George Osborne has unveiled tax breaks for beer drinkers, drivers and first time buyers as he admitted the economy is still struggling.
The Chancellor's Budget contained a string of moves designed to ease the cost-of-living, including a 1p cut in the price of beer and the cancellation of a planned fuel duty hike.
A £130bn mortgage guarantee scheme will help people without big deposits buy homes, with interest-free loans worth 20% of the value of a new build property also available.
And in what he called a Budget for "the aspiration nation", Mr Osborne said the income tax threshold will rise to £10,000 in 2014, a year earlier than planned.
The Chancellor also gave small businesses a boost by unveiling a new employment allowance which will save employers £2,000 on their National Insurance bills.
But he was forced to admit that the recovery was taking far longer than expected as he confirmed growth forecasts for this year have been cut in half to just 0.6%.
The independent Office for Budget Responsibility does expect Britain to avoid a triple-dip recession but public borrowing will be higher because of the floundering recovery.
It is now forecast to hit £114bn this year instead of £108bn before eventually falling to £42bn in 2017/18.
Driving home the problems facing Britain, figures released hours before the Budget showed the first rise in unemployment for a year - up 7,000 to 2.52m.
But despite growing calls to change course from his austerity regime, Mr Osborne insisted there could be no turning back.
"It is taking longer than anyone hoped but we must hold to the right track," he said.
Labour leader Ed Miliband claimed: "All he offers is more of the same - higher borrowing and lower growth - a more of the same Budget from a downgraded Chancellor.
"He is the wrong man in the wrong place at the worst possible time for the country."
But Mr Osborne declared: "This is a Budget that doesn't duck our nation's problems. It confronts them head on. It is a Budget for an aspiration nation. It is a Budget for a Britain that wants to be prosperous, solvent and free."
He fleshed out plans for a further £2.5bn in Whitehall cuts over the next two years to fund capital spending projects.
And he confirmed plans to help working parents with tax-free childcare support and to introduce a flat rate pension by 2016.
The Capital Gains Tax holiday will also be extended and corporation tax cut further by 1% to 20% in April 2015.
But there will be anger at the extension of the 1% public sector pay cap to 2015/16, which came as civil servants staged a 24-hour strike.
There will also be further cuts in the spending review for 2015/16, up from £10bn to £11.5bn.
And the Chancellor announced that the Bank of England's remit was being overhauled but that it will keep its inflation target of 2%.
The House of Commons was extremely rowdy as Mr Osborne delivered one of the most important speeches of his career.
Shadow chancellor Ed Balls was singled out by the deputy speaker for barracking from Labour's front bench.
The Office for Budget Responsibility (OBR) now predicts growth of 2.3% for 2015, 2.7% in 2016 and 2.8% in 2017.
This means the Chancellor is now set to borrow £55.7bn more over the next five years than he was planning as little ago as in December.
Figures do show that the deficit has fallen from 11.2% of GDP in 2009/10 to 7.4% this year and is set to continue dropping until it reaches 2.2% in 2017/18.
But the OBR confirms Mr Osborne will miss his target for total public sector debt to start falling as a percentage of national income by 2015/16.
It now forecasts this will rise to a peak of 85.6% of GDP or a staggering £1.58tn in 2016/17 - an increase of 6.4% on its previous figures.
There was consternation as the speech began when the London Evening Standard newspaper posted its front page, complete with full details of the Budget, on Twitter.
The paper suspended the person behind the tweet and launched an investigation as it issued a fulsome apology for breaking the embargo.
Editor Sarah Sands said: "We have immediately reviewed our procedures. We are devastated that an embargo was breached and offer our heartfelt apologies."
John Longworth, director general of the British Chambers of Commerce, criticised Mr Osborne for not going far enough to support business and boost growth.
"We are at an unprecedented moment in economic history, and the Government should be doing everything in its power to get the economy moving", he said.
But Simon Walker, director general of the Institute of Directors, said: "We applaud this Budget. The Chancellor has stuck to his guns and held his nerve - which is exactly what we wanted to see.
"Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it."