Blair promises NHS improvements that may cost £37bn a year

Tony Blair promised yesterday to give the NHS enough extra money to bring the spending on health up to the European average – a pledge that could cost up to £37bn a year.

The Chancellor, Gordon Brown, who seemed taken by surprise, looked on glumly as the Prime Minister made the vow during Prime Minister's Questions. The Institute for Fiscal Studies has estimated meeting the European average could cost £10bn a year; the equivalent of 3p on income tax. The King's Fund, an independent think-tank, calculated it would cost up to £37bn a year – 12p on tax – if rising spending on health in other European countries is taken into account.

Mr Blair's vow could reopen divisions with Mr Brown. When he made the same pledge last year, Mr Brown is said to have told him: "You've stolen my f***ing Budget."

The promise was dropped from Labour's manifesto at the general election because the Treasury saw it as too ambitious but Mr Blair renewed it yesterday after the pledge in Tuesday's pre-Budget report to raise health spending. When Charles Kennedy, the Liberal Democrat leader, asked if it was still the Government's policy to meet the European average by 2005, Mr Blair said: "Of course it is, which was precisely the point of what the Chancellor was announcing yesterday."

Last night, the Treasury tried to play down Mr Blair's comments and rejected the £10bn estimate. It said Britain would give 7.7 per cent of its gross domestic product to health by the 2003-2004 financial year, adding the "aspiration" set out by Mr Blair last year was 8 per cent, the EU average at the time.

Michael Howard, the shadow Chancellor, accused Mr Blair of being "in a panic" and "throwing money at an unreformed health system" but his attack was undermined by a leaked Tory memo revealing his party's proposals "will entail those who can afford it making some payment for healthcare services".