How big is the NHS budget?
In March 2000 the chancellor Gordon Brown unveiled a "historic" four-year, £19bn package of funding for the NHS that will bring the UK closer to the European average on health spending and, in theory, stem the damage of years of underfunding. He announced average real increases of 6.1% over the coming four years, which is claimed to be the longest period of sustained growth in the service's 52-year history. With this increase, the NHS budget will reach £68.7bn by 2003-04, some £19.4bn more than in 1999-00.

This massive cash injection follows a wretched winter crisis for the NHS, with ministers under fire over bed shortages, cancelled operations, overcrowded casualty departments, staff shortages, and a flu "epidemic". After being pressed on claims of NHS underfunding by TV interviewer David Frost in January, Tony Blair promised that the government would increase health spending up to the European average. In fact, despite the extra billions this target will be missed.

According to the Treasury, total health spending will rise to 7.6% of national wealth or gross domestic product by 2003-04. This compares with a current European average of around 8%: 9.6% in France; 10.7% in Germany; and 13.9% in the US.

Are the extra billions enough?
There is no doubt that the rise is significant, raising UK health spending per household from £1,850 in 1998-99 to £2,800 in 2003-04. However, it is unlikely to prevent calls for additional resources. Rising public expectations of the NHS, the pressure to fund the use of expensive new technologies and drugs, and staff pay demands will continue to put pressure on the NHS budget. The NHS also has to juggle investment with historical financial deficits in trusts and health authorities of up to £700m.

How is the NHS financed?
Over 90% of NHS spending is met from general taxation and an element of national insurance contributions. The remainder comes largely from the receipts of land and property sales and a small amount from charges.

This year the government has experimented with "hypothecated taxes", earmarking £300m from tobacco tax increases for the NHS. The NHS plan, published in summer 2000, concluded that "the way the NHS is financed continues to make sense" and rejected alternatives such as private insurance, social insurance, new charges and rationing.

Who gets the money?
The £54.2bn allocation for the NHS across the UK in 2000-01 translates into £44.2bn in England. Scotland will this year spend £5.4bn on health, Wales around £3bn and Northern Ireland's combined health and social services budget is just over £2bn.

&#149Over half of the hospital and community health services budget goes on providing acute services, the general term for medical and surgical interventions provided in hospitals.

&#149 Mental health accounts for a further 12% while dedicated services for the elderly take a further 10% (although elderly people receive a lot more spending through other parts of the budget).

&#149 Three areas, mental health, cancer and coronary heart disease, have been identified as clear priorities for investment.

&#149The vast majority of the English allocation, some £34.3bn, is distributed through the country's 99 health authorities in unified budget allocations, which were introduced in 1999 to break down some of the artificial boundaries between hospital and primary care funding.

&#149These allocations are then passed down to new primary care groups and primary care trusts, which in addition to overseeing GP services will commission hospital services.

&#149 The largest proportion of each health authority's unified budget pays for services that are provided by trusts. But the budgets also cover GPs' staff, premises, computer and prescribing costs.

By bringing prescribing inside the unified budgets, drug costs are now "cash-limited" in an attempt to keep their expense down. In addition to their unified budgets, health authorities also administer a non-cash-limited family health services budget, which covers allowances and fees charged by GPs, and payments to opticians, dentists and pharmacists. For the current year this amounts to £4.2bn.