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Tax on cigarettes will go up eight pence per packet, in line with inflation, while tax on beer will go up one pence per pint and four pence per bottle of wine. Duty on spirits and cider is frozen.

The annual rise in fuel duty will be delayed for six months.

The Budget also includes plans to raise spending on the NHS by ten per cent each year until 2008 and to put an extra £8.5bn into education by 2007/08.

There will be extra funding for early years education and childcare of £669m by 2007-08 compared to 2004-05.

The Budget includes a £100 payment to pensioner households with someone aged 70 or over to help with their council tax bills.

Efficiency gains across the public sector of 2.5 per cent a year through a freeze in administration costs and reductions in staff levels in several major departments will release resources for front line services.

The Chancellor also announced plans to relocate 20,000 civil service posts to the regions. Merging the Customs and Excise and Inland Revenue Departments will mean that businesses have a single tax service to deal with and will cut staff posts by 10,500.

The Budget projections show that: the economy is expected to grow by 3 to 3.5 per cent in both 2004 and 2005, as forecast in last year's Budget and Pre-Budget Report;  inflation is set to remain low and close to the government's target; and  the public finances remain sound.

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