Gordon Brown has announced a rapid increase in NHS spending, broadly in line with the conclusions of Derek Wanless in his review of future health spending needs.

The chancellor announced there would be a 7.4 per cent average annual real terms growth in UK-wide NHS spending for each of the next five years.

This would take spending up to £72.1 billion in 2002/03, £87.2 billion in 2004/5 and then rising to £105.6 billion in 2007/08.

It would take NHS spending as a share of GDP from 7.7 per cent this year to 8.7 per cent in 2005/06 and 9.4 per cent in 2007/08.

The increases mean a rise in NHS cash spending per household from £2370 in 2001/02 to £4060 in 2007/08 - a 48 per cent real terms increase.

Brown promised that the extra resources would be matched by both reform and a new system of accountability.

A new independent audit system will see annual reports to parliament on how the extra money is being spent and what the result of the spending has been.

Brown said he had considered the hypothecation of taxes, earmarking revenue specially for NHS spending, but proceeded to rule it out. It could bring about the opposite of sound, long-term, sustainable funding, he argued, by linking funding to economic performance.

But more funding would have to be found to pay for quality health care.

"It is not whether we have to pay more, but how we pay more," said Brown.

However he ruled out alternative systems of funding the spending increases he announced.

Private insurance would leave many excluded, social insurance would add costs for businesses and healthcare charges would penalise the sick, Brown argued.

Instead, he announced a one per cent increase in National Insurance rates for employers and employees.

Ahead of the Budget speech, Derek Wanless, who has conducted a government-sponsored review of NHS spending requirements, had called for a seven per cent boost in health spending each year over the next five years, with slower rates of growth in subsequent years.

While the report looks ahead to 2022, 15 years further than the chancellor has in this Budget, Brown's spending increases up to 2007/08 would be more generous than the report's projections.

Wanless had also said that social services would need substantial additional funding, and should be considered in tandem with health care funding.

The chancellor announced there would be real terms growth in social service care budgets of six per cent a year.