Britain is set to grow faster than expected this year and next, Chancellor of the Exchequer George Osborne said in his annual budget Wednesday, drawing battle lines before national polls in 2015.
Chancellor of the Exchequer George Osborne holds the budget box outside 11 Downing Street in London on March 19, 2014 as he prepares to unveil the budget
Osborne warned however that an escalation of the Ukraine crisis could harm British output and push up low inflation, as he addressed parliament on the coalition government's latest tax and spending plans.
Britain's recovery would be harmed also by the Conservative-led coalition pulling away from deep cuts to state spending aimed at wiping out the country's huge deficit inherited from the opposition Labour party, he said.
In moves to woo voters ahead of next year's general election, Osborne unveiled plans that would see workers paying less income tax and offer more choice to retirees on how they draw their private pensions.
He also outlined incentives for savers hit by the Bank of England's record low 0.50-percent interest rate.
"We are now growing faster than Germany, faster than Japan, faster than the United States. In fact there is no major advanced economy in the world growing faster than Britain today," Osborne said.
But he stressed: "Faster growth alone will not balance the books... there will have to be more hard decisions, more cuts."
On Ukraine tensions, Osborne said "an escalation risks higher commodity prices, higher inflation and lower growth. It is a reminder of why we need to build our economy's resilience."
British gross domestic product was set to grow 2.7 percent in 2014, up from the previous forecast for expansion of 2.4 percent, said Osborne, 14 months ahead of national polls.
The British economy was then predicted to expand by 2.3 percent in 2015, upgraded from the previous growth estimate of 2.2 percent.
The economy had expanded in 2013 by 1.8 percent, which was the fastest growth rate since before the global financial crisis.
Osborne is a member of Prime Minister David Cameron's Conservatives that heads the coalition comprising also the Liberal Democrats.
- Warning on housing market -
In the run-up to the budget, Osborne had already unveiled plans for a higher subsidy on childcare costs and the extension until 2020 of a scheme that helps people to join and move up the property ladder by offering government-backed loans for house purchases.
Some experts have criticised the Help-to-Buy scheme due to fears it risks creating a fresh property bubble in London, where house prices are rising strongly.
Osborne on Wednesday said he had called upon the Bank of England to be "particularly vigilant against the emergence of potential risks in the housing market".
In a boost for the government ahead of the budget statement, official data on Wednesday showed that British unemployment is falling and the number of people in work has struck a record high.
Wednesday's budget is also the last before Scotland votes in a referendum on whether to become independent from the rest of Britain -- a poll that has implications for North Sea oil revenues and role of the pound currency.
Also on Wednesday, the Treasury announced plans to introduce a new 12-sided one-pound coin, which is claimed to be "the most secure coin in circulation", in an effort to curb counterfeiting.