The UK economy is continuing to grow faster than forecast but the rate of increase has slowed slightly.

The Chancellor of the Exchequer announced in the Budget that GDP growth in 2014 is now expected to be 2.7%, well up from the 1.8% predicted at the Budget last year but less impressive on the 2.4% predicted in the Autumn Statement.

Equally, growth is expected to rise by 2.3% in 2015 and then 2.6% in both 2016 and 2017. Previous forecasts were 2.2% and 2.6% respectively.

But the Chancellor warned that faster growth alone will not “balance the cuts” and that hard decisions had to be taken and more economic cuts are to come.

He introduced a cap on public welfare spending that will only rise in line with inflation.

The faster growth does lower government debt with the budget deficit now forecast to be 5.5% of GDP in 2014/15 and 4.2% in 2015/16.

This will lead to a balanced budget by 2018/19 and save the economy some £42bn in reduced interest payments.

The Chancellor confirmed the 2% inflation target for the Bank of England will remain in place for this year and then next two years.

He also said economic growth would generate 1.5 million more jobs over the next five years but he stayed clear of any employment rate predictions.

Earnings were now rising faster than inflation, leaving many more people better off, he claimed.