I have looked at these programmes in detail, and I know they can be delivered on this revised timescale.

It will put people to work, renovating infrastructure, modernising schools, and creating more fuel efficient homes.

All vital for the future prosperity of the country and supporting jobs in key industries.

This is only possible because I am prepared to take action now.

Mr Speaker, this spending will help put money into the economy in the coming months.

But to prevent the recession deepening, we also need to take action to put money into the economy immediately.

I have looked at a range of ways which might achieve this.

I have decided that the best and fairest approach is a measure which will help everyone.

To deliver a much-needed extra injection of spending into the economy right now.

I therefore propose to cut VAT from 17.5 to 15 per cent until the end of next year.

This VAT reduction will come into effect next Monday on December 1st.

It will continue for 13 months before returning to the present level of 17.5 per cent at the beginning of 2010 by which time we expect the recovery to be underway.

This temporary reduction is the equivalent of the Government giving back some 12 and a half billion pounds to consumers to boost the economy.

It will make goods and services cheaper and, by encouraging spending, will help stimulate growth.

And this is only possible because I have rejected advice to take no action.

Mr Speaker, I am also taking additional measures to support people on modest and middle incomes.

In May I announced an increase, for this year alone, in the income tax personal allowance - a benefit of £120 a year for basic rate taxpayers.

I have decided to make this temporary tax cut permanent. And to increase it to £145 a year in April.

This will benefit 22 million basic rate tax payers.

My announcement in May helped 4.2 million households affected by the abolition of the 10p rate.

This announcement will help another half a million households - not just this year but for good.

But along with these immediate steps to help businesses and families now, I am also announcing measures to ensure sustainable public finances in the medium term.

I considered a number of options to raise revenue in future years.

And I have chosen those which are fairest - and affect those who have done best out of the growth of the last decade.

Mr Speaker, by 2011 we expect the economy to be recovering strongly, profits rising and incomes growing at close to 4 per cent, as they have over the last decade.

I propose, therefore, from April 2011 to increase by half a percent all rates of National Insurance Contributions, for both employees and employers.

But to ensure this increase does not fall on those on modest incomes, I have also decided, at the same time, to raise the starting point for national insurance to align it with that of income tax.

No one under £20,000 will pay any more national insurance contributions as a result.

Second, those with the highest incomes have seen their earnings almost double since 1996.

So again from April 2011, I intend, only on income over £150,000, to introduce a new rate of income tax of 45 per cent.

This higher rate of tax will only affect the top one per cent of incomes.

I also intend to withdraw the long-standing anomaly of the income tax system, by which the personal allowance is worth twice as much to higher-rate than basic-rate taxpayers.

Again, I will protect those on middle incomes and this will only affect those earning over £100,000, the top 2 per cent.

So from April 2010, those with incomes between £100,000 and £140,000 will see the value of their personal allowance reduced - so they get the same benefit as a basic rate taxpayer.

For people with incomes above £140,000 I will withdraw the full value of the personal allowance.

I also intend to maintain the ceiling on tax relief given to people with pension funds up to £1.8m, until and including 2015/16.

The reduction in VAT lowers the amount of tax paid on tobacco, alcohol and petrol.

In addition, petrol prices have come down, by 7 pence a litre last month alone.

So I will offset the VAT reduction, by increasing all these duties by an amount which should keep the overall cost to consumers the same this year.

Of course, if we see a stronger economy and increased tax revenues, we will review whether we need to take these tax raising measures.

But I also believe it is right that, as we all benefit fairly from the exceptional measures we take today, we should all share fairly the burden of the future.

Taken together these steps will ensure that there is extra money flowing into the economy now when it is needed most, but we can reduce borrowing as growth returns.

And as a result of my decisions today to provide support now and balance the books in the future, I will bring the current budget back into balance by 2015/16.

Fiscal support now and fiscal sustainability both now and in the future.

Mr Speaker, small and medium firms are the engine of our economy.

They make up the vast majority of businesses and employ around 60 per cent of the private sector workforce.

They also are facing continuing difficulties with cash flow and credit.

I know that many profitable businesses are concerned that these twin problems threaten their future. I am determined to help them.

So my objectives today for business are threefold.

First, help equip them for the challenges of the future.

Second, to improve access to credit and ease cash flow.

And third, to reduce burdens on them at this difficult time.