More cash for schools and hospitals

¿21bn for the NHS in the big announcement

The Chancellor of the Exchequer, Gordon Brown, has pledged a total of £40bn for the major public services of health and education.

The two departments are to get more than all the other departments of government put together over the next three years.

In his half-hour statement to the House of Commons on his Comprehensive Spending Review, Mr Brown announced the biggest single investment in education in history - a growth of £19bn over the period, compared with £7bn extra in the last three years.

However initially only £3bn of this will be available, with £6bn in the year 2000, and £10bn in the following twelve months.

NHS promise

In total, there will be £21bn extra for the NHS over the next three years.

Next year, spending will increase by 5.7%, the year after by 4.5%, and over the rest of the parliament the government would achieve an average yearly growth of 4.7%.

Under the last government, he said, the average figure had been 2.5%.

Crime prevention also gets more

Elderly people also benefit from a package of measures - including the restoration of free eye tests for all pensioners.

Other areas of spending to benefit will be the fight against crime, science and transport, as well as museums, the arts and sport.

There will also be more overseas aid and an increase in the grant to the BBC World Service.

Money for modernisation

The chancellor said the money was in return for reform in every department, and there would be standards of efficiency "to ensure that every penny is well spent".

The money will not mean big pay rise for nurses and other public sector workers

Each department had signed a contract explaining how the money would be spent, and cash would only be released if departments stuck to those plans.

There will be tight controls on public service pay, and on social security spending, which is expected to rise less quickly than in the previous parliament.

The figures are contained in the Comprehensive Spending Review (CSR), the document described by prime minister's office as "without doubt the single most important publication since the election".

The review is designed to set public spending limits for the next three years and will begin in the financial year 1999-2000.

Mr Brown said the aim was to take public spending out of party politics.

However, Shadow Chancellor Francis Maude accused Mr Brown of "a comprehensive failure on public finance, disguised through series of accounting fiddles and deceptions.

Some say the review is bigger than a budget

He added: "This is not a comprehensive spending review, it's a comprehensive spending failure."

For the Liberal Democrats, Treasury spokesman Malcolm Bruce welcomed Mr Brown's investment of part of the "war-chest" he had saved up in health and education.

But he warned: "Today's settlement is no bonanza for public services when viewed over the whole parliament."

A new format for public spending

One of the innovations of the CSR is that it replaces the annual spending round which took place between spending departments and the Treasury and was often a source of friction within the government.

¿19bn extra over three years for the education service

Under the CSR, Labour is free to set out its own priorities for public spending for the first time after its initial commitment to keep to the public spending limits set by the last Conservative government.

Critics have warned that setting spending limits for a period as long as three years carries the risk of being knocked off target by unexpected events such as a recession.

The announcement comes against a background of rising interest rates and a strong pound which is affecting the performance by the UK's manufacturing base, giving rise to fears that another recession could be a possibility.

However initial reaction in the city was good with the FTSE 100 index of leading companies' share prices closing at 6100.2, a rise of 142 points over a day which also saw good inflation figures announced.