Aurelia Butler

Stung by criticism of his Spring Statement, Rishi Sunak has engaged in some “serious redistribution from rich to poor” in his latest package of measures to address the cost of living crisis, analysts say — imperilling his ability to brand himself a low-tax chancellor. Here, the Financial Times examines how the new support will help different households. How far will this fill the hole in household finances?The £15bn package — a near-doubling of energy support announced earlier in the year — will undoubtedly make a big difference. Sunak said almost all the 8mn households on means-tested benefits would receive £1,200 — a £650 one-off payment, delivered in two instalments, in addition to the £400 discount on energy bills to be given to all households and the £150 council tax rebate many have already been given.This means help for the poorest goes a lot further than many had expected in offsetting an expected increase of more than £1,500 in the average household energy bill over the year to October, and broader price rises.Torsten Bell, director of the Resolution Foundation think-tank, said the package was “big and very welcome”, while Clare Moriarty, at the charity Citizens Advice, said it was a “life raft for the millions of people struggling to keep their heads above water”.Helen Barnard, research and policy director at the charity Pro Bono Economics, said it was also well-structured, with the first one-off payment set to land in people’s bank accounts in July, and extra support being delivered automatically to pensioners and disabled people who might otherwise have fallen through the cracks. The chancellor made it clear this year’s one-off support would be on top of next year’s uprating of benefits — when they will finally catch up with inflation. The Treasury also confirmed it would be tax free and would not count towards the cap on the total amount of benefits households can receive.How targeted are the measures?Overall, the measures announced on Thursday represent a big rebalancing of help towards low-income families. Sunak was stung by criticism that his Spring Statement in March, which targeted help at people in work, neglected the poorest in society.The Resolution Foundation said two-thirds of the fresh cash would go to the poorest half of households, while the overall effect of tax changes and support coming into effect this year would be “much more progressive”, with an average gain of £1,195 for the poorest fifth of households, and an average loss of £456 for the top fifth. “Mr Sunak is engaging in some serious redistribution from rich to poor — albeit against a backdrop of rising inequality,” said Paul Johnson, director of the Institute for Fiscal Studies think-tank. After factoring in tax changes, and all government support, a worker on median earnings of around £29,000 could now expect their living standards to be broadly unchanged this year, the IFS said, while a full-time minimum wage worker would be around £340 better off in real terms. However, the decision to channel support through flat rate payments, rather than a benefits uprating, will help some households more than others. Some on middle incomes, who just qualify for benefits, will receive the full £650 while others in very similar circumstances will not, the IFS noted. Single adults will also receive much more, and families much less, than they would have done if benefits had been uprated in April instead.The doubling of the discount on energy bills, which is now a grant rather than a loan, means Sunak is handing significant amounts to some households who do not need it, in order to reach those on middle incomes who are in a more precarious position. The £300 payment to pensioners will also benefit around 3.7mn households in the top half of the income distribution. Does this settle cost of living concerns?Charities said that while the measures will reduce the immediate crunch on household finances, their one-off nature does little to address the holes in the UK’s welfare safety net for the longer term. Barnard said that whatever the political calculations behind Sunak’s change of tack, “real people” would get “real help”. Once the immediate crisis passed, though, there was a need “to strengthen the underlying system . . . so that fewer people are on the verge of a crisis the whole time”. Why did Sunak fund the package through a windfall tax?Sunak and prime minister Boris Johnson concluded that a dramatic U-turn on a windfall tax was politically inevitable, according to senior Tory officials. Private polling by Downing Street found it was hugely popular with voters.“Tory governments don’t do unpredictable tax raids like this,” said one ally of Johnson. “We set the bar really high on doing it — there was lots of internal opposition.” Many cabinet ministers wanted tax cuts, not rises.Johnson was reluctant to proceed with the windfall tax U-turn if it would only raise £2bn, as Labour proposed. Sunak said he could raise £5bn from oil and gas companies this year, with perhaps £3-4bn more from electricity companies.“That was a game changer,” the Johnson ally said. “If you’re going to take the pain, the gain has to be worth it.” Sunak also argued it was fiscally right to partly fund new spending, rather than fuelling inflation by borrowing more.The prime minister was also dismayed by comments by Bernard Looney, BP chief executive, that his company’s investment plans would not be affected by a windfall tax, according to Johnson’s allies.Sunak will now be under huge pressure to start cutting taxes in his autumn Budget. “One day the low tax chancellor will actually start cutting taxes rather than putting them up,” said one Tory official. More

WASHINGTON (Reuters) – The Biden administration has not invited the governments of Venezuela and Nicaragua to the U.S.-hosted Summit of the Americas next month, a State Department official said on Thursday, amid the threat of an embarrassing boycott by some regional leaders.Kevin O’Reilly (NASDAQ:ORLY), the U.S. summit coordinator, said it would be up to the White House to determine whether to invite Cuba to the June 6-10 meeting in Los Angeles but that Cuban civil society activists had been asked to attend.Cuban President Miguel Diaz-Canel said on Twitter (NYSE:TWTR) on Wednesday that “under no circumstances” would he go to the summit, accusing Washington of applying “brutal pressure” to ensure that it would not be inclusive.Biden administration officials have scrambled to avoid a boycott threatened by some leaders, including Mexican President Andres Manuel Lopez Obrador, if Cuba, Venezuela and Nicaragua are excluded.Lopez Obrador said on Thursday he would probably decide on Friday whether he will attend.Possible snubs have raised the risk of unraveling a summit that U.S. President Joe Biden’s aides hoped would be a chance to reassert the United States’ influence in a region it is often accused of neglecting.Seeking a way to mollify Lopez Obrador, Washington is considering inviting a lower-level Cuban representative as an observer, according to people familiar with the matter.Asked by a Senate subcommittee whether the United States had invited anyone from the Cuban government, O’Reilly said: “That will be a decision for the White House.”A senior State Department official said in April that Cuba, Venezuela and Nicaragua were unlikely to be allowed to attend.Asked whether those countries – Washington’s main ideological rivals in the region – would be invited, White House spokesperson Karine Jean-Pierre said “we’re still considering additional invites.”Pressed about whether any representative of Venezuelan President Nicolas Maduro’s government was being invited, O’Reilly said: “Absolutely not. We don’t recognize them as a sovereign government.”The United States and a number of other countries have recognized opposition leader Juan Guaido as Venezuela’s rightful president and shunned Maduro, a Socialist, after accusing him of rigging his 2018 re-election.O’Reilly said it would be a “White House call” whether to invite Guaido in Maduro’s place.Asked whether Nicaraguan President Daniel Ortega had been invited, O’Reilly answered with a terse “No.” Ortega, a former Marxist guerrilla who won a fourth term in November after jailing rivals, said last week he was “not interested” in attending. More

(Reuters) -Former U.S. President Donald Trump must testify under oath in the New York Attorney General’s civil investigation into his business practices, an intermediate state appeals court ruled on Thursday.A four-judge panel unanimously upheld a trial court decision from February enforcing subpoenas for Trump and his two eldest children, Donald Trump Jr. and Ivanka Trump, to provide deposition testimony in Attorney General Letitia James’ investigation.”Once again, the courts have ruled that Donald Trump must comply with our lawful investigation into his financial dealings,” James said in a statement. “We will continue to follow the facts of this case and ensure that no one can evade the law.”Alan Futerfas, a lawyer for Trump, did not immediately respond to a request for comment.In January, James said her nearly three-year investigation into the Trump Organization had uncovered significant evidence of possible fraud https://www.reuters.com/world/us/ny-attorney-general-details-possible-fraud-donald-trumps-family-business-2022-01-19. She described what she called misleading statements about the values of the Trump brand and six properties, saying the company may have inflated real estate values to obtain bank loans and reduced them to lower tax bills.Trump issued a statement earlier this year calling the accusations false and accusing James of a political agenda in targeting him and his family.Trump and his children have said testifying would violate their constitutional rights because their words could be used in a related criminal probe led by Manhattan District Attorney Alvin Bragg, which James joined last May.Trump, a Republican, has also accused James of selectively prosecuting him because he is a political enemy. James and Bragg are Democrats.The appeals court rejected those arguments, saying James reviewed “significant volumes of evidence” before issuing the subpoenas.”Appellants have not identified any similarly implicated corporation that was not investigated or any executives of such a corporation who were not deposed,” the court said of the Trumps. “Therefore, appellants have failed to demonstrate that they were treated differently from any similarly situated persons.” More

BENGALURU (Reuters) – New Zealand’s house prices are forecast to sink 9.0% this year as aggressive interest rate hikes take some heat out of the blazing housing market amid a worsening cost of living crisis, keeping potential buyers on the sidelines, a Reuters poll found.House prices have nearly doubled in the last seven years as investors have cashed in on near-zero interest rates and access to cheap loans. That has led to increased homelessness and fuelled inequality, making New Zealand’s the most unaffordable housing market among developed nations.Although house prices have already started to come off their highs, they are still very far from returning to their pre-pandemic levels.The 9% decline predicted for this year in the latest Reuters poll of 11 property market analysts taken May 11-26 is much larger than the 0.8% fall predicted in a February poll. House prices are forecast to decline a further 2.0% in 2023.”The cost of housing in New Zealand is a national embarrassment. The reasons are deep-seated. Ultimately it comes down to the fact that new housing supply just hasn’t been responsive enough to periods of rising housing demand,” said Jeremy Couchman, senior economist at Kiwibank.Couchman forecasts house prices will fall a little more than 10% this year in what he calls a “short and sharp” correction.While such an expected fall was a long time coming, the drop may be too small to offer much reprieve for first home buyers after prices soared over 250%, almost four times the average increase across OECD countries.The Reserve Bank of New Zealand, which considers house prices as one factor in its policy deliberations, has already hiked interest rates by a total of 175 basis points since October last year and signalled on Wednesday a lot more tightening was to come.It expects home prices to drop by around 20% or more before they reach sustainable levels.ANZ, Macquarie Bank, Infometrics and Real Estate Institute of New Zealand (REINZ) said average house prices would have to fall between 30-50% – roughly the amount they fell after the oil shock of 1973 – to make housing affordable.While lower house prices would help the government’s affordability objectives, it would be a bitter pill to swallow for very recent homebuyers, watching their capital decline and facing higher repayments as interest rates rise.”Increasing interest rates will hinder the ability to service mortgages…lending restrictions, including minimum deposit, will hurt first-time homebuyers who don’t have support from the bank of mum and dad to raise the initial deposit,” said Ankur Dakwale, research analyst at Bayleys Realty Group.When asked to describe the level of New Zealand house prices on a scale of 1 to 10, from extremely cheap to extremely expensive, the median response was 9. For Auckland, it was 10.Still, not everyone expected prices to fall this year. REINZ and Infometrics forecast house prices to rise 5.0% and 4.1% this year, respectively.”Sentiment from buyers has changed from a fear of missing out to a fear of overpaying and this all has a suppressing effect on house price increases,” said David Shaw, property market analyst at REINZ.”(But) even a drastic slowdown in house price increases from the past year will still leave moderate increases in place.” (For other stories from the Reuters quarterly housing market polls:) More

WASHINGTON (Reuters) -The White House said on Thursday it expects minimal impact on the U.S. and global economy from a potential Russia debt default as Washington decided to not extend a waiver that enabled Russia to pay U.S. bondholders.”We expect the impact on the U.S. and the global economy to be minimal, given Russia has already been isolated financially,” White House spokesperson Karine Jean-Pierre said in a press briefing on Thursday.”That being said, Treasury Department continues to monitor and have conversations with global financial community,” she said.The United States pushed Russia closer to the brink of a historic debt default on Wednesday by not extending its license to pay bondholders, as Washington ramps up pressure following Russia’s actions in Ukraine.The U.S. Treasury Department said on its website late on Tuesday it would let lapse a license which expired at 12:01 a.m. ET (0401 GMT) on Wednesday and allowed Russia to make interest and maturity payments on its sovereign debt to U.S. persons.That waiver has allowed Russia to keep up government debt payments, but its expiry now appears to make a default inevitable on at least some its $40 billion of international bonds – Russia’s first major external one for more than a century.Western sanctions imposed after the Kremlin’s Feb. 24 invasion of Ukraine, and countermeasures from Moscow, have complicated the movement of money across borders, yet Russia has made a conscious effort to keep paying bondholders. More