A remarkably bullish Chancellor Gordon Brown yesterday told MPs the UK was better-placed than most to survive the slowdown in the world economy. At the same time he set the stage for a fierce political debate about the tax rises which will be necessary to make good Labour's renewed promise of "a world-class health service" free for all at the point of use.

Mr Brown delighted Labour MPs with a Pre-Budget Report pledging an extra £1 billion sterling (€1.6 billion) for the National Health Service in the coming year while citing an interim report by Mr Derek Wanless, former chief executive of the National Westminster Bank, to signal the government's rejection of an insurance-based alternative means of funding the service.

This, he acknowledged, would mean "a significantly higher share of national income" in future to deliver the government's vision of "a world class health service that meets the needs of the people of Britain and puts the needs of patients first".

Looking ahead to next year's spending round, Mr Brown suggested it was possible to "forge a new national consensus" on the issue.

He said the decisions taken "will determine not only the long-term future of our health service but the character of our country".

However, he was mocked by the shadow chancellor, Mr Michael Howard, who said after almost five years in power Labour must be judged by its own record of delivery. "Every year they make these promises, every year they break them," he declared.

The Liberal Democrats, meanwhile, claimed the Chancellor's statement confirmed their view that improving public services would require a rising tax burden.

In his report the Chancellor acknowledged "real risks" for the British and world economies following the terrorist assault on the United States on September 11th.

With the US officially in recession and forecasters predicting a global growth downturn, Mr Brown cautioned MPs: "No country can insulate itself from such a synchronised slowdown."

However, the famously pessimistic Presbyterian Chancellor declared himself "cautiously optimistic" about Britain's economic outlook.

He said past "tough decisions" by the Labour government - augmented by the lowest unemployment since the 1970s, and debt at its lowest as a share of national income since the first World War - would enable it to increase borrowing to meet spending commitments on schools, hospitals and transport, without breaking its own strict fiscal rules.

Net borrowing this year would be £2.5 billion, rising to £12 billion next year and £15 billion, £13 billion and 13 billion in each of the three following years.

And Mr Brown seemed to anticipate only a short-lived slowdown before the restoration of happier economic conditions.

He now expected growth this year of 2.25 per cent, at the lower end of his original budget forecast for growth of between 2.25 per cent and 2.75 per cent.

For next year the Chancellor anticipated growth would be 2- 2.5 per cent, before rising in 2003 to between 2.75 and 3.25 per cent.

Among other measures yesterday the Chancellor announced he was scrapping stamp duty on the sale of some commercial and residential properties in deprived areas, as well as the tax on football pools.

Mr Brown also promised the basic state pension would rise by at least £100 year-on-year.