Gordon Brown will be warned by a Treasury review that public spending will have to rise further for Labour to meet the public's expectations on health by the next election.

Taxes might even have to be raised, if the National Health Service is to keep pace with growing demand, an ageing population, and the advance in medical technology, the Chancellor will be told.

Fresh evidence of the financial dilemma facing the Government emerged as it pledged another £300m to tackle the problem of "bed-blocking" in hospitals by elderly patients.

The review, headed by Derek Wanless, the former group chief executive of NatWest bank, was set up by the Treasury earlier this year.

Mr Wanless was asked to consider the future financing of a publicly funded health service "free at the point of use" over the next two decades.

His brief implicitly ruled out the greater use of private care in the health service. He has already concluded that above-inflation health spending increases will be necessary for many years to improve NHS standards substantially.

That will leave the Government facing the prospect of further spending increases, with the economy possibly on a downturn, or even tax rises at the time of the next election.

Mr Brown's spending plans, set out last year, committed the Government to an additional 5.7 per cent a year on the health budget. Much of Mr Brown's contingency fund has been drained by the foot-and-mouth epidemic and is under further pressure because of the military action against terrorism.

Under Tuesday's bed-blocking initiative, councils and private firms will be given £300m over the next two years to place the elderly in care homes rather than leaving them in hospitals.