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Rishi Sunak defends halving domestic flight taxes in Cop26 run-up

flight taxes

Rishi Sunak defends halving domestic flight taxes in Cop26 run-up

Rishi Sunak has defended cutting domestic flight taxes in the run-up to next week’s Cop26 summit, after being accused of going “headlong in the wrong direction” about tackling climate emergency at a pivotal point for Britain.

Labour said it was an “astonishing” announcement from the chancellor in Wednesday’s budget, given the UK government will urge many world leaders, set to arrive in Scotland within days, to speed up decarbonisation plans in their own countries.

Sunak halved the tax on domestic flights, which are already far cheaper and more polluting than train journeys. Air passenger duty was increased by £4 on “ultra-long” flights of more than 5,550 miles, from £87 to £91. Overall, the changes were a tax giveaway of £30m a year.

After criticism from environmental groups, the chancellor batted away claims it could lead to 400,000 more domestic flights every year. “What we’re doing on air-passenger duty is going back to a system we used to have, which means we don’t essentially double-tax people for flying inside the UK – so in that sense it’s a pro-union policy,” Sunak told BBC Radio 4’s Today programme.

He said the new ultra long-haul band was fair because it meant “the further you’re flying, the more emissions, then you will pay a higher rate”.

Sunak was asked why he did not simply increase the levy for longer haul flights and leave domestic air-passenger duty at its current level, instead of cutting it significantly.

“We could have done, but we wanted to deliver on a previous commitment to reform air-passenger duty to return to the system that we used to have so people flying within the UK are not taxed twice, which we never thought was right,” the chancellor said.

“It supports the union, it supports regional airports, which are big employers. But also aviation in general only accounts for about 7-8% of our overall carbon emissions and, of that, I think domestic aviation is less than 5% – so it is a tiny proportion.”

Asked if the UK should be showing moral leadership on the issue, given it will be pressing other countries to drastically increase their commitments to tackling climate change by trying to limit global warming to 1.5 degrees, Sunak said: “We’re a country that has decarbonised faster than basically any other advanced nation over the past 10, 20, 30 years, so I think our track record on this is pretty good, actually.

“In my small responsibility on the finance side, last week the UK was named the world’s best place for green finance anywhere in the world … I feel pretty confident about our leadership on this issue.”

However, Labour’s shadow chancellor, Rachel Reeves, who stood in for Keir Starmer in the Commons yesterday after he had tested positive for Covid, said: “We wouldn’t have gone ahead with that cut.

“I find it astonishing that the week before Cop26, when we are supposed to be showing global leadership, we have cut air-passenger duty on domestic flights. We should be encouraging people to use our train network for those journeys, not cutting APD on domestic flights.”

She added: “If you’re a banker on a short-haul flight sipping champagne, you would have been cheering at the budget yesterday. If you’re on a modest income and you’re worried about the rising cost of living, frankly there was very little to cheer.”

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UK’s Truss defends economic plan that sent pound tumbling

UK’s Truss defends economic plan that sent pound tumbling

British Prime Minister Liz Truss on Thursday defended her economic plan and shrugged off the negative reaction from financial markets, saying she’s willing to make “difficult decisions” to get the economy growing.

In her first public comments since the government’s announcement of billions in uncosted tax cuts roiled markets and drove the pound to record lows, Truss said Britain was facing “very, very difficult economic times.” But she said the problems were global and spurred by Russia’s invasion of Ukraine.

She spoke after the Bank of England took emergency action Wednesday to stabilize U.K. financial markets and head off a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound tumbling and the cost of government debt soaring.

Truss told BBC local radio that “we had to take urgent action to get our economy growing, get Britain moving and also deal with inflation.”

“Of course lots of measures we have announced won’t happen overnight. We won’t see growth come through overnight,” she said. “What is important is that we are putting this country on a better trajectory for the long term.”

In a series of interviews, Truss said her government’s decision to cap energy bills for households and businesses would help tame inflation and help millions of people facing a cost of living crisis.

But it was not that decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions — without an independent economic assessment of the cost and impact.

The Bank of England warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” and said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets.

The bank’s former governor, Mark Carney said that the government and the central bank appeared to be pulling in different directions.

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the Bank — has led to quite dramatic moves in financial markets,” he told the BBC.

The pound traded at around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.

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Stimulus Packages Provided During Pandemic Triggered Inflation- CBN

The Central Bank of Nigeria (CBN) has attributed the rising inflationary rates to the stimulus packages provided to citizens during and after the pandemic.

It added that although this increased spending, it also created global supply challenges.

CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The Monetary Policy Committee had on Tuesday, unanimously voted to increase interest rate to 15.5 per cent.

“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.

“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.

Mahmoud also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China for the rise in global inflationary trend.

“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted in some shortages which made prices go up.

“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he added.

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China’s yuan slides to 14-year low against US dollar

China’s yuan slides to 14-year low against US dollar

China’s yuan fell to a 14-year low against the dollar Wednesday despite US central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from its March high.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.

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