03 Dec 3.12.2017 Budget 2017: Philip Hammond promises to stabilise UK housing market
3.12.2017 Budget 2017: Philip Hammond promises to stabilise UK housing market
UK is expecting the biggest downgrade in its economic prospects since the financial crisis, due to weaker productivity growth. Sharp cut in UK’s economic growth forecasts overshadowed Philip Hammond’s promise to fix the housing market with tax cuts for first-time buyers, planning reform and investment. The forecast also means 17 years of stagnating wages.
While Hammond insisted the economy was “at a turning point”, promised that the Budget’s investments would create new opportunities, and Conservative MPs viewed Hammond’s tax and spend plan as “solid”, the Independent Office for Budget Responsibility (OBR) stated that the housing measures could not disguise the difficulties Mr Hammond faces with much worse economic forecasts.
Hammond planned to increase the annual amount of new homes built to 300,000 by 2025 with a £44bn package of investment, loans and guarantees, aided by removal and cuts in stamp duty for first-time buyers for purchases below £300,000 or `£500,000 thresholds respectively. However OBR claimed that those cuts would increase house prices and will only contribute to the purchase of an additional 3,500 homes per year. Lower household incomes mean the reduction in forecasts for the growth in spending on home building.
The OBR cut the projected UK economy growth rate for 2017 from 2 per cent to 1.5 per cent and, despite an £8.4bn improvement in public finances for 2017-18 compared with the March Budget, borrowing is predicted to be higher than previously anticipated according to most of the forecasts. The chairman of the OBR said that weak economy growth would lead to insignificant improvements in living standards. It is also predicted that the level of pay would not reach its 2008 level until 2025.
Many measures in the Budget concentrated on making the UK’s economy more technologically advanced. Hammond stated that a national productivity investment fund would be extended for another year and would increase to £31bn. He also promised £400m to an electric car-charging infrastructure fund and announced higher taxation on new diesel vehicles.
The chancellor claimed that too much of the UK’s economic growth is concentrated in the capital and decided to invest more in regional initiatives. Hammond backed up the Northern powerhouse, the Midlands engine initiatives and committed £300m for the High Speed 2 rail project incorporating further improvements in the train network in the north of England.