The statement on Wednesday is expected to underpin Prime Minister Andy Burnham’s aim to spread wealth across the UK and help small businesses, while cutting household bills.

Mr Healey will confirm the state pension will rise by 3.9% to £13,036, and to maintain the principle that the state pension is tax free he will announce a rise in the tax-free allowance for low-income pensioners to that threshold.

Those on higher incomes and who also receive a private pension will continue to pay income tax on the state pension. There is speculation that the increase in the state pension age to 68 will be brought forward.

There may, however, be changes to taxes on shares, while pension funds will be encouraged to invest more in private companies.

Mr Healey is likely to announce cuts in regulatory requirements, including green levies, while there will be a commitment to more spending on defence and raising taxes paid by banks which will report big profits over the next two weeks. He is also tipped to introduce a tax on online retailers to help high streets.

However, the PM and chancellor have been warned that the government is failing to grasp the “precarious” fiscal position facing the country and must tackle soaring borrowing costs by cutting public spending.

Andy Haldane, a former economist at the Bank of England, described plans to raise taxes on the banks as “penny wise, pound foolish” and sent a broader economic message that if businesses make profits “the taxman cometh”.

Mr Haldane, who turned down an invitation to become one of Mr Burnham’s advisers, told The Times that the journey to growth is by unlocking the “animal spirits” of the business sector with a smaller state and lower taxes “and that means lower government spending and tough choices.”

The government’s commitment to helping enterprise also suffered a setback after Alex Depledge, the Treasury entrepreneurship adviser, announced she is resigning, claiming that start-ups were being treated as a “sideshow” and must not be pushed to the “margins of economic policy”.

She is due to leave the day after the Budget.