Boost for hospitals and education

Schools and hospitals are to receive an extra pounds 2.2bn from the Government's reserves next year. The move took new Labour firmly back on to the old Labour territory of better funding for health and education.

As there would be no spending round this year, the Chancellor said, he would allocate an extra pounds 1.2bn to the National Health Service during the next financial year plus an extra pounds 1bn to schools. In addition, there would be pounds 1.3bn over the next five years - pounds 150 per pupil - to help pay for new school buildings and for repairs to existing buildings.

But there was tacit agreement from the Government last night that the move would not help schools and hospitals through the coming winter. In a letter to senior health service officials the Secretary of State for Health, Frank Dobson, recognised that there were still challenging times ahead.

However, the promise of extra money next year should help schools and hospitals in the interim. To an extent, they can muddle through in the knowledge that they can expect a windfall later.

Mr Brown told MPs that although the majority of the Government's pounds 5.5bn reserves for 1998-99 would be retained for contingencies, he could afford to spend money which might otherwise have been distributed during the Autumn public spending round.

On health, measures such as the recovery of the costs of road traffic accidents from insurance companies would help to save money, he said. However, there would also be extra cash for hospitals while a broader review of their future took place.

"Now that long-term changes are under way I want the NHS to be able to plan also for the year ahead. I want them to do so in the sure knowledge of a prudent and realistic allocation for 1998-99 which will ensure that services are maintained and that patient care is secure," he said.

Mr Brown added that extra money for education would be directed specifically to schools and that local authorities would be expected to show that they were spending it on raising standards and improving discipline.

"The Government must be satisfied that resources in education are going direct to learning in our classrooms," he said.

In addition, public/private partnerships would be encouraged to help upgrade school buildings. Cash from the windfall tax would be invested to equip schools with better classrooms and technology.

Schools would be invited to submit plans on how they intended to modernise, but pounds 1.3bn would be made available over the course of the Parliament to back the programme.

The move was condemned by both the Conservatives and the Liberal Democrats as failing to address the real needs of schools and the health service.

William Hague, the Conservative leader, said Mr Brown hoped to use the extra cash to soften the blow from tax rises.

"This is a budget in which the Government have broken a central election promise and tried to comfort their supporters by saying there will be a pounds 1.2bn increase in health service spending when last year there was a pounds 1.6bn increase in the health service," he said.

Paddy Ashdown, the Liberal Democrat leader, said extra money would be welcome but the crisis in hospitals would happen this winter before it was paid. Over the past 18 years the average rate of growth in health spending had been 3.1 per cent but the planned rate of growth for next year would be 0.15 per cent. That represented one twentieth of the annual increase during a time which had "brought the health service to its knees," he said.