Alistair Darling is planning a pre-Budget report that will defer tough new measures to cut Britain's budget deficit while increasing taxes on the wealthy and focusing resources on stimulating the economy.
The Chancellor has concluded that it is too soon to cut spending and risk strangling the economic recovery.
An official close to the preparations for next Wednesday's statement told the Financial Times: "We don't anticipate any dramatic fiscal tightening".
But Darling will seek to placate those who argue the £175bn deficit is dangerously high by promising measures to halve the deficit in four years.The fiscal responsibility bill will set out detailed plans to cut the deficit to 5.5 per cent by 2014.
Frontline services such as patient care, teaching and policing will be defined and protected from cut, according to the FT.
The plan means government departments face cuts of 8.6 per cent in real terms in the three years after April 2011.
The current £175bn deficit projection is likely to be raised "by a few billion pounds", but Treasury officials are confident the figure will remain well below £200bn.
