Osborne: We may have to work longer
Mr Osborne told MPs: "I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity."
That raised the prospect of ever long working lives. Mr Osborne also set a target for savings in the welfare budget of £10 billion by 2016.
However, there was some good news as he revealed that the withdrawal of British troops from Afghanistan by the end of 2014 meant military operations there would £2.4 billion lower than expected.
Mr Osborne said the Office for Budget Responsibility expects UK plc "to avoid a technical recession with positive growth in the first quarter" of this year.
He said the OBR had reported that the economy has "carried a little more momentum into the new year than previously anticipated".
He added: "Indeed, the Office for Budget Responsibility is slightly revising up in their growth forecast for the UK this year to 0.8%." This is up from 0.7% last autumn.
The OBR is also predicting growth of 2% next year, 2.7% in 2014 and 3% in both 2015 and 2016. Mr Osborne also gave an upbeat assessment of attempts to beat down the UK's debt mountain.
He said Public Sector Net Debt is set to peak at 76.3% of GDP in 2014-15, almost 2% lower than previously forecast - before falling the following year.