The spring budget on 6 March is likely to be the last major fiscal event before the next general election, expected later this year.
The Tories have been hinting at further tax reductions in a bid to woo over voters as the party continues to languish behind Labour in the polls.
But as the country enters a recession, questions remain over whether there is enough so-called fiscal headroom in the Treasury’s coffers to make such a move.
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Here’s a look at what we can expect from the spring budget.
Income tax cut
The big headline grabber of the spring budget would be if Jeremy Hunt decided to cut income tax.
He is under pressure to do so by Tory MPs and has previously hinted he is keeping the move up his sleeve as a pre-election giveaway.
However, the chancellor has recently cast doubt over whether he would have the capacity to do this, given the high costs of servicing government debt and the UK entering recession.
Economists have also warned that public services could buckle under the weight of any further spending cuts to fund tax reductions.
According to the Resolution Foundation, slashing income tax by just 1p would cost £7bn and would actually result in tax bills rising for anyone earning less than £38,000 a year if the freeze on personal allowance thresholds was maintained.
Cancelling the personal allowance freeze planned for 2024-2025 would also cost £7bn, the think tank said, so this may be a more likely option as it would result in more people paying less tax.
National Insurance cut
Alternatively, Mr Hunt could…
