Fuel duty is to be frozen, benefits squeezed and Whitehall spending slashed in a bid to revive Britain's flagging economy, George Osborne has announced.
The Chancellor, in his mini-Budget, revealed that he is scrapping the planned 3p hike in fuel duty set for January and will also postpone April's rise.
The move is aimed at releasing some pressure on struggling workers and families, but it was a rare piece of good news in an otherwise bleak Autumn Statement.
Mr Osborne warned there are no "miracle cures" for the economy as he admitted austerity will now have to last up to 2018, well into the next parliament.
He was also forced to concede that the Government is set to miss its target of reducing debt by 2015 and that slashing the deficit will take longer.
And he revealed that the Office of Budget Responsibility (OBR) is now predicting the economy will shrink by 0.1% this year compared to a previous forecast for 0.8% growth.
George Osborne insisted the economy is starting to heal To raise extra cash, benefits and tax thresholds will only rise by 1% - a below-inflation increase - although pensions and disability allowances will be exempt.
As anticipated, the pension pots of top earners are also targeted, with their relief falling from £50,000-a-year to £40,000 and from £1.5m to £1.25m over a lifetime.
Meanwhile, HM Revenue & Customs will receive a £77m boost to help crack down on people and businesses dodging tax.
Despite the dire state of the economy, Mr Osborne - who has now been Chancellor for two-and-a-half years - is refusing to change course.
He insisted that turning back from his programme of drastic cuts would be a "disaster" for the country.
Taking on his critics, he declared that he was "confronting the country's problems, instead of ducking them" as he sought to show "we're all in this together".
"It's a hard road, but we are getting there. Britain is on the right track and turning back now would be a disaster," he said.
"People know there are no quick fixes... but they want to know that we are making progress. It's taking time, but the British economy is healing."
Union protesters in George Osborne masks Sticking to his theme, he later added: "We cannot relax our efforts. Britain is heading in the right direction. The road is hard but we are making progress."
Mr Osborne told MPs that the Government was still on course to eliminate the structural deficit, according to estimates by the OBR.
But the watchdog does expect that the coalition will miss the second key target of having public sector debt falling as a proportion of gross domestic product by 2015-16.
The Chancellor's hands are largely tied because of weaker than expected economic growth and high borrowing.
He has been battling to regain the upper hand since his much-criticised Budget in March but the state of the economy has left him with very little room for manoeuvre.
Shadow chancellor Ed Balls claimed that the coalition's economy strategy had been "completely derailed" and that they have failed their own key test.
Half way into this parliament, the country could now see "the true scale of this Government's economic failure", he said.
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