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Quest Means Business
British Government Unveils `Business-Friendly' Budget; EU Seeking Fair Play for Contracts Abroad; Dollar Gains Against Pound and Euro; HP to Merge Printer, PC Units; Mixed Session in US Markets; Slow Trading in Europe
Aired March 21, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It is Britain's budget for business, says the government. The message: we must work, not borrow our way to growth.
Here's a passenger announcement: everyone flying out of the UK, pay more tax.
And punish the protectionists. Tonight, the EU Trade Commissioner wants to price open public contracts.
I'm Richard Quest. I mean business.
Good evening. There is no other road but austerity. Britain's finance minister used today's budget as a rallying call and a restatement of his belief that only strict discipline and hard work can bring about a recovery.
The chancellor of the ex-checker, George Osborne, said he was "unashamed" to cut taxes both for corporations and for Britain's highest individual earners. He presented a budget that he said was all about enterprise investment and, as he put it, good old-fashioned hard graft.
(RINGS BELL)
(BEGIN VIDEO CLIP)
GEORGE OSBORNE, UK FINANCE MINISTER: Britain is going to earn its way in the world. There is no other road to recovery. This budget supports working families and helps those looking for work.
It unashamedly backs business, and it is on the side of aspiration, those who want to do better for themselves and for their families. This budget reaffirms our unwavering commitment to deal with Britain's record debt.
(END VIDEO CLIP)
QUEST: Now, amongst the hundreds of proposals, these are the main headline measures of the review. Let's start. The red book shows the top rate of income tax has been cut -- or will be -- from next April from 50 percent, 50 pence in the pound, down to 45 percent for those earning more than 150,000 pounds, about $225,000, $230,000 a year.
This is the controversial one. This is the one that, frankly, everybody will be talking about tomorrow because the opposition claims this shows that not everybody is in it together, what the opposition called "a millionaire's budget."
On the plus side for corporations, they are speeding up the cut in corporation tax, down to 24 percent from next April down to 22 percent in two years time, and that is an expensive measure. It costs several hundred million dollars a year and, crucially, will give Britain one of the lowest if not the lowest corporate -- corporation tax in the G7.
If you're thinking of buying a very expensive home in London, well -- or in the UK -- think again. Stamp Duty, this is the tax that is on documents for purchase of property, a "mansion tax," 7 percent for those properties over 2 million pounds, 3 -- 3.5 -- $3.2 million.
That's if you buy it in your own name. If you want to buy it in that company, that offshore company that you've set up, that'll cost you 15 percent in terms of the tax involved.
Jim Boulden is live outside the Houses of Parliament for us tonight. Jim, the minutiae of the individual tax take -- look, he's still borrowing, the government is still borrowing 120-odd billion this tax year, the best part of 100 billion next tax year, and the economics haven't changed.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, things have gotten a little better her in the UK since he last spoke in November, I think, Richard. He's talking about inflation coming down, Britain probably not going into recession in 2012, where other parts of Europe are already in recession. So, he said it would probably skirt that.
We also see unemployment peaking this year and coming down next year, he says. And so, with all of that in there, he had a little bit of wiggle room, a little bit of maneuvering, but he made it very clear, Mr. Osborne, he saw this as a neutral budget.
This wasn't about adding more austerity. It's not like Greece, it wasn't about stimulus -- we're not going to see that for a generation anyway.
QUEST: All right.
BOULDEN: So, it was about tinkering at the edges and just doing a little bit more for business, and that's really what he's -- was on about today.
(BEGIN VIDEO CLIP)
OSBORNE: This is how Britain will earn its way in the world, with far-reaching tax reform, with a simpler tax system, where ordinary taxpayers understand what they're being asked to pay. With a tax system that is more competitive for business than any other major economy in the world. A tax system where millions of the lowest paid are lifted out of tax altogether.
(END VIDEO CLIP)
QUEST: Jim, can he get away, politically, with this 45 percent tax rate, the cut in the top rate of tax? Look, I know -- I read the HMRC report, it doesn't raise -- it raises peanuts in the total tax take. Politically, though, it's dynamite.
BOULDEN: It's dynamite because they're in a coalition government here in the UK, and the Liberal Democrats, the minority party of the coalition, didn't like that. So, that's why they have this "Mansion Tax," to give them something to take back to their constituents.
Of course, Labour Party is not happy about this. They put the 50 percent tax rate in there, so this was something for business, this is something for the wealthy in this country, something for the people who vote for the Conservative Party, so definitely he can get away with it as far as his own party is concerned.
QUEST: Jim Boulden, who's at the Houses of Parliament for us tonight.
The Economic Secretary to the British Treasury says the budget is a clear sign that Britain is open for business. I asked the MP Chloe Smith if the government's plan was about more than just austerity.
(BEGIN VIDEOTAPE)
CHLOE SMITH, ECONOMIC SECRETARY TO THE UK TREASURY: I think you'll find this budget makes a real move, it's a radical reforming budget, it says Britain is open for business.
If you look at the tax measures we've made, they're pretty far- reaching. If you look at the boosts we're giving to investment and jobs throughout this budget, I think you'll find this budget says we are absolutely open for business.
QUEST: Right.
SMITH: We are, indeed, dealing with difficult circumstances. The OBR's forecast remain much the same, for example, since the autumn. But we are grabbing that and making sure we are open for business.
QUEST: Except, this year's -- if I look in the red book, which seems to show the total fiscal impact of policy, is a negative of some $2 billion. So, there's a bit of a giveaway there, a lot of it comes from the forestalling measures. So, I'm wondering, how do you square the fact that you said it was neutral when it clearly isn't?
SMITH: Well, this is a fiscally neutral budget, and there are several ways in which various parts of the packages balance off against each other. On the point about forestalling, I think, actually, that's rather an interesting point.
This is one of the first budgets to admit, in fact, that such things do happen and that our measures are responsible and serious and should be taken into account when they come into play and in a way that gives clear signals for investment in this country.
QUEST: Right, but if the argument in favor of getting rid of the 50 percent tax rate, lowering it to 45 percent -- and I've read part of the HMRC's report into that -- if it was so overwhelming and you've had to put anti-forestalling measures in to prevent people shifting bonuses, why not just get rid of it now?
SMITH: Well, as I say, I think it's actually an important part of giving a signal that Britain is open for business. So, we want to give that forward-looking signal there in that case.
We also want to say, as I say, act responsibly. You mention the report. What we've endeavored to do is act on the facts as we found them. We are, therefore, acting from that point to put Britain's tax rate back -- top tax rate back down to 45 pence.
I think, actually, what's also really interesting, there, is the way that interacts with all of the measures in this budget. It seeks to make the richest pay more, which I think is very positive in terms of fairness inside Britain.
But equally, by giving that year of notice in that particular case, we can make sure that companies and firms seeking to invest in Britain know we are open for business and can then plan accordingly.
(END VIDEOTAPE)
QUEST: The Economics Minister of the UK Treasury, Chloe Smith. Amit Kara is the UK economist at UBS in London. We need to put this all into perspective. What did you make of the budget?
AMIT KARA, UK ECONOMIST, UBS: Well, I think as a start, a lot of it was leaked, so at least from a macro-economic point of view, today's budget was quite a non-event.
Perhaps the corporation tax story was a little bit of a surprise, but beyond that, the headlines that you've been talking about, the 50 P rate of tax, many of the other measures, were well-known at least a week before.
QUEST: Right. Now, the OBR says it's going to have them -- they haven't shifted their economic forecast since the autumn statement. As I look at the red book, it does seem as if the total fiscal impact is slightly negative, isn't it? It does cost about 2 billion when you take the forestalling measures into account.
KARA: Yes, I mean, it is slightly negative, but -- big picture, if you look at the OBR's forecast, say, this time last year compared to what they had in November and, indeed, what they have now --
QUEST: Right.
KARA: -- those are big changes.
QUEST: OK, all right --
KARA: I think the -- the small numbers that we are talking about are really second order, from my perspective.
QUEST: All right. So, can politically -- does it make any effect, the Stamp Duty, the cut in income tax? All these little things which, Chloe Smith on this program say send the message. What do you think? Does it send a message, or is it tokenism?
KARA: Well, I think the fact that the OBR hasn't changed their GDP growth forecast suggest that they don't really make a dramatic difference. I think at the margin, they make some impact. It's impossible to -- virtually impossible to quantify that effect.
I think in terms of the long-term growth rate of this country, it depends on much more fundamental factors rather than tinkering at the margin.
(CROSSTALK)
QUEST: And the --
KARA: It's really --
QUEST: Whoa, whoa. Tonight, Fitch says it reaffirms the Triple-A rating for the UK, but it also says it's still continuing with its negative watch. Do you think the fact the government is continuing this austerity, continuing its plans in that regard, does make Triple-A more secure?
KARA: Well, the rating agencies are strongly suggesting that the UK remain on this path, so I guess that makes it more secure.
Whether that is the right path or not, only time will tell. It might -- we might realize in a few months time that aggressive fiscal austerity is not helping, and we need to embark on a different path. But for now, the rating agencies are telling us that's what we need to do.
QUEST: Amit, many thanks, indeed, for joining us from UBS tonight.
The EU's promising action against protectionism. The EU Trade Commissioner talks about leveling the playing field for European business when it comes to procurement. He's on QUEST MEANS BUSINESS --
(RINGS BELL)
QUEST: -- next.
(COMMERCIAL BREAK)
QUEST: The European Union wants equal opportunities to compete for public sector contracts overseas. In short, it's all about the power of procurement when companies are bidding for government contracts in other nations.
It -- the EU is demanding the power to punish companies who governments won't play fair. I spoke to EU Trade Commissioner Karel De Gucht and asked whether he was taking a carrot or stick approach when actually trying to force other governments to open up their procurement process.
(BEGIN VIDEOTAPE)
KAREL DE GUCHT, EUROPEAN TRADE COMMISSIONER: I'd go with the carrot, telling them very clearly, look, our markets are open, please do the same, and then we can do business.
But if there would be a clear refusal to do so, then we can also use the stick and close our own markets totally or some chapters of the market for the countries concerned, because as you like to say, it's a very important market in Europe, it's about 16 percent. But for example, in China, it's double.
QUEST: As I look at this, Commissioner, this is only going to work if you -- if your teeth are shown and its understood by the other party you're prepared to use them. If it's consultations, negotiations, and reports and it goes on for years, people will get nowhere.
DE GUCHT: That's probably true, but that's not a decision we have to take now. What we have to do now is put it into place and put it into practice afterwards in good faith.
And if deferred countries concerned are not ready to play ball with us, then we will take a decision, and I think we have demonstrated repeatedly in the past that we are ready to take action, as recent as one week ago, together with the United States, we took action, for example, on rare earths, no? Because the Chinese are unwilling to take measures.
So, yes, we are ready to take measures, but it's a good practice to first speak to each other and see whether you can find a solution.
QUEST: Are you intending to take any action if it becomes clear that certain countries are using protectionist measures against European airlines or European countries over the ETS scheme?
DE GUCHT: Look. The Emission Trading System, it's European legislation that has unanimously been adopted by the Council amid a very large majority in parliaments. We cannot simply change this.
What we have always argued is that you would have or should have an international agreement within the framework of the International Civil Aviation Organization. We should sit at the table and negotiate an international outcome of this.
Having said this, we do not expect to have retaliation in the way that you are putting it forward. But if that were the case, then we will look at what we have to do. But let's take the better solution and let's come to an international agreement, no?
The reason that we have to take the measures --
(CROSSTALK)
QUEST: But, well -- well, Commissioner, you say --
DE GUCHT: Yes?
QUEST: -- "Let's wait to see," but the reality is, the retaliation is already underway. The head of Lufthansa, the head of Airbus, CEOs, are now saying that they're feeling the weight of retaliation. Are you going to act?
DE GUCHT: What those companies have been saying is that they see this as a serious risk. Until now, it does not materialize, and if it does materialize, we will take up our responsibility as we always do.
(END VIDEOTAPE)
QUEST: The EU Trade Commissioner talking to me earlier.
As the ink dries on Hewlett-Packard's latest restructuring plan, investors are seeing red at the New York Stock Exchange, and HP is being hammered on the market.
Let's take a look at the foreign exchanges. The pound reversed its gains against the dollar as UK public foreign figures came in higher than expected. Sterling is down around a tenth of one percent. The euro is down a quarter of one percent. Japan's currency is similar by a right amount. Right now, a dollar buys you just under 84 yen.
(COMMERCIAL BREAK)
QUEST: The markets are open and doing business. Alison Kosik's at the New York Stock Exchange. If it's another day, it must be another restructuring at Hewlett-Packard. They tried it once and it was a sensational flop. Cost the chief executive.
And now, they're trying again, printers and PCs, all the P's in one pod. Does it -- what's going on?
ALISON KOSIK, CNN CORRESPONDENT: Poor Hewlett-Packard, right?
(LAUGHTER)
KOSIK: I heard -- I read that someone was joking HP stands for "Help me, Please!" Hewlett-Packard's really having big issues. Right now, the stock, having issues of its own, just today down another 2 percent.
The company, Richard, as you know, it struggled so long to try to turn itself around. That's why it brought in Meg Whitman as chief executive in September, and her honeymoon was over almost before it even had a chance to get started.
Hewlett-Packard's really been losing market share to its rivals in PCs and printing. Case in point, Dell. Dell's shares are up 17 percent. Even Cisco Systems shares are doing pretty well compared to HP.
Despite the negative reaction, though, the restructuring at HP is looking to actually put into motion, may be a good thing. Analysts say the company really needs to simplify its structure. Too many of its units are in competition with one another.
But remember, it almost did away with the PC unit altogether last year, so it is trying to revive itself with the help of its bread and butter, the printing business.
But even that's been struggling lately. And last year, printing sales were flat, profit fell 10 percent. The company clearly has a lot of issues. Investors, they're clearly getting tired of waiting for a turnaround at this point.
QUEST: The -- well, absolutely. No doubt, next week another turnaround at HP. A dearth, really, of significant economic news at the moment. We're in a bit of a quiet patch at the moment, so the market at this point takes a bit of a watch and wait.
KOSIK: Watch and wait, yes. You're seeing the market take a bit of a breather. Right now, the Dow is down 14, the NASDAQ, S&P are up a bit.
You look at the run-up for the major averages, it's been pretty significant, and you really don't want to see the market go up in a straight line, vertical. It wouldn't be healthy for the market. So, seeing these small pullbacks every now and then, it's healthy for the market, because you don't want to create that big bubble, right?
QUEST: I -- ah! I can hear investors around the world saying, "No! No, Ms. Kosik! We want to see the market going in a straight line all the way up!" But you're right, a consolidation --
KOSIK: No, but --
QUEST: Go on.
KOSIK: Then, that bubble pops, and we -- then that bubble pops, and we're all in trouble, right?
QUEST: Sensible words from the New York Stock Exchange.
(RINGS BELL)
QUEST: Alison, thank you for that. Alison Kosik at the New York Stock Exchange. Don't blame me, I didn't say we didn't want the market to go -- of course, if you've shorted the market, for those of you that may have shorted the market, then you actually don't want it to go up at all.
Quiet session in Europe. Let's look at markets. Sainsbury's was up 4.5 percent in the London market. Q4-4 earnings beat forecasts. Aviva down 5.5, the insurance company. The European equities team has -- John Botham has left the group.
Deutsche Boerse biggest gain in Frankfurt, up 3 percent. SocGen, which has been beaten warmly around the head in recent weeks with the Greece crisis, is down 1.8 percent.
In a moment, Britain says it's open for business, and it's slamming the door on company tax avoidance. The former UK chancellor, Norman Lamont, gives his review of the 2012 British budget.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
At this moment, there are tense negotiations underway in France, where hundreds of police have a suspected serial killer surrounded. Officials say Mohamed Merah is in an apartment building in Toulouse. He is believed to be the man who gunned down seven people this month. The French authorities say Merah claims to be a jihadist trained by al Qaeda.
Anti-government activists in Syria now say more than 10,000 people have been killed since the start of the crackdown. This video posted online appears to show a funeral march this week in Idlib. An opposition group has told CNN at least 70 people died today alone.
A row of white coffins bring home the sheer scale of last week's Swiss bus crash and the disaster. At a funeral service for 17 of the victims in Belgium, King Albert II and the royal family led the service in the town of Lommel. Twenty-eight people died in the crash. Swiss investigators are due to travel to Belgium to start questioning the survivors about what happened.
Thousands of mourners in Jerusalem attended funerals today for four people killed at a Jewish school in Toulouse in France. A rabbi and his two sons were buried together. A 7-year-old girl was laid to rest at a different ceremony -- cemetery. The girl's brother made a last request of her at the funeral, asking his sister not to be sad, but to pray for their parents to have strength.
New evidence suggests a low dose of aspirin taken every day could prevent and could even be used to treat cancer. The study is in the British medical journal "The Lancet" and shows that people who use aspirin every day have a 15 percent less chance of dying of cancer than those who don't take the medication. After five years, that rate jumps to 37 percent.
Now, before you all rush off and buy your aspirin, researchers caution, the results haven't been confirmed.
One of the most controversial elements of the UK budget announced today was the decision to cut the top rate of income tax from 50 to 45 percent. What difference does 5 percent make, you may well ask.
Well, when the country is in recession or at least facing austerity and there are cuts to public services, the opposition say it's a millionaire's budget.
Norman Lamont served as the UK Finance Minister in the early 1990s. He told me earlier why he thinks the current government waited until next year to actually implement today's tax cut.
NORMAN LAMONT, FORMER UK FINANCE MINISTER: It is awful (inaudible) isn't it? I think the government previously thought they wouldn't be able to reduce the top rate of tax for maybe a couple of years. But I think they felt, within the coalition that when there was going to be a big increase in personal allowances, this was the moment that they could actually start the process of reducing the top rate of tax.
Obviously, someone like myself, would have preferred to have seen it completely abolish the top rate and the top rate down to 40 percent and I'd have liked to have seen it now. But I think they saw an opportunity and they also had in mind other measures like the 7 percent stamp duty on properties above 2 million. I think it is a political decision.
QUEST: And that's -- that 2 million, 7 percent, what sort of message do you think that sends and particularly the 15 percent and the overseas investors? Do you think it -- it does send a message that Britain is open for -- for overseas entrepreneurs?
LAMONT: I don't agree with that has applied to the 15 percent because I think the 15 percent is aimed at people who use the device of overseas companies, sometimes UK residents, establish an overseas company in order to buy a property in the UK and that is just tax avoidance.
It's quite a widespread device and I think that they are right actually to act against that. We'll see how much revenue it brings in but I think it is tax avoidance. I don't think it means Britain is anti- business or anything like that.
QUEST: And if we take this budget and I know you travel extensively, Lord Lamont, how would you put this and the state of British economy now into the wider context? Does austerity still have to be the call what words?
LAMONT: Well, there is this great debate in this country, which is completely unreal about whether we're reducing the deficit too quickly. The truth is we're reducing our deficit far more slowly than countries in Europe.
We may be reducing it faster than the United States, which is something of a special case but, you know, our deficit is much larger than that, twice that of Italy and it is larger than that of France and it is larger than that of many countries in the Euro zone.
We are -- we are lucky that we had a relatively low stock event at the start of this crisis and that we have the freedom to adjust our own exchange rate and also to print money. Those are all -- those are all advantages that our currency has over the Euro but really our public finances are only correcting themselves quite slowly.
QUEST: Finally, Lord Lamont, you did budget yourself. You sat down, you read the criticisms the next day, did any of it ever actually hit home when you read what people said about you? Did you read the criticisms of your budget and did that ever hurt?
LAMONT: I always read the criticism of my budgets. I delivered three budgets. The first two were really well received. The third budget was the most unpopular; it was violently unpopular and it was by far the best budget I ever delivered.
QUEST: A touch of modesty from Lord Norman Lamont. So the question I've been Tweeting is what do you think is the correct, the moral, the right top maximum rate of tax that any government should level @richardquest?
JT has Tweeted saying, "There's no real number. It should be based on what's needed to help the less fortunate." A bit of a wimp cop out there.
Greg Tanner (ph) says 70 percent on the top 1 percent even more in some cases". I'm glad you're not the Chancellor of the Exchequer, 75 percent says democracy watchdog.
Lukas Tiema (ph) at Lukas Saver (ph) says, "As much percentage, basically 10 percent of all income and wealth governments should learn to limit themselves."
At richardquest the question is very simple. What do you think the government should make as its top rate of tax? What is morally, when does it become too much to actually extract anymore from taxpayer's pockets?
George Osborne said, "Tax business" but it didn't stop him stuffing a hefty tax on the airline industry.
Flights out of the UK are going to get more expensive. Our business traveler review in a moment.
(COMMERCIAL BREAK)
QUEST: Now for our business traveler review, it is called "air passenger duty" or "APD". It is the British government's tax on airline tickets. It is hated by the industry. Many in the UK and the big airlines and in Europe say it is actually doing terrible damage to the aviation sector.
It will rise by 8 percent this year, more than double the rate of inflation. But it's not only passengers and travelers that hate it. Countries a long way from the UK, also dislike it and CNN's Ayesha Durgahee explains why this tax is so disliked.
(BEGIN VIDEOTAPE)
AYESHA DURGAHEE, CNN CORRESPONDENT: Passengers departing the UK have to pay a fee. It varies depending on your destination and where you're sitting on the plane. The air passenger duty is divided into four categories or band based on the distance between London and your final stop. The new 8 percent increase comes into force on April 1st.
For example, Band A covers the shortest flight up to 2,000 miles. Economy passengers will be charged 13 pounds or $20, passengers in premium economy, business and first class, pay double.
It goes up from there with the high end in Band D. Passengers flying to destinations that are more than 6,000 miles away will be charged 92 pounds or about $145 for those in economy. Again, double for premium seats.
And remember, this is just for one ticket so a family of four traveling to the Far East or Australia in economy, will have to cough up 368 pounds or about $580 and that's even before you pay the airfare. So a lot of families may be priced out of long haul holidays.
The banding system has been one of the most contemptuous issues of the air passenger duty because of the way the distances are measured from London to the Capital City of the final destination.
For example, the Caribbean is just over 4,000 miles away from London and falls into Band C. Passengers pay more with a flight to the region than they would if they flew to Los Angeles or even Hawaii.
Even though LA is more than 5,000 miles away from London and Hawaii more than 7,000, passengers only pay the lower Band B rates because the Capital of the United States is Washington, D.C. and is closer to London.
The UK government looked into the matter last year and decided the banding system would remain in place at least for now. It maintains that tax provides crucial funding.
The airline industry however, warns that in the long-term, it could be detrimental to the UK economy with travelers turning to cheaper options and airlines pulling root.
Ayesha Durgahee, CNN, London.
(END VIDEOTAPE)
QUEST: The major airlines say APD is destroying jobs and squeezing the life out of the British economy and transport industry. Mike Carrivick is the Chief Executive of BAR, UK represents more than 80 airlines including BA and Virgin Atlantic.
Mike, the airlines have all come out today and said that they hate this, that -- that they knew it was coming but they think it's (inaudible). Is the evidence there that APD has harmed the industry?
CARRIVICK: Yes, it has. Out of the regional airports and we tend to forget these in our (inaudible) as we concentrate on the London air force. Traffic has actually declined quite substantially.
QUEST: They have been banging on about this ...
CARRIVICK: Yes.
QUEST: .for ages.
CARRIVICK: Yes.
QUEST: The government hasn't listened to you.
CARRIVICK: No.
QUEST: The governments ignored you.
CARRIVICK: They have indeed to a large extent. They held off of one price increase but what I think will happen is we'll actually lose a business and then we'll turn around and say, what on earth happened?
QUEST: When you say you'll lose the business, if you're coming to the UK you can't lose the business. You've got to pay it.
CARRIVICK: No because people coming to the UK have the option of not going to the UK and going to the continent. By the time you're tied up with what's called the (inaudible) Visa rather than paying for a UK Visa, all sorts of other things, people decide not to come to the UK at all, that's one aspect.
There's another aspect about where airlines put their planes. If the UK becomes that expensive to have the option of saying, OK, we'll go elsewhere.
QUEST: The amount of money involved here, I was looking at the amount that was raised last year from APD.
CARRIVICK: Yes.
QUEST: It's about 2 billion pounds.
CARRIVICK: Yes.
QUEST: Just over $3 billion, which I worked out at being half the percentage point of the total tax take in the UK. So it's not a huge amount of money but individually on taxes of the tickets, you've got some numbers there, haven't you?
CARRIVICK: I do indeed. Let me quote very briefly if I may.
QUEST: Please.
CARRIVICK: Once you get beyond Europe and the economy we're talking 13 pounds at the moment for Europe .
QUEST: That's about $20.
CARRIVICK: That's about $20; I'll talk in pounds if I may be more comfortable.
QUEST: Yes, please, please.
CARRIVICK: United (inaudible) USA is 65 percent pounds, 81 pounds to Hong Kong, 92 for Singapore and Australia. However, you have the temerity to travel in premium economy to get the extra three inches. Those prices double. I've just come back from Australia and paid 170 pounds in APD.
QUEST: Right, what was your ticket there? What was your ticket? Now see that's the problem, I mean I got (inaudible).
CARRIVICK: Anything more than basic economy...
QUEST: Right, so...
CARRIVICK: . the pay is double.
QUEST: Right so if you -- if you buy -- I'm going to put the other points of view here .
CARRIVICK: Yes.
QUEST: . because you know we're not just sort of balanced this out. If you're paying four or five thousand pounds for a business class ticket to the West coast of Australia -- of the U.S., or to Australia, it's a relatively small amount of money that's involved.
CARRIVICK: Well, first of all, it's a cost to business anyway. Secondly, the Chancellor says this country's open for business but he's putting all these financial hurdles in the way. Thirdly, more and more companies are actually downgrading their travelers to actually go into premium economy. But they're still paying these massive sums.
QUEST: And finally, we do need to talk about -- there is one anomaly in the -- as Ayesha Durgahee' s report made clear. It depends where your capital is.
CARRIVICK: Yes.
QUEST: So it costs more to fly to the Caribbean, which is less than to Hawaii. But hang on, isn't that just one anomaly, the U.S. or West Coast Hawaii? It's an anomaly (inaudible).
CARRIVICK: We're not concentrating on the anomalies. We're concentrating on the sheer cost of APD and the impediment to business.
QUEST: Right. My final point then, how disappointed are you tonight that basically -- I mean I've - I've always said that, you know the -- the aviation industry bleeds and no one listens.
CARRIVICK: Well, we are disappointed because the government thinks we just pass this charge on to the passengers, which we do and they think the market is not disrupted by it. The market is disrupted by it. It has a choice and is beginning to say, we've had enough, we can go elsewhere.
QUEST: Thank you very much, Mike. (Inaudible). Thank you very much (inaudible).
Now, last night when we were talking there was of course, the first reports from the earthquake in Mexico. Jenny Harrison's at the World's Weather Center to bring us up to date.
We -- we had a pretty good idea of the size and the scale but obviously, daylight and 24 hours later we get a much better idea of damage and injuries.
Jenny Harrison: Yes, we do, Rich, but I mean I think the shocking thing -- the amazing thing the -- the -- the great thing with this particular earthquake is that actually there have been no significant reports that even any -- any serious injuries so that is quite remarkable given the magnitude -- the 7.4 magnitude quake (inaudible) course only 20 kms deep.
Let's just remind you, of course where it is and here in Mexico and of course we've got all these big plates -- these tectonic plates which all converge in this area, the North American plate, the Caribbean plate, the Caucus plate, the Pacific plate, which is why this region is one that does see some fairly frequent seismic activity.
Just a reminder, and this is what happened, of course the large yellow bed, that is the 7.4. Since then, the earthquakes have been smaller in magnitude and so they're coming literally as smaller dots on this fugal earth imagery. But all this yellow area, that is where the shaking was certainly at its greatest. That is where most of the damage was done.
This gives you an idea what did indeed happen to many homes and in fact, at least 800 homes, more than that, were damaged in some way. A lot of the structures, of course, in this region, they are not really built to withstand earthquakes certainly of this magnitude.
Now, since then, let me just take you to this particular image, there has been 18 aftershocks since the original 7.4 quakes. The last one was actually just after 5:30 a.m. this morning -- this Wednesday morning local time. They have varied in strengths from 4.3 to 5.3 magnitude, so, as I say, they are certainly a lot weaker than they were.
Generally this sort of strength we saw, we expect to see about 15 annually across the world and we could see a quake of about a 6.4 magnitude but if we do see that, well, again, we have no real way of knowing when that might occur.
But remember, these aftershocks, they can continue for many months ahead. As I say, for now they've between that sort of 4.3 and 5.3 category. We've had just 18 so far, Richard.
QUEST: Jenny, thank you for that. Just quickly update us if you would, please whether your -- whether the weather -- well, you know whether the weather -- whether we like it or not. But the weather -- look, they will work eventually for the next 24 hours in Europe (inaudible).
HARRISON: Yes, I will indeed. Actually you've had some lovely weather there, of course it's sunny in London and there's more to come, Richard, much of central eastern, southern Europe, southern (inaudible) that big day with high pressure.
We've have had some very welcome rain even some snow into the south west, (inaudible) remember a severe draft in some areas there. It is dying off now and this high pressure really is just the most dominant feat to the temperatures across also, well above for the average.
Berlin, for the next few days, I believe we have 18 degrees on Friday. The average is nine so double the average for this time of year. It is reaching 21, 22 in Bucharest; the average here is 13 and if you see no real rain in any of the -- these locations either.
In Kiev, 6 degrees is the average getting to 10 degrees above on Friday under those good sunny skies. What it does mean is the outlook April through June much warmer than average across the central and eastern areas.
Normally that goes hand in hand with some very dry conditions as well. There's not a great deal of rain or snow on the map for the next 48 hours, instead it'll stay fine and dry.
There is one or two airports, which could experience some weather delays. Fog often a problem at this time of year particularly with high pressure. A lot of low (inaudible) just sticking around in the morning hours. It should generally burn off as the day goes on and look at these temperatures, 17 degrees. In fact, in London that is the temperature, which we generally see in May, not this time of year in March.
Looking to maybe going into the U.S., there's been some strong thunder storms the last few hours and tornado watches in place. But clearly, it's about as the temperatures here. There's some rain coming through towards the end of the week but it doesn't really bring the temperatures down.
And again, in terms of temperatures, above average, look at that, 20 degrees above average in Chicago and guess what? It doesn't get much cooler, 16 degrees above average there on Thursday and then mostly sunny skies and the same in Toronto in Canada. So yes, summer's come very early, Richard in the Northern hemisphere. What are you eating? What is that?
QUEST: Oh, gee, I thought -- I thought it was a (inaudible) bar or something.
HARRISON: Really? Oh.
QUEST: I think it's what the Americans would call chips, what you and I would call crisps.
HARRISON: Yes, I -- can I just tell you, I wasn't -- when I first moved over here I waited about half an hour in the supermarket looking for the crisps and (inaudible) then it dawned on me they're called chips, which is why I couldn't see them. You know they -- (inaudible) can I tell you?
QUEST: Got to be -- got to be very careful. You can't empty -- you can't empty your fillings and it's all over, Jenny. Not that you would know anything about that at all.
HARRISON: Really? (Inaudible).
QUEST: Jenny Harrison at the World Weather Center. When we come back in just a moment, why are British companies that make these crisps is trying to turn them into chips and more importantly, what they're doing about the budget. Umm, not bad.
COMMERCIAL BREAK
QUEST: I have broken my own rule, never eat on air. It gets right between the teeth and not the end of that. The UK's crisp manufacturer Tyrell's is one of the companies set to benefit from next month's corporate tax cut. The company is 10 years old, is making a big push into the United States. The Chief Executive of Tyrells Crisps is with me now. It's David Milner.
We -- we will talk about your expanse into the U.S. in just a second and the cutting corporate tax, corporation tax and those sorts of measures, do they help a company like yourself, like your own relatively young, relatively pushing for export markets?
DAVID MILNER, CEO, TYRELLS CRISPS: Well, I think it's very encouraging that the government recognize the importance of small businesses and the role that we can play in the recovery and the economy. So I'm delighted to hear some of those measures.
QUEST: When you set your investment decisions, how aware because you're -- you're 10 years old.
MILNER: Yes.
QUEST: So you -- you basically got started, got a market up and running and then were hit by the recession.
MILNER: Well, I think that's -- that's an important point that we're a small business in very tough economic times doing very well. And I think that's what's interesting about our success is that despite the difficult times and us being a premium product, the business is growing very well.
QUEST: What sorts of things, measures do people like you want? Do you want cuts in corporation tax? Do you want cuts in employment (inaudible) taxes, income tax? What helps you most? And -- and this of course is -- is coming true of any company in any part of the world.
MILNER: Well, we really tend to focus on what we can do about things rather than hoping that somebody will do something for us.
QUEST: Really?
MILNER: So we -- two years ago we decided that we should really push our international business and today a quarter of all our sales are done outside of the UK and that's something that we spotted as an opportunity and we brought the expertise in because the most important thing in any business is having great management. And we've brought some really talented people into the business and they've been able to have the skill set to drive into new economies.
QUEST: OK, talking on that, looking at your -- your -- your product range .
MILNER: Yes.
QUEST: . and you're now moving into the United States.
MILNER: Yes, we launched that nine months ago.
QUEST: Are you barking mad? The last thing the United States needs is another crisp manufacturer.
MILNER: Well, as you say they're chips, not crisps and I think having crisps is probably kind of a novelty for them. It's a very attractive market.
QUEST: Of course, oh yes.
MILNER: It's a completed, stack market in the world.
QUEST: OK, but it's all right, it's attractive, it looks big; it's like a big banana. But how are you going to take it on board when you're competing against the market leaders with their billions of dollars and hundreds of millions in marketing budgets?
MILNER: Well, we're a small business.
QUEST: Yes.
MILNER: But like any business, small or big, we're in a global market and I think the risk is not stepping into the global market. The risk is staying where you are and so we -- we've moved into -- we're the brand leader in France in (inaudible) crisps now.
We have 8 million Euros of sales in France. We're the fastest growing crisp brand in the UK and we hope to be the fastest growing crisp brand in the U.S.
QUEST: What works and what doesn't? And -- and more importantly, I think do you seek regional variation, Sunday best roast chicken, mature -- I would like it to mature cheddar, not any old cheddar.
MILNER: (Inaudible).
QUEST: It's mature cheddar (inaudible).
MILNER: Well, it's true, it has to be the best.
QUEST: And mature too, (inaudible) cranberry, (inaudible). Which ones work best?
MILNER: Well, the best seller in any crisp brand is always salted.
QUEST: That's basic, that's boring. (Inaudible), which of the (inaudible), which one's best?
MILNER: Well, what happens is (inaudible) low sausage. Because we're (inaudible) if you have a (inaudible) low sausage here but we're -- we're based on (Tyrrell's court farm) in (inaudible) and (inaudible) is just up the road.
QUEST: Right.
MILNER: And (inaudible) sausage is one of our best sellers and they love that sort of thing in America because it's something different, they've got plenty of chips, as you say but they haven't got Tyrell's crisps.
QUEST: Yes, we thank you for that. Good luck in the United States. What is going to be your -- your barometer of success there besides profits? How long are you going to give it?
MILNER: Well, it's going very well now. If it continues to grow at the rate it's at, we're doing 8 million in sales in our first year, if it grows at that rate, we'll be very happy.
QUEST: Thank you for coming in and talking with us.
MILNER: Thank you, Richard.
QUEST: Now just a few minutes before the closing belt on Wall Street and the DOW is down 26 points, 13, 014 -- 13, 143, the latest report on new home sales jumping with enthusiasm about the economy.
I asked you what you thought was the right rate of -- top rate of income tax. Graham says 35 percent sounds right. Varity says -- she comes up with 40 percent and Clayg777G says a flat rate of 12.5 percent. The top rate of tax, in that, I'll have a quick (inaudible), for a profitable moment.
COMMERCIAL BREAK
QUEST: Tonight's profitable moment, the British (inaudible) Coalition took a thumping big risk today. Although the economic numbers haven't changed, the government is cutting the 50 peak rate of income tax at a time when Britain is still suffering from austerity.
Even though the tax authorities confirm the 50 percent rate wasn't bringing anything like the original forecast, it is extremely politically risky. No G20 country has a rate as high as Britain's and psychologically it sends that message, everyone's in this together. Now it seems like the wealthy are being lifted into the lifeboats.
What is surprising is that the government delayed the cut until this time next year. Think about it, just think about it. If a tax is useless, why wait? Why give the wealthy time to postpone bonuses until they pay less next year? It's politics pure and simple. The tax was useless, it had to go. Good (inaudible) people will be saying tonight perhaps in Britain, not just yet.
And so that is Quest Means Business for tonight. I'm Richard Quest in London. With the closing bell just ahead, whatever you're up to in the hours ahead I do hope it's profitable. The news is next.
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