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Economic growth this year is expected to be 2.75%, rising to between 2.75% and 3% next year, he added.
By mid-2007 Mr Brown said he expected inflation to be at its 2% target.
He said 10 years ago, Britain was bottom of the G7 league for national income per head but was now second only to the US.
From February, air passenger duty will rise from £5 to £10 for most flights.
Tax discounts for bio-fuels will be extended.
Basic state pension to rise 3.6% in April and pension credit minimum guarantee to rise £5 for single people and £7.65 for couples.
The overall surplus for this economic cycle is £8bn, meeting the "golden rule", while borrowing will fall from 2.3% of national income to 1.3% by 2011.
Capital investment in education next year will be £8.3bn, on transport £9.6bn and on housing nearly £8bn.