The Liberal government will slash unemployment benefits and defense spending in a budget that spares most Canadians any significant tax increases and delays a big reduction in the deficit.

"For years, governments have been promising more than they can deliver, and delivering more than they can afford," Finance Minister Paul Martin told the House of Commons. "This has to end. We are doing it."

Martin on Tuesday presented a $123-billion (U.S.) budget - the first of Prime Minister Jean Chretien's government.