Jeremy Hunt will say the UK is facing an economic “storm” as he prepares to unveil £60 billion-worth of tax rises and spending cuts in his autumn statement.
The chancellor will tell MPs that the government must “take difficult decisions now” to repair the public finances, which have been battered by Covid-19, the war in Ukraine and the effects of Kwasi Kwarteng’s disastrous mini-budget.
HuffPost UK understands Hunt will confirm that he is slashing public spending by around £35 billion and increasing taxes by £25 billion as he tries to balance the nation’s books.
But he will also insist that the government will “protect the vulnerable, because to be British is to be compassionate”.
That could mean that welfare benefits and the state pension will rise in line with inflation, meaning they will not be cut in real terms.
The chancellor will deliver Thursday morning's autumn statement against a backdrop of rising interest rates, as well as soaring energy bills and inflation.
He is expected to increase taxes for the highest earners by reducing the threshold at which they start paying the 45p top income tax rate from £150,000 to £125,000.
But he has already admitted that everyone in the country will have to pay more tax as the government tried to fill a £55 billion financial black hole.
The windfall tax on the bumper profits of energy firms is also set to be increased and extended to bring in billions of pounds more revenue for the Treasury.
In his statement to the Commons, Hunt will say: "As countries all over the world grapple with inflation, our plan reflects British values: we are both honest about the challenges, and fair in our solutions.
“We are taking difficult decisions to deliver strong public finances and help keep mortgage rates low, but our plan also protects our long-term economic growth.
“At the same time, we protect the vulnerable, because to be British is to be compassionate.
“There is a global energy crisis, a global inflation crisis and a global economic crisis.
“But the British people are tough, inventive, and resourceful. We have risen to bigger challenges before.
“We aren’t immune to these global headwinds, but with this plan for stability, growth and public services - we will face into the storm."
In a clear repudiation of September's mini-budget – which saw Kwarteng implement former prime minister Liz Truss's plan for huge tax cuts funded by extra borrowing – Hunt will say the government's priority is to bring down inflation, which has hit 11.1%, the highest rate in 40 years.
He will say: "High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising.
"It erodes savings, causes industrial unrest, and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built."
Hunt will say the Bank of England has his "wholehearted support" as it tried to tackle inflation by increasing interest rates.
"Families across Britain make sacrifices every day to live within their means, and so too must governments because the United Kingdom will always pay its way," the chancellor will say.
“We are taking a balanced path to stability: tackling the inflation that eats away at a pensioner’s savings and increases the cost of mortgages to families, at the same time supporting the economy to recover. But it depends on taking difficult decisions now."
Shadow chancellor Rachel Reeves said the UK had been "held back by 12 years of Tory economic failure and wasted opportunities".
She said: "What Britain needs in the autumn statement today are fairer choices for working people, and a proper plan for growth."