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Britain hikes growth forecasts, vows to pursue austerity

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(Globalpost/GlobalPost)

Britain on Thursday hiked its economic growth forecasts as the recovery gathers speed but vowed to pursue its deficit-slashing strategy, warning that Britons might have to work until 69 before claiming a state pension.

The economy will grow by 1.4 percent in 2013 and 2.4 percent in 2014, finance minister George Osborne told lawmakers in his autumn statement, citing new forecasts.

That marked hefty upgrades from the previous figures from the Office for Budget Responsibility (OBR) of 0.6 percent and 1.8 percent respectively, given in March.

"I can today report the hard evidence that shows our economic plan is working... The job is not yet done," Osborne, the Chancellor of the Exchequer, told lawmakers.

"Yes, the deficit is down but it is still far too high and today we take more difficult decisions," he said, but added that the Conservative-Liberal Democrat coalition government would borrow less than expected this year.

And he pledged: "The hard work of the British people is paying off and we will not squander their efforts."

Osborne announced a new cap from next year on welfare spending, amid the coalition's ongoing drive to slash the deficit.

The Conservative minister also outlined plans for another £3.0 billion ($4.9 billion, 3.6 billion euros) in savings in the public sector, but added that the National Health Service would be excluded.

Osborne said the state pension age is now forecast to rise to 69 in the late 2040s, so that the pension age "keeps tracks with life expectancy".

That compares with the previous plans to raise it from 65 to 68, and means that many Britons might have to work until the age of 70.

The pensions reforms have drawn strong criticism from trade unions, who have complained that people are being asked to work until they drop.

In a boost for companies, Osborne added that increases in business rates would be capped at 2.0 percent with effect from April 2014, and added that fuel duty would be frozen again next year.

The upgraded growth forecasts come as Britain enjoys a solid economic recovery, thanks to a buoyant property market and rebounding consumer expenditure -- and despite painful austerity measures.

The economy grew by 0.8 percent in the third quarter, notching up the fastest quarterly rate for more than three years.

Osborne also updated growth predictions for 2015 to 2.2 percent and in 2016, to 2.6 percent.

"We need to secure the economic recovery for the long term," the Chancellor told lawmakers on Thursday.

He added: "We seek a responsible recovery, one where we don't squander the gains that we have made.

"We need a government that lives within its means in a country that pays its way within the world."

Osborne added that the government would borrow £111 billion ($182 billion, 134 billion euros) in the current 2013/2014 financial year, which runs from April to March.

That was less that the previous £120 billion borrowing target, which is a measure of the public deficit.

The OBR also forecast that borrowing over the next five years would be £73 billion less than previously thought, with a "small cash surplus" by 2018/2019.

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http://www.globalpost.com/dispatch/news/afp/131205/britain-hikes-growth-forecasts-vows-pursue-austerity