Chancellor Alistair Darling today promised a Budget to speed economic recovery by protecting jobs and spreading prosperity.
Opening his Budget speech, Mr Darling warned that Britain faced the most serious global economic turmoil for over 60 years.
But he said the Government would protect investment in schools, hospitals and other key public services, while rebuilding the financial services sector.
"Today's Budget will continue to help people through this global recession and prepare Britain for the opportunities of the future."
Mr Darling said the impact was being felt in every continent, country and community.
"When the world economy was plunged into deep crisis in the 1930s, the response, both nationally and internationally, was too little and too late.
"This failure to act turned a serious downturn into a prolonged depression.
"We will not repeat those mistakes again."
He said governments across the globe had taken "decisive action".
"This action, taken promptly and decisively, gives us good grounds for confidence."
He also said the Budget "builds on the substantial help for people and businesses in the Pre-Budget Report in November.
"It builds on the steps we have taken to recapitalise and restore confidence in our financial institutions.
"And it builds on the outcome of the G20 Summit in London this month, when the world's leading economies came together to agree unprecedented co-ordinated action to speed global recovery."
Mr Darling predicted the economy would start growing again "towards the end of the year."
He continued: "I am also confident that, as the global economy recovers to double in size over the next 20 years, Britain can, and will be, a world leader.
"This Budget will help make sure we seize this opportunity."
He added: "As I told the House in November, we and other countries have been battling against a succession of shocks which have hit the world economy.
"At the end of 2007, problems in international mortgage markets began to put a damaging squeeze on credit."
He said the collapse of Lehman Brothers "shattered already fragile confidence and brought the international financial system to its knees.
"Since then, an extraordinary international financial crisis has fed into the wider economy, causing a steep and widespread world recession."
Mr Darling said the crisis that started in the developed economies had spread to emerging and developing countries.
"For the first time since the Second World War, the world economy is expected to contract this year."
He said "considerable economic uncertainty" over the last few months had "fully justified the action we, and other countries, have taken to support business and people.
"Since the autumn, we have put the banks on a stronger footing, cleaning up their balance sheets, and helping boost bank lending.
"As a result, banks will be able to lend billions of pounds more this year and next, to homebuyers and businesses.
"Getting credit flowing again is the essential precondition to economic recovery."
Measures announced in the Pre-Budget Report, including an income tax cut and VAT reduction, were putting £20 billion into the economy.
"There is increased support for pensioners, as well as investment in vital public services and accelerated capital projects - protecting thousands of jobs.
"And because of the reforms we have made to the welfare system since 1997, this comes on top of extra help when families need it most.
"I understand the anxiety behind calls to support those whose wages have fallen.
"This is exactly the support our flexible system can - and is - already offering.
"As shorter working weeks or irregular patterns reduce wages, those on tax credits can see an automatic increase to compensate for the loss of income."
He said the Bank of England interest rate of half a per cent was "the lowest it has ever been", reducing the cost of mortgages and loans.
The Bank had been given new means to support the flow of credit and put money into the economy.
Inflation had come down "which means people's income will go further.
"Taken together, the total policy support for the UK economy is expected to protect up to half a million jobs."
There has been "unprecedented co-ordinated action at an international level" to tackle the recession.
The G20 summit agreed over one trillion dollars of additional support for the world economy.
But Mr Darling said: "There are no quick fixes. No overnight solutions."
He added: "Now we must make sure we deliver on these agreements - starting at the meeting of world finance ministers in Washington this week.
"And I want the next meeting of EU finance ministers to be focused on rebuilding growth in Europe, based on the foundations laid by the G20.
"We also need a clear path to recovery - both fiscally and by investing to build Britain's future."
Mr Darling said no country could insulate itself from the worldwide downturn.
"As an open economy, the world's sixth biggest exporter of goods and the second largest exporter of services, we are affected by the collapse in demand in other countries," he said.
The UK economy contracted by 1.6% in the last quarter of 2008.
"For the first quarter of this year, I expect the economy will again contract by a similar amount.
"And my forecast for GDP growth for the year as a whole will be -3-1/2% - in line with other independent forecasts."
Mr Darling said: "Because of our underlying strength, the measures we are taking, domestically and internationally, I expect to see growth resume towards the end of the year."
He said IMF forecasts published today show that the British economy "will suffer less than Germany, less than Japan, less than Italy, and less than the euro area as a whole this year."
He forecast growth of 1.25% in 2010 "because of the pick up in world demand, the continuing benefit of lower prices and the substantial recovery measures put in place."
Mr Darling added: "In future, the sources of our growth will be more varied - and we need to ensure we play to our country's strengths.
"It will increasingly come from an expansion in investment by businesses in the industries of the future, such as low-carbon, advanced manufacturing and communications.
"These industries, together, are as important to the British economy as the financial services sector."
He said growth would also be driven by the opportunities to export as the global economy doubled in size in the next two decades.
"From 2011, I am forecasting that the economy will continue to recover, with growth of 3.5% from then on.
"To account for the impact of the global shock, I have further adjusted trend output - or the productive potential of the economy.
"But in future years, the economy will recover towards a trend rate of growth of around 2.75%."
The Chancellor said inflation would "continue coming down sharply", reaching 1% by the end of this year.
He said: "I am today writing to the Governor of the Bank of England, in the usual way, to confirm that the inflation target remains unchanged at 2%.
"Retail Price Index inflation is forecast to remain negative, falling to -3% by September, before moving back above zero next year."
He acknowledged "the deepening global recession has had an impact on the public finances, here and in every country across the world.
"In this Budget, I will set out steps to ensure they are on a sustainable path.
"And due to the measures that I will announce today, the current deficit is expected to halve within four years."
"It is not in any Government's power to prevent all job losses.
"And even when the recovery is under way, it will take time for unemployment to start falling."
But he said Governments must give people targeted help to find a new job as quickly as possible - and to gain new skills.
"This is not just morally the right thing to do but economically essential."
He said he would announce steps "to ensure short-term job loss does not turn into a lifetime on benefits."
Mr Darling announced an extra £1.7 billion of funding for Job Centre Plus and the New Deal "so that everyone can receive high-quality support".
There will be additional support for people who have been out of work for 12 months through the Flexible New Deal.
"I am also determined that we do even more to protect young people from the damaging impact of long-term unemployment.
"The alternative is a return to the days when a whole generation of young people found themselves abandoned to a future on the scrapheap.
"We will not repeat that mistake."
He said he wanted to offer a "guarantee" that from January, everyone under the age of 25 who had been out of work for 12 months would be offered a job or a place in training.
Those in training would receive additional money on top of their benefits.
The Government was working with employers to create or support as many as 250,000 jobs.
"This will include delivering local services, traineeships in social care, and other high demand sectors - as well as jobs for people of all ages in particularly badly hit communities."
He said the Government would spend over £260m of new money for training and subsidies to help young people get the skills or experience needed in sectors with strong future demand.
It would also provide extra investment to ensure that every 16 and 17 year old who wanted to stay in education or training could do so.
"To deliver this for the next two years, I am providing a further £250m this year and £400m in 2010-11," he said.
Mr Darling said the measures will enable an additional 54,000 places, in sixth forms and further education colleges, for students in the next academic year.
The Chancellor announced the Support for Mortgage Interest scheme will be maintained at the higher level of support for a further six months.
He said: "The housing market is also being held back by a lack of mortgage credit.
"The Government has taken action to encourage an increase in mortgage lending - and this year, the major UK banks will increase the availability of mortgages by around £20 billion."
He said the recession and the credit crunch had made it much harder for people to take their first step up the housing ladder.
To help he was extending the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year.
He also announced an £80m extension to HomeBuy Direct - the Government shared equity mortgage scheme.
And on help for businesses announced in November, he said: "Over 100,000 businesses, which employ well over half a million people, have taken up the option to defer their tax bills. I will continue this help.
"Some 800,000 smaller companies will benefit from the delay in the increase in corporation tax."
Mr Darling said he was extending the help which allows loss-making companies to reclaim taxes on profits made in the last three years.
"This help, which will lead on average to repayments worth £4,000 each year, will now be available for two years until November 2010.
"Well over 100,000 businesses will have their full current losses wiped out."
He also announced a "top-up trade credit insurance scheme" which will match private sector trade credit insurance provision if insurers reduce their cover to any business operating in the UK.
Mr Darling said a vehicle scrapping scheme will be implemented next month.
"It will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over 10 years old."
He said Business Secretary Lord Mandelson will announce details of the scheme which will run until March 2010.
He said he would act to put public finances on a sustainable footing in the medium and long-term.
The wider tax-take had come down sharply.
In the UK, tax as a share of GDP was 1.2% lower now than it was a year ago.
"Here and across the world, tax revenues are down and will take some years to come back up.
"At the same time, our reformed welfare state is rightly providing support to families, but it does come at an added cost to the exchequer.
"Many countries have also intervened to strengthen their banking systems.
"My public finances forecasts today include a provisional estimate for the potential cost of this - totalling 3.5% of GDP."
Mr Darling insisted that allowing borrowing to rise was "the right thing to do".
"The alternative, to take money out of the economy now, as some have suggested, would damage key public services, create more unemployment, lengthen the downturn and lead, in the end, to higher, not lower debt."
He said the Budget measures "represent a fiscal easing of about 0.5% of GDP this year - followed by a tightening of 0.8% of GDP per year until 2013-14.
"I believe this is a sensible pathway to sustainable public finances.
"It will mean, as I have said, that the budget deficit will be halved in the next four years.
"At this stage, when there is so much uncertainty, to do so quicker would prevent us helping people now, choke off the recovery, and stop us investing for the future."
Mr Darling said public sector net borrowing will be £175 billion this year, 12.4% of GDP.
"From 2010, as the economy starts to recover, and the measures announced in November and today take effect, borrowing will fall to £173 billion, then £140 billion, £118 billion and £97 billion.
"As a share of GDP, our borrowing will be 11.9% of GDP next year, and then, as we move towards balance, 9.1% in 2011-12, then 7.2% and 5.5% in 2013-14."
He said: "UK net debt, which includes the cost of stabilising the banking system, will, as a share of GDP, increase from 59% this year, to 68% next, 74% in 2011-12, 78% and 79% cent in 2013-14.
"It will stabilise and then begin to fall in 2015-16."
He expected the underlying current budget deficit to come back into balance two years later.
He said "it cannot be fair that those who should pay tax, are allowed to avoid it."
Tax loopholes and evasion schemes had been identified which, when closed, would result in £1bn of extra revenue over the next three years.
There would be new measures to help pensioners and savers on middle and modest incomes.
He said he intended to address the anomaly "which sees a tiny proportion at the top taking a large slice of the help we give people to save".
Mr Darling announced changes to pension tax relief for those with incomes over £150,000.
"It is difficult to justify how a quarter of all the money the country spends on pensions tax relief goes, as now, to the top 1.5% of pension savers.
"So from April 2011, I will restrict pension tax relief for those with incomes over £150,000 so it is gradually tapered to the same 20% rate the majority of people receive."
Mr Darling said he would not increase income tax this year.
"However, as the economy recovers and wages start to grow again, it is right that we take additional steps.
"I believe that it is fair that those who have gained the most should contribute more.
"Only those with incomes over £100,000 a year - or 2% of the population - will be affected.
"In November, I announced a new rate of income tax of 45% on incomes above £150,000 - the top 1% of taxpayers.
"In order to help pay for additional support for people now, I have decided that the new rate will be 50%, and will come in from next April - a year earlier.
"In November, I also announced that I was reducing personal allowances for the very highest earners with incomes over £100,000.
"These allowances are worth twice as much as those of basic-rate taxpayers.
"I have now decided to fully withdraw the benefit of that allowance for those with incomes over £100,000 from next April."
He said: "I will continue to monitor oil prices, but I expect that fuel duty will increase by 2p per litre in September, and then by 1p a litre above indexation each April for the next four years.
"Alcohol duties will go up by 2% from midnight tonight.
"There will be an increase in tobacco duty of 2% from 6pm tonight.
"Taken together, these measures will raise over £6bn by 2012."
He added that just as every family was looking closely at their own budget to ensure they got best value for money, so should the Government.
Mr Darling said plans to find an additional £5bn of efficiency savings in 2010-11, on top of a total of £30bn in this spending review period were on track.
"I can confirm that we are able to secure these savings that year, while increasing investment, as planned, for local health services by over 5% and for schools by over 4%.
Reports published by five independent reviews had identified extra efficiencies from 2011 which would rise to a further £9bn of additional savings a year by 2013-14.
Wordle image courtesy of www.wordle.net