Aurelia Butler

Announcing a half-yearly budget update in parliament, Sunak said he was increasing the threshold at which workers start to pay national insurance, or social security, contributions by 3,000 pounds ($3,958.50) this year.”That’s a 6 billion pound personal tax cut for 30 million people across the United Kingdom,” he said, adding the cut was equivalent to more than 330 pounds a year per worker, making it the largest single personal tax cut in a decade.But Sunak stuck to his plan to increase national insurance contributions from next month, part of his plan to fund more spending on health and social care after the COVID-19 pandemic.In his Spring Statement, he announced a reduction of one pence in the pound in the basic rate of income tax in 2024 while a cut in fuel duty of 5 pence per litre would start later on Wednesday and last until March next year.Sunak and Prime Minister Boris Johnson have been under pressure, including from lawmakers within their Conservative Party, to do more to help households as they struggle with the rising cost of living.Sunak announced new forecasts showing the British economy will grow more slowly this year than previously predicted, hit by uncertainty caused by Russia’s invasion of Ukraine, and that inflation will be much higher.The forecasts drawn up by the Office for Budget Responsibility (OBR) showed the economy was likely to grow by 3.8% in 2022, a sharp slowdown from a forecast of 6.0% made in October.Inflation, as measured by the consumer price index, is now seen at 7.4% in 2022, compared with October’s forecast of 4.0%.Earlier, data showed Britain’s consumer price inflation hit a 30-year high of 6.2% last month, driven by soaring costs for energy and food, which poorer households especially may find hard to cut back on.The OBR forecast that gross domestic product would grow by 1.8%, 2.1% and 1.8% in 2023, 2024 and 2025. In October, the OBR had forecast growth of 2.1%, 1.3% and 1.6% over the next three years. ($1 = 0.7579 pounds) More

UK inflation rose to a 30-year high last month, putting fresh pressure on chancellor Rishi Sunak to announce greater support for households when he delivers his Spring Statement on Wednesday.The Office for National Statistics said the consumer price index rose at an annual rate of 6.2 per cent in February, up from 5.5 per cent in January and the highest rate since 1992. Economists in a Reuters poll had predicted 5.9 per cent. The recent surge has been driven by soaring global prices for energy, petrol, food and durable goods: the ONS said the biggest factors driving the February increase came from transport, furniture and household goods. Prices for clothing rose especially rapidly in February, but food inflation also picked up to an annual rate of 5.1 per centYael Selfin, economist at KPMG, said the figures confirmed a “worsening squeeze on consumer incomes” that could force the chancellor to do more to shield those most affected, and add to pressure on the Bank of England to raise interest rates.Kitty Ussher, chief economist at the Institute of Directors, said the data showed rising inflation was now “hard-wired into routine business decisions”, adding to uncertainties and leaving households reliant on benefits with their incomes lagging far behind prices.February’s CPI reading is higher than analysts had expected but inflation is set to rise even more sharply in April, when regulated energy prices will jump. The Bank of England warned last week that CPI would rise above 8 per cent by June and could reach double digits towards the end of the year if Russia’s invasion of Ukraine kept global energy prices at elevated levels.

Jack Leslie, senior economist at the Resolution Foundation, said February’s figures were “a foretaste of the huge income squeeze coming”, which would be a “complete disaster for living standards”.Sunak will promise to “stand by” families hit by rising living costs when he publishes economic forecasts alongside today’s Spring Statement, with measures likely to include a cut in fuel duty.But he is unlikely to use all the headroom afforded him by a recent recovery in the public finances, because the Treasury is nervous that higher inflation and interest rates will raise the cost of servicing government debt more than it will boost tax revenues in the coming year. About £500bn of debt payments are linked to the legacy RPI measure of inflation, which rose to 8.2 per cent in February. More

Governor Lee Ju-yeol said in a speech wrapping up his eight-year term at the Bank of Korea that as high inflation was expected to continue “for a considerable period” and there was a need to reduce financial imbalances, “it is necessary to continue reducing the degree of monetary policy easing”.Lee, who has presided over 76 rate decision meetings in total, ends his term on March 31 and will pass on his duties to Rhee Chang-yong, a veteran technocrat at the International Monetary Fund.The BOK held its base rate unchanged at 1.25% at its February meeting, after back-to-back hikes on surging coronavirus cases and escalating tensions in Ukraine.Even then, Lee said expectations of more rate hikes by the bank to about 1.75% or 2.00% were “reasonable”, adding that there was a stronger need to respond with policy actions to stabilise prices.In February, the bank sharply raised its inflation forecasts to 3.1% from 2.0% for this year, while keeping its growth forecast unchanged at 3.0%.Lee, however, said on Wednesday the BOK’s February forecast did not include the Russian invasion of Ukraine and signalled a revision may be made later.”Russia’s invasion of Ukraine came soon after (our last meeting) and the economic conditions have worsened since then,” Lee told reporters.”We will still have to monitor the development of Russia-Ukraine conflicts and its impact … but it is true that we are concerning that the Russia-Ukraine war will bring much higher inflationary pressure and add strains on growth,” Lee added.Russia calls its actions in Ukraine a “special military operation”. More

SEOUL (Reuters) -South Korea on Wednesday nominated veteran International Monetary Fund official Rhee Chang-yong as its new central bank chief, a pick who is widely expected to continue the bank’s efforts to curb inflation with aggressive interest rate hikes.Rhee, currently the director of the Asia and Pacific Department at the IMF, will join the Bank of Korea as Asia’s fourth-largest economy battles surging prices, driven by supply chain snags and the Ukraine war.He succeeds Governor Lee Ju-yeol, whose term ends March 31 after eight years helming the bank.Economists say while Rhee, 61, is likely to be less hawkish than Lee, affecting the make-up of the bank’s seven-member board, he is not expected to significantly alter the BOK’s current policy posture.”Looking at his past comments and reports, he is more of a dove, although he won’t reveal such a stance given current economic climate,” said Kyobo Securities economist Paik Yoon-min. “But I do think that the BOK’s board might end up with more dovish colour.”The BOK next reviews its policy rate on April 14 and analysts expect the board to take the base rate to 1.75% by end-2022 from 1.25% currently.Kong Dong-rak at Daishin Securities also said Rhee would be less of a hawk than Governor Lee, although “he won’t blatantly make that clear until after a few hikes.”The BOK has raised interest rates three times since August to hose down inflationary pressures and a build-up of financial imbalances, making it one of the world’s more hawkish central banks.Governor Lee on Wednesday reiterated the need for further policy tightening as the economy struggles with red-hot inflation.TRANSITIONSThe change in bank governor comes amid a wider political transition in the country with conservative President-elect Yoon Suk-yeol set to take office in May, replacing outgoing leader Moon Jae-in.Moon’s office said on Monday the president had discussed the nomination with Yoon, although Yoon’s transition committee released a separate statement saying the nomination had not been addressed in conversations.Before commencing his four-year term, Rhee will be subject to questions from lawmakers about his economic expertise and ethical standards.Members of the National Assembly often grill those tapped as top officials in parliamentary hearings, although Rhee’s nomination does not formally require legislative approval.Such hearings in the past have focused on a wide range of personal matters, including nominees’ property transactions, tax histories and even the military service of relatives.As a director at the IMF, Rhee currently oversees its lending operations and surveillance work across Asia-Pacific.Before joining the IMF in 2014, Rhee served as chief economist at the Asian Development Bank and a Sherpa for the country’s G-20 Presidential Committee when South Korea hosted the group’s summit in 2010.He has worked closely with finance ministry officials, including former vice finance minister Choi Sang-mok who is now a part of President-elect Yoon’s transition committee. More

The attempt by US president Joe Biden last week to extract a promise from China’s leader Xi Jinping not to give material support to Russia’s invasion of Ukraine was always going to be a long shot. The fact that after two hours it ended with little more than mutual threats of sanctions should be a wake-up call to foreign businesses operating in China.The risks of doing business in China have been escalating for some time. Tensions between Washington and Beijing over technology exports, the mass incarceration of 1mn Uyghurs and other Muslim groups in Xinjiang, and the crackdown in Hong Kong, have forced many companies to think about contingency plans. Supply chain disruptions caused by the Covid pandemic then drove home the dangers of relying on China for key components or products. But the underlying assumption held by many companies has been that, in the end, China’s interest in economic and political stability would stem any rash actions such as a military move on Taiwan. Few companies are yet willing to ask whether the risks of dealing with Xi’s increasingly authoritarian regime are beginning to outweigh the benefits of being in a market of 1.4bn people. Volkswagen, which relies on China for at least half its annual net profit, has even been prepared to brave the reputational risk of having a factory in Xinjiang.“In the past year . . . companies have been scrambling to find a solution to maintaining their economic interests in China while realising they are exposing themselves to political risk,” says Max Zenglein, chief economist at the Mercator Institute for China Studies. “They lacked a concrete example of what this means and didn’t anticipate how quickly this could escalate.” Russia’s aggression may have changed that calculus, however. In less than four weeks, more than 400 companies have pulled out of Russia or suspended operations, according to the Yale School of Management. Some have left for fear of being caught by sanctions but others — such as McDonald’s, Starbucks, TJ Maxx or Uniqlo — have recognised the risk of a customer backlash if they stay open. The Russian crisis “makes them realise that maybe they need to factor these risks more heavily into their calculations”, Zenglein says. “It is a case study for how the global system can unravel.” It would not be that easy to quit China, which is the world’s largest importer and exporter of intermediate goods used to make a finished product. In 2020, China’s share of foreign direct investment rose to an all-time high of 25 per cent, according to the Peterson Institute for International Economics. But a report by Merics’s Zenglein points out that while certain industries (the auto sector) and countries (Germany) rely heavily on China, the dependence of European business can be overstated. A survey of 25 listed EU companies from different countries revealed that on average they derived 11 per cent of revenue from China in 2019.A few — notably on the Republican right in the US — are suggesting that businesses decouple entirely from the country. That would spell disaster for the global economy. But some executives are reassessing the principles that have previously guided their China plans.“Things you would normally do because it made commercial sense to do them, you have to ask if it makes sense any longer,” said a senior executive at a European multinational, who asked to remain anonymous to protect the company’s interests. “Is this supplier relationship going to be feasible in an environment where the prospect of sanctions is just around the corner?”Corporate lawyers such as Dan Harris of US-based Harris Bricken are advising clients to start thinking about “asset light” strategies, such as licensing or franchising where appropriate. At the very least, diversification of manufacturing elsewhere in Asia, or even further afield, should be a priority.It may also be wise to ensure that in future Chinese operations are dedicated to the local market, separate from the rest of the world. “In the past people might have chosen to create global export capability around a nucleus in China. But they aren’t going to do that any more,” the executive said. Most China experts believe that Beijing has no imminent plans to follow Russia’s example with an invasion of Taiwan. But many Russian experts also thought Moscow would not send tanks across the Ukrainian border. The lesson of Russia’s invasion is not just that the unthinkable can happen, but that the consequences can play out at a speed and scale few had imagined [email protected] More

The cost of living crisis will make Boris Johnson’s plans to tackle the UK’s regional inequalities much more difficult to achieve, according to Andy Haldane, outgoing head of the government’s levelling up task force.At the end of his six-month sabbatical overseeing the government’s levelling up white paper, Haldane acknowledged that some of the people who would be hit hardest by soaring inflation would be those living in the “left behind” areas that the prime minister’s flagship policy is meant to help.The former Bank of England chief economist accepted the government’s 12 key goals to reduce regional inequalities would be negatively affected as a result, but insisted this would not undermine the policy.“The cost of everything — including borrowing, energy, goods, service, of people — has gone up,” Haldane told the Financial Times. “It’s going to make [the levelling up goals] harder to achieve, and even more important to achieve.”He suggested that the burden of surging inflation would fall disproportionately on people and places most in need of the government’s levelling up agenda.“This is why I have a degree of confidence that, far from taking the wind from the sails of levelling up, the cost of living crisis makes [the policy] even more of an imperative economically, socially and politically,” added Haldane. The chief executive of the Royal Society of Arts joined the Cabinet Office on a six month secondment last year to help provide much-needed substance to Johnson’s levelling up plans.

Haldane, 54, who grew up in a Yorkshire working class household, was picked by Johnson and Michael Gove, levelling up secretary, as a longstanding champion of left behind areas.He said the government would introduce legislation by June that would make it “difficult to upend” the 12 policy “missions” contained in the 332-page white paper — including increasing business investment and tackling violent crime — by enshrining them in law. The goals are meant to be achieved by 2030.Labour criticised the white paper unveiled in February for not being accompanied by new government funding: instead ministers pointed to money contained in chancellor Rishi Sunak’s spending review last October.Haldane suggested that more money for levelling up may be allocated in the coming years. “The missions are 2030 missions that span multiple spending reviews; we’ll have several more bites at this cherry,” he said.The first marked outcome from the white paper is expected to be further devolution in England via the creation of several directly elected “county mayors”.These local leaders are expected to have similar powers to so-called metro mayors such as Sadiq Khan in London and Andy Burnham in Manchester, who have a big say over initiatives to boost economic growth in their areas.Haldane argued that levelling up was about forging a “new model of government”, not merely spending more money.Whitehall should aim “to empower and enable others to regenerate their place”, he said.Haldane added that the civil service, seen by some as a centralising force in London, was “getting” what levelling up was about, although he admitted it was a “work in progress” for certain Whitehall departments.Critics of levelling up have said Johnson’s plans are a response to cuts to public services introduced by former prime minister David Cameron, particularly reductions in local government funding.

Haldane said rebuilding civic institutions was “absolutely sine qua non of making good on levelling up”.He supported a call by Gove that control of some taxation — the levelling up secretary has suggested business rates — should be handed to mayors.“So far the debate about devo has been devolution very largely of powers to spend, but not enough power to tax,” said Haldane. “Do I see the endpoint of this evolutionary trajectory needing to be one in which local areas have greater powers to tax as well to spend? Yes, I do.”He outlined several initiatives to drive forward the white paper’s objectives.Gove’s department for levelling up, housing and communities is hiring a dozen “levelling up directors” to focus on ensuring central and local government combine on implementing the white paper’s 12 key goals. Meanwhile, a new committee of cabinet ministers is meeting “almost weekly” to focus on “levelling up considerations”.Haldane outlined two main types of places that would be targeted by levelling up measures.He said the first were “city regions that are punching below their potential”, adding that some of the UK’s most successful cities, including Glasgow and Manchester, underachieved compared to European peers.The second were “stranded towns” that did not form a part of a city region. Haldane said the aim was “less about becoming some hub for business, and culture and finance” but improving metrics such as “life satisfaction, happiness, health outcomes . . . a nice high street with decent shops, reasonable transport”.Johnson is betting his government will have made enough progress on levelling up in the next two years for it to form a core part of his pitch to voters for a second term in office, particularly in so-called red wall areas that the Conservatives seized off Labour at the last general election.Haldane said a “downpayment” would have been made by 2024 on some of the white paper’s core goals — including tackling illiteracy and innumeracy — but others, such as improving life expectancy, will take longer.“What people really want is a sense of the tide having been turned, it’s all about direction of travel rather than destination,” he added. More

HONG KONG (Reuters) – The Australian dollar marched higher and the Japanese yen continued its slide on Wednesday, as markets turned more positive on riskier assets and high commodity prices drove developments.The Australian dollar hit its highest level since December 2015 versus the yen, having gained 8% in March so far. Versus the dollar, the Australian dollar touched a four and-a-half month high of $0.7477 in early trade, having gained 0.95% overnight, while the yen slipped to as low as 121.4 per dollar after the dollar had climbed 1.1% on the Japanese currency overnight. The Aussie’s breaking of resistance at $0.745 was due to gains in equities and commodities, said ANZ analysts adding that “global risk sentiment continues to direct the AUD’s outlook. European and U.S. equity markets rallied on Wednesday, as – aside from commodities – investors shrugged off worries about the market and economic impact of the war in Ukraine. [MKTS/GLOB] High commodity prices are bad news for the yen, however, as Japan imports the bulk of its energy, widening the country’s trade deficit. “USD-JPY has nowhere to go but up,” said analysts at TD securities, who pointed to the differential between U.S. and Japanese rates and the yen’s vulnerability to the ongoing shock in commodities. The yield on U.S. benchmark 10 year yields rose to 2.4026% in early Asian hours on Wednesday, still supported by U.S. Federal Reserve chair Jerome Powell’s speech on Monday which opened the door for raising interest rates by more than 25 basis points at upcoming policy meetings in order to combat inflation. “A number of other Fed speakers are jumping on Chair Powell’s aggressive hiking bandwagon,” said analysts at ING. Powell himself is due to speak again later today in a busy week for public remarks by Fed policy markers. However, rising U.S. yields have had little effect on the dollar, as investors say much of the increase is already in the price. The dollar index, with measures the greenback against six major peers, was at 98.456, with the euro little changed at $1.1022. Sterling touched $1.3279 its highest against the dollar in nearly three weeks, as focus turns to UK inflation data and British finance minister Rishi Sunak’s Spring Statement, both scheduled later on Wednesday. [GBP/]In cryptocurrency markets bitcoin was around $42,400, holding on to its overnight gains, and ether was just under $3,000. More