Tax rise threat over fresh NHS inquiry

Gordon Brown has ordered another inquiry into the funding of the National Health Service, which is expected to lead to a further injection of billions of pounds next year.

In a move that could also pave the way for a further increase in national insurance payments before the next general election, the Chancellor has asked Derek Wanless, the former chief executive of NatWest, to study whether the NHS needs more money on top of the £40bn allocation over five years announced last year.

The cash boost followed an investigation by Mr Wanless and was funded partly by the penny-in-the-pound rise in national insurance contributions, which took effect this month. Such a scheme would be controversial, since Mr Brown would be accused of using the Wanless report to justify tax rises needed to balance his books. Independent analysts warned he would face a "black hole" of up to £11bn after he issued optimistic forecasts for economic growth in this month's Budget.

The Chancellor predicted the economy would grow by 3 to 3.5 per cent next year. But the Treasury's latest survey of independent forecasts, issued last week, shows a predicted growth of 2.3 per cent on average.

Labour's private polling shows that people are prepared to pay higher taxes if the money is earmarked for improving the health service but would be reluctant to pay for a general increase in government spending.

Mr Brown is already committed to raising the health budget from £68.1bn in 2002-03 to £109.4bn in 2007-08. To provide long-term stability for the NHS, he now intends to extend the guarantee of substantial increases to 2010.

The decision will form part of the next government-wide spending review, to be published in the summer of next year. Mr Wanless will submit his study to the Treasury next year, which would allow any decision on health spending to be announced in next year's Budget.

The former banker will update the 164-page report he produced last year by checking the NHS's progress against the three possible scenarios he mapped out: "slow uptake", "solid progress" and "fully engaged". These measure lifestyle changes such as smoking, diet and exercise as well as medical technology, computer equipment and NHS productivity. The "funding gap" between the best and worst scenarios could be as high as £30bn.

Mr Brown has asked Mr Wanless to look at two issues in depth ­ efforts across Whitehall departments to adopt a "prevention rather than cure" strategy and health inequalities in different parts of the UK.

The investigation will be seen as an attempt by the Chancellor to keep a firm grip on health policy at a time when ministers are anxious to ensure that the public notices a return on their investment before the next general election. There is concern that almost a third of the extra money is being soaked up by higher pay.

The Chancellor has clashed with Alan Milburn, the Secretary of State for Health, over his plans to allow high-performing hospitals to win foundation status, bringing more money and freedom from Whitehall.

Mr Brown's decision to commission work on health inequalities could reopen a debate about whether foundation hospitals will result in a two-tier NHS, as the Chancellor fears. He used Budget documents to set limits on borrowing powers of the new-style hospitals and said they should not raise large amounts of extra money by treating more private patients.

Almost 130 Labour MPs have signed a Commons motion opposing the plans, and the prospect of a big rebellion forced ministers to delay the Bill's second reading until after Easter. Last year Mr Wanless found the performance of NHS trusts was linked to "socio-economic" issues.