LONDON (AFX) - Chancellor Gordon Brown may have to raise taxes by 7 bln stg to pay for substantial improvements in the UK's ailing public services, according to the respected think-tank Institute for Fiscal Studies. The IFS, which published its Green Budget today, said Brown may have to tap taxpayers for more money if he wants to maintain a cautious approach to the public accounts as well as meet the government's manifesto pledges, most notably with regard to the National Health Service. As well as delivering his next budget on April 17, Brown is in negotiations with his cabinet colleagues about the government's spending plans for the latter part of this Parliament, for the years 2003-4 to 2005-6. He is due to announce his next comprehensive spending plans this summer. The last year of the current spending review, 2003-4, is the first year of the next one. The IFS's director Andrew Dilnot said Brown would have to raise taxes by 7 bln stg if he wants to increase government spending at a rate of 2.75 pct a year in real terms as well as maintaining the level of caution of recent years in the public finances. If Brown sticks to his plan of raising spending by 2.5 pct a year in real terms and maintain the level of caution, then taxes would have to rise by only 5 bln, said Dilnot. Brown is under pressure to deliver more money to the public services for the latter years of this Parliament, as public unease grows about the state of the UK's public services, particularly health and transport. However, with the economy stalling and the public finances expected to run into deficit from next year, Brown has less room to manoeuvre, raising the prospect of a tax-raising budget in April. In his pre-Budget report last November, Brown put tax hikes back on the political agenda, when he said a "modernised national health service will need greater capacity and significantly more long-term investment". In addition, Prime Minister Tony Blair has committed the government to raising the proportion of national income spent on health to the EU average by 2005/6. According to Carl Emmerson, a research economist at the IFS, the government will be around 1 bln stg short of the current EU average by the end of the current spending plans in 2003/4. But if spending is weighted by a country's national income and population, then the UK's will be 10 bln. Given the manifesto commitment not to increase income tax, the government is most likely to raise the threshold on national income contributions, according to IFS research economist Tom Clark. Currently national insurance contributions are not paid on any personal income over 30,000 stg a year. Getting rid of the upper limit on National Insurance contributions altogether would raise 9 bln stg, according to Clark. Getting rid of the anomaly between 30,000 and 35,000 stg, where the higher 40 pct tax rate is paid, would only raise 900 mln stg. The IFS also said that the current budget surplus in 2001/2 is likely to be 14 bln, 3 bln more than forecast by the Treasury, as a result of higher tax receipts and underspend by government departments.