Britain's Chancellor is picking one of two evils to rein in the budget

Britain's Chancellor George Osborne is stuck between a rock and a hard place when it comes to balancing the budget.

And now he is looking to go back on his word and cut spending. But if he doesn't do this, he would probably have to hike taxes.

Osborne made a promise last year that under the current Conservative-led government he would commit to meeting a £10 billion surplus target by 2020. Osborne's budget surplus target is the equivalent to 0.5% of national income. The budget deficit is the amount in which expenditures exceed revenue. A budget surplus is when income exceeds expenditure.

However, the Conservatives were only re-elected last year, this time as a majority government and not a coalition, and Prime Minister David Cameron and Osborne promised to not to raise VAT, national insurance, or income tax. The party also campaigned against extra taxes on things like high-valued property, and cut corporation tax.

Altogether, that's a lot of revenue that now can't be raised.

The country also has problems in terms of spending. The Conservatives have agreed not to cut health, education, or foreign aid spending. And Cameron has insisted on reaching NATO's aim for each country to spend an amount worth 2% of GDP on defence.

Last week, Osborne admitted on the BBC's Andrew Marr Show that "the world is a more uncertain place than at any time since the financial crisis" and that economy was £18 billion smaller than he had predicted - back when he pledged to create a budget surplus.

The British Chambers of Commerce even cut its economic growth forecast for the UK economy in what it called a "wake-up" call to policymakers. The BCC said in a statement it had downgraded Britain's economic growth predictions from 2.5% to 2.2% this year and from 2.5% to 2.3% next year.

But according to the Financial Times, Osborne is now going to try achieve his target by finding £4 billion worth of spending cuts. It is not certain from the report where those cuts would come from.

However, the alternative - if Osborne does plan to stick to his 2020 target - would be tax hikes.

Last month, London-based think tank the Institute for Fiscal Studies warned that Britons could face some surprise tax rate hikes or possibly even some more austerity measures because Osborne may feel "boxed in" by his own "ambitious target to eliminate the budget deficit by 2019-20 and then to continue to run budget surpluses thereafter."

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