OAPs smile, liquor drinkers cheer, but smokers must cough up for the NHS

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Chancellor Gordon Brown today raided his £12 billion war chest to give the health service a Budget boost.

To the delight of his own backbenchers, he made a commitment to increase spending on the NHS over the next four years by a record 6.1 per cent annually over and above the rate of inflation.

That would lead to NHS spending of £68.7 billion by 2004 - the equivalent of £2,800 per household and up on the current total of £45 billion,

Smokers who from tonight will have to pay 25p extra for a pack of cigarettes will be doing their bit for the health service - Mr Brown said the proceeds from the price hike will go straight to the NHS.

Other public services to benefit included schools - with a £1 billion boost in spending, with a further £565 million split between transport and law and order.

By next April, a package of measures will also be in place to ensure that one million pensioners will be £1,000-a-year better off than when Labour came to power.

Mr Brown froze duty on spirits, but put 1p a pint on beer and 4p on a bottle of wine. Duty on petrol is to rise by 2p a litre - in line with inflation.

There was also bad news for the wealthiest home buyers, who were hit as the Chancellor sought to dampen house price inflation.

He raised stamp duty by half a per cent to 3 per cent on property sales above £250,000 and 4 per cent for sales above £500,000.

At the same time he offered small investors a tax free boost by raising to £7,000 the amount which can be invested in an Individual Savings Account next year.

For low-income families Mr Brown said that the Working Families Tax Credit would be increased from next April to guarantee a minimum family income of £214 a week.

Child benefit would be raised to £15.50 a week from next year with an additional £4.35 a week in support for the poorest children.

The new children's tax credit would be raised by £26 to £442, benefiting five million families.

Mr Brown said that it would leave next year's tax burden for the average working family at its lowest level since 1972.

In a rapid-fire 51-minute Budget speech, Mr Brown pointed to healthy growth, continued low inflation, lower long-term interest rates and a 10% rise in living standards since he became Chancellor in 1997.

He told MPs that prudent management of the economy had delivered reduced debt interest payments - down by £4 billion a year - lower unemployment, reduced social security spending - down by £3 billion - and a current surplus for this year forecast to be £17 billion.

Mr Brown said: "This Budget is built on the realities of this new economy - that we will meet and master a new tide of unprecedented technological change by continuing to remove the old barriers to business investment and by continuing to expand employment opportunity for hard working families."

Predictably, leader of the opposition, William Hague was not impressed, describing the Chancellor who presented his fourth budget as "a mugger who grabs your money then wants you to thank him for giving you the bus fare to get home."

"The Chancellor is taxing more and delivering less and that's why taxes are going up," he added.