British finance minister Rachel Reeves is likely to announce tens of billions of pounds of new tax increases on Wednesday in a budget that puts her credibility on the line both with bond investors and with lawmakers demanding more welfare spending.
Little more than a year after ordering 40 billion pounds ($52.7 billion) of tax hikes - the biggest since the 1990s and which she promised would be a one-off - Reeves has been forced to look at further revenue-raising measures due to an expected downgrade of Britain's economic prospects and higher debt costs.
Reeves said she was taking "fair and necessary choices" to improve the country and speed up economic growth but she recognised the unhappiness among voters.
"I have to be honest that the damage done from austerity, a chaotic Brexit and the pandemic were worse than we thought."
Reeves said she would help families with the cost of living, cut hospital waiting lists and reduce debt.
"I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing," she said.
Economists expect between 20-30 billion pounds of tax hikes when she addresses parliament.
Although Britain is on course to have the second-strongest growth among the Group of Seven nations this year, according to the International Monetary Fund, at 1.3% it would be way below the norm of 2.5% before the 2007-08 global financial crisis.
Reeves said in her first budget last year that she was returning stability to the public finances after the shocks delivered by Brexit, the coronavirus pandemic and the "mini-budget" crisis of former Conservative Prime Minister Liz Truss.
But those plans are likely to be holed by a downgrade of Britain's economic outlook - set to be delivered alongside the budget – from the government's fiscal forecasters, who have been overly optimistic for years about productivity growth.
She is expected to drag more workers into the income tax net and make more of them pay higher rates by extending a freeze on threshold levels, something she said last year she would not do because of the hit it would deliver to households.
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