Chancellor George Osborne has warned that any tax cuts in next month's 2012 Budget would have to come from further cuts in public spending, insisting that there would be no further borrowing by the coalition.
The chancellor's comments are unlikely to provide much comfort to Nick Clegg, who has called for the process to raise the tax threshold for low earners to be speeded up.
Speaking to Dermot Murnaghan on Sky News, Osborne said of Clegg's wish: "He knows as I do, as the country knows, that any tax cut would have to be paid for. There'd have to be a tax rise or a cut in spending elsewhere."
Osborne would not be drawn on claims that the Lib Dems were pushing for a mansion tax on large and expensive properties, but said: "We are a coalition, and the budget will be a coalition budget, when it comes."
He said they were "looking closely" at loopholes which allow wealthy people to avoid paying much of their stamp duty, and would assess the tax returns recently competed by those paying the 50p rate. There are claims from Tories that the 50p rate brings in very little revenue to the Treasury, but damages the economy because it makes the UK seem anti-business.
Osborne insisted: "We are taking measures including cutting business tax," claiming that foreign ministers had noticed that Britain had become an "attractive place for investment."
Osborne also said that the G20 would not be pumping any more money from the International Monetary Fund (IMF) into the Eurozone, because they hadn't so far seen the "colour of eurozone money."
Speaking from the G20 finance ministers' summit in Mexico, the Chancellor said : "While at this G20 conference there are a lot of things to discuss, I don't think you're going to see any extra resources committed here because eurozone countries have not committed additional resources themselves, and I think that quid pro quo will be clearly established here in Mexico City."
The Budget will be delivered on Wednesday the 21st of March.
Labour deputy leader Harriet Harman said Mr Osborne was "still on Plan A" and called on him to use the Budget to take action to stimulate growth.
"We want to see the Government producing a Budget for jobs and growth that will actually stimulate the economy. We think the best tax measure for doing that would be a cut in VAT," she told the Murnaghan programme.
"They really do need to step forward and stimulate the economy. It is not growing. If you can't grow the economy, you can't reduce the deficit."