Jan 06 - British finance minister George Osborne reinforces his plans for lower spending to allow for the possibility of tax cuts as the Conservative-led government tries to seize the initiative in a pre-election year. Joanna Partridge reports
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Visiting a business in Britain's Midlands, Finance Minister George Osborne has a lot to smile about.
The UK is enjoying a surprisingly strong recovery - it's now one of the quickest-growing developed economies.
But Osborne's warned voters that the economic improvement can't be taken for granted.
He's announced more major cuts to welfare spending - to help reduce what is still a big budget deficit.
SOUNDBITE: George Osborne, British Finance Minister, saying (English):
"As we start the New Year, I want to warn you about a dangerous new complacency around in our politics at the moment. You hear some of my political opponents talking as if the hard part of the job is done, and we can go back to the bad old habits. We have got to make more cuts -- 17 billion pounds this coming year, 20 billion pounds next year, and over 25 billion pounds further across the two years after that."
After years of austerity, many wonder where Osborne will find these extra savings.
Will Hobbs is from Barclays.
SOUNDBITE: Will Hobbs, VP Research, Economics & Strategy, Barclays, saying (English):
"We suspected that even without the spending cuts that the Chancellor enacted in his last budget, that the deficit would narrow automatically, just because the tax take would rise in a recovering economy, and that much has come true and actually the need for austerity has got much much less."
Now the economic outlook is brighter, the government is facing calls to put more money in people's pockets.
It's also facing criticism from the opposition Labour party about the decline in living standards since the financial crisis.
Osborne and his Conservative colleagues are already looking ahead to the election in May 2015 - some predict they may cut taxes beforehand to win over voters.
Risks to the recovery also remain - Osborne warned of repairs to Britain's banking system and troubles in the euro zone.
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