2017 UK budget summary recap
Last week, the UK’s Chancellor of the Exchequer, Philip Hammond released his second budget. This is the second budget release after the UK voted to leave the EU in 2016. Here is a quick summary of the details of the 2017 budget
Vince De Castro, Head of Marketing at Orbex, provides a comprehensive synopsis of Britain’s recently unveiled budget, in which the Chancellor of the Exchequer set forth the economic metrics for the country’s major benchmarks for the 12 months ahead.
Stamp duty abolished for first time buyers up to 300,000 GBP
According to the budget detail, the UK government abolished stamp duty for first time buyers on properties with a value below or equal to 300,000 British pounds.
The move is expected to benefit over 95% of first time buyers and is expected to help revive the housing market in the UK. Just a month ago, a separate industry survey conducted by Halifax showed that consumer confidence in the UK housing market fell to a 5-year low.
Nearly one out of five respondents said that they expect house prices to fall further in an environment of higher interest rates and higher inflation. The decline in the housing market comes amid a slower economy where wages have failed to catch the pace of inflation increase. This comes as the UK’s unemployment rate hit the lowest levels since the 1970’s.
Fuel duty on petrol and diesel scraped
The 2017 budget also saw the fuel duty increase that was scheduled to be implemented in April next year being scrapped. The move comes amid law makers putting pressure on PM Theresa May.
Campaigners instead called for more investment on building roadways and to scrap VAT on fuel completely. Higher fuel prices are expected to significantly impact the UK’s consumer price or inflation.
With inflation hovering near 3%, a full percentage point above the BoE’s 2% inflation target rate, the Bank of England has started to hiked interest rates. The central bank officials remain divided of course on the forward guidance. Some members do not want further rate hikes as that could be detrimental to growth.
OBR slashes growth forecasts
The UK’s Office for Budget Responsibility (OBR) released its forecasts on GDP in the UK. According to the latest forecasts, productivity growth is expected to slow significantly on account of Brexit.
For the year 2017, the OBR said that the UK economy will expand at a pace of 1.5%. This was a downward revision from the March forecasts which showed growth would average 2%.
Last week, the second revised GDP estimates for the UK showed no change. Data from the UK’s Office for National Statistics (ONS) showed that the economy grew at a pace of 0.4% in the three months ending September. This was the same as the preliminary GDP release.
On an annual basis, the UK economy was seen expanding at a pace of 1.5%. This was a slowdown in the expansion as the UK’s economy was seen rising 1.8% in the quarter ending September the year before.
By the year 2020, the OBR forecasts that the UK’s GDP could slow to a pace of 1.3% before it starts to increase. The lower growth is expected to result in lower tax receipts for the government.
Borrowing costs are also expected to rise to 2.4% of the GDP, which was slightly better than compared to the 2.9% forecasts made previously.
“Regrettably our productivity performance continues to disappoint. Today the OBR revised down the outlook for productivity growth, business investment and GDP growth,” Hammond said while releasing the budget.
The Chancellor also set aside an amount of 3 billion pound sterling towards Brexit preparations for the next two years. He said that the government was prepared to face “any possible outcome.”
The three billion comes on top of the 700 million that was invested following the Brexit vote. He said that the government will not hesitate to spend more if needed. The British pound did not react much to the budget release as price touched a weekly high of 1.3336 marking a five-week high.