British PM Cameron warns: brace for more budget cuts

Britain will have to keep cutting public spending to reduce the budget deficit, Prime Minister David Cameron said, underlining the government's tough task of trying to shunt the economy out of recession and winning back waning public support.

An aide said the government was paving the way for the next phase of austerity rather than signaling bigger than planned cuts, but investors say longer or deeper cuts look likely after a return to recession cast doubt over Britain's deficit targets.

The 2015 election will be fought on the state of the economy and how best to get the deficit under control. The Conservative-led coalition government planned to all but erase the deficit by 2015 but has already been forced to add two more years of cuts.

Underlying borrowing between April and August was a fifth higher than last year, suggesting either bigger cuts or a further extension of austerity could be on the cards when the government updates its economic forecasts on December 5.

"It is a very challenging situation, you only have to switch on your television set and look at what is happening in the euro zone. We have got many countries going into quite a deep recession, these are very difficult times," Cameron said.

"We inherited a budget deficit at around 11 percent, it is down to eight percent," he told the BBC. "The figures for this year, it is too early to say where they will end up."

Official forecasts in March predicted a fall to below six percent this year, a target which now looks uncertain.

Abandoning the austerity plan would prove politically disastrous for the Conservatives, who staked their 2010 election pitch on it.

"The economy is healing. But it's a longer and harder road that we have to travel down," finance minister George Osborne said in an interview with the Mail on Sunday. "There will have to be further cuts."