Though Sunak has repeatedly maintained the NI hike must go ahead, mounting pressures could change his mind, notes Chris Sanger at EY: “With the increase in the oil price, there is definitely an opportunity for the Chancellor to rethink that.”

Tax thresholds, which are currently frozen, could also be scrapped to avoid ramping up the burden on workers at a time when living standards are spiralling. Under the freeze, the Treasury will rake in an extra £1.5bn this coming year as pay rises pull workers into higher tax brackets.  

And extra spending could help. The Resolution Foundation proposes raising benefits by 8.1pc, rather than the 3.1pc increase that is due and reflects inflation as it was in September 2021. This could be reversed next year, meaning the ongoing cost to the Government is unchanged, but families do not have to suffer a sharp fall in spending power. 

Tight purse strings

But the question is, can the Chancellor afford these changes? As always, the problem is finding the money.

According to the IFS, achieving the level of protection Sunak was aiming for with his £9bn February intervention, will need another £12.5bn due to changing circumstances.

That would be expensive at the best of times. Currently, with the cost of living crisis hot on the heels of the pandemic, borrowing has been pushed to its highest level as a share of GDP since the Second World War.

In October, the Office for Budget Responsibility (OBR) predicted borrowing would fall to £83bn in the coming financial year, post-April, after strong tax receipts this year.

Martin Beck, chief economic adviser to the EY Item Club, warns that October forecast is now extremely optimistic, however.

“Next year is looking a lot worse. You have got the effect of lower growth and higher inflation,” says Beck.

According to Beck, each extra one percentage point on RPI inflation adds £5.5bn to Government spending, as around one-quarter of the national debt is linked to prices. Inflation has already soared to 7.8pc, its highest since 1991, and is set to rise further. 

Rising interest rates will add to that burden as each percentage point adds £10bn to annual borrowing costs.

“On top of that, what will the Government do about energy prices and to support households? If the Government wants to make a meaningful impact they are going to have to spend tens of billions,” Beck says.

“Adding the inflation effect, interest rate effect and new measures [borrowing] is going to be well over £100bn. You have got a really unpleasant situation, everything is going in the wrong direction.”