Rise in national insurance of £4bn may be unveiled to boost NHS

An increase in national insurance contributions of £4bn could be earmarked for the NHS as part of Tony Blair's drive to sell forthcoming tax rises to the public.

The Treasury and Downing Street are planning the move in an ambitious attempt to raise Britain's health spending to the European Union average.

Although a dedicated "NHS tax" has been ruled out, clearly labelling a rise in national insurance contributions is seen as the most "voter-friendly" way of pushing up taxes, government sources have told The Independent.

Under plans being considered, an increase in the income percentage paid into national insurance, from 10 to 11 per cent, would raise £3bn. A further £1bn would come from raising the upper earnings limit from 25 per cent to 40 per cent. Other tax rises, such as an increase in the VAT on cigarettes, are also being considered.

Although the increases are likely to be announced in the April Budget, they may not come into effect until next year.

Senior Cabinet members weighed in behind Tony Blair's warning this week that the public would have to pay more tax for sustained NHS investment. Alan Milburn, the Secretary of State for Health, and Estelle Morris, the Secretary of State for Education and Skills, said world-class health care could not be done "on the cheap".

But Gordon Brown was tight-lipped. Speaking in Fife, the Chancellor said: "The Budget is on April 17 and the budget decisions are announced in the Budget. The Budget, as Tony Blair himself said last night, is in April and the Budget makes the decisions about these matters."

But in a speech to NHS managers, Mr Milburn said tax rises were "the fairest and most efficient way" of funding NHS improvements over the long term. "This is a debate that we need to take to the country and will take to the country. No one should pretend for a moment that this is an easy thing for a New Labour government. It isn't," he said. "But I believe the right priority for our country is to raise the resources to properly fund the NHS."

The Conservatives also appeared to concede that tax rises may be needed when Liam Fox, the shadow Health Secretary, made the suggestion yesterday. "Taxes may need to rise. We said recently that we wouldn't rule out more money going into the health service if necessary. What we need to make sure is that money is being spent sensibly," Dr Fox told BBC News. However, he later insisted that he had simply been stating that his party's policy review could not rule out a rise in general taxation.

Charles Kennedy, the Liberal Democrat leader, said Mr Blair was acknowledging Labour had failed the NHS. "One should always welcome a sinner who repents. But it would have been more honest for Tony Blair to have told the British people that he was going to raise taxes before the general election, rather than after it."