Rachel Reeves is unlikely to raise the basic rates of income tax and national insurance in order to avoid breaking a promise to protect “working people” in the budget.

It comes as Sky News has obtained an internal definition of “working people” used by the Treasury.

Officials have been tasked with protecting the income of the lower two-thirds of working people, meaning in theory people earning more than around £46,000 could face a squeeze in the budget.

However, this is likely to rule out increases to the basic rate of income tax and national insurance, since they would pay more tax.

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Rachel Reeves is unlikely to hike these taxes because the Treasury says those earning £45,000 or less qualify as “working people”.

Sky News understands that ministers are still considering whether to break manifesto pledges, and these options remain on the table.

The main elements of the budget must be finalised by the middle of November, in the next two to three weeks.

Rachel Reeves is facing a black hole in the budget that could exceed £35bn, after the latest Office for Budget Responsibility (OBR) forecast came in worse than expected.

The OBR had been anticipated to downgrade expected future productivity rates by 0.1% or 0.2% of GDP.

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Each extra 0.1% point means an additional £7bn drop in revenue and a corresponding increase in the size of the black hole the Chancellor must fill in the budget.

However, now the OBR is expected to downgrade future trend growth by 0.3%. This means that the black hole left by the productivity downgrade is around £21bn.

The chancellor needs to find around £10bn because of welfare U-turns, reinstating the winter fuel allowance and other policy changes.

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On Monday, the chancellor also said she would increase headroom – the buffer between her spending projects and borrowing limited by her fiscal rules.

This is likely to cost another £5bn to £10bn, to get her out of the doom loop “cycle” which Ms Reeves acknowledged to Sky News she risked being stuck in.

This means the total size of the black hole likely to be needed to be filled is around £35bn or £40bn.

Sources insist that this figure is before the final forecasts from the OBR, and therefore is subject to change.

The Treasury said it does not comment on tax measures or the size of the black hole.

David Lammy has confirmed there will be an independent investigation into the accidental release of a migrant jailed for sex offences, as he blamed “human error” for the incident.

The deputy prime minister and justice secretary told MPs he was “livid” on behalf of Hadush Kebatu’s victims and he would be deported back to Ethiopia “as quickly as possible”.

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Kebatu, who was found guilty in September of sexually assaulting a 14-year-old girl and a woman in Epping, was freed in error from HMP Chelmsford in Essex on Friday instead of being handed over to immigration officials for deportation.

His accidental release sparked widespread alarm and a manhunt that resulted in him being found and arrested by the Metropolitan Police in the Finsbury Park area of London at around 8.30am on Sunday.

The incident has sparked questions over how the man, whose crimes sparked protests in Epping over the use of asylum hotels, was able to be freed.

Addressing MPs in the House of Commons, Mr Lammy said the mistake should not have happened as he sought to lay part of the blame on to the Conservatives over the state of the prison system over the past 14 years.

He said “there must and there will be accountability” for the mistaken release of Kebatu from prison.

“I’ve been clear from the outset that a mistake of this nature is unacceptable,” he said.

“We must get to the bottom of what happened and take immediate action to try and prevent similar releases in error to protect the public from harm.”

Mr Lammy said he ordered an “urgent review” into the checks that take place when an offender is released from prison, and new safeguards have been added that amount to the “strongest release checks that have ever been in place”.

The justice secretary said the investigation would be led by former Metropolitan Police deputy commissioner Dame Lynne Owens, who also used to lead the National Crime Agency.

He also said the investigation would have the same status as high-profile probes into other prison incidents, including the attack on three prison officers at HMP Franklin in April of this year and the escape of Daniel Khalife from HMP Wandsworth in 2023.

‘Calamity Lammy’

Shadow justice secretary Robert Jenrick referred to a report by Sky News which detailed how a witness present at the prison observed Kebatu appearing “confused” upon his release.

The witness said Kebatu had in fact tried to go back into the prison several times, but was instead guided to Chelmsford station, where he caught a train to London.

Mr Jenrick claimed the case was proof “the only illegal migrants this government are stopping are those that actually want to leave the UK”.

“Dear oh dear,” he said. “Where to begin? This justice secretary could not deport the only small boat migrant who wanted – no – who tried to be deported.

“Having been mistakenly released, Hadush Kebatu came back to prison asking to be deported not once, not twice, but five times, but he was turned away.”

He went on: “The only illegal migrants this government are stopping are those that actually want to leave the UK.

“His officials, briefing the press, called it the mother of all – yeah, they’re not wrong, are they?”

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Mr Jenrick, who served as immigration minister under the previous Conservative government, branded his opposite number “calamity Lammy”.

“It’s a national embarrassment and today the justice secretary feigns anger at what happened.”

Continuing with his attack, Mr Jenrick asked Mr Lammy whether he would resign if Kebatu was not deported “by the end of the week” – to which he received no reply.

But asked later by an MP whether he was considering his position, Mr Lammy replied: “A ridiculous question, the answer is no.”

The new checks announced by Mr Lammy on Monday involve five pages of instructions and require more senior prison staff to sign off a release, according to documents obtained by Sky News.

The instructions are effective from Monday.