Rachel Reeves has signalled that the better off will be forced to “contribute more” ahead of her Budget. Treasury sources have said the Chancellor will not cut spending or significantly increase borrowing.

But it will leave her with no option but to hike taxes amid warnings of a black hole of up to £30 billion in the public finances. Sources close to the Chancellor told The Telegraph: “She will be fair when asking those to contribute more to rebuild our public services.”

A Treasury insider added she was prepared to take “tough decisions” because the “stability” of the public finances is at risk, but insisted there would be no “return to austerity”.

They added that the economy was facing a “once in a generation challenge” for which there were “no quick fixes”.

They said that the Chancellor was determined to “maintain a tight grip on public spending and wage a war on waste” to keep inflation and interest rates down.

They said: “Borrowing more would put our public finances in jeopardy, saddling future generations with more debt, while a return to austerity would condemn the country to decline.”

It comes amid ongoing speculation of major tax rises ahead of next month’s Budget.

Labour pledged in its manifesto not to increase taxes for “working people”.