Brown taunts the Tories: we invest, you cut taxes

Prime minister in waiting Gordon Brown used his 10th budget yesterday to sharpen the political battle lines with David Cameron's Conservatives, by unveiling a package of extra funding for teachers, school buildings, IT and science, designed to start closing the spending gap between the state and private sectors.

The chancellor signalled that education would be given top priority in a tough spending round next year and contrasted Labour's desire to invest the proceeds of economic growth in public investment with Tory ambitions for tax cuts.

Reflecting government confidence that education would prove a trump card for Labour, one cabinet minister said there had been "fear in the eyes" of the opposition frontbench as the chancellor laid out his plans for education.

Mr Brown revealed, however, that the cost of extra investment in schools would be a zero real increase in spending for Charles Clarke's Home Office over the three years from 2007-08, and that spending would be cut by 5% a year at the Treasury, Revenue and Customs, the Department for Work and Pensions and the Cabinet Office.

Although the chancellor insisted that both the economy and the public finances were on the mend, the squeeze on the exchequer was underlined by his announcement that pay increases in the public sector would average only 2.25%, with only nurses getting more.

Mr Brown also announced plans to sell off a number of state assets, including part of British Energy, to raise money for the next spending round.

Labour MPs were cheered by the chancellor's desire to close the gap between spending on pupils in the state and private sectors. By 2011, he said, capital spending on buildings and equipment in the state sector would rise by 50% to £8bn a year, so that spending for each pupil would reach £1,000 - the same as in private schools.

Mr Brown admitted, however, that he could put no timescale on his long-term aim of raising overall spending on schools from £5,000 a pupil to the £8,000 in the private sector, thereby allowing similar pupil-teacher ratios across the board. "To improve pupil teacher ratios and the quality of our education, we should agree an objective for our country that stage by stage, adjusting for inflation, we raise average investment per pupil to today's private school level."

As a down-payment, Mr Brown said each primary school headteacher would receive £44,000 direct from the government next year, up from this year's £31,000. In the secondary sector, the average school would see its allocation go up from £98,000 this year to £150,000 in April and £190,000 next year.

The chancellor said investment in education was vital to meet the challenge of globalisation; he unveiled plans for 3,000 extra science teachers and free A- level tuition for those aged under 25 who had left school lacking the right qualifications for the modern workforce.

The shadow education secretary, David Willetts, derided Mr Brown's promise to lift spending on state pupils to that of privately educated children: "The chancellor has offered us an aspiration with absolutely no means of achieving it."

Mr Brown's £440m for education was part of a £2bn package of extra spending, which included an additional £800m for Ministry of Defence operations in Iraq and Afghanistan and £100m to double the number of community support officers to back up the police.

In an hour-long address, Mr Brown also targeted Mr Cameron's green credentials by introducing a new top-rate car tax on petrol guzzlers of £210, and raising the climate change levy for the first time in five years, the one green tax already ruled out by the Conservative leader.

He claimed that Mr Cameron's promise to share the proceeds of growth already meant that the Tories were committed to £17bn less in public spending. The shadow treasury secretary, Theresa Villiers, rejected the figure, but surprisingly admitted that Tory plans would mean less spending on schools and hospitals.

Treasury plans to raise pension credit aimed at the poorest pensioners were fought off by the prime minister and the work and pensions secretary, John Hutton, who insisted that all big decisions on pensions must await the pensions white paper in six weeks' time. Mr Brown was allowed, however, to announce £250m for off-peak free national bus travel for every pensioner and disabled person. Pensioners' groups attacked him for failing to repeat the £200 council tax subsidy to those over 65, claiming Labour would pay a heavy price in the May local elections.

Overall, Mr Brown summed up his thinking: "The budget's choice is to invest more, not less, in schools and families, to strengthen the new deal, not to abolish it, to maintain the climate change levy and not remove it, and instead of cutting investment, to hold firm and not waiver, on the principles that have given Britain stability."

Mr Cameron called the chancellor the roadblock for reform and "a figure from the past". He said: "We wondered whether we could get a budget or a leadership bid, and we did not get much of either. Cut through all the rhetoric, billions raised, billions spent, no idea where the money has gone. With a record like that, the chancellor should be running for Labour party treasurer."

The Tories pointed out that taxes overall in the budget were rising by £5.5bn, and argued that the proportion of the tax-take drawn from green taxes was falling. "In a carbon-conscious world, we have a fossil fuel chancellor," the Tory leader said.