Gordon Brown has gambled his reputation as a shrewd political operator on tax increases to fund a massive injection of cash into the National Health Service.

Risking accusations of a return to "tax and spend" economics, the chancellor announced increased NHS spending amounting to 7.4 per cent in real terms over the next five years.

To pay for the cash bonanza, the chancellor announced across-the-board national insurance increases and froze the lower-end income tax rate.

Employees, employers and the self employed will all pay an extra one per cent in national insurance under Brown's gamble.

Prompting fresh claims of tax by "stealth", higher earners will pay the additional one per cent on all their earnings - rather than simply up to the £30,000 payments ceiling.

Brown said he was rising to the "challenge of renewing public services" and declared his intention to build a "consensus" around improvements in health provision.

Announcing the first increases to direct taxation since he became chancellor, Brown said: "Britain can in this parliament build a consensus that we advance enterprise and fairness together."

Downing Street insists that Brown's budget is one of the "central building blocks of the parliament". The chancellor's aides say he has been developing today's "budget for investment" since becoming shadow chancellor a decade ago.

Cost?

The much-trailed increase in national insurance will cost £3.70 per week for those earning £21,400.

Those earning £32,100 a year will pay an extra £5.75 per week.

But those earning over £30,000 will effectively pay an extra penny on tax on their whole salary as a result of the decision not to apply the ceiling to the one per cent hike.

Business, which will also pay an extra penny on the pound on wage bills, has accused the chancellor of levying a "tax on jobs".

Manufacturing has warned that labour intensive firms, such as Corus, could be forced into making job losses.

Iain Duncan Smith accused Brown of breaking a pre-election pledge by raising national insurance.

To rowdy Labour cheers, the Conservative leader said: "This government said it wouldn't raise income taxes at all and everyone knows this is a tax on income. You've added a penny in the in the pound to income tax today. You've broken your promise to the British people".

Public Opinion

Brown is banking on being able to persuade the public that the money is essential to improve a failing NHS.

The publication of the Wanless report set out the enormity of the task - predicting that spending on the health service would have to rise by seven per cent a year in real terms over the next five years.

But the Tories and business leaders warned the chancellor that NHS investment will only deliver benefits if it is closely allied to radical reform.

The shadow chancellor, Michael Howard, told ePolitix.com that the country was paying a high price for Labour's rejection of alternative funding methods.

"Labour's refusal to take reform seriously has meant taxes are up but people have nothing to show for the extra money they have paid," he warned.

Since last autumn, ministers have been preparing the ground for tax increases as part of a concerted "softening-up" exercise.

The decision "tell it how it is" was being seen as clear evidence that Labour strategists recognise the risks involved in today's announcement.

But to soften the blow, the increase will not come into effect until April 2003 - when they will be offset - or masked - by annual salary increases.

Brown's decision not to announce the fact that the increase will apply up to and beyond the national insurance ceiling was criticised as further evidence of the chancellor's "smoke and mirrors" approach to budget announcements.

The Lib Dems argue that year-on-year the chancellor has made the tax system more complex and less transparent.

Lib Dem leader Charles Kennedy, who will support the tax increase, told ePolitix.com that the announcement was an admission of failure by the government.

"Having under-invested in our health service, they are now going to have to put taxes up to fund future spending," he said.

"This is a vindication of what the Liberal Democrats have been saying all along - that you can't get something for nothing."

No Surprises?

Much of the chancellor's announcement had been well-trailed by his spin machine as part of a carefully choreographed pre-budget PR offensive.

As predicted, he announced plans for a new tax credit for families earning up to £58,000 where one parent does not work.

The credit, which will be paid directly into the bank account of the partner who stays at home, is being billed as an attempt to end discrimination against single-earner households.

Brown also fleshed out plans for the new child tax credit, which will integrate all means-tested and income-related support for children into one payment for the main carer.

Budget-hardened smokers were dealt their annual budget blow - with cigarettes rising by six pence.

Drinkers are raising their glasses - with a freeze on duty on wine, spirits and beer.

Pubs which serve beer brewed in small "micro breweries" are to see the duty on a pint halved - equivalent to 14 pence off the price of a pint. But alcopop drinkers will see a real-terms increase as the chancellor redefines the drink as a spirit rather than wine product.

Scooterman is to be given a cash boost after the chancellor announced a £35 reduction in road tax on small motorbikes. Vehicle excise duty on small engine cars will also fall by £35.

Petrol prices stay as they are amid on-going fears about the recent rises in oil prices.

Brown also announced full-house for bingo goers when he revealed that duty on bingo tickets is to be scrapped. He said it was "time to tax the profits and not the players".

Breaks for Business

Many of the tax-breaks for business had already been set out by Brown - who effectively cleared the decks for a single-issue budget.

Brown said he would reduce the burden of tax on business to "help create a culture of entrepreneurship in every community".

But business has accused the chancellor of giving with one hand and taking away with the other. Business leaders fear that the tax breaks will be more than swallowed up by the increase in employers' national insurance liability.

Brown announced that the basic rate of corporation tax for small firms will fall from 20 pence to 19 pence with immediate effect.

The 10 pence starting rate of corporation tax is to be abolished - a move which means the first £10,000 in a firm's profit is tax free - billed as a step-up for new business starts.

Over recent months the chancellor has stressed that creating the right environment for enterprise is "central to everything" the government does.

Small firms received a further boost through a reduction in capital gains tax on assets held and the creation of a paperwork-busting flat-rate VAT scheme for firms with a turnover less than £100,000.

A new community tax credit will encourage investment in firms located in economic blackspots whilst the exemption on stamp duty for premises in deprived areas will be extended to cover all properties rather than those under £150,000.