Chancellor Gordon Brown today defended his record on tax and spending while cutting his growth forecast for the UK economy this year and next.

Delivering his pre-Budget report to a packed and rowdy House of Commons this afternoon, Brown admitted that growth would reach just 1.75% this year and 2.25% in 2006. In March his expectations were much rosier, at between 3% and 3.5% this year.

Economists expected the about-face, and many claim Brown’s spending programme for public services made increases in borrowing and taxation inevitable. In his defence Brown pointed to the UK’s “stability” – a word he used on multiple occasions in the address.

The UK enjoys historically low unemployment, high employment, and benign inflation and interest rates, he said, adding that this was the case despite domestic and international economic pressures. He said 2005 had been a “most challenging year”.

But the statement, which at just 35 minutes was one of Brown’s shortest, was thin on the ground in terms of both new investments and changes to the tax regime. There were early signs that businesses were happy with the statement and relieved at the absence of any obvious tax hikes.

Brown revealed plans to help first time buyers get on the property ladder, new start-up advice groups for manufacturers, new training funding for teenagers. He also promised to ask for competitiveness tests for EU regulations.

Meanwhile, fuel duty will be frozen for the whole of next year, and fuel allowances will be increased for pensioners.

Reacting to the statement, shadow chancellor George Osborne attacked the UK’s yawning budget deficit and higher than expected borrowing which will go up by £150bn over the next five years.

He said the statement sounded like a “tractor production figures for the old Soviet Union” – implying that his positive sounding predictions they were woefully optimistic.

He also implied that Brown’s long talked about rise to prime minister was being harmed by his faltering track record as chancellor. He said investment in businesses had fallen and that the UK was far less productive than before 1997.

He said Brown was making excuses for flagging UK growth and that it was actually tax rises that had stalled companies. “The chickens are coming home to roost,” he said.

Lib Dem finance spokesman Vincent Cable accused Brown of pulling “rabbits from hats”.