The UK is expected to keep significant financial support to prop up its virus-battered economy when the budget is unveiled on Wednesday but taxes could also be raised to rein in surging debt levels.
Reports suggest Chancellor Rishi Sunak will keep the money taps turned on to help save jobs and businesses.
He also warned about future tax increases and spending cuts that will be needed to offset £300 billion ($418 billion) of aid handed out since the pandemic struck a year ago.
He is expected to increase corporation tax, or a levy on company profits, from a UK record-low 19 per cent, while sticking to the Conservative government's pre-pandemic pledge not to increase income tax or value-added tax (VAT).
Mr Sunak’s three chief aims for the budget and surrounding media interviews will be to offer “openness, honesty and certainty”, according to Treasury officials.
He alluded to the challenges ahead in a glossy six-minute video posted on his Twitter account on Monday.
The video, produced by the Treasury, features a relaxed-looking chancellor sitting on a stool in front of a grey backdrop.
An off-screen voice asks him to describe the day just over a year ago he became chancellor after his predecessor Sajid Javid suddenly resigned following a dispute with Downing Street.
To a dramatic soundtrack, Mr Sunak recounts his first briefing about coronavirus with the government’s scientific advisers.
“I remember when we finished the call, there was just silence,” he said.
Mr Sunak then recalls his response to the pandemic, accompanied by a montage of shots featuring the chancellor.
Rishi Sunak - in pictures
The slick video - the latest offering to burnish Mr Sunak's personal brand, fuelling leadership speculation - ends with a warning that the budget will be "honest" about the challenges facing the UK.
“Honesty of our situation, both in the short term … but also honesty about our long term,” Mr Sunak said.
Warning of the need for Mr Sunak to dispel “dangerous illusions”, respected former Conservative leader William Hague said on Tuesday taxes would have to be raised as part of the UK’s Covid recovery after a year of heavy borrowing.
"It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up," he wrote in The Telegraph.
He added that dismissing the need for tax rises because borrowing was currently inexpensive “was wonderfully convenient but ultimately dangerous”.
Despite the warnings, Mr Sunak is expected to extend support to workers and businesses hit hardest, perhaps by prolonging some furlough payments.
In a slew of pre-budget teasers, Mr Sunak said the government would provide more than £400 million of additional support for the badly hit culture sector, with grants to help museums, theatres and galleries in England re-open once coronavirus restrictions start to ease in the coming months.
Many theatres have been closed since March 2020.
“Throughout the crisis we have done everything we can to support our world-renowned arts and cultural industries, and it’s only right that we continue to build on our historic package of support for the sector,” Mr Sunak said.
“This industry is a significant driver of economic activity, employing more than 700,000 people in jobs across the UK, and I am committed to ensuring the arts are equipped to captivate audiences in the months and years to come.”
A “significant chunk” of a £300 million sports recovery fund will help cricket fans return to stadiums this summer, while £2.8 million will be earmarked to promote the UK and Ireland’s bid for the 2030 football World Cup.
Communities will also be able to claim up to £250,000 to rescue their local pubs from closure.