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UK's Osborne says to miss short-term budget targets, sticks to plan

[LONDON] British finance minister George Osborne said he would miss his short-term targets for cutting the budget deficit but he stuck to his promise to fix the public finances by the end of the decade, hoping that voters will back his tough approach.

Five months before a national election, Mr Osborne said Britain's deficit would fall to 5.0 per cent of gross domestic product in the 2014/15 financial year.

That compared with a forecast of 4.9 per cent made in March by Britain's independent budget office.

The slightly slower pace of improvement largely reflects how Britain's strong economic recovery has not yet turned into significant rises in pay for workers or income tax receipts for the government, a setback for Prime Minister David Cameron.

Mr Osborne said borrowing was set to fall slightly less than expected in the current financial year and in 2015/16 before it improves slightly more than expected in the following four years.

"Out of the red and into the black for the first time in a generation - a country that inspires confidence around the world because it seeks to live within its means," Mr Osborne said as he delivered a half-yearly update on the economy and the public finances to Britain's parliament.

He was expected to include measures to help home-buyers and small businesses as he sought to offer something to voters, many of whom have seen their living standards fall steadily since the financial crisis.

Ahead of Wednesday's statement, the government has announced more funding for Britain's health service and details of a new road-building programme.

Mr Cameron has previously said he wanted to reward voters with income tax cuts, once the public finances were stronger.

Mr Cameron's Conservatives narrowly lag the opposition Labour party in most opinion polls.

But they score more highly on economic policy, and Osborne sought to use Wednesday's high-profile budget statement to ramp up his message to voters that the recovery would only be safe in his hands.

"Now Britain faces a choice. Do we squander the economic security we have gained, go back to the disastrous decisions on spending and borrowing and welfare that got us into this mess?" Mr Osborne said. "Or do we finish the job - and go on building the secure economy that works for everyone."

Labour has hammered Osborne for missing the long-term budget targets he set out in 2010, shortly after he became finance minister. Then, he promised to largely eradicate a soaring deficit equivalent, which stood at around 10 per cent of GDP, by 2015.

Instead he is only half way through that plan which was knocked off course by the effects of the euro zone's debt crisis and, critics say, by the pinch of Mr Osborne's tight grip on government spending in recent years.

"David Cameron and George Osborne have now failed every test and broken every promise they made on the economy," Labour's would-be finance minister Ed Balls said on Tuesday.

Labour has said it wants to eradicate a measure of the budget deficit which excludes capital spending during the next parliament, creating room to borrow to fund investment.