George Osborne has boasted the British economy is growing at twice the rate expected just nine months ago, and faster than any other major country.
Delivering his Autumn Statement, the Chancellor said Britain was set to be back in the black by 2018/19 – but warned the job was "not yet done" and pledged "a recovery for all".
To Tory cheers, he declared: "Britain's moving again; let's keep going."
But Shadow Chancellor Ed Balls accused Mr Osborne of being in "complete denial" and told the Commons living standards for families were falling "year on year on year".
The Chancellor believes improving economic data justifies his austerity plan, but he made plain the tough medicine would continue.
The most controversial new measure to tackle the nation's debt mountain was to tell those under the age of 50 they will have to work into their seventies before drawing down the state pension.
Unions warned young people are facing the prospect of working "until they drop" under the new retirement age plans.
People now in their 40s will not now get the state pension until they are 68, while those in their 30s will have to wait another year until they are 69.
And the young jobless should lose benefits as he ordered a fresh round of £3billion in spending cuts over three years.
Ben Bradshaw, Labour MP for Exeter, said: "Everyone understands that because we're living longer we'll have to work later, but what worries me about this Government is that all of the burden is being placed on young people who will now not only have to work till 70 but have student debts and can't get on the property ladder. We're creating real generational injustice."
The autumn statement, a half-yearly update of tax and spending plans, are based on the economic projections provided by the independent Office for Budget Responsibility.
Mr Osborne warned higher growth, lower borrowing and falling unemployment would be "squandered" if he does not stick to his austerity programme.
In March, the OBR forecast growth of 0.6% in 2013 and 1.8% in 2014. But yesterday it dramatically upgraded the figures for this year to 1.4%, the highest in-year increase since 1999 and making the British economy the fastest growing in the developed world. It also predicted the UK budget deficit would be eradicated in 2018/19 for the first time in 18 years.
Other key announcements included scrapping the planned 2p a litre fuel tax rise; an extra £1 billion of cuts from the budgets of government departments for each of the next three years; and a cap on total government welfare spending to start in 2015.
Giveaways confirmed included a tax break for married couples from 2015, trumpeted by the Conservatives, and free school meals for all infant age school pupils, a flagship Liberal Democrat policy.
George Eustice, Conservative MP for Camborne and Redruth and a Government minister, said: "It is clear the economy is recovering and that George Osborne's plan is working but it is also clear that whilst a lot has been achieved there is still more to do.
"I particularly welcomed the further freeze in fuel duty that is so important for households and businesses in Cornwall as well as the scrapping of employers' National Insurance for under-21s and helping 16 and 17-year-olds to find apprenticeships. Young people need a break in life and getting that first job is absolutely critical but can be very difficult."
Andrew George, Liberal Democrat MP for St Ives, said: "This was three-quarters a Liberal Democrat autumn statement. It shows what can be achieved if parties come together to provide political stability, in the national interest.
"There's plenty of room to have strong disagreements on detail – and I'll make sure that the Liberal Democrats continue to stick up for the underdog. But the broad direction has to be the right one."
Plan for 2p-a-litre fuel tax rise to be scrapped
The pressure on hard-pressed rural motorists has been eased slightly as Chancellor George Osborne scrapped a 2p-a-litre fuel tax rise.Mr Osborne had first announced at this autumn’s Conservative Party conference that the 2014 rise would be cancelled – but only if this was financially possible.Countryside residents in the region are more reliant on a car than urban counterparts given the parlous state of rural public transport.The freeze was among a slew of measures to tackle the so-called “cost of living crisis”.Among the heavily trailed “giveaways” were an income tax allowance transfer for married and civil partnership couples worth £200 a year, free school meals for infants to save around £400 a year, and reform of energy bills to knock almost £50 off.Mel Stride, Conservative MP for Central Devon, said: “This was an important statement for my constituents, especially the freeze in fuel duty which will save £11 every time my constituents fill up compared with what it would have been under Labour plans. In remote rural areas fuel prices really matter.”In the House of Commons, Oliver Colvile, Conservative MP for Plymouth Sutton and Devonport, welcomed the Chancellor’s pledge to spare councils from another round of Whitehall budget cuts, and said it was reminder to local authorities that they “no longer need to increase council tax”. Mr Osborne replied: “If his council does not deliver a council tax freeze, he can ask Labour why it is putting up the cost of living for his constituents.”But Alison Seabeck, Labour MP for Plymouth Moor View, said: “The Chancellor spoke of economic recovery and improved predictions for future growth, however this simply is not being felt by thousands of Plymouth families who are experiencing higher prices to heat their homes, stagnant wages and have a Chancellor who fails to stand up for them, and sides with the rich.”
At a glance:
Forecast for 2013 economic growth upgraded from 0.6% to 1.4%, and for 2014 from 1.8% to 2.4%.The OBR forecast of growth for the four years from 2015 has been forecast at 2.2%, 2.6%, 2.7% and 2.7%. Employment will rise by 400,000 in 2013, says Office for Budget Responsibility (OBR). Unemployment forecast to fall from 7.6% this year to 7% in 2015, and 5.6% by 2018.Public sector net borrowing is forecast to be 5.6% in 2014, then 4.4%, 2.7% and 1.2% in subsequent years, with a small surplus by 2018/19.The Government will borrow £111 billion this year – £9 billion less than predicted in March. Borrowing to fall to £96 billion next year, then £79 billion, £51 billion and £23 billion in following years.Debt is forecast at 75.5% of GDP this year, rising to 78.3% next year, and 80% in 2015, before falling to 79.9% in 2016, then 78.4% and 75.9% in following years.PENSIONSState pension to rise by £2.95 a week from next April.Pensioners to get chance to make voluntary national insurance contributions to boost retirement income.New principle that people spend a third of adult life in retirement implies increase in state pension age to 68 in mid-2030s, 69 in late 2040s.A package of measures to tackle tax avoidance, evasion, fraud and error is expected to raise more than £9 billion over next five years.Capital gains tax will be imposed on non-residents who sell residential property in the UK from April 2015.A new £1,000 transferable tax allowance for married couples from April 2015 will be “just a start”. Rolling back green levies will take an average £50 off energy bills.Planned petrol tax rise of 2p/litre next year is scrapped.Employer national insurance contributions for staff under 21 to be removed.Infrastructure plan includes agreement with Hitachi on next nuclear power station in Anglesey, deal with insurance industry to invest £25 billion and support for long-term investment in offshore wind.The Chancellor announced commitment to invest in quantum technology, tax allowance halving taxes on early profits in shale gas, and a new science centre in Edinburgh University named after the discoverer of the Higgs-boson particle.New loans worth £1 billion will be made available to unblock housing developments, including in Manchester and Leeds.Expansion of free school meals to all schoolchildren in reception, year 1 and year 2.Jobseekers 18-21 without basic maths/English must train in these or lose benefits.Job seekers aged 18 to 21 will be required to start a traineeship, work experience or community work after six months or lose their benefits.HM Revenue and Customs will fund employers directly for apprenticeships with an extra 20,000 higher apprenticeships over next two years.An additional 30,000 student places will be offered next year, with the cap on student numbers abolished in 2015.BUSINESSExport finance capacity for UK businesses will be doubled to £50 billion to help firms break into emerging markets.The small business rate relief scheme will be extended for one year from April 2014. Inflation increase in business rates will be capped at 2% from April 2014.New reoccupation relief will encourage the use of vacant town centre shops.