Britons may have to work till 70 years old under new austerity plans

LONDON (AFP) - Britons may have to work for longer before claiming a state pension, under further austerity plans to be presented by Finance Minister George Osborne in a Budget update on Thursday.

Chancellor of the Exchequer Osborne has already written to ministers explaining that another £3 billion (S$6 billion) will be cut from public spending over the next three years.

He is also expected to unveil upgraded official economic growth forecasts, as Britain's recovery picks up speed.

The Conservative-Liberal Democrat coalition government will seek to bring forward plans to extend the retirement age to 68 before they are entitled to a state pension, according to a government source.

The state pension age was due to rise to from 65 to 68 by 2046. However, Mr Osborne will reportedly propose to bring the change forward to the 2030s, and will aim to lift the age to 69 in the 2040s. That means Britons might have to work until the age of 70.

Under the new rules, people would spend no more than a third of their expected lifespan drawing a state pension.

"This is part of the government's long-term plan to secure a responsible recovery," the source added.

"It is a difficult decision to make sure there is a fair deal across future generations and that the country can live within its means.

"It will help make sure the country can offer people decent pensions in their old age in a way that with increasing life expectancy the country can also afford."

As well as efficiency savings, the government will have to find cutbacks of 1.1 per cent over the next two years as the government looks to rein in a stubborn deficit.

Mr Osborne is also set to announce that ring-fenced departments including health, schools, foreign aid, local government, revenue and customs and the security services will be protected.

Britain is enjoying a solid economic recovery thanks to a buoyant property market and rebounding consumer expenditure against a background of austerity policies.

Mr Osborne has pledged to deliver a "responsible recovery", playing down the prospect of any major tax giveaways or spending commitments.

The Chancellor, a member of Prime Minister David Cameron's Conservative party, has already unveiled plans to overhaul energy levies in a bid to lower household bills.

The move was aimed at countering a pledge from the main opposition Labour party to freeze electricity and gas prices, should it win a general election due in mid-2015.

Other announcements will include a move towards subsidising offshore wind farms and £150 million for improving school kitchens to help meet a pledge for free school meals for all pupils Britain said on Wednesday that it intended to sell its 40 per cent stake in Eurostar, the high-speed cross-Channel rail service, as part of a £20 billion privatisation drive.

The new national infrastructure plan sets out how the government intends to privatise a swathe of financial and corporate assets by 2020.

Alongside Thursday's update, the Office for Budget Responsibility (OBR) watchdog is set to upgrade its forecasts for growth and borrowing.

In March, the OBR cut its 2013 economic growth forecast, blaming the impact of the eurozone debt crisis. Gross domestic product was expected to grow by just 0.6 percent this year, followed by 1.8 per cent in 2014 and 2.3 per cent in 2015.

The economic recovery has since strengthened with third-quarter growth of 0.8 per cent - the fastest rate for more than three years.

The government is meanwhile set to undershoot its £120 billion borrowing target, a measure of the public deficit, in the current 2013/2014 financial year, which runs from April to March.

Shortly after Thursday's Budget update, the Bank of England is forecast to keep interests rate at a record-low 0.50 per cent, where they have stood since March 2009 to stimulate growth.