An embattled Alistair Darling today stressed that he had not "re-written the Budget" - despite announcing tax-cuts for 22 million people to end the row over the abolition of the 10p tax rate just two months after the last financial statement.

During a 12-minute radio grilling this morning, the Chancellor claimed the decision to borrow £2.7 billion to give those on low and middle incomes an extra £120 per year was designed to compensate "those who lost out", and would not harm the economy.

Yet, despite defending the drastic decision - the first time in living memory that income tax rates have changed within a financial year - Mr Darling admitted that he was "worried" about the inflationary pressures placed on ordinary families due to rising oil and food prices.

Speaking on BBC Radio 4's Today programme, Mr Darling was played a recording of a previous interview when the 10p tax row first emerged, in which he said: "What I can't do is to re-write the budget - the financial year has already begun. It isn't possible, as you go into a financial year, to unravel the whole thing and attempt to re-write it."

Asked if he had broken this promise by announcing the borrowing of £2.7bn just two months after March's financial statement, he said: "You know, I haven't re-written the Budget. What I have done, as I said I would do three weeks ago, is that I said I would look at this."

Coming close to apologising for the row over the abolition of the 10p rate - an issue which campaigners said had caused Labour damage at this month's local elections - he said: "You know, I am not getting away from the fact that this whole business over the 10 pence is something that we could have handled better - we are now putting that right.

"Because, you know, people say: 'You should be sorry for what you did, but what are you going to do to sort it out?' We are sorting it out."

Questioned about Britain's economic situation, Mr Darling repeatedly referred to the need to ease the pressure on families squeezed by the credit crunch, the cause of which he stressed had come from "abroad".

Adding that he was concerned about rising inflation - the Bank of England this morning warned that inflation could rise up to four percent this year, more than two percentage points above target - the Chancellor said he would come up with proposals in his pre-budget report, this autumn, to help families.

"I am worried about the inflationary pressures coming from oil, coming from food prices, but if you look at our inflation, it is historically low, and it is less than the euro area," he said.

Yesterday's emergency 'mini-budget' was forced on Mr Darling by the need to avoid Commons defeat on his Finance Bill.

It came on a day when Government fears that a housing crash may be on the way were laid bare by a ministerial blunder as Caroline Flint, the Housing Minister, walked into a Cabinet meeting with a briefing paper clearly visible and stating that "at best" housing prices this year will fall by 5 to 10 per cent.

Whether Mr Darling's pledge will stave of defeat for Labour in next week’s Crewe & Nantwich by-election appeared unlikely.

Today Gordon Brown, in whose last Budget as Chancellor the 10p tax rate abolition was announced, is set to disclose a raft of new policy proposals in order to get the Government back on track.

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