Chancellor Gordon Brown today ended the freeze on fuel duty and doubled the tax for air travellers as he sought to establish his "green" credentials.
Delivering his 10th - and almost certainly his last - Pre-Budget Report, Mr Brown promised that the extra funds raised would be used to fund the Government's priorities such as public transport.
He told the Commons that fuel duty will go up by 1.25p a litre from midnight, ending the three-year freeze.
And from February 1, air passenger duty will double - rising from £5 to £10 for most flights.
Mr Brown said investment in school, college and university buildings would rise to £10.2 billion by 2010-11 - a cumulative increase of £36 billion over the next four years.
He also promised additional cash paid direct to head teachers rising from £39,000 to £50,000 for the typical primary school and from £150,000 to £200,000 for secondary schools.
He said the increased payments were the equivalent of £200 per pupil.
On the economy, a buoyant Chancellor said growth this year was now expected to hit 2.75% compared to the 2 to 2.5% he was forecasting at the time of the Budget in March.
And he forecast continued growth next year of 2.75 to 3.25%.
The Chancellor also said the public finances were in good shape and that he was set to meet his "golden rule" - only borrowing to invest over the course of the economic cycle - with a current account surplus of £8 billion.
Officials later disclosed that he had brought the date at which the current cycle is deemed to have ended from 2008-09 to 2006-07.
He said net borrowing would fall back from a peak of £37 billion this year to £31 billion, £27 billion, £26 billion, £24 billion and £22 billion in the coming years.
Mr Brown said the UK's future growth was linked to the skills of the country's workforce.
To that end, he announced that universities would receive £60 million a year for applied research with commercial potential to help British science to transform knowledge into new jobs.
And he said former CBI director general Sir Digby Jones would take up a new role in boosting skills.
On the environment, Mr Brown announced a package of measures, including an exemption from stamp duty for new zero-carbon emission homes.
There was good news for expectant mothers with the announcement that additional child benefit would be paid to every mother in the last months of pregnancy.
The Chancellor also announced new penalties for film and music piracy to be introduced alongside greater rights to copy for personal use.
And he confirmed January 1 2007 as the date for the introduction of new tax relief for film-making.
The Chancellor moved to shore up the public finances, announcing plans for a further £30 billion sell-off of surplus government land and buildings.
At the same time, a new Whitehall efficiency drive would release a further £26 billion a year for frontline services such as the National Health Service.
The Treasury, HM Revenue and Customs, the Cabinet Office and the Department for Work and Pensions will have their budgets cut by 5% while the Department for Constitutional Affairs will lose 3.5%.
Shadow chancellor George Osborne accused the Mr Brown of having "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 said that borrowing would be higher in every year than Mr Brown forecast in this year's Budget.
Mr Osborne said: "What this country needed was a report that prepares our economy for a future that is more competitive, more flexible, and more global than before, but that is not what we got today.
"With this pre-budget report, like the nine pre-budget reports before it, Britain is moving further from the direction we need to go."