Tax cuts to enhance feel-good factor

The feel-good factor has returned to the UK economy and will be further boosted by tax cuts in the Budget, according to a report published today.

It points to growth in the purchase of expensive items such as homes and cars as a clear sign that consumer confidence is returning.

The quarterly state of the market report by the Chartered Institute of Marketing says the property sector - more important in the UK than any other country - is becoming more buoyant as rising prices and continuing mortgage repayments eliminate negative equity.

Wage rises are expected to outpace price rises, increasing the amount of disposable income available to consumers, the institute says.

Although the Chancellor, Kenneth Clarke, has played down the chances of tax cuts, the institute forecasts reductions worth 2p off the basic rate of income tax.