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OECD - UNITED KINGDOM

London tries to counter recession forecasts

2 min

The OECD has issued a warning concerning the recession expected to hit the United Kingdom at the end of 2008. The British government has decided to exempt small properties from stamp duty next year to support activity.

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The British government announced Tuesday that homes worth up to 175,000 pounds (215,000 euros, 311,000 dollars) would be exempt from stamp duty for the next year, a move aimed at bolstering the stricken housing market.

The measure, which comes into effect Wednesday, raises the threshold at which stamp duty or sales tax is paid from 125,000 pounds, and is expected to save buyers up to 1,750 pounds.

It was announced alongside other steps to help first-time buyers and to support homeowners at risk of repossession as Britain experiences a prolonged property slump alongside high inflation and interest rates, and slowing economic growth.

Many Britons are struggling to borrow money from banks for mortgages because of the credit squeeze that followed the US subprime home loans crisis.

"Help with stamp duty, help for first-time buyers, help to build more social housing, help to take unsold properties off the housing market and help for people who get into difficulties," Prime Minister Gordon Brown said.

"These are the things a government should do to help us come through what is a difficult situation and show that our economy is resilient and will come through these problems."

House prices in Britain fell 1.7 percent in July on June levels, dropping for the fourth month running, and were down 8.8 percent from a year earlier, home loan provider Halifax said.

The average price of a home in Britain was 177,231 pounds in July, Halifax said.

Stamp duty is currently charged at a rate of one percent on property worth between 125,000 and 250,000 pounds, three percent between 250,000 and 500,000 pounds and four percent above half a million. It netted the government 13.4 billion pounds last year.

Tuesday's announcement came as the Organisation for Economic Cooperation and Development (OECD) said the British economy would be in recession in the second half of 2008.

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