01/11/2012 Newsnight


01/11/2012

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


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Tonight, a Newsnight investigation into some of the world's most

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successful companies. Companies who appear to make massive profit in

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Britain, but pay very little tax. # I'd like to buy the world a coke

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# And keep it company Companies such as Coca-Cola are

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doing nothing illegal, of course, but is it immoral. It is

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irresponsible, unethical and unacceptable. There needs

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substantial reform to bring our business tax system up-to-date, as

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it should be. I will ask the Treasury Minister, David Gauke, why

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the loopholes can't be closed, and whether smaller British companies

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are put at a disadvantage. The comedian, Freddie Starr, is

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arrested by detectives investigating the Jimmy Savile

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abuse claims. He becomes the second celebrity to face questioning, as

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the police investigation turns the spotlight on those still alive. We

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will have the latest. And with social media sites

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sweeping in and sometimes out of fashion, we ask the founder of

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Tumblr, what is so different about his site. It can be this really

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delightful surprise when you bump into some stranger on Tumblr or

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anywhere on the Internet, who cares about the same stuff that you do. I

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don't think it is narcissistic, I think it is a whole new opportunity

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for humans to socialise that hasn't existed before.

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Good evening, one of the big priorities at the Treasury has been

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in very hard times, new efforts to crack down on those not paying or

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avoiding tax. One or two celebrities have been named, and

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possibly shamed, but for many people, scandal is not -- the

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scandal is not what is legal, but what is permitted -- illegal, but

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what is permitted under the law. Newsnight's investigation has

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revealed that some of the world's biggest companies apparently make

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massive profits in Britain, but in some cases could pay as little as

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2% tax. While smaller British companies have been paying

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corporation tax at 26%. Nothing illegal in what these big companies

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are doing, that is the point. Their iconic adverts have adorned

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gable walls, bus shelters and TV screens for decades -- competing

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for our attention in order to create and sustain global brands.

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Which their owners know have a monetary and intangible value,

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worth billions of pounds. But while the most powerful and sticky brands

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openly talk to us, their corporate owners are much less open about

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their tax affairs. But research by Newsnight seems to show that many

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of the largest UK multinationals here are paying only a fraction of

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the corporation tax that they might have paid. And it is perfectly

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legal. Because large multinationals don't publish a figure for how much

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profit they make in each individual country, we had to estimate it,

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using extrapolate from the worldwide figure. If the global

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profit margin is 20-30%, we applied that to UK sales, which is

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published. That gives us a chance to estimate how much corporation

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tax could have been paid if the full rate of corporation tax was

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being paid, and of course, to compare that with the actual rate

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of corporation tax that was paid. Needless to say the companies don't

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like our methodology, and one company said it was completely

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flawed, but it gives us a chance to compare and contrast. We looked at

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the accounts filed at companies House by 19 of the best known

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American multinationals, and found that the tax gap between what was

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paid in corporation tax, and what could have been paid, amounted to

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almostp �3 billion. The microchip maker, Intel, sits in most PCs and

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laptop, last year it made �4 billion in UK sales, based on the

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worldwide profit margin it could have paid �348 million in UK

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corporate taxes, instead it said �27 million, a corporation tax rate

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Coca-Cola is still the world and UK This is a former tax lawyer, and

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now a Conservative MP for Dover, who has been campaigning for all

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firms to pay their fair share in tax. Post 2008, the world has

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changed. After the financial crisis, this playing the system is no

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longer acceptable. It is not acceptable for people claiming

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benefits, it is not acceptable for the super-rich. Everyone has to

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play their role in ensuring we get the deficit down and repair the

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nation's finances. The head of Google, they said we love you guys,

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we will pay tax if we have to, we don't, so we don't. No firm wished

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These firms are in good company, Starbucks, Google and Facebook, are

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paying almost no taxes on their UK profits at all. The key to this is

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something called transfer pricing, which allows one part of a company

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to bill another part for using goods, and especially services. In

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general, the bit of the multinational which controls

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valuable brand trade mark or patents, bases itself in a low-tax

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company like Luxembourg, Ireland, or Switzerland. From there it can

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bill the British sister company, where taxes are higher, for

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permission to use those trade marks or certain product. That has the

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effect of magnifying the profits in the low-tax countries, and

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minimising them in Britain. Finally, the profits left over in Luxembourg

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or other low-tax country, gets sent back to the States were it can't be

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taxed a second time. To prevent abuse, companies have to show the

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relevant tax authorities that they are billing fairly. The rules

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established by the OECD, even they admit that things are getting a bit

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out of control. The concern is there has been a shift towards

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aggressive tax planning, which may have been encouraged by the

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Governments, let's be fair, but which now needs to be stopped. It

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needs to be stopped with firmer rules which would be clearer, more

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simple, but west which have to be implemented.

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HMRC's new strategy is to man mark each of the biggest 2,000 companies

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operating here. And they have recovered �29 billion above what

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they would have otherwise got over the past few years. But that's

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unlikely to assuage ordinary voters, who are paying more tax, while the

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brands and the companies they love, might be paying much less.

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The Treasury Minister, David Gauke, is here. This is legal, but it's

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wrong, isn't it? Well I can't comment about individual companies.

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Ministers don't get to see any of the confidential information HMRC

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sees. If there is an abuse of the system, if businesses are

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artificially diverting profit out of the UK, we expect to see HMRC on

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the case, and indeed HMRC are on that case, we are strengthening

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their ability to deal with transfer pricing, as Joe described it. What

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I would say, having seen the report, we have to remember what

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corporation tax is, it is a tax on profits from activity conducted in

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the UK. It is not a tax on sales. It is not a tax on turnover. It is

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a tax on profits in the UK. But if it's in the UK, it should be taxed

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in the UK. But if a small company, a tea shop, would be taxed at 26%,

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going down to 24%, corporation tax, some companies. And on to 22%.

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companies are paying 2% or 3% or 4%, that sounds immoral? 2-3% on what?

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I have to say having looked at the methodology, as it was explained

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there, I'm not sure it is necessarily a fair one, but there

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are others who can speak more about the technical details on it. Your

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colleague seems to think it is immoral? It is not right if

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companies are artificially lowering their profits so they end up paying

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less in corporation tax. That is not right, that is why HMRC are

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strengthening their ability to deal with that sort of behaviour, that

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is why they have got in an additional �4.7 billion over the

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last five years, specifically on transfer pricing. You at HMRC is

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very complicated in the tax laws, what are you doing those who

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transfer pricing, going to Luxembourg where there is a low-tax

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regime, lower than the 22% we have here? You can't do anything? One is

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about strengthening HMRC's capacity to deal with t they have got in

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over the last five years �4.7 billion because they take a strong

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line on transfer pricing. The second is working with other

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countries, if we see profits being diverted to low-tax jurisdictions

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or tax havens, clearly that is a concern. HMRC would consider that

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to be a risk factor, we would want to address it. You said you can't

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comment on individual cases, people understand that, when you have

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somebody like Eric Scmidt of Google saying we would pay more if you

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taxed us? The tax is on the activities they conducted in a

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particular jurisdiction. If you have a business that actually, if

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you like, exports its services or the goods, from one country to

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another, it's taxed in the country in which it's in, rather than the

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country in which its sales are done. That also benefits UK businesses,

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who are based here and provide their services overseas, we get the

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tax from those UK businesses. That's the way corporation tax work.

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And actually, you are right to say that the UK can't unilaterally

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change that, we would have to work with other countries to do it.

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will leave it there, we are also joined by Bill Dodwell, head of tax

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accountany at Deloittes. Maurice Lindsay owns a clothing website,

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and we have a tax campaigner. How common is this, do big

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multinationals naturally just take advantage of this? This all started

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20, 30 years ago, when multinationals found it was more

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efficient to run their businesses on a centralised model. So instead

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of doing everything, in each individual country, they worked out,

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if they had one big factory somewhere, and another factory

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doing a different thing somewhere else, that would be a better,

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overall result. It would reduce their costs, and it would drive

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down and produce consumer benefit. Then when they came to look about

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where to base their activities, they will lock at a whole range of

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activities. They will look at have we got people here, have we got

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killed people, do we have access to university research, for example,

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what about the tax situation. They will look at all of those things

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together, and make a choice based on that combination. Do you see

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that this is, and could be unfair to smaller businesses, who can't do

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that, who haven't got that reach, and they would find it very

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difficult to compete against some of these big players? I think, you

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will have to ask a smaller business soon. The question really is,

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smaller businesses have different strength, and different things they

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are good at. They are very nimble, they can move rapidly into markets

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in the way businesses cannot. unfair Poppy? I think it is unfair

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in terms of the economies of scale, it is not, you don't want to get

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into an argument of David and Golaith, smaller companies have

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advantages and disadvantages, as you have just said, but when I have

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to spend money on accountant to obviously, as part of any business

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strategy to keep their taxes low, but I'm not in a position to spend

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millions of pounds protecting my position with Government, and

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making sure that frg's protected. Presumably -- Everything's

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protected. Presumably your accountant will minimise your

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exposure to tax. You could conceivably, if you were bigger,

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take advantage of it? There is an element is we are trying to talk

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about what is morally correct in a capitalist world, but we are all

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out to make as much money as possible in businesses. There is

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that difficulty. But if you look at Starbucks assay they haven't made

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profit, and comparing them similar companies who have made the same in

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UK revenue, and the differences in what they have paid, it is

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unbelievable. You have written a lot about this, what do you want

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the Government to do? Well, I found it frustrating to hear David say

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that he wasn't going to comment on individual cases, because that begs

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the question, who is he working for, who is the Government working for?

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You should be commenting on individual cases, should be telling

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companies they should not be avoiding tax. I want to put this in

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some kind of context. We are now seeing the biggest cuts we have

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ever had in British history in public spending. People's lives are

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really being damaged and destroyed by these cuts, and as it was

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written in the Guardian yesterday, if all tax avoidance and evasion in

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this country was tackled, it could pay off the entire budget deficit.

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This is really immoral, that is the key. I'm sure many people will

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agree but, with 20% of the cuts to the police and difficulties for

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families up and down the country. What do you want the Government to

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do about it, it is a very complicated position, 120 tax

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treaties, they can't unpick all of it? What I find frustrating, this

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myth that nothing can be done about it. There are alternatives out

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there. There have been suggestions made, particularly by the tax

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justice network, which has written a very extensive document on an

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anti-avoidance principle. Saying what? It advocates an anti-

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avoidance principle in the law. So companies would have to adhere to

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the spirit of the law rather than the letter of the law. Which is

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what the tax schemes essentially. Do the other things the Tax Justice

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Network has advocated, is Government's refuse to give

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Government contracts to companies that avoid tax. Those are very,

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very good measures that should at least be looked at by the

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Government. What about consumer boycotts, not going to Starbucks or

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Coca-Cola if you feel strongly about it? I wrote about this, if

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you, on a moral level, as I do, feel that this type of behaviour is

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wrong, you should boycott it. However, I think consumer boycotts

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have limited effect. What really needs to happen is a long-term

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campaign against tax avoidance, that takes place in a variety of

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ways, with a variety of taxes. Going with the spirit of the law

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rather than the letter of the law. How would that work? Companies do

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it here to the spirit of the law. We are about to get a general anti-

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abuse rule, as well, brought into the UK, to prevent those very small

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minorities who try to duck out of that particular aspect. I think the

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issue we are locking at here though, isn't just about spirit of the law

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and anything like that, it is about the fact that, in a globalised

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world, it is open and sensible for multinationals to deliver a cheaper

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service to their consumers, by basing their activities around the

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world. That is where their choices come from. Starbucks or Coca-Cola

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won't pull out of this country if they had to pay 24% tax rather than

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4% tax, would they? I can't comment on their particular situation.

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big companies that sell us stuff, are not just going to leave a

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market and an important market like this? I'm sure that is absolutely

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right for an important market like Britain. You have to think, where

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do the profits come from. If you think about the US technology

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companies in the news, of course, they are spending billions of

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dollars developing their technology in the US, that really is the key

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driver of their profits. Do you see any solution to this, Poppy Dinsey,

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you are not going to drink cappuccino from tomorrow among?

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can't get behind the boycotting idea, as a start-up entrepeneur, I

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often have a three-hour gap between meetings, I will constituent in

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Starbucks and pay �3 for a bottle of water and use the Internet for

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two hours. Its hard work to be boycotting the majority of big

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companies, and everything gets big, big becomes evil, this sort of

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thing. I think loophole need to be closed, and you are always going to

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try to pay as little as possible. Whilst you can, it is going to

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happen. Do you sense the frustration that many people feel,

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you are cutting the police budget, just to take one example, people

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resent it and would like you to spend more money, and have more

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money to spend. This would be potentially way of getting more

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money? I can understand there's a frustration there. Indeed that is

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the reason why we have reinvested �917 million into HMRC, and over

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the course of this parliament, by the end of the parliament, they are

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going to be getting an additional �7 billion a year, dealing with

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avoidance and evasion. It is really important to get the tax due in. I

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think the point I'm making is that, although there can often be

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allegations about particular companies, I think it is right that

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ministers don't talk about. That the sort of country that the amount

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of tax that is paid is decided by what a minister says on the basis

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of political matters, as opposed to what the law says, is not where we

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want to be. Businesses can choose where they locate their activities,

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not so much their sales, but their activities. We do want businesses

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to locate here. We do want to be competitive here. All of that, but

:19:14.:19:17.

we also want to make sure businesses pay the right amount of

:19:17.:19:20.

tax. That is exactly what we are trying to do.

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Next week the German Chancellor, Angela Merkel, will meet the Prime

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Minister and top of the agenda will be what to do about the EU budget.

:19:27.:19:35.

Both leaders want cut, but the ability of these two fiscally

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conservative nations might be held back because Angela Merkel is at

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the heart of the EU, and David Cameron, after last night's vote

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about budget cuts, is seen as on the outer circle. How are Mr

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Cameron's views considered by those he has to negotiate with on the

:19:51.:20:01.
:20:01.:20:05.

budget. There is one Brit who is still

:20:05.:20:10.

popular in Europe. This week 007 was topping box-office charts

:20:10.:20:18.

across the continent. Tough, powerful, in control. Just the

:20:18.:20:22.

image the PM would like us to have abroad. It is one view of the

:20:22.:20:32.

British. Here's another, as the new Bond film was released, Germany's

:20:32.:20:35.

best-known news magazine was comparing us to the grumpy old men

:20:35.:20:43.

in the Muppet Show. I think there's a "K" in knucklehead. The UK is now

:20:43.:20:46.

just a spectator, it says, watching from the sidelines as a new

:20:46.:20:50.

European Union is taking shape. Does that mean they are getting

:20:50.:20:58.

better or worse! This is a sense that there's the people sitting on

:20:58.:21:07.

the island, looking over, watching the continent, and not really

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participating, more like observing and making mean comments. Trying to

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sabotage, even, whatever is being done. David Cameron will soon be in

:21:17.:21:22.

Brussels for another crucial EU summit. That word "crucial" is

:21:22.:21:26.

often overused. After last night's vote, it is clear that negotiating

:21:26.:21:30.

positions are hardening fast. And it's now a real chance, there will

:21:30.:21:35.

be no budget deal in three weeks time. You know, now that we may be

:21:35.:21:38.

seeing Cameron undermined at home, needs to push for a cut. There is

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no willingness anywhere, Paris, Berlin, even some of the northern

:21:42.:21:46.

European countries, which are traditional UK allies on the budget,

:21:46.:21:50.

there is no support for that right now. If there is isolation before,

:21:50.:21:56.

even increased isolation now. is this row really about? The

:21:56.:22:02.

current EU budget of worth around �12 -- 126 billion euros in 2011,

:22:02.:22:06.

the European Commission says that should rise to pay for EU

:22:06.:22:10.

enlargement and new functions, like financial supervision. The UK

:22:10.:22:15.

Government wants the budget to rise only with inflation. Labour and

:22:15.:22:19.

Tory rebels want to go further with an actual cut. Everyone wants to

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see a reduction in the EU budget, the negotiations have just started.

:22:27.:22:31.

There are 26 other countries. We accept a deal that is not good for

:22:31.:22:35.

Britain, we will only do a deal that is good for Britain. Last

:22:35.:22:39.

night in a House of Commons be date on the budget...That Position on

:22:39.:22:42.

the budget was backed by Nick Clegg today. But he made it very clear.

:22:42.:22:48.

He will not support any further attempt to clawback wider powers

:22:48.:22:52.

from Brussels. Europe is changing, yes. But rather than go into

:22:52.:22:57.

retreat, now is the time to confront those changes head-on. We

:22:57.:23:03.

theed to make a decision about who we -- need to make a decision about

:23:03.:23:07.

who we will be in the new Europe. I say we need to be strong, loud,

:23:07.:23:15.

present. All right, so an EU row might not be quite as exciting as a

:23:15.:23:20.

Bond film, but this month's budget summit could be about as lively as

:23:20.:23:24.

Brussels ever gets. He specially if David Cameron carries through with

:23:24.:23:29.

that threat, to veto the whole deal, if he doesn't get his way.

:23:29.:23:31.

mutual destruction that is going on here now, Britain is coming with

:23:31.:23:36.

its veto threat, the response from the EU is OK, if you want to really

:23:36.:23:39.

veto this, and make this go through the end of the year, we will force

:23:39.:23:42.

you to pay more money than you would have with a budget deal. That

:23:42.:23:46.

is the clash of interests that is happening right now. There is a lot

:23:46.:23:50.

of fear that this November summit will be a real disaster, and lead

:23:50.:23:56.

to a lot of problems for all member states involved. The stakes are

:23:56.:24:00.

high, if David Cameron compromises on this budget deal, he risks

:24:00.:24:04.

infuriating his own backbenchers. But if he sticks to his guns, he

:24:04.:24:14.
:24:14.:24:14.

could alienate most of Europe. We have the London correspondent, and

:24:14.:24:18.

other our guests. Seen across Europe, particularly in

:24:18.:24:22.

Germany, did last night's Commons vote really matter, did it filter

:24:22.:24:28.

through? Yeah, I think actually it does matter. But I think it matters

:24:28.:24:31.

for different reasons than generally reported, it won't change

:24:31.:24:34.

much on the budget, there Nick Clegg is absolutely correct. But I

:24:34.:24:39.

think the one thing that really is a game-changer, is Labour's

:24:39.:24:45.

position. Because they now are starting to have a position. And

:24:45.:24:49.

they are possibly moving into a rebel position. They are now

:24:49.:24:52.

starting to consider whether it might be a better option for

:24:52.:24:59.

Britain to leave the EU. The interesting thing about it is

:24:59.:25:03.

there is a coherent and intelligence analysis about it. The

:25:03.:25:05.

problem with Cameron's Government at the moment, they don't have a

:25:06.:25:08.

position on Europe, they don't have a coherent position on Europe. On

:25:08.:25:13.

the one hand, they say, OK, Europe should further integrate, on the

:25:13.:25:17.

other hand they say they won't be part of it. What they don't think

:25:18.:25:24.

through is Britain will be catapult today some second-teir position

:25:24.:25:30.

they won't be able to live with. that context, won't be it very

:25:30.:25:34.

difficult if Merkel and Cameron meet next week, they have a lot in

:25:34.:25:38.

common about the way economies work, but they can't work together on

:25:38.:25:41.

this? I say they could quite well, and I think they started to. I

:25:41.:25:46.

think something has changed since last December. Last December Merkel

:25:46.:25:51.

and Cameron also a week before Cameron vetoed, but the big mistake

:25:51.:25:56.

he made, he didn't listen. He had, apparently, this obscure list from

:25:56.:25:59.

his Treasury, he had a list of certain points that he thought he

:25:59.:26:04.

could ram through. He didn't listen to the City, he didn't listen to

:26:04.:26:08.

other countries, he only looked to his backbencher. That has changed.

:26:08.:26:12.

I think he realises now that he has to make some deal with Merkel.

:26:12.:26:15.

Merkel says, repeated low, she would like Britain to be a bigger

:26:15.:26:19.

player in all -- repeededly she would like Britain to be a bigger

:26:20.:26:24.

player in it all? I think she does genuinely want the British to be

:26:24.:26:29.

there. For the simple reason you need more of a free market edge.

:26:29.:26:33.

Firstly, because she agrees with that, and also because it is a

:26:33.:26:36.

balance to the French and the people in the south. It brings,

:26:36.:26:40.

from her point of view, the Nordic, and some of the easterners. I think

:26:40.:26:44.

there is a role for Britain. But her tolerance for giving the Brits

:26:44.:26:49.

a lot is not great. Where are the other British friends, I don't know,

:26:49.:26:56.

the Poles, perhaps, the Finns? was the hope when in Brussels. A

:26:56.:27:00.

year ago we kept on being told that Cameron really fought this country,

:27:00.:27:04.

and lots of people would back him up, and they didn't. That is the

:27:04.:27:08.

danger, from a mildly euro-sceptic point of view, it is getting to a

:27:08.:27:12.

point where people begin to get very annoyed with Britain. Did this

:27:12.:27:18.

really matter last night, or because of the reason Imke Henkel

:27:18.:27:21.

said? That is very interesting, there is a real problem for Labour,

:27:21.:27:24.

a short-term strategic gain, they beat the Government in a vote that

:27:25.:27:30.

didn't matter. You are getting incredible reactions in Europe now.

:27:30.:27:36.

Poor Douglas Alexander is deeply humiliated by Ed Balls. You have

:27:36.:27:43.

seen the Austrian ambassador's text recent low, poor labour is now seen

:27:43.:27:49.

-- poor Labour is seen as the anti- European party in Europe. Oddly, I

:27:49.:27:54.

think Cameron is greatly helped by this. In what way? It is not a

:27:54.:27:58.

defeat that has any consequence, or binding quality to it, I think he

:27:58.:28:04.

came out of it very statesmanlike. He adopts a pragmatic position in

:28:04.:28:10.

Europe. He will go there and negotiate. Do exactly what Ed

:28:10.:28:13.

Miliband would have done if he hadn't gone on a tactical flip. It

:28:13.:28:17.

is a wonderful moment. I would almost say that the revival of the

:28:17.:28:22.

Tories on Europe, and towards the next election, started last night.

:28:22.:28:25.

That is perhaps not entirely how you see it, can you see that

:28:25.:28:30.

Cameron can say, you see what I'm dealing with at home, I have Labour

:28:30.:28:33.

also saying this, you are better to deal with me? Merkel knows that.

:28:33.:28:38.

That is not the point. The point is his difficulty, is he had listened

:28:38.:28:44.

far too much to his people at home. He has to start to make alliances

:28:44.:28:48.

across Europe, and there are quite a few states who would be

:28:48.:28:51.

interested, or would have been interested, I'm not sure if they

:28:51.:28:57.

are any more. I think the problem for Cameron really is, he hasn't

:28:57.:29:02.

thought through his position. Labour hasn't either? I think

:29:02.:29:07.

Britain is starting to. I think Labour's really starting to think

:29:07.:29:10.

it through. They are very much at the beginning, but the Europe that

:29:10.:29:15.

is now envisaged, with a core Europe, and other states around,

:29:15.:29:21.

that will not work. I think there is a degree of opportunism, there

:29:21.:29:25.

is a degree of opportunism, and Labour, it is naked and obvious,

:29:25.:29:27.

they are doing something in order to carve out a position. I think

:29:27.:29:30.

what's interesting about Cameron, is when he came in, when you talk

:29:30.:29:34.

to the people in Europe, they repeatedly, when Cameron first

:29:34.:29:39.

appear, they kept on talking about him being a "little Englander",

:29:39.:29:43.

they saw the thing at Christmas last year as being frustrated. It

:29:43.:29:46.

was just him trying to deal with his backbencher, as we saw this

:29:46.:29:49.

time round. What is interesting, is he parked had himself, by doing

:29:49.:29:55.

this thing straight up, by doing this thing about any cessation of

:29:55.:29:59.

sovereignty, you have to be to have a referendum. Many wiser old men

:29:59.:30:03.

said be careful on. That the reason it would be difficult going forward,

:30:03.:30:08.

if there is a deal to save the euro it will be sovereignty going to

:30:08.:30:10.

Brussels. That is when Cameron and Osborne might be prepared to go

:30:10.:30:15.

along with t but the referendum will keep them in. In terms of the

:30:15.:30:18.

friendlessness in Europe, in terms it of the Government, is it your

:30:18.:30:22.

position, Peter, when Cameron talks about, or when Conservative

:30:22.:30:27.

backbenchers have a vote, force a vote causing a toughening in the

:30:27.:30:30.

British position, they are speaking for many German voters as well,

:30:31.:30:35.

they are equally sceptical. Is that how you see it? What I think is the

:30:35.:30:42.

other European leaders, we look at it in our parochial way, they are

:30:42.:30:50.

very sympathetic, they have all got domestic issues. Angela Merkel has

:30:50.:30:55.

issues. They see that Britain has a domestic issue, Cameron has the

:30:55.:31:00.

management issue. I think also that when Cameron goes to Brussels, a

:31:00.:31:04.

lot of -- with a euro-sceptic message there will be a lot of

:31:04.:31:07.

European leaders quite happy to come in behind that cover. They

:31:07.:31:12.

will be delighted today hear him say that.S Certainly true of some

:31:12.:31:17.

German vote -- it is certainly true of some German voters? That is an

:31:17.:31:20.

important point to make much the other importance of the vote

:31:20.:31:23.

yesterday evening is it chimes with the sentiment around Europe, that

:31:23.:31:27.

is the sentiment of the people. It is interesting, a German minister

:31:27.:31:33.

today already react to it, not just saying there go the Brits again. He

:31:33.:31:38.

said it would be more difficult, but he also said it is fantasy to

:31:38.:31:42.

increase the European budget. final thought, just the thought of

:31:42.:31:46.

another British veto, by theself would that be bad news, in European

:31:46.:31:51.

eyes, if not domestic? I disagree with the other two on this. I think

:31:51.:31:54.

within Germany there is a straight forward element to the populus fed

:31:54.:31:57.

up with giving money to other people. That is there. The moment

:31:57.:32:00.

you start testing it on the idea of people coming out of the European

:32:00.:32:04.

Union, there you have a tougher thing, I think. It is a much more

:32:04.:32:07.

solid, coherence around the idea of Europe. Once you get to play like

:32:07.:32:14.

France and the others it is harder There have been further development

:32:14.:32:19.

tonight in the inquiry sentering on Jimmy Savile. The comedian, Freddie

:32:19.:32:23.

Starr, who has always denied any wrongdoing, and still does, has

:32:23.:32:28.

been arrested. We have the details. What is going on? Starr who is now

:32:28.:32:36.

69, has been arrested as part of operation yue tree, looking into --

:32:36.:32:42.

Yew ld tree, looking into the investigation: it happened when

:32:42.:32:47.

Karin Ward told the BBC that he had groped her when she was 13. He said

:32:47.:32:57.
:32:57.:32:57.

he never met her. But then footage emerged of them when he was hosting

:32:57.:33:02.

on Clunk Click, with Jimmy Savile, but he admits he was wrong but says

:33:02.:33:10.

he denies any wrong done. We should say that Miss Ward took part in a

:33:10.:33:15.

investigation with Newsnight about Jimmy Savile that was not proceeded

:33:15.:33:18.

with. Max Clifford is involved now? He has had phone calls from pop

:33:19.:33:23.

musicians of the time who are concerned they might fall under

:33:23.:33:28.

suspicion, simply because at some moment in the past they may have

:33:28.:33:33.

encountered Jimmy Savile and young members of the audience on Top Of

:33:33.:33:38.

The Pops. Everyone who has phoned me from the 60s and 70s, says they

:33:39.:33:43.

had no knowledge or involvement in any shape or form, but, for example,

:33:43.:33:46.

I was there doing Top Of The Pops, Jimmy Savile came up to me, with

:33:46.:33:50.

some girls, will I have a picture I had a picture. There is a picture

:33:50.:33:55.

of me, and him, with girls. I don't know their age. What he did with

:33:55.:34:00.

them afterwards, before, I haven't got a clue. But you see how that

:34:00.:34:05.

could now be damaging for me. other development, that Newsnight

:34:05.:34:08.

investigation, which was dropped, we have heard a bit more about what

:34:08.:34:12.

is happening about that? This is the Pollard inquiry, named after

:34:12.:34:17.

Nick Pollard, late of Sky News. It has emerged that the inquiry has

:34:17.:34:21.

asked some members of BBC staff for documents. It is also embarked on

:34:21.:34:26.

what is described as an electronic search of archive documents,

:34:26.:34:30.

presumably e-mails and the like. The inquiry will have a barrister

:34:30.:34:33.

asking questions of the interviewees, and they, in turn,

:34:33.:34:38.

will be allowed to have their own lawyers. The inquiry will be in

:34:38.:34:43.

private, but its final report will be published. They hope that will

:34:43.:34:48.

be before the end of the month. Remember Friends Reunited, it was a

:34:48.:34:53.

social media darling for a while, and then fell prey to a new fancy,

:34:53.:34:58.

called Facebook. In the world of social media one of the newer

:34:58.:35:02.

success stories is Tumblr, like Facebook before it has become an

:35:02.:35:06.

internet phenomenon. In a moment we will debate how far it is fashion

:35:06.:35:11.

or the solidity of a new business model. Paul Mason went to meet

:35:11.:35:15.

Tumblr's founder, the very successful, 26-year-old, Karp.

:35:15.:35:18.

There is a joke on the internet, Facebook is how you would like

:35:18.:35:24.

others to see you, Twitter is how you see yourself, and Tumblr

:35:24.:35:31.

is...oh look, funny cat picture! If so, David Karp has raised a heck of

:35:31.:35:35.

a lot of money on the back of funny cat pictures. The 26-year-old is

:35:35.:35:41.

the boss of the hottest property on the net. I tried to set up blogs on

:35:41.:35:47.

the big publishing platforms at the time. I tried to tweet, I used

:35:47.:35:52.

flick flicker, and all the other things -- Flickr and all the other

:35:52.:35:57.

things around, I wanted something to be more expressive and present

:35:57.:36:03.

myself in a way that I was proud of. What is Tumblr, if you are asking,

:36:03.:36:08.

you are probably over 24 years old, you express videos and other stuff

:36:08.:36:14.

to express yourself. It sounds mundane, but it is given rise to

:36:14.:36:20.

something called "curating", this year's buzzword. What is curating?

:36:20.:36:24.

Even if you are the guy who isn't in front of the camera playing

:36:24.:36:27.

guitar, you can still express a point of view and the things you

:36:27.:36:32.

care about, through the stuff you select. On Tumblr you find users do

:36:32.:36:37.

just pull stuff together and it expresses them? They do all of it.

:36:37.:36:40.

We have millions of creator, people who make the stuff, they are

:36:40.:36:43.

getting in front of the camera, taking the photos and recording the

:36:43.:36:50.

songs. They are making the tough. Around that you have tens of

:36:50.:36:54.

millions of curators, and channelling into the blogs they

:36:54.:37:00.

care about, and the audience of 150 million people that show up every

:37:00.:37:07.

month. 150 million is small stuff compared to Facebook with one

:37:07.:37:12.

billion. But it is host to smaller users, nail art is one,. You don't

:37:12.:37:18.

think there is a level of narcissism going on, you put your

:37:18.:37:21.

favourite Barbra Streisand song next to your cat, who is

:37:21.:37:23.

interested? The interest is really to have something out there for the

:37:23.:37:28.

people who care. It can be this really delightful surprise when you

:37:28.:37:31.

bump into some stranger in Tumblr or anywhere on the Internet who

:37:31.:37:35.

cares about the same things you do. I don't think it is narcissistic, I

:37:35.:37:39.

think it is a whole new opportunity for humans to socialise, that

:37:40.:37:44.

hasn't existed before. Social media has come a long way. Smartphones

:37:44.:37:50.

and tablets and all the other gadgets we are queuing up to buy,

:37:50.:37:55.

have put the power to create original content in the hands of

:37:55.:38:00.

ordinary people. And Karp has raised $125 million of venture

:38:00.:38:05.

capital on the idea it all has to go somewhere. All of this stuff is

:38:05.:38:10.

on the hardware. I'm so excited about Apple and Google today are

:38:10.:38:15.

pushing the hardware so far, so quickly. As the creative horse

:38:15.:38:19.

power in that hardware moves faster and faster and faster as it seems

:38:19.:38:23.

to be right now, the software I think will just explode around that.

:38:23.:38:27.

You are starting to see that. There is a whole ecosystem of these

:38:27.:38:30.

favourite apps that are popping up. What I'm most excited about in

:38:31.:38:36.

social media is all the stuff people are making. That includes

:38:36.:38:40.

trouble. Tumblr's breakthrough moment came when Occupy Wall Street,

:38:40.:38:45.

used it to tell the story of the 99%. This making Karp one of the

:38:45.:38:51.

few capitalists whose eyes light up at the thought of anarchists

:38:51.:38:56.

protesting. The 99% blog started on Tumblr, started to garner all this

:38:56.:39:00.

attention and the events ultimately ended up being organised through

:39:00.:39:03.

communication going on Twitter, people saying we're going here, and

:39:03.:39:07.

the police are there, and we are going here now. The reach you can

:39:07.:39:12.

build out of a network like Tumblr, and the mass communication that is

:39:12.:39:15.

able to go down in a network like Twitter is incredible, something

:39:15.:39:18.

that has never existed before. There is the communication, the

:39:18.:39:22.

other end is just the media. It is easier than ever for you and me,

:39:22.:39:25.

people who may not have been the ones going in there and making the

:39:25.:39:28.

stuff. It is easier than ever for you and me to make something that

:39:29.:39:32.

is really compelling, really tells a story, and put that out into the

:39:32.:39:37.

world and really move people. is a dark side to Tumblr, not just

:39:37.:39:43.

porn, but lots of references to teenage angst, self-harm, eating

:39:43.:39:47.

disorders. And Karp does intend to make profits out of other people's

:39:47.:39:51.

content, by the time honoured method. Our model is pretty simple.

:39:51.:39:54.

We have all of this attention built off all of the great work that

:39:54.:39:59.

these creators are making, attracting an audience of 150

:39:59.:40:03.

million people, we are selling a little sliver of that attention to

:40:03.:40:07.

marketers. Will it succeed? Nobody knows, where does the social metdia

:40:07.:40:12.

go next, nobody knows that either - - media go next, nobody knows that

:40:12.:40:16.

either, that's the point. We will try to figure that out, Suw

:40:16.:40:23.

Charman Anderson is a social media consultant, and the editor of Wire

:40:23.:40:31.

clouk is here. Some media -- wire.co.uk is here. Some media

:40:31.:40:36.

sites you go on to and then move to the next one? There are social

:40:36.:40:41.

media sites that come and go and you never hear of them. Other sites

:40:41.:40:46.

like orchid huge for a while, and less popular now. There is a huge

:40:46.:40:49.

ecosystem of media sites and social networks out there. There is a huge

:40:49.:40:55.

big ones that most people have heard about, Facebook, Twitter,

:40:55.:41:00.

linkedin. They are the players. Some of these big successful sites,

:41:00.:41:04.

is there something that makes the break for them? Once you have

:41:04.:41:07.

critical mass and you are the destination, it is hard for an

:41:07.:41:11.

outside Tory breakthrough. If Facebook has a billion people

:41:11.:41:13.

connected, that is where your friends will be. There is a barrier

:41:13.:41:17.

to entry. Do they come and go, the Friends Reunited, or MySpace,

:41:17.:41:20.

something like that, people can leave? Often it is the ones that

:41:20.:41:26.

are in a hurry to make some revenue that fade away. Remember MySpace,

:41:26.:41:32.

Miguel-Anxo Murado paid a lot of money for that, -- Rupert Murdock

:41:32.:41:36.

went nowhere with that, it was founded on advertising and wasn't

:41:36.:41:39.

about community. The people at Twitter and the other successful

:41:39.:41:43.

networks are trying to get the user engagment right, a place where

:41:43.:41:52.

people want to share and hang out, the money will probably follow.

:41:52.:41:57.

Twitter and Facebook, people get angry at the idea ofed ands popping

:41:57.:42:03.

up, it is not for the d ads popping up, it is for -- ads popping up, it

:42:03.:42:08.

is not for the user? There is a risk of alienating users, people

:42:08.:42:12.

don't want ads cutting into what they think of as a personal

:42:12.:42:15.

conversation. There is also the risk, particularly for Twitter,

:42:15.:42:20.

they foblg cuss so hard on a mass market -- focus so hard on a mass

:42:20.:42:24.

marketing model, they are ignoring other sources of revenue. They are

:42:24.:42:27.

putting themselves at risk. Because if the ads don't work for them. If

:42:27.:42:32.

it doesn't make enough money, then they aren't set up to move on to a

:42:32.:42:35.

different kind of revenue model. Like what. What would be better for

:42:35.:42:39.

Twitter, do you think? There a few things they could do. Including

:42:39.:42:45.

premium accounts and business accounts. When you look at networks

:42:45.:42:49.

like linkedin, that gets two-thirds of revenues from fee, not

:42:49.:42:56.

advertising. Advertising isn't the only way to make money. But Twitter

:42:56.:42:59.

is resolutely ignoring other potential sources of income.

:42:59.:43:03.

that another thing, you get interested for one reason or

:43:03.:43:06.

another and building a community, then the ad, or something you

:43:06.:43:11.

really don't like pops up, and that could be the death blow? Not so

:43:11.:43:18.

much for Twitter. Twitter is all about tiny nuggets of communication.

:43:18.:43:22.

140 characters. What screen does a tiny nugget of communication work

:43:22.:43:27.

best at? On your smartphone. The smartphone, the mobile internet is

:43:27.:43:36.

where the revenue will come from, that is why Facebook bought into

:43:36.:43:40.

Instagram. For a slice of that. There is figures from a venture

:43:40.:43:44.

capital firm a couple of months ago, that print media currently accounts

:43:44.:43:49.

for 7% of our engagment time, but 25% of advertising. Mobile is about

:43:49.:43:56.

10% of our time, but just 1% of advertising. It's going to cash up.

:43:56.:44:00.

-- Catch up. In terms of the next five years or so. Have you any

:44:00.:44:06.

thoughts of what will survive and what the social media landscape

:44:06.:44:11.

will look like, so we can all make money out of it, what would you put

:44:11.:44:15.

your money? Mobile is a key market. Mobile advertising is the nut to

:44:15.:44:20.

crack. Facebook has done very well just over recent months in

:44:20.:44:24.

increasing its mobile advertising revenue. They have 60% of users who

:44:24.:44:30.

access Facebook through mobile. You are really looking at tools that

:44:30.:44:36.

either allow people to achieve something really important,

:44:36.:44:40.

Linkedin is about finding a job and your professional career, that

:44:40.:44:45.

won't go away. Twitter and Facebook are about maintaining your social

:44:45.:44:48.

life and maintaining social relationship, that won't go away as

:44:48.:44:51.

a need. Whether Twitter and Facebook actually survive is

:44:51.:44:54.

another kettle of fish. Do you really think so, given the size of

:44:54.:45:00.

both of them? With Twitter, they aren't making a huge amount of

:45:00.:45:03.

money at the moment. If they don't increase their revenues and start

:45:03.:45:07.

to turn a healthy profit, there might be tension with the investors.

:45:07.:45:12.

With Facebook the issue is the IPO, which was a bit of a shamble, and

:45:12.:45:17.

their share price is shadeing at 55% lower than where it was in May

:45:17.:45:23.

-- trading at 55% lower than where it was in May. That could cause

:45:23.:45:27.

stormy seas for Facebook. That's all tonight, I'm back tomorrow. We

:45:27.:45:30.

will leave you with the news that not everyone in the United States

:45:30.:45:33.

is absolutely thrilled that Obama and Romney are back on the campaign

:45:33.:45:43.
:45:43.:45:47.

trail. It is good to be back in Green Bay

:45:47.:45:53.

Wisconsin. We have to take back America, I'm counting on you.

:45:53.:46:01.

I'm tired of Barack Obama and Mitt Romney. That is why you are crying?

:46:01.:46:11.
:46:11.:46:11.

Oh, it will be over soon Abbey. The Oh, it will be over soon Abbey. The

:46:11.:46:13.

election will be over soon, OK? It is cold out and won't get warmer

:46:13.:46:18.

over the next few days. A chilly start to the day, a brisk old wind

:46:18.:46:21.

feeding showers across the country. Hit and miss, some place avoiding

:46:21.:46:27.

them. Having a bright and breezy day, others seeing heavy downpours.

:46:27.:46:31.

Mid-afternoon plenty of blue sky and sunshine. Temperatures aren't

:46:32.:46:35.

perterrific, but out of the breeze and into the sun not too bad.

:46:35.:46:38.

Shower towards the south coast. Some will be heavy, possibly

:46:38.:46:46.

thundery too. It will be cold enough on the

:46:46.:46:50.

higher ground of Wales. Not too many problems roaming the hills

:46:50.:46:53.

tomorrow afternoon. Some sunshine inbetween. For Northern Ireland,

:46:53.:46:56.

after a brightish start it will tend to cloud over with outbreaks

:46:56.:47:00.

of rain pushing from the north. A disappointing end to the day here.

:47:00.:47:05.

For Scotland, after an icey start in some place, plenty of sunshine

:47:05.:47:08.

around, away from southern most areas across the borders. Hill snow.

:47:08.:47:12.

As we hit the weekend, northern areas seeing that mixture again of

:47:12.:47:15.

sunshine, a few showers, and it will be cold enough for further

:47:15.:47:19.

snow over the high ground. Further south too, mixture, some bright

:47:19.:47:22.

spells, but nobody, nobody is immune from some fairly sharp

:47:22.:47:26.

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