Public services are to receive continued increases in expenditure, the chancellor has confirmed.

Speaking in the Commons, Gordon Brown announced that spending on education will increase by £12bn between this year and 2007/08.

In health, expenditure will increase by £23bn during the same period. Hospital charges for pensioners will be abolished, the chancellor said.

Transport spending will increase by £2.4bn over the next three years, while the Home Office and Ministry of Defence will receive £3.5bn and £3.7bn additional funding respectively.

But education was the main focus of the Budget statement.

"It is because education is the 21st century road to prosperity that Britain must become the best-educated, best-trained, best-skilled country in the world," the chancellor said.

"Since 1997 we have doubled investment per pupil from £2,500 to £5,000 a year. But still we invest less per pupil than our major competitors."

Brown went on to pledge that by next year there will be 1,000 more 'Sure Start' children's centres, rising to 3,500 by 2010, with local councils being reimbursed with the lost VAT on these services.

Families will also be entitled to 15 hours free nursery education from 2007.

The 'Building for Schools' programme for secondary schools will be introduced to primary schools, with investment starting at £1.6bn in this year, rising to £1.8bn in 2007/08, £2bn in the following year and £2.3bn in 2009/10.

Meanwhile, spending on IT capital through the government's three-year programme will increase by £1.67bn.

The chancellor also confirmed the launch of a 'Teach for Britain' scheme, expanding the 'Teach First' scheme from London to cities including Liverpool and Birmingham.

To encourage students to stay in school, the education maintenance allowances of up to £75 a week will be available to those in unwaged work or full-time education.

Direct payments to primary schools will increase from £31,000 this year to £34,000 and £36,000 over the next three years - while in secondary schools, head teachers will receive £98,500 this year, rising to £109,000 and £115,000.

Transport review

The chancellor also confirmed that Rod Eddington, who has recently stood down as chief executive of British Airways, will advise both the Treasury and the Department for Transport over Britain's long-term transport needs.

"Having doubled transport investment since 1997, and with the railways carrying more than one billion passengers last year, it is right to examine Britain’s long term needs and priorities," the chancellor said.