Rachel Reeves is aiming to raise £40 billion in tax rises and spending cuts in the Budget, it has emerged.
The chancellor hopes that filling Treasury coffers with the huge sum will avoid a return to the austerity of the Tory years.
Labour has claimed that the last Conservative government left a financial “black hole” of £22 billion in the public finances.
But Reeves yesterday told the cabinet that she needed to raise that “just to keep public services standing still”.
According to the Financial Times, Reeves needs to find another £18 billion on top of that when she delivers the Budget in a fortnight.
Addressing the cabinet on Tuesday, the chancellor warned that “the scale of inheritance meant there would have to be difficult decisions on spending, welfare and tax”.
A Labour spokesperson said Reeves told ministers she “could not turn around 14 years of decline in one year or one Budget”.
“However, the Budget would deliver on the government’s priorities to protect working people, fix the NHS, and rebuild Britain,” the spokesperson added.
The chancellor is already under fire over her plans to raise around £17 billion by increasing the employers’ rate of National Insurance.
Critics say that would break Labour’s manifesto pledge not to increase NI, income tax or VAT.
Reeves was handed a rare piece of good news this morning when it was announced that inflation has fallen to a lower-than-expected 1.7%.