JEFF RANDALL: Looking back on 2012, two events stand out – the Olympics and the Queen’s Diamond Jubilee celebration brought Britons together in a summer of rare national celebration but it wasn’t all gold medals and party hats. The Jimmy Savile scandal blighted the BBC and the Leveson Inquiry highlighted a moral bankruptcy in parts of the British press. Here in the City the banks were caught cheating their customers, fiddling interest rates and laundering drugs cash and some multi nationals were exposed as serial tax dodgers. Overseas, the Eurozone crisis, the race for the White House and the change of leadership in Beijing all added up to a truly remarkable news year. Putting the Mac into Big Mac, Jill McDonald is UK Managing Director of the world’s biggest hamburger chain, a business that many thought was recession proof but only last month McDonald’s revealed that global sales had fallen for the first time in almost ten years, quite a challenge for the woman in charge. Drinking to success but not excess, Paul Walsh is one of the FTSE 100’s most enduring chief executives. As the boss of Diageo, the company that owns Guinness, Smirnoff and Johnnie Walker, he doesn’t dodge the debate over Britain’s binge drinking culture and what to do about cut price booze. And most definitely upwardly mobile, from selling phones out of his flat in 1989 to a knighthood at Buckingham Palace earlier this month, arise Sir Charles Dunstone, Chairman of Carphone Warehouse and TalkTalk Group. My guests are at the top of their trade and we are at the top of the Gherkin, home of Jeff Randall Live for my Christmas Dinner.  So guys, an extraordinary news year this year, the good news undoubtedly was the Olympics and of course the Jubilee, Jill you were heavily involved in the Olympics, do you think it has galvanised the country on a permanent basis or was it just a passing ray of sunshine?   

JILL McDONALD: Well in quarter three there was definitely a boost to the economy and I think we have yet to see whether that’s going to play out through the rest of the year but I think what it did do was give the country a bit of confidence, a bit of a much needed boost. It was a very different atmosphere and vibe being in London.   

PAUL WALSH: You know, there were many people out there who were saying that the UK couldn’t do this, well we did it and not only did we do it, we did it magnificently well.   

CHARLES DUNSTONE: I can only echo what Paul said, I think the most lasting legacy of the Olympics is the impression people from overseas have about the UK and we’re also introspective and gloomy as British people that it’s passed now but I’m really struck when I travel how people are still talking about it and how their impression of Britain has changed.   

JEFF RANDALL: I know you guys are going to raise this, so I’m going to raise it first to take it on the chin. One of the biggest events of the year has to be the Leveson Inquiry and what it tells us about the British press, the British media, what it tells us about ourselves but as business people who are very much the centre of press attention, what did you take from all that? Do you think we got it right, washing our dirty linen in public like that, Charles?   

CHARLES DUNSTONE: I think the media is obsessed with the media, the rest of us don’t worry about it as much as …   

JEFF RANDALL: I think we should point out you used to be on the board of the Daily Mail.   

CHARLES DUNSTONE: I was, but as I said the media is obsessed with the media, so it got the most enormous amount of coverage.   

JEFF RANDALL: It was pretty ugly wasn’t it? I’m not talking about the coverage – the events that were covered were ugly.   

CHARLES DUNSTONE: Yes, they were. But it was like a cleansing that probably had to occur.   

PAUL WALSH: It was cathartic. I think it had to happen but I hope we don’t overreact. It was terrible, the events were terrible but I do believe in the freedom of the press and I think if this swings into any form of over-regulation that is not good longer term.   

JEFF RANDALL: So you wouldn’t approve of statutory regulation? You still believe that the press can handle it themselves?   

PAUL WALSH: I do but I think there needs to be some stiffness behind that, there needs to be some real resolve but yes, I think correctly structured, self-regulation is the best solution.   

JEFF RANDALL: What do you think, Jill?   

JILL McDONALD: I don’t think most people do want to see a state controlled press and media in any way but I think the interest that was generated, partly because the acts were so terrible that led up to it, but I think consumers and the public are more interested in terms of having businesses behave well and the media is a big business.   

CHARLES DUNSTONE: There is an issue there, actually, that the Leveson Inquiry in a way is shutting the stable door after the horse has bolted in that it really hasn’t done anything to confront all the media that goes on in new media, so Twitter, Facebook, it has no way of how do you address these issues, how do you address the fact that people put things on websites that are overseas so you can say there is an injunction saying you can’t find out about this person, you can’t find out about … Of course you can, you can just go to a website in another country. And so we run the risk of hamstringing the traditional press but all we’re going to do is drive the salaciousness onto people that host things overseas and we won’t have solved anything.   

JEFF RANDALL: One of the big stories this year that has almost developed a life of its own is corporation tax. We know why, the Chancellor needs every penny he can get. Just off the top of your head, what do you think about that debate, has this been a good thing?   

JILL McDONALD: Customers, consumers, want businesses to be doing the right thing, paying their fair share of tax. I think it is politicians who are creating the laws who need to address and look at those but I do think that it’s in danger of spinning a little bit out of control because you don’t want the conversation to be so negative about business and all businesses being tarred with the brush of not doing the right thing because, as we know, business is ultimately what’s important to help Britain grow again.   

PAUL WALSH: I agree, we run the risk that this debate on tax can almost become Orwellian, so it is no tax – bad, some tax – good. Well it’s far more complex than that, far more complex and …   

JEFF RANDALL: In particular for an international company like yours.   

PAUL WALSH: Well like ourselves, we’re a global player, we only make a finite amount of profit but often our product and its onward packaging and its onward logistics can touch a myriad of tax jurisdictions so you have to determine how that is apportioned.   

JEFF RANDALL: You can’t pay tax everywhere.   

PAUL WALSH: You can’t pay it everywhere. And equally our tax codes in the UK actually reward companies for investment so you could quite legitimately have somebody who is investing in the UK, creating jobs, building a business, who are not paying tax, that’s what the tax code allows. Just for the record, we pay Corporation Tax, we collect on behalf of the government £1.2 billion a year in duty and VAT, we pay NI of over 30 million a year and pension fund payments of £200 million a year and so on. I’m not coming at this from a self-serving angle.   

JEFF RANDALL: As you would expect, Paul, I bothered to research your tax position before we came on air and I was shocked to learn that last year you paid more than a billion in Corporation Tax which represented 33% of last year’s profits, I mean that’s not normal is it? That had to be an anomaly.   

PAUL WALSH: Yes, it was probably some catch up but it is complex.                                                                                   

JEFF RANDALL: But going forwards, I read in your report that you expect to pay Corporation Tax of about 18%.   Corporation Tax in this country next year is going to be 23% so there’s a gap, why would that be?   

PAUL WALSH: Well first of all bear in mind that only 7% of our sales are in the UK. Equally there are tax jurisdictions such as Ireland where Corporation Tax is 12% so you get a blend and that’s what that figure is.   

JEFF RANDALL: What about you, Charles? Your tax, the last time I looked at it, I think was about 22 million quid.   

CHARLES DUNSTONE: Yes, we’re a British based business, we pay the tax that’s due. I think part of the issue that I’ve watched over the last few weeks sort of reflects the slightly schizophrenic view that people in the UK have got with Europe because I think for a lot of international brands, they think they’re doing business in Europe and we represent it to them that Europe is a single market, please come and do business here and so they base themselves in one jurisdiction or another jurisdiction and then say, actually we don’t like that, we want to make sure that what you do here is particular to Britain and the fact that you’ve decided to make your headquarters in Dublin and not in London, that’s how the single market works.   

JEFF RANDALL: But there are multinationals operating in Britain, making very, very big profits, huge sales, paying next to nothing – that doesn’t feel right to the man on the street who’s buying the product and feels under the cosh himself for taxes.   

JILL McDONALD: There’s an expectation for customers, particularly in an economy of austerity that businesses pay their fair share. One man’s efficient tax planning though is another’s tax avoidance so the law does need to be looked at but in McDonald’s for example we pay what we would consider to be our fair share of Corporation Tax, we paid £42 million last year. So there is a sort of lens of fairness, I think, that stakeholders are requiring.   

PAUL WALSH: Every sovereign nation creates a tax code and in the UK our government has the opportunity to change that tax code through legislation every year so if something is happening that they don’t like, change it. Companies like ours and I’m sure the others round the table, if we have a tax structure that we’re interested in developing we actually go along to the revenue and share it with them and they’ll say yes, no, maybe but if they don’t like it they can close or change the regulations accordingly but I think we run the risk of getting into this debate of if you pay tax, everything’s fine. What about the company that’s investing billions and will get appropriate tax losses, capital allowances, they’re creating a lot of jobs so be very careful that we don’t suddenly get so simplified in our approach that it conspires against what this nation is trying to do – create jobs.    

CHARLES DUNSTONE: But I think also you have to distinguish in this debate between people who are paying different amounts of tax around Europe and people that are basing themselves in the Cayman Islands or Bermuda or somewhere. It feels to me that the EU issue is a muddle of the EU’s making and we’re a part of that and it is actually very confusing for companies and they are operating in the EU and they are going to try and be as efficient as they can. I think someone who has deliberately put themselves in some kind of offshore jurisdiction where they’re piling up the cash, I think they have more questions to answer because that is actively trying to deprive the whole region of its due tax.   

JEFF RANDALL: Yes, Paul, you mentioned jobs and I think you’re absolutely right, for most people the definition of the recession is when the number of jobs is diminishing, shrinking. Tell me about what’s going on in this employment market in Britain right now because the economists are telling us that the recession, it’s all catastrophic, we’re going to have four million unemployed and yet since July employment has gone up, the claimant count is diminishing, what’s happening? Jill, you’re a huge employer.   

JILL McDONALD: Yes, we employ over 90,000 people in this country alone and I think the latest statistics demonstrate that it is actually the private sector who is growing jobs and recruiting more people so it is still incredibly hard for a number of young people to get their first job.   

PAUL WALSH: I do think that we need to treat the sort of 18-28 year old cohort, the unemployment levels are high and as a nation we’ve got to tackle that systematically which probably means we’ve got to get our thinking right for the current 14 year olds who are going to be coming in. I very much subscribe to some kind of nationally driven skills based training analogous of the old service period, national service – I’m not saying anything like that but something where you actually come out and you get a rigorous training and it’s obligatory, it’s obligatory and if you don’t want to do that, do you know what, you don’t get those benefits.   

JEFF RANDALL: What about the balance in this country between how we try to protect consumers and how we allow them to do what many would simply describe as act as free people in an open society and I’m thinking in particular – you have been involved in the obesity debate, Paul, binge drinking debate, are we getting this right?   

JILL McDONALD: As a business person, I’m a firm believer in self-regulation, with that comes responsibility for business. An issue like obesity is a massively complicated issue and I think for example taxation, as a way of addressing the issue, it would be way too simplistic, no evidence of it working anywhere but to move forward on some of these debates, you need multi interventions across a number of different areas. It’s so complicated, just single, interventions aren’t effective.   

JEFF RANDALL: And yes, Paul, when we see these videos of kids smashed out of their heads on a Friday night, throwing bricks through windows, it’s very easy to jump to the conclusion that we need to do something about boozing in this country and you are the country’s biggest booze supplier, what do you say?   

PAUL WALSH: First of all we are trying to do something, we are trying to educate and I think alongside …   

JEFF RANDALL: Really? I mean are you really?   

PAUL WALSH: Oh I think, Jeff, if you look at our history on advertising, you look at some of the work we’ve done around responsibility awareness, yes we are and I think it’s having an impact.   

JEFF RANDALL: What about minimum pricing, is there a role for that?   

PAUL WALSH: No, it’s nonsense.   

JEFF RANDALL: Why?   

PAUL WALSH: It’s never been proven to work, at the time when you least want people to consume alcohol is when they are the most insensitive to price so no, that’s not going to work. We should have targeted interventions, pricing is not the mechanism.   

JEFF RANDALL: What about the other big story of the year, the eurozone? You operate all over Europe, what’s your take? Are you internally taking precautions about a country dropping out of the euro? Are you sweeping your cash?   

CHARLES DUNSTONE: No, I wish there was more cash to sweep!    

JEFF RANDALL: I wasn’t talking about your personal cash!   

CHARLES DUNSTONE: I don't know, I think it is about a political union and they know it’s going to be complicated, they know it’s going to be difficult but in the end the euro will prevail and the eurozone will ensure that the euro prevails.    

JEFF RANDALL: Paul, your business, the fabric of your business is interwoven with Europe, what do you think?   

PAUL WALSH: I think first of all you, Jeff, and your fellow journalists will have another fertile year on the euro. This crisis is not going away. Do I believe in time the euro will prevail? I do.   

JEFF RANDALL: And you do believe it will prevail intact, i.e. all members current will be all members future?   

PAUL WALSH: I believe that in five years’ time it will be a different Eurozone with maybe a different complexion and configuration to what we see today.   

JEFF RANDALL: And Jill, when your masters in Chicago ring up and say hey Jill, what the hell is going on in the Eurozone, what do you say?   

JEFF RANDALL: And Jill, when your masters in Chicago ring up and say: hey. Jill, what the hell is going on in the Eurozone, what do you say?    

JILL McDONALD: I say thank goodness I’m based in the UK and we’re not in the Eurozone, hurrah! So no, I would agree that the consequences of the euro failing are so deeply unpalatable that I would not be surprised if a Greece or one of the markets did drop out.   

JEFF RANDALL: We move on. Tell me about the year ahead, 2013, reasons to be cheerful.   

JILL McDONALD: Reasons to be cheerful, okay. Quarter three 2012 as we’ve talked about right at the beginning, we saw the Olympics, it was fantastic, we got an economic boost as a result of it, I reckon that is going to carry Andy Murray through to Wimbledon success and England through to Ashes victory in quarter three 2013.   

JEFF RANDALL: Crikey, we’re now not just on to a general overview but some severe and very accurate or very precise predictions.   

JILL McDONALD: You did ask for reasons to be cheerful.   

JEFF RANDALL:  Good, okay. What about you, Paul? Just tell me before you give your predictions how you see the year generally in terms of business?   

PAUL WALSH: I think the US will continue on its recovery, I actually think the US is building …   

JEFF RANDALL: So you’re not bothered about the fiscal cliff, you think that will be settled?   

PAUL WALSH: It will be sorted and I think the US will continue on its trajectory. I think the emerging markets, whilst they may have taken a bit of a pause, they’ve still got very attractive growth rates and I think within Europe it’s going to be much the same, they will be very polarised and I think southern Europe is going to continue to struggle but I do believe that the UK is stabilising and could see modest growth next year.   

JEFF RANDALL: Charles, the year ahead first before your sagacious predictions.   

CHARLES DUNSTONE: I’m cautiously optimistic. I think that the UK economy and the people within the UK economy have proven themselves to be adaptable. We’re in control of our own fiscal future and I clearly listen and read the media and everyone is telling the government what to do and it’s hard for the government to do everything and I think what you’re seeing with the employment figures is it’s up to us in business and the rest of the economy to get on with it. The best thing the government can do for us is to have a stable environment so we understand and are confident on interest rates and that sort of thing and then we get on.   

JEFF RANDALL: Two things for 2013 and this is a traditional part of this dinner now, what we need is one very, very firm prediction and one item I would broadly describe as your wish list, something you would like to have. Charles?   

CHARLES DUNSTONE: I think that energy prices are going to start to come down, not petrol prices but prices for electricity and gas, because I think the effect of shale gas in the US is so dramatic that the inflation that’s been coming out of Russia and places is unsustainable and if that can happen it would be fantastic for the economy and for consumers. In terms of my more general predictions, it’s a bit more gloomy and I say this with my fellow retailers in mind but I am very nervous for the high street. I think beyond the pressure that retailers have felt due to the economic cycle, I think that changing customer behaviour of buying more and more products online is going to affect more and more retailers and yes, I think we’ll see more bankruptcies and more empty stores.    

JEFF RANDALL: So why don’t we just have Carphone Warehouse online?   

CHARLES DUNSTONE: Well, the thing with Carphone Warehouse is we always say we actually sell advice and people pay for our advice by buying the phone from us because we advise you what to buy, we set up your email, your contacts, so people still want to have an interaction with us and that’s quite unique in the high street.   

PAUL WALSH: The UK will move into quarter on quarter GDP improvement, GDP improvement next year every quarter will be better than the previous. I’m not saying by how much but it will be a trajectory.   

JEFF RANDALL: So a nice steady growing economy.   

PAUL WALSH: Yes. My wish is that Scotch whiskey exports top £150 a second. They currently stand at £135 a second but I’m optimistic that next year we’ll get it to £150 a second.   

JEFF RANDALL: Jill, one firm prediction and one wish list.   

JILL McDONALD: My firm prediction and I can say with great certainty that there’ll be more uncertainty next year. Economists will probably continue to get it wrong, hopefully they’ll get it wrong in a positive way i.e. we’ll see more growth rather than less growth but I do think it’s going to be a little bit groundhog day for consumers, they are going to have less disposable income. When we came out of recession and then went back into recession, I think from a consumer perspective it kind of felt bad right the way through that time so I think there is going to be continuing uncertainty. My wish would be that just the pinch is relieved a little bit from consumers that their disposable income does grow. I think if customers could just see and feel a few more pennies in their pockets that would give more confidence which would be better for business.  

JEFF RANDALL: Okay, for what it’s worth, because I’m merely the host, my prediction is that inflation in twelve months’ time will be higher than it is today,   CPI today is 2.7. I think that for two reasons: one, I see a lot of food price inflation coming down the pipeline and I do believe that those at the very top of this country have finally lost the will to battle inflation and what they are trying to embrace and perhaps with the new Governor of the Bank of England is a little bit of inflation to erode our debts in a painless way. My wish is the same wish that I had in 2010 and 2011, is that we get our boys and girls out of Afghanistan as soon as possible.  Guys, I think this has been rather more positive, rather more optimistic than I thought and I’m delighted because I’m too rather more optimistic. I look at those OBR job numbers and I want to believe them and I think next year will be better than this so why don’t we raise our glasses in a little toast to prosperity and health for all in 2013. Lovely to see you at the Christmas dinner, thank you very much indeed. Cheers.    

ALL: Cheers.