George Osborne has said the UK is growing faster than any other major economy thanks to his policies, but the job of recovery was "not yet done".
Delivering his Autumn Statement, the chancellor said Britain was set to be back in the black by 2018/19.
But money was still tight and millions would have to wait longer before they got a state pension.
He said his plan was "working", but Labour said he was "in denial" about the "cost-of-living crisis".
"For all his complacent boasts, for three damaging and wasted years, for most people there is no recovery at all," said shadow chancellor Ed Balls.
Mr Osborne announced in his speech plans for the pension age to "keep track with life expectancy" to save future taxpayers £500bn.
The date when the state pension age rises to 68 will be brought forward to the mid-2030s - it had not been due to kick in until 2046 - and the age could rise to 69 by the late 2040s.
It means people now in their forties will not get the state pension until they are 68, while those in their thirties will have to wait until they are 69.
Other key announcements include:
- Economy to grow 1.4% this year - double the 0.6% predicted in March, with 2.4% growth next year, instead of 1.8%
- An extra £1bn of cuts from the budgets of government departments for each of the next three years
- Car tax discs to be scrapped and replaced by electronic vehicle excise duty system
- Next year's planned 2p-a-litre fuel tax rise scrapped
- Borrowing falls more than forecast and employment forecasts are revised up
- Pensioners living abroad will have to prove they are alive more often in a crackdown on fraud and error
- A major crackdown on tax-evasion and avoidance aims to recoup £9bn over five years
- Employer National Insurance contributions for under-21s earning less than £42,285 scrapped from April 2015
- Tax breaks to encourage "fracking" for gas
- A cap on total government welfare spending will start in 2015
- An extra £150m to update and build kitchens and dining rooms in English primary schools
- A move towards subsidising offshore wind farms instead of onshore wind farms
- Plans for £375bn of investment in energy, transport, communications, and water projects
- Selling off the government's 40% stake in the Eurostar rail service
BBC political editor Nick Robinson said the government was worried economic growth might not continue as it was mainly based on consumer spending, so Mr Osborne had been aiming to deliver a "steady-as-she-goes" statement.
BBC business editor Robert Peston said the small budget surplus predicted for 2018/19 depended on the government slashing public spending as a proportion of GDP to levels last seen in 1948, which he said was a "remarkable change".
Lib Dem Chief Secretary to the Treasury Danny Alexander insisted the recovery was not just dependent on consumer spending, but he stressed there was a need for businesses to start investing again.
The chancellor used his speech to cap business rate increases in England to 2% next year, rather than the rate of inflation, in an effort to boost firms and High Streets.
And he announced a £1,000 discount in business rates for small shops and pubs, for the next two years, and halved rates for new occupants of vacant shops.
Mr Osborne began his 50-minute statement by saying the UK was now growing faster than any other major economy but he stressed he wanted a "responsible recovery" and warned of "more difficult decisions" to come on spending.
He acknowledged that the effects of the economic crash on family budgets were still being felt, but he pledged: "The hard work of the British people is paying off and we will not squander their efforts."
He added: "The plan is working - it is a long-term plan for a grown-up country. The job is not yet done but Britain is moving again - let's keep going."
The Autumn Statement is a half-yearly update on the Budget, allowing the chancellor to give MPs a guide to his tax and spending plans.
These plans are based on the economic projections provided by the Office for Budget Responsibility - a body set up in 2010 to provide independent economic forecasts.
Responding for Labour in the Commons, shadow chancellor Ed Balls said Mr Osborne had broken his promise to balance the UK's books by 2015 and said that, despite the improved growth forecasts, the economy was in far worse shape than Mr Osborne had predicted it would be at this stage.
Mr Osborne's announcement on the state pension age sparked anger among trade unions and campaign groups, with the TUC saying "today's young workers are being told they must work until they drop".
Plaid Cymru's leader at Westminster Elfyn Llwyd said it was "seriously unfair" because life expectancy in some parts of the country was 75.
The SNP's Stewart Hosie said a "modest" increase in cash for Scotland, through the Barnett formula, would "barely dent the massive cuts we have had in capital and revenue spending over the past few years".