Cash for schools and hospitals rises at fastest rate for 30 years

The amount of money being spent on schools and hospitals has grown at its fastest pace in almost 30 years, according to new figures yesterday.

The Office for National Statistics said growth in public spending in the first quarter of the year rose by 5.7% during the previous 12 months, the biggest increase since the first three months of 1975.

Gordon Brown and Tony Blair have faced criticism that the infusion of funds into key public services has not fed through into better-quality services.

But Treasury officials have often argued that there are considerable time lags between a decision, for example, to build a new hospital and the completion of the project. They believe that yesterday's data backs up their case.

Mr Brown will present his latest spending review on July 12, when he will announce that more cash is available for health and education, but that other departments will have to tighten their belts because of a growing public deficit.

There was more good news for the government as other figures showed that the output of the National Health Service - operations, patients treated, and so on - had increased by more than had been thought in recent years.

Health output rose by just over 4% in each of the past three years, up from the previously estimated level of 2%-2.5%.

The government has faced accusations that all the extra money put into the NHS in the past three years has been swallowed up by higher wages and costs, rather than in the provision of better treatment for patients.

It responded by commissioning Professor Tony Atkinson to carry out a review of the figures, and yesterday's data were the first results of his efforts.

"We welcome these improvements to calculating health output," said the Treasury spokesman. "The new figures capture a much wider range of health service outputs and represent an important first step to help us get a truer picture of health output and productivity, as the NHS continues to improve year on year."

Yesterday's figures also showed that Mr Brown may be in danger of breaking his "golden rule" of borrowing only to cover investment over the economic cycle.

The ONS issued revised data for the fiscal year to the end-of March showing an overall deficit of £37.2bn, or £4.2bn worse than it estimated recently, although broadly in line with Mr Brown's forecasts in his budget in March.

The surplus on the current budget, which excludes investment spending, was £4.7bn worse than previously thought at a shortfall of £23.4bn.

Staticians said the revision was due to stronger than expected spending, rather than to weak tax revenues.

It appears that the amount of wriggle room in the golden rule is now just £2.3bn, rather than £8.9bn.

They cautioned, however, that various other revisions due in the coming weeks would add at least £3bn back into the pot.

However, a Treasury spokesman denied that Mr Brown was in trouble.

"The government remains firmly on track to meet its strict fiscal rules. As the chancellor said in his Mansion House speech, 'the spending review ... will both meet all our commitments and all our fiscal rules'."

But experts said that, while the figures were likely to be revised in the government's favour, they could still be worrying.

Robert Chote, the head of the Institute of Fiscal Studies, said: "On the face of it, this makes life more difficult for the government. It is touch and go whether the government meets the golden rule over the current cycle."