A national School Olympics and a �600m funding package for athlete training were the key parts of his plan.

"The 2012 Games is for athletes to excel in, but must be an event all Britain can share in," he said.

British Olympic Association boss Simon Clegg said the government should be "congratulated for their commitment".

Lottery funding would supply �300m for "training and facilities for our world-class athletes of the future", with �200m of public money and �100m coming from private sector sponsorship.

The additional �300m means all Olympic sports can focus on programmes that will contribute to the target of fourth place in the 2012 medals table Simon Clegg BOA chief executive

The money is to be added to the �60m a year already targeted at elite athletes and potential medal winners.

The School Olympics will be open to all school children across the country every year from now until 2012, with the first event taking place in Glasgow, and then moving round the country.

The BOA said it was pleased with the �300m pledge, which will come from public money and private sponsors and is in addition to the �300m in lottery funding which already comes through UK Sport's World Class Performance programme.

BBC News: The Budget in detail

"The additional �300m announced by the Chancellor means that all Olympic sports can focus on delivering programmes that will contribute to the BOA's aspirational target of fourth place in the 2012 medals table," Clegg said.

At previous Olympic Games in Barcelona and Sydney, the host nation has seen an upsurge in medal success, and UK Sport is keen for a repeat display when the Games are held in London.

The BOA has set a target of finishing fourth in the medals standings, behind the USA, Russia and China.

To achieve that, the Association calculates British athletes wil need to win at least 60 medals, including 17 golds.

Tessa Jowell, Olympics Minister and Secretary of State for Culture, Media and Sport, also welcomed the cash boost.

With this new funding we can prepare for an even brighter future with many more gold medals to celebrate Tessa Jowell

"Gordon Brown's announcement creates exactly the right environment for our young sportsmen and women to prosper in Beijing in 2008 and at our own Olympic and Paralympic Games in 2012," she said.

"This funding will allow UK Sport and our governing bodies to set in motion the most ambitious programme we've ever seen in this country for spotting talent and turning it into medal success on the world stage.

"We have all been thrilled by the achievements of competitors from the UK in Melbourne and with this new funding we can prepare for an even brighter future with many more gold medals to celebrate."