The Government is expected to make fewer public sector job cuts than first anticipated, with the Office for Budget Responsibility adjusting its estimate down to 330,000 from 490,000.

The OBR altered its forecast because the government had put more emphasis on welfare cuts than on departmental spending cuts since it made its earlier forecast, revealed in the Chancellor’s emergency Budget in October.

It has also raised its estimate for economic growth this year, from 1.2% to 1.8%.

The OBR said: “The economy will continue to recover from recession, but at a slower pace than in the recoveries of the 1970s, 1980s and 1990s.”

It also forecast that with a peak of just over 8% unemployment in 2011, the rate would fall to just over 6% by 2015.

British Retail Consortium Director General Stephen Robertson said: “Stronger growth is a good thing but the Chancellor should remain cautious.

“Consumer confidence continues to fall. People’s worries about job prospects and personal finances are mounting. The, very necessary, public sector cuts together with January’s VAT rise have still to hit.

“The Chancellor should use his, better than expected, position as an opportunity to ease tax burdens on businesses and householders.

“Using any extra money he finds himself with to hold back next April’s business rates increases and to remove the £1bn carbon reduction stealth tax he’s slapped on businesses would support retails’ dual role in growing jobs and the economy while holding down household bills.”