Call for windfall tax on banks and oil firms to bail out NHS

The Chancellor has been urged by Labour MPs to impose a windfall profits tax on banks and energy companies in next week's Budget to give him room to bail out the NHS hospitals facing deficits totalling more than £600m.

Mr Brown next week will face his first head-to-head clash in the Commons with David Cameron, the Tory leader, who could be challenging him at the next election, after Mr Brown takes over from Tony Blair. But Mr Brown was warned that he will be criticised by some on his own side if he does not tackle the NHS deficits.

Gordon Brown told MPs in a private briefing his economic prudence helped it survive the highest oil prices for quarter of a century without the shock of mass unemployment. Mr Brown has been wary of Tory charges of being a tax-and-spend Chancellor. Henow faces increasing pressure to tax banks and oil companies who have made record profits in recent months. A former cabinet minister said: "A windfall profits tax on banks would be very popular with our supporters. The NHS crisis is worse than our education reform problems ."

The left-wing Campaign Group of Labour MPs claim the banks and energy companies have profits totalling £50bn, which should be subject to a special tax. They published an alternative budget, Corporate Greed and Peace Dividends, urging the introduction of a new wealth tax of 50 per cent on "fat cat'' city bonuses which they estimate could net £3.75bn.

The group is also calling on the Government to save £1.3bn a year by withdrawing British forces in Iraq.

Senior Tory figures believe Mr Brown will want to reinforce his reputation for economic stability with a "steady as she goes" package next Wednesday.

George Osborne, the Shadow Chancellor, said that Mr Brown was planning to raise £2bn in business taxes, run a heavy budget deficit, and that for the first time "Britain will have German levels of taxation and spending".