A new sugar levy on the soft drinks industry will be introduced, the Chancellor said.
It will be introduced in two years time to ensure companies reduce the sugar content of drinks and promote low sugar brands.
He said it was a "perfectly reasonable step" to protect children's health.
"Money from this new [sugar] levy will be used to double the funding we dedicate to sport in every primary school," Mr Osborne said.
The lower growth forecast for the economy means the Chancellor will have to raise taxes or make drastic cuts, the economic think-tank said.
The Budget seems to be a return to 'nudge, nudge' politics which looks at behaviour, the cost of dealing with it, and makes a calculation.
Around 20 Tory backbenchers wrote to the Chancellor, even before the Budget was delivered, to outline their concerns about the measure.