Budget: George Osborne Defends Economic Plans

George Osborne has defended his Budget as he pointed to Cyprus and warned Britain's problems "could be a lot worse".

In an interview on Sky News, the Chancellor insisted the public understood he had to take tough decisions to secure the country's future.

"People know that it is a difficult situation out there but it is a situation that could be very much worse for Britain if we didn't take these decisions," he said.

New figures showing public borrowing down to £2.8bn in February - the lowest for the month since 2008 - provided a chink of light for Mr Osborne on Thursday.

But Labour continued to attack his "aspiration nation" Budget, warning it does not do enough to boost growth and questioning its central plan for a major new mortgage scheme.

Shadow chancellor Ed Balls said: "You could have people on very high incomes going into buy-to-let or buying a second home and getting a taxpayers' guarantee up to £600,000. The devil is in the detail there."

Appearing on Sky News, Mr Balls added: "The Chancellor said 'I will secure the recovery, I will keep the AAA credit rating'. It's all gone. It's a long hard road to nowhere with this Chancellor at the moment."

But Mr Osborne accused the Opposition of having no "serious economic alternative" and resorting to "personal abuse" instead of setting out its own plans.

George Osborne and Ed Balls bumped into each other in Millbank

He said: "It is a tough economic situation and of course if it is a difficult job dealing with that situation but it is a job the whole British people is facing at the moment.

"I think the British public understand there is not a simple or easy answer to our country's problems but just the painstaking work of putting right what went wrong."

MPs are debating the details of the Budget in the House of Commons today.

Central to Mr Osborne's plans are the moves to stimulate the housing market but his measures have sparked fears of a new debt-fuelled boom.

The Government is set to plough billions into boosting home ownership by underwriting the mortgages of hundreds of thousands of people.

Interest-free loans lasting five years and worth up to 20% of the value of new build homes under £600,000 will be available.

And from next January, taxpayers' money will be used as a guarantee for home buyers who can only pull together small deposits.

Mr Osborne claimed on Thursday that the measures would help boost the flat housing market and provide jobs in construction as new homes were built.

He insisted: "It doesn't mean a return to five or six years ago when you had those big 125% Northern Rock mortgages.

"It is just saying to people if you can get together a decent deposit, we are going to help you buy a home. People are being robbed of that at the moment because of the problems in our financial markets."

In his Budget, there were further tax breaks for drinkers, drivers and working parents.

There was a 1p cut in the price of beer as the beer duty escalator was also scrapped, and a planned fuel duty hike was cancelled.

Small businesses will be boosted by a new employment allowance which will save employers £2,000 on their National Insurance bills.

And plans to raise the income tax threshold have been brought forward to 2014, meaning earnings up to £10,000 will be tax free.

But those announcements could not disguise the dismal economic figures and forecasts that showed the austerity era will last a decade.

The Chancellor with a couple who bought a flat using shared equity

Official growth forecasts for this year have been cut in half to 0.6% because the recovery is so weak, and next year's figure has also been downgraded.

The independent watchdog the Office for Budget Responsibility (OBR) also warned that the decline in borrowing seen in the first years of the coalition "no appears to have stalled".

Public borrowing predictions for every year to 2017/18 have been revised upwards, putting the total £55.7bn higher than it was just three months ago.

The OBR expects Britain to narrowly escape an unprecedented triple-dip recession, predicting a small increase in GDP in the first quarter of this year.

But debt is not set to fall as share of national income until two years after Mr Osborne's original 2014 target.

It is due to peak at 85.6% of GDP - equal to a massive £1.58tn - in 2016/17 - an increase of 6.4% on previous forecasts.

Labour condemned Mr Osborne as a "downgraded Chancellor" who was simply offering "more of the same" and some experts criticised him for not going far enough to boost growth.

Research for consumer group Which? carried out immediately after the Budget found 89% of voters backed the rise in the personal tax allowance and 87% supported the fuel duty move.

But it also suggested that a third of the public now feel less confident about the prospects of the economy this year, and 28% feel less confident about their own finances.

Some 59% said the Government should rethink its economic plan and 44% expect their personal finances to worsen over the coming year.

In another blow to Mr Osborne, hours after his Budget was delivered peers inflicted a major defeat on the Government over its "shares for rights" plan.

Former Civil Service chief Lord O'Donnell linked the plans to slavery and ex-Tory minister Lord Forsyth of Drumlean said they were "ill-thought through, confused and muddled".

:: Shadow chancellor Ed Balls will be among the guests on Jeff Randall Live on Sky News tonight at 7pm.

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