Brown set to increase taxes in budget

The British government prepared to gamble today that Britons were ready to dig deep into their own pockets to fund a massive …

The British government prepared to gamble today that Britons were ready to dig deep into their own pockets to fund a massive increase in spending on health care.

As Chancellor of the Exchequer Mr Gordon Brown put finishing touches to his annual budget speech, a new government report said tens of billion of pounds were needed to make up for decades of under-investment on health.

The National Health Service, established in 1948, is plagued by low staff morale, vast waiting lists for treatment and scandals of botched operations - tales that may yet topple Blair's government despite its huge parliamentary majority.

Mr Blair has tied his political fortunes to delivery of world class healthcare to an electorate which he says will judge him on his public service record.

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Mr Brown, who is due to present his budget to parliament at 3.30 p.m., told cabinet colleagues today that economic stability will be the foundation of his plans.

Mr Brown has earned a reputation for solid economic management since taking over at the Treasury in 1997. He received a pre-budget boost today as new figures showed Britain's unemployment lines shrank to their shortest for over 26 years.

With unemployment at 3.1 per cent, inflation below Mr Brown's 2.5 per cent target and economic growth in line with government forecasts at 2.2 per cent last year, Britain has emerged from last year's global slowdown as the best performer among the Group of Seven richest nations.

But its healthy economic record is not matched by its public services, which have fallen well below standards in continental Europe.

Spending on health must increase from 7.7 per cent of national income now to as much as 12.5 per cent in 20 years time to reverse the history of under-investment which has left the NHS unable to cope, according to a new study commissioned by Mr Brown.

Most speculation has centred around changes to the rates and ceiling of a payroll tax known as national insurance, currently the government's second biggest earner.

Raising the national insurance ceiling to the upper rate threshold of income tax would raise nearly a £1 billion. A rise in the employee's rate from 10 to 11 per cent would add £3.3 billion.