Britain should aim to lead the world in developing new treatments and drugs, the chancellor said as he announced the government would set up a central body to oversee health research in hospitals and universities, with a budget of more than £1bn a year.

John Bell, Regius Professor of Medicine at Oxford University, will head the new Office for Strategic Coordination of Health Research (OSCHR) which is the central recommendation of a review of health research, carried out for the Treasury by Sir David Cooksey, and accepted in full by Gordon Brown.