Gordon Brown has sought to establish his green credentials as he announced fuel and air duty increases in his 10th and possibly final pre-Budget report.
Mr Brown is setting out his long-term vision
He also said stamp duty on some "carbon neutral" new homes could be scrapped.
The chancellor said economic growth of 2.75% would top forecasts, and outlined plans for more spending on schools.
But the Tories said the UK was heading in the "wrong direction", while the Lib Dems and campaign groups said the green taxes did not go far enough.
Although fuel duty is going up 1.25p per litre from midnight and air passenger duty from £5 to £10 for most flights, Mr Brown rejected demands to re-link petrol prices to inflation.
Mr Brown, who is widely expected to take over as prime minister next year, told MPs the UK was performing better than its major competitors, apart from the US.
Much of his speech, in the House of Commons, focused on investment in schools and training which he said was vital if the UK was to compete in the future with countries such as China and India.
Former director general of the CBI, Sir Digby Jones, has been made the government's skills envoy, said Mr Brown.
And there would be new cash for children who had fallen behind at school and more basic skills training for adults.
There would also be an increase in the number of apprenticeships on offer for young people, he said.
With all eyes on next summer's Comprehensive Spending Review, Mr Brown held off from making major policy announcements.
But he unveiled further details of planned capital investments in schools in England. Separate announcements will be made for Wales, Scotland and Northern Ireland.
He pledged to increase annual spending to £10bn by 2010, which he said would match spending per-pupil on buildings and equipment in the state sector to that in the private sector.
Other measures include:
- A further 300,000 households to be offered free insulation and free central heating.
- Consultation on bringing in bursaries worth £2,000 for looked-after children - such as those in local authority care - to go to university.
- Bookstart scheme to be extended so children get free books when they leave primary school.
- Child Benefit to be paid to pregnant women from 29 weeks from April 2009.
- An extra £600m for operations in Afghanistan and Iraq.
- An extra £84m for intelligence and counter-terrorism.
- Every government department has to examine each of their assets and consider the case for sale. A register of possible assets to be sold is to be published in January.
Mr Brown said trend growth (the assumed rate) of the UK economy will be maintained at 2.75%, while the public finances will be based on a rate of 2.5%
And he forecast economic growth next year of 2.75% to 3.25%.
'Vote for change'
But shadow chancellor George Osborne said Mr Brown had "buried" the fact that he had downgraded his growth forecast for 2008, which would leave the UK with the largest structural deficit of any major European economy.
He also attacked the chancellor for failing to mention rising unemployment and the "crisis" in the NHS.
And he mocked Mr Brown's aspiration to become prime minister, saying he was equally responsible for the "failures" of the Blair years, including hospital cuts, failing schools and "destroyed" pensions.
"The truth is this - Labour can only be new once and if the public want change they're going to have to vote for change," said Mr Osborne.
Vincent Cable, for the Liberal Democrats, said Mr Brown's economic figures were impressive "on the surface".
But until they were independently audited, Mr Brown would be like a "clever schoolboy who always gets 10 out of 10 in his tests because he has marked them himself".
He said Mr Brown's legacy as a chancellor would be huge levels of personal debt, a failing education system, widening inequality and green proposals that fell far short of those recommended by the Stern report.
He also questioned how Mr Brown could avoid a public sector pay squeeze, with so many commitments to big capital projects such as the Olympics, ID cards and new schools.
And green groups accused the chancellor of just "fiddling around the edges" with "pretty feeble" measures instead of taking the "heroic" actions needed to halt the global threat of climate change.