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UK economy forecast to grow – along with average house prices

POSTED ON 21 APRIL 2017

With growth in the UK economy having picked up through 2016 and employment reaching a record high of 31.8 million people, the Office for Budget Responsibility (OBR) now forecasts that the UK economy will grow by 2% in 2017

The OBR also forecast that the economy will grow at a slightly slower rate in 2018, before picking up to 2% in 2021.

The Office for National Statistics (ONS) estimates that the economy grew 1.8% in real terms in 2016 and growth remained robust in the second half of the year, at 0.6% in Q3 and 0.7% in Q4 2016, stronger than the OBR anticipated at Autumn Statement 2016.

Average house prices are also forecast to increase at an average annual rate of 4.8%; this contributes to expected increases in household net wealth, which is forecast to reach 879% of household income in 2021.

From autumn 2017, the government’s intention is to move towards a single fiscal event each year – an autumn Budget, with the Spring Budget being the first step in that transition. This change is said to enable a move towards a more stable and certain tax environment, helping businesses and individuals to plan better.

However, controversy has already surrounded the Budget when Chancellor Philip Hammond ditched plans to increase national insurance contributions for the self-employed. It was seen as a humiliating U-turn just a week after the measure formed the centrepiece of his first budget. Both the Treasury and No 10 insisted the decision, which leaves a £2bn hole in the chancellor’s budget plans over the next five years, had been taken jointly by May and Hammond, but others have seen it as a direct order from May to drop the plans in order to avoid the party breaking their manifesto pledge to make ‘no increases in VAT, national insurance contributions or income tax’.

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