Britain is walking tall again, insists Osborne, as he uses final Budget to boost Tories' election chances

In a widely expected move, Mr Osborne recognised the "pressing danger" to the North Sea oil and gas industry because of the plunge in oil prices and reversed in full the 12 per cent tax rise he slapped on its profits in 2011.

He also announced other tax breaks for the embattled sector to boost investment, exploration and production in an assistance package worth £1.3bn over five years.

Sir Ian Wood, the highly respected oil analyst, said: "Government are to be congratulated for recognising the need for this step change in the fiscal regime as essential to make the UKCS more internationally competitive."

Malcolm Webb, Chief Executive of Oil and Gas UK, also welcomed the Government changes, saying they laid the "foundations for the regeneration of the UK North Sea" while Alistair Carmichael, the Scottish Secretary, claimed they would help save "thousands, possibly tens of thousands of jobs".

With growth figures revised up and debt falling, the Chancellor insisted that, after five years of tough choices, the UK Government's economic plan was working.

"Today, I report on a Britain that is growing, creating jobs and paying its way. We took difficult decisions in the teeth of opposition and it worked; Britain is walking tall again," he declared.

In a highly political economic statement, he tried to kill off a number of Labour lines of attack; claiming the cost-of-living crisis was over because living standards would be higher this year than in 2010 and that there would not be 1930s levels of drastically reduced spending because the growing economy would end the squeeze on public finances a year earlier than planned.

Mr Osborne told MPs he now aimed to run a surplus of £7bn by 2019/20, a major reduction in the £23bn surplus he forecast in his Autumn Statement, which meant he would him room to ease spending cuts.

But Labour described the Budget as "a flop" and insisted the Tories were still intent on major cuts that would take the country back to 1930s levels of public spending.

Ed Miliband accused Mr Osborne of having "failed working families", insisting: "Never has the gap between the Chancellor's rhetoric and the reality of people's lives been greater than it was today. This is a Budget that people won't believe from a government that is not on their side; because of their record, because of their instinct, because of their plans for the future."

The SNP said the Chancellor had "blown his last chance" to deliver for Scotland.

"Today, George Osborne could have delivered a Budget focused on delivering economic growth by tackling inequality. He has not; he has decided to continue with his utterly failed austerity agenda," claimed Stewart Hosie, the Nationalists' deputy leader.

Meantime, Nigel Farage said: "This government has evidently failed in its promise to the British people to eradicate the deficit and whilst it took Labour 13 years to double the debt this government has done it in five.

"Mr Osborne talks about a long-term economic plan, today he pushed all his targets back and created a long grass economic plan," insisted the Ukip leader.

The Chancellor used the last major act of the Lib-Con Coalition to woo various sections of society in a bid to convince them to give the Tories another term in office.

As widely expected he confirmed another rise to the tax-free personal allowance by £200 to £10,800 in 2016 and £11,000 in 2017.

Having helped workers, he also targeted savers with the creation of a new personal allowance, which will abolish the savings tax for 17m people and mean 95 per cent of all savers will pay no tax on their savings.

"People have already paid tax once on their money when they earn it; they shouldn't have to pay tax a second time when they save it," stressed the Chancellor, noting: "At a stroke we create tax-free banking for almost the entire population."

In a further help to savers, Mr Osborne announced a new "fully flexible ISA", enabling them to take money out of the tax-free account but then be able to put it back in later in the year without losing any of their tax-free entitlement.

Together with the already announced plans to allow pensioners to cash in their annuities, he said the Government was conducting a "savings revolution".

In a move to help first-time buyers across the UK get on the property ladder, a new help-to-buy ISA will be established, which will see the Government add £50 to every £200 people put away towards a deposit up to a maximum of £3000.

There was yet again another penny cut from beer duty, a two per cent reduction in the duty on scotch whisky and cider while that on wine, tobacco and fuel was frozen.

The markets responded positively to the Budget, rising more than 100 points to end the day on 6945.

In a packed Commons chamber, Mr Osborne announced to Tory cheers that he would meet his promise made in 2010 that debt would be falling as a share of national income by the end of the parliament.

He explained a combination of lower welfare bills, falling interest rates and further sales for the bailed-out banks meant borrowing was set to fall faster than forecast.

"The hard work and sacrifice of the British people has paid off. The original debt target I set out in my first Budget has been met.

"We will end this parliament with Britain's national debt share falling. The sun is starting to shine - and we are fixing the roof," he boasted.

The Chancellor explained that because the national debt share was falling a year earlier than forecast in the Autumn Statement, the squeeze on public spending was due to end a year earlier too.

"In the final year of this decade, 2019/20, public spending will grow in line with the growth of the economy. We can do that while still running a healthy surplus to bear down on our debt."

Mr Osborne said the Office for Budget Responsibility had ticked up its growth forecast for this year to 2.5 per cent compared to the 2.4 per cent it was predicting at the time of the Autumn Statement in December. Growth would also be slightly higher next year at 2.3 per cent as against a previous forecast of 2.2 per cent, he noted.

As well as announcing another crackdown on tax evasion and avoidance, the so-called Google Tax, the Chancellor also said he would increase the rate of levy on banks to 0.21 per cent of their balance sheets, which, he said, would raise an additional £900m a year.

He confirmed plans to scrap annual tax returns and replace them with "digital tax accounts", allowing people to manage their affairs using smartphones or computers.

In a clear election pitch, Mr Osborne added: "The critical choice facing the country now is this: do we return to the chaos of the past or do we say to the British people: let's go on working through the plan that is delivering for you?"

But in response, Mr Miliband said there had never been such a large gap between the Chancellor's rhetoric and the reality of people's lives.

The Labour leader condemned Mr Osborne for failing to mention investment in the NHS or public services.

He set out the "inconvenient truth" of the Chancellor's record, claiming he had failed Britain's families by presiding over falling wages, not building enough homes and creating too many low-paid, insecure jobs.

"People are £1600 a year worse off, the next generation has seen wages plummet and tuition fees treble. You have built fewer homes than at any time for nearly 100 years. And it's certainly not a truly national recovery when there are more zero hours contracts than the population of Glasgow, Leeds and Cardiff combined."

He added: "That is the reality of the lives of working people. These are the facts, these are the inconvenient truths of his record;it's a recovery for the few from a government of the few."

Elsewhere, Mr Carmichael claimed the UK economy was now in a "virtuous cycle", where inflation was low, employment rising, tax revenue increasing and debt falling. "I feel good about the Budget," he insisted.

Today, his Liberal Democrat colleague Danny Alexander, the Chief Secretary to the Treasury, will set out their party's alternative Budget, which is likely to feature greater tax rises than planned by the Tory Chancellor.