Gordon Brown's hopes of a trouble free budget have been dashed amid competing cabinet demands for a dwindling pot of cash.

As it emerges that the MoD has already "raided" money from next year's budget to fund extra troop commitments, the home secretary, David Blunkett, is said to be demanding extra cash to fund crime and asylum plans.

The call comes amid a drop in revenues from both income and corporation tax over recent months.

Ministers responsible for transport, education and law and order fear that their allocations will be squeezed by the increased military expenditure - which has led to demands for an additional £1 billion a year - and the government's new drive to improve the NHS.

The chancellor yesterday repeated his commitment to additional investment in the health service, funded through general taxation.

Dismissing any suggestion of social insurance or further charges, he argued the NHS was the "best insurance policy in the world".