Delivering one of his most difficult Budgets yet, the Chancellor confirmed that debt will rise as a proportion of GDP this year.
However, he insisted the UK is “well placed” to handle the problems, and the pledge of eradicating the deficit would still be met by 2019-20 - thanks in part to another £3.5 billion of spending cuts.
The embarrassing admission came after Mr Osborne previously conceded that he had breached his own cap on welfare spending.
In a defiant speech to the Commons, the Chancellor insisted the government had kept UK plc “steady” with by taking difficult action to bring the finances under control.
He also risked infuriating Tory backbenchers by using his platform to warn of the risks of leaving the European Union, saying the independent Office for Budget Responsibility (OBR) agreed with him that Brexit would generate significant “uncertainty”.
For Yorkshire, Mr Osborne says he is giving go-ahead for flood defence schemes in York, Leeds and the Calder Valley, following December’s disastrous rainfall.
He gave the go-ahead for a new High Speed 3 (HS3) rail link between Manchester and Leeds and the creation of a new four-lane M62 motorway, part of which runs between the two cities.
He said he would “develop the case” for a new tunnelled road from Manchester to Sheffield and upgrade the A66 and A69 which serve the North Pennines.
Mr Osborne said: “I said we would build the Northern Powerhouse - we’ve put in place the mayors, we’re building the roads, we’re laying the track.
“We’re making the Northern Powerhouse a reality and rebalancing our country.”
Three ways George Osborne could create the first major cross-Pennine road since M62
The Chancellor announced a £12 billion crackdown on tax dodging, including moves to end the use of “personal service companies” by public sector employees to minimise their tax liabilities.
In the wake of the row over Google’s tax bill, small businesses will be given help to overcome the “the great unfairness” they face competing against global giants like Amazon and eBay.
New actions will tackle overseas retailers who who store goods in Britain and sell them online without paying VAT.
Corporation tax will fall to 17% by 2020. The Chancellor also announced that he is permanently raising the threshold for small business rate relief from £6,000 to a maximum of £15,000 and for the higher rate from £18,000 to £51,000.
He said this would mean that, from April next year, 600,000 small businesses will pay no business rates at all, at an annual saving for them of up to nearly £6,000. A further quarter of a million businesses will see their rates cut.
A series of major infrastructure projects were outlined including the HS3 train project and Crossrail 2. And tolls on the Severn Crossings between England and Wales are to be halved by 2018.