Delivering one of his most difficult Budgets yet, the Chancellor was forced to admit that government debt will rise as a proportion of GDP this year - breaking a key rule he had set himself - and growth forecasts have been sharply revised down.
But he insisted the UK was “well placed” to handle the worldwide slowdown and the deficit would still be wiped out by 2019-20 - thanks in part to another £3.5 billion of spending cuts.
The embarrassing debt admission - which followed the breach of his welfare spending cap - came in a speech to MPs that included a number of surprise measures as well as a host of grim economic data.
Mounting an impassioned defence of his austerity programme, Mr Osborne argued it had saved the country hundreds of millions of pounds and prevented the next generation being “burdened”.
He insisted the policies meant he was able to give tax cuts for millions of hard-working families - with the personal allowance rising to £11,500 next year and the higher 40p rate going up to £45,000.
Fuel duty will be frozen for the sixth year in a row after he defied expectations of an inflation-linked rise and beer duty has also been put on hold, while corporation tax will fall to 17% by 2020 and there will be tax incentives for smaller businesses.
However, a 0.5% increase to insurance premium tax will generate £700 million to boost flood defences, and in the wake of the Google tax bill row, there will be a fresh £12 billion crackdown on tax dodging by firms and individuals.
The most eye-catching news was the introduction of a sugar tax by 2018, which will see companies charged based on the level of sugar in their products. The £520 million due to be raised will be used to help support school sport, he said.
MAIN POINTS AT A GLANCE...
• All primary and secondary schools out of local authority control in England by 2020•
• Sugar tax on the soft drinks industry•
• Forecast of one million more jobs over the course of this Parliament•
• New crackdown on tax dodging•
• Tobacco duty up by 2% above inflation from 6pm - more still on hand-rolling tobacco•
• Beer, spirits and cider duty frozen•
• ISA limit increased to £20,000•
• Lifetime ISAs for young people•
• 40p rate threshold rises to £45,000 from 2017