Britain sticks to austerity path in budget

Chancellor of the Exchequer Osborne, whose is facing calls from within his own Conservative party to change course, told MPs that Britain "must hold to the right track" as he outlined his tax and spending plans for 2013/14.

"We are slowly but surely fixing our country's economic problems," Osborne told the nation.

"We have now cut the deficit, not by a quarter but by a third. Despite the progress we have made there is much more to do and today I am going to level with people... It is taking longer than anyone hoped but we must hold to the right track."

This referred to sticking to his so-called Plan A of driving down the record budget deficit inherited from the previous Labour administration in 2010 -- despite calls from both inside and outside the coalition government to curb massive spending cuts to kick-start the economy.

Osborne's insistence on driving down the deficit comes despite the chancellor announcing that the government was halving its economic growth forecast for 2013.

Gross domestic product (GDP) was expected to grow by just 0.6 percent this year compared with a previous forecast of 1.2 percent, according to estimates issued by the Office for Budget Responsibility (OBR).

Economic growth guidance for 2014 was also cut to 1.8 percent from the previous estimate of 2.0 percent that was given in December.

Osborne added that Britain was on course to avoid sinking into its third recession since the 2008 global financial crisis, despite its economy contracting by 0.3 percent in the final three months of 2012.

In better news, Osborne said infrastructure plans would be backed by £3.0 billion ($4.5 billion, 3.5 billion euros) a year from 2015-2016 -- to ensure that the "economic arteries of every part of this country" could benefit.

On the eve of the budget, Prime Minister David Cameron's Downing Street office said some government departments would be made to cut their budgets to save £2.5 billion over the next two years.

The money saved between now and 2015 -- the time of the next general election -- would be used on infrastructure spending, a spokesman said.

The decision is at odds with Business Secretary Vince Cable, who has called on the government to consider borrowing more to stimulate economic growth.

Cable, a leading member of the Liberal Democrats which shares power with the Conservatives, said that the danger of slow growth may now be more damaging than the loss of confidence through increased borrowing.

But Cameron earlier this month insisted that his government, which passed the mid-term mark in January, would stick to the path of austerity despite a turbulent few weeks that saw Britain stripped of its top-level AAA credit rating.

In a further blow to the prime minister, civil servants were Wednesday holding a 24-hour strike in a row over pay and other working conditions.

The Public and Commercial Services union said up to 250,000 of its members would join the walkout, hitting government departments, jobcentres, tax offices, border patrols and courts.