might be earning �1 million a year is claiming their
:18:46. > :18:48.winter fuel allowance. You can either have a whole load of
:18:48. > :18:54.bureaucrats checking each individual and having some sort of
:18:54. > :18:57.benefit cap, or you can take that money back through a more
:18:57. > :19:01.progressive tax system. Governments have been terrified of having a
:19:01. > :19:07.more progressive tax system. That is one way of claiming it back.
:19:07. > :19:10.winter fuel allowance, bus passes, TV licences? The best way to do
:19:11. > :19:18.that is to do it through a progressive tax system. Do you
:19:18. > :19:23.claim such things? No. I didn't think it was right to claim my
:19:23. > :19:28.state pension when I was earning quite comfortably. I think that was
:19:28. > :19:32.wrong. I know most rich people probably do. That is wrong. Means-
:19:32. > :19:37.testing is wrong? Means-testing - when you look at how means testing
:19:37. > :19:44.works, what happens is an awful lot of people who should claim end up
:19:44. > :19:48.not claiming. The thing about the bus pass - do you want to employ
:19:48. > :19:51.several thousand bureaucrats to check each individual whether they
:19:51. > :19:56.should be paying or whether they shouldn't? It is much better to use
:19:56. > :20:02.the tax system to claw this back. You have all those bureaucrats in
:20:02. > :20:08.the tax inspectorate, let them do it. Use the bureaucrats in the tax
:20:08. > :20:13.inspectorate to claw it back? into a number of schools where
:20:13. > :20:17.there are generations of families that have just not worked. Why is
:20:17. > :20:22.that happening? Why is that continuing? Is that the thing
:20:22. > :20:26.that's being aspired to just not to work? Why do you think it is
:20:26. > :20:31.happening? Our benefits system does make it an easy choice sometimes
:20:32. > :20:36.because if you do go out to work and if you are on the minimum pay
:20:36. > :20:45.job, then maybe it is easier not to work because you are not that - it
:20:45. > :20:48.is not - you are not in benefit... When I left school in t' 60 -- in
:20:48. > :20:52.the '60s, every boy got a job. That job paid them enough to support
:20:52. > :20:57.wife and family. I didn't know anyone on benefits through my 20s.
:20:57. > :21:01.We have lost the jobs that working- class people used to get. We wiped
:21:01. > :21:05.out manufacturing. All those areas where people could without going to
:21:05. > :21:09.university have a good job. They have gone. I want to bring in
:21:09. > :21:14.Graeme. You have been thinking about it at the Department of Work
:21:14. > :21:18.and Pensions. Is it politically possible? You get into the granny
:21:18. > :21:21.tax trap, you are robbing the poor. It is politically almost impossible
:21:22. > :21:25.to do this? I think it is if you don't have an argument about what
:21:25. > :21:28.sort of system you are trying to bring about. If you try and lop
:21:28. > :21:32.bits off the system, it is hard to come up with a justification for
:21:32. > :21:36.that. That is why you have to an argument about where you might
:21:36. > :21:39.shift money. You could look at holding down the growth in child
:21:39. > :21:42.benefit over a period of time and switching some of that into
:21:42. > :21:46.childcare. With restricted resources as a country, we need to
:21:46. > :21:49.think about investing in services that are going to raise our
:21:49. > :21:55.employment rate. The people who were hit will protest and some of
:21:55. > :22:00.them are middle-income people relatively well-off, they protest
:22:00. > :22:03.very articulately? Sure, there are huge political difficulties with it.
:22:03. > :22:09.There is a significant budget deficit. Welfare has to play its
:22:09. > :22:13.part. You have to make an argument. Is this about re-working the
:22:13. > :22:17.welfare state and any Government will have to tackle it?
:22:17. > :22:23.universal credit will be so crucial. Let me give you an example. I had
:22:23. > :22:27.all the growers came up saying they were having to import labour from
:22:27. > :22:31.Moldova to take the picking jobs that students used to do. Because
:22:31. > :22:36.of the way that the benefits system is so sticky, it is sticky as to
:22:36. > :22:38.where you are located. Once you have the house, you can't move
:22:38. > :22:42.somewhere else. These jobs have accommodation for the summer. You
:22:42. > :22:47.can return with thousands of pounds which is what students are doing. I
:22:47. > :22:52.think we do have to make sure that the universal credit, which will
:22:52. > :22:58.start in six months' time, will really make those incentives for
:22:58. > :23:04.moving into work and that is the best form of welfare reform you can
:23:04. > :23:08.have. Will it save enough? Largely, it is a tidying-up exercise. There
:23:08. > :23:13.is an overclaiming going on... There's the 65 pence withdrawal
:23:13. > :23:17.rate which is much more attractive. There are some improved work
:23:17. > :23:22.incentives. It has been slightly overclaimed by putting all these
:23:22. > :23:25.benefits together that you will get millions of people into work.
:23:25. > :23:30.Therefore you won't save as much as people think you might save? It is
:23:30. > :23:33.only 10% of the benefits bill that is spent on the main out of work
:23:33. > :23:38.benefits. So the big-ticket items of spending aren't there. That
:23:38. > :23:43.doesn't take away from the fact we need to get more people into work.
:23:43. > :23:48.Do you accept you have to change the welfare state otherwise it
:23:48. > :23:53.won't exist? I started 50 years ago, I can't concede not doing something
:23:53. > :23:55.each day. The idea you sit at home and watch daytime TV, that is the
:23:55. > :24:00.most depressing prospect. That means you have to create jobs. We
:24:00. > :24:05.have moved away from being a full employment economy. We have got -
:24:05. > :24:09.in London we have a third of a million families on waiting lists.
:24:10. > :24:13.Every architect is looking for work. The Lib Dems are looking at
:24:14. > :24:18.accessing pension funds to fund a proper public works programme. Put
:24:18. > :24:22.those people back to work, they spend that money, it creates more
:24:22. > :24:26.jobs. Let's start thinking about getting people back into jobs
:24:26. > :24:30.rather than just punishing people who haven't got one. If the jobs
:24:30. > :24:35.aren't there, we are always talking about growth and where the jobs are
:24:35. > :24:38.coming from, then I think money should be invested into really
:24:38. > :24:41.providing aspiration and inspiration into the young and into
:24:41. > :24:46.everybody. These days, the world is a different place. You can start -
:24:46. > :24:50.I started my business in my bedroom on a laptop. It's cost - it doesn't
:24:50. > :24:54.cost what it used to cost. I think we need to drive that more so. We
:24:54. > :24:57.are seeing a lot more start-ups now. I think that is really important.
:24:57. > :25:00.If there isn't the jobs, what are we going to do? We have to do
:25:00. > :25:04.something different. Thank you all very much.
:25:04. > :25:07.London down more than 2%. Bank shares down sharply. Barclays,
:25:07. > :25:12.Lloyds and RBS all down by around 4%. Milan down 3.7%. Madrid down
:25:12. > :25:15.3.3%. And the euro down against the dollar. It must be another meeting
:25:15. > :25:18.in Brussels to try to sort out the euro crisis. Our economics editor,
:25:18. > :25:28.Paul Mason, is in Brussels to try to find out what, if anything,
:25:28. > :25:29.
:25:29. > :25:35.might be different this time. The European leaders are running out of
:25:35. > :25:44.time and options, none more urgently than this man, the interim
:25:44. > :25:50.Prime Minister of Greece. Prime Minister, how long have you got?
:25:50. > :25:55.There are 25 days until the Greek election, Monday nigh -- money is
:25:55. > :25:59.draining out of the country's banking system. What mainstream
:25:59. > :26:05.politicians in Greece want is for these limos of the European leaders
:26:05. > :26:09.to bring some help, pronto. What the EU politicians need to say to
:26:10. > :26:15.Greece tonight is that while the terms of the bail-out are
:26:15. > :26:19.negotiable, to make them easier, more bearable for Greece as well as
:26:19. > :26:23.Greek citizens, Greece's future remains firmly in the eurozone that
:26:23. > :26:28.there are no plans, that nobody wants Greece out of the eurozone
:26:28. > :26:38.and nobody can make it happen or will make it happen. Next problem?
:26:38. > :26:41.
:26:41. > :26:45.The Spanish PM met the French President today and both know the
:26:45. > :26:53.markets are terrified of a banking collapse in Spain. The country's
:26:53. > :26:56.banks need money, soon, to finally shore up their toxic debts. Mariano
:26:56. > :27:00.Rajoy does not want to suffer the fate of the Irish and the
:27:00. > :27:04.Portuguese. TRANSLATION: Most probably we will
:27:04. > :27:09.need some funds to recapitalise some Spanish banks. Don't believe
:27:09. > :27:13.though that we are talking about significant amounts. Please bear in
:27:13. > :27:20.mind the Government has no intention or wish to seek European
:27:20. > :27:28.bail-out funds to do this. Enter the French, with a demand for
:27:28. > :27:32.growth. But it will be a challenge. The French President has disrupted
:27:32. > :27:40.not just the traffic here in Brussels, but all the patterns of
:27:40. > :27:44.previous summits, but what he needs now is action on his growth agenda.
:27:44. > :27:48.On this, at least, the British Prime Minister agrees.
:27:48. > :27:51.REPORTER: What is going to bang their fist on the table tonight?
:27:51. > :27:55.This is an important meeting for Britain because what happens in the
:27:55. > :28:00.eurozone affects our country. Of course, what we need is a decisive
:28:00. > :28:03.plan for Greece and we need decisive plans to help get the
:28:03. > :28:07.European economies moving. If we are not going to keep coming back
:28:07. > :28:11.and back to meetings like this, we also need to deal with some of the
:28:11. > :28:15.longer term issues at the heart of running a successful single
:28:15. > :28:25.currency. So for the most powerful politician in Europe, Germany's
:28:25. > :28:27.
:28:27. > :28:32.Angela Merkel, it is crunch time. Mrs Merkel has become the nay sayer,
:28:32. > :28:37.she said no to the creation of common eurobonds to stabilise the
:28:37. > :28:41.currency. But she knows she is isolated at this summit. She can go
:28:41. > :28:47.on being isolated as long as the majority of Germans believe she is
:28:47. > :28:51.doing the best she's ever done for their country. The problem is if
:28:51. > :28:56.there is a bank run, there is nothing the Greek Government can do
:28:56. > :29:00.to restore confidence. That is why if you are pessimistic, the EU
:29:01. > :29:08.authorities may have less than a month in the run-up to the Greek
:29:08. > :29:13.elections to do something big that restores confidence. When tonight's
:29:13. > :29:19.limo-logjam disperses, we will know whether they have any plan at all.
:29:19. > :29:24.Paul is watching the paint dry in Brussels! Is anything happening?
:29:24. > :29:30.little bit of briefing on the floor below me by Special Advisers, but
:29:30. > :29:33.they haven't broken up yet. I am told by somebody with access to the
:29:33. > :29:37.inner sanctum, there won't be too many decisions taken tonight. The
:29:37. > :29:41.basic problem remains - they don't agree. What we are sighing are,
:29:41. > :29:47.said the person I spoke to, the -- we are seeing are, said the person
:29:47. > :29:53.I spoke to, are the emergence of new groups, particularly around
:29:53. > :29:59.Francois Hollande. He seems to be created access with Mariano Rajoy
:29:59. > :30:02.of Spain and Monte of Italy. He was imposed from above on to Italy. The
:30:02. > :30:07.agenda of that little grouping is lay off Greece for a bit and give
:30:07. > :30:10.this Spanish, as we heard in the clip, some way out of their banking
:30:10. > :30:17.crisis that isn't so humiliating that the Government then falls.
:30:17. > :30:22.Beyond that, we know they have been discussing whether what you would
:30:22. > :30:25.do to give Greece 50 billion euros to leave the euro. That is a what
:30:25. > :30:30.if scenario. Apart from that, we have paralysis as we have for many
:30:30. > :30:35.of the other meetings. Exactly. David Cameron has been saying it
:30:35. > :30:41.can't go on and on. As he well knows, it has gone on and on?
:30:41. > :30:45.if you look at Mr Cameron as a sort of worked example of what's
:30:45. > :30:49.happened to many political leaders here, nine months ago Cameron came
:30:49. > :30:55.with an agenda, he tried to do something, he tried to contribute.
:30:55. > :30:58.They are not willing bystanders now. The problem is, you see the
:30:58. > :31:02.engagement begin to turn to frustration as politicians say,
:31:02. > :31:06."There's only so much we can do." The Brits are concerned about being
:31:06. > :31:11.seen as outsiders butting into somebody else's problems. Many of
:31:11. > :31:15.the Europeans think we caused all this. Cameron is less able to act
:31:15. > :31:17.despite, as you saw in the clip, his frustration. If that is
:31:17. > :31:24.anything like what other politicians are feeling, what you
:31:24. > :31:27.begin to see is an ebbing away of the ability to move things along.
:31:27. > :31:32.We might remember this meeting, quite possibly, as the last chance
:31:32. > :31:37.they had to sort something before the Greek election presses the
:31:37. > :31:40.start button on a serious crisis. Paul, we have so much to look
:31:40. > :31:43.forward to. Thank you. We have more now on the Newsnight
:31:43. > :31:45.investigation into how some civil servants are avoiding paying income
:31:45. > :31:53.tax by channelling earnings through service companies. Peter Marshall
:31:53. > :31:58.is here. The head of the student loans commission was being paid
:31:58. > :32:04.�182,000 a year through a private service company. Thus reducing his
:32:04. > :32:07.tax bill by tens of thousands of pounds a year. Danny Alexander, the
:32:07. > :32:11.Chief Secretary to the Treasury, immediately put him on the payroll
:32:11. > :32:15.and made him PAYE and ordered a review of all senior public
:32:15. > :32:21.servants to see who else was on these similar arrangements. He
:32:21. > :32:27.found out, as we reported, quite a lot. 2,400, he told the Commons
:32:27. > :32:36.today, are on these deals. These are highly-paid people, the minimum
:32:36. > :32:40.they get is �58,000 a year. If you are on a salary of �120,000 a year,
:32:40. > :32:44.it means you reduce your tax and National Insurance by �23,000.
:32:44. > :32:48.Danny Alexander was at pains to point out that some of these deals
:32:48. > :32:51.go back two years to the past Labour Government, 20 of them go
:32:51. > :32:55.back ten years, which he said was an extraordinary length of time to
:32:55. > :33:04.be on contract, all the time he was at pains to stress this is not a
:33:04. > :33:09.problem of this Government's making. It is clear that off payroll
:33:09. > :33:13.engagement has been endemic for too many years. It is a problem that
:33:13. > :33:17.built-up and was presided over by the previous Government. It is
:33:17. > :33:21.likely that under their watch, many more thousands of cases of off
:33:21. > :33:25.payroll payment may have come and gone yet no-one said a word. The
:33:26. > :33:29.solution to this problem is not to turn a blind eye, or brush it under
:33:29. > :33:33.the carpet. We have to bring an end to the don't ask, don't tell
:33:33. > :33:38.approach to this issue. That is his analysis. What is he going to do
:33:38. > :33:43.about it? He will make all these individuals go on staff and become
:33:43. > :33:46.PAYE from September. We all have to pay our fair share, he said. This
:33:46. > :33:48.will apply across the Government and the Health Service. When the
:33:48. > :33:55.Government changes the law, it will apply to the public sector, too.
:33:55. > :34:05.All those in controlling positions must be on the payroll. And those
:34:05. > :34:05.
:34:05. > :34:09.who aren't are freelancers. With no exceptions? A number of MPs were
:34:09. > :34:14.questioning the BBC's arrangements so I checked before coming here.
:34:14. > :34:19.The BBC's position is all BBC employees pay tax at source, PAYE,
:34:19. > :34:24.others who work for the BBC but maybe freelancers, working for a
:34:24. > :34:28.range of employers across the industry, they can be paid off the
:34:28. > :34:33.payroll as can perhaps some presenters who may write books and
:34:33. > :34:36.have multiple employers. This is quite legitimate and in agreement
:34:37. > :34:39.with the Revenue. Thank you. Facebook translated its popularity
:34:39. > :34:42.as a social networking site into popularity with investors in its
:34:42. > :34:48.Initial Public Offering which valued shares at $38 each, though
:34:48. > :34:51.almost immediately the price slid around 18% to $31. Tonight the US
:34:51. > :34:55.Senate Banking Committee said it is reviewing various issues regarding
:34:55. > :34:57.the offering. The bank, Morgan Stanley, which advised Facebook, is
:34:57. > :35:00.being sued for allegedly warning some favoured big investors that
:35:00. > :35:10.future earnings were likely to be lower than previously thought - a
:35:10. > :35:13.warning smaller investors did not receive. Joe Lynam reports.
:35:13. > :35:18.There is a reason why the people at the front of this shop are smiling
:35:18. > :35:23.- they had just all become very real billionaires. Last Friday's
:35:23. > :35:32.Facebook flotation or IPO, was one of the biggest ever and valued the
:35:32. > :35:36.soirbl network at over -- social network at over $100 billion. But
:35:36. > :35:40.now the lawyers have taken over. Facebook and some Wall Street banks
:35:40. > :35:44.are being sued by a group of private investors who have lost
:35:44. > :35:48.their T-shirts since last Friday. They allege that in the run-up to
:35:48. > :35:51.the IPO Facebook warned Morgan Stanley things may not be as rosy
:35:51. > :35:54.as they thought. The bank is accused of passing on that
:35:54. > :35:59.information only to a select group of its Wall Street chums, instead
:35:59. > :36:03.of telling all would-be investors. It is not clear whether anybody
:36:03. > :36:08.broke any rules. What is clear is that if they did not break rules,
:36:08. > :36:11.the rules themselves are very unfair. They gave much better
:36:11. > :36:17.information to big institutional investors than they did to small
:36:17. > :36:21.investors. Whether they broke the rules is probably going to be
:36:21. > :36:26.litigated now. It all started so well on flotation day, shares
:36:26. > :36:30.launched at $38 and rose a bit before closing where they started.
:36:30. > :36:33.Rumours that some key information had been withheld as well as
:36:33. > :36:39.glitches on the Nasdaq market started a big sell-off on Monday
:36:40. > :36:45.and by yesterday, it had closed at $31, almost a fifth down. The
:36:45. > :36:49.shares have rallied today, closing at $32. While it is highly unlikely
:36:49. > :36:54.that fewer people will use Facebook as a result of the IPO, its
:36:54. > :36:58.reputation may have taken a knock. Facebook was to become the medium
:36:58. > :37:04.for targeted advertising on a social network. Losing investors
:37:04. > :37:08.billions in two or three days may scare off some would-be advertisers.
:37:08. > :37:15.To see all these shareholder lawsuits going on, to have a share
:37:15. > :37:21.price that was ramped pre-IPO and then went down afterwards, that is
:37:21. > :37:25.not good. Secondly, longer term, I know because this will be hard for
:37:25. > :37:30.us, is recruitment. If you have a share price, particularly if you
:37:30. > :37:34.are in the heart of Silicon Valley, and your share price is going down,
:37:34. > :37:37.that could damage your long-term prospects. Talent is everything.
:37:37. > :37:42.What was the vital bit of information which may have been
:37:42. > :37:46.withheld from some smaller investors before the float? When
:37:46. > :37:51.Facebook went global in 2006 it was enjoyed mostly on large screen
:37:51. > :37:57.devices such as desktops and laptops. Adverts worked because
:37:57. > :38:01.they didn't dominate the page. Now we consume our social networking on
:38:01. > :38:06.hand-held devices and smartphones. There, advertising is too small to
:38:06. > :38:10.be effective or too big that it annoys the user. It was that fear
:38:10. > :38:14.that Facebook might not be able to get as much money from phone users
:38:14. > :38:17.that caused concern. Morgan Stanley said today that it had follow load
:38:17. > :38:24.the same procedures for the Facebook offering that it follows
:38:24. > :38:27.for all IPOs and these procedures were in compliance with all
:38:27. > :38:32.applicable regulations. With nearly one billion regular users, Facebook
:38:32. > :38:41.is the world's most valuable address book. It has been tainted a
:38:41. > :38:43.little by appearing to cosy up to Wall Street over mom and pop
:38:43. > :38:49.invstors investors. Andrew Edgecliffe-Johnson is Media
:38:49. > :38:56.Editor at the Financial Times and Dan Wagner is a Venture Capitalist.
:38:56. > :39:01.Andrew, did Morgan Stanley get this wrong? It did a brilliant job for
:39:01. > :39:07.their client. They got $16 billion of cash out of investors who seemed
:39:07. > :39:11.to be lining up for this IPO. At the same time, the price was not
:39:11. > :39:20.sustained and every adviser to a flotation like this wants to see a
:39:20. > :39:24.pop, they want to see the shares go up 10% and stay there and build-up.
:39:24. > :39:30.The difficult balance here is that a bank advising a company like
:39:30. > :39:35.Facebook is trying to do two different things. It is trying to
:39:35. > :39:41.get the best price for the company and for its original investors who
:39:41. > :39:44.might be selling out. But it is also trying to keep the new
:39:44. > :39:47.investors happy and engaged and create a good buzz around the
:39:47. > :39:51.company. There is certainly not a good buzz around the company today.
:39:51. > :39:57.It is a failure. It's not worked the way it is supposed to. Dan,
:39:57. > :40:01.quite a few American newspapers have used the word "botched" - do
:40:01. > :40:07.you agree? Not really. The IPO was priced fully. It certainly was...
:40:07. > :40:10.At the top end? Yes. What happens is typically with an IPO it is
:40:10. > :40:15.book-built during the process with investor demand and the price may
:40:16. > :40:18.get pushed up. You have to remember these investment banks work for the
:40:18. > :40:22.institutional investors because they are the ones who keep taking
:40:22. > :40:25.the new issues every time a new one comes along. They want stuff them
:40:25. > :40:31.with an expensive stock because there's demand. They will try and
:40:31. > :40:36.price it as fairly as they can with the expectation there will be an
:40:36. > :40:41.uplift in the after- market. What Andrew called a pop. Do you think
:40:41. > :40:45.it is right, is it normal for some of those more favoured big
:40:45. > :40:50.institutional investors to have information that mum and dad back
:40:50. > :40:56.home buying a few shares doesn't get? I don't believe they do. The
:40:56. > :41:00.SEC has strict guidelines. You have an S1 that gets filed with the SEC.
:41:00. > :41:05.It was restated with new information. Anyone can go to the
:41:05. > :41:08.web and download the S1 to read it in detail. So I think that full
:41:08. > :41:12.information was out there. Whether everyone took advantage of that
:41:12. > :41:16.before making their investment is up to them. Andrew, is there a
:41:16. > :41:18.problem in this because of Facebook likes to look after the little
:41:18. > :41:24.people, that is part of the image, whether you believe that or not is
:41:24. > :41:29.up to you. Do you think that is an image problem for them now? I think
:41:29. > :41:32.it is difficult. They have 900 million users. This is what has
:41:32. > :41:37.built them up into this company. They have also said in that filing
:41:37. > :41:40.that Dan refers to, we were not, we didn't start life trying to be a
:41:40. > :41:46.company. We started off with a social mission. We don't wake nup
:41:46. > :41:52.the morning and think about profit -- wake up in the morning and think
:41:52. > :41:56.about profit first. This, frankly, makes you wonder whether they could
:41:56. > :42:04.have been a bit more like a normal company. There are lawsuits piling
:42:04. > :42:08.up. Regulators are lining up to look at this. The facts will not be
:42:08. > :42:14.clear for a little while. What is disclosed in the court process, we
:42:15. > :42:18.have yet to find out. So there is always a grey area where the big
:42:18. > :42:22.investment banks are allowed to communicate with the big clients,
:42:22. > :42:26.to point out that that sentence in the filing is the important one,
:42:26. > :42:30.where they talk about slowing a mobile growth, the mom and pop
:42:30. > :42:33.investor might well have missed that. So people involved in the IPO
:42:33. > :42:39.today are saying the information was out there for everybody to see,
:42:39. > :42:49.there was a lot of press about it, we wrote about it in the Financial
:42:49. > :42:51.
:42:51. > :42:56.Times. But it is a grey area. I want to bring in Dan. Do you
:42:56. > :43:00.think it is a problem for Facebook in future? No, I don't. We have to
:43:00. > :43:04.remember two things. Shares go up and they go down. In this case, the
:43:04. > :43:09.shares have gone down a little bit. This is a business that has the
:43:09. > :43:18.most extraordinary profile. It's gone from profits, from losses in
:43:18. > :43:22.2008 to a profit of a billion. Based on... It has 900 million
:43:22. > :43:27.users. Exactly. Based on people loving what they do and thinking
:43:27. > :43:30.this is a nice, friendly thing. If that is damaged, then they haven't
:43:30. > :43:35.got... I don't think that is damaged. It is a dominant player in
:43:35. > :43:41.social media and it will remain the dominant player for some years to
:43:41. > :43:51.come. Thank you. Let's look at tomorrow's front-pages. The
:43:51. > :43:52.
:43:52. > :43:59.Guardian has the EUfissure widens - - EU fissure widens over Greece.
:43:59. > :44:07.The FT, Europe braced for turmoil as Greece fears take their toll.
:44:08. > :44:14.It's got Facebook down below. The Times has market slides amid future
:44:14. > :44:23.over Greece. The Mail has a story about a British rabies victim
:44:23. > :44:29.fighting for his life. The Independent - eurozone set to
:44:29. > :44:33.abandon Greece and austerity. Finally, the Telegraph as Welfare
:44:33. > :44:42.to Work fraud scandal, whistleblower accuses company of
:44:42. > :44:46.misusing billions... What is that about, David? The best way of
:44:46. > :44:50.helping people is to get them into work off benefits. The Government's
:44:50. > :44:54.big idea is to pay private companies to do that. They are
:44:54. > :44:58.channelling �5 billion into that. They pay them by results. What if
:44:58. > :45:03.those results aren't all that they seem? The Telegraph are leading on
:45:03. > :45:11.secret testimony by one of the auditors of the Welfare to Work
:45:11. > :45:17.provider A4e. He describes Welfare to Work as "multi-billion pound
:45:17. > :45:21.scandal" and there is an unevidentical culture. In the past,
:45:21. > :45:25.the Department for Work and Pensions has said that if they do
:45:25. > :45:31.uncover systematic fraud, they will lose all of their Government
:45:31. > :45:37.contracts. Now, Newsnight has obtained a report by a man called
:45:37. > :45:40.Eddie Hutchinson, head auditor at A4e between 2011/12. He testified
:45:40. > :45:45.at the Public Accounts Committee yesterday. Now, rather surprisingly,
:45:45. > :45:50.that testimony was heard in secret, as was insisted on by some
:45:50. > :45:57.Conservative members. Now, that is why it has not emerged until now.