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 Wednesday, 17 April, 2002, 21:59 GMT 22:59 UK
Tax bills rise to boost NHS
Gordon Brown
Gordon Brown has announced the first increase in direct taxation since he became chancellor five years ago.

In a big political gamble, he will use a 1p in the pound hike in National Insurance contributions to pay for the UK's biggest ever increase in health service funding.

Key points
1% on National Insurance payments
2.5bn extra for working families
Freeze on alcohol duty
6p on a pack of cigarettes
Road tax and fuel duties frozen

The increase on both employer and employee NI contributions will go towards a 40bn rise in NHS spending over five years.

But Conservative leader Iain Duncan Smith said the chancellor had broken a Labour election pledge not to increase income tax, saying National Insurance is a tax on income.

He said Labour had "frittered away" opportunities, "condemning the British people to second class public services."

'British ideal'

Liberal Democrat leader Charles Kennedy welcomed the increased cash for the NHS but said "for many patients it has come anything up to five years too late".
Budget diaries

A pensioner, a doctor and student give BBC News Online their Budget verdicts.

Mr Brown said the increases in health spending would "make our NHS the best insurance policy in the world... a British ideal, free at the point of need, for everyone, in every part of Britain".

He said NHS funding would rise by an average of 7.4% in real terms each year, increasing from 65.4bn this year to 105.6bn in 2007/08.

It means UK health spending will increase from 6.7% of domestic economic output in 1997 to 9.4% by 2007/08, compared with a current European Union average of 8%.

Mr Brown announced a freeze on duties on beer, spirits and wine and an increase of six pence on the price of a pack of 20 cigarettes. Fuel duties are also being frozen.

'Fair contribution'

The chancellor said the extra money for the NHS would come hand-in-hand with more scrutiny of how it was spent.

Effect of tax increases
Average income (21,400): Up 3.70 a week
Above average earnings (32,100): Up 5.75 a week
Below average earnings (10,700): Up 1.65 a week

He said: "It is right that when everyone - employees and employers - benefits from the insurance provided by the National Health Service, everyone who can should make a fair contribution."

He said the UK faced a "fundamental choice" over the NHS. Pledging whether to continue with free access to health services "will define the character of the country" in the years to come, he said.

Mr Brown said Health Secretary Alan Milburn would be setting out new financial incentives for hospital performance, more freedom for staff, the reform of social services care for the elderly and more choice for patients.

'Steady and firm'

The chancellor also announced extra payments directly to schools, saying education would receive priority in this Parliament. He said this would mean an increase of 16,000 a year for a typical secondary school.

Iain Duncan Smith
Duncan Smith: Pledge broken

He pledged that by keeping a "steady and firm" hand on public finances he could find an extra 4bn for public services next year.

But the new money would have to be matched with "modernisation leading to results", he said.

Mr Brown set out details of how he planned to "make work pay" with new working and child tax credits - benefits paid through the tax system - which he said would benefit people on low incomes.

It was a policy for "fairness for families", he said.

Populist measures

He said there would be 2.5bn in extra support for six million families, with the new child tax credit available for those with joint incomes of up to 58,000 a year.

The chancellor also announced a number of measures aimed at boosting business.

He said the government's aim was to increase productivity, investment and enterprise to build a more prosperous Britain.

The chancellor peppered his speech with populist measures, including the abolition of tax on bingo and the halving of duty on small brewers' own beer in time for the football World Cup finals this summer.

Strong economy

He also increased the threshold after which inheritance tax is paid to 250,000 from 242,000 and froze licence fees for cars, vans and lorries.
Chancellor Gordon Brown
Brown: Everyone must pay for NHS

Mr Brown began his Budget by setting out three challenges which he said the Budget would address: boosting enterprise, creating family prosperity for all and renewing public services.

He said the UK economy was in a strong position, with the lowest inflation and unemployment rates for 40 years.

The chancellor said the UK last year recorded the highest growth of all its major competitors and that he was sticking to his view that the economy would grow by 2 to 2.5% this year.

Raising his previous forecast, he said growth would come in at 3 to 3.5% in 2003 and 2.5 to 3% in 2004.

Oil protest

But his decision to spare motorists an increase in petrol duty was not matched by similar generosity to the oil industry.

Changes to the complex tax structure for UK oil producers led to howls of protest from the offshore industry.

They claim better capital allowances were more than offset by a 10% increase in tax on profits.

  The BBC's Andrew Marr
"This is a calculated gamble"
  The BBC's Carole Walker
"People will expect a noticeable improvement in the Health Service"
  Michael Howard, Shadow Treasury Spokesman
"More money needs to be spent on the NHS, but we need changes"
The Budget: Has the chancellor got it right?



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16 Apr 02 | Politics
14 Apr 02 | Politics
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