An extra �1bn is to be pumped into the NHS over the next three years, Chancellor Gordon Brown has announced.

Every acute hospital trust in the country is to receive between �500,000 and �1m a year for the next three years to invest in services, renovate old-fashioned, nurse-run nightingale wards and buy new equipment such as x-rays and scanners.

Cash will also be paid direct to GPs to run primary care services on the ground.

In addition, a �135m fund is to be set up to recruit and retain front line NHS staff, including an extra 20,000 nurses by 2004.

Some �50m will be pumped into that fund next year, followed by �45m the following year, and �40m the year after that.

Christine Hancock, general secretary of the Royal College of Nursing, said: "Pay is still a key factor in improving nurse recruitment and retention and we'd like to see this new money targeted at continuing the trend of above inflation pay increases.

"We know one in five nursing students never join the nursing workforce. Using this money to increase student bursaries would help to ensure that not a single student leaves their course because of financial hardship."

Of the �1bn total, services in England will receive �835m.

The Chancellor said: "Our priority has been and is Britain's public services."

However, Nick Harvey, for the Liberal Democrats, said promises of new staff for the NHS were "too little, too late".

He said: "The 20,000 nurses have already been pledged in the national NHS Plan.

"They were not enough to address the problem of under-capacity in the NHS then and they are not enough now."

Drug development

Health Secretary Alan Milburn listens to the budget speech

Mr Brown also announced a new tax credit to encourage British pharmaceutical firms to accelerate research into new drug treatments for diseases that afflict those in the developing world.

He said diseases such as tuberculosis, aids and malaria killed 8m people each year - including 3m children in the poorest countries.

Mr Brown said: "These are deaths that are in many cases that are avoidable, and diseases that in many cases are preventable.

"We have a capacity to help and we have a moral duty to act."

The Chancellor said it was also planned to set up a purchase fund to ensure that new drugs were made as widely available as possible.

Last year

This year's announcement follows big increases in NHS spending spread over four years announced by the Chancellor in his budget last year.

The announcement followed a public pledge made by Prime Minister Tony Blair on the BBC television programme Breakfast With Frost that the government would attempt to bring the UK much closer to the European average on health spending.

Mr Brown told the House of Commons in March 2000 that spending on the NHS would rise to �54.2bn in the financial year 2000-2001 - �2bn more than had been planned.

The year after that, spending would rise again, to �58.6bn, then to �63.5bn, then to �68.7bn in the year starting April 2003.

Over the four years Mr Brown said NHS spending would grow by 6.1% a year over inflation - nearly twice the average rate of growth since the inception of the health service in 1948.