Rachel Reeves urges Labour MPs to unite behind the Budget

There had also been concerns in the party about suggestions she would use this Budget to raise income tax rates, a move that would have broken the party’s election manifesto promise.

The government now appears to have stepped back from that proposal.

Instead, it could consider extending the freeze on the levels at which people start to pay income tax and national insurance, meaning more people are drawn into paying more tax on their wages and pensions over time.

The chancellor could also look at a range of smaller measures to raise money including new taxes on high-value homes in England, electric vehicles and gaming companies.

She needs to find more money in order to meet her own rules aimed at reducing debt and borrowing, while closing a gap in public finances, estimated to be around £20bn.

Other possible money-raising measures include:

Reeves has also suggested she will scrap the two-child benefit cap, which limits the benefits parents can claim for their third child or subsequent children born after 6 April 2017.

The triple lock – which means the state pension increases by either 2.5%, average earnings growth or inflation – is expected to stay in place.

Conservative shadow chancellor Mel Stride said he worried the Budget would see “tax on hard- pressed hard-working people being transferred into the benefits system”.

Speaking at a conference on Monday, head of the Confederation of British Industry Rain Newton-Smith urged Reeves not to inflict “death by a thousand taxes” on businesses.

She said the chancellor should have “the courage to take two tough decisions rather than 20 easier ones”.

Liberal Democrat Treasury spokesperson Daisy Cooper accused the government of “rank hypocrisy” over its potential tax plans.

“Rachel Reeves once accused the Conservatives of ‘picking the pockets’ of working people by freezing tax thresholds – now Labour plans to do exactly the same,” she said.