Brown rules out income tax rise

Blair backs certain tax rises to fund the NHS

Chancellor Gordon Brown has ruled out raising income tax to pay for reform of the National Health Service.

He said the government would stand by its pledge at the general election in June not to put up income tax or VAT.

But he left the door open for increasing national insurance contributions and introducing new taxes linked to public service improvements.

His comments on the BBC's Breakfast With Frost programme came after Tony Blair backed his plans to fund an overhaul of the NHS by raising certain taxes.

Brown to keep tax promise

Mr Brown said he would not rule out tax rises, but added: "We will keep every promise that we made at the general election and in our manifesto."

He called for a debate on linking any additional taxes to public service improvements.

'Hostage to economy'

He said: "There's a debate about linking the taxes we pay more closely to the services we receive and that's a debate that is right to go on.

"People want to see value for money for the taxes they're paying."

But the chancellor warned that a "hypothecated" health tax specifically for the NHS would be "hostage" to the economic conditions.

We have in broad terms to match other European countries

Tony Blair
Prime Minister

Mr Brown refused to be drawn on how much extra cash the government intended to channel into healthcare.

That depended on the final report of ex-National Westminster bank group chief executive Derek Wanless into the future funding of the NHS, he said.

In an interview with the Independent on Sunday, Mr Blair said he was opposed to a specific "health tax" - favoured by Health Secretary Alan Milburn but firmly opposed by Mr Brown.

Pledge

However, the prime minister backed away from his pledge to raise health spending in Britain to the European average by 2005.

He said he believed the best way to fund NHS improvements was "through general taxation".

He accepted there may be support for a specific health tax, but added: "Whatever discussions people want to have about it, I don't think it's a central question."

This possible return to higher tax levels to fund better public services did not mean New Labour was now dead, Mr Blair added.

His comments came after Number 10 was forced to deny he had clashed with Mr Brown over a health tax.

Another source of potential conflict with the chancellor was also removed when he said his commitment to match European health spending - originally made 18 months ago and repeated in the Commons on Wednesday - was only a "broad" aim.

Duncan Smith: 'Soviet' NHS

He said: "I am not deciding spending levels now. I am saying in broad terms what I have said previously.

"We have in broad terms to match other European countries," he said.

Health Secretary Alan Milburn agreed that raising spending to European levels was now an aim to be achieved "over time", he told BBC1's On the Record.

But his Conservative counterpart Liam Fox demanded clarification and called the government's health policy "a shambles".

'Soviet-style' system

Meanwhile, Conservative leader Iain Duncan Smith, speaking on the same BBC programme as the chancellor, said the health service was a "Soviet-style" system which needed drastic reform to cope with more money.

He said: "The system itself was designed for an era that has gone, a Soviet-style system that just doesn't allow people to get choice and doesn't allow people to get the best treatment.

"We now have the highest level of waste for years, £10bn a year, and this year they're going to underspend by £700m because the system cannot take the extra money."