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Budget will reflect ‘the harsh light of fiscal reality’, but ‘better days lie ahead’, Sir Keir Starmer will say in speech to mark one of the most important financial statements in history recent.

The Prime Minister will warn of “unprecedented” economic challenges and invite the public to judge him on his ability to meet them as he sets the tone for Wednesday’s announcement.

He is expected to promise the Budget will “ignore the populist chorus of easy answers” ​​amid a series of expected tax rises, including an increase in employers’ national insurance by at least one percentage point.

Referring to statements announced by New Labour’s Gordon Brown and Conservative Chancellor George Osborne during times of austerity, Sir Keir will say: “We need to be realistic about where our country is today. This is not 1997, when the economy was good and public services were on their knees.

“And this is not 2010, where public services were strong, but public finances were weak. These are unprecedented circumstances.

“And that’s before even addressing the long-term challenges that have been ignored for 14 years: an economy plagued by weakness in terms of productivity and investment, a state that needs urgent modernization to meet the challenge of an unstable world. »

The Prime Minister is expected to say he will not offer the UK’s problems as “an excuse”, adding: “Politics is always a choice. It’s time to choose a clear path and accept the harsh light of financial reality so we can rally behind a credible long-term plan.

It comes amid accusations of hypocrisy from the opposition over an expected move to extend the freeze on income tax thresholds introduced under the Conservatives, and confusion over the Labor government’s use of the term ” workers”.

The party had promised in its manifesto that it would not raise taxes on workers – explicitly ruling out an increase in VAT, national insurance and income tax.

But ministers have since come under pressure to clarify who falls into this category after Sir Keir suggested those who make money from assets such as property would not meet the definition.

Education Secretary Bridget Phillipson sought to reassure workers that workers would not see higher taxes “on their pay slip” when confronting broadcasters on Sunday morning.

But critics have argued that employees will still face a greater burden as the Chancellor is expected to extend the freeze on income tax thresholds, which would force people to pay higher rates due to a phenomenon known as the “tax brake”.

Ms Phillipson admitted her frustration at ministers’ refusal to confirm who will be hit by higher levies in the Budget, but refused to “speculate” on what changes will come on Wednesday.

Other measures expected in the statement include a reduction in the income threshold at which employers contribute to national insurance.

Combined with an increase in the employer contribution rate, this is expected to raise around £20 billion as Ms Reeves seeks to revive public services and put the economy on firmer footing.

Some £1.4 billion has already been announced to rebuild crumbling schools, along with a tripling of investment in free breakfast clubs, £1.8 billion for expanding childcare of children funded by the government and £44 million to support kinship and foster carers.

Ministers vowed there would be no return to austerity, but Ms Reeves reportedly called on departments to make 2% savings to free up “billions” of pounds to be reinvested on the front line.

The chancellor will also confirm a change to the UK debt rule that will allow the government to spend billions more on infrastructure, such as replacing dilapidated public sector buildings.

It should target public sector net financial liabilities (PSNFL) as a new measure of debt rather than the current measure of underlying public sector net debt.

A move to the PSNFL would give it more room to achieve its debt reduction goal because it includes a broader mix of state assets and liabilities – including notably expected student loan repayments for offset part of the liabilities.

Sources said the chancellor was seeking to find up to £40bn in tax rises and spending cuts to avoid a return to austerity in next Wednesday’s Budget report.

Ms Reeves admitted she would raise some taxes, highlighting a £22bn black hole in the public finances which ministers said had been left behind by their Tory predecessors, but did not specify which ones.

Capital gains tax, inheritance tax and fuel taxes are among other levers it could use to increase revenue.

The Prime Minister will say on Monday that the budget will be underpinned by a commitment to stability.

“It is stability that means we can invest, and reform that will maximize that investment,” Sir Keir is expected to say.

“Stability, investment, reform. This is how we fix the NHS, rebuild Britain and protect workers’ pay slips. Respond to the mandate for change.

He will challenge critics to offer an alternative to Labour’s plans and explain which public services should be cut instead.

“It is time to ignore the populist chorus of easy answers…we will never return to that,” the Prime Minister will say.

“If people want to criticize the path we choose, that’s their right. But then let them express a different direction.

“This is what it means to repair the foundations and bring about change. Everyone in this country will benefit. Everyone can wake up on Thursday and understand that a new future is being built, a better future.

Writing in the Mirror, he asked the public to “judge us by whether, in five years’ time, you will have more money in your pocket”.

The Conservatives branded Sir Keir’s comments “hollow” and accused the government of “broken promises” over expected tax rises.

“The Prime Minister has some nerve if he thinks the British public will swallow the nonsense he is spouting,” a Conservative spokesperson said.