UK sticks with austerity as growth forecast cut

U.K. Finance Minister George Osborne sticks to austerity path as growth forecasts are slashed.

LONDON (CNNMoney) Britain said Wednesday it would further tighten the screws on general government spending as officials forecast weaker growth and higher borrowing than just three months ago.

Finance Minister George Osborne also announced plans to change the mandate of the Bank of England, giving incoming governor Mark Carney slightly more flexibility in hitting its 2% inflation target and potentially more scope to manage interest rate expectations.

The U.K. economy risks falling into a triple-dip recession in the first quarter of 2013 as domestic demand remains depressed by austerity measures and falling real incomes and exporters feel the impact of the eurozone crisis, despite a weaker currency.

The independent Office for Budget Responsibility said it expected the U.K. would narrowly avoid recession but slashed its growth forecast for 2013 to 0.6% from 1.2%. It also said public debt would peak at nearly 86% of GDP in 2016-17, rather than 80% in 2015-16, as forecast in December.

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Osborne, presenting his annual budget to lawmakers, said the government's policy of fiscal discipline and active monetary policy would eventually bear fruit.

"It is taking longer than anyone hoped, but we must hold to the right track," he said.

Government departments, with the exception of health and education, would be subject to further spending cuts, and public-sector pay caps would be extended.

The money raised will be used to increase spending on infrastructure by

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