In announcing the UK budget, Chancellor of the Exchequer Alistair Darling predicted that the economy would contract at a rate of 3.5 percent in 2009, with a fall of around 1.6 percent in the fourth quarter.
That puts the economy in its deepest slump since just after World War II.
The cost of propping up the banking system was 3.5 percent of GDP, Darling said.
But the government predicted its economy would grow at a rate of 3.5 percent by 2011.
The following are some of the highlights of tax and spending initiatives the budget proposes.
The budget announced £1.7 billion for further employment resources and help.
The plan will also aim at ensuring that all those under 25 out or work for 12 months will be offered a job or training.
"In order to help pay for additional support for people now, I have decided that the new rate will be 50 percent, and will come in from next April -- a year earlier," Darling said.
Government borrowing will be 12.4 percent of GDP this year, falling to 5.5 percent in 2013-14, the Chancellor predicted.
Alcohol duty will rise by 2 percent this week. In addition, duty on tobacco will rise by 2 percent starting this Wednesday.
In a bid to reduce carbon emissions by 34 percent by 2020, the budget includes £1 billion for low-carbon technologies.
And £100 million will be given to local governments for energy-efficient housing.
The budget "will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over 10 years old. It will be a time-limited scheme until March 2010," Darling said.
Darling predicted that the current government deficit would halve within four years.
The inflation target will remain steady at 2 percent.
And the economy is expected to start growing again "by the end of the year," Darling said.
The government will extend the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year, with 60 percent of residential properties continuing to be exempt.
There will be £1 billion to help homeowners and the construction industry.
To aid small businesses with cash flow problems due to a shortage of credit, the budget extends the help that allows loss-making companies to reclaim taxes on profits in the last three years.
It will also raise the main capital allowance rate to 40 percent.
The budget boosts the total annual limit on individual savings accounts (ISAs) to £10,200, with £5,100 that can be cash.
State pensions will rise by 2.5 percent, even if the retail price index (RPI) is below that.