Jeremy Hunt will set out tax rises and spending cuts totaling £60bn in the Autumn Statement under current plans, including at least £35bn in cuts, according to The Guardian.
Ministers must present the key points of the autumn statement to the Office for Budget Responsibility (OBR) by Monday morning.
Treasury sources also said decisions on whether to increase benefits in line with inflation and whether to change the triple lock on pensions were likely to be made within days so the OBR could take them into account in the forecasts.
Conservative MPs have already protested earlier suggestions to break the triple lock, which would increase pensions in line with inflation, and link benefits to wages rather than inflation.
Early drafts of the statement contain plans to cut spending by up to £35bn and tax rises of up to £25bn, likely to include freezing income tax thresholds and tax relief of the dividends.
A Whitehall source said the figures remained estimates and were subject to change, but that Hunt, the chancellor, told an all-staff meeting he was looking for measures totaling £50bn-£60bn.
The scale of the measures has been boosted by dire forecasts from the Bank of England last week, when it predicted higher interest rates would push the economy into the longest recession since the 1930s .
The Bank blamed rising energy prices and a tight labor market for the decision to raise interest rates. Hunt’s fiscal tightening is likely to worsen forecasts, with the Bank saying the economy was already contracting and would continue to contract for eight consecutive quarters until the summer of 2024.
The chancellor is said to be concerned to ensure the measures give the Treasury enough “leeway” for further economic shocks and ensure the plans have credibility in the market. “Filling it down to the pound is not credible,” a Treasury source said, referring to the so-called fiscal “black hole”.
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Tory MPs are likely to be alarmed by reported plans for a raid on capital gains and pension tax relief.
The target for higher rate pension tax relief would affect those earning more than £50,270, who receive 40% tax relief on their pension savings under the current system. Landlords, business owners and savers will also be hardest hit by changes to the capital gains rules, in what is likely to be a reduction in relief and allowances.
Capital gains have the potential to bring in billions if they were changed to match income tax rates. This change was the main recommendation of the Office for Tax Simplification in 2020, but was rejected by Rishi Sunak last year when he was chancellor.
Hunt has previously said the guiding principle will be that “those with the broadest shoulders should be asked to carry the biggest load”.
Sunak and Hunt are said to have agreed that tax thresholds will be frozen until 2028, two years later than previously announced. It would raise millions as inflation pushes more people into higher tax brackets or paying taxes for the first time. It is expected to raise £5 billion a year but has been described as a “secret tax”.