Pre-Budget boost for Hammond as OECD hikes growth forecast to 1.6% this year – and urges Chancellor to spend MORE

Philip Hammond was handed a pre-Budget boost today as an influential think-tank upgraded its forecasts for the economy.

UK plc will grow by 1.6 per cent this year, according to the Organisation for Economic Co-operation and Development (OECD) – some 0.4 per cent higher than its estimate from November.

The revision came as Britain continued to defy Project Fear doomsayers who warned in the run-up to the historic referendum that a Brexit vote would plunge us into recession.

The Organisation for Economic Co-operation and Development (OECD) has upgraded its growth forecast for the UK this year by 0.4 per cent

The Chancellor will look to lay the ground for the looming divorce with the EU tomorrow when he delivers his first full Budget.

The better-than-expected performance of the economy is thought to have left him sitting on a £60billion warchest to help smooth the Brexit process.

But Mr Hammond has signalled he has no intention of splashing the cash – making clear new spending commitments will be funded by cuts elsewhere or tax rises.

In its latest economic outlook report, the OECD boosted its prediction for 2017 by 0.4 per cent, compared to its estimate from November.

But it stuck to its forecast that growth would slow to 1 per cent in 2018, when Brexit talks are likely to be at their most tense.

Without singling out Mr Hammond, the think-tank urged all governments to boost spending and reform markets to support economic growth.

The OECD warned about the impact of ‘uncertainty’ on Britain’s future trading relationship and rising inflation, which last week was pushed to a two-and-a-half-year high of 1.8 per cent by the collapse in the pound following last year’s referendum.

‘In the United Kingdom, the pace of expansion in 2016 was lower than in previous years, despite support from resilient household spending, actions by the Bank of England and adjustment to the fiscal stance following the Brexit vote,’ the report said.

‘UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom’s future trading relations with its partners.’

Chancellor Philip Hammond is delivering his first Budget tomorrow

The OECD also warned ‘rapid house price increases’ in Britain could herald a future economic downturn.

‘In advanced economies, some countries have experienced rapid house price increases in recent years, including Australia, Canada, Sweden and the United Kingdom.

‘As past experience has shown, a rapid rise of house prices can be a precursor of an economic downturn.

‘House price-to-rent ratios are at record highs in several countries and above long-term averages in many others.

‘Although there has been a slower accumulation of household debt in recent years, mortgage-debt-to-income ratios remain high in many countries.’

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