GEORGE Osborne has unveiled a new era of Government support for home buyers as he tries to gloss over a Budget undermined by warnings of yet more pain to come.

The Chancellor won plaudits for his plans to under-write mortgage payments and help those buying a new home, his decision to scrap a beer duty escalator and this September’s fuel rise and the move to bring forward an income tax cut for thousands.

But amid the cheers Mr Osborne’s Budget could do little to hide the deteriorating state of Britain’s finances.

The forecast for economic growth was halved, borrowing expectations have gone up by £55bn since November and a further round of departmental spending cuts are still to be announced.

Labour leader Ed Miliband derided Mr Osborne as a “downgraded Chancellor” offering “more of the same – higher borrowing, lower growth”.

But the Chancellor insisted the coalition Government’s “tough decisions” had cut the deficit by one-third and helped create 1.25 million jobs in the private sector since the election, while keeping interest rates at record lows.

“Private sector employment has been growing more quickly in the North East, North West and Yorkshire than across the country as a whole,” he told the House of Commons, despite job loss figures showing unemployment rose by 7,000 over the last three months.

Mr Osborne brought a planned increase in income tax thresholds to £10,000 forward to 2014, which Tory aides said will mean everyone who paid the 10p tax rate under Labour will next year be taken out of the tax altogether.

The OBR halved its prediction for GDP growth for this year from 1.2% to 0.6% and trimmed next year’s forecast from 2% to 1.8%. And the independent body said that the decline in borrowing seen in the first years of the coalition Government “now appears to have stalled”.

Debt will not fall as a share of national income until two years after Mr Osborne’s original 2015 target and will peak at 85.6% of GDP (£1.58 trillion) in 2016/17, an increase of 6.4% on the previous forecast.

Mr Osborne acknowledged that recovery was “taking longer than anyone hoped” but rejected Labour calls for a change in the course of economic policy, telling MPs: “We must hold to the right track.”

Outlining a “fiscally neutral” package aimed squarely at the aspirational, he told people who want to buy their own home, start businesses or pay for childcare so they can go out and work: “We are on your side.”

Among the key policies designed to support aspiration was a new Employment Allowance worth £2,000 to every company in the country to encourage them to take on staff, which means 450,000 small businesses will no longer have to pay employers’ National Insurance.

Mr Osborne also unveiled a Help to Buy programme for would-be home-owners – its name chosen to echo Margaret Thatcher’s Right to Buy scheme – which will offer shared equity loans for new-build homes as well as Government-backed mortgage guarantees to help people struggling to raise a deposit on property.

He also ditched the planned 3p rise in fuel duty, telling MPs that petrol will now be 13p a litre cheaper than if he had not acted to freeze taxes over the past two years.

Last night Newcastle Council leader Nick Forbes said the prospect of further cuts to public spending and welfare bills “fills me with horror”.

Describing the Budget as a missed chance for the region, the Labour leader said: “That we have had three years worth of pain and three years of austerity for absolutely no gain means it is clearly time to think again.

“We have here a missed opportunity to stimulate jobs and growth and I am disappointed the Chancellor has not listened to our plea to invest in house building, a move which would have significantly helped the city’s economy.”

There was a more mixed reaction from Sarah Green, director of CBI North East, who said: “The further cut in the rate of corporation tax to 20% by 2015 will give the UK the lowest rate in the Western world and could further incentivise inward investment in the North East.”

But while welcoming other moves, she added: “We would have liked to have seen a more urgent push on projects where work could get under way.”