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Cabinet ministers have written to the Treasury to complain about departmental cuts being proposed ahead of this month’s Budget and spending review.
Whitehall sources have suggested that the government is facing a £40bn gap in funding public services that would have to be filled by tax rises.
There has been considerable Cabinet disquiet about spending cuts required to meet the Treasury’s proposed spending limits.
An agreement was supposed to have been reached on Wednesday evening as the final major measures in the Budget were due to be sent to the official forecaster, the Office for Budget Responsibility.
Filling the gap in funding public services could lead to the largest tax rising Budget in a generation when Chancellor Rachel Reeves makes her statement on 30 October.
Reeves has decided to commit to a new borrowing rule that means day-to-day spending must be covered by tax revenues.
As the government insists it will stick to manifesto promises not to raise taxes on working people, the focus is now on the extension of National Insurance to employer pensions contributions and increases in some form of capital gains tax.
There is also speculation that amid falling petrol prices, there is a possibility of higher fuel taxes.
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