Gordon Brown will today vow to carry on spending on crumbling schools and hospitals despite a worrying slump in the economy.

The chancellor's seventh budget will be his gloomiest to date and force the Government to borrow billions of pounds more than predicted.

But Mr Brown, bolstered by an increase in National Insurance Contributions, will insist his massive spending plans for public services will not be blown off course.

The 1p in the pound hike for workers and employers - which came into force at the start of this week - will pay for a record £8bn investment in the NHS by the Government.

Yet the chancellor - famous for his "prudence" - will be forced to borrow extra cash to pay for other spending commitments.

Mr Brown will blame war in Iraq and the sluggish performance by French and German economies for a downward revision in UK growth prospects.

He lowered his growth forecasts in last November's pre-Budget report to 2.5 to 3 per cent for 2003 and 3 to 3.5 per cent in 2004.

Analysts now expect them to be cut to 2 to 2.5 per cent for 2003 and 2.5 to 3 per cent for 2004.

Economic growth for the eurozone as a whole during 2003 is only expected to be 1 per cent.

He will say this weak performance is holding back the growth of the global economy which is hitting the UK - forcing extra borrowing.

In the pre-Budget report, Mr Brown raised borrowing projections to £24 billion for 2003-4 and £19 billion in 2004-5.

This is now likely to increase further in each of the next two years.

Other measures in today's budget, the first to be delivered at 12.30pm, are likely to include an increase of at least 10p on cigarettes.

Tax on petrol and diesel could also rise.

Stamp duty could be increased on property transactions worth more than £1 million from four per cent to five per cent, according to reports.

But Mr Brown could offer help at the other end of the market by raising the level where duty starts from £60,000.

Shadow Chancellor Michael Howard claimed there was widespread unease at the Budget.

He said they were facing a "triple whammy" of national insurance rises, frozen personal allowances and council tax rises averaging 13 per cent.

The Government was now spending £14,412 every second.

Mr Howard added: "People are feeling anxious about the future. They are concerned about their jobs, savings, pensions and public services."