Jeremy Hunt is facing warnings of real-term cuts to NHS funding worth £2 billion in the coming financial year as he puts the finishing touches to this week’s Budget.

The already-strained health service could suffer a 1.2% cut in day-to-day spending in England – the largest reduction since the 1970s – according to analysis by the Institute for Fiscal Studies (IFS), despite ministers’ promises not to squeeze healthcare.

Critics urged the Chancellor to cancel the “scandalous” spending cuts amid calls for public service funding to be prioritised over tax reductions in his financial statement on Wednesday.

The IFS said the health budget would be 2.4% lower in 2024–25 without further funding of around £2.1 billion.

Without the cash boost, the NHS would be forced to cut staffing, pay or patient services, even as it faces extra costs linked to workforce expansion and a pledge to tackle waiting lists, the think tank said.

Mr Hunt has signalled he wants to move towards a “lower tax economy” in a hint at a pre-election giveaway to voters in the form of a national insurance or income tax cut.

He has been clear that he will not pay for tax cuts with borrowing, meaning a combination of spending cuts and tax rises elsewhere will be necessary for him to keep to his own fiscal rules on debt.

There has been speculation he could shave more off his post-election public spending plans, reducing overall departmental spending – currently pencilled in to rise by 1% per year in real terms after 2025 – to 0.7%.

Newly elected MPs welcomed to Westminster
Rachel Reeves (Aaron Chown/PA)

But experts have already cast doubt on the whether the existing plans are realistic, as they would involve significant cuts to under-pressure unprotected services such as the courts, police and local authorities.

Amid deteriorating forecasts for the public finances, officials have drawn up a range of options for raising money to fund a personal tax cut, potentially including reforms to the non-dom tax status that allows overseas-domiciled individuals to avoid paying UK tax on their overseas earnings.

The policy is a key plank of Labour’s plans and adopting it could lay a trap for Sir Keir Starmer’s party, which would have to find an alternative way to pay for pledges including NHS improvements.

Shadow chancellor Rachel Reeves criticised the Tories for “pickpocketing the Labour Party of its policies”.

She told a meeting of Labour MPs on Monday: “(Mr Hunt) is cynically talking up maxing out headroom to pay for pre-election promises. I see through it and so do the British people.”

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Other rumoured tax rises include a new levy on vapes and removing tax breaks for second-home owners who rent out their properties to tourists.

Mr Hunt is expected to freeze fuel duty for another year, in a move that will cost the Treasury around £5 billion.

He will reportedly extend the 5p-a-litre petrol and diesel duty cut for motorists and again scrap an inflation-linked rise in the levy.

Speculation ahead of the Budget has suggested the Chancellor could seek to cut 1p or 2p off income tax or – as a cheaper alternative – national insurance, to ease the burden on working households and set dividing lines with Labour ahead of the general election later this year.

Mr Hunt on Monday indicated a more efficient public sector could give him greater scope for tax cuts.

The IFS urged him to deliver more top-up spending for the NHS in Wednesday’s Budget, rather than hold back extra money until later in the year as he has done previously.

Liberal Democrat Treasury spokesperson Sarah Olney said: “What this Conservative Government is doing to our NHS is nothing short of scandalous. They have left health services shockingly underfunded and it is patients who are bearing the brunt of their neglect.

“The Chancellor must cancel these planned spending cuts to the NHS at the Budget. To push ahead with them would show that this Conservative Government does not understand the crisis that local health services are in and the unnecessary suffering they are putting patients through.

“The neglect of our NHS is holding back economic growth. Millions of people who want to work can’t as they simply cannot access the treatment they deserve. To fix our economy we must first fix our NHS.”