Alistair Darling is expected to make a pledge to protect “frontline services” such as schools, hospitals, police.
The public spending defecit is likely to peak this year at £180bn, but Darling plans to halve this to 5.5 per cent of GDP in 2013-14.
The cuts are not expected to be achieved through departmental spending limits but rather efficency savings and flat spending.
The Chancellor is also expected to push through plans for a one-off tax on bank bonus pools which have provoked outrage in the City this week.
Rather than taxing individual bankers’ bonuses, Darling is expected to unveil a windfall tax on the funds put aside by the banks to pay staff bonuses.