Low-income families, mothers and motorists are the biggest beneficiaries of around £3.6bn in tax cuts, benefits and extra spending on services set out in Gordon Brown's annual Budget speech today.

The result will be a big boost to household spending, supporting the British economy at a time when growth in demand from overseas is set to slow. Mr Brown estimates that domestic consumer demand will grow at between 3.25 per cent and 3.5 per cent this year.

Mr Brown's giveaway was generous but not too generous, economists said. Futures markets continued to price in the expectation of an interest rate cut by the Bank of England's Monetary Policy Committee by the middle of this year. It had been feared that too large a fillip to spending could create inflationary pressures, preventing the Bank from loosening monetary policy for the foreseeable future. David Page, economist at Investec, said: "There should be little here to worry the MPC."

It was difficult to find many individuals who failed to gain from the measures announced in Mr Brown's Budget speech, in spite of constant government references in recent months to "targeted tax cuts" to particular groups. His generosity is likely to endear him to voters in May's probable general election, but not raise the hackles of most economists. Mark Miller, economist at Morgan Stanley Dean Witter, said: "I wouldn't call it a massive giveaway ahead of the election."

Mr Brown awarded £10 a week to low and middle-income families through the forthcoming Children's Tax Credit - £1.50 more than his earlier estimate. The Working Families Tax Credit will aid similar groups, rising by £5 from June. Lower earners will gain the most proportionately from a rise in the 10p income tax band from the first £1,520 of taxable income to £1,880. They also benefit more proportionately than other groups from one of the few surprises of the Budget - a lower-than-expected rise of only 6 per cent in cigarette taxes and a duty freeze on wine and beer. These measures complement a widely expected freezing in tax on spirits. Such 'sin taxes' tend to be seen as regressive because lower-income people spend a higher percentage of their income on alcohol and nicotine.

For mothers, paid maternity leave will be extended from 18 to 26 weeks, the flat rate of maternity pay will rise from £60 to £100 a week within two years, and from April 2002 the Children's Tax Credit for families with new-born children will be £20 a week until their first birthday.

Mr Brown confirmed that single pensioners will see a rise in the basic pension by £5 a week, with couples enjoying an increase of £8.

The chancellor confirmed a £1.7bn range of measures presented for consultation in November's Pre-Budget Report to appease motorists and hauliers in the wake of the autumn's protests over the high cost of fuel. These include cuts in taxes on ultra-low sulphur fuel and reductions in vehicle excise duty.

Extra spending on education and health will aid recruitment but also risk pushing up average earnings, which are already growing fast.

Mr Brown is loosening fiscal policy a little, but not radically. He estimated today that the government had achieved a surplus of £16.4bn in the fiscal year to the end of March - more than £6bn above the forecast in November's Pre-Budget Report. But today's tax cuts and benefit increases have helped push down the estimated surplus for the coming year to £6bn, implying a big injection of money into the economy. That could increase fears among the more hawkish members of the MPC of a rise in inflation, ruling out a repetition of February's quarter-point interest rate cut to 5.75 per cent. The MPC next decides rates tomorrow, though it had always been expected to leave rates unchanged in March to avoid appearing to comment too directly on the Budget.

However, some economists argue that if Mr Brown wants to cut taxes, now is a good time to do so. Healthy economic growth has pushed up the proportion of their income which consumers are paying to the government, as their increased earnings lift them into a higher tax bracket. The chancellor is therefore in one sense simply giving the money back. Moreover, Britain's economy is expected to slow this year after strong growth last year, hit by the drain on exports and perhaps on confidence caused by a sharp US downturn. Tax cuts might provide some economic consolation. With underlying inflation at its lowest rate since records began in the mid-1970s, many economists argue that there is no danger in a little largesse.

Mr Brown retained his autumn estimate that British economic growth this year will be between 2.25 and 2.75 per cent, even though he acknowledged that the growth rate in the world's major economies was likely to slow sharply this year. But that is still lower than last year's rate of 3 per cent growth.

But critics argue that if the chancellor wants to stimulate growth without inflation, he has gone entirely the wrong way about it. The hawks on the MPC have continually fretted since last year over the strong growth in household demand. Their supporters say Mr Brown is stimulating the wrong half of the economy. They argue that he would have done better to help business serve this demand, by giving it a little more money to spend on expanding capacity. The Institute for Fiscal Studies estimates that the majority of the increase in the government's tax take since it came to power has come from business rather than the consumer, leaving companies with less money to plough back into investment. Business investment grew last year at the slowest rate for seven years in real terms. The chancellor today revised his forecast for business investment this year upwards to between 2.5 and 3 per cent, but many business bodies are more pessimistic.

Mr Brown's speech did hold out the likelihood of a future extension of existing tax credits for research and development from small to larger companies in a year's time, along with a range of unspectacular measures for business this year. Moreover, the chancellor's £7,000 limit on the annual contribution to tax-free individual savings accounts was prolonged today to 2006, maintaining the incentive for savers to invest in companies. But businesses continue to grumble about the drain in competitiveness from the employee time spent in administering the government's wide range of worker benefits, and this Budget will do little to mute these complaints.