This is going to be a big budget – not to mention a complex budget.

It could, depending on how it lands, determine the fate of this government. And it’s hard to think of many other budgets that have been preceded by quite so much speculation, briefing, and rumour.

All of which is to say, you could be forgiven for feeling rather overwhelmed.

But in practice, what’s happening this week can really be boiled down to three things.

1. Not enough growth

The first is that the economy is not growing as fast as many people had hoped. Or, to put it another way, Britain’s productivity growth is much weaker than it once used to be.

The upshot of that is that there’s less money flowing into the exchequer in the form of tax revenues.

2. Not enough cuts

The second factor is that last year and this, the chancellor promised to make certain cuts to welfare – cuts that would have saved the government billions of pounds of spending a year.

But it has failed to implement those cuts. Put those extra billions together with the shortfall from that weaker productivity, and it’s pretty clear there is a looming hole in the public finances.

3. Not enough levers

The third thing to bear in mind is that Rachel Reeves has pledged to tie her hands in the way she responds to this fiscal hole.

She has fiscal rules that mean she can’t ignore it. She has a manifesto pledge which means she is somewhat limited in the levers she can pull to fill it.

Put it all together, and it adds up to a momentous headache for the chancellor. She needs to raise quite a lot of money and all the “easy” ways of doing it (like raising income tax rates or VAT) seem to be off the table.

So… what will she do?

Quite how she responds remains to be seen – as does the precise size of the fiscal hole. But if the rumours in Westminster are to be believed, she will fall back upon two tricks most of her predecessors have tried at various points.

First, she will deploy “fiscal drag” to squeeze extra income tax and national insurance payments out of families for the coming five years.

What this means in practice is that even though the headline rate of income tax might not go up, the amount of income we end up being taxed on will grow ever higher in the coming years.

Second, the chancellor is expected to squeeze government spending in the distant years for which she doesn’t yet need to provide detailed plans.

Together, these measures may raise somewhere in the region of £10bn. But Reeves’s big problem is that in practice she needs to raise two or three times this amount. So, how will she do that?

Most likely is that she implements a grab-bag of other tax measures: more expensive council tax for high value properties; new CGT rules; new gambling taxes and more.

No return to austerity, but an Osborne-like predicament…

If this summons up a particular memory from history, it’s precisely the same problem George Osborne faced back in 2012. He wanted to raise quite a lot of money but due to agreements with his coalition partners, he was limited in how many big taxes he could raise.

The resulting budget was, at the time at least, the single most complex budget in history. Consider: in the years between 1970 and 2010 the average UK budget contained 14 tax measures. Osborne’s 2012 budget contained a whopping 61 of them.

And not long after he delivered it, the budget started to unravel. You probably recall the pasty tax, and maybe the granny tax and the charity tax. Essentially, he was forced into a series of embarrassing U-turns. If there was a lesson, it was that trying to wodge so many money-raising measures into a single fiscal event was an accident waiting to happen.

Except that… here’s the interesting thing. In the following years, the complexity of budgets didn’t fall – it rose. Osborne broke his own complexity record the next year with the 2013 budget (73 tax measures), and then again in 2016 (86 measures). By 2020 the budget contained a staggering 103 measures. And Reeves’s own first budget, last autumn, very nearly broke this record with 94 measures.

In short, budgets have become more and more complex, chock-full of even more (often microscopic) tax measures.

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In part, this is a consequence of the fact that, long ago, chancellors seem to have agreed that it would be political suicide to raise the basic rate of income tax or VAT. The consequence is that they have been forced to resort to ever smaller and fiddlier measures to make their numbers add up.

The question is whether this pattern continues this week. Do we end up with yet another astoundingly complex budget? Will that slew of measures backfire as they did for Osborne in 2012? And, more to the point, will they actually benefit the UK economy?

A defiant Rachel Reeves has urged Labour MPs to unite behind this week’s budget – but appeared to admit they might not like all of her policies.

Addressing the Parliamentary Labour Party last night, the chancellor described politics as a “team sport” and insisted that tomorrow’s announcements will be “fair”.

Backbenchers are said to have become increasingly frustrated at the prospect of further tax hikes, which come against a backdrop of falling opinion poll ratings.

Ed Conway: Three things the budget boils down to

Ms Reeves argued the budget should be regarded as a package – and not a “pick ‘n’ mix” where MPs “like the cola bottles but not the fruit salad”.

She added that her three top priorities were to cut the cost of living, reduce NHS waiting lists and slash the cost of servicing debt – with £1 in every £10 now spent on interest.

Newspaper reports suggest there were cheers in the room when Ms Reeves vowed to stay in Number 11 and withstand criticism about her handling of the economy.

She was quoted as saying: “I’ll show the media, I’ll show the Tories, I will not let them beat me, I’ll be there on Wednesday, I’ll be there next year, and I’ll be back the year after that.”

The chancellor suggested Labour MPs will be happy with 95% of the budget’s contents, but hinted there are difficult political decisions yet to be announced.

Setback for Reeves as growth forecasts cut

Yesterday, Sky News revealed that the Office for Budget Responsibility’s growth forecasts are going to be downgraded every year until the current parliament ends in 2029.

Our deputy political editor Sam Coates reports that the government will argue there are “a number of reasons” for the revision.

But he added: “However you cut it, whatever the reasoning, once again, last year, growth will be lower after this budget than before, which is not a great position for a government that had claimed growth as their top priority.”

In some better news for the government, Ms Reeves is expected to announce that she has more headroom than first thought – meaning ministers will be able to claim that the country is no longer in an “economic doom loop”.

“That might well be one of the positive surprises when we actually get to Wednesday’s budget,” Coates added on the Politics At Sam and Anne’s podcast.

‘I think she’s doing a terrible job’

Meanwhile, Conservative leader Kemi Badenoch has accused the government of stymying growth and pursuing “job-killing measures”.

She told Sky News that she thinks Ms Reeves is “doing a terrible job” as chancellor – and warned Labour should pay close attention to public perception of the budget.

“A lot of people out there in the country, men and women, thinks that she needs to cut tax, and if she raises it, then she should go,” Ms Badenoch added.

At the CBI conference in London yesterday, the Opposition leader urged the government to scrap the Employment Rights Bill – describing it as an “assault on flexible working” that would empower trade unions and drag the UK back to the 1970s.

Ms Badenoch said: “Killing it would be a signal to the world that Britain still understands what makes an economy grow.

“If the chancellor had any sense, and any regard for business, she would use the budget to say ‘we got this one wrong’ and drop it.”

This Employment Rights Bill includes measures that would ban zero hours contracts, but Ms Badenoch has argued that this would amount to a “de facto ban” on seasonal and flexible work.

The CBI conference marks a difficult anniversary for the government – with attention turning to the speech Ms Reeves gave there a year ago.

Having already delivered her first budget, she had told businesses that she was “not coming back with more borrowing or more taxes” – a statement that flies in the face of what the chancellor is expected to unveil tomorrow.

Read more from Sky News:
What tax rises and spending cuts will be announced?
Analysis: Chancellor’s authority is on shaky ground

Greens call for wealth tax

In other developments, the Green Party has called on the government to introduce a 1% tax on wealth over £10m – rising to 2% over £1bn. Its estimates suggest this measure could help potentially raise £15bn a year in revenues.

Zack Polanski also wants the rates of capital gains tax, which is currently one of the lowest among G7 nations, to be raised in line with income tax.

He will outline his demands on Mornings With Ridge And Frost ahead of a protest in Westminster.

Announcements have been gradually trickling through ahead of the budget tomorrow, with the chancellor widely expected to freeze income tax thresholds once again.

Ms Reeves is also set to lift the two-child cap on benefits, with figures suggesting this policy will cost about £3bn a year.

Over the weekend, it was confirmed that rail fares in England will be frozen for the first time since the 1990s – meaning some commuters will save hundreds of pounds on season tickets.

An above-inflation rise to the state pension is planned too, meaning 13 million people will receive an extra £550 a year from April.

Nigel Farage has said he did not racially abuse fellow pupils while at school in a “hurtful or insulting way”.

The Reform UK leader said he had never been part of “an extremist organisation or engaged in direct, unpleasant personal abuse” but added: “Can I remember everything that happened at school? No, I can’t.”

Tories ‘scraping the barrel’ by comparing Reform and Nazi badges

Speaking to reporters on Monday, Mr Farage said there was a “strong political element” to the allegations, which were first published in The Guardian.

The newspaper reported that the former UKIP leader allegedly made racist and antisemitic comments while he was a pupil at Dulwich College, an independent school in south London.

But asked whether he racially abused fellow pupils when he was at school, Mr Farage said: “No.

“And this is 49 years ago, by the way. 49 years ago. Have I ever tried to take it out on any individual on the basis of where they’re from? No.”

Pressed on the same question again, he replied: “I would never, ever do it in a hurtful or insulting way.”

He added: “I just entered my teens. Can I remember everything that happened at school? No, I can’t. Have I ever been part of an extremist organisation or engaged in direct, unpleasant personal abuse, genuine abuse, on that basis? No.”

Challenged on what was described as a “very caveated” answer – and that he was “not quite ruling this out”, the Reform UK leader responded: “I’ve never directly really tried to go and hurt anybody.

“Have I said things 50 years ago that you could interpret as being banter in a playground that you could interpret in a modern light of day in some sort of way? Yes.

“Have I ever misspoken in my life in my younger days when I was a child? Probably.

“I would say to you, there is a strong political element to this.”

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The latest accusations come after Sarah Pochin, the Reform MP for Runcorn and Helsby, was embroiled in a racism row after she said it “drives me mad when I see adverts full of black people, full of Asian people”, which do not “reflect our society” – comments she later apologised for.

Mr Farage told reporters that while he was “unhappy” about the “ugly” remarks, he did not think they were “racist”.

But Sir Keir Starmer has called Mr Farage “spineless” for not taking action against Ms Pochin for “obvious racism”.

He told reporters last week: “The man is spineless. If that had been someone in my party, I’d have dealt with it straight away.

“He needs to explain the latest allegations, and whilst he’s at it, he needs to explain why he’s too spineless to take action in relation to what is obvious racism in the comments of his fellow MP.”