Officials believe that a new windfall tax on banks and a further increase on oil firms could help increase government receipts squeezed by weaker growth and rising costs to fund new spending pledges on the cost of living and defence.

Bloomberg reports that the plans could put bosses at the City on edge as it ramps up its two-month lobbying campaign amid speculation ahead of this year’s Budget.

Citigroup boss Dame Jane Fraser warned Mr Healey against a new banking tax, while UK Finance has separately written to the Chancellor to warn of the risks to the financial services sector.

Mr Healey will also have to find money to fund a 3.6% pay rise for Avanti train drivers, according to the Sunday Times, with some already earning more than £70,000. The Prime Minister is understood to have secured the deal, which would avoid disruption to his commute between Downing Street and Number 10 North. Reports have suggested east coast operator LNER could also be handed a 12% pay rise over four years.

And now the squeeze on public finances could limit the Government’s freedom to provide businesses and households with “breathing space”.

City economists are anticipating the Budget on October 28 will not break too far from the previous government’s economic plans. Expansions in public spending and further borrowing are not expected. The decision to raise defence spending to 3% of GDP will be left to the middle of next year when it undertakes its scheduled spending review.

A Treasury spokesperson said: “The Chancellor is fully focused on his priorities to boost business, help with the cost of living and support people in every postcode, underpinned by fiscal discipline and a commitment to meeting the fiscal rules with a buffer against uncertainty.

“The Office for Budget Responsibility will publish its updated forecast alongside the Budget in October and we will not comment on rumour, speculation or proposals about its contents ahead of then.”