GORDON Brown fired up Labour's faltering election campaign yesterday with a giveaway Budget that promised £1.5bn of sweeteners to pensioners facing higher council tax bills and homebuyers hit by soaring property prices.

The Chancellor sought to trump Tory pledges of help with rising council tax bills with a £200 one-off refund, costing £800m, for every pensioner household from April.

In a surprise move that delighted the Labour benches, he pledged £400m to introduce free local bus travel for all over-65s. At present, English local authorities offer only a 50 per cent discount.

There was also help for motorists, with a temporary freeze in petrol duty, and for housebuyers, who will not pay stamp duty on purchases below £120,000 - a doubling of the threshold that will cost £250m.

On the day it was revealed a quarter of manufacturing jobs in the North-East have disappeared since Labour came to power, Mr Brown opened his Budget by saying Britain's economy had to become more highly skilled.

He said: "Long-term prosperity will be secured only if we make the right decisions to be world leaders in science, enterprise and education."

Mr Brown was roared on by Labour MPs who have watched a successful Conservative campaign close the gap in the polls with a General Election expected to be only seven weeks away.

But Tory leader Michael Howard attacked a "vote now, pay later" Budget, warning that voters would pay the price with tax rises next year if Tony Blair was returned to Downing Street.

Liberal Democrat leader Charles Kennedy said the council tax refund was "little more than a sticking plaster". It was unfair and should be scrapped, he added.

In a Budget promising sustained investment in education, there was a boost for the North-East with plans for a "design centre" in Newcastle to boost the creative industries.

To be launched by the regional development agencies as part of the Northern Way strategy, it will ensure businesses across the North can take advantage of the latest design skills.

But the Chancellor also announced a shock immediate end - 21 months early - to stamp duty exemption for companies moving into 2,000 "enterprise areas", including many in the North-East.

It will be replaced by a Local Enterprise Growth Initiative, worth £300m over three years. Local authorities will be able to bid for grants of up to £10m.

Instead of being targeted at 2,000 struggling electoral wards, the scheme will be open to the 88 poorest councils covered by the Neighbourhood Renewal Fund.

Mr Brown announced an extra 2,800 civil service jobs moving out of London, making a total of 7,800 so far, more than a third of the target of 20,000 by 2010.

They include a share of 600 National Lottery jobs in the Department of Culture heading for Newcastle and up to 800 Department of Health and Department for the Environment jobs identified for Yorkshire.

The speech set the stage for a scramble for the support of pensioners, the age group most likely to vote in the coming election.

Mr Brown's across-the-board £200 council tax rebate is for one year only.

Aides said that was because a review of changes to the tax is due to report by the end of this year.

Free local bus travel cannot come in until April next year, at the earliest, because it requires legislation.

It will be for off-peak journeys only and will be financed by a change to corporation tax rules that will force booming North Sea oil companies to pay their taxes earlier, bringing in £1.1bn this year.

The Tories immediately pointed out that their plans for a 50 per cent council tax refund for pensioners would offer up to £500 to those facing the highest bills.

In other measures, Mr Brown put 7p on a packet of cigarettes, 1p on a pint of beer and 4p on a bottle of wine, but he froze duty on spirits, cider and sparkling wine.

Tax breaks for the first £7,000 of savings in ISAs will be extended to 2010 and inheritance tax will be paid only on estates worth £275,000 - up from £260,000 this year.

From next month, there will be £2,000 return-to-work bonuses available to single parents and the rebuilding programme for primary schools will be boosted by £650m by 2010.

Mr Brown said the Budget guaranteed stability, investment not cuts and, with rises in child benefit and the child tax credit, offered every child the best start in life.

But Mr Howard said: "This Budget is not about what's good for our country, it's all about the interests of the Labour Party."

Mr Kennedy said it was shocking that, after eight years under Labour, the poorest 20 per cent paid a higher proportion of their income in tax than the richest 20 per cent.