Chancellor Gordon Brown has cut the basic income tax rate from 22p to 20p in the pound but the cost of cigarettes, beer and gas guzzlers will rise under the Budget presented today.

In what is widely tipped to be his last Budget, Mr Brown announced duty on beer and cider rises 1p a pint from Sunday, wine 5p and cigarettes 11p and road tax for gas guzzling cars goes up to £300 this year.

Motorists have been given a reprieve from this year's 2p fuel duty rise, which will be postponed for six months, while the duty on spirits was frozen.

In a bid to "do something more" to cut smoking, Mr Brown also lowered the VAT from 17.5 per cent to 5 per cent on nicotine patches and other aids to quitting.

"This is a Budget for Britain's families," Mr Brown told Parliament.

Unemployed lone parents in London will receive a total of £60 a week in tax credits to help them cope with the extra costs of living in the capital.

"This is a Budget to expand prosperity and fairness for Britain's families - and it is built on the foundation of the longest period of economic stability and sustained growth in our country's history."

Mr Brown said the income tax cut would make it the "lowest basic rate for 75 years".

For the coming year, cash for investment and reform in the NHS in England will rise by £8billion, said Mr Brown.

Intelligence and counter-terrorism will receive an additional £86million for the coming year, and there will be a 25 per cent increase in science funding.

Mr Brown said he wanted to help the 17million savers with ISAs, raising the tax-free threshold from £3,000 to £3,600 in April next year.

He rejected a Conservative plan for an extra tax on airlines to reduce carbon emissions, saying it did not stack up.

Extra cash for public services comes from efficiency savings, Mr Brown said, and the £36billion sale of Government assets, ahead of the publication of the Comprehensive Spending Review, which will take place in the autumn rather than July as previously expected.

Mr Brown told the Commons the British economy was growing, alongside the US, faster than all the other G7 economies - between 2.5 per cent to 3 per cent for 2008 and 2009.

In this economic cycle, current spending and revenues show a surplus of £11bn, which the chancellor said met his Golden Rule.

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