The Government will merge the research budgets of the NHS and the Medical Research Council, in line with the recommendations of a review of public funding of health research by Sir David Cooksey, a retired venture capitalist.

One of the aims is to ensure research is translated into real benefits for patients, according to the Cooksey report, which was published yesterday to coincide with the Chancellor's pre-Budget report.

Mr Brown confirmed that the MRC will retain its institutional structure and that a new National Institute for Health Research will be established, led by Professor John Bell, a medical geneticist at Oxford University.

The combined budgets of the NHS and MRC for 2007-2008 was expected to come to £1.3bn a year but the Chancellor has only confirmed a research budget of "over £1bn", raising fears that there will be cuts, according to Professor Michael Rees of the British Medical Association. "We are pleased that research and development budgets will be ring-fenced. However, medical researchers need to be confident that baseline funding will not be eroded by the new combined fund," Professor Rees said.

Andrew Lansley, the shadow Health Secretary, said: "Gordon Brown did not say whether funding for medical research would stay the same.

"We really need some clarification if an effective strategy is to be established in time for the comprehensive spending review," he added.