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Wednesday, 28 November, 2001, 15:03 GMT
Downing Street fuels tax speculation
Gordon Brown faces serious budget choices this year
Downing Street has backed Chancellor Gordon Brown's suggestion that tax increases may be needed to pay for substantial improvements to the NHS.

According to Tony Blair's official spokesman, the prime minister "absolutely agrees" with the chancellor that tax rises cannot be ruled out.

The prime minister also understood that the NHS needs further investment - but it must be linked to changes and reform, the spokesman added.

The Conservatives have countered that more private funding, alongside reform of the NHS structure, would provide a better service than just using cash raised from taxes.

'World class'

Mr Blair's words will fuel speculation that Labour is preparing to fight the next general election on a tax-raising platform, for the first time since 1992.

In his pre-Budget statement to the Commons on Tuesday, Mr Brown announced an extra 1bn for the NHS next year but said in future a "significantly higher share of national income" would have to be found to fund a "world class" health service.

We as a country will have to put more money in - I don't rule out tax rises for the future

Gordon Brown
The chancellor's comments were prompted by the government-commissioned Wanless Report, which concluded the NHS would be best funded by public money.

Mr Brown told BBC Radio 4's Today programme: "We don't rule out tax rises."

"We said at the election that we have got to put the NHS on a sound, long-term footing.

"I've now looked at the Wanless Report, which says that not only are there huge demands for the future that result from new technology, new drugs, new treatment but of course there's also a big rise in people's expectations."

More reform

The pace of modernisation and reform would have to be stepped up, Mr Brown went on, and he repeated his call for a national debate and consensus on the way forward.

But the Tories believe extra private money is necessary, like healthcare systems elsewhere in Europe that they are examining as part of a wide-ranging policy review.

Shadow chancellor Michael Howard told BBC News: "If you look at other countries which deliver better healthcare than we do... the key difference is not in the amount of taxation they devote to healthcare, it's in the other resources which they are able to bring to bear."

Shadow chancellor Michael Howard
Michael Howard said it was a 'black day' for UK healthcare
Alan Milburn, the health secretary, told BBC Radio 4's the World at One that there was "no such thing as a free lunch when it comes to healthcare - you've got to somehow find the cash".

"It can come from one of two sources: either it can come through general taxation and the public purse or else you have to say to the public that people are going to have pay more and more for their treatment."

BBC News political editor Andrew Marr has says taxes would have to rise "pretty substantially" to fulfil Mr Brown's pledge to improve the NHS - a big gamble for a chancellor with a reputation for prudence.

The growing debate over taxation came ahead of the announcement of more details from the pre-Budget report.

Click here to see the key pre-Budget announcements at-a-glance

Health Secretary Alan Milburn is expected this week to outline his short-term spending plans for the NHS to the Commons.

A statement is expected on Wednesday from Work and Pensions Secretary Alistair Darling, who will announce how a pledged 2bn to pensioners will be spent.

Changes to the New Deal, which is intended to help the long-term unemployed back to work, will also be unveiled.

Statements are expected later in the week from Trade and Industry Secretary Patricia Hewitt, Transport Secretary Stephen Byers and Culture Secretary Tessa Jowell.

'World class NHS'

The pre-Budget measures to help pensioners included a minimum 100 annual rise in the basic state pension, a new tax credit for modest savers and extension of the winter allowance.

A boost for business came in the form of capital gains tax reform, an extension of the 10p corporation tax band and confirmation that research and development tax credits were being extended to large firms.

Liberal Democrat Treasury spokesman Matthew Taylor said: "In the face of British manufacturing collapse, the NHS in crisis and pensioners in poverty, we get tax fiddles and spin on spending figures."

The BBC's Carole Walker
"The political divide over the health service is sharper than ever"
Chancellor of the Exchequer Gordon Brown
"I do not rule out tax rises"
Dr Peter Hawker, British Medical Association
"This is a long-term project that is vital to the health of the nation"
See also:

27 Nov 01 | Business
Brown pressed to give green Budget
27 Nov 01 | UK
Hauliers welcome tax move
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