Alan Milburn has staked the government's reputation on "real and significant" improvements in the health service before the next general election.

The health secretary was setting out how the government intends to use the £40 billion awarded in yesterday's Budget.

He said the NHS would be able to recruit 35,000 more nurses and 15,000 doctors by 2008 as a result of the cash injections.

Milburn defended the government's decision to fund NHS improvement through central taxation, rejecting claims it amounted to a blank cheque.

"We believe it to be the best insurance policy because it is based on ability to pay - not the size of your wallet," he told the Commons. "Our formula is simple - investment plus reform equals results and we are happy to be judged on that."

From the Tory frontbench, Dr Liam Fox said Labour had effectively conceded defeat.

"They are admitting today that they wasted five years and the one word we did not hear from them today was sorry," he said.

Milburn told the Commons that a new regime of independent audits, independent inspections and independent scrutiny of patient complaints would be put in place to ensure the new money was being put to good effect.

A new Commission for Healthcare, Audit Inspection would judge performance whilst the public would act as jury, said Milburn.

But the Lib Dem health spokesman, Dr Evan Harris, said the government should devolve decision making to a local level rather than expand the number of auditors monitoring the health service.

"He is moving from stethoscope to spreadsheet and it will damage patient care," he said.

Milburn told the Commons that the government will also give "greater freedoms" to the best performing hospitals and trusts.

He pledged to build 40 new hospitals and hundreds of new primary care trusts (PCTs).

"The best primary care trusts, just like the best NHS hospitals, should enjoy greater freedoms and more rewards. We will establish new Foundation hospitals and Foundation PCTs, fully part of the NHS, but with more freedoms than they have now," he said.

He said successful hospitals should be able to borrow to expand services. He said he wanted to "liberate the potential of all members of staff" to improve levels of patient care.

New employment practices within the NHS would help deliver change, said Milburn.

"As well as growing the numbers of health professionals, there need to be fundamental changes in job design and work organisation. This requires new contracts for GPs, consultants, nurses and other staff," he said.

Flanked by the prime minister, Milburn said that waiting times would fall from a maximum of 15 months now to six months by 2005, and three months by 2008.

To achieve this, the secretary of state said he wanted to see money following the patient - even if it meant patients going to the private sector.

"From this summer patients who have been waiting six months for a heart operation will be able to choose a hospital whether it is public or private which has capacity to offer quicker treatment," he said.

Milburn's speech came as senior members of the cabinet embarked on a round of interviews and photocalls to win the battle for hearts and minds following the tax rises in the Budget.

Downing Street said on Thursday that the prime minister was "ready to put the arguments forward in the best way".

Tony Blair and Gordon Brown visited Chelsea and Westminster hospital to herald the new five-year spending boost for the health service.