Mr Kerr promised "enterprise, opportunity and fairness"

Health already receives the largest share of the Scottish budget and Mr Kerr said spending would rise to �10bn a year by 2008.

Scotland's universities are to receive an extra �100m in each of the next three years, said Mr Kerr.

Transport spending will rise to almost �2bn a year by 2008.

BBC Scotland's political staff said Mr Kerr's budget announcement was unsurprising and chimed in closely with the first minister's outline of the Scottish Executive's legislative programme at the opening of the new Holyrood parliament building.

VOTE RESULTS Where would you spend Scotland's budget? Education 24% Environment 10% Health 14% Housing 9% Law and order 15% Transport 27% 753 Votes Cast Results are indicative and may not reflect public opinion Vote now closed

Health continues to be the top priority because of the nation's consistently poor record and Mr Kerr said he was seeking to continue efforts towards a "healthier Scotland".

Mr Kerr promised to cut waiting times between specialist referral and treatment for cardiac intervention to 16 weeks.

Scotland's universities will benefit from "robust funding" to help offset the impact of top-up tuition fees in England, with higher education sector funding rising from �787m now to more than �1bn in 2008.

There will be 300 new schools and more teaching staff.

Transport spending will see a significant increase to fund major road and rail links aimed at underpinning economic growth.

The executive has commitments to public transport projects such as Edinburgh and Glasgow airport rail links, completion of the central Scotland motorway network and construction of the Aberdeen bypass.

'Devolution is working'

However, councils expressed concern at the minister's announcement that their revenue support grant will not rise above 10% over the next three years.

Mr Kerr said he was announcing a "budget for enterprise, opportunity and fairness with a commitment to invest more than �85bn from 2005 to 2008".

He said: "Devolution is working for Scotland but we need to do more.

"We need to make better use of our resources and we have allocated enough funding to each department to allow them to meet their Partnership Agreement commitments.

"We need to drive harder and faster for economic growth, for achievement in education and science, for faster and better health care and for safer communities.

Mr Kerr said the executive was aiming to strike a balance between providing services and promoting economic growth.

Ministers would continue with their commitment to increase non-domestic rates by no more than the rate of inflation.