:00:12. > :00:18.Tonight, a Newsnight investigation into some of the world's most
:00:19. > :00:25.successful companies. Companies who appear to make massive profit in
:00:25. > :00:29.Britain, but pay very little tax. # I'd like to buy the world a coke
:00:29. > :00:33.# And keep it company Companies such as Coca-Cola are
:00:33. > :00:36.doing nothing illegal, of course, but is it immoral. It is
:00:36. > :00:39.irresponsible, unethical and unacceptable. There needs
:00:39. > :00:43.substantial reform to bring our business tax system up-to-date, as
:00:43. > :00:46.it should be. I will ask the Treasury Minister, David Gauke, why
:00:46. > :00:50.the loopholes can't be closed, and whether smaller British companies
:00:50. > :00:53.are put at a disadvantage. The comedian, Freddie Starr, is
:00:53. > :00:58.arrested by detectives investigating the Jimmy Savile
:00:58. > :01:01.abuse claims. He becomes the second celebrity to face questioning, as
:01:01. > :01:06.the police investigation turns the spotlight on those still alive. We
:01:06. > :01:09.will have the latest. And with social media sites
:01:09. > :01:13.sweeping in and sometimes out of fashion, we ask the founder of
:01:13. > :01:16.Tumblr, what is so different about his site. It can be this really
:01:16. > :01:20.delightful surprise when you bump into some stranger on Tumblr or
:01:20. > :01:25.anywhere on the Internet, who cares about the same stuff that you do. I
:01:25. > :01:34.don't think it is narcissistic, I think it is a whole new opportunity
:01:34. > :01:37.for humans to socialise that hasn't existed before.
:01:37. > :01:42.Good evening, one of the big priorities at the Treasury has been
:01:42. > :01:45.in very hard times, new efforts to crack down on those not paying or
:01:45. > :01:49.avoiding tax. One or two celebrities have been named, and
:01:49. > :01:53.possibly shamed, but for many people, scandal is not -- the
:01:53. > :01:57.scandal is not what is legal, but what is permitted -- illegal, but
:01:57. > :02:00.what is permitted under the law. Newsnight's investigation has
:02:00. > :02:04.revealed that some of the world's biggest companies apparently make
:02:04. > :02:08.massive profits in Britain, but in some cases could pay as little as
:02:08. > :02:11.2% tax. While smaller British companies have been paying
:02:11. > :02:21.corporation tax at 26%. Nothing illegal in what these big companies
:02:21. > :02:22.
:02:22. > :02:26.are doing, that is the point. Their iconic adverts have adorned
:02:26. > :02:30.gable walls, bus shelters and TV screens for decades -- competing
:02:30. > :02:35.for our attention in order to create and sustain global brands.
:02:35. > :02:39.Which their owners know have a monetary and intangible value,
:02:39. > :02:44.worth billions of pounds. But while the most powerful and sticky brands
:02:44. > :02:49.openly talk to us, their corporate owners are much less open about
:02:49. > :02:52.their tax affairs. But research by Newsnight seems to show that many
:02:52. > :02:56.of the largest UK multinationals here are paying only a fraction of
:02:56. > :03:02.the corporation tax that they might have paid. And it is perfectly
:03:03. > :03:06.legal. Because large multinationals don't publish a figure for how much
:03:06. > :03:09.profit they make in each individual country, we had to estimate it,
:03:09. > :03:15.using extrapolate from the worldwide figure. If the global
:03:15. > :03:18.profit margin is 20-30%, we applied that to UK sales, which is
:03:18. > :03:21.published. That gives us a chance to estimate how much corporation
:03:21. > :03:25.tax could have been paid if the full rate of corporation tax was
:03:26. > :03:30.being paid, and of course, to compare that with the actual rate
:03:30. > :03:33.of corporation tax that was paid. Needless to say the companies don't
:03:33. > :03:38.like our methodology, and one company said it was completely
:03:38. > :03:42.flawed, but it gives us a chance to compare and contrast. We looked at
:03:42. > :03:45.the accounts filed at companies House by 19 of the best known
:03:45. > :03:49.American multinationals, and found that the tax gap between what was
:03:49. > :03:56.paid in corporation tax, and what could have been paid, amounted to
:03:56. > :04:02.almostp �3 billion. The microchip maker, Intel, sits in most PCs and
:04:02. > :04:08.laptop, last year it made �4 billion in UK sales, based on the
:04:08. > :04:12.worldwide profit margin it could have paid �348 million in UK
:04:12. > :04:22.corporate taxes, instead it said �27 million, a corporation tax rate
:04:22. > :05:00.
:05:00. > :05:05.Coca-Cola is still the world and UK This is a former tax lawyer, and
:05:05. > :05:11.now a Conservative MP for Dover, who has been campaigning for all
:05:11. > :05:14.firms to pay their fair share in tax. Post 2008, the world has
:05:14. > :05:17.changed. After the financial crisis, this playing the system is no
:05:17. > :05:22.longer acceptable. It is not acceptable for people claiming
:05:22. > :05:27.benefits, it is not acceptable for the super-rich. Everyone has to
:05:27. > :05:32.play their role in ensuring we get the deficit down and repair the
:05:32. > :05:37.nation's finances. The head of Google, they said we love you guys,
:05:37. > :05:47.we will pay tax if we have to, we don't, so we don't. No firm wished
:05:47. > :06:13.
:06:13. > :06:18.These firms are in good company, Starbucks, Google and Facebook, are
:06:18. > :06:21.paying almost no taxes on their UK profits at all. The key to this is
:06:21. > :06:25.something called transfer pricing, which allows one part of a company
:06:25. > :06:28.to bill another part for using goods, and especially services. In
:06:28. > :06:34.general, the bit of the multinational which controls
:06:34. > :06:37.valuable brand trade mark or patents, bases itself in a low-tax
:06:38. > :06:41.company like Luxembourg, Ireland, or Switzerland. From there it can
:06:41. > :06:44.bill the British sister company, where taxes are higher, for
:06:44. > :06:49.permission to use those trade marks or certain product. That has the
:06:49. > :06:53.effect of magnifying the profits in the low-tax countries, and
:06:53. > :06:59.minimising them in Britain. Finally, the profits left over in Luxembourg
:06:59. > :07:02.or other low-tax country, gets sent back to the States were it can't be
:07:03. > :07:07.taxed a second time. To prevent abuse, companies have to show the
:07:07. > :07:12.relevant tax authorities that they are billing fairly. The rules
:07:12. > :07:16.established by the OECD, even they admit that things are getting a bit
:07:16. > :07:19.out of control. The concern is there has been a shift towards
:07:19. > :07:23.aggressive tax planning, which may have been encouraged by the
:07:23. > :07:28.Governments, let's be fair, but which now needs to be stopped. It
:07:28. > :07:32.needs to be stopped with firmer rules which would be clearer, more
:07:32. > :07:37.simple, but west which have to be implemented.
:07:37. > :07:41.HMRC's new strategy is to man mark each of the biggest 2,000 companies
:07:41. > :07:46.operating here. And they have recovered �29 billion above what
:07:46. > :07:50.they would have otherwise got over the past few years. But that's
:07:50. > :07:58.unlikely to assuage ordinary voters, who are paying more tax, while the
:07:58. > :08:02.brands and the companies they love, might be paying much less.
:08:02. > :08:07.The Treasury Minister, David Gauke, is here. This is legal, but it's
:08:07. > :08:13.wrong, isn't it? Well I can't comment about individual companies.
:08:13. > :08:17.Ministers don't get to see any of the confidential information HMRC
:08:17. > :08:22.sees. If there is an abuse of the system, if businesses are
:08:22. > :08:26.artificially diverting profit out of the UK, we expect to see HMRC on
:08:26. > :08:30.the case, and indeed HMRC are on that case, we are strengthening
:08:30. > :08:34.their ability to deal with transfer pricing, as Joe described it. What
:08:34. > :08:39.I would say, having seen the report, we have to remember what
:08:39. > :08:43.corporation tax is, it is a tax on profits from activity conducted in
:08:43. > :08:47.the UK. It is not a tax on sales. It is not a tax on turnover. It is
:08:47. > :08:54.a tax on profits in the UK. But if it's in the UK, it should be taxed
:08:54. > :09:00.in the UK. But if a small company, a tea shop, would be taxed at 26%,
:09:00. > :09:10.going down to 24%, corporation tax, some companies. And on to 22%.
:09:10. > :09:13.companies are paying 2% or 3% or 4%, that sounds immoral? 2-3% on what?
:09:13. > :09:17.I have to say having looked at the methodology, as it was explained
:09:17. > :09:23.there, I'm not sure it is necessarily a fair one, but there
:09:23. > :09:26.are others who can speak more about the technical details on it. Your
:09:26. > :09:29.colleague seems to think it is immoral? It is not right if
:09:29. > :09:34.companies are artificially lowering their profits so they end up paying
:09:34. > :09:38.less in corporation tax. That is not right, that is why HMRC are
:09:38. > :09:43.strengthening their ability to deal with that sort of behaviour, that
:09:43. > :09:53.is why they have got in an additional �4.7 billion over the
:09:53. > :09:55.
:09:55. > :09:59.last five years, specifically on transfer pricing. You at HMRC is
:09:59. > :10:04.very complicated in the tax laws, what are you doing those who
:10:04. > :10:10.transfer pricing, going to Luxembourg where there is a low-tax
:10:10. > :10:14.regime, lower than the 22% we have here? You can't do anything? One is
:10:14. > :10:19.about strengthening HMRC's capacity to deal with t they have got in
:10:19. > :10:21.over the last five years �4.7 billion because they take a strong
:10:21. > :10:28.line on transfer pricing. The second is working with other
:10:28. > :10:32.countries, if we see profits being diverted to low-tax jurisdictions
:10:32. > :10:37.or tax havens, clearly that is a concern. HMRC would consider that
:10:37. > :10:40.to be a risk factor, we would want to address it. You said you can't
:10:40. > :10:48.comment on individual cases, people understand that, when you have
:10:48. > :10:51.somebody like Eric Scmidt of Google saying we would pay more if you
:10:51. > :10:55.taxed us? The tax is on the activities they conducted in a
:10:55. > :10:59.particular jurisdiction. If you have a business that actually, if
:10:59. > :11:03.you like, exports its services or the goods, from one country to
:11:03. > :11:08.another, it's taxed in the country in which it's in, rather than the
:11:08. > :11:11.country in which its sales are done. That also benefits UK businesses,
:11:11. > :11:15.who are based here and provide their services overseas, we get the
:11:15. > :11:19.tax from those UK businesses. That's the way corporation tax work.
:11:19. > :11:22.And actually, you are right to say that the UK can't unilaterally
:11:22. > :11:29.change that, we would have to work with other countries to do it.
:11:29. > :11:36.will leave it there, we are also joined by Bill Dodwell, head of tax
:11:36. > :11:42.accountany at Deloittes. Maurice Lindsay owns a clothing website,
:11:42. > :11:45.and we have a tax campaigner. How common is this, do big
:11:45. > :11:49.multinationals naturally just take advantage of this? This all started
:11:49. > :11:53.20, 30 years ago, when multinationals found it was more
:11:53. > :11:57.efficient to run their businesses on a centralised model. So instead
:11:57. > :12:00.of doing everything, in each individual country, they worked out,
:12:00. > :12:04.if they had one big factory somewhere, and another factory
:12:04. > :12:09.doing a different thing somewhere else, that would be a better,
:12:10. > :12:13.overall result. It would reduce their costs, and it would drive
:12:13. > :12:17.down and produce consumer benefit. Then when they came to look about
:12:17. > :12:21.where to base their activities, they will lock at a whole range of
:12:21. > :12:24.activities. They will look at have we got people here, have we got
:12:24. > :12:28.killed people, do we have access to university research, for example,
:12:28. > :12:32.what about the tax situation. They will look at all of those things
:12:32. > :12:36.together, and make a choice based on that combination. Do you see
:12:36. > :12:39.that this is, and could be unfair to smaller businesses, who can't do
:12:39. > :12:42.that, who haven't got that reach, and they would find it very
:12:42. > :12:47.difficult to compete against some of these big players? I think, you
:12:47. > :12:49.will have to ask a smaller business soon. The question really is,
:12:49. > :12:55.smaller businesses have different strength, and different things they
:12:55. > :13:00.are good at. They are very nimble, they can move rapidly into markets
:13:00. > :13:04.in the way businesses cannot. unfair Poppy? I think it is unfair
:13:04. > :13:09.in terms of the economies of scale, it is not, you don't want to get
:13:09. > :13:12.into an argument of David and Golaith, smaller companies have
:13:12. > :13:17.advantages and disadvantages, as you have just said, but when I have
:13:17. > :13:22.to spend money on accountant to obviously, as part of any business
:13:22. > :13:24.strategy to keep their taxes low, but I'm not in a position to spend
:13:24. > :13:31.millions of pounds protecting my position with Government, and
:13:31. > :13:34.making sure that frg's protected. Presumably -- Everything's
:13:34. > :13:38.protected. Presumably your accountant will minimise your
:13:38. > :13:42.exposure to tax. You could conceivably, if you were bigger,
:13:42. > :13:46.take advantage of it? There is an element is we are trying to talk
:13:46. > :13:50.about what is morally correct in a capitalist world, but we are all
:13:50. > :13:55.out to make as much money as possible in businesses. There is
:13:55. > :13:58.that difficulty. But if you look at Starbucks assay they haven't made
:13:58. > :14:02.profit, and comparing them similar companies who have made the same in
:14:02. > :14:04.UK revenue, and the differences in what they have paid, it is
:14:04. > :14:09.unbelievable. You have written a lot about this, what do you want
:14:09. > :14:13.the Government to do? Well, I found it frustrating to hear David say
:14:13. > :14:18.that he wasn't going to comment on individual cases, because that begs
:14:18. > :14:21.the question, who is he working for, who is the Government working for?
:14:21. > :14:25.You should be commenting on individual cases, should be telling
:14:25. > :14:28.companies they should not be avoiding tax. I want to put this in
:14:28. > :14:32.some kind of context. We are now seeing the biggest cuts we have
:14:32. > :14:37.ever had in British history in public spending. People's lives are
:14:37. > :14:41.really being damaged and destroyed by these cuts, and as it was
:14:41. > :14:45.written in the Guardian yesterday, if all tax avoidance and evasion in
:14:45. > :14:50.this country was tackled, it could pay off the entire budget deficit.
:14:50. > :14:53.This is really immoral, that is the key. I'm sure many people will
:14:53. > :14:56.agree but, with 20% of the cuts to the police and difficulties for
:14:56. > :15:00.families up and down the country. What do you want the Government to
:15:00. > :15:05.do about it, it is a very complicated position, 120 tax
:15:05. > :15:08.treaties, they can't unpick all of it? What I find frustrating, this
:15:08. > :15:11.myth that nothing can be done about it. There are alternatives out
:15:11. > :15:17.there. There have been suggestions made, particularly by the tax
:15:17. > :15:22.justice network, which has written a very extensive document on an
:15:22. > :15:25.anti-avoidance principle. Saying what? It advocates an anti-
:15:25. > :15:28.avoidance principle in the law. So companies would have to adhere to
:15:28. > :15:33.the spirit of the law rather than the letter of the law. Which is
:15:33. > :15:36.what the tax schemes essentially. Do the other things the Tax Justice
:15:36. > :15:40.Network has advocated, is Government's refuse to give
:15:40. > :15:44.Government contracts to companies that avoid tax. Those are very,
:15:44. > :15:48.very good measures that should at least be looked at by the
:15:48. > :15:52.Government. What about consumer boycotts, not going to Starbucks or
:15:52. > :15:57.Coca-Cola if you feel strongly about it? I wrote about this, if
:15:57. > :16:02.you, on a moral level, as I do, feel that this type of behaviour is
:16:02. > :16:07.wrong, you should boycott it. However, I think consumer boycotts
:16:08. > :16:11.have limited effect. What really needs to happen is a long-term
:16:11. > :16:16.campaign against tax avoidance, that takes place in a variety of
:16:16. > :16:19.ways, with a variety of taxes. Going with the spirit of the law
:16:19. > :16:23.rather than the letter of the law. How would that work? Companies do
:16:23. > :16:28.it here to the spirit of the law. We are about to get a general anti-
:16:28. > :16:31.abuse rule, as well, brought into the UK, to prevent those very small
:16:31. > :16:35.minorities who try to duck out of that particular aspect. I think the
:16:35. > :16:39.issue we are locking at here though, isn't just about spirit of the law
:16:39. > :16:45.and anything like that, it is about the fact that, in a globalised
:16:45. > :16:48.world, it is open and sensible for multinationals to deliver a cheaper
:16:48. > :16:52.service to their consumers, by basing their activities around the
:16:52. > :16:56.world. That is where their choices come from. Starbucks or Coca-Cola
:16:56. > :17:01.won't pull out of this country if they had to pay 24% tax rather than
:17:01. > :17:05.4% tax, would they? I can't comment on their particular situation.
:17:05. > :17:10.big companies that sell us stuff, are not just going to leave a
:17:10. > :17:13.market and an important market like this? I'm sure that is absolutely
:17:14. > :17:17.right for an important market like Britain. You have to think, where
:17:17. > :17:21.do the profits come from. If you think about the US technology
:17:21. > :17:24.companies in the news, of course, they are spending billions of
:17:24. > :17:30.dollars developing their technology in the US, that really is the key
:17:30. > :17:35.driver of their profits. Do you see any solution to this, Poppy Dinsey,
:17:35. > :17:39.you are not going to drink cappuccino from tomorrow among?
:17:39. > :17:44.can't get behind the boycotting idea, as a start-up entrepeneur, I
:17:44. > :17:48.often have a three-hour gap between meetings, I will constituent in
:17:48. > :17:51.Starbucks and pay �3 for a bottle of water and use the Internet for
:17:52. > :17:56.two hours. Its hard work to be boycotting the majority of big
:17:56. > :18:01.companies, and everything gets big, big becomes evil, this sort of
:18:01. > :18:07.thing. I think loophole need to be closed, and you are always going to
:18:07. > :18:09.try to pay as little as possible. Whilst you can, it is going to
:18:09. > :18:12.happen. Do you sense the frustration that many people feel,
:18:12. > :18:15.you are cutting the police budget, just to take one example, people
:18:15. > :18:19.resent it and would like you to spend more money, and have more
:18:19. > :18:23.money to spend. This would be potentially way of getting more
:18:23. > :18:28.money? I can understand there's a frustration there. Indeed that is
:18:28. > :18:32.the reason why we have reinvested �917 million into HMRC, and over
:18:32. > :18:38.the course of this parliament, by the end of the parliament, they are
:18:38. > :18:41.going to be getting an additional �7 billion a year, dealing with
:18:41. > :18:46.avoidance and evasion. It is really important to get the tax due in. I
:18:46. > :18:51.think the point I'm making is that, although there can often be
:18:51. > :18:54.allegations about particular companies, I think it is right that
:18:54. > :18:57.ministers don't talk about. That the sort of country that the amount
:18:58. > :19:02.of tax that is paid is decided by what a minister says on the basis
:19:02. > :19:05.of political matters, as opposed to what the law says, is not where we
:19:05. > :19:09.want to be. Businesses can choose where they locate their activities,
:19:09. > :19:14.not so much their sales, but their activities. We do want businesses
:19:14. > :19:17.to locate here. We do want to be competitive here. All of that, but
:19:17. > :19:20.we also want to make sure businesses pay the right amount of
:19:20. > :19:23.tax. That is exactly what we are trying to do.
:19:23. > :19:27.Next week the German Chancellor, Angela Merkel, will meet the Prime
:19:27. > :19:35.Minister and top of the agenda will be what to do about the EU budget.
:19:35. > :19:38.Both leaders want cut, but the ability of these two fiscally
:19:39. > :19:42.conservative nations might be held back because Angela Merkel is at
:19:42. > :19:48.the heart of the EU, and David Cameron, after last night's vote
:19:48. > :19:51.about budget cuts, is seen as on the outer circle. How are Mr
:19:51. > :20:01.Cameron's views considered by those he has to negotiate with on the
:20:01. > :20:05.
:20:05. > :20:10.budget. There is one Brit who is still
:20:10. > :20:18.popular in Europe. This week 007 was topping box-office charts
:20:18. > :20:22.across the continent. Tough, powerful, in control. Just the
:20:22. > :20:32.image the PM would like us to have abroad. It is one view of the
:20:32. > :20:35.British. Here's another, as the new Bond film was released, Germany's
:20:35. > :20:43.best-known news magazine was comparing us to the grumpy old men
:20:43. > :20:46.in the Muppet Show. I think there's a "K" in knucklehead. The UK is now
:20:46. > :20:50.just a spectator, it says, watching from the sidelines as a new
:20:50. > :20:58.European Union is taking shape. Does that mean they are getting
:20:58. > :21:07.better or worse! This is a sense that there's the people sitting on
:21:07. > :21:11.the island, looking over, watching the continent, and not really
:21:11. > :21:17.participating, more like observing and making mean comments. Trying to
:21:17. > :21:22.sabotage, even, whatever is being done. David Cameron will soon be in
:21:22. > :21:26.Brussels for another crucial EU summit. That word "crucial" is
:21:26. > :21:30.often overused. After last night's vote, it is clear that negotiating
:21:30. > :21:35.positions are hardening fast. And it's now a real chance, there will
:21:35. > :21:38.be no budget deal in three weeks time. You know, now that we may be
:21:38. > :21:42.seeing Cameron undermined at home, needs to push for a cut. There is
:21:42. > :21:46.no willingness anywhere, Paris, Berlin, even some of the northern
:21:46. > :21:50.European countries, which are traditional UK allies on the budget,
:21:50. > :21:56.there is no support for that right now. If there is isolation before,
:21:56. > :22:02.even increased isolation now. is this row really about? The
:22:02. > :22:06.current EU budget of worth around �12 -- 126 billion euros in 2011,
:22:06. > :22:10.the European Commission says that should rise to pay for EU
:22:10. > :22:15.enlargement and new functions, like financial supervision. The UK
:22:15. > :22:19.Government wants the budget to rise only with inflation. Labour and
:22:19. > :22:27.Tory rebels want to go further with an actual cut. Everyone wants to
:22:27. > :22:31.see a reduction in the EU budget, the negotiations have just started.
:22:31. > :22:35.There are 26 other countries. We accept a deal that is not good for
:22:35. > :22:39.Britain, we will only do a deal that is good for Britain. Last
:22:39. > :22:42.night in a House of Commons be date on the budget...That Position on
:22:42. > :22:48.the budget was backed by Nick Clegg today. But he made it very clear.
:22:48. > :22:52.He will not support any further attempt to clawback wider powers
:22:52. > :22:57.from Brussels. Europe is changing, yes. But rather than go into
:22:57. > :23:03.retreat, now is the time to confront those changes head-on. We
:23:03. > :23:07.theed to make a decision about who we -- need to make a decision about
:23:07. > :23:15.who we will be in the new Europe. I say we need to be strong, loud,
:23:15. > :23:20.present. All right, so an EU row might not be quite as exciting as a
:23:20. > :23:24.Bond film, but this month's budget summit could be about as lively as
:23:24. > :23:29.Brussels ever gets. He specially if David Cameron carries through with
:23:29. > :23:31.that threat, to veto the whole deal, if he doesn't get his way.
:23:31. > :23:36.mutual destruction that is going on here now, Britain is coming with
:23:36. > :23:39.its veto threat, the response from the EU is OK, if you want to really
:23:39. > :23:42.veto this, and make this go through the end of the year, we will force
:23:42. > :23:46.you to pay more money than you would have with a budget deal. That
:23:46. > :23:50.is the clash of interests that is happening right now. There is a lot
:23:50. > :23:56.of fear that this November summit will be a real disaster, and lead
:23:56. > :24:00.to a lot of problems for all member states involved. The stakes are
:24:00. > :24:04.high, if David Cameron compromises on this budget deal, he risks
:24:04. > :24:14.infuriating his own backbenchers. But if he sticks to his guns, he
:24:14. > :24:14.
:24:14. > :24:18.could alienate most of Europe. We have the London correspondent, and
:24:18. > :24:22.other our guests. Seen across Europe, particularly in
:24:22. > :24:28.Germany, did last night's Commons vote really matter, did it filter
:24:28. > :24:31.through? Yeah, I think actually it does matter. But I think it matters
:24:31. > :24:34.for different reasons than generally reported, it won't change
:24:34. > :24:39.much on the budget, there Nick Clegg is absolutely correct. But I
:24:39. > :24:45.think the one thing that really is a game-changer, is Labour's
:24:45. > :24:49.position. Because they now are starting to have a position. And
:24:49. > :24:52.they are possibly moving into a rebel position. They are now
:24:52. > :24:59.starting to consider whether it might be a better option for
:24:59. > :25:03.Britain to leave the EU. The interesting thing about it is
:25:03. > :25:05.there is a coherent and intelligence analysis about it. The
:25:06. > :25:08.problem with Cameron's Government at the moment, they don't have a
:25:08. > :25:13.position on Europe, they don't have a coherent position on Europe. On
:25:13. > :25:17.the one hand, they say, OK, Europe should further integrate, on the
:25:18. > :25:24.other hand they say they won't be part of it. What they don't think
:25:24. > :25:30.through is Britain will be catapult today some second-teir position
:25:30. > :25:34.they won't be able to live with. that context, won't be it very
:25:34. > :25:38.difficult if Merkel and Cameron meet next week, they have a lot in
:25:38. > :25:41.common about the way economies work, but they can't work together on
:25:41. > :25:46.this? I say they could quite well, and I think they started to. I
:25:46. > :25:51.think something has changed since last December. Last December Merkel
:25:51. > :25:56.and Cameron also a week before Cameron vetoed, but the big mistake
:25:56. > :25:59.he made, he didn't listen. He had, apparently, this obscure list from
:25:59. > :26:04.his Treasury, he had a list of certain points that he thought he
:26:04. > :26:08.could ram through. He didn't listen to the City, he didn't listen to
:26:08. > :26:12.other countries, he only looked to his backbencher. That has changed.
:26:12. > :26:15.I think he realises now that he has to make some deal with Merkel.
:26:15. > :26:19.Merkel says, repeated low, she would like Britain to be a bigger
:26:20. > :26:24.player in all -- repeededly she would like Britain to be a bigger
:26:24. > :26:29.player in it all? I think she does genuinely want the British to be
:26:29. > :26:33.there. For the simple reason you need more of a free market edge.
:26:33. > :26:36.Firstly, because she agrees with that, and also because it is a
:26:36. > :26:40.balance to the French and the people in the south. It brings,
:26:40. > :26:44.from her point of view, the Nordic, and some of the easterners. I think
:26:44. > :26:49.there is a role for Britain. But her tolerance for giving the Brits
:26:49. > :26:56.a lot is not great. Where are the other British friends, I don't know,
:26:56. > :27:00.the Poles, perhaps, the Finns? was the hope when in Brussels. A
:27:00. > :27:04.year ago we kept on being told that Cameron really fought this country,
:27:04. > :27:08.and lots of people would back him up, and they didn't. That is the
:27:08. > :27:12.danger, from a mildly euro-sceptic point of view, it is getting to a
:27:12. > :27:18.point where people begin to get very annoyed with Britain. Did this
:27:18. > :27:21.really matter last night, or because of the reason Imke Henkel
:27:21. > :27:24.said? That is very interesting, there is a real problem for Labour,
:27:25. > :27:30.a short-term strategic gain, they beat the Government in a vote that
:27:30. > :27:36.didn't matter. You are getting incredible reactions in Europe now.
:27:36. > :27:43.Poor Douglas Alexander is deeply humiliated by Ed Balls. You have
:27:43. > :27:49.seen the Austrian ambassador's text recent low, poor labour is now seen
:27:49. > :27:54.-- poor Labour is seen as the anti- European party in Europe. Oddly, I
:27:54. > :27:58.think Cameron is greatly helped by this. In what way? It is not a
:27:58. > :28:04.defeat that has any consequence, or binding quality to it, I think he
:28:04. > :28:10.came out of it very statesmanlike. He adopts a pragmatic position in
:28:10. > :28:13.Europe. He will go there and negotiate. Do exactly what Ed
:28:13. > :28:17.Miliband would have done if he hadn't gone on a tactical flip. It
:28:17. > :28:22.is a wonderful moment. I would almost say that the revival of the
:28:22. > :28:25.Tories on Europe, and towards the next election, started last night.
:28:25. > :28:30.That is perhaps not entirely how you see it, can you see that
:28:30. > :28:33.Cameron can say, you see what I'm dealing with at home, I have Labour
:28:33. > :28:38.also saying this, you are better to deal with me? Merkel knows that.
:28:38. > :28:44.That is not the point. The point is his difficulty, is he had listened
:28:44. > :28:48.far too much to his people at home. He has to start to make alliances
:28:48. > :28:51.across Europe, and there are quite a few states who would be
:28:51. > :28:57.interested, or would have been interested, I'm not sure if they
:28:57. > :29:02.are any more. I think the problem for Cameron really is, he hasn't
:29:02. > :29:07.thought through his position. Labour hasn't either? I think
:29:07. > :29:10.Britain is starting to. I think Labour's really starting to think
:29:10. > :29:15.it through. They are very much at the beginning, but the Europe that
:29:15. > :29:21.is now envisaged, with a core Europe, and other states around,
:29:21. > :29:25.that will not work. I think there is a degree of opportunism, there
:29:25. > :29:27.is a degree of opportunism, and Labour, it is naked and obvious,
:29:27. > :29:30.they are doing something in order to carve out a position. I think
:29:30. > :29:34.what's interesting about Cameron, is when he came in, when you talk
:29:34. > :29:39.to the people in Europe, they repeatedly, when Cameron first
:29:39. > :29:43.appear, they kept on talking about him being a "little Englander",
:29:43. > :29:46.they saw the thing at Christmas last year as being frustrated. It
:29:46. > :29:49.was just him trying to deal with his backbencher, as we saw this
:29:49. > :29:55.time round. What is interesting, is he parked had himself, by doing
:29:55. > :29:59.this thing straight up, by doing this thing about any cessation of
:29:59. > :30:03.sovereignty, you have to be to have a referendum. Many wiser old men
:30:03. > :30:08.said be careful on. That the reason it would be difficult going forward,
:30:08. > :30:10.if there is a deal to save the euro it will be sovereignty going to
:30:10. > :30:15.Brussels. That is when Cameron and Osborne might be prepared to go
:30:15. > :30:18.along with t but the referendum will keep them in. In terms of the
:30:18. > :30:22.friendlessness in Europe, in terms it of the Government, is it your
:30:22. > :30:27.position, Peter, when Cameron talks about, or when Conservative
:30:27. > :30:30.backbenchers have a vote, force a vote causing a toughening in the
:30:31. > :30:35.British position, they are speaking for many German voters as well,
:30:35. > :30:42.they are equally sceptical. Is that how you see it? What I think is the
:30:42. > :30:50.other European leaders, we look at it in our parochial way, they are
:30:50. > :30:55.very sympathetic, they have all got domestic issues. Angela Merkel has
:30:55. > :31:00.issues. They see that Britain has a domestic issue, Cameron has the
:31:00. > :31:04.management issue. I think also that when Cameron goes to Brussels, a
:31:04. > :31:07.lot of -- with a euro-sceptic message there will be a lot of
:31:07. > :31:12.European leaders quite happy to come in behind that cover. They
:31:12. > :31:17.will be delighted today hear him say that.S Certainly true of some
:31:17. > :31:20.German vote -- it is certainly true of some German voters? That is an
:31:20. > :31:23.important point to make much the other importance of the vote
:31:23. > :31:27.yesterday evening is it chimes with the sentiment around Europe, that
:31:27. > :31:33.is the sentiment of the people. It is interesting, a German minister
:31:33. > :31:38.today already react to it, not just saying there go the Brits again. He
:31:38. > :31:42.said it would be more difficult, but he also said it is fantasy to
:31:42. > :31:46.increase the European budget. final thought, just the thought of
:31:46. > :31:51.another British veto, by theself would that be bad news, in European
:31:51. > :31:54.eyes, if not domestic? I disagree with the other two on this. I think
:31:54. > :31:57.within Germany there is a straight forward element to the populus fed
:31:57. > :32:00.up with giving money to other people. That is there. The moment
:32:00. > :32:04.you start testing it on the idea of people coming out of the European
:32:04. > :32:07.Union, there you have a tougher thing, I think. It is a much more
:32:07. > :32:14.solid, coherence around the idea of Europe. Once you get to play like
:32:14. > :32:19.France and the others it is harder There have been further development
:32:19. > :32:23.tonight in the inquiry sentering on Jimmy Savile. The comedian, Freddie
:32:23. > :32:28.Starr, who has always denied any wrongdoing, and still does, has
:32:28. > :32:36.been arrested. We have the details. What is going on? Starr who is now
:32:36. > :32:42.69, has been arrested as part of operation yue tree, looking into --
:32:42. > :32:47.Yew ld tree, looking into the investigation: it happened when
:32:47. > :32:57.Karin Ward told the BBC that he had groped her when she was 13. He said
:32:57. > :32:57.
:32:57. > :33:02.he never met her. But then footage emerged of them when he was hosting
:33:02. > :33:10.on Clunk Click, with Jimmy Savile, but he admits he was wrong but says
:33:10. > :33:15.he denies any wrong done. We should say that Miss Ward took part in a
:33:15. > :33:18.investigation with Newsnight about Jimmy Savile that was not proceeded
:33:19. > :33:23.with. Max Clifford is involved now? He has had phone calls from pop
:33:23. > :33:28.musicians of the time who are concerned they might fall under
:33:28. > :33:33.suspicion, simply because at some moment in the past they may have
:33:33. > :33:38.encountered Jimmy Savile and young members of the audience on Top Of
:33:39. > :33:43.The Pops. Everyone who has phoned me from the 60s and 70s, says they
:33:43. > :33:46.had no knowledge or involvement in any shape or form, but, for example,
:33:46. > :33:50.I was there doing Top Of The Pops, Jimmy Savile came up to me, with
:33:50. > :33:55.some girls, will I have a picture I had a picture. There is a picture
:33:55. > :34:00.of me, and him, with girls. I don't know their age. What he did with
:34:00. > :34:05.them afterwards, before, I haven't got a clue. But you see how that
:34:05. > :34:08.could now be damaging for me. other development, that Newsnight
:34:08. > :34:12.investigation, which was dropped, we have heard a bit more about what
:34:12. > :34:17.is happening about that? This is the Pollard inquiry, named after
:34:17. > :34:21.Nick Pollard, late of Sky News. It has emerged that the inquiry has
:34:21. > :34:26.asked some members of BBC staff for documents. It is also embarked on
:34:26. > :34:30.what is described as an electronic search of archive documents,
:34:30. > :34:33.presumably e-mails and the like. The inquiry will have a barrister
:34:33. > :34:38.asking questions of the interviewees, and they, in turn,
:34:38. > :34:43.will be allowed to have their own lawyers. The inquiry will be in
:34:43. > :34:48.private, but its final report will be published. They hope that will
:34:48. > :34:53.be before the end of the month. Remember Friends Reunited, it was a
:34:53. > :34:58.social media darling for a while, and then fell prey to a new fancy,
:34:58. > :35:02.called Facebook. In the world of social media one of the newer
:35:02. > :35:06.success stories is Tumblr, like Facebook before it has become an
:35:06. > :35:11.internet phenomenon. In a moment we will debate how far it is fashion
:35:11. > :35:15.or the solidity of a new business model. Paul Mason went to meet
:35:15. > :35:18.Tumblr's founder, the very successful, 26-year-old, Karp.
:35:18. > :35:24.There is a joke on the internet, Facebook is how you would like
:35:24. > :35:31.others to see you, Twitter is how you see yourself, and Tumblr
:35:31. > :35:35.is...oh look, funny cat picture! If so, David Karp has raised a heck of
:35:35. > :35:41.a lot of money on the back of funny cat pictures. The 26-year-old is
:35:41. > :35:47.the boss of the hottest property on the net. I tried to set up blogs on
:35:47. > :35:52.the big publishing platforms at the time. I tried to tweet, I used
:35:52. > :35:57.flick flicker, and all the other things -- Flickr and all the other
:35:57. > :36:03.things around, I wanted something to be more expressive and present
:36:03. > :36:08.myself in a way that I was proud of. What is Tumblr, if you are asking,
:36:08. > :36:14.you are probably over 24 years old, you express videos and other stuff
:36:14. > :36:20.to express yourself. It sounds mundane, but it is given rise to
:36:20. > :36:24.something called "curating", this year's buzzword. What is curating?
:36:24. > :36:27.Even if you are the guy who isn't in front of the camera playing
:36:27. > :36:32.guitar, you can still express a point of view and the things you
:36:32. > :36:37.care about, through the stuff you select. On Tumblr you find users do
:36:37. > :36:40.just pull stuff together and it expresses them? They do all of it.
:36:40. > :36:43.We have millions of creator, people who make the stuff, they are
:36:43. > :36:50.getting in front of the camera, taking the photos and recording the
:36:50. > :36:54.songs. They are making the tough. Around that you have tens of
:36:54. > :37:00.millions of curators, and channelling into the blogs they
:37:00. > :37:07.care about, and the audience of 150 million people that show up every
:37:07. > :37:12.month. 150 million is small stuff compared to Facebook with one
:37:12. > :37:18.billion. But it is host to smaller users, nail art is one,. You don't
:37:18. > :37:21.think there is a level of narcissism going on, you put your
:37:21. > :37:23.favourite Barbra Streisand song next to your cat, who is
:37:23. > :37:28.interested? The interest is really to have something out there for the
:37:28. > :37:31.people who care. It can be this really delightful surprise when you
:37:31. > :37:35.bump into some stranger in Tumblr or anywhere on the Internet who
:37:35. > :37:39.cares about the same things you do. I don't think it is narcissistic, I
:37:40. > :37:44.think it is a whole new opportunity for humans to socialise, that
:37:44. > :37:50.hasn't existed before. Social media has come a long way. Smartphones
:37:50. > :37:55.and tablets and all the other gadgets we are queuing up to buy,
:37:55. > :38:00.have put the power to create original content in the hands of
:38:00. > :38:05.ordinary people. And Karp has raised $125 million of venture
:38:05. > :38:10.capital on the idea it all has to go somewhere. All of this stuff is
:38:10. > :38:15.on the hardware. I'm so excited about Apple and Google today are
:38:15. > :38:19.pushing the hardware so far, so quickly. As the creative horse
:38:19. > :38:23.power in that hardware moves faster and faster and faster as it seems
:38:23. > :38:27.to be right now, the software I think will just explode around that.
:38:27. > :38:30.You are starting to see that. There is a whole ecosystem of these
:38:31. > :38:36.favourite apps that are popping up. What I'm most excited about in
:38:36. > :38:40.social media is all the stuff people are making. That includes
:38:40. > :38:45.trouble. Tumblr's breakthrough moment came when Occupy Wall Street,
:38:45. > :38:51.used it to tell the story of the 99%. This making Karp one of the
:38:51. > :38:56.few capitalists whose eyes light up at the thought of anarchists
:38:56. > :39:00.protesting. The 99% blog started on Tumblr, started to garner all this
:39:00. > :39:03.attention and the events ultimately ended up being organised through
:39:03. > :39:07.communication going on Twitter, people saying we're going here, and
:39:07. > :39:12.the police are there, and we are going here now. The reach you can
:39:12. > :39:15.build out of a network like Tumblr, and the mass communication that is
:39:15. > :39:18.able to go down in a network like Twitter is incredible, something
:39:18. > :39:22.that has never existed before. There is the communication, the
:39:22. > :39:25.other end is just the media. It is easier than ever for you and me,
:39:25. > :39:28.people who may not have been the ones going in there and making the
:39:29. > :39:32.stuff. It is easier than ever for you and me to make something that
:39:32. > :39:37.is really compelling, really tells a story, and put that out into the
:39:37. > :39:43.world and really move people. is a dark side to Tumblr, not just
:39:43. > :39:47.porn, but lots of references to teenage angst, self-harm, eating
:39:47. > :39:51.disorders. And Karp does intend to make profits out of other people's
:39:51. > :39:54.content, by the time honoured method. Our model is pretty simple.
:39:54. > :39:59.We have all of this attention built off all of the great work that
:39:59. > :40:03.these creators are making, attracting an audience of 150
:40:03. > :40:07.million people, we are selling a little sliver of that attention to
:40:07. > :40:12.marketers. Will it succeed? Nobody knows, where does the social metdia
:40:12. > :40:16.go next, nobody knows that either - - media go next, nobody knows that
:40:16. > :40:23.either, that's the point. We will try to figure that out, Suw
:40:23. > :40:31.Charman Anderson is a social media consultant, and the editor of Wire
:40:31. > :40:36.clouk is here. Some media -- wire.co.uk is here. Some media
:40:36. > :40:41.sites you go on to and then move to the next one? There are social
:40:41. > :40:46.media sites that come and go and you never hear of them. Other sites
:40:46. > :40:49.like orchid huge for a while, and less popular now. There is a huge
:40:49. > :40:55.ecosystem of media sites and social networks out there. There is a huge
:40:55. > :41:00.big ones that most people have heard about, Facebook, Twitter,
:41:00. > :41:04.linkedin. They are the players. Some of these big successful sites,
:41:04. > :41:07.is there something that makes the break for them? Once you have
:41:07. > :41:11.critical mass and you are the destination, it is hard for an
:41:11. > :41:13.outside Tory breakthrough. If Facebook has a billion people
:41:13. > :41:17.connected, that is where your friends will be. There is a barrier
:41:17. > :41:20.to entry. Do they come and go, the Friends Reunited, or MySpace,
:41:20. > :41:26.something like that, people can leave? Often it is the ones that
:41:26. > :41:32.are in a hurry to make some revenue that fade away. Remember MySpace,
:41:32. > :41:36.Miguel-Anxo Murado paid a lot of money for that, -- Rupert Murdock
:41:36. > :41:39.went nowhere with that, it was founded on advertising and wasn't
:41:39. > :41:43.about community. The people at Twitter and the other successful
:41:43. > :41:52.networks are trying to get the user engagment right, a place where
:41:52. > :41:57.people want to share and hang out, the money will probably follow.
:41:57. > :42:03.Twitter and Facebook, people get angry at the idea ofed ands popping
:42:03. > :42:08.up, it is not for the d ads popping up, it is for -- ads popping up, it
:42:08. > :42:12.is not for the user? There is a risk of alienating users, people
:42:12. > :42:15.don't want ads cutting into what they think of as a personal
:42:15. > :42:20.conversation. There is also the risk, particularly for Twitter,
:42:20. > :42:24.they foblg cuss so hard on a mass market -- focus so hard on a mass
:42:24. > :42:27.marketing model, they are ignoring other sources of revenue. They are
:42:27. > :42:32.putting themselves at risk. Because if the ads don't work for them. If
:42:32. > :42:35.it doesn't make enough money, then they aren't set up to move on to a
:42:35. > :42:39.different kind of revenue model. Like what. What would be better for
:42:39. > :42:45.Twitter, do you think? There a few things they could do. Including
:42:45. > :42:49.premium accounts and business accounts. When you look at networks
:42:49. > :42:56.like linkedin, that gets two-thirds of revenues from fee, not
:42:56. > :42:59.advertising. Advertising isn't the only way to make money. But Twitter
:42:59. > :43:03.is resolutely ignoring other potential sources of income.
:43:03. > :43:06.that another thing, you get interested for one reason or
:43:06. > :43:11.another and building a community, then the ad, or something you
:43:11. > :43:18.really don't like pops up, and that could be the death blow? Not so
:43:18. > :43:22.much for Twitter. Twitter is all about tiny nuggets of communication.
:43:22. > :43:27.140 characters. What screen does a tiny nugget of communication work
:43:27. > :43:36.best at? On your smartphone. The smartphone, the mobile internet is
:43:36. > :43:40.where the revenue will come from, that is why Facebook bought into
:43:40. > :43:44.Instagram. For a slice of that. There is figures from a venture
:43:44. > :43:49.capital firm a couple of months ago, that print media currently accounts
:43:49. > :43:56.for 7% of our engagment time, but 25% of advertising. Mobile is about
:43:56. > :44:00.10% of our time, but just 1% of advertising. It's going to cash up.
:44:00. > :44:06.-- Catch up. In terms of the next five years or so. Have you any
:44:06. > :44:11.thoughts of what will survive and what the social media landscape
:44:11. > :44:15.will look like, so we can all make money out of it, what would you put
:44:15. > :44:20.your money? Mobile is a key market. Mobile advertising is the nut to
:44:20. > :44:24.crack. Facebook has done very well just over recent months in
:44:24. > :44:30.increasing its mobile advertising revenue. They have 60% of users who
:44:30. > :44:36.access Facebook through mobile. You are really looking at tools that
:44:36. > :44:40.either allow people to achieve something really important,
:44:40. > :44:45.Linkedin is about finding a job and your professional career, that
:44:45. > :44:48.won't go away. Twitter and Facebook are about maintaining your social
:44:48. > :44:51.life and maintaining social relationship, that won't go away as
:44:51. > :44:54.a need. Whether Twitter and Facebook actually survive is
:44:54. > :45:00.another kettle of fish. Do you really think so, given the size of
:45:00. > :45:03.both of them? With Twitter, they aren't making a huge amount of
:45:03. > :45:07.money at the moment. If they don't increase their revenues and start
:45:07. > :45:12.to turn a healthy profit, there might be tension with the investors.
:45:12. > :45:17.With Facebook the issue is the IPO, which was a bit of a shamble, and
:45:17. > :45:23.their share price is shadeing at 55% lower than where it was in May
:45:23. > :45:27.-- trading at 55% lower than where it was in May. That could cause
:45:27. > :45:30.stormy seas for Facebook. That's all tonight, I'm back tomorrow. We
:45:30. > :45:33.will leave you with the news that not everyone in the United States
:45:33. > :45:43.is absolutely thrilled that Obama and Romney are back on the campaign
:45:43. > :45:47.
:45:47. > :45:53.trail. It is good to be back in Green Bay
:45:53. > :46:01.Wisconsin. We have to take back America, I'm counting on you.
:46:01. > :46:11.I'm tired of Barack Obama and Mitt Romney. That is why you are crying?
:46:11. > :46:11.
:46:11. > :46:13.Oh, it will be over soon Abbey. The Oh, it will be over soon Abbey. The
:46:13. > :46:18.election will be over soon, OK? It is cold out and won't get warmer
:46:18. > :46:21.over the next few days. A chilly start to the day, a brisk old wind
:46:21. > :46:27.feeding showers across the country. Hit and miss, some place avoiding
:46:27. > :46:31.them. Having a bright and breezy day, others seeing heavy downpours.
:46:32. > :46:35.Mid-afternoon plenty of blue sky and sunshine. Temperatures aren't
:46:35. > :46:38.perterrific, but out of the breeze and into the sun not too bad.
:46:38. > :46:46.Shower towards the south coast. Some will be heavy, possibly
:46:46. > :46:50.thundery too. It will be cold enough on the
:46:50. > :46:53.higher ground of Wales. Not too many problems roaming the hills
:46:53. > :46:56.tomorrow afternoon. Some sunshine inbetween. For Northern Ireland,
:46:56. > :47:00.after a brightish start it will tend to cloud over with outbreaks
:47:00. > :47:05.of rain pushing from the north. A disappointing end to the day here.
:47:05. > :47:08.For Scotland, after an icey start in some place, plenty of sunshine
:47:08. > :47:12.around, away from southern most areas across the borders. Hill snow.
:47:12. > :47:15.As we hit the weekend, northern areas seeing that mixture again of
:47:15. > :47:19.sunshine, a few showers, and it will be cold enough for further
:47:19. > :47:22.snow over the high ground. Further south too, mixture, some bright
:47:22. > :47:26.spells, but nobody, nobody is immune from some fairly sharp