Brown paves way for NHS tax rises

Chancellor Gordon Brown today swept away claims that the NHS is no longer viable and committed the Government to make the present health system work through extra spending.

Brandishing the new Wanless Report on the Health Service as evidence, he pledged that Britain will in future spend a "significantly" higher proportion of the national income on health and promised an extra £1 billion next year.

In his annual pre-Budget report to the Commons, Mr Brown also promised new concessions for pensioners, and additional incentives for business and enterprise.

Mr Brown acknowledged that "no one can yet judge the full impact of the events of 11 September" on the world economy, and on Britain. But he declared himself " cautiously optimistic" that Britain will escape the worst consequences of the recession already hitting America, Japan and other big economies, forecasting Britain's growth for 2002 between 2-2.5 per cent, which if it is achieved would be the highest in the G7 nations. Conspicuously absent from the Chancellor's statement was any reference to higher taxes - which most pundits think will be inevitable, as the economy slows down.

The Chancellor also delivered a pensions guarantee that, from now on, the basic State pension will always rise by at least £100 a year, every year, for a single pensioner and £160 a year for a couple.

He also confirmed plans for a new pensioner credit, to protect the savings of poorer pensioners, a scheme which, he said, would help up to half the elderly in the country. And he pledged that the £200 a year winter cold weather allowance will continue at least until the end of this Parliament.

The Armed Forces and the Security Services gain an extra £120million as a downpayment on the cost of the campaign against terrorism. There will also be £30million for the Metropolitan police and other forces. The money will help pay for the Met's Operation Calm policing initiative which has seen an extra 1,000 officers on terrorism patrol in central London to protect key buildings and facilities such as the Houses of Parliament, Canary Wharf and the airports.

There were gasps in the Commons when Mr Brown said that tackling foot-and-mouth in the worst-hit areas would cost £2.7billion. The Chancellor is also to give the go-ahead for the long-promised move to abolish stamp duty on property sales in Britain's most deprived areas with the promise that the scheme will be under way before the end of the year.

The Government is also publishing a list of areas, London included, where the concession will apply, and the threshold for the value of properties involved. It appeared that the Treasury had found a way around the problem that the original scheme looked set to benefit yuppie property owners in Docklands, as well as the deprived it was intended to assist.

The Chancellor spelled out the scale of the economic problems worldwide, pointing out that a highly unusual slowdown had seen growth rates fall on every continent. But his speech praised the Bank of England for acting "decisively" with seven interest rate cuts, helping to ensure that the impact on this country had been less than elsewhere.

The package confirmed cuts in capital gains tax to encourage investors and a go-ahead for research and development help for industry.

A cut in the duty on beer produced by small independent brewers is on the way, as is the abolition of tax on football pools.

Other pledges, however - such as baby bonds to give each child a nest egg at birth - appear to be on hold. Detailed figures for Mr Brown's promised child credit and employment credit are likely to have to wait until the Budget in spring.

Mr Brown coupled today's package with a warning that Britain must be ready to cope with an economic "storm" amid the global slowdown after the attacks on America. But he maintained that the economy had the muscle to meet the rising costs of key services and unforeseen demands on the Treasury without large tax rises.

He told the Evening Standard before his statement: "These are testing and uncertain times for the world economy. But because of the tough action we have taken, we are better placed than we have been in the past to weather the storm." With inflation and the number of jobless at a historic-low and with the public finances "in good order", he added: "We can meet the costs of our international obligations and maintain our commitments to invest in public services." The doubt is echoed in the title of today's pre-Budget report: Building A Stronger, Fairer Britain In An Uncertain World.

Mr Brown is set to downgrade his forecasts for the UK's economic growth, while raising his estimates of the deficit in the next two years.

He now faces an extra bill of perhaps £3.5 billion to meet the Railtrack crisis on top of the foot-and-mouth epidemic and the costs of the Afghan campaign.

However, independent analysts including the Organisation for Economic Co-operation and Development have backed his claim that the economy and the Treasury are sufficiently robust to cope.

The Tories and other critics are focusing on the threat of longer-term tax rises and the real battleground: the spending plans for the next threeyear cycle, which will not be decided until next summer.

They warned that, although the Chancellor could cover some of the gap by borrowing while staying within the Treasury's own rules for prudence, looking further ahead substantial tax rises were inevitable to pay for Labour's plans for transport, education and other services.

The warning will be given weight by a report on the long-term future of the National Health Service, being published by the Government alongside Mr Brown's package and to which he referred in his speech.

As Mr Brown prepared to deliver his pre- Budget re por t this afternoon he was jolted by a sudden, unprovoked and fulsome tribute from No10.

"On a day like today we can see how fortunate we are to have such a superb Chancellor," said the Prime Minister's official spokesman. "And how the very close relationship which he has with the Prime Minister is one of the great strengths of this Government."

The lavish praise out of the blue, however, raised more questions than it answered. Some wanted to know why No10 should raise the topic at all when the recurrent stories of strains between Mr Brown and Mr Blair had actually died down for a few days. Others recalled the praise of another Premier, Margaret Thatcher, describing her Chancellor, Nigel Lawson, as "unassailable" not long before he went.

Pre-Budget analysis