The Labour government, with its eyes focused firmly on the next election, yesterday announced a major switch of resources to boost schools and hospitals over the next three years.
Chancellor Gordon Brown brought Labour backbenchers cheering to their feet as he promised an end to two years of belt-tightening. Mr Brown announced an extra £19 billion sterling for education, more than half of it to be spent in 2001, the year likely to precede the next general election.
The extra cash means education spending will rise by an average of 5.1 per cent a year, enabling the government to meet its pledge at the last election to cut class sizes. There will be extra money for nurseries, childcare and other services for children under three, an area where Britain lags behind its neighbours.
"This is what we mean by education, education, education," Mr Brown told parliament, referring to a Labour Party election slogan from last year.
Putting education at the top of his priority list helped Mr Blair win a landslide majority 15 months ago, reflecting widespread public unease that Britain's schools and teachers are lagging behind its international competitors.
Spending on the state-run health service, where waiting lists have risen since the election, will get an even bigger boost - an extra £21 billion over three years, equivalent to an average annual rise of 4.7 per cent. Mr Brown promised the extra money would deliver "the largest hospital building and modernisation programme this country has seen".
The announcements came after a nine-month review which took a root-and-branch look at spending by every ministry.
Mr Brown's easing of the purse-strings from 1999 onwards follows a draconian hold on expenditure during the first two years of the government's five-year term. The three-year review breaks with the traditional pattern of annual spending rounds, which have led in the past to uncertainty and U-turns as governments have battled with the ups and downs of the economic cycle.
Money will be saved by selling off assets, by trimming defence spending, by reduced debt interest payments and by cuts in other areas including legal aid, agriculture and the budget for industry. But there will be no big savings on the £100 billion a year social security budget, a sign that the government has found its early hopes of cutting welfare spending were over-optimistic.
Transport will get an extra £1.1 billion, but Mr Brown hinted that the government's priority would be to push ahead with its plans to channel private finance into major projects such as the London Underground railway.
The Chancellor also had good news for cash-starved museums, promising a real increase in spending on culture and sport of 5.5 per cent. More money will go to the BBC World Service, which comes under the Foreign Office, and has been the target of financial restrictions in the past. More diplomats will be sent to areas where new embassies are understaffed, such as the oil-rich Caspian region.
The Secretary of State, Dr Mo Mowlam, last night welcomed the Chancellor's announcement that Northern Ireland will receive an extra £1.4 billion over the next three years, writes Frank Millar. Total expenditure in the North, including social security benefits, next year, will be £9.5 billion.
Decisions on departmental allocation of the new money will not be taken before the autumn. Dr Mowlam said that, with the exception of the Law and Order Vote, most of the expenditure will become the responsibility of the new Northern Ireland assembly next year.
Dr Mowlam said that she would therefore be consulting the First Minister, Mr David Trimble, and the Deputy First Minister, Mr Seamus Mallon, on the detailed spending plans.