Billions have to be cut from spending plans, Brown warns

Gordon Brown will issue a tough public warning to his cabinet colleagues today that they will have to cut back their spending plans by several billion pounds.

In a keynote speech ahead of the Budget on 17 April, the Chancellor will make clear he will need to veto bids for extra money for politically sensitive areas including defence, crime, transport and education to inject more cash into the National Health Service.

But he will also warn Alan Milburn, the Secretary of State for Health, that he will have to justify every pound of the extra money channelled into his budget. The Treasury is alarmed that ministers' demands for extra cash in a three-year spending blueprint to be agreed by July would put Labour's economic credentials in jeopardy and cost huge tax rises.

The Chancellor will make clear new resources will have "strings attached". He will intervene directly in the detailed budgets of departmental ministers, rejecting bids for higher spending in areas which have not delivered value for money and forcing ministers to produce savings in some areas before they can spend in others.

Mr Brown will tell the Social Market Foundation think-tank at Westminster: "Resources must always be matched by reform and the achievement of results. The something-for- nothing days are over in our public services and there can be no blank cheques.

"Our ambition for the Budget and spending review is to put the NHS on a sound, long-term financial footing. This must be based on tough choices between and within departments, matching resources with reform.

"Before committing the Treasury to additional expenditure, we will need to know of Health and all departments whether that extra spending is a priority, whether there is a clear strategy for reform to deliver value for money and the track record of increased resources leading to improved results." Mr Brown will add: "We have not come this far to put our hard-won economic stability and fiscal discipline at risk. We will not compromise on economic stability."

Today's speech will fire the starting gun for a battle between Mr Brown and cabinet ministers. Four of them may appeal directly to Tony Blair for a better deal.

They are David Blunkett, the Home Secretary, who wants more money to fight crime and for prisons; Geoff Hoon, the Defence Secretary, who will cite the extra 1,700 troops being sent to Afghanistan; Stephen Byers, the Secretary of State for Transport, who is seeking more money for the railways and Estelle Morris, the Secretary of State for Education, who is worried her department will lose because of the priority given to health.

Mr Brown will insist the NHS must continue to be funded from general taxation rather than European-style social insurance or people taking out private insurance.

He will shortly receive the final report of an inquiry into health spending trends by Derek Wanless, the former chief executive of NatWest, which will be published at the time of the Budget. It is expected to pave the way for a limited tax rise to boost the NHS, probably through higher national insurance payments.

¿ The Government is reportedly considering plans to pay childcare allowances to single parents coming off benefits to pay for relatives to look after their children while they work. Parents on low incomes can currently have some childcare costs met, but not if the burden falls on families.