Chancellor Rachel Reeves is set to prioritise spending cuts in next week’s Spring Statement, delaying potential tax hikes until October.
Leading economists have warned that the Chancellor must now choose between raising taxes again or implementing significant cuts to public services.
The £40 billion tax increase introduced last autumn has not sparked the growth the Government had hoped for.
The impact has been particularly felt by pensioners, farmers and businesses who were hit by what critics called “punishing new taxes”.
Despite mounting pressure, government sources suggest she will hold off on announcing tax rises — despite Conservative warnings of a stealth income tax raid through frozen thresholds.
Reeves is grappling with a budget deficit of £15-20billion after the Office for Budget Responsibility downgraded its growth forecasts.
The chancellor has not ruled out making such a move later in the year, should the economy continue to struggle.
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