UK Pre-Budget Report - War on terror

Pre-Budget Report - War on terror

The Chancellor has allocated further funding to support the war on terrorism and provide additional humanitarian assistance to the people of Afghanistan.

The Chancellor told Parliament that:

an additional £100 million has been made available to the Ministry of Defence for new equipment and immediate operational requirements;
extra resources of £20 million for this year will be set aside to cut off the supply of finance to terrorists and to fund other anti-terrorism measures;
a further 30 million pounds has been made available to the Metropolitan police and other police forces to fund the need for additional policing since September 11th;
Britain is contributing an extra £100 million to fund humanitarian assistance to Afghanistan, and elsewhere, and to meet new international development obligations.

full transcript of the Chancellor's speech follows

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Pre-Budget Report: Chancellor's statement

Chancellor of the Exchequer, Gordon Brown has published the Pre-Budget Report. Addressing Parliament, he said:

"In total over the next three years one billion pounds more to our hospitals and one billion more to our schools - money that we could not provide if we made irresponsible tax cuts."

Read the speech in full below.

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"The task of this Pre-Budget Report is:

to rise to the global economic challenge facing our country and;
to set out how - upon a foundation of stability and growth - we can, and will, build a stronger, fairer Britain even in an uncertain world.
So Mr Speaker, I start with the state of the world economy.

America is in recession. Japan is in recession as are other Asian economies like Singapore, Taiwan and Hong Kong. The euro area is slowing rapidly. And world trade growth has slowed dramatically from its 12 per cent growth last year to only 1 per cent this year.

Growth among the main G7 economies is expected to slow from 3.5 per cent last year to just 1 per cent this year.

Indeed for the first time for three decades each region of the world has slowed at one and the same time and more sharply than before.

And independent forecasters expect the world downturn to be deeper and longer with economic growth in 2002 of just 1.5 per cent in the euro area, 0.7 per cent in the USA, and minus 0.6 per cent in Japan.

No one country can insulate its economy from such a synchronised slowdown - and in addition no one can yet judge the full and final impact of the traumatic and tragic events of September 11th.

These testing times demand decisive action.

So in Britain, interest rates have been cut seven times in 9 months. And Britain's interest rates are now the lowest for nearly 40 years.

And with public spending and public investment rising this year, our fiscal policy is - at the right time of the economic cycle - complementing and reinforcing monetary policy and thus stability and growth.

In the past, when the main economies of the industrialised world have gone into a downturn, Britain has invariably come off worst.

Indeed, in the past, in every major global slowdown since 1945, Britain has entered weaker, suffered longer, experienced higher inflation and endured higher unemployment.

So it is at a time like this that our new monetary and fiscal regime - Bank of England independence, the symmetrical inflation target, our new fiscal rules and the tough decisions we have taken to reduce debt - is being tested.

When the world turned down in 1998, decisive action by the newly independent Bank of England ensured the British economy sustained its growth.

Throughout 2001 Britain has continued to grow.

And monetary policy has played its full part.

First, the Bank of England has been able to take pre-emptive action because British inflation has been at or near our target of 2.5 per cent for four years, in contrast to inflation rising to 10 per cent when the world economy slowed in 1990.

Over the last two years, Britain has had the lowest annual inflation since 1963. Indeed, our average inflation has been lower than any other comparable country in Europe.

Second, the symmetrical inflation target set in 1997 at 2.5 per cent means that inflation below that figure is as undesirable as inflation above it.

Deflation is as unacceptable as inflation.

So it is because in 1997 we put in place a symmetrical target - one that is pro-growth as well as anti-inflation - that, while at every other time since 1945 when the world faced a slowdown Britain was unable to act decisively or acted too late, this time the Bank of England has been able to adjust policy at the right time and in the right way to safeguard both economic stability and growth.

That is why during this world slowdown our interest rates are now 4 per cent in contrast to British interest rates of 10 per cent - and for one whole year 15 per cent - during the boom and bust of a decade ago.

I come to the forecasts for growth in an uncertain world economy.

At the time of last year's Pre-Budget Report, independent forecasters said US growth in 2001 would be 3.4 per cent - they now expect it to be just 1 per cent.

For Germany they expected growth of 3 per cent - now actual growth is expected to be 0.7 per cent.

For Japan they expected growth of 2 per cent - now actual growth is expected to be minus 0.5 per cent.

Last year we forecast British growth in 2001 would come in at a range from 2.25 to 2.75 per cent. And we based our public finance projections on 2.25 per cent.

I can tell the House that our expected growth figure is exactly that, two and a quarter per cent.

So while some Pre-Budget representations claimed Britain was worst placed of any to withstand the global slowdown, the OECD and IMF have both forecast that Britain this year will have the highest growth of any of the G7 countries.

In the period ahead there are of course real risks for both Britain and the world. But it is because of the decisive action we have taken on monetary and fiscal policy that I remain cautiously optimistic about the prospects for the British economy.

While next year independent forecasts expect the United States to grow by just 0.7 per cent, the euro area to grow by 1.5 per cent and Japan to contract by 0.6 per cent, we now forecast British growth of from 2 to 2.5 per cent - and then rising in 2003 to 2.75 to 3.25 as the economy returns to trend in 2004.

While the British economy has been stable, it can and must be stronger.

All countries are having to respond to unique economic circumstances: an overshoot and then collapse in US information technology investment and then IT production (both down 12 per cent), a downturn that contributed to falling industrial production as a whole (now down 4.3 per cent across the G7) and then to a dramatic slowdown in world trade in industrial goods (from 13 per cent growth last year down to almost zero now) along with a large increase in business uncertainty since September 11th.

With manufacturing output having fallen across the world - by an estimated 5 per cent in the G7 countries - British manufacturing output has fallen over the same period by 2 per cent after rising by 2 per cent in 2000 - and there have been consequent effects for both exports and imports and for business investment whose share of national income nonetheless continues near an all time high.

The challenge for Britain - for manufacturing and across the economy - is both to maintain our hard won stability and to accelerate the productivity improvements that will increase output, jobs and wealth.

The global risks which demand continuing vigilance are both cyclical and structural in nature:

Downside risks if America takes longer to recover or if there is a long term change in oil prices or a longer term change in company or consumer behaviour after September 11th - which would lead to a much more uncertain world economy in which Britain would have to work even harder to make productivity gains.

And, further out, there are upside risks of inflationary pressures if, as a result of lower interest rates, consumer spending grows too quickly. But there is also an upside opportunity for growth if world recovery is accompanied by productivity improvements here in Britain.

So - far from deferring our enterprise agenda - this is exactly the time to press ahead with supply side reforms to encourage new investment and higher productivity and it is now right that we take forward the measures on enterprise on which we have been consulting.

Further statements on manufacturing will be made in the days ahead by the Secretary of State for Trade and Industry, and on the reform of our planning laws by the Secretary of State for Transport, Local Government and the Regions with proposals to improve the flexibility, speed and responsiveness of the land use system.

Today, I can tell the House we will proceed with four tax cuts for enterprise and the abolition of one further tax in its entirety.

To help British business and particularly manufacturers to invest in the technologies of the future, I have decided - following our consultation - that we will, in next year's Finance Bill, legislate for a new Research and Development Tax Credit for large companies, a tax cut to boost innovation.

To increase investment and reward entrepreneurship we will, from next April, make a second tax cut - a cut in capital gains tax to 20 per cent for business assets held for more than one year and 10 per cent for business assets held for two. Three quarters of taxpayers with business assets will pay only a 10p rate - overall a capital gains tax regime more favourable to enterprise than that of the United States.

To reward managers taking risks in new business ventures, I now propose to double the reach of our share option scheme to all businesses with assets of up to 30 million pounds, a tax incentive that I will introduce immediately.

Because, for small businesses, I want to cut tax bills and red tape, I can confirm that the Budget will extend the 10p corporation tax band, cutting taxes for small companies, and that from April a new flat rate and simplified scheme for payment of VAT will cut form filling and also save a typical small business up to 1,000 pounds a year. There is a strong case for cash help for small firms to bring their payroll and tax systems online and I am publishing today and consulting on the Carter Review.

In each year since 1997 I have abolished at least one tax, most recently abolishing betting duty.

For 54 years since the 1947 Budget, tax has been levied on the football pools.

I have agreed that the tax on pool companies will be 15 per cent on their gross profits.

And after an agreement with the industry that guarantees the continuation of their funding of the Football Foundation and the Foundation for Sport and the Arts, I am abolishing football pools tax altogether.

This change will take effect from April 1st.

So just as people no longer have to pay tax when they bet, they will no longer have to pay tax when they do the pools.

Every charity or local sports club who run pools based competitions will see this tax liability abolished.

The details of our consultation on the tax status of amateur sports clubs will be announced by the Financial Secretary and the Minister for Sport on Friday.

I turn to jobs.

Today, the Secretary of State for Trade and Industry and I are publishing our joint report on regional economic policy and the work of Regional Development Agencies - set up by the Deputy Prime Minister - in tackling regional inequalities and achieving balanced economic growth across the United Kingdom.

The key focus is on local innovation, indigenous investment and improved infrastructure and skills. And to complement the locally based venture capital funds that we are forming in every region of the country, we are today publishing our prospectus for a new 50 million pound fund to help small firms in every region access the risk capital they need - capital that is often not available from banks.

New investment, new businesses and new jobs are the key to regenerating our high unemployment communities. A new Community Investment Tax Credit, on which I am publishing details today, will match every 100 million pounds of private investment with 25 million of additional public investment. And as a special measure to help the slowest growing and highest unemployment areas of Britain we will, in 2000 wards in constituencies throughout the country and for all property transactions for homes and business properties worth up to 150,000 pounds, abolish stamp duty from Friday. And in the Budget I propose to legislate so we can take more business property transactions in these areas out of stamp duty.

This Government will do all it can to fight unemployment in normal times and in times like these.

I can report that Britain's unemployment this year is the lowest since the 1970s.

For the first time in a century unemployment in Britain is lower than in Japan, lower than in America. And compared with Britain the unemployment rate in the euro area is 50 per cent higher - the equivalent of one million more British people in work.

Because we will not retreat from our commitment to full employment, the Secretary of State for Work and Pensions will tomorrow announce new measures to help the newly redundant and expand the New Deal to help the long term unemployed back to work.

And because a third of the existing workforce lacks basic or Level 2 qualifications and because the old voluntaristic approach has not worked, we have been investigating the joint CBI and TUC proposals for a tax credit for in-work training. And following today's report from the Performance and Innovation Unit we will, from September next year, pilot a new approach combining direct financial support for business - especially small business - with time off for training, under which employees, employers and government each accept their responsibilities.

Because the skills of the future start in the schools of today, the Secretary of State for Education will be announcing further projects funded from the Capital Modernisation Fund.

This is also a testing time for our fiscal regime and I now turn to the public finances.

While in past downturns, interest rates have come down too late, too little or, because of high inflation, not at all, so too excessive levels of debt or deficit can make it difficult for fiscal policy to play its proper role.

When we came to power, debt was too high and debt interest payments ran at 3.6 per cent of national income.

So we maintained spending limits, took the necessary tax decisions and cut debt. But we also set tough long term fiscal rules - not for a year or even two but for the economic cycle: rules that demand fiscal discipline by a tighter approach in the best of times and allow the automatic stabilisers to work fully at a time like this, in both cases fiscal policy supporting monetary policy.

And because from 1997 we tightened fiscal policy by 4 per cent of national income, we have been able to reduce net debt below 40 per cent, not just in one year but across the economic cycle.

I said in the Budget in 2000-1 that we would repay 34 billion pounds of the national debt.

In fact, we were able, by cautious budgeting, to repay in the last year not 34 billions but a total of 37 billions.

In total, since we came to power we have now repaid 51 billion pounds of the national debt.

In 1996-97, debt was 44 per cent of British national income.

Two years ago we brought it down to 36 per cent.

This year it has been brought down to 31 per cent.

In contrast to nearly 40 per cent in USA, 40 per cent in Germany, 41 per cent in France, 53 per cent in the euro area as a whole, 57 per cent in Japan and 95 per cent in Italy - Britain's debt is now the lowest share of national income in the G7 and the lowest of all our major European competitors.

Mr Speaker, we had a choice last year: to use the mobile phone proceeds for current spending.

In fact, by using the 22 billion for reducing our debt burden we achieve a permanent saving of one billion pounds a year in debt interest payments.

One billion available, not on a one off basis, but each year and every year.

Let me give the House the full figures.

Debt interest payments were running at 29 billion a year when we came to power, more paid out in debt interest than all the money spent on all our schools.

I can report that debt interest which fell to 26 billion pounds last year, will fall again to 22 billion this year, and we expect it to fall next year to 21 billion, just 2 per cent of our national income.

Just as last year we paid off more debt in one year than previous governments paid off in all of the previous half century, so this year debt interest payments will consume less of our national income than at any time in a century - since the time of the First World War.

The Government's determination to keep a steady hand on the public finances and the economy is for a purpose.

With debt and debt interest payments down, it has been possible, even as corporate and other revenues have declined, to maintain our three year spending plans for hospitals, schools and public services, respond to the emergencies that have arisen, and now borrow at the right time for the economy to make essential investments in the national interest - while still meeting the fiscal rules that we have set over the economic cycle, even on cautious assumptions and even on the cautious case.

Our cautious assumptions include deliberately cautious forecasts for equity prices, oil prices, interest rates and economic growth.

And I can report to the House that, even while we project significantly lower tax revenues this year and next, we are still well within our first rule this year and every year - the golden rule that we balance the current budget over the cycle.

The current budget is projected this year to be in surplus by 10 billion pounds and in future years 3 billions, 4 billions, 7 billions and 8 billions.

Net public borrowing is projected to be 2.5 billion pounds and in future years 12 billions, 15, 13 and 13.

And we are well within our sustainable investment rule: that debt be at or below 40 per cent of national income, with debt projected to be 31 per cent in every one of the next five years.

Taken together, the monetary and fiscal figures I am publishing today show we are also well within the Maastricht criteria. Consistent with our policy on the euro, we are undertaking the preliminary and technical work necessary to allow our assessment of the five economic tests.

Let me turn now to decisions on spending that have resulted from the terrible events of September 11th.

I can report that for new equipment and immediate operational requirements, an additional 100 million pounds has been made available to the Ministry of Defence.

To cut off the supply of finance to terrorists and to fund other anti-terrorism measures, we have set aside extra resources of 20 million pounds for this year alone.

To fund the need for additional policing since September 11th, a further 30 million pounds has been made available to the Met and other police forces.

To fund humanitarian assistance to Afghanistan, and elsewhere, and to meet new international development obligations, Britain is contributing an extra 100 million pounds.

And in addition to the extra responsibilities we have assumed since September 11th, we now expect tackling Food and Mouth Disease and supporting the recovery of rural areas to cost 2.7 billions.

In this Pre-Budget Report we also prepare for the Budget and the coming Spending Round.

As the Prime Minister has said, meeting our international development responsibilities is not an option but a duty.

Out of the tragedy of September 11th a new sense of our obligations to each other has been born and a recognition that, if globalisation is to work for all the people of the world including the poor, then - as the Secretary of State for International Development is urging - a new deal for prosperity must be forged between the richest developed countries and the poorest developing countries.

The UK Government will propose to the Financing for Development Conference of the United Nations that to meet the world's agreed 2015 Development Goals - every child in primary schooling, a two thirds reduction in child mortality, a halving of world poverty - that the international community now establish a new international fund leveraged up to 50 billion dollars a year to help achieve for the developing countries after 2001 what was achieved for Europe after 1945.

And I can confirm that in the next Spending Round we will not only raise significantly the amounts of our own overseas development aid but also raise its share in national income, a measure for which I hope there will be broad all party support right across this House.

This challenge of giving must be met by Government on behalf of the people. But people too, encouraged by Government, should be empowered to give more of themselves.

For the first time Gift Aid provides a 28 per cent addition to every donation by taxpayers to recognised charities and this is now being widely used. Special end-of-year appeals to contribute foreign coins to charity can receive the 28 percent addition.

I have also asked the Inland Revenue to consult charities on an innovation that could take Gift Aid to a new level and allow taxpayers to donate directly to their designated charities on the annual tax form and to gain tax relief for doing so.

The cause of the environment also reminds us how closely our lives are bound up by what happens elsewhere in the world. In the 21st Century the global environment is the local environment. To stem the tide of global warming the Deputy Prime Minister is leading the pressure for new international agreements.

And because these issues are central to our Budget and Spending Review, we are consulting from today on a total of 10 environmental measures. They include additional tax relief for businesses investing in environmentally friendly technologies, and new tax incentives to encourage the fuels and the vehicles of the future. All of these measures reflecting Britain's commitment to energy efficiency, innovation and conservation and to playing our part in safeguarding the environment.

We are investing 180 billion pounds over 10 years in transport. And so that foreign lorries pay some of the environmental and other costs of using British roads, we are also publishing today our consultation document on introducing a charging system under which non-British companies and lorries pay their fair share.

I turn to the Pre-Budget consultation on measures for families and pensioners.

The old welfare state we inherited paid out benefits, too often without regard to individual circumstances or personal responsibility.

Today, the Working Families Tax Credit is making work pay for nearly 1.3 million families - 400,000 more than Family Credit - with around 150,000 families getting help with childcare. Since 1997 lone parent employment has risen by 20 per cent and today 200,000 more lone parents, in work, are receiving the Working Families Tax Credit.

Building on this we will later this week introduce legislation for the next step: extending the principle of the Working Families Tax Credit to make work pay for those without children as well.

And the Children's Tax Credit, the first recognition of children in the tax system in a generation, provides up to 520 pounds extra a year for 5 million families. Later this week we will publish new legislation for our next step: on top of universal Child Benefit we will integrate into one payment all income-related support for children, as we advance towards our goal of abolishing child poverty.

For the first time, all support for children will now be paid to the main carer - usually the mother - the best way to strengthen families.

So our approach in modernising welfare is not to seek narrowly targeted benefits just for those at the bottom, but the right help at the right time when it is needed for work and children for hard working families, with over 5 million - 85 per cent - now eligible for the Working Families or Children's Tax Credits.

For the first time, through tax credits, the tax system is paying money to families rather than taking it, with tax rates now ranging from 40 per cent at the top to as low as minus 200 per cent for low paid families: tax credits modernising the welfare state, encouraging work and helping families without stigmatising them.

And today the Secretary of State for Pensions and I are announcing new measures to apply the same approach to pensions - more help to every pensioner in Britain, most to those who need it most.

The guarantees we propose not only tackle the poverty faced by the poorest, weakest and frailest but also reward rather than penalise the modest savings and occupational pensions of the majority. And they are backed up by a tax policy that is fair to those who have provided well for their own retirement.

Upon the foundation of the Basic State Pension, we have already announced our first guarantee, that no pensioner will have an income below 98 pounds a week in April 2002, 100 pounds a week in April 2003, with no couples receiving less than 154 pounds a week - at least 1,000 pounds more a year than in 1997, a 24 per cent real terms increase.

Pensioner poverty is a reproach to us all.

And the Minimum Income Guarantee that is already benefiting 1.8 million households will rise in line with earnings for the whole of this Parliament.

Today we are also setting aside new funds, 2 billion pounds, to provide a second guarantee from 2003: for all pensioners in communities round the country whose hard work has secured a small occupational pension or modest savings but who have, in the past, been penalised for their thrift and savings, I can confirm that any pensioner with income in retirement below 135 pounds a week - and any pensioner couple with income below 200 pounds - will see their hard earned savings and occupational pensions rewarded with extra money, not penalised - as in the past - by losing all their benefits.

For a single pensioner on the Basic State Pension, with 1000 pounds a year in occupational pension, the Pension Credit will mean an extra 600 pounds a year.

For a pensioner couple with the Basic State Pension and occupational pension of 1500 pounds a year, the Pension Credit will mean an extra 900 pounds a year.

Together the Minimum Income Guarantee and the Pension Credit will be available to half of all pensioner households, 5.4m pensioners in total.

The Secretary of State for Work and Pensions will spell out the full details tomorrow.

And for those pensioners who pay tax, we offer a third guarantee: when the new system is introduced in 2003, we will raise the pensioner's tax allowance at least in line with earnings for the rest of this Parliament.

And for all of Britain's 11 million pensioners, I can announce a fourth guarantee: that the Secretary for Pensions and I have decided that the Basic State Pension will always rise by at least 100 pounds a year for single pensioners and 160 pounds for couples.

In future the State Pension will rise by at least 2.5 per cent, or more if inflation is higher - at least 100 pounds more every year.

I can also confirm that I have set aside sufficient money so that the Winter Fuel Allowance will be paid at 200 pounds for each year of this entire Parliament.

So these are our guarantees:

- for every pensioner an increase of at least 100 pounds a year every year in the Basic State Pension;
- and for 5.4 million starting on the Pension Credit in 2003 up to an additional 1,000 pounds per household;
- free TV licences for all pensioners over 75;
- for the poorest pensioners a Minimum Income Guarantee of 100 pounds a week;
- and for every pensioner household a 200 pounds Winter Fuel Allowance each and every year of this Parliament.

Every pensioner in Britain better off.

Meeting our obligations to all those who in peace and war have worked for, fought for, served and built our country all their lives.

I turn now to the long term funding of the National Health Service and the decisions we have to make for the 2002 Spending Review.

Building the 20th Century health service was among the greatest achievements of an earlier generation.

Renewing the health service for the twenty first century is among the great challenges for our generation.

For decades NHS funding was decided on a year to year basis with no certainty for professionals or patients.

Having put the public finances in order and released extra resources in 1997, 1998 and 1999, the 2000 spending review provided an average real terms increase of around 6 per cent a year for the NHS to 2004 - significantly above the historic average of 3.3 per cent.

And because we knew that money had to be matched with modernisation, the Ten Year NHS Plan is also implementing significant reforms:

devolving 75 per cent of the NHS budget to primary care trusts;
setting national service frameworks for the main diseases and conditions;
reforming contracts for family doctors, consultants and nurses;
and changing working practices with greater diversity of provision and patient choice.
Within the framework of the Ten Year Plan, reporting to the Prime Minister and Secretary of State for Health, further work is being done on management, accountability and incentives in a reformed NHS.

And today we can further support health service reform.

Because of our prudence, debt is lower and debt interest payments are lower.

And I am able to announce that even in these testing times, while meeting all our fiscal rules, even on cautious assumptions, we are releasing for next year an extra one billion pounds for the NHS.

UK health spending in the coming year will now rise by 6 billions, 9.6 per cent in cash terms, 7 per cent in real terms.

The Secretary of State for Health and his Scottish, Welsh and Northern Ireland counterparts will announce how this extra money will be spent.

Our resolve is to tackle the immediate, medium term and long term needs of our NHS.

The pressures on the NHS, the vital place it has in the fabric of Britain and the critical role it plays for the British people mean that we must plan not just one to three years ahead, but five years, ten years and even twenty years ahead.

So in the Budget in March 2000, eighteen months ago, I said that to prepare for the next spending round an independent review should examine long term NHS funding needs, over the next twenty years.

In the half-century history of the NHS no such review has ever been carried out. Taking the long-term view means honestly facing the scale of the challenges ahead.

The review is being conducted by Mr Derek Wanless, formerly of NatWest. Today he is publishing his interim report, a 220 page detailed examination on future trends in health care and future funding issues on which he will consult widely.

But the first question he said he had to ask is whether a publicly-funded tax based health service could itself be a significant pressure on costs and whether a tax funded NHS remained the best way forward.

He has looked at other European and international methods of funding and finds all health systems facing rising pressures.

In systems which rely on private medical insurance, he concludes that compared to the NHS, there is less cost control, more uneven coverage, and many left out.

And in systems which rely predominantly on social insurance, he has found excessive administrative overheads, insufficient incentives for cost control and, for example in France, large costs for employers and for employees who pay charges for every GP and hospital visit even after their social insurance premiums.

Mr Wanless' interim report states: 'my conclusion is that there is no evidence that any alternative financing method to the UK's would deliver a given quality of healthcare at a lower cost to the economy. Indeed other systems seem likely to prove more costly. Nor do alternative balances of funding appear to offer scope to increase equity'.

So having examined whether a publicly-funded NHS is itself a pressure on costs and thus whether it is sustainable, Mr Wanless' view is that the principle of an NHS publicly-funded through taxation, available on the basis of clinical need and not ability to pay, remains both the fairest and most efficient system for this country.

Mr Wanless has also examined in detail the cost pressures facing the service for the future.

He concludes there will be significant pressure both from technological innovation and from rising public expectations but less pressure on the NHS than is commonly thought from an ageing population.

He also highlights the potential long-term gains, building on the reforms of the NHS plan, from a better use of workforce time and of resources generally, including the gains to be had from investment in information technology.

And Mr Wanless emphasises in particular a problem that goes back to the foundation of the NHS - over decades - a history of under-investment over 50 years and a long-term lack of capacity.

And comparing Britain to other European countries, such as France and Germany, his figures show a decisive difference in the area of finance despite some significant closing of the gap in the past couple of years: that these countries have, over decades, committed significantly more public resources as a share of national income to healthcare.

And the Wanless Report is highlighting the difference it will make for patients if the NHS is put on a sustainable long-term footing and if we secure the best use of resources. Building on the 100 new hospitals, 10,000 more doctors, and the booked appointments of the Ten Year Plan - swift access to the best drugs and treatment and greater patient choice - the goal: a world class health service that meets the needs of all people in Britain, and puts patients first.

Mr Wanless will publish his final conclusions next year in time to inform the 2002 Spending Review and will consult in the next few months with experts, patient groups, all interested members of the public and the doctors, nurses and all staff who work so hard and give so much of themselves to the NHS every day.

The Spending Review will be the time for final decisions. What can be done will of course depend upon the economy and the public finances and indeed over the past four years through savings on debt interest, reallocating resources and economic growth we have been able to do more for the NHS.

And I believe that as we plan to make our Budget and spending decisions next year and to fulfill all our commitments to economic prosperity and social justice, it will be right to devote a significantly higher share of national income to the National Health Service.

The decisions we will be making are for a decade and more.

And the way we make these decisions - whether we can forge a new consensus across parties and across Britain - will determine not only the long-term future of the health service but the character of our country.

Mr Speaker, I believe out of this debate an enduring national consensus can be built around the two central conclusions at the heart of Mr Wanless' first report: that a publicly-funded national health service is best for Britain, and a modernised national health service will need significantly greater capacity and significantly more long-term investment.

With economic stability the foundation, with a steady and prudent approach to the public finances, I believe we will have the strength to take the right decisions and to build a stronger, fairer Britain.

And I commend this Statement to the House."

ENDS

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