The NHS will have £56bn to spend next year, £1bn more than previously planned, after Gordon Brown signalled he wanted to reverse years of under-investment.
The Chancellor said health spending in the coming year would rise by £6bn, or 7 per cent in real terms, compared with the £50bn provided this year. The aim was to tackle the "immediate, medium-term and long-term needs of our NHS" so that the service was able to cope with demands for medical care in 20 years' time, he added.
Mr Brown's pledge came as he published an independent review of the financing of the NHS which concluded that health care should continue to be paid for by general taxation.
No alternative source of funding could deliver as fair a system of health care at a lower cost to the economy, according to the report by Derek Wanless, the former chief executive of NatWest. But the NHS could introduce hotel-style charges for non-clinical "extras" such as bedside telephones, computers or televisions, it said.
Mr Brown said he hoped that "an enduring national consensus" about the future of the NHS could be built out of the two central conclusions in Mr Wanless's interim report.
"That a publicly funded National Health Service is best for Britain, and a modernised National Health Service will need significantly greater capacity and significantly more long-term investment," the Chancellor told the Commons.
In the first major assessment of long-term funding since the NHS was founded in 1948, the Wanless report made clear that health standards in Britain left much to be desired and were "generally poor" in comparison with other Western nations.
Although the NHS did many things well, the report said it had failed to modernise and "standards of health care in the UK have fallen behind people's expectations."
"We are not keeping up with the quality of service provided routinely in many other countries," it said, blaming "cumulative under-investment over at least 30 years" and organisational shortcomings.
The UK also lagged behind many other countries in the amount of national wealth spent on health, the report said. Total health spending was just 6.8 per cent of GDP, compared with 7.9 per cent in Sweden, 10.3 per cent in Germany and an EU average of 7.9 per cent.
Public or private
No figures were given for the resources that would be required to keep the NHS going over the next two decades. But the report said that the ageing population, the demand for new technology and rising patient expectations would drive up NHS costs.
If it was to remain publicly funded, money could come from general taxation or social insurance. But countries such as France which relied on social insurance were shifting towards greater use of taxation because of excessive overheads, lack of incentives for cost control, and charges for treatment on top of insurance premiums.
Private funding systems, such as America's, tended to be "inequitable" and "regressive", have "weak incentives for cost control [and] high administration costs" and "can deter appropriate use".
Insisting that the present system of funding was both fair and efficient, the report said: "There is no evidence that any alternative financing method to the UK's would deliver a given quality of health care at a lower cost to the economy.
"Indeed other systems seem likely to prove more costly. Nor do alternative balances of funding appear to offer scope to increase equity."
While clinical services would remain free, the report said Britain would need to consider "greater choice in non-clinical services" for which individual patients would pay.
In the years ahead, pressure for more single rooms and "greater home comforts" would increase. Patients would reasonably expect comfortable accommodation that was "neither the Ritz nor a youth hostel," with healthy food, more access to entertainment and less gloomy surroundings.
To satisfy these expectations, the NHS could negotiate contracts with private companies to install bedside televisions and phones "with modest charges for the service".
"As patient expectations increase, the UK will need to consider whether to provide a mechanism to allow patients to express their preferences for greater choice in non-clinical services.
"Such patient charges for non-clinical services may offer a way to extend choice for these services without diverting NHS resources away from clinical care," the report said.
The health of the British public rated poorly in comparison with seven other countries with broadly similar living standards, with women faring worse than men.
Women had a shorter life expectancy at birth and at age 65 than all the other nations. Apart from New Zealand, more women died prematurely and more babies died in the first year of life. Life expectancy for men was lower than all the other countries apart from the Netherlands.
"Much of the difference in health outcomes can be explained by the UK's comparatively low level of health care resources," the report said, stressing that Britain had fewer doctors per head than many similar countries.
Targets had been set for improving the public's health, including reducing cancer deaths by one-fifth and preventing 20,000 deaths a year from heart disease. New drugs, such as statins to treat people at risk of heart attacks, would also add to costs. Statins alone could cost £2bn a year if all the six million people at high risk of heart disease were treated.
But the report said that the ageing population might not increase NHS costs as much as feared even though the number of very elderly people is expected to rise by more than one-third over the next 20 years.
Old people may be more obese in future, but they would have benefited from better health care throughout their lives. The effect of the ageing population could therefore be to "postpone rather than increase health service costs" and could add less than one per cent a year to the NHS bill.
Technological advances in medicine were one of the major drivers behind increased costs and over the past 20 years they had contributed around 2 per cent a year to NHS costs.
Even so Britain had been "relatively slow to adopt new technologies, leaving it lagging behind many other countries". The NHS had a "particularly poor record" on computerisation and exploiting the benefits of IT systems.
On top of that came advances in genetics which had the potential to make a significant impact on costs. But the report forecast that extra spending would not exceed the 2 per cent "floor".
Staff costs amount for two-thirds of health spending, with 1.25 million employees in the NHS and a further million in social care. The UK did "not have enough" doctors, nurses and other professional staff, employing fewer than most other European countries. But the report said there was no evidence the NHS should seek to match the EU average, and gave no estimate of the costs of a government recruitment campaign.