Chancellor George Osborne has pledged to "balance the books" by 2016 with a combination of spending cuts and tax rises.
Delivering his first Budget speech to the Commons, on 22 June 2010, he announced that the headline rate of VAT will be increased to 20% from January 2011.
Child benefit will be frozen for three years, there will be cuts to family tax credits and housing benefits, and there will be a two year pay freeze for public servants paid over £21,000.
Capital Gains Tax remains at 18% for low and middle earners but from midnight, higher rate taxpayers will pay 28%.
Mr Osborne told MPs that the plan was "tough; but it is also fair."
"This is an emergency Budget, so let me speak plainly about the emergency that we face," the chancellor said.
He said postponing difficult decisions was not an option.
"The consequence for Britain would be severe. Higher interest rates, more business failures, sharper rises in unemployment, and potentially even a catastrophic loss of confidence and the end of the recovery."
Mr Osborne said everyone would be asked to contribute. "But in return we make this commitment. Everyone will share in the rewards when we succeed," he said
"When we say that we are all in this together, we mean it."