Britain will prolong deep austerity measures by one year, Chancellor of the Exchequer George Osborne said on Wednesday, and the government slashed its growth forecasts amid \"deep-seated\" economic problems. Presenting a budget update, Chancellor of the Exchequer Osborne admitted that the coalition government would fail to meet its official target for reducing public debt as a proportion of British economic output by 2015/2016. Correcting the huge budget deficit is a vital policy objective for the government. \"It is taking time but the British economy is healing after the biggest financial crash in our lifetime,\" Osborne insisted in his Autumn Statement. Confirming that he was prolonging the government\'s austerity programme to 2017-18 -- beyond Britain\'s next general election due in 2015 -- Osborne said: \"We are making progress. It\'s a hard road, but we are getting there. Britain is on the right track and turning back now would be a disaster.\" Explaining why he was extending cuts in public spending again, Osborne said the British economy faced \"deep-seated problems at home and abroad.\" He said: \"In last year\'s Autumn Statement we committed the government to maintain the same pace of consolidation for two further years beyond the current spending review into 2015 and 2016-2017\". Osborne said: \"In this year\'s Autumn Statement we extend the consolidation for one further year into 2017-2018.\" Britain meanwhile slashed its economic outlook, forecasting the economy would shrink by 0.1 percent this year and then return to growth in 2013, according to figures published alongside the budget update. The new forecast, issued by the Office for Budget Responsibility (OBR) fiscal watchdog, showed a sharp drop on the previous 2012 growth estimate of 0.8 percent that was given in Osborne\'s annual budget in March. The OBR added that British gross domestic product was forecast to grow by 1.2 percent in 2013. That compared with previous guidance for greater expansion of 2.0 percent. Osborne also revealed that debt as a proportion of gross domestic product (GDP) was now expected to fall in 2016/2017 -- a year later than the government\'s previous forecast. Recent official data showed that Britain had escaped from recession in the third quarter of this year, with its economy growing by a robust 1.0 percent. However the return to growth was owing to one-off factors such as the London Olympics and rebounding activity after public holidays in the second quarter. \"The message... is that we are making progress,\" Osborne said. The Conservative-Liberal Democrat coalition government imposed austerity measures to slash a record deficit inherited from the previous Labour administration. The opposition Labour party maintains that the cuts pushed the economy into a painful double-dip recession. The Organisation for Economic Cooperation and Development urged Osborne last week to push back his debt reduction targets rather than drive through more growth-damaging austerity. Ahead of the budget update, Osborne had pledged on Tuesday to invest £5.0 billion in schools, transport and science over the next two fiscal years, with the cash sourced from a new raft of spending cuts across most civil service departments. And on Monday, Osborne launched a campaign against \"tax dodgers\" and \"cowboy advisers\" to claw back £2.0 billion a year, as lawmakers alleged that multinationals such as Starbucks and Google are avoiding huge tax bills.