Chancellor Gordon Brown today raided his £12 billion war chest to give the NHS a Budget boost.

Mr Brown delighted Labour MPs with a commitment to increase spending on the health service over the next four years by a record 6.1 per cent each year over and above inflation.

That would lead to NHS spending of £68.7 billion by 2004, the equivalent of £2,800 per household and up on the current total of £45 billion. The money being poured into the NHS would allow the recruitment of recruit 10,000 more nurses.

The NHS boost was the centrepiece of a £4 billion Budget injection into the public services which also saw:

1 £1 billion for education.

2 £285 million to fight crime.

3 £280 million in a ring-fenced fund for transport.

Mr Brown promised that by next April a package of measures would ensure one million pensioners would be £1,000-a-year better off than when Labour came to power. Mr Brown froze duty on spirits, but put 1p a pint on beer and 4p on a bottle of wine. Duty on petrol is to rise by 2p a litre in line with inflation.

Smokers were hit hard with a 25p a pack rise from tonight with the money raised being ploughed into the NHS. Upmarket home buyers were hit as the Chancellor sought to dampen house price inflation without damaging the overall economy.

He raised stamp duty by half a percent to three per cent on property sales above £250,000 and four per cent for sales above £500,000. At the same time he offered small investors a tax free boost by raising to £7,000 the amount which can be invested in an Individual Savings Account next year.

For low-income families Mr Brown said that the Working Families Tax Credit would be increased from next April to guarantee a minimum family income of £214 a week. Child benefit would be raised to £15.50 a week from next year with an additional £4.35 a week in support for the poorest children.

The new children's tax credit would be raised by £26 to £442, benefiting five million families. Mr Brown said that it would leave next year's tax burden for the aveage working family at its lowest level since 1972.

In a rapid-fire 51-minute Budget speech, Mr Brown pointed to healthy growth, continued low inflation, lower long-term interest rates and a ten per cent rise in

living standards since he became Chancellor in 1997.

He told MPs that prudent management of the economy had delivered reduced debt interest payments (down by £4 billion a year), lower unemployment, reduced social security spending (down by £3 billion) and a current surplus for this year forecast to be £17 billion.

But Tory leader William Hague was not impressed.Mr Hague said: "The Chancellor is like a mugger who grabs your money then wants you to thank him for giving you the bus fare to get home." He added: "The Chancellor is taxing more and delivering less and that's why taxes are going up."

On the boost for the NHS, Mr Brown, whose Labour government was been stung by fierce criticism of the NHS during the winter, said: "This Government is committed to a publicly -funded NHS, true to the original principles of its founders."

He said that spending on the health service had traditionally risen by 3.3 per cent above inflation. But funding would now rise by 6.1 per cent above inflation every year for the next four years, the largest increase in NHS spending in the history of the health service.

A spokesman for health think tank the King's Fund said: "Basically the Chancellor has torn up the Comprehensive Spending Review on health and started again with new figures from scratch.

"If spent right it will deal with some of the major problems faced by the health service. What we want to see is health authorities being allowed to spend the extra money where it is needed rather than being forced to put it into modernisation funds or spend it on meaningless initiatives such as waiting list targets."

The spokesman said the 6.1 per cent boost was still "nowhere near" the increases some experts have said are needed to bring NHS spending up to EU levels within the next five years. Doctors' leaders said they were "delighted" with the announcement of extra spending.

Dr Ian Bogle, who chairs the British Medical Association, said: "We are delighted that the Government has responded so quickly to our call for a fundamental review of health service funding. "We see this as a first major step to putting the health service on a firm, long-term basis."

Mr Brown said the extra money would also be used to recruit an extra 10,000 nurses over the next two years. But he warned the extra money would also require more modernisation and reform of the health service.

On the duty on alcohol, Mr Brown was criticised for failing to address the issues of beer smuggling and cross-Channel shopping. The Campaign for Real Ale said: "Yet another penny increase on beer tax is an open invitation to the growing army of smugglers. Recent evidence shows that children as young as 11 are taking smugglers up on their offer. The social consequences of this tax rise could be huge."

Quentin Rappoport, director of the Wine and Spirit Association said: "At present one in seven bottles of wine drunk in the UK are brought in France, and that does not account for those that are smuggled illegally.

"A rise of 4p on wine is asking for trouble. By not cutting the duty on wine the Chancellor has encouraged people to continue shopping in France and has kissed goodbye to an awful lot of revenue which will continue to be paid into the French coffers."

The British Institute of Innkeepers said it was disappointed that the Chancellor had not used duty in the fight against smuggling. Spokeswoman Mary Curnock Cook said: "Bootleggers don't care who they sell to and we know that children can buy smuggled alcohol very easily outside the legal framework. Our research shows that the problem has increased, despite the freeze in the last budget, and we are sure the problem will carry on growing."

But there were some winners within the licensing industry. Director General of the Scotch Whisky Association, Hugh Morison, said: "Ultimately the Treasury is going to have tackle the growth of cross-Channel shopping through lowering duty rates, but tonight the industry will raise a glass in toast of a further step towards a modern tax system and the removal over time of duty discrimination."

On a sobering note, alcohol abuse charity Alcohol Concern welcomed the rises. A spokeswoman said: "Any increases in the real price of alcohol are associated with decreases in consumption."

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.