Chancellor George Osborne unveiled a budget for "growth and jobs" today and declared: "Britain has a plan and we're sticking to it".
But he announced a cut growth forecasts amid continuing bad economic news.
Mr Osborne promised help for families with the cost of living and high oil prices, and the economic stability he said was needed for sustainable growth.
He said despite inheriting a record deficit, the budget would not be a tax-raising package.
But he added: "Nor can we afford a give-away."
He said the Office for Budget Responsibility had downgraded predictions of growth for this year from 2.1% to 1.7%, blaming a weaker than expected final quarter of last year, the rise in commodity prices and the higher-than-expected inflation.
He said the OBR expected inflation to remain between 4% and 5% for most of this year, before dropping to 2.5% next year and then to 2% in two years' time.
The black hole in the public finances will be greater than previous OBR predictions, coming in at £122 billion next year instead of £117 billion, he said.
It will then fall to £101 billion the year after, to £70 billion in 2013-14, then to £46 billion and to £29 billion by 2015-16, Mr Osborne said.
Key Budget Announcements
- Fuel duty to be cut by 1p per litre from 6pm tonight.
- Inflation rise in fuel duty planned for next week to be delayed until 2012. Fuel duty escalator that adds 1p to fuel duty on top of inflation each year to be cancelled for the rest of this Parliament.
- New Fair Fuel Stabiliser to be introduced, funded by increasing the supplementary charge on North Sea oil and gas production from 20% to 32% from tomorrow.
- Vehicle Excise Duty to increase in line with inflation, and frozen for heavy goods vehicles.
- No new changes to alcohol duty beyond those already announced.
- Tobacco duty rates to increase by 2% above inflation, as previously announced. Tobacco duty regime reformed to narrow differential between lower-cost brands and the others.
- Plans to switch air passenger duty from passengers to planes have been dropped. This year's APD rise postponed for one year, and the Government will seek to impose the tax on private jets.
- Personal tax allowance to rise by £630 to £8,105 in April 2012 - a real increase of £48 a year or £126 in cash terms.
- Pay rise of £250 for armed forces, prison, NHS, teachers and civil servants earning under £21,000.
- Clampdown on tax avoidance to raise £1 billion per year from levies including Stamp Duty, Capital Gains Tax and relief on CDs imported from Channel Islands.
- Gift Aid on small donations to be provided without filling forms in, benefiting charities by £240 million.
- From April 2012, people leaving 10% or more of their estate to charity will enjoy 10% reduction in inheritance tax, benefiting charities by £300 million.
- Simplification of Gift Aid, including increase in benefit limits from £500 to £2,500.
- Chancellor and Pensions Secretary developing options for a new single-tier state pension of around £140 per week, which would not apply to current pensioners.
- Government to seek automatic mechanism for future increases in state pension age, based on regular reviews of longevity.
- Funds for an additional 40,000 apprenticeships and 10,000 higher-level apprenticeships.
- Numbers of places on a new work experience scheme to increase to 100,000 over two years, rather than 20,000 as previously announced.
- New funding to double the number of University Technical Colleges from 12 to at least 24.
- Green Investment Bank created with an additional £2 billion, to start operation one year early in 2012.
- Climate change levy discount on electricity for those signing up to climate change agereements will rise from 65% to 80% from April 2013.
- The UK to become the first country in the world to introduce a carbon price floor for the power sector.
- Funds provided for 21 new Enterprise Zones.
- Central funding of £100 million to help councils repair potholes.
- Investment of £200 million in regional railways.
- Small companies' research and development tax credit to rise to 200% in April and 225% in 2012.
- Investment of £100 million in new science facilities in Cambridge, Norwich, Harwell and Daresbury, funded from Bank Levy.
- Help for manufacturing to include new export credits, a technology and innovation centre and nine new university centres.
- Support for Mortgage Interest scheme extended by one year to January 2013, reducing mortgage arrears for 100,000 jobless homeowners.
- New shared equity scheme for first-time buyers to help 10,000 families get onto the housing ladder, funded from £250 million from the Bank Levy.
- Small business rate relief holiday extended by one year to October 2012, at a cost of £370 million.
- Reforms to radically reduce delays in approval for clinical trials; to improve the intellectual property regime in digital and creative industries; and reform the money laundering regime.
- Reviews launched on the revenue raised by the 50p tax rate and on the taxation of very high value property.
- Charge on non-domiciled taxpayers to increase from £30,000 for those here for seven years to £50,000 for those in the country for 12 years, raising more than £200 million.
- Entrepreneurs Relief scheme to be doubled to £10 million from April 6.
- Income Tax relief on Enterprise Investment Scheme to increase from 20% to 30% in April 2011.
- New planning rules to require planners to prioritise growth and jobs with a new presumption in favour of sustainable development, while retaining existing controls on Green Belt land.1
- Today's Plan for Growth will remove £350 million worth of regulation on businesses.
- Bank Levy rate to be adjusted next year to offset the effect of Corporation Tax reduction on banks.
- Corporation Tax reduced by 2% from April 2011 - rather than 1% as previously announced - and to fall by 1% in each of the next three years to reach 23%.
- New rules to apply 5.75% rate on overseas financing income to attract international investment.
- Government to consult on merging the operation of National Insurance and Income Tax.
- From April 2012, the default indexation assumption for direct taxes to move to the CPI inflation index.
- The Budget abolishes 43 complex tax reliefs to simplify the system.
- OBR central forecast is that the Government will meet its fiscal mandate of a balanced structural current budget and falling national debt by the end of the Parliament.
- National debt forecast to be 60% of national income this year bedfore peaking at 71% and falling to 69% by the end of the spending review period.
- Borrowing to fall to £122 billion next year, then £101 billion in 2012/13, £70 billion in 2013/14, £46 billion in 2014/15 and £29 billion in 2015/16.
- Borrowing for this year to be £146 billion - below target.
- Additional cost of military operations in Libya to be funded by Treasury reserve.
- Asset Puchase Facility set up under Labour to remain in place.
- Office for Budget Responsibility forecasts growth of 1.7% for 2011, 2.5% next year, 2.9% in 2013, 2.9% in 2014 and 2.8% in 2015.
- OBR forecasts inflation to remain between 4% and 5% for most of this year, dropping to 2.5% next year and 2% in two years' time.