Gordon Brown ended the freeze on petrol duty, doubled air passenger duty and announced a raft of initiatives to combat climate change today as he laid out what is expected to be his final Pre-Budget Report as Chancellor.

Mr Brown also set a target to create a further five million skilled workers by 2020 through massive investment in education and skills to help Britain "prepare for the global economy as the most educated nation in the world".

The Chancellor told the Commons that Britain had enjoyed 38 successive quarters of economic growth under Labour and growth this year, at 2.75 per cent, would surpass his own Budget forecast from April.

Growth in 2007 would remain on target at 2.75-3.25 per cent while inflation would fall to its target rate of 2 per cent.

He told the Commons: "Ten years ago Britain was seventh in the G7, bottom of the league for national income per head. In the last two years Britain has been second only to the USA.

"In no other decade has Britain’s personal wealth - up 60 per cent - grown so fast. And this Pre-Budget Report drives forward the great economic mission of our time - to meet the global challenge, to unleash the potential of all British people, so that the British economy outperforms our competitors - and deliver security, prosperity, and fairness for all."

Mr Brown prefaced his speech by quipping that he was pleased to be able to deliver his "latest" Pre-Budget Report - even though the accepted wisdom at Westminster is that he will take over from Tony Blair as Prime Minister by next summer.

But the political significance of his Budget update was clear - he is in no mood to allow David Cameron's Conservatives to steal a march with voters through that party's new focus on green policies.

Environmental initiatives included the doubling of air passenger duty, which for the short-haul flights that represent some 75 per cent of trips will rise from £5 to £10. The Treasury is also to extend discounts on duty for certain types of green fuels.

Meanwhile, fuel duty will rise by 1.25p a litre from midnight after a three-year freeze, although Mr Brown said that he would not restore the "fuel duty escalator" and had rejected a real-terms increase.

Other green measures included plans to open Britain's first carbon-capture plant and a long-term project to curb carbon emissions from homes - which account for 30 per cent of all emissions.

Mr Brown said that the Government would set out plans next week to ensure that within 10 years every new home will be rated as a zero-carbon home - "and we will be the first country ever to make this commitment".

To encourage the building of such homes - houses where energy costs are minimised through technology - they will also be exempted from stamp duty.

But there were no extra taxes on 4x4 vehicles, seen by many as the symbol of environmental wastefulness, and climate change campaigners dismissed the overall package as "horrifyingly piecemeal".

On education, Mr Brown said the Government was stepping up its investment programme with capital spending on schools of £36 billion by 2011. He said that he wanted to have 12,000 new or completely refurbished schools.

He also announced that direct payments to schools would go up in April from £39,000 to £50,000 for the typical primary and from £150,000 to £200,000 for the typical secondary - equivalent to an extra £200 per pupil.

Addressing welfare issues, Mr Brown said that he had received "powerful representations" on the need to improve nutrition during the last months of pregnancy and the first few weeks of pregnancy. Accordingly, child benefits will be paid to all mothers from the 29th week of pregnancy.

The Chancellor also said that he was making Individual Savings Accounts (Isas), allowing tax-free savings, permanent beyond 2010. But, despite previous hints that he might increase it, the maximum annual limit remains at £7,000.

Although the various tax increases should boost Treasury coffers by about £2 billion a year - half of it from the aviation duty - Mr Brown said that he would have to borrow an extra £7 billion over five years to shore up public finances.

George Osborne, the Shadow Chancellor, taunted him for having to raise borrowing despite "the biggest tax increase in our peacetime history".

Mr Osborne said that Britain would have the "largest structural deficit of any major European economy next year".

Drivers and hauliers reacted angrily to Mr Brown's announcement of an end to the freeze on fuel duty and some warned of fuel protests similar to those seen in September 2000.

Dai Owen, a haulier who owns a firm in North Wales, said the move could be the final straw for his business, which is already struggling to break even.

"We used to run 18 trucks on the Continent but not anymore and here is Gordon Brown murdering us on fuel duty," he said. "Well, we are finished, we are out of business. We have a lot of lads here with mortgages and families and we are just about breaking even."

He added: "If we had the best education system and the best hospital treatment I wouldn’t mind but we are always hearing that we have the worst."

Nigel Humphries, of the Association of British Drivers, said the decision to end the freeze on fuel duty was "disgraceful". He said: "We haven’t got a problem in principle with fuel duty. It is the fairest way to do it but it is too high and not enough is spent on transport."

The decision to raise aviation duty also came in for criticism. British Airways said of the decision: "Air Passenger Duty is an extremely blunt instrument that provides the Treasury with extra funds for general public expenditure without any benefit to the environment whatsoever.

"Further taxing hard-working families and British businesses is not the way to address climate change. Unlike other transport sectors, UK aviation pays for all its own infrastructure and security.

"This hike in Air Passenger Duty is revenue-raising pure and simple with aviation being treated as a cash-cow."

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