Chancellor John Healey has announced tax increases on landlords, savers and banks to fund cost-of-living support for millions of households, as Britain's economic outlook deteriorates.
In his first Budget, Healey unveiled a £2.6billion package providing £100 payments to 20 million households in council tax bands A to D this January, helping offset energy bills forecast to rise by £460 a year.
The measures will be funded through a four percentage point increase in taxes on savings and property income from April, alongside a temporary doubling of the bank profits surcharge from 3% to 6%.
The changes will push Britain's tax burden to another postwar high, while higher-rate taxpayers will pay 44% on savings and property income and additional-rate taxpayers almost 50%.
The Office for Budget Responsibility (OBR) warned that landlords could pass higher costs on to tenants through increased rents.
Healey said the measures would give households “breathing space” amid rising global economic pressures.
“This is a budget for the working people of Britain delivered at a time when global pressures are hitting people at home,” he said.
However, the Chancellor faced criticism for postponing major decisions on defence spending and welfare reform until next autumn.
The OBR downgraded its growth forecast for next year and warned that living standards would stagnate amid higher inflation and interest rates.
Real household disposable income is expected to fall next year, while government borrowing will be £34billion higher than previously forecast over the next two years.
The Chancellor's fiscal headroom has narrowed to £15billion, leaving public finances vulnerable to further economic shocks.
Other announcements included delaying a planned 5p fuel duty increase until July and targeting defence spending of 3% of GDP by 2030, without identifying how the additional £10billion annual cost would be funded.
Unemployment is forecast to exceed 5% next year, while sickness and disability benefit spending is expected to surpass £100billion by the decade's end.