George Osborne blamed the "dangerous" global economic situation as he was forced to admit breaking one of his own key fiscal rules.
Delivering one of his most difficult Budgets yet, the Chancellor confirmed that debt will rise as a proportion of GDP this year.
However, he insisted the UK is "well placed" to handle the problems, and the pledge of eradicating the deficit would still be met by 2019-20 - thanks in part to another £3.5 billion of spending cuts.
The embarrassing admission came after Mr Osborne previously conceded that he had breached his own cap on welfare spending.
In a defiant speech to the Commons, the Chancellor insisted the government had kept UK plc "steady" with by taking difficult action to bring the finances under control.
He also risked infuriating Tory backbenchers by using his platform to warn of the risks of leaving the European Union, saying the independent Office for Budget Responsibility (OBR) agreed with him that Brexit would generate significant "uncertainty".